Annual Report (10-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2019

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

Commission File No. 000-49760

Petro River Oil Corp.

(Exact name of registrant as specified in its charter)

Delaware		98-0611188
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

55 5th Avenue, Suite 1702, New York, NY 10003

(Address of Principal Executive Offices, Zip Code)

(469) 828-3900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.00001 per share	PTRC	OTC Pink Marketplace

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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 definition of “large accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer [ ]			Accelerated filer [ ]
Non-accelerated filer [X]			Smaller reporting company [X]
			Emerging growth company [ ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of October 31, 2018, the aggregate market value of the registrant’s common stock held by non-affiliates was $13,778,575, based on the closing bid price of $1.06 per share on October 31, 2018, as reported on OTC Pink Marketplace.

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

Class		Outstanding at August 9, 2019
Common Stock, $0.00001 par value per share		17,938,540 shares

T A B LE OF CONTENTS

		Page No.
PART I

Item 1.	Business	2
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 8.	Financial Statements and Supplementary Data	30
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	30
Item 9A.	Controls and Procedures	31

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	32
Item 11.	Executive Compensation	32
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32
Item 13.	Certain Relationships and Related Transactions, and Director Independence	32
Item 14.	Principal Accounting Fees and Services	32

PART IV

Item 15.	Exhibits and Financial Statement Schedules	32
Item 16.	Form 10-K Summary

Signatures		35

Index to Financial Statements		F-1

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FORWARD-LOOKING STATEMENTS

This report, including information included in future filings by us with the Securities and Exchange Commission (the “ SEC ”), as well as information contained in written material, press releases and oral statements issued by us or on our behalf, contain, or may contain, certain statements that are “forward-looking statements” within the meaning of federal securities laws that are subject to a number of risks and uncertainties, many of which are beyond our control. This report modifies and supersedes documents filed by us before this report. In addition, certain information that we file with the SEC in the future will automatically update and supersede information contained in this report. All statements, other than statements of historical fact, included in this report regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

Forward-looking statements may include statements about our business strategy, reserves, technology, financial strategy, oil and natural gas realized prices, timing and amount of future production of oil and natural gas, the amount, nature and timing of capital expenditures, drilling of wells, competition and government regulations, marketing of oil and natural gas, property acquisitions, costs of developing our properties and conducting other operations, general economic conditions, uncertainty regarding our future operating results and plans, objectives, expectations and intentions contained in this report that are not historical.

All forward-looking statements speak only as of the date of this report, and, except as required by law, we do not intend to update any of these forward-looking statements to reflect changes in events or circumstances that arise after the date of this report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “ Risk Factors ” and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and elsewhere in this report. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

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P ART I

ITEM 1. BUSINESS

Business Overview

Petro River Oil Corp. (the “ Company ”) is an independent energy company focused on the exploration and development of conventional oil and gas assets with low discovery and development costs, utilizing modern technology. The Company is currently focused on moving forward with drilling wells on several of its properties owned directly and indirectly through its interest in Horizon Energy Partners, LLC (“ Horizon Energy ”), as well as entering highly prospective plays with Horizon Energy and other industry-leading partners. Diversification over a number of projects, each with low initial capital expenditures and strong risk reward characteristics, reduces risk and provides cross-functional exposure to a number of attractive risk adjusted opportunities.

The Company’s core holdings are in the Mid-Continent Region in Oklahoma, including in Osage County and Kay County, Oklahoma. Following the acquisition of Horizon I Investments, LLC (“ Horizon Investments ”) in December 2015, the Company has additional exposure to a portfolio of domestic and international oil and gas assets consisting of highly prospective conventional plays diversified across project type, geographic location and risk profile, as well as access to a broad network of industry leaders from Horizon Investment’s interest in Horizon Energy. Horizon Energy is an oil and gas exploration and development company owned and managed by former senior oil and gas executives. It has a portfolio of domestic and international assets. Each of the assets in the Horizon Energy portfolio is characterized by low initial capital expenditure requirements and strong risk reward characteristics.

The Company’s prospects in Oklahoma are owned directly by the Company and indirectly through Spyglass Energy Group, LLC (“ Spyglass ”), a wholly owned subsidiary of Bandolier Energy, LLC (“ Bandolier ”). As of January 31, 2018, Bandolier became wholly-owned by the Company. Bandolier has a 75% working interest in an 87,754-acre concession in Osage County, Oklahoma. The remaining 25% working interest is held by the operator, Performance Energy, LLC.

Effective September 24, 2018, the Company acquired a 66.67% membership interest in LBE Partners, LLC, a Delaware limited liability company (“ LBE Partners ”), from ICO Liquidating Trust, LLC, in exchange for 300,000 restricted shares of the Company’s common stock. LBE Partners has varying working interests in multiple oil and gas producing wells located in Texas.

The execution of the Company’s business plan is dependent on obtaining necessary working capital. While no assurances can be given, in the event management is able to obtain additional working capital, the Company plans to continue drilling additional wells on its existing concessions, and to acquire additional high-quality oil and gas properties, primarily proved producing, and proved undeveloped reserves. The Company also intends to explore low-risk development drilling and work-over opportunities. Management is also exploring farm-in and joint venture opportunities for the Company’s oil and gas assets.

Recent Developments

Horizon Subscription Agreement

On February 25, 2019, the Company executed a Subscription Agreement, pursuant to which the Company purchased 145.454 membership units in Horizon Energy Acquisition, LLC (“ Horizon Acquisition ”) , representing an approximate 14.6% membership interest in Horizon Acquisition, for $400,000 (the “ Acquisition of Interest ”) . Horizon Acquisition is a company focused on oil and gas exploration activities. As a result, the Company acquired an additional 5.63% working interest in an international, offshore exploration project in the North Sea, which is in addition to a 5.63% interest in the same project indirectly held by the Company through its investments in Horizon Energy.

In connection with the Acquisition of Interest, the Company also executed the Limited Liability Company Agreement for Horizon, which provides the Company with the right to appoint one Manager to Horizon Acquisition’s three-member Board of Managers. The Company appointed Mr. Cohen, the Company’s Executive Chairman, to the Board of Managers. Mr. Cohen purchased 36.363 membership units in Horizon Acquisition in a separate transaction, representing an approximate 3.6% membership interest.

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Creation of a New Series A Convertible Preferred Stock

On January 31, 2019, the Company filed the Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock with the Secretary of State for the State of Delaware – Division of Corporations, which it thereafter amended on March 13, 2019 (collectively, the “ Series A COD ”). The Series A COD designates 500,000 shares of the Company’s preferred stock as Series A Convertible Preferred, par value $0.00001 per share (“ Series A Preferred ”), each share with a stated value of $20.00 per share.’ Shares of Series A Preferred are not entitled to dividends unless the Company elects to pay dividends to holders of its common stock. Shares of Series A Preferred rank senior to the Company’s common stock and Series B Cumulative Convertible Preferred Stock.

Holders of Series A Preferred have the right to vote, subject to a 9.999% voting limitation (which does not apply to Scot Cohen), on an as-converted basis with the holders of the Company’s common stock on any matter presented to the Company’s stockholders for their action or consideration; provided, however, that so long as shares of Series A Preferred remain outstanding, the Company may not, without first obtaining the affirmative consent of a majority of the shares of Series A Preferred outstanding, voting as a separate class, take the following actions: (i) alter or change adversely the power, preferences and rights provided to the holders of the Series A Preferred under the Series A COD, (ii) authorize or create a class of stock that is senior to the Series A Preferred, (iii) amend its Certificate of Incorporation so as to adversely affect any rights of the holders of the Series A Preferred, (iv) increase the number of authorized shares of Series A Preferred, or (v) enter into any agreements with respect to the foregoing.

Each share of Series A Preferred has a liquidation preference equal to the Stated Value plus all accrued and unpaid dividends. Each share of Series A Preferred is convertible into that number of shares of the Company’s common stock (“ Conversion Shares ”) equal to the stated value, divided by $0.40 per share , which conversion rate is subject to adjustment in accordance with the terms of the Series A COD; provided, however, that holders of the Series A Preferred may not convert their shares of Series A Preferred in the event that such conversion would result in such holder’s ownership exceeding 4.999% of the Company’s outstanding common stock (the “ Ownership Limitation ”), which Ownership Limitation may be increased up to 9.999% at the sole election of the holder (the “ Maximum Percentage ”); provided, further, that the Ownership Limitation and Maximum Percentage do not apply to Mr. Cohen. Holders of Series A Preferred may elect to convert shares of Series C Preferred into Conversion Shares at any time.

Series A Financing

On January 31, 2019, the Company sold and issued an aggregate of 178,101 units of its securities, for an aggregate purchase price of $3,562,015, to certain accredited investors (the “ New Investors ”) pursuant to a Securities Purchase Agreement (“ SPA ”) and to certain debtholders (the “ Debt Holders ”) pursuant to Debt Conversion Agreements (the “ Debt Conversion Agreements ”) (the “ Offering ” and the “Series A Financing” ). The sale of the units resulted in net cash proceeds of approximately $2.8 million. The units sold and issued in the Offering consisted of an aggregate of (i) 178,101 shares of the Company’s newly created Series A Preferred shares, convertible into 8,905,037 shares of the Company’s common stock, and (ii) five-year warrants to purchase 8,905,037 shares of Company’s common stock, at an exercise price of $0.50 per share. Pursuant to the Debt Conversion Agreements, the Debt Holders, consisting of Mr. Cohen and Fortis Oil & Gas (“ Fortis ”), agreed to convert all outstanding debt owed to the Debt Holders, amounting to $300,000 and $321,836, respectively, into units issued pursuant to the SPA. In addition to the conversion of outstanding debt, the Company and the Debt Holders also agreed to convert all accrued interest totaling $18,853 and $62,523, respectively.

The Offering resulted in net cash proceeds to the Company of approximately $2.8 million, which net proceeds do not include the amount of debt converted into units by the Debt Holders. The Company currently intends to use the net proceeds to fund the drilling of ten additional development and exploration wells in its Osage County concession (the “ New Drilling Program ”), and a large exploration venture in the North Sea, United Kingdom with Horizon Energy Partners, LLC.

In connection with the Offering, on January 31, 2019, Bandolier entered into Assignment of Net Profit Interest agreements (the “ Assignment Agreements ”) with each of the New Investors and Debt Holders, pursuant to which (i) Bandolier assigned and transferred to the New Investors and Debt Holders a 75% interest in profits, if any, derived from the ten new wells the Company intends to drill pursuant to the New Drilling Program, payments of which shall be made to the New Investors and Debt Holders, pro rata, on a quarterly basis following the full completion of the New Drilling Program, and (ii) in the event the Company elects to drill additional wells on its Osage County concession in the next two years, the New Investors and Debt Holders shall have the right to participate in and fund the drilling and production of the next ten wells on the same terms and conditions set forth in the Assignment Agreements.

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Senior Secured Debt Exchange

On January 31, 2019, the Company entered into agreements (the “ Secured Debt Conversion Agreements ”) with Petro Exploration Funding, LLC and Petro Exploration Funding II, LLC (together, the “ Secured Debt Holders ”), pursuant to which they agreed to convert approximately $2.3 million and $2.8 million, respectively, of outstanding senior secured debt (including accrued and unpaid interest) (the “ Senior Secured Debt ”) owed under the terms of their respective Senior Secured Promissory Notes into 116,503 and 140,799 shares of the Company’s newly created Series A Preferred, respectively (the “ Senior Secured Debt Exchange ”). As a result of the Senior Secured Debt Exchange, all indebtedness, liabilities and other obligations arising under the respective Senior Secured Promissory Notes were cancelled and deemed satisfied in full.

As additional consideration for the conversion of the Senior Secured Debt, the Company agreed to (i) reduce the exercise price of warrants issued to the Secured Debt Holders on June 15, 2017 and November 6, 2017 from $2.38 and $2.00, respectively, to $0.50 per share of common stock issuable upon the exercise of such warrants, and (ii) to extend the expiration date of such warrants to five years from the Closing Date. The Company computed the fair value of the warrants directly preceding the modification and compared the fair value to that of the modified warrants with new terms. The fair value of the modified warrants was lower than the fair value of the warrants preceding the modification; therefore, no accounting treatment resulted from the modification.

Acquisition of Membership Interest in LBE Partners, LLC

On October 2, 2018, the Company, ICO and LBE, which owns various working interests in several oil and gas wells located in the Hardin oil field in Liberty, Texas, entered into a Membership Interest Purchase Agreement (the “ LBE Purchase Agreement ”), effective September 24, 2018, pursuant to which the Company purchased a 66.67% membership interest in LBE Partners from ICO in exchange for 300,000 shares of the Company’s common stock. Both ICO and LBE Partners are managed by Scot Cohen, the Company’s Executive Chairman.

Recent Oil Discoveries

In April of 2019, the Company successfully completed the West Blackland 3-35 well, in addition to the West Blackland 4-34, and South Red Eagle 1-34, located on its concession in Osage County, Oklahoma.

On July 24, 2018, the Company announced the successful drilling of the Arsaga 25-2 exploration well, located on its concession in Osage County, Oklahoma.

On May 22, 2018, the Company announced the discovery of a new oil field, the N. Blackland Field, in its concession in Osage County, Oklahoma, upon successfully testing of the 2-34 exploration well.

In May 2017, Bandolier discovered two new oil fields with the successful drilling of the W. Blackland 1-3 and S. Blackland 2-11 exploration wells. On December 15, 2017, the Company received permits from the Bureau of Indian Affairs to drill eight additional wells in the W. Blackland Field, which were successfully completed in April 2018. The Company’s W. Blackland concessions are currently producing, and, with the drilling of additional wells, the Company currently anticipates that its revenue will significantly increase throughout the remainder of the current fiscal year.

In addition to the Company’s current development plans, within its current 3-D seismic data, additional structures in Osage County have been identified. Assuming that it is able to obtain sufficient working capital, the Company currently plans to drill ten additional wells in calendar year 2019: seven in the N. Blackland Field, two in the Arsaga structure and one in the Section 13 structure. The Company anticipates financing the drilling of these wells using the cash flows from current production of its existing wells.

Our Objective

Our primary objective is to enhance shareholder value by increasing our net asset value, net reserves and cash flow through development, exploitation, exploration, and acquisition of oil and gas properties.

Our Strategy

We intend to follow a balanced risk strategy by allocating capital expenditures to a combination of lower risk development and high potential exploration prospects. Key elements of our business strategy include the following:

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Develop and exploit our existing oil and natural gas properties . Our principal growth strategy has been to explore, develop and exploit our acquired and leased properties to add proven reserves.

Pursue selective acquisitions . The Company has acquired leasehold positions that it believes contain substantial resource potential and meet its targeted returns on invested capital. Management intends to continue to pursue strategic acquisitions that meet the Company’s operational and financial targets. We seek to acquire developed and undeveloped oil and gas properties that will provide us with additional development and exploratory prospect opportunities. We may also acquire a working interest in one or more prospects from others and participate with the other working interest owners in drilling and, if warranted, completing oil or gas wells on a prospect. We may purchase producing oil or gas properties.

Use the latest 3-D seismic technology to maximize returns . Technical advances in imaging and modeling can lower risk and enhance productivity. The Company intends to utilize 3-D seismic and other technological advancements that benefit its exploratory and developmental drilling program.

Plan of Operation

The Company is currently engaged in oil and natural gas acquisition, exploration, development and production, with activities principally in Oklahoma in the United States, and Northern Ireland, Denmark and the U.K. in Western Europe. We focus on developing our existing properties, while continuing to pursue acquisitions of oil and gas properties with upside potential.

The Company intends to grow its resources and production through exploration activities and development of identified potential drilling locations, and through acquisitions that meet the Company’s strategic and financial objectives. Our plan includes:

Leveraging our management experience . The Company’s executive team, along with Horizon Energy, the Company’s operating partner, has extensive and proven experience in the oil and gas industry. We believe that the experience of our executive team will help reduce the time and cost associated with drilling and completing exploration and development of our conventional assets and potentially increasing recovery. Collectively, our management team and engineering professionals identify and evaluate acquisition opportunities, negotiate and close purchases and manage acquired properties. Our key management team possesses an average of over thirty years of experience in oil and gas exploration and production in multiple resource plays, including exploration and production in the Company’s core regions of Osage, Oklahoma, Kay County, Oklahoma, Liberty, Texas and the North Sea.

Leveraging our established business relationships . Our executive team, along with Horizon Energy, has many relationships with operators and service providers in our core asset regions. We believe that leveraging our relationships will provide us with a competitive advantage in developing our acreage and identifying acquisition targets.

De-risking our acreage position and build a vertical drilling program . The Company has identified a multi-year inventory of potential drilling locations that will drive reserves and production growth and provide attractive return opportunities. The Company views its Osage County, Kay County and Horizon Energy projects as de-risked because of the significant production history in the areas and well-established industry activity surrounding the acreage.

Partnership with Horizon Energy . Following the acquisition of Horizon Investments, the Company has, through its now wholly-owned subsidiary Horizon Investment, a 14.52% ownership in Horizon Energy, which includes a portfolio of several domestic and international oil and gas assets consisting of highly prospective conventional plays diversified across project type, geographic location and risk profile, as well as access to a broad network of industry leaders. On February 25, 2019, the Company purchased approximately 14.6% direct interest in Horizon Energy Acquisition, LLC, an entity controlled by Horizon Energy which is focused on an international, offshore oil and gas exploration project in the North Sea.

Competitive Strengths

Financial flexibility . Our capital structure and high degree of operational control continue to provide us with significant financial flexibility. On January 31, 2019, we entered into a Senior Secured Debt Exchange whereby we converted all our outstanding debt, including interest, into Series A Preferred shares. Following this restructuring, we have no corporate debt, enabling us to make capital decisions with no restrictions imposed by debt covenants, lender oversight and/or mandatory repayment schedules. Additionally, in concert with our partner, Horizon Energy, we control the majority of our anticipated future net drilling locations, including the timing and selection of drilling locations as well as completion schedules. This allows us to modify our capital spending program depending on financial resources, leasehold requirements and market conditions.

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Cost-efficient operators . In the past, our management team has shown an ability to drill wells in a cost-efficient way and to successfully integrate acquired assets without incurring significant increases in overhead.

History

The Company was originally incorporated under the Company Act (British Columbia) on February 8, 2000 under the name Brockton Capital Corp. We then changed our name to MegaWest Energy Corp. ( “MegaWest” ) effective February 27, 2010, before changing our name to Gravis Oil Corp. on June 20, 2011. On September 11, 2012, we re-organized under the laws of the State of Delaware. Prior to September 11, 2012, and at April 30, 2012, we were organized under the laws of Alberta, Canada.

Petro River Oil LLC (“ Petro ”), a wholly-owned subsidiary of MegaWest, was formed 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 play in the state of Kansas (“ Mississippi Assets ”). Effective December 23, 2015, Petro divested the Mississippi Assets. In connection with the divestiture, the assignee and purchaser of the Mississippi Assets agreed to pay outstanding liabilities, including unpaid taxes, and assume certain responsibilities to plug any abandoned wells. No cash consideration was paid for the interests.

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 in exchange for a capital contribution of $5.0 million (the “ Bandolier Acquisition ”). In connection with the Bandolier Acquisition, the Company had the right to appoint a majority of the board of managers of Bandolier. The Company’s Executive Chairman was a manager of, and owned a 20% membership interest in, Pearsonia West Investment Group, LLC (“ Pearsonia West ”), a special purpose vehicle formed for the purpose of investing in Bandolier with the Company and Ranger Station, LLC (“ Ranger Station ”). Concurrent with the Bandolier Acquisition, Pearsonia West 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 Pearsonia West’s investment in Bandolier, the Company and Pearsonia West entered into an agreement, dated May 30, 2014, granting the members of Pearsonia West 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 $16.00 per share, subject to adjustment (the “ Option ”). The Option was never exercised by the members of Pearsonia West. On November 6, 2017, the Company acquired all of Pearsonia West’s interest in Bandolier for 1,466,667 shares of the Company’s common stock and thereafter owned 100% interest in Bandolier.

Until the execution of the Contribution Agreement, described below, the Company had operational control along with a 50% ownership interest in Bandolier. As a result, the Company consolidated Bandolier. The remaining 50% non-controlling interest represented the equity investment from Pearsonia West and Ranger Station. The Company allocated the proportionate share of the net operating income/loss to both the Company and the non-controlling interest.

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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, the owner of oil and gas leases, leaseholds, lands, and options and concessions thereto located in Osage County, Oklahoma. Spyglass controlled a significant contiguous oil and gas acreage position in Northeastern Oklahoma, consisting of 87,754 acres, with substantial original oil in-place, stacked reservoirs, as well as exploratory and development opportunities that could be accessed through both horizontal and vertical drilling. Significant infrastructure was already in place, including 32 square miles of 3-D seismic, 3 phase power, a dedicated sub-station as well as multiple oil producing horizontal wells.

The Company recorded the purchase of Spyglass by Bandolier 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.

Acquisition and Dilution of Horizon Investments.

On December 1, 2015, the Company entered into a conditional purchase agreement with Horizon Investments (as amended, the “ Purchase Agreement ”), pursuant to which the Company acquired, on May 3, 2016, (i) a 20% membership interest in Horizon Energy; (ii) three promissory notes issued by the Company to Horizon Investments in the aggregate principal amount of $1.6 million (the “ Horizon Notes ”); (iii) approximately $690,000 held in escrow pending closing under the Purchase Agreement (the “ Closing Proceeds ”); and (iv) certain bank, investment and other accounts maintained by Horizon Investments, in an amount which, together with the principal amount of the Horizon Note and the Closing Proceeds, totaled not less than $5.0 million (collectively, the “ Purchased Assets ”). The consideration for the Purchased Assets was 11,564,249 shares of the Company’s common stock, $0.00001 par value (“ Common Stock ”) , which shares were issued to Horizon Investments at closing.

On February 2, 2018, Horizon Investments received from Horizon Energy a capital call in the amount of $600,227. Horizon Investments did not have the required funds to fund the capital call. The capital call was not mandatory and the consequence of Horizon Investments’ failure to fund the capital call was a dilution in Horizon Investments’ interest in Horizon Energy by 27.43%, therefore reducing Horizon Investments’ interest in Horizon Energy from 20.01% to 14.52%. Scot Cohen, a member of the Company’s Board of Directors, a substantial stockholder, and a member of Horizon Energy, participated with other Horizon Energy members to make the requested capital call in light of Horizon Investment’s inability to make the requested capital call. The determination not to make the requested capital call, and therefore allow Mr. Cohen to increase his membership interest in Horizon Energy, was discussed and approved by the independent members of the Company’s Board of Directors.

Acquisition of Membership Interest in LBE Partners, LLC

Competition

We operate in a highly competitive environment. We compete with major and independent oil and natural gas companies, many of whom have financial and other resources substantially in excess of those available to us. These competitors may be better positioned to take advantage of industry opportunities and to withstand changes affecting the industry, such as fluctuations in oil and natural gas prices and production, the availability of alternative energy sources and the application of government regulation.

Compliance with Government Regulation

The availability of a ready market for future oil and gas production from possible U.S. assets depends upon numerous factors beyond our control. These factors may include, amongst others, regulation of oil and natural gas production, regulations governing environmental quality and pollution control, and the effects of regulation on the amount of oil and natural gas available for sale, the availability of adequate pipeline and other transportation and processing facilities and the marketing of competitive fuels. These regulations generally are intended to prevent waste of oil and natural gas and control contamination of the environment.

We expect that our sales of crude oil and other hydrocarbon liquids from our future U.S.-based production will not be regulated and will be made at market prices. However, the price we would receive from the sale of these products may be affected by the cost of transporting the products to market via pipeline.

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Environmental Regulations

Our U.S. assets are subject to numerous laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may require the acquisition of a permit before drilling commences; restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities; limit or prohibit drilling activities on certain lands within wilderness, wetlands and other protected areas; require remedial measures to mitigate pollution from former operations, such as pit closure and plugging abandoned wells; and impose substantial liabilities for pollution resulting from production and drilling operations. Public interest in the protection of the environment has increased dramatically in recent years. The worldwide trend of more expansive and stricter environmental legislation and regulations applied to the oil and natural gas industry could continue, resulting in increased costs of doing business and consequently affecting profitability. To the extent laws are enacted or other governmental action is taken that restricts drilling or imposes more stringent and costly waste handling, disposal and cleanup requirements, our business and prospects could be adversely affected.

Operating Hazards and Insurance

The oil and natural gas business involves a variety of operating hazards and risks such as well blowouts, craterings, pipe failures, casing collapse, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, formations with abnormal pressures, pipeline ruptures or spills, pollution, releases of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to us from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations.

In accordance with customary industry practices, we expect to maintain insurance against some, but not all, of such risks and losses. There can be no assurance that any insurance we obtain would be adequate to cover any losses or liabilities. We cannot predict the continued availability of insurance or the availability of insurance at premium levels that justify its purchase. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect our financial condition and operations.

Pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our future financial condition. If we were unable to obtain adequate insurance, we could be forced to participate in all of our activities on a non-operated basis, which would limit our ability to control the risks associated with oil and natural gas operations.

Employees

At April 30, 2019, we employed four full-time employees and two part-time employees. We also retained several consultants to provide both operational, investor relations and marketing support.

Geographical Area of the Company’s Business

The principal market that we compete in is the North American and Western Europe. The Company is currently contemplating expansion into additional international energy markets via its investments in Horizon Energy.

I T EM 1A. RISK FACTORS

You should carefully consider the following risk factors, in addition to the other information set forth in this Report, in connection with any investment decision regarding shares of our common stock. Each of these risk factors could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our common stock. Some information in this Report may contain “forward-looking” statements that discuss future expectations of our financial condition and results of operation. The risk factors noted in this section and other factors could cause our actual results to differ materially from those contained in any forward-looking statements.

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Risks Relating to Our Business

Our results of operations as well as the carrying value of our oil and gas properties are substantially dependent upon the prices of oil and natural gas. In the event the prices for oil and natural gas decrease, our results of operations could be adversely affected, and our ability to continue our planned development and acquisition activities could be substantially curtailed.

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

We own certain assets unrelated to our traditional oil and gas properties. The acquired technologies are in development stage, have not been proven, and require additional capital to develop. We may not be able to successfully raise sufficient capital or otherwise successfully develop these technology assets.

In 2015, we purchased certain assets to produce gasoline-like liquid and high-purity hydrogen from natural gas, at low temperature and at low pressure, as well as to reduce the methane from coal mines and other wells. The purchased assets require additional capital or a strategic partner in order to develop. Management currently intends to defer development of these assets while it focuses on its drilling activities. No assurances can be given that the Company will be able to successfully raise sufficient capital to develop the assets, or otherwise find a strategic or development partner to develop the same. In addition, the purchased assets are in the development stage and are unproven, and no assurances can be given that we will be able to commercialize the assets.

We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.

We have received a limited amount of revenue from operations and have limited assets. To date, we have acquired certain interests in oil and gas properties, but have only recently developed and commenced production of wells drilled on those properties. Furthermore, although we have announced additional oil field discoveries in the last year with the potential to generate commercial revenue, there can be no assurance that they will yield significant production. We have a limited operating history. Our success is significantly dependent on a successful acquisition, drilling, completion and production program. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate additional recoverable reserves or operate on a profitable basis. Since we are principally in the exploration stage, with minimal development and production activities, potential investors should be aware of the difficulties normally encountered by enterprises in the exploration stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment.

Our independent auditors’ report for the fiscal years ended April 30, 2019 and 2018 have expressed doubts about our ability to continue as a going concern

Due to the uncertainty of our ability to meet our current operating and capital expenses, in our audited annual financial statements as of and for the years ended April 30, 2019 and 2018 our independent auditors included a note to our financial statements regarding concerns about our ability to continue as a going concern . The Company has incurred recurring losses and has generated limited revenue since inception. These factors and the need for additional financing in order for the Company to meet its business plan, raise substantial doubt about the ability to continue as a going concer n. The presence of the going concern note to our financial statements may have an adverse impact on the relationships we are developing and plan to develop with third parties as we continue the commercialization of our products and could make it challenging and difficult for us to raise additional financing, all of which could have a material adverse impact on our business and prospects and result in a significant or complete loss of your investment.

Because we are small and have a limited amount of capital, we may have to limit our exploration and development activity, which may result in a loss of your investment.

Because we are small and our capital available for operations is limited, we must limit our exploration and development activity. As such, we may not be able to complete an exploration and development program that is as thorough as we would like. In that event, existing reserves may go undiscovered and undeveloped. Without additional capital, we cannot generate sufficient revenue and you may lose your investment.

We had cash and cash equivalents at April 30, 2019 and 2018 of $1,214,858 and $47,330, respectively. At April 30, 2019, we had working capital of approximately $170,000. We are dependent on obtaining, and are continuing to pursue, the necessary funding from outside sources, including obtaining additional funding from the sale of securities in order to continue our operations. Without adequate funding, we may not be able to meet our obligations. To further develop the Company’s assets, management currently intends to raise additional capital through debt and equity instruments.

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Exploratory drilling is a speculative activity that may not result in commercially productive reserves and may require expenditures in excess of budgeted amounts.

Drilling activities are subject to many risks, including the risk that no commercially productive oil or gas reservoirs will be encountered. There can be no assurance that new wells drilled by us or in which we have an interest will be productive or that we will recover all or any portion of our investment. Drilling for oil and gas may involve unprofitable efforts, not only from dry wells, but also from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. The cost of drilling, completing and operating wells is often uncertain. Our drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, many of which are beyond our control, including economic conditions, mechanical problems, pressure or irregularities in formations, title problems, weather conditions, compliance with governmental requirements and shortages in or delays in the delivery of equipment and services. Such equipment shortages and delays sometimes involve drilling rigs where inclement weather prohibits the movement of land rigs causing a high demand for rigs by a large number of companies during a relatively short period of time. Our future drilling activities may not be successful. Lack of drilling success could have a material adverse effect on our financial condition and results of operations.

Our operations are also subject to all of the hazards and risks normally incident to the development, exploitation, production and transportation of, and the exploration for, oil and gas, including unusual or unexpected geologic formations, pressures, down hole fires, mechanical failures, blowouts, explosions, uncontrollable flows of oil, gas or well fluids and pollution and other environmental risks. These hazards could result in substantial losses to us due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. Insurance for wells in which we participate is generally obtained, although there can be no assurances that such coverage will be sufficient to prevent a material adverse effect to us if any of the foregoing events occur.

We may not identify all risks associated with the acquisition of oil and natural gas properties, or existing wells, and any indemnifications we receive from sellers may be insufficient to protect us from such risks, which may result in unexpected liabilities and costs to us.

Our business strategy focuses on acquisitions of undeveloped and unproven oil and natural gas properties that we believe are capable of production. We may make additional acquisitions of undeveloped oil and gas properties from time to time, subject to available resources. Any future acquisitions will require an assessment of recoverable reserves, title, future oil and natural gas prices, operating costs, potential environmental hazards, potential tax and other liabilities and other factors.

Generally, it is not feasible for us to review in detail every individual property involved in a potential acquisition. In making acquisitions, we generally focus most of our title and valuation efforts on the properties that we believe to be more significant, or of higher-value. Even a detailed review of properties and records may not reveal all existing or potential problems, nor would it permit us to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. In addition, we do not inspect in detail every well that we acquire. Potential problems, such as deficiencies in the mechanical integrity of equipment or environmental conditions that may require significant remedial expenditures, are not necessarily observable even when we perform a detailed inspection. Any unidentified problems could result in material liabilities and costs that negatively impact our financial condition and results of operations.

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

We are and will continue to be subject to various operating and other casualty risks that could result in liability exposure or the loss of production and revenue.

Our oil and gas business involves a variety of operating risks, including, but not limited to, unexpected formations or pressures, uncontrollable flows of oil, gas, brine or well fluids into the environment (including groundwater contamination), blowouts, fires, explosions, pollution and other risks, any of which could result in personal injuries, loss of life, damage to properties and substantial losses. Although we carry insurance at levels that we believe are reasonable, we are not fully insured against all risks. We do not carry business interruption insurance. Losses and liabilities arising from uninsured or under-insured events could have a material adverse effect on our financial condition and operations.

The cost of operating wells is often uncertain. Our drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including title problems, weather conditions, compliance with governmental requirements and shortages or delays in the delivery of equipment. Furthermore, completion of a well does not assure a profit on the investment or a recovery of drilling, completion and operating costs.

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We face significant competition, and many of our competitors have resources in excess of our available resources.

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

Strategic relationships upon which we may rely are subject to change, which may diminish our ability to conduct our operations.

Our ability to successfully acquire additional properties, to discover and develop reserves, to participate in drilling opportunities and to identify and enter into commercial arrangements with customers will depend on developing and maintaining close working relationships with industry participants and on our ability to select and evaluate suitable properties and to consummate transactions in a highly competitive environment. These realities are subject to change and may impair our ability to grow.

To develop our business, we will endeavor to use the business relationships of our management to enter into strategic relationships, which may take the form of joint ventures with other private parties and contractual arrangements with other oil and gas companies, including those that supply equipment and other resources that we will use in our business. We may not be able to establish these strategic relationships, or if established, we may not be able to maintain them. In addition, the dynamics of our relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to in order to fulfill our obligations to these partners or maintain our relationships. If our strategic relationships are not established or maintained, our business prospects may be limited, which could diminish our ability to conduct our operations.

We may not have satisfactory title or rights to all of our current or future properties.

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

We may be responsible for additional costs in connection with abandonment of properties.

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

Governmental regulations could adversely affect our business.

Our business is subject to certain federal, state and local laws and regulations on taxation, the exploration for, and development, production and marketing of, oil and natural gas, and environmental and safety matters. Many laws and regulations require drilling permits and govern the spacing of wells, rates of production, prevention of waste and other matters. These laws and regulations have increased the costs of our operations. In addition, these laws and regulations, and any others that are passed by the jurisdictions where we have production, could limit the total number of wells drilled or the allowable production from successful wells, which could limit our revenue.

Our interests in the Horizon Entities could be adversely affected as a result of Britain’s vote to leave the European Union.

In June 2016 the United Kingdom voted to exit the European Union (“ EU ”). This event is now popularly referred to as “Brexit”. The Company has exposure to Brexit through its investment in Horizon Energy and Horizon Energy Acquisition, LLC (collectively, " Horizon Entities "). While management considers the risk relating to Brexit from licenses held by the Horizon Entities not to be significant, including from certain supplies for UK licenses which are obtained from European Union suppliers outside of the UK, there is a possibility for either customs-related delays or tariffs. In addition, should Brexit create a reduction in the value of the British Pound Sterling against the US Dollar, such a result may have an impact on future revenue and expense. While management acknowledges that Brexit does present some risk to its business in the UK, these risks are manageable, and the resulting impact is unlikely to have a material impact on the Company.

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Laws and regulations relating to our business frequently change, and future laws and regulations, including changes to existing laws and regulations, could adversely affect our business.

In particular and without limiting the foregoing, various tax proposals currently under consideration could result in an increase and acceleration of the payment of federal income taxes assessed against independent oil and natural gas producers, for example by eliminating the ability to expense intangible drilling costs, removing the percentage depletion allowance and increasing the amortization period for geological and geophysical expenses. Any of these changes would increase our tax burden.

All states in which the Company owns leases require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration for and production of oil and gas. Such states also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and gas properties, the establishment of maximum rates of production from wells and the regulation of spacing, plugging and abandonment of such wells. The statutes and regulations of these states limit the rate at which oil and gas can be produced from our properties. However, we do not believe we will be affected materially differently by these statutes and regulations than any other similarly situated oil and gas company.

Environmental liabilities could adversely affect our business.

In the event of a release of oil, natural gas or other pollutants from our operations into the environment, we could incur liability for any and all consequences of such release, including personal injuries, property damage, cleanup costs and governmental fines. We could potentially discharge these materials into the environment in several ways, including:

●

from a well or drilling equipment at a drill site;

●

leakage from gathering systems, pipelines, transportation facilities and storage tanks;

	●	damage to oil and natural gas wells resulting from accidents during normal operations; and

	●	blowouts, cratering and explosions.

In addition, because we may acquire interests in properties that have been operated in the past by others, we may be liable for environmental damage, including historical contamination, caused by such former operators. Additional liabilities could also arise from continuing violations or contamination that we have not yet discovered relating to the acquired properties or any of our other properties.

To the extent we incur any environmental liabilities, it could adversely affect our results of operations or financial condition.

Climate change legislation, regulation and litigation could materially adversely affect us.

There is an increased focus by local, state and national regulatory bodies on greenhouse gas (“ GHG ”) emissions and climate change. Various regulatory bodies have announced their intent to regulate GHG emissions, including the United States Environmental Protection Agency, which promulgated several GHG regulations in 2010 and late 2009. As these regulations are under development or are being challenged in the courts, we are unable to predict the total impact of these potential regulations upon our business, and it is possible that we could face increases in operating costs in order to comply with GHG emission legislation.

Passage of legislation or regulations that regulate or restrict emissions of GHG, or GHG-related litigation instituted against us, could result in direct costs to us and could also result in changes to the consumption and demand for natural gas and carbon dioxide produced from our oil and natural gas properties, any of which could have a material adverse effect on our business, financial position, results of operations and prospects.

Risks Relating to Our Financial Position and Capital Requirements

We will require additional capital to execute our business plan. If we are unable to obtain funding, our business operations will be harmed.

We will require additional capital to execute our business plan, further expand our exploration and continue with our development programs. We may be unable to obtain additional capital required. Furthermore, inability to maintain capital may damage our reputation and credibility with industry participants. Our inability to raise additional funds when required would have a negative impact on our consolidated results of operations and financial condition.

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Future acquisitions and future exploration, development, production, leasing activities and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.

We may pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing or other means. We may not be successful in raising the capital needed and we may not obtain the capital we require by other means. This would adversely affect our consolidated financial results and financial condition.

We have a history of losses, which may continue, which may negatively impact our ability to achieve our business objectives.

We generated total revenue of $1,622,077 and $723,409 for the years ended April 30, 2019 and 2018, respectively, generated from oil and gas sales. In addition, we recorded royalty revenue of $23,093 and $0 for the years ended April 30, 2019 and 2018, respectively. We incurred a net loss of $5,501,966 and $20,337,681 for the years ended April 30, 2019 and 2018, respectively. To date, we have acquired interests in oil and gas properties, but have only recently developed and commenced production of wells drilled on those properties. Furthermore, although we have announced additional oil field discoveries in the last year with the potential to generate commercial revenue, there can be no assurance that they will yield significant production. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable. Revenue and profits, if any, will depend upon various factors, including whether we will be able to continue expansion of our revenue. We may not achieve our business objectives, and the failure to achieve such goals would have an adverse impact on us.

As our properties are in early stages of development, we may not be able to establish commercial reserves on these projects, and/or such projects may not result in sufficient reserves to fund future operations and/or development activities. Exploration for commercial reserves of oil is subject to a number of risk factors. Few of the properties that are explored are ultimately developed into producing oil and/or gas fields. Since we may not be able to establish commercial reserves, we are therefore considered to be an exploration stage company.

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

Our future financial condition, access to capital, cash flows and results of operations depend upon the prices we receive for our oil and natural gas. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. Factors that affect the prices we receive for our oil and natural gas include:

	●	the level of domestic production;

	●	the availability of imported oil and natural gas;

	●	political and economic conditions and events in foreign oil and natural gas producing nations, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, and acts of terrorism or sabotage;

	●	the ability of members of OPEC to agree to and maintain oil price and production controls;

	●	the cost and availability of transportation and pipeline systems with adequate capacity;

	●	the cost and availability of other competitive fuels;

	●	fluctuating and seasonal demand for oil, natural gas and refined products;

	●	concerns about global warming or other conservation initiatives and the extent of governmental price controls and regulation of production;

	●	weather;

	●	foreign and domestic government relations; and

	●	overall economic conditions.

Any prolonged decline in oil or gas prices could have a material adverse effect on our operations, financial condition, and level of development and exploration expenditures and could result in a reduction in the carrying value of our oil and gas properties.

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Risks Related to Our Common Stock

The liquidity, market price and volume of our stock are volatile.

Our common stock is not traded on any exchange, but is currently quoted on the OTC Pink Marketplace (“ OTC Pink ”). The liquidity of our common stock may be adversely affected, and purchasers of our common stock may have difficulty selling our common stock, particularly if our common stock does not continue to be quoted on the OTC Pink or another recognized quotation services or exchange.

The trading price of our common stock could be subject to wide fluctuations in response to quarter-to-quarter variations in our operating results, announcements of our drilling results and other events or factors. In addition, the U.S. stock markets have from time to time experienced extreme price and volume fluctuations that have affected the market price for many companies and which often have been unrelated to the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our securities.

Our stock is categorized as a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our stock.

Our stock is categorized as a “penny stock.” The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“ FINRA ”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We may issue preferred stock in the future with rights senior to our common stock, and the terms of the preferred stock may reduce the value of your common stock.

We are authorized to issue up to 5,000,000 shares of preferred stock in one or more series, of which, 29,500 shares of have been designated as Series B Convertible Preferred Stock and 500,000 shares have been designated as Series A Convertible Preferred Stock. Our Board of Directors may determine the terms of future preferred stock offerings without further action by our stockholders. If we issue additional share of preferred stock, it could affect your rights or reduce the value of your common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with or sell our assets to a third party. Preferred stock terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions.

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We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

We have paid no cash dividends on any of our classes of capital stock to date and currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Any payment of cash dividends will depend upon our financial condition, contractual restrictions, financing agreement covenants, solvency tests imposed by corporate law, results of operations, anticipated cash requirements and other factors and will be at the discretion of our Board of Directors. Furthermore, we may incur indebtedness that may severely restrict or prohibit the payment of dividends.

IT E M 1B. UNRESOLVED STAFF COMMENTS

None.

IT E M 2. PROPERTIES

Kern County

On March 4, 2016, the Company executed an Asset Purchase and Sale and Exploration Agreement (the “ Kern Agreement ”) to acquire a 13.7% working interest in certain oil and gas leases in 5,000 gross acres located in southern Kern County, California (the “ Project ”). Horizon Energy also purchased a 27.5% working interest in the Project.

Under the terms of the Kern Agreement, the Company paid $108,333 to the sellers on the closing date, and was obligated to pay certain other costs and expenses after the closing date related to existing and new leases as more particularly set forth in the Kern Agreement. In addition, the sellers were entitled to an overriding royalty interest in certain existing and new leases acquired after the Closing Date, and the Company was required to make certain other payments, each in amounts set forth in the Kern Agreement.

On July 18, 2017, the Company announced a new oil field discovery in its Sunset Boulevard prospect in Kern County, California upon successfully drilling the Cattani-Rennie 47X-15 exploration well (“ CR 47X ”). The CR 47X was drilled to a depth of approximately 8,500 feet and confirmed at least two commercially successful pay zones.

In February 2018, the Company transferred its working interest in the Kern County prospect for additional interests in Oklahoma, as more particularly discussed below, but retained an overriding royalty interest in the project. Horizon Energy’s interests in Kern County were not affected by the transaction.

Kay County

On February 14, 2018, the Company entered into a Purchase and Exchange Agreement with Red Fork, pursuant to which (i) the Company agreed to convey to Mountain View Resources, LLC, an affiliate of Red Fork, 100% of its 13.7% working interest in and to the project in Kern County, California, and (ii) Red Fork agreed to convey to the Company 64.7% of its 85% working interest in and to an AMI situated in Kay County, Oklahoma (the “ Red Fork Exchange ”). The fair value of the assets acquired was $108,333 as of the date of the Agreement. Following the Red Fork Exchange, the Company and Red Fork each retained a 2% overriding royalty interest in the projects that they respectively conveyed.

The acquisition of the additional concessions in Kay County, Oklahoma added additional prospect locations adjacent to the Company’s 87,754-acre concession in Osage County, Oklahoma. The similarity of the prospects in Kay and Kern County allows for the leverage of assets, infrastructure and technical expertise.

Osage County

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 87,754 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 3-D seismic, 3 phase power, a dedicated sub-station as well as multiple oil producing horizontal wells.

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In May 2017, Bandolier discovered a new oil field with the successful drilling of the W. Blackland 1-3 and S. Blackland 2-11 exploration wells. On December 15, 2017, the Company received permits from the Bureau of Indian Affairs to drill eight additional wells in the W. Blackland Field, which were successfully completed in April 2018. The Company has received additional permits, and is currently in the process of drilling an additional two wells. Our W. Blackland concessions are currently producing, and, with the drilling of additional wells, we anticipate substantially increasing revenue throughout the remainder of the current fiscal year.

On May 22, 2018, the Company announced the discovery of a new oil field, the N. Blackland Field, in its concession in Osage County, Oklahoma upon successfully testing of the 2-34 exploration well (the “ 2-34 ”). The 2-34 was drilled to a depth of approximately 2,850 feet, and initial results indicate both Mississippian Chat and Burges formations were discovered and have been comingled to increase production rates. The N. Blackland Field is approximately 200 acres, and the Company expects to drill an additional eight to ten wells to develop the structure. This structure was identified using 3-D seismic technology. This development project is anticipated to result in production revenue prior to the end of the current fiscal year.

On July 24, 2018, the Company announced the successful drilling of the Arsaga 25-2 exploration well, located on its concession in Osage County, Oklahoma. In April of 2019, the Company successfully completed the West Blackland 3-35 well, in addition to the West Blackland 4-34, and South Red Eagle 1-34, located on its concession in Osage County, Oklahoma.

In addition to our current development plans, within our current 3-D seismic data, additional structures in Osage County have been identified. The Company plans to drill seven additional wells in calendar years 2019 & 2020: three in the N. Blackland Field, three in the Arsaga structure and one in the Section 13 structure. The Company anticipates drilling these wells out of cash flows from current production of its existing wells.

The Osage County drilling program is the result of a Joint Exploration and Development Agreement (the “ Exploration Agreement ”), dated August 19, 2016, between Spyglass, Phoenix 2016, LLC (“ Phoenix ”) and Mackey Consulting & Leasing, LLC (“ Mackey ”). Pursuant to the Exploration Agreement, Phoenix and Mackey operate and provide certain services, including obtaining permits and providing technical services, at cost, in connection with a Phase I Development Program as agreed to by the parties (the “ Phase I Program ”). Phoenix and Mackey will earn a 25% working interest on all wells drilled in the Phase I Program. Following success and completion of the Phase I Program, Phoenix and Mackey shall earn a 25% working interest in the Osage County, Oklahoma Concession held by Spyglass. Under the Exploration Agreement, Bandolier has agreed commit up to $2.1 million towards costs of the Phase I Program, which has been completed.

As discussed above, in connection with the Series A Financing, Bandolier entered into Assignment Agreements with each of the New Investors and Debt Holders, pursuant to which (i) Bandolier assigned and transferred to the New Investors and Debt Holders a 75% interest in profits, if any, derived from the ten new wells the Company plans to drill in the Osage County concession in 2019, payments of which shall be made to the New Investors and Debt Holders, pro rata, on a quarterly basis following the full completion of the New Drilling Program, and (ii) in the event the Company elects to drill additional wells on its Osage County concession in the next two years, the New Investors and Debt Holders shall have the right to participate in and fund the drilling and production of the next ten wells on the same terms and conditions set forth in the Assignment Agreements.

In connection with each of the $2.0 million and $2.5 million secured note financings consummated on June 13, 2017 and November 6, 2017, respectively, the Company issued an overriding royalty interest equal to 2% in all production from the Company’s interest in the Company’s concessions located in Osage County, Oklahoma.

As a result of the above transactions, the Company currently has approximately $4.7 million in oil and gas assets in Osage County.

Horizon Energy

Horizon Energy Acquisition . On May 3, 2016, the Company consummated the acquisition of Horizon Investments. As a result of the acquisition, the Company acquired: (i) a 20% membership interest in Horizon Energy; (ii) three promissory notes issued by the Company to Horizon Investments in the aggregate principal amount of $1.6 million (the “ Horizon Notes ”); (iii) approximately $690,000 (the “ Closing Proceeds ”); and (iv) certain bank, investment and other accounts maintained by Horizon Investments , in an amount which, together with the principal amount of the Horizon Note and the Closing Proceeds, totaled not less than $5.0 million (collectively, the “ Purchased Assets ”) (the “ Horizon Acquisition ”). The Horizon Acquisition was completed in accordance with the terms and conditions set forth in the Conditional Purchase Agreement first entered into by the Company and Horizon Investments on December 1, 2015 (the “ Purchase Agreement ”). Also, on the May 3, 2016, the Company and Horizon Investments entered into an amended and restated Purchase Agreement, pursuant to which the Company agreed to provide for additional advances by Horizon Investments to the Company.

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As consideration for the Horizon Acquisition, and in accordance with the Purchase Agreement, as amended, the Company issued 11,564,249 shares of its common stock to Horizon Investments on the Closing Date, which amount included 1,395,916 additional shares of common stock in consideration for the additional cash, receivables and other assets reflected on Horizon Investment’s balance sheet on the May 3, 2016.

Horizon Energy is an oil and gas exploration and development company owned and managed by former senior oil and gas executives with access to a broad network of industry insiders. It has a portfolio of domestic and international assets, including two assets located in the United Kingdom, adjacent to the giant Wytch Farm oil field, the largest onshore oil field in Western Europe. Each of the assets in the Horizon Energy portfolio is characterized by low initial capital expenditure requirements and strong risk reward characteristics.

LBE Partners LLC

Effective on September 24, 2018, the Company acquired a 66.67% membership interest in LBE Partners from ICO in exchange for 300,000 restricted shares of the Company’s common stock. LBE Partners has varying working interest in multiple oil and gas producing wells located in the Hardin Field, Texas.

As a result of the above transactions, the Company currently has approximately $1.2 million in oil and gas assets in Texas.

Operational and Project Review

The following table summarizes the costs incurred in oil and gas property acquisition, exploration, and development activities for the Company for the years ended April 30, 2019 and 2018:

Cost	Oklahoma	Texas	Larne Basin	Other (1)	Total
Balance, May 1, 2017	$ 1,232,192	$ -	$ 761,444	$ 100,000	$ 2,093,636
Additions	3,665,851	-	-	-	3,665,851
Depreciation, depletion and amortization	(146,141 )	-	-	-	(146,141 )
Impairment of oil and gas assets	(972,488 )	-	(761,444 )	-	(1,733,932 )
Balance, April 30, 2018	3,779,414	-	-	100,000	3,879,414
Additions	1,307,720	2,431,419	-	-	3,739,139
Depreciation, depletion and amortization	(380,873 )	(283,974 )	-	-	(494,295 )
Impairment of oil and gas assets	-	(984,774 )	-	-	(664,847 )
Balance, April 30, 2019	$ 4,706,261	$ 1,162,707	$ -	$ 100,000	$ 5,968,968

(1)	Other property consists primarily of four, used steam generators and related equipment that will be assigned to future projects. As of April 30, 2019 and 2018, management concluded that impairment was not necessary as all other assets were carried at salvage value.

For the year ended April 30, 2019, the Company recognized an impairment charge of $984,774 on the Texas assets. For the year ended April 30, 2018, the Company performed a ceiling test and recognized impairment charges of $972,488 on the Oklahoma assets. In addition, the Company recognized an impairment charge of $761,444 on the Larne Basin assets.

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Oil Wells, Properties, Operations, and Acreage

The following table sets forth the number of oil wells in which we held a working interest as of April 30, 2019 and 2018:

	Producing				Non-Producing
	April 30, 2019		April 30, 2018		April 30, 2019		April 30, 2018
	Gross	Net	Gross	Net	Gross	Net	Gross	Net

Osage County, OK	15	15	12	12	56	56	42	42
Kay County, OK	-	-	-	-	-	-	-	-
Texas	3	3	-	-	10	10	-	-
Total	18	18	12	12	66	66	42	42

The following table sets forth the lease acreage we have an interest in, by area, as of April 30, 2019 and 2018:

Project Areas	April 30, 2019		April 30, 2018
	Gross	Net	Gross	Net

Larne Basin	-	-	-	-
Kern County	-	-	-	-
Osage County, OK	87,754	65,816	87,754	65,816
Kay County, OK	-	-	-	-
Texas (1)	9,685	8,681	-	-
Total	97,439	74,497	87,754	65,816

(1)	Management concluded that as of April 30, 2019, the Texas assets were impaired by $984,774.

Oil and Natural Gas Reserves

Oil and natural gas information is provided in accordance with ASC Topic 932 - “ Extractive Activities - Oil and Gas. ”

The Company had approximately $5.9 million and $9.9 million in proven and probable oil and gas reserves as of April 30, 2019 and 2018, respectively. For the year ended April 30, 2019 the reports by Cawley, Gillespie & Associates (“ CGA ”) covered 100% of the Company’s oil reserves.

Proved oil and natural gas reserves, as defined within 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.

Our undeveloped acreage includes leased acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas, regardless of whether or not such acreage is held by production or contains proved reserves. A gross acre is an acre in which we own an interest. A net acre is deemed to exist when the sum of fractional ownership interests in gross acres equals one. The number of net acres is the sum of the fractional interests owned in gross acres.

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Net Production, Unit Prices and Costs

The following table presents certain information with respect to our oil and natural gas production and prices and costs attributable to all oil and natural gas properties owned by us for the periods shown.

	For the Years Ended April 30,
	2019	2018
Production volumes:
Oil (Bbls)	29,935	12,054
Natural gas (Mcf)	22,802	5,893
Total (Boe)	33,735	13,036
Average realized prices:
Oil (per Bbl)	$ 52.66	$ 59.16
Natural gas (per Mcf)	$ 2.00	$ 1.75
Total per Boe	$ 48.08	$ 55.49
Average production cost:
Total per Boe	$ 12.34	$ 1.41

Drilling and Other Exploratory and Development Activities

Osage County, OK . The Company plans to drill seven additional wells in 2019: three in the N. Blackland Field, three in the Arsaga structure and one in the Section 13 structure. Each well will cost the Company approximately $200,000 . The Company anticipates drilling these wells out of funds received in connection with the Series A Financing as well as cash flows from current production of its existing wells.

Liberty, Texas – In September 2018, the Company acquired a 66.67% membership interest in LBE Partners. LBE Partners has varying working interests in multiple oil and gas producing wells located in the Hardin Field in Texas. The Company currently anticipates that this acquisition will provide additional positive cashflow to the Company and increase its oil and gas asset portfolio.

The Company’s Direct Working Interest Projects

Pearsonia West – Osage County, Oklahoma . The Company is pursuing its core strategy in this well-known basin, drilling vertical wells in relatively shallow conventional legacy reservoirs using modern 3-D seismic surveys. The Company has acquired approximately 87,754 acres in Osage County in an area that was the focus of a deeper horizontal play and is reprocessing 36 square miles of 3-D seismic data to refocus on a shallow (3,000 to 4,000 ft.) vertical program. The Company is targeting the Mississippian-aged Chat formation and Pennsylvanian-aged formations. Pearsonia West is a low-cost conventional project surrounded by 800 million barrels of historical production. The Company plans to drill up to 10 vertical development wells this year at a cost of $200,000 per well, and up to 3 exploration wells at a cost of $200,000 per well. The Company has drilled three development wells as of July 30, 2019.

Kay County, Oklahoma - In February 2018, the Company, through an exchange transaction and no cash consideration, acquired a 55% interest in an exploration project in Kay County, Oklahoma, the county adjoining and just to the west Osage County, the Company’s current core area. The acquisition included rights to newly reprocessed 50 square mile 3D seismic survey. The primary exploration objectives are the Pennsylvanian-aged Red Fork channels. Historically these have been prolific producers in nearby fields.

Horizon Energy Projects

Denmark Offshore. The Denmark project is a prospective, underexplored oil basin on trend with the major oil and gas fields offshore in Norway and the United Kingdom. We are currently evaluating the four licenses awarded in the year ended April 30, 2018 to Ardent Oil Denmark (“ Ardent ”) (Horizon Energy owns 50% of Ardent). Horizon Energy is in the process of interpreting the high-quality 3-D seismic survey we acquired last year. Ardent will thereafter commence marketing efforts to farm-out the prospect to a major oil company. The other three licenses are being high-graded and are in various stages of evaluation.

Dorset, U.K. Onshore . The Dorset project is south of and adjacent to the giant Wytch Farm oil field, the largest onshore oil field in Western Europe, which has produced approximately 500 million barrels of oil and 175 billion cubic feet of natural gas since production first began in 1979. Horizon Energy was recently awarded two onshore blocks. Seven wells were previously drilled within the license area, including the first UK offshore well in 1963 on Lulworth Banks. Six of these wells encountered oil or gas shows and three flowed oil or gas on test. A new 3-D seismic survey is planned in calendar year 2019 over new blocks to more clearly image prospects/leads identified on older 2-D data.

Horizon Energy Acquisition, LLC

North Sea U.K. ("The U.K. Project"). The U.K. Project includes three (3) Seaward Production Licenses (P2300, P2329, and P2427, collectively, the "Licenses"), encompassing approximately 455,000 net acres with the potential of being awarded a fourth license adjacent to the Licenses comprising approximately 150,000 net acres. These licenses are located in the heart of a large Zechstein and Carboniferous exploration trend on the Mid North Sea High in the UK southern North Sea. Horizon Energy is in the process of sponsoring a new3-D seismic survey to be acquired commencing in the early 2nd quarter of 2019 covering the Mid North Sea High area. Petro River has a 14.52% direct interest in Horizon Energy Acquisition.

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I T EM 3. LEGAL P ROCEEDINGS

(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. The Landlord subsequently terminated the lease.

On January 30, 2014, the landlord filed a Statement of Claim against the Company for rental arrears in the amount aggregating CAD $759,000 (approximately USD $564,000 as of April 30, 2019). The Company filed a defense and on October 20, 2014, it 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 CAD $665,000 (approximately USD $494,000 as of April 30, 2019). The applications were heard on June 25, 2015 and the court allowed both the Company’s summary judgment application and the landlord’s amendment application. Both of these orders were appealed though two levels of the Alberta courts and the appeals were dismissed at both levels. The net effect is that the landlord's claim for loss of prospective rent is to proceed. On October 4, 2018, the Company and the landlord entered into a settlement agreement under which all actions by the landlord and the Company were dismissed for a payment by the Company to the landlord of 68,807 shares of its common stock.

(b) In September 2013, the Company was notified by the Railroad Commission of Texas (the “ Railroad Commission ”) that the Company was not in compliance with regulations promulgated by the Railroad 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 Railroad Commission therefore collected $25,000 from the Company, which was originally deposited with the Railroad Commission, to cover a portion of the estimated costs of $88,960 to plug the wells. In addition to the above, the Railroad 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 Spyglass, 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, 2014 Amended Complaint on various procedural and legal grounds. Following the significant briefing, the Court, on March 31, 2016, granted the Motion to Dismiss as to all defendants and entered a judgment in favor of the defendants against the plaintiffs. On April 14, 2016, Spyglass with the other defendants, filed a Motion seeking its attorneys’ fees and costs. The motion remains pending. On April 28, 2016, the Plaintiffs filed three motions: a Motion to Amend or Alter the Judgment; a Motion to Amend the Complaint; and a Motion to Vacate Order. On November 23, 2016, the Court denied all three of Plaintiffs’ motions. On December 6, 2016, the Plaintiffs filed a Notice of Appeal to the Tenth Circuit Court of Appeals. That appeal is pending as of the filing date of these financial statements. There is no specific timeline by which the Court of Appeals must render a ruling. Spyglass intends to continue to vigorously defend its interest in this matte r.

(d) MegaWest Energy Missouri Corp. (“ MegaWest Missouri ”), 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. MegaWest Energy Missouri and Petro River Oil Corp. , case number 13B4-CV00019) is a case for unlawful detainer, pursuant to which the plaintiffs contend that the MegaWest Missouri oil and gas lease has expired and MegaWest Missouri 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. MegaWest Missouri filed an Answer and Counterclaims on November 26, 2013, and the plaintiffs filed a motion to dismiss the counterclaims. MegaWest Missouri filed a motion for Change of Judge and Change of Venue and the case was transferred to Barton County, Missouri. The court granted the motion to dismiss the counterclaims on February 3, 2014.

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.

IT E M 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

I T EM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Shares of our common stock trade in the United States on the OTC Pink Marketplace under the symbol “PTRC.”

Holders

As of August 12, 2019, we had 166 holders of record of our registered common stock, and our common stock had a closing bid price of $0.30 per share.

Transfer Agent and Registrar

Our transfer agent is Computershare, Inc., located at 462 South 4th Street, 11th Floor, Louisville, KY 40202. Their telephone number is (502) 625-0400.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

None.

IT E M 6. SELECTED FINANCIAL DATA

Not applicable.

IT E M 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Forward Looking Statements

The following is management’s discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management and should be read in conjunction with the accompanying financial statements and their related notes included in this Report. References in this section to “we,” “us,” “our,” or the “Company” are to the consolidated business of Petro River Oil Corp. and its wholly owned and majority owned subsidiaries.

This Report contains forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expects,” “intends,” “estimates,” “continues,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this Report or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

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Business Overview

Recent Developments

Horizon Subscription Agreement

On February 25, 2019, the Company executed a Subscription Agreement, pursuant to which the Company purchased 145.454 membership units in Horizon Energy Acquisition, LLC (“ Horizon Acquisition ”) , representing an approximate 14.6% membership interest in Horizon Acquisition, for $400,000 (the “ Acquisition of Interest ”) . Horizon Acquisition is a company focused on oil and gas exploration activities. As a result, the Company acquired an additional 5.63% working interest in an international, offshore exploration project in the North Sea, which is in addition to an 5.63% interest in the same project indirectly held by the Company through its investments in Horizon Energy.

Creation of a New Series A Convertible Preferred Stock

On January 31, 2019, the Company filed the Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock with the Secretary of State for the State of Delaware – Division of Corporations, which it thereafter amended on March 13, 2019. The Series A COD designates 500,000 shares of the Company’s preferred stock as Series A Preferred, each share with a stated value of $20.00 per share. Shares of Series A Preferred are not entitled to dividends unless the Company elects to pay dividends to holders of its common stock. Shares of Series A Preferred rank senior to the Company’s common stock and Series B Cumulative Convertible Preferred Stock.

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Each share of Series A Preferred has a liquidation preference equal to the Stated Value plus all accrued and unpaid dividends. Each share of Series A Preferred is convertible into that number of shares of the Company’s common stock (“ Conversion Shares ”) equal to the Stated Value, divided by $0.40 per share, which conversion rate is subject to adjustment in accordance with the terms of the Series A COD; provided, however, that holders of the Series A Preferred may not convert their shares of Series A Preferred in the event that such conversion would result in such holder’s ownership exceeding 4.999% of the Company’s outstanding common stock, which Ownership Limitation may be increased up to 9.999% at the sole election of the holder; provided, further, that the Ownership Limitation and Maximum Percentage do not apply to Mr. Cohen. Holders of Series A Preferred may elect to convert shares of Series C Preferred into Conversion Shares at any time.

Series A Financing

On January 31, 2019, the Company sold and issued an aggregate of 178,101 units of its securities, for an aggregate purchase price of $3,562,015, to New Investors to an SPA and to certain Debt Holders pursuant to Debt Conversion Agreements. The sale of the units resulted in net cash proceeds of approximately $2.7 million. The units sold and issued in the Offering consisted of an aggregate of (i) 178,101 shares of the Company’s newly created Series A Preferred shares, convertible into 8,905,037 shares of the Company’s common stock, and (ii) five-year warrants to purchase 8,905,037 shares of Company’s common stock, at an exercise price of $0.50 per share. Pursuant to the Debt Conversion Agreements, the Debt Holders, consisting of Mr. Cohen and Fortis, agreed to convert all outstanding debt owed to the Debt Holders, amounting to $300,000 and $321,836, respectively, into units issued pursuant to the SPA. In addition to the conversion of outstanding debt, the Company and the Debt Holders also agreed to convert all accrued interest totaling $18,853 and $62,523, respectively.

The Offering resulted in net cash proceeds to the Company of approximately $2.7 million, which net proceeds do not include the amount of debt converted into units by the Debt Holders. The Company currently intends to use the net proceeds to fund the drilling of ten additional development and exploration wells in its Osage County concession and a large exploration venture in the North Sea, United Kingdom with Horizon Energy Partners, LLC.

In connection with the Offering, on January 31, 2019 Bandolier entered into Assignment Agreements with each of the New Investors and Debt Holders, pursuant to which (i) Bandolier assigned and transferred to the New Investors and Debt Holders a 75% interest in profits, if any, derived from the ten new wells the Company intends to drill pursuant to the New Drilling Program, payments of which shall be made to the New Investors and Debt Holders, pro rata, on a quarterly basis following the full completion of the New Drilling Program, and (ii) in the event the Company elects to drill additional wells on its Osage County concession in the next two years, the New Investors and Debt Holders shall have the right to participate in and fund the drilling and production of the next ten wells on the same terms and conditions set forth in the Assignment Agreements.

Senior Secured Debt Exchange

On January 31, 2019, the Company entered into the Secured Debt Conversion Agreements with the Secured Debt Holders, pursuant to which they agreed to convert approximately $2.3 million and $2.8 million, respectively, of outstanding Senior Secured Debt (including accrued and unpaid interest) owed under the terms of their respective Senior Secured Promissory Notes into 116,503 and 140,799 shares of the Company’s newly created Series A Preferred, respectively. As a result of the Senior Secured Debt Exchange, all indebtedness, liabilities and other obligations arising under the respective Senior Secured Promissory Notes were cancelled and deemed satisfied in full.

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Acquisition of Membership Interest in LBE Partners, LLC

On October 2, 2018, the Company, ICO and LBE, which owns various working interests in several oil and gas wells located in the Hardin oil field in Liberty, Texas, entered into the LBE Purchase Agreement, effective September 24, 2018, pursuant to which the Company purchased a 66.67% membership interest in LBE Partners from ICO in exchange for 300,000 shares of the Company’s common stock. Both ICO and LBE Partners are managed by Scot Cohen, the Company’s Executive Chairman.

Financial Condition and Results of Operations

For the Years Ended April 30, 2019 and 2018:

Oil and Natural Gas Sales

During the year ended April 30, 2019, the Company recognized $1,622,077 in oil and gas sales, and revenue from royalty interests, compared to $723,409 for the year ended April 30, 2018. The overall increase in sales of $898,668 is primarily due to the commencement of production in Osage County, Oklahoma in addition to the acquisition of LBE. While no assurances can be given, the Company anticipates increasing revenue in subsequent quarters as a result of the Company’s discoveries in Osage County, Oklahoma and revenue resulting from the Company’s drilling program for calendar year 2019.

We have listed below the total production volumes and total revenue net to the Company for the years ended April 30, 2019 and 2018.

	For the Year Ended April 30, 2019	For the Year Ended April 30, 2018
Oil volume (BBL)	29,935	12,054
Gas volume (MCF)	22,802	5,893
Volume equivalent (BOE)(1)	33,735	13,036
Revenue	$ 1,622,077	$ 723,409

(1) Assumes 6 Mcf of natural gas is equivalent to 1 barrel of oil.

Royalty Revenue

In connection with the Purchase and Exchange Agreement dated February 14, 2018 between Petro River and Red Fork Resources (“ Red Ford ”), a subsidiary of Horizon Energy, Petro River conveyed to Red Fork its 13.75% interest in the Mountain View Project and received a 64.70% interest from Red Fork in a new project in Kay County. Petro River also retained a 2% royalty interest in the membership interest conveyed to Red Fork in the Mountain View Project. In relation to this agreement, the Company recognized $23,093 in revenue during the year ended April 30, 2019.

Lease Operating Expenses

During the year ended April 30, 2019, lease operating expense was $416,445, compared to lease operating expenses of $127,814 for the year ended April 30, 2018. The overall increase in lease operating expense of $288,631 was primarily attributable to increased activity in the Company’s drilling activity in Osage County, Oklahoma and the acquisition of LBE.

Depreciation, Depletion and Accretion

During the year ended April 30, 2019, depreciation, depletion and accretion expense was $683,163, compared to depreciation, depletion and accretion expense of $157,386 for the year ended April 30, 2018. The overall increase in depreciation, depletion and accretion expense of $525,777 was primarily attributable to increased activity in the Company’s drilling activity in Osage County, Oklahoma and the acquisition of LBE.

Impairment of Oil and Gas Assets

The Company assesses all items classified as unproved property on an annual basis for possible impairment. The Company assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: land relinquishment; intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. Significant changes in these factors could reduce our estimates of future net proceeds, and accordingly could result in an impairment of our oil and gas assets. During the year ended April 30, 2019, the Company reviewed the oil and gas assets for impairment and recognized an impairment charge of $984,774 on the Texas properties. During the year ended April 30, 2018, the Company reviewed the oil and gas assets for impairment and recognized an impairment charge of $1,733,932 on the Oklahoma properties.

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General and Administrative Expense

General and administrative expense for the year ended April 30, 2019 was $1,727,670, compared to $3,644,751 for the year ended April 30, 2018. The decrease was primarily attributable to decreases in salaries and benefits, and office and administrative expenses. These changes are outlined below:

	For the Year Ended	For the Year Ended
	April 30, 2019	April 30, 2018
Salaries and benefits	$ 628,752	$ 1,109,190
Professional fees	845,761	1,980,152
Office and administrative	253,157	555,409
Total	$ 1,727,670	$ 3,644,751

Salaries and benefits include non-cash stock-based compensation of $497,672 for year ended April 30, 2019, compared to $906,591 for the year ended April 30, 2018. The decrease in stock-based compensation of $408,919 from the prior year was due to fewer awards made during the current period. General and administrative expense decreased due to management’s commitment to substantially reduce expense. Professional fees decreased to $845,761 for the year ended April 30, 2019 compared to $1,980,152 for the year end April 30, 2018 as a result of the divestiture of the Mountainview Properties during the 2019 fiscal year.

Interest Income (Expense)

During the year ended April 30, 2019, the Company recognized $3,124,286 of net interest expense, compared to $65,569 for the year ended April 30, 2018. The interest expense for the year ended April 30, 2019 included $2,139,251 and $467,183, which included the amortization of the debt discount and interest expense, respectively, related to the June 2017 $2.0 million and November 2017 $2.5 million Secured Note financings. In addition, during the year ended April 30, 2019, the Company recognized $75,000 of expense from a legal settlement. In addition, in relation to the debt restructuring, during the year ended April 30, 2019, the Company recognized interest expense of $525,352 related to the excess fair value of its derivative liabilities, and a loss on extinguishment of debt of $64,853. The net interest expense recorded in the 2018 period was attributable to $597,053 of interest income accrued on the related party notes receivable, which was offset by $363,977 and $294,613, the accretion of the debt discount and interest expense related to the June 2017 $2.0 million and November 2017 $2.5 million Secured Note Financings.

Loss on Assumption of Pearsonia Interests

On November 6, 2017, the Company entered into the Membership Interest Assignment with Pearsonia, the owner of a 46.81% membership interest in Bandolier. Pursuant to the Membership Interest Assignment, the Company issued 1,466,667 shares of its Common Stock to Pearsonia in exchange for all membership interests in Bandolier held by Pearsonia, resulting in the Company acquiring an additional 46.81% stake in Bandolier’s 106,500-acre concession in Osage County, Oklahoma. Upon recording this transaction, the Company recorded a loss on assumption of $3,351,965. The Company did not incur a similar transaction during the year ended April 30, 2019.

Loss on Redetermination

On January 31, 2018, the Company entered into the Assignment Agreement with MegaWest, whereby the Company transferred its interest in MegaWest in exchange for MegaWest’s membership interests in Bandolier. The Exchange Transaction followed the receipt by the Company of a notice of Redetermination of MegaWest’s Assets conducted by Fortis. Upon execution of the agreement, the Company wrote-off the MegaWest Assets and recorded a loss of $11,914,204. The Company did not incur a similar transaction during the year ended April 30, 2019.

Change in Derivative Liability

In relation to the Series A Financing in January 2019, the Company identified certain features in the warrants that required the Company to classify the warrants as a derivative liability. For the year ended April 30, 2019, the Company recorded a change in the value of the derivative liability of $41,410.

Net Gain on Real Estate Rights

During the year ended April 30, 2018, the Company recognized $267,734 net gain on its interest in real estate rights. The net gain on interest in real estate rights during the year ended April 30, 2018 was due to the sale of one condominium unit by Fortis and the resulting profits which were assigned to MegaWest pursuant to the Contribution Agreement, less the book value recorded by MegaWest. The Company did not incur a similar transaction during the year ended April 30, 2019.

Liquidity and Capital Resources

At April 30, 2019, the Company had working capital of $169,943, consisting of $1,605,171 of current assets and $1,435,228 of current liabilities.

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. At April 30, 2019, the Company had cash and cash equivalents of approximately $1.2 million. The Company’s primary source of operating funds since inception has been equity and note financings, as well as through the consummation of the Horizon Acquisition.

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On January 31, 2019, the Company consummated the Series A Financing, pursuant to which the Company sold and issued an aggregate of 178,101 Units, for an aggregate purchase price of $3,562,015, to certain accredited investors pursuant to an SPA and to certain debtholders pursuant to Debt Conversion Agreements, resulting in net cash proceeds to the Company of approximately $2.7 million and the termination of the Cohen Loan Agreement and debt owed to Fortis. In addition, on January 31, 2019, the Company entered into the Secured Debt Conversion Agreements, pursuant to which Funding Corp. and Funding Corp. II converted all outstanding debt due to them under the June 2017 Secured Note and November 2017 Secured Note, together amounting to an aggregate of approximately $5.1 million, into shares of Series A Preferred. As a result, the Company increased its current assets and decreased its current liabilities significantly.

On June 18, 2018, the Company entered into a Loan Agreement with Scot Cohen (the “ Cohen Loan Agreement ”), the Company’s Executive Chairman, pursuant to which Mr. Cohen loaned the Company $300,000 at a 10% annual interest rate due September 30, 2018. On December 17, 2018, the maturity date of the Cohen Loan Agreement was extended to March 31, 2019. As noted above, the Cohen Loan Agreement was terminated on January 31, 2019 in exchange for the issuance of units, consisting of 15,000 shares of Series A Preferred and warrants to purchase 750,000 shares of Company Common Stock sold and issued in the Series A Financing.

In June and November 2017, the Company consummated the Secured Note financings for an aggregate of $4.5 million, which Secured Notes accrued interest at a rate of 10% per annum and were scheduled to mature on June 13, 2020. On May 17, 2018, the parties executed an extension of the due date of the first interest payment due pursuant to each of the Secured Notes from June 1, 2018 to December 31, 2018. As consideration for the interest payment extension, the Company agreed to pay the holders an additional 10% of the interest due on June 1, 2018 on December 31, 2018. On December 17, 2018, the parties executed a second extension of the due date of the first interest payment due pursuant to each of the Secured Notes from December 31, 2018 to March 31, 2019. As a result of the Series A Financing discussed above, the outstanding balances of the Secured Notes were converted into shares of Series A Preferred.

The current level of working capital, along with results from operations, may be insufficient to maintain current operations as well as the planned added operations for the next 12 months. These factors raise substantial doubt about the ability to continue as a going concern. Management intends to raise additional capital through debt and equity instruments, if necessary, in order to execute its business and operating plans. Management can provide no assurances that the Company will be successful in any capital raising efforts. In order to conserve capital, from time to time, management may defer certain development activity.

Operating Activities

During the year ended April 30, 2019, operating activities used cash of $468,512, compared to $346,354 used in operating activities during the year ended April 30, 2018. The Company incurred a net loss during the year ended April 30, 2019 of $5,501,966, compared to a loss of $20,337,681 for the year ended April 30, 2018 . For the year ended April 30, 2019, the net loss was offset by non-cash items such as stock-based compensation, impairment of oil and gas assets, change in fair value of derivative liabilities, depreciation, depletion and accretion of asset retirement obligation, accretion of debt discount, derivative liabilities in excess of face value of equity instruments, loss on extinguishment of debt and loss on legal settlement. Cash used in operations was also influenced by changes in accounts receivable, accrued interest on notes receivable, prepaid expense and accounts payable and accrued expense. For the year ended April 30, 2018, the net loss was offset by non-cash items such as stock-based compensation, depreciation, depletion and accretion of asset retirement obligation and the deferred tax liability. Cash used in operations was also influenced by changes in accounts receivable, accrued interest on notes receivable, prepaid expenses and accounts payable and accrued expenses.

Investing Activities

Investing activities during the year ended April 30, 2019 resulted in cash used of $1,764,144 , compared to cash used of $4,487,548 during the year ended April 30, 2018. During the year ended April 30, 2019, the Company invested an $844,733 in Horizon Energy Partners and Horizon Energy Acquisition LLC, compared to $379,418 in the comparable period in 2018. During the year ended April 30, 2018, the Company received proceeds of $1,553,884 from profits in its real estate rights. As a result of the Exchange Transaction entered into by and between the Company and MegaWest on January 31, 2018, the Company no longer has any interest in real estate rights, and thus did not receive any profits in real estate rights for the year ended April 30, 2019. During the year ended April 30, 2019, the Company incurred $1,058,097 of expenditures on oil and gas assets, compared to $3,536,935 for the year ended April 30, 2018. During the year ended April 30, 2019, the Company executed no new notes receivable agreements with related parties, compared to $ 1,558,501 during the corresponding period ended April 30, 2018. During the year ended April 30, 2019, the Company received cash of $138,686 from the acquisition of LBE Partners.

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Financing Activities

Financing activities during the year ended April 30, 2019 resulted in cash provided of $3,400,184 , compared to cash provided of $4,250,000 during the year ended April 30, 2018. During the year ended April 30, 2019, the Company received $2,800,184, $300,000 and $300,000 from the issuance of Series A Preferred stock and Warrants issued in connection with the Series A Financing, proceeds from a related party note payable and cash received from the non-controlling interest contribution, respectively. During the year ended April 30, 2018, the Company received net proceeds of $4,250,000 from a related party note payable.

Capitalization

The number of outstanding shares and the number of shares that could be issued if all common stock equivalents are converted to shares is as follows:

As of	April 30, 2019	April 30, 2018
Convertible preferred shares	21,770,137	-
Common shares	17,938,540	17,309,733
Stock options	2,607,385	2,555,385
Stock purchase warrants	11,128,706	2,223,669
	53,444,768	22,088,787

Critical Accounting Policies and Estimates

The Company’s significant accounting policies are described in Note 3 to the annual consolidated financial statements for the year ended April 30, 2019 and 2018. The consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States (“ U.S. GAAP ”).

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenues and expenses, to disclose contingent assets and liabilities as of the date of the consolidated financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period. The most significant estimates and assumptions include the valuation of accounts receivable, and the useful lives and impairment of property and equipment, goodwill and intangible assets, the valuation of deferred tax assets and inventories and the provision for income taxes. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Because the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application.

The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our consolidated financial statements:

Oil and Gas Operations

The Company follows the full cost method of accounting for oil and gas operations, whereby all costs related to exploration and development of oil and gas reserves are capitalized. Under this method, the Company capitalizes all acquisition, exploration and development costs incurred for the purpose of finding oil and natural gas reserves, including salaries, benefits and other internal costs directly attributable to these activities. Costs associated with production and general corporate activities, however, are expensed in the period incurred. Costs are capitalized on a country-by-country basis. To date, there has only been one cost center, the United States.

The present value of estimated future net cash flows is computed by applying the average first-day-of-the-month prices during the previous twelve-month period of oil and natural gas to estimated future production of proved oil and natural gas reserves as of year-end less estimated future expenditures to be incurred in developing and producing the proved reserves and assuming continuation of existing economic conditions. Prior to December 31, 2009, prices and costs used to calculate future net cash flows were those as of the end of the appropriate quarterly period.

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Following the discovery of reserves and the commencement of production, the Company will compute depletion of oil and natural gas properties using the unit-of-production method based upon production and estimates of proved reserve quantities. Costs associated with unproved properties are excluded from the depletion calculation until it is determined whether or not proved reserves can be assigned to such properties. Unproved properties are assessed for impairment annually. Significant properties are assessed individually.

The Company assesses all items classified as unproved property on an annual basis for possible impairment. The Company assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: land relinquishment; intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate impairment, the related exploration costs incurred are transferred to the full cost pool and are then subject to depletion and the ceiling limitations on development oil and natural gas expenditures.

Proceeds from the sale of oil and gas assets are applied against capitalized costs, with no gain or loss recognized, unless a sale would alter the rate of depletion and depreciation by 25% or more.

Significant changes in these factors could reduce our estimates of future net proceeds, and accordingly could result in an impairment of our oil and gas assets. Management will perform annual assessments of the carrying amounts of its oil and gas assets as additional data from ongoing exploration activities becomes available.

Revenue Recognition

ASU 2014-09, “ Revenue from Contracts with Customers (Topic 606) ,” supersedes the revenue recognition requirements and industry-specific guidance under Revenue Recognition (Topic 605) . Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic 606 on May 1, 2018, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Under the modified retrospective method, prior period financial positions and results will not be adjusted. The cumulative effect adjustment recognized in the opening balances included no significant changes as a result of this adoption. While the Company does not expect 2018 net earnings to be materially impacted by revenue recognition timing changes, Topic 606 requires certain changes to the presentation of revenues and related expenses beginning May 1, 2018. Refer to Note 10 – Revenue from Contracts with Customers for additional information.

The Company’s revenue is comprised revenue from exploration and production activities as well as royalty revenues related to a royalty interest agreement executed in February 2018. The Company’s oil is sold primarily to marketers, gatherers, and refiners. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies, and natural-gas marketers. NGLs are sold primarily to direct end-users, refiners, and marketers. Payment is generally received from the customer in the month following delivery.

Contracts with customers have varying terms, including spot sales or month-to-month contracts, contracts with a finite term, and life-of-field contracts where all production from a well or group of wells is sold to one or more customers. The Company recognizes sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed. Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs.

Revenues are recognized for the sale of the Company’s net share of production volumes. Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues.

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Off-Balance Sheet Arrangements

None.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than twelve months. The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance at the beginning of its first quarter of fiscal 2020 and plans to utilize the transition option which does not require application of the guidance to comparative periods in the year of adoption. While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be recording right-of-use assets and corresponding lease obligations for current operating leases. The adoption is expected to have an impact on the Company’s consolidated balance sheets, but not on the consolidated statements of income or cash flows. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date. Additionally, the Company is in the process of reviewing current accounting policies, changes to business processes, systems and controls to support adoption of the new standard.

In September 2016 , the FASB issued ASU 2016-13, Financial Instruments - Credit Losses . ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. ASU 2016-13 is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Company is currently assessing the impact this accounting standard will have on its financial statements and related disclosures.

In June 2018, the FASB issued Accounting Standards Update (ASU) No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after the grant date. ASU 2018-07 is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within that reporting period. Early adoption is permitted, but no earlier than the Company’s adoption date of Topic 606, Revenue from Contracts with Customers (as described above under “Revenue Recognition”). The Company does not believe the new standard will have a significant impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. This update is to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each entity’s financial statements. The amendments in this update apply to all entities that are required, under existing U.S. GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company is currently evaluating this guidance and the impact of this update on its consolidated financial statements.

The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows.

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.

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IT E M 7A. QUANTITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to the financial statement pages beginning on page F-1 comprising a portion of this annual report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On August 21, 2018, the Company accepted the resignation of GBH CPAs, PC ( “ GBH ” ) and engaged Marcum LLP ( “ Marcum ” ) as its independent registered public accountants. This change occurred in connection with GBH, the Company ’ s prior independent public accountants, resigning as a result of GBH combining its practice with Marcum effective July 1, 2018. The engagement of Marcum has been approved by the Audit Committee of the Company ’ s Board of Directors.

Pursuant to applicable rules, the Company makes the following additional disclosures:

(a) GBH ’ s reports on the consolidated financial statements of the Company at and for the fiscal years ended April 30, 2018 and 2017 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that such reports contained an explanatory paragraph with respect to uncertainty as to the Company ’ s ability to continue as a going concern.

(b) During the fiscal years ended April 30, 2018 and 2017 and through August 21, 2018, there were no disagreements with GBH on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which if not resolved to GBH ’ s satisfaction would have caused it to make reference thereto in connection with its reports on the Company ’ s financial statements for such years. During the fiscal years ended April 30, 2018 and 2017 and through August 21, 2018, there were no events of the type described in Item 304(a)(1)(v) of Regulation S-K.

(c) During the fiscal years ended April 30, 2018 and 2017 and through August 21, 2018, the Company did not consult with Marcum with respect to any matter whatsoever, including, without limitation, with respect to any of (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company ’ s financial statements; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or an event of the type described in Item 304(a)(1)(v) of Regulation S-K.

The Company has provided GBH with a copy of the foregoing disclosure and requested that it furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements made therein. A copy of such letter is attached as Exhibit 16.1 to this Current Report on Form 8-K, and is incorporated by reference herein.

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ITE M 9A. CONTROLS AND PROCEDURES TO DISCUSS

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e), as of April 30, 2019. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of April 30, 2019 due to a material weakness in our internal control over financial reporting, as discussed below.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as required under applicable United States securities regulatory requirements. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s chief executive and chief financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

	●	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

	●	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

	●	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. A system of internal controls can provide only reasonable, not absolute, assurance that the objectives of the control system are met, no matter how well the system is conceived or operated. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 2019. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“ COO ”) in the 2013 Internal Control Integrated Framework. Based on that evaluation under this framework, our management concluded that as of April 30, 2019, our internal control over financial reporting was not effective because of the following material weaknesses in our internal control over financial reporting:

	●	Due to our small number of employees and resources, we have limited segregation of duties, and as a result there is insufficient independent review of duties performed.

	●	As a result of the limited number of accounting personnel, we rely on outside consultants for the preparation of our financial reports, including financial statements and management discussion and analysis, which could lead to overlooking items requiring disclosure.

This annual report does not include an attestation report by our independent registered public accounting firm regarding internal control over financial reporting. As we are neither a large accelerated filer nor an accelerated filer, our management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes to Internal Controls and Procedures for Financial Reporting

There were no significant changes in the Company’s internal control over financial reporting that were identified in connection with such evaluation that occurred during the period covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. To begin remediating the material weakness identified in internal control over financial reporting of the Company, the Company engaged Brio Financial Group and appointed its Managing Member, David Briones, to act as the Company’s Chief Financial Officer on August 15, 2013. During the year ended April 30, 2019, Management intended to hire additional accounting staff, and operational and administrative executives. However, due to the lack of resources those hires were delayed until such time additional financing is received. Management intends to prepare and implement sufficient written policies and checklists to remedy the material weaknesses identified above.

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P A RT III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item will be set forth in our definitive proxy statement for our 2019 annual meeting of stockholders to be filed within 120 days after our fiscal year end and is incorporated in this report by reference.

ITEM 11. EXEC UTIVE COMPENSATION

ITEM 12. SEC URITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

ITEM 13. CER TAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14. ACCOUNTING FEES AND SERVICES

PA R T IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements.

Our financial statements as set forth in the Index to Financial Statements attached hereto commencing on page F-1 are hereby incorporated by reference.

(b) Exhibits.

The following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted, incorporated by reference herein:

Exhibit Number		Exhibit Description
3.1 (1)		Certificate of Incorporation of the Company.
3.2 (1)		Bylaws of the Company.
3.3 (12)		Certificate of Amendment to the Certificate of Incorporation of Petro River Oil Corporation, effective December 1, 2015 (Reverse Split).
3.4 (12)		Certificate of Amendment to the Certificate of Incorporation of Petro River Oil Corporation, effective December 1, 2015 (Authorized Increase).
3.5 (13)		Certificate of Amendment to the Certificate of Incorporation of Petro River Oil Corporation, dated June 15, 2016.
10.1 (2)		Securities Purchase Agreement of Petro River Oil LLC, dated as of April 23, 2013, by and among Petro River Oil Corp., Petro River Oil, LLC, the holders of outstanding secured promissory notes of Petro River Oil, LLC, the members of Petro River Oil, LLC and Mega Partners 1 LLC.
10.2 (7)		Amended and Restated 2012 Equity Compensation Plan.
10.3 (6)		Assignment and Assumption Agreement, dated as of May 30, 2014, by and between Bandolier Energy, LLC and PO1, LLC.
10.4 (6)		Agreement, dated as of May 30, 2014, by and between Petro River Oil Corp. and Pearsonia West Investment Group, LLC.
10.5 (2)		Employment Agreement, by and between Petro River Oil Corp. and Scot Cohen, dated April 23, 2013

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10.6 (4)		Amendment No. 1 to the Employment Agreement, by and between Petro River Oil Corp. and Scot Cohen, dated November 20, 2013.
10.7 (2)		Form of Securities Purchase Agreement, dated April 23, 2013

10.8 (5)		Securities Purchase Agreement, by and between Petro River Oil Corp. and Petrol Lakes Holding Limited, dated December 12, 2013.
10.9 (6)		Form of Bandolier Energy LLC Subscription Agreement, dated May 30, 2014.
10.10 (6)		Securities Purchase Agreement, by and between Spyglass Energy Group, LLC, Nadel and Gussman, LLC, Charles W. Wickstrom, Shane E. Matson and Bandolier Energy, LLC, dated January 1, 2014.
10.11 (6)		Assignment and Assumption Agreement, by and between Bandolier Energy, LLC and PO1, LLC, dated May 30, 2014.
10.12 (6)		Agreement, by and between Petro River Oil Corp. and Pearsonia West Investment Group, LLC, dated May 30, 2014.
10.13 (8)		Asset Purchase Agreement by and among Petro River Oil Corp, Petro Spring I, LLC, Havelide GTL LLC and certain shareholders, dated February 18, 2015.
10.14 (8)		Employment Agreement by and between the Company and Stephen Boyd, dated February 18, 2015
10.15 (8)		Form of Warrant.
10.16 (9)		Asset Purchase Agreement by and among Petro River Oil Corp, Petro Spring II, LLC, Coalthane Tech LLC and certain shareholders, dated February 27, 2015.
10.17 (15)		Contribution Agreement, by and between Petro River Oil Corp., MegaWest Energy Kansas Corporation and Fortis Property Group, dated October 30, 2015, effective October 15, 2015.
10.18 (15)		Employment Agreement, by and between Petro River Oil Corp. and Stephen Brunner, dated October 30, 2015.
10.19 (12)		Conditional Purchase Agreement, by and between Petro River Oil Corp. and Horizon I Investments, LLC, dated December 1, 2015.
10.20 (12)		Form of Escrow Agreement.
10.21 (12)		Non-Recourse Note, by and between Petro River Oil Corp. and Horizon I Investments, LLC, dated December 1, 2015.
10.22 (10)		Farm-Out Agreement, dated January 19, 2016.
10.23 (10)		Escrow Agreement, dated January 18, 2016.
10.24 (10)		Non-Recourse Promissory Note, in the principal amount of $750,000, dated January 13, 2016.
10.25 (11)		Assignment of Oil and Gas Lease, by and between MegaWest Energy Missouri Corp. and Paluca Petroleum, Inc., dated July 11, 2016.
10.26 (14)		Asset Purchase and Sale and Exploration Agreement, dated March 4, 2016.
10.27 (16)		Securities Purchase Agreement, dated June 13, 2017.
10.28 (17)		Form of Warrant, dated June 13, 2017.
10.29 (18)		Security Agreement, dated June 13, 2017.
10.30 (19)		Assignment of Overriding Royalty Interests, dated June 13, 2017.
10.31 (20)		Promissory Note, dated June 13, 2017.
10.32 (21)		Security Purchase Agreement, dated September 20, 2017.
10.33 (22)		Form of Warrant, dated November 6, 2017.
10.34 (23)		Form of Security Agreement, dated November 6, 2017.
10.35 (24)		Form of Assignment of Overriding Royalty Interests November 6, 2017.
10.36 (25)		Form of Secured Promissory Note, dated November 6, 2017.
10.37 (26)		Assignment and Assumption of Membership Interest, dated November 6, 2017.
10.38 (27)		Modification of Promissory Notes, dated December 29, 2017.
10.39 (28)		Assignment and Assumption of Membership Interest, dated January 31, 2018.
10.40 (29)		Purchase and Exchange Agreement, dated February 14, 2018.
14.1 (3)		Code of Business Conduct and Ethics.
21.1*		Subsidiaries.
31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1 (30)		Report of Pinnacle Energy Services, LLC with respect to oil and reserves, dated June 8, 2017.
99.2*		Report of Cawley, Gillespie & Associates with respect to oil and reserves in Oklahoma – Spyglass/Pearsonia, dated May 1, 2018.
99.3*		Report of Cawley, Gillespie & Associates with respect to oil and reserves in Osage County, Oklahoma, dated May 1, 2018.

101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

-33-

Table of Contents

*	Attached hereto
(1)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on September 13, 2012.
(2)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on April 29, 2013.
(3)	Incorporated by reference to our Transition Report on Form 10-K filed with the Securities and Exchange Commission on August 28, 2013.
(4)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on November 22, 2013.
(5)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on December 16, 2013.
(6)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on June 5, 2014.
(7)	Incorporated by reference to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on August 13, 2014.

(8)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on February 23, 2015.
(9)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on March 5, 2015.
(10)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on January 20, 2016.
(11)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on July 13, 2016.
(12)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on December 7, 2015.
(13)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on June 20, 2016.
(14)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on March 10, 2016.
(15)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on November 5, 2015.
(16)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on June 16, 2017.
(17)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on June 16, 2017.
(18)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on June 16, 2017.
(19)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on June 16, 2017.
(20)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on June 16, 2017.
(21)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on November 6, 2017.
(22)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on November 6, 2017.
(23)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on November 6, 2017.
(24)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on November 6, 2017.
(25)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on November 6, 2017.
(26)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on November 6, 2017.
(27)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on January 5, 2018.
(28)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on February 5, 2018.
(29)	Incorporated by reference to our Form 8-K filed with the Securities and Exchange Commission on February 16, 2018.
(30)	Incorporated by reference to our Form 10-Q filed with the Securities and Exchange Commission on March 26, 2018.

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Table of Contents

P E TRO RIVER OIL CORP.

FINANCIAL INFORMATION

			Page

Reports of Independent Registered Public Accounting Firms			F-2

Consolidated Balance Sheets as of April 30, 2019 and 2018			F-3

Consolidated Statements of Operations for the Years Ended April 30, 2019 and 2018			F-4

Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended April 30, 2019 and 2018			F-5

Consolidated Statements of Cash Flows for the Years Ended April 30, 2019 and 2018			F-6

Notes to Consolidated Financial Statements			F-7

F-1

Table of Contents

REP O RT OF INDEPENDENT RE GISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Petro River Oil Corp.

New York, New York

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Petro River Oil Corp. (the “Company”) as of April 30, 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2019, and the results of its operations and its cash flows for the year ended April 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has suffered recurring losses from operations and cash used in operating activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide s a reasonable basis for our opinion.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2015.

Houston, Texas

August 13, 2019

F-2

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Petro River Oil Corp.

New York, New York

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Petro River Oil Corp. (the “Company”) as of April 30, 2018, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2018, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Other Matters

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GBH CPAs, PC

We served as the Company’s auditor from 2015 to 2018.

GBH CPAs, PC

www.gbhcpas.com

Houston, Texas

July 30, 2018

Pe t ro River Oil Corp. and Subsidiaries

Consolidated Balance Sheets

	As of
	April 30, 2019	April 30, 2018
Assets
Current Assets:
Cash and cash equivalents	$ 1,214,858	$ 47,330
Accounts receivable - oil and gas	128,987	308,099
Prepaid expense and other current assets	206,210	612
Prepaid oil and gas asset development costs	55,116	-
Total Current Assets	1,605,171	356,041

Oil and gas assets, full cost method
Costs subject to amortization, net	5,868,932	3,779,414
Costs not being amortized, net	100,000	100,000
Property, plant and equipment, net	63	822
Investment in Horizon Energy Partners	2,037,151	1,592,418
Investment in Horizon Energy Acquisition, LLC	400,000	-
Other assets	5,266	17,133
Total Long-term Assets	8,411,412	5,489,787
Total Assets	$ 10,016,583	$ 5,845,828

Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expense	$ 714,786	$ 908,343
Accrued interest on notes payable – related party	-	298,581
Redetermination liability	-	259,313
Asset retirement obligations, current portion	720,442	413,794
Total Current Liabilities	1,435,228	1,880,031

Long-term Liabilities:
Asset retirement obligations, net of current portion	328,749	246,345
Note payable - related parties, net of debt discount	-	2,360,750
Derivative liabilities	4,191,754	-
Total Long-term Liabilities	4,520,503	2,607,095

Total Liabilities	5,955,731	4,487,126

Commitments and contingencies

Equity:
Preferred shares – 5,000,000 authorized; par value $0.00001; 0 shares issued and outstanding	-	-
Preferred A shares – 500,000 authorized; par value $0.00001 per share; 435,403 and 0 issued and outstanding, respectively; liquidation preference of $8,708,060	4	-
Preferred B shares – 29,500 authorized; par value $0.00001; 0 shares issued and outstanding	-	-
Common shares – 150,000,000 authorized; par value $0.00001; 17,938,540 and 17,309,733 issued and outstanding, respectively	180	173
Additional paid-in capital	59,563,627	52,407,543
Accumulated deficit	(56,154,121 )	(51,049,014 )
Total Petro River Oil Corp. Equity	3,409,690	1,358,702
Non-controlling interests	651,162	-
Total Equity	4,060,852	1,358,702
Total Liabilities and Equity	$ 10,016,583	$ 5,845,828

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

F-3

Table of Contents

Pe t ro River Oil Corp. and Subsidiaries

Consolidated Statements of Operations

	For the Year Ended
	April 30, 2019	April 30, 2018
Revenues
Oil and natural gas sales	$ 1,622,077	$ 723,409
Royalty revenue	23,093	-
Total Revenue	1,645,170	723,409


Operating Expense
Lease operating expenses	416,445	127,814
Depreciation, depletion and accretion	683,163	157,386
Impairment of oil and gas assets	984,774	1,733,932
General and administrative	1,727,670	3,644,751
Total Operating Expense	3,812,052	5,663,883

Operating Loss	(2,166,882 )	(4,940,474 )

Other Income (Expense)
Interest income (expense), net	(3,124,286 )	(65,569 )
Loss on assumption of Pearsonia interests	-	(3,351,965 )
Loss on redetermination	-	(11,914,204 )
Loss on legal settlement	(75,000 )	-
Loss on extinguishment of debt	(94,388 )	-
Change in fair value of derivative liabilities	(41,410 )	-
Net gain on real estate rights	-	267,734
Other Income (Expense)	(3,335,084 )	(15,064,004 )

Net Loss Before Income Tax Provision	(5,501,966 )	(20,004,478 )

Income Tax Provision	-	333,203

Net Loss	(5,501,966 )	(20,337,681 )

Net Income (Loss) Attributable to Non-controlling Interests	(396,859 )	101,423

Net Loss Attributable to Petro River Oil Corp.	(5,105,107 )	(20,439,104 )

Deemed Dividend on Series A Preferred Stock	(3,512,021 )	-

Net Loss Available for Petro River Oil Corp. Common Shareholders	$ (8,617,128 )	$ (20,439,104 )

Loss Per Common Share – Basic and Diluted	$ (0.48 )	$ (1.24 )

Weighted Average Number of Common Shares Outstanding – Basic and Diluted	17,772,293	16,546,093

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

F-4

Table of Contents

Petro River Oil Corp. and Subsidiaries

Consolidated Statement of Changes in Stockholders’ Equity

For the Years Ended April 30, 2019 and 2018

	Preferred	Preferred	Common	Common	Additional Paid-in	Accumulated	Non-controlling	Total Stockholders’
	Shares	Amount	Shares	Amount	Capital	Deficit	Interests	Equity

Balance at May 1, 2017	-	$ -	15,827,921	$ 158	$ 46,681,073	$ (30,609,910 )	$ 12,610,470	$ 28,681,791

Stock-based compensation	-	-	-	-	906,591	-	-	906,591

Cashless exercise of options	-	-	15,145	-	-	-	-	-

Warrants issued with secured promissory note	-	-	-	-	2,003,227	-	-	2,003,227

Contribution of overriding royalty interest	-	-	-	-	250,000	-	-	250,000

Acquisition of Pearsonia interest	-	-	1,466,667	15	2,566,652	-	785,298	3,351,965

Acquisition of Bandolier interest upon redetermination	-	-	-	-	-	-	(13,497,191 )	(13,497,191 )

Net income (loss)	-	-	-	-	-	(20,439,104 )	101,423	(20,337,681 )

Balance at April 30, 2018	-	-	17,309,733	173	52,407,543	(51,049,014 )	-	1,358,702

Stock-based compensation	-	-	260,000	3	497,669	-	-	497,672

Shares issued for legal settlement	-	-	68,807	1	74,999	-	-	75,000

Stock issued for acquisition of non-controlling interest	-	-	300,000	3	1,496,262	-	748,021	2,244,286

Non-controlling interest contribution	-	-	-	-	-	-	300,000	300,000

Deemed dividend	-	-	-	-	(3,512,021 )	-	-	(3,512,021 )

Preferred A and warrants issued for:
Cash and services	147,009	1	-	-	2,800,183	-	-	2,800,184
Debt conversion	31,092	-	-	-	621,836	-	-	621,836
Secured debt	257,302	3	-	-	5,177,156	-	-	5,177,159

Net loss	-	-	-	-	-	(5,105,107 )	(396,859 )	(5,501,966 )

Balance at April 30, 2019	435,403	$ 4	17,938,540	$ 180	$ 59,563,627	$ (56,154,121 )	$ 651,162	$ 4,060,852

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

F-5

Table of Contents

P e tro River Oil Corp. and Subsidiaries

Consolidated Statements of Cash Flows

	For the Year Ended
	April 30, 2019	April 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (5,501,966 )	$ (20,337,681 )
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	497,672	906,591
Depreciation, depletion and accretion	683,163	157,386
Amortization of debt discount	2,139,251	363,977
Impairment of oil and gas assets	984,774	1,733,932
Loss on redetermination	-	11,914,204
Loss on assumption of Pearsonia interests	-	3,351,965
Loss on legal settlement	75,000	-
Loss on extinguishment of debt	94,388	-
Net gain on interest in real estate rights	-	(267,734 )
Change in fair value of derivative liability	41,410	-
Derivative liability in excess of face value of equity instrument	525,352	-
Deferred income tax expense	-	333,203
Changes in operating assets and liabilities:
Accounts receivable – oil and gas	179,112	(299,676 )
Accounts receivable – other	-	17,449
Ac crued interest on notes receivable – related party	-	(593,021 )
Prepaid expenses and other current assets	(193,731 )	1,267,555
Accounts payable and accrued expenses	(324,430 )	1,105,496
Accrued interest on notes payable – related party	331,493	-
Net Cash Used in Operating Activities	(468,512 )	(346,354 )

CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from the sale of interest in real estate rights	-	1,553,884
Prepaid oil and gas assets	-	(446,856 )
Issuance of notes receivable – related party	-	(1,558,501 )
Capitalized expenditures on oil and gas assets	(1,058,097 )	(3,536,935 )
Cash received from acquisition of LBE Partners	138,686	-
Cash paid in MegaWest exchange transaction	-	(119,722 )
Cash paid for cost method investment	(844,733 )	(379,418 )
Net Cash Used in Investing Activities	(1,764,144 )	(4,487,548 )

CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from the issuance of Series A Preferred Stock and warrants	2,800,184	-
Proceeds from notes payable - related party	300,000	4,500,000
Cash paid for debt inducement	-	(250,000 )
Cash received from non-controlling interest contribution	300,000	-
Net Cash Provided by Financing Activities	3,400,184	4,250,000

Change in cash and cash equivalents	1,167,528	(583,902 )

Cash and cash equivalents, beginning of year	47,330	631,232
Cash and cash equivalents, end of year	$ 1,214,858	$ 47,330

SUPPLEMENTARY CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes	$ 30,782	$ 86,876
Interest paid	$ -	$ -

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Receivable for sale of oil and gas equipment	$ -	$ 17,449
Warrants issued with note payable	$ -	$ 2,003,227
Overriding interest contributed as debt inducement	$ -	$ 250,000
Accrued oil and gas development costs	$ 239,866	$ 54,458
Change in estimate of asset retirement obligations	$ 15,695	$ 61,633
Additions to asset retirement obligation from new drilling	$ -	$ 29,325
Derivative liability from warrant issuances	$ 3,512,021	$ -
Issuance of Series A Preferred Stock for conversion of debt	$ 5,798,995	$ -

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

F-6

Table of Contents

P E TRO RIVER OIL CORP. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

1.	Organization

Recent Developments

Horizon Subscription Agreement

On February 25, 2019, the Company executed a Subscription Agreement, pursuant to which the Company purchased 145.454 membership units in Horizon Energy Acquisition, LLC (“ Horizon Acquisition ”) , representing an approximate 14.6% membership interest in Horizon Acquisition, for $400,000 (the “ Acquisition of Interest ”) . Horizon Acquisition is a company focused on oil and gas exploration activities. As a result, the Company acquired an additional 5.63% working interest in an international, offshore exploration project in the North Sea, which is in addition to an 5.63% interest in the same project indirectly held by the Company through its investments in Horizon Energy.

F-7

Table of Contents

Creation of a New Series A Convertible Preferred Stock

On January 31, 2019, the Company filed the Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock with the Secretary of State for the State of Delaware – Division of Corporations, which it thereafter amended on March 13, 2019 (collectively, the “ Series A COD ”). The Series A COD designates 500,000 shares of the Company’s preferred stock as Series A Convertible Preferred, par value $0.00001 per share (“ Series A Preferred ”), each share with a stated value of $20.00 per share (the “ Stated Value ”). Shares of Series A Preferred are not entitled to dividends unless the Company elects to pay dividends to holders of its common stock. Shares of Series A Preferred rank senior to the Company’s common stock and Series B Cumulative Convertible Preferred Stock.

Each share of Series A Preferred has a liquidation preference equal to the Stated Value plus all accrued and unpaid dividends. Each share of Series A Preferred is convertible into that number of shares of the Company’s common stock (“ Conversion Shares ”) equal to the Stated Value, divided by $0.40 per share (the “ Conversion Price ”), which conversion rate is subject to adjustment in accordance with the terms of the Series A COD; provided, however, that holders of the Series A Preferred may not convert their shares of Series A Preferred in the event that such conversion would result in such holder’s ownership exceeding 4.999% of the Company’s outstanding common stock (the “ Ownership Limitation ”), which Ownership Limitation may be increased up to 9.999% at the sole election of the holder (the “ Maximum Percentage ”); provided, however, that the Ownership Limitation and Maximum Percentage do not apply to Mr. Cohen. Holders of Series A Preferred may elect to convert shares of Series C Preferred into Conversion Shares at any time.

Series A Financing

On January 31, 2019 (the “ Closing Date ”), the Company sold and issued an aggregate of 178,101 units of its securities, for an aggregate purchase price of $3,562,015, to certain accredited investors (the “ New Investors ”) pursuant to a Securities Purchase Agreement (“ SPA ”) and to certain debtholders (the “ Debt Holders ”) pursuant to Debt Conversion Agreements (the “ Debt Conversion Agreements ”) (the “ Offering ”). The sale of the units resulted in net cash proceeds of approximately $2.7 million. The units sold and issued in the Offering consisted of an aggregate of (i) 178,101 shares of the Company’s newly created Series A Preferred shares, convertible into 8,905,037 shares of the Company’s common stock, and (ii) five-year warrants to purchase 8,905,037 shares of Company’s common stock, at an exercise price of $0.50 per share. Pursuant to the Debt Conversion Agreements, the Debt Holders, consisting of Mr. Cohen and Fortis Oil & Gas (“ Fortis ”), agreed to convert all outstanding debt owed to the Debt Holders, amounting to $300,000 and $321,836, respectively, into units issued pursuant to the SPA. In addition to the conversion of outstanding debt, the Company and the Debt Holders also agreed to convert all accrued interest totaling $18,853 and $62,523, respectively.

In connection with the Offering, on January 31, 2019 Bandolier Energy, LLC (“ Bandolier ”), a wholly owned subsidiary of the Company, entered into Assignment of Net Profit Interest agreements (the “ Assignment Agreements ”) with each of the New Investors and Debt Holders, pursuant to which (i) Bandolier assigned and transferred to the New Investors and Debt Holders a 75% interest in profits, if any, derived from the ten new wells the Company intends to drill pursuant to the New Drilling Program, payments of which shall be made to the New Investors and Debt Holders, pro rata, on a quarterly basis following the full completion of the New Drilling Program, and (ii) in the event the Company elects to drill additional wells on its Osage County concession in the next two years, the New Investors and Debt Holders shall have the right to participate in and fund the drilling and production of the next ten wells on the same terms and conditions set forth in the Assignment Agreements.

F-8

Table of Contents

Senior Secured Debt Exchange

Acquisition of Membership Interest in LBE Partners, LLC

On October 2, 2018, the Company, ICO Liquidating Trust, LLC (“ ICO ”) and LBE Partners, which owns various working interests in several oil and gas wells located in the Hardin oil field in Liberty, Texas, entered into a Membership Interest Purchase Agreement (the “ LBE Purchase Agreement ”), effective September 24, 2018, pursuant to which the Company purchased a 66.67% membership interest in LBE Partners from ICO in exchange for 300,000 shares of the Company’s common stock valued at $333,000 based on the market value of the stock on the grant date. Both ICO and LBE Partners are managed by Scot Cohen, the Company’s Executive Chairman.

The Company recorded the purchase of LBE Partners using the acquisition method of accounting as specified in ASC 805 “ Business Combinations. ” This method of accounting requires the acquirer to record the net assets and liabilities acquired at the historical cost of LBE Partners because the Company determined that this acquisition was a related party transaction.

The following table summarizes fair values of the net assets acquired and liabilities assumed and the allocation of the aggregate value of the purchase consideration, and non-controlling interest:

Purchase consideration:
Common stock issued	$ 333,000
Total Purchase Consideration	$ 333,000

Purchase price allocation:
Cash	$ 138,686
Prepaid drilling costs	55,116
Oil and gas assets – net	2,425,482
Liabilities assumed – accounts payable	(19,198 )
Liabilities assumed – asset retirement obligation	(355,800 )
Non-controlling interest	(748,021 )
Contributed capital	(1,163,265 )
Net assets acquired	$ 333,000

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, 2017 and May 1, 2018 (the beginning of each fiscal year). The pro-forma amounts presented are not necessarily indicative of either the actual operation results had the acquisition transaction occurred as of May 1, 2017 and May 1, 2018.

	For the Year Ended April 30, 2019
	Petro River	LBE Partners	Pro-Forma Combined
Revenue	$ 1,645,170	$ 300,342	$ 1,975,630
Net income (loss)	(5,105,107 )	50,643	(5,054,464 )
Loss per share of common share - basic and diluted	(0.48 )		$ (0.48 )
Weighted average number of common shares outstanding - basic and diluted	17,772,293		17,772,293

F-9

Table of Contents

	For the Year Ended April 30, 2018
	Petro River	LBE Partners	Pro-Forma Combined
Revenue	$ 723,409	$ 351,936	$ 1,075,345
Net income (loss)	(20,337,681 )	8,709	(20,328,972 )
Loss per share of common share - basic and diluted	(1.24 )		$ (1.21 )
Weighted average number of common shares outstanding - basic and diluted	16,546,093		16,846,093

At April 30, 2019 the non–controlling interest in LBE was as follows:

Non–controlling interest at April 30, 2018	$ -
Acquisition of non–controlling interest in LBE Partners acquisition	748,021
Contributions from non–controlling interest	300,000
Non–controlling share of net loss	(396,859 )
Non–controlling interest at April 30, 2019	$ 651,162

MegaWest Exchange Transaction

On January 31, 2018, the Company entered into an Assignment and Assumption of Membership Interest with MegaWest Energy Kansas Corp. (“ MegaWest ”) (the “ Assignment Agreement ”), whereby the Company transferred its interest in MegaWest in exchange for a 50% membership interest in Bandolier Energy LLC (“ Bandolier ”) (the “Bandolier Interest” ) then held by MegaWest (the “ Exchange Transaction ”), as a result of the Bandolier Acquisition, as defined below. The Exchange Transaction followed the receipt by the Company of a notice of Redetermination, as defined below, of MegaWest’s assets, including MegaWest’s interest in the Bandolier Interests (together, “ MegaWest Assets ”), conducted by Fortis Property Group, LLC, a Delaware limited liability company (“ Fortis ”) .

The Redetermination was conducted pursuant to the Contribution Agreement, pursuant to which the Board of MegaWest was entitled to engage a qualified appraiser to determine the value of the MegaWest Assets and Bandolier Interests, and upon the completion thereof (a “ Redetermination ”), in the event the MegaWest Assets were determined to be less than $40.0 million, then a Shortfall, as defined in the Contribution Agreement, exists. As a result, the Company would be required to make cash contributions to MegaWest in an amount equal to the amount of the Shortfall (the “ Shortfall Capital Contribution ”). The Contribution Agreement further provided that, in the event that the Company was unable to deliver to MegaWest the Shortfall Capital Contribution required after the Redetermination, if any, MegaWest would have the right to exercise certain remedies, including a right to foreclose on the Company’s entire interest in MegaWest. In the event of foreclosure, the Bandolier Interest would revert back to the Company.

In lieu of engaging a qualified appraiser to quantify the Shortfall Capital Contribution, and in lieu of requiring MegaWest to exercise its remedies under the terms of the Contribution Agreement, the Company and MegaWest entered into the Exchange Transaction. As a result, the Company has no further rights or interest in MegaWest, and MegaWest has no further rights or interest in any assets associated with the Bandolier Interests. Pursuant to the Contribution Agreement and Assignment Agreement, the Company continues to be responsible for a reimbursement payment to MegaWest in the amount of $259,313, together with interest accrued thereon at an annual rate 10%, which will be due and payable one year after the date of the Assignment Agreement and has been included as a payable since January 31, 2018.

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As a result of the Redetermination, the Company recorded a loss on redetermination of $11,914,204 reflecting the write-off of the related assets, liabilities and non-controlling interests of Fortis’ interest in MegaWest as shown below:

Assets
Cash and cash equivalents	$ 119,722
Accounts receivable - real estate - related party	1,146,885
Accrued interest on notes receivable - related party	1,390,731
Interest in Bandolier	259,313
Notes receivable - related party, current portion	26,344,883
Total Assets	$ 29,261,534

Liabilities
Accounts payable and accrued expenses	$ 74,212
Deferred tax liability	3,775,927
Total Liabilities	3,850,139

Non-controlling interest	13,497,191

Loss on redetermination	$ (11,914,204 )

At the time the parties entered into the Contribution Agreement, management anticipated that the market price for crude oil would return to prices reached prior to 2015, and that additional wells would be drilled, resulting in greater revenue from the Bandolier Interests. Subsequent to the execution of the Contribution Agreement, only two wells had been drilled as of January 2018. That fact, together with the relatively low price of crude oil and the anticipated delays in drilling additional wells to demonstrate the value of the Bandolier Interests contributed to Fortis’ election to terminate the Contribution Agreement at the end of its term, as amended. Had the market price of oil supported the value of developing the Bandolier oil and gas properties at that time, under the terms of the Contribution Agreement, Fortis would have been required to fund the planned drilling program.

2.	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. The Company has incurred significant operating losses since its inception. As of April 30, 2019, the Company had an accumulated deficit of approximately $56.2 million, had working capital of approximately $170,000, and had cash and cash equivalents of approximately $1.2 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. The Company’s primary source of operating funds since inception has been debt and equity financings. In addition, the Company has a limited operating history prior to its acquisition of Bandolier. These matters raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.

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.

Management is focusing on specific target acquisitions and investments, limiting operating expenses, and exploring farm-in and joint venture opportunities for the Company’s oil and gas assets. No assurances can be given that management will be successful. In addition, Management intends to raise additional capital through debt and equity instruments in order to execute its business, operating and development plans. Management can provide no assurances that the Company will be successful in its capital raising efforts. In order to conserve capital, from time to time, management may defer certain development activity.

3.	Basis of Preparation

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“ 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.

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These consolidated financial statements include the Company and the following subsidiaries:

Bandolier Energy, LLC; Horizon I Investments, LLC; and MegaWest Energy USA Corp. and MegaWest Energy USA Corp.’s wholly owned subsidiaries:

MegaWest Energy Texas Corp.

MegaWest Energy Kentucky Corp.

MegaWest Energy Missouri Corp.

As a result of the acquisition of membership interest in the Osage County Concession in November 2017, Bandolier is now a wholly-owned subsidiary of the Company and the Company consolidates 100% of the financial information of Bandolier. Bandolier operates the Company’s Oklahoma oil and gas properties.

As a result of the acquisition of a 66.67% membership interest in LBE Partners effective on September 24, 2018, LBE Partners is now a subsidiary of the Company, and the Company consolidates the financial information of LBE Partners with a non-controlling interest in the remaining 33.33% membership interest. LBE Partners has varying working interest in multiple oil fields located in Texas.

Also contained in the consolidated financial statements for the periods ended April 30, 2019 and 2018 is the financial information of MegaWest, which prior to January 31, 2018 was 58.51% owned by the Company. The consolidated financial statements for the year ended April 30, 2018 include the results of operations of MegaWest; however, the assets and liabilities were written off in the year ended April 30, 2018.

4.	Significant Accounting Policies

(a)

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company’s financial statements are based on a number of significant estimates, including oil and natural gas reserve quantities which are the basis for the calculation of depreciation, depletion and impairment of oil and natural gas properties, and timing and costs associated with its asset retirement obligations, as well as those related to the fair value of stock options, stock warrants and stock issued for services. While we believe that management’s estimates and assumptions used in preparation of the financial statements are appropriate, actual results could differ from those estimates.

(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. The Company has not experienced any loses on such accounts.

As of April 30, 2019, approximately $752,000 exceed the FDIC insurance limits.

(c)

Receivables:

Receivables that management has the intent and ability to hold for the foreseeable future are reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for doubtful accounts. Losses from uncollectible receivables are accrued when both of the following conditions are met: (a) information available before the financial statements are issued or are available to be issued indicates that it is probable that an asset has been impaired at the date of the financial statements, and (b) the amount of the loss can be reasonably estimated. These conditions may be considered in relation to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, an accrual shall be made even though the particular receivables that are uncollectible may not be identifiable. The Company reviews each receivable individually for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information, and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay. Bad debt expense is included in general and administrative expenses, if any.

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Credit losses for receivables (uncollectible receivables), which may be for all or part of a particular receivable, shall be deducted from the allowance. The related receivable balance shall be charged off in the period in which the receivables are deemed uncollectible. Recoveries of receivables previously charged off shall be recorded when received. The Company charges off its account receivables against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The allowance for doubtful accounts at April 30, 2019 and 2018 was $0.

(d)

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.

Long-lived assets are 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, 2019 and 2018, management engaged a third party to perform an independent study of the oil and gas assets. The Company recorded total impairment of $984,774 and $1,733,932 to the consolidated statements of operations for the years ended April 30, 2019 and 2018, respectively.

Proved Oil and Gas Reserves : 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 proved reserves were impaired to the salvage value prior to the Company’s acquisition of its interest in Bandolier. The price used to establish economic viability 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.

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, 2019 and 2018.

(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.

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(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)	Fair Value of Financial Instruments:

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“ Paragraph 820-10-35-37 ”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, and accounts payable and accrued liabilities approximate their fair value because of the short maturity of those instruments.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

(h)	Preferred Stock:

The Company applies the accounting standards for distinguishing liabilities from equity under U.S. GAAP when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as permanent equity.

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(i)	Derivative Liabilities:

The Company evaluates its options, warrants, convertible notes, or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. The change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“ Section 815-40-15 ”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.

The Company utilizes a binomial option pricing model to compute the fair value of the derivative liability and to mark to market the fair value of the derivative at each balance sheet date. The Company records the change in the fair value of the derivative as other income or expense in the consolidated statements of operations.

The Company had derivative liabilities of $4,191,754 and $0 as of April 30, 2019 and 2018, respectively.

(j)

Income Taxes:

Income Tax Provision

The Company utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry-forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

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Uncertain Tax Positions

The Company evaluates uncertain tax positions to recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

At April 30, 2019 and 2018, the Company had $0 and $0, respectively, of liabilities for uncertain tax positions. Interpretation of taxation rules relating to net operating loss utilization in real estate transactions give rise to uncertain positions. In connection with the uncertain tax position, there was no interest or penalties recorded as the position is expected but the tax returns are not yet due.

The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the outcomes of such matters. In addition, when applicable, the Company will adjust tax expense to reflect the Company’s ongoing assessments of such matters, which require judgment and can materially increase or decrease its effective rate as well as impact operating results.

The number of years with open tax audits varies depending on the tax jurisdiction. The Company’s major taxing jurisdictions include the United States (including applicable states).

(k)

Revenue Recognition:

ASU 2014-09, “ Revenue from Contracts with Customers (Topic 606) ,” supersedes the revenue recognition requirements and industry-specific guidance under Revenue Recognition (Topic 605) . Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic 606 on May 1, 2018, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Under the modified retrospective method, prior period financial positions and results will not be adjusted. The cumulative effect adjustment recognized in the opening balances included no significant changes as a result of this adoption. Although the Company does not expect 2018 net earnings to be materially impacted by revenue recognition timing changes, Topic 606 requires certain changes to the presentation of revenue and related expense beginning May 1, 2018. Refer to Note 12 – Revenue from Contracts with Customers for additional information.

The Company’s revenue is comprised of revenue from exploration and production activities as well as royalty revenue related to a royalty interest agreement executed in February 2018. The Company’s oil is sold primarily to marketers, gatherers, and refiners. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies, and natural-gas marketers. NGLs are sold primarily to direct end-users, refiners, and marketers. Payment is generally received from the customer in the month following delivery.

Contracts with customers have varying terms, including spot sales or month-to-month contracts, contracts with a finite term, and life-of-field contracts where all production from a well or group of wells is sold to one or more customers. The Company recognizes sales revenue for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed. Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs.

Revenue is recognized for the sale of the Company’s net share of production volumes. Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenue.

(l)

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.

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.

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The fair value of an 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 the Company’s estimate, the equity–based compensation expense could be significantly different from what the Company has recorded in the current period.

The Company determines the fair value of the stock–based payments to non-employees 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 expense resulting from stock-based compensation is recorded as general and administrative expenses in the consolidated statement of operations, depending on the nature of the services provided.

(m)

Per Share Amounts:

Basic net income (loss) per common share is computed by dividing net loss attributable to stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (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. For the years ended April 30, 2019 and 2018, potentially dilutive securities were not included in the calculation of diluted net loss per share because to do so would be anti-dilutive.

The Company had the following common stock equivalents at April 30, 2019 and 2018:

	April 30, 2019	April 30, 2018
Series A Preferred Shares	21,770,150	-
Stock options	2,607,385	2,555,385
Stock purchase warrants	11,128,706	2,223,669
Total	35,506,241	4,779,054

(n)

Recent Accounting Pronouncements:

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The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows.

(o)

Subsequent Events:

The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

5.	Oil and Gas Assets

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

Cost	Oklahoma	Texas	Larne Basin	Other (1)	Total
Balance, May 1, 2017	$ 1,232,192	$ -	$ 761,444	$ 100,000	$ 2,093,636
Additions	3,665,851	-	-	-	3,665,851
Depreciation, depletion and amortization	(146,141 )	-	-	-	(146,141 )
Impairment of oil and gas assets	(972,488 )	-	(761,444 )	-	(1,733,932 )
Balance, April 30, 2018	3,779,414	-	-	100,000	3,879,414
Additions	1,307,720	2,431,419	-	-	3,739,139
Depreciation, depletion and amortization	(380,873 )	(283,974 )	-	-	(664,847 )
Impairment of oil and gas assets	-	(984,774 )	-	-	(984,774 )
Balance, April 30, 2019	$ 4,706,261	$ 1,162,671	$ -	$ 100,000	$ 5,968,932

(1)	Other property consists primarily of four, used steam generators and related equipment that will be assigned to future projects. As of April 30, 2019 and 2018, management concluded that impairment was not necessary as all other assets were carried at salvage value.

Kern and Kay County Projects. On February 14, 2018, the Company entered into a Purchase and Exchange Agreement with Red Fork Resources (“ Red Fork ”), pursuant to which (i) the Company agreed to convey to Mountain View Resources, LLC, an affiliate of Red Fork, 100% of its 13.7% working interest in and to an area of mutual interest (“ AMI ”) in the Mountain View Project in Kern County, California, and (ii) Red Fork agreed to convey to the Company 64.7% of its 85% working interest in and to an AMI situated in Kay County, Oklahoma (the “ Red Fork Exchange ”). The fair value of the assets acquired was $108,333 as of the effective date of the agreement. Following the Red Fork Exchange, the Company and Red Fork each retained a 2% overriding royalty interest in the projects that they respectively conveyed. Under the terms of the Purchase and Exchange Agreement, all revenue and costs, expense, obligations and liabilities earned or incurred prior to January 1, 2018 (the “ Effective Date ”) shall be borne by the original owners of such working interests, and all of such revenue and costs, expense, obligations and liabilities that occur subsequent to the effective date shall be borne by the new owners of such working interests.

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The acquisition of the additional concessions in Kay County, Oklahoma added additional prospect locations adjacent to the Company’s 106,000-acre concession in Osage County, Oklahoma. The similarity of the prospects in Kay and Kern County allows for the leverage of assets, infrastructure and technical expertise.

Acquisition of Interest in Larne Basin. On January 19, 2016, Petro River UK Limited, (“ Petro UK ”), a wholly owned subsidiary of the Company, entered into a Farmout Agreement to acquire a 9% interest in Petroleum License PL 1/10 and P2123 (the “ Larne Licenses ”) located in the Larne Basin in Northern Ireland (the “ Larne Transaction ”). The two Larne Licenses, one onshore and one offshore, together encompass approximately 130,000 acres covering the large majority of the prospective Larne Basin. The other parties to the Farmout Agreement are Southwestern Resources Ltd, a wholly owned subsidiary of Horizon Energy, which acquired a 16% interest, and Brigantes Energy Limited, which retained a 10% interest. Third parties own the remaining 65% interest.

Under the terms of the Farmout Agreement, Petro UK deposited approximately $735,000 into an escrow agreement (“ Escrow Agreement ”), which amount represented Petro UK’s obligation to fund the total projected cost to drill the first well under the terms of the Farmout Agreement. The total deposited amount to fund the cost to drill the first well is approximately $6,159,452, based on an exchange rate of 1.0 British Pound for 1.44 U.S. Dollars. Petro UK was and will continue to be responsible for its pro-rata costs of additional wells drilled under the Farmout Agreement. Drilling of the first well was completed in June 2016 and was unsuccessful. The initial costs incurred by the Company were reclassified from prepaid oil and gas development costs to oil and gas assets not being amortized on the consolidated balance sheets.

Oklahoma Properties. During the year ended April 30, 2019, the Company recorded additions related to development costs incurred of approximately $1.3 million for proven oil and gas assets.

Texas Properties. Effective on September 24, 2018, the Company acquired a 66.67% membership interest in LBE Partners from ICO in exchange for 300,000 restricted shares of the Company’s common stock. LBE Partners has varying working interest in multiple oil and gas producing wells located in Texas. The Company recorded additions of approximately $2,430,000 for oil and gas assets related to this acquisition.

Impairment of Oil & Gas Properties. As of April 30, 2019, the Company assessed its oil and gas assets for impairment and recognized a charge of $984,774 related to its Texas oil and gas properties. As of April 30, 2018, the Company assessed its oil and gas assets for impairment and recognized a charge of $1,733,932 related to its Oklahoma and Larne Basin oil and gas properties.

6.	Asset Retirement Obligations

The total future asset retirement obligations were 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, 2019 and 2018 based on a future undiscounted liability of $1,118,249 and $728,091, respectively. These costs are expected to be incurred within 1 to 42 years. A credit-adjusted risk-free discount rate of 10% and an inflation rate range of 1.5% to 2.66% were used to calculate the present value.

Changes to the asset retirement obligations were as follows:

	Year Ended April 30, 2019	Year Ended April 30, 2018
Balance, beginning of period	$ 660,139	$ 558,696
Additions	355,800	29,325
Change in estimates	15,695	61,633
Disposals	-	-
Accretion	17,557	10,485
	1,049,191	660,139
Less: Current portion for cash flows expected to be incurred within one year	(720,442 )	(413,794 )
Long-term portion, end of period	$ 328,749	$ 246,345

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During the year ended April 30, 2019 and 2018, the Company recorded accretion expense of $17,557 and $10,485, respectively.

Expected timing of asset retirement obligations:

Year Ending April 30,
2019	$ 720,442
2020	-
2021	-
2022	-
2023	-
Thereafter	397,807
Subtotal	1,118,249
Effect of discount	(69,058 )
Total	$ 1,049,191

7.	Related Party Transactions

Series A Financing

On January 31, 2019, the Company entered into a Securities Purchase Agreement with Scot Cohen, the Company’s Executive Chairman , pursuant to which Mr. Cohen purchased $737,616 of units in connection with the Series A Financing (the “ Cohen Investment ”). In addition, Mr. Cohen also converted $300,000 and $18,583 of debt and accrued interest, respectively, owed under the Cohen Loan Agreement, as set forth below, into units pursuant to a Debt Conversion Agreement (the “ Cohen Debt Conversion ”). As a result of the Cohen Investment and the Cohen Debt Conversion, the Company issued Mr. Cohen an aggregate of 51,881 shares of Series A Preferred and warrants to purchase 2,594,040 shares of the Company’s common stock. For more information regarding this transaction, see Note 1.

Acquisition of Membership Interest in LBE Partners

On October 2, 2018, the Company, ICO and LBE Partners entered into the LBE Assignment Agreement and the LBE Purchase Agreement, pursuant to which, effective September 24, 2018, the Company purchased a 66.67% membership interest in LBE Partners from ICO in exchange for 300,000 restricted shares of the Company’s common stock to ICO. Both ICO and LBE Partners are managed by Mr. Cohen. For more information regarding this transaction, see Note 1.

Related Party Loan

On June 18, 2018, Bandolier entered into a loan agreement with Scot Cohen (the “ Cohen Loan Agreement ”), pursuant to which Mr. Cohen loaned the Company $300,000 at a 10% annual interest rate, due on September 30, 2018. The purpose of the Cohen Loan Agreement was to provide the Company with short-term financing in connection with the Company’s drilling program in Osage County, Oklahoma. On December 17, 2018, the maturity date of the loan was extended from September 30, 2018 to March 31, 2019. On January 31, 2019, the Company and Mr. Cohen entered into a Debt Conversion Agreement, pursuant to which Mr. Cohen agreed to convert all outstanding debt and accrued interest owed under the Cohen Loan Agreement into units, consisting of an aggregate of 15,000 shares of Series A Preferred and warrants to purchase 750,000 shares of Company common stock, sold and issued in the Series A Financing. As a result, the Cohen Loan Agreement was terminated and deemed satisfied in full. For more information regarding the debt conversion, see Note 1. Upon conversion of the note, the Company recorded a total loss on debt extinguishment totaling $94,388, consisting of $35,920 from Mr. Cohen’s loan and $58,468 from Fortis Oil & Gas.

June 2017 $2.0 Million Secured Note Financing

Scot Cohen owns or controls 31.25% of Funding Corp., the former holder of the senior secured promissory note in the principal amount of $2.0 million (the “ June 2017 Secured Note ”) issued by the Company on June 13, 2017. The June 2017 Secured Note accrued interest at a rate of 10% per annum and was scheduled to mature on June 30, 2020. The June 2017 Secured Note is presented as “Note payable – related party, net of debt discount” on the consolidated balance sheets.

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On May 17, 2018, the parties executed an extension of the due date of the first interest payment from June 1, 2018 to December 31, 2018. As consideration for the interest payment extension, the Company agreed to pay Funding Corp. an additional 10% of the interest due June 1, 2018 on December 31, 2018. The Company accrued an additional $19,160 of interest expense related to this extension. On December 17, 2018, the parties executed a second extension of the due date of the first interest payment from December 31, 2018 to March 31, 2019.

On January 31, 2019, the Company and Funding Corp. entered into a Secured Debt Conversion Agreement, pursuant to which Funding Corp. agreed to convert the outstanding balance due under the June 2017 Secured Note, amounting to approximately $2.3 million, into 116,503 shares of Series A Preferred. As a result of the Secured Debt Exchange, all indebtedness, liabilities and other obligations arising under the June 2017 Secured Note were cancelled and deemed satisfied in full.

In connection with the issuance of the June 2017 Secured Note, the Company issued to Funding Corp. warrants to purchase 840,336 shares of the Company’s common stock (the “ June 2017 Warrant ”). Upon issuance of the June 2017 Secured Note, the Company valued the June 2017 Warrant using the Black-Scholes Option Pricing model and accounted for it using the relative fair value of $952,056 as debt discount on the consolidated balance sheet. On January 31, 2019, as additional consideration for the conversion of the amounts due under the June 2017 Secured Note, the Company agreed to (i) reduce the exercise price of the June 2017 Warrant from $2.38 per share to $0.50 per share, and (ii) to extend the expiration date of the June 2017 Warrant to January 31, 2024. The Company computed the fair value of the warrants directly preceding the modification and compared the fair value to that of the modified warrants with new terms. The fair value of the modified warrants was lower than the fair value of the warrants preceding the modification; therefore, no accounting treatment resulted from the modification.

As additional consideration for the purchase of the June 2017 Secured Note, the Company issued to Funding Corp. an overriding royalty interest equal to 2% in all production from the Company’s interest in the Company’s concessions located in Osage County, Oklahoma, originally held by Spyglass, valued at $250,000, which was recorded as contributed capital, since no repayment was required, and debt discount on the consolidated balance sheet.

The debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt, using the effective interest method. The amortization of debt discount is included as a component of interest expense in the consolidated statements of operations. There was unamortized debt discount of $0 as of April 30, 2019. During the years ended April 30, 2019 and 2018, the Company recorded amortization of debt discount totaling $994,190 and $207,867, respectively.

As of April 30, 2019 and 2018, the outstanding balance, net of debt discount, was $0 and $1,005,812, respectively, and accrued interest on the June 2017 Secured Note due to related party was $0 and $174,065, respectively. As a result of the Secured Debt Exchange, the June 2017 Secured Note was terminated as of January 31, 2019.

November 2017 $2.5 Million Secured Note Financing

Scot Cohen owns or controls 41.20% of Funding Corp. II, the former holder of the senior secured promissory note in the principal amount of $2.5 million (the “ November 2017 Secured Note ”) issued by the Company on November 6, 2017. The November 2017 Secured Note accrued interest at a rate of 10% per annum and was scheduled to mature on June 30, 2020. The November 2017 Secured Note is presented as “Note payable – related party, net of debt discount” on the consolidated balance sheets.

On May 17, 2018, the parties executed an extension of the due date of the first interest payment from June 1, 2018 to December 31, 2018. As consideration for the interest payment extension, the Company agreed to pay Funding Corp. II an additional 10% of the interest due on June 1, 2018 on December 31, 2018. The Company accrued an additional $14,247 of interest expense related to this extension. On December 17, 2018, the parties executed a second extension of the due date of the first interest payment from December 31, 2018 to March 31, 2019.

On January 31, 2019, the Company and Funding Corp. II entered into a Secured Debt Conversion Agreement, pursuant to which Funding Corp. II agreed to convert the outstanding balance due under the November 2017 Secured Note, amounting to approximately $2.8 million, into 140,799 shares of Series A Preferred stock. As a result of the Secured Debt Exchange, all indebtedness, liabilities and other obligations arising under the November 2017 Secured Note were cancelled and deemed satisfied in full.

In connection with the issuance of the November 2017 Secured Note, the Company issued to Funding Corp. II warrants to purchase 1.25 million shares of the Company’s common stock (the “ November 2017 Warrant ”). Upon issuance of the November 2017 Note, the Company valued the November 2017 Warrant using the Black-Scholes Option Pricing model and accounted for it using the relative fair value of $1,051,171 as debt discount on the consolidated balance sheet. In relation to the financing, Scot Cohen paid $250,000 for an overriding royalty interest from Funding Corp. (as discussed below), which was recorded as additional debt discount on the consolidated balance sheet. On January 31, 2019, as additional consideration for the conversion of the amounts due under the November 2017 Secured Note, the Company agreed to (i) reduce the exercise price of the November 2017 Warrant from $2.00 per share to $0.50 per share, and (ii) extend the expiration date of the November 2017 Warrant to January 31, 2024. The Company computed the fair value of the warrants directly preceding the modification and compared the fair value to that of the modified warrants with new terms. The fair value of the modified warrants was lower than the fair value of the warrants preceding the modification; therefore, no accounting treatment resulted from the modification.

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As additional consideration for the purchase of the November 2017 Secured Note, the Company issued to Funding Corp. II an overriding royalty interest equal to 2% in all production from the Company’s interest in the Company’s concessions located in Osage County, Oklahoma, originally held by Spyglass (the “ Existing Osage County Override ”) then transferred to Funding Corp. as inducement for the June 2017 Secured Note. The Existing Osage County Override was then acquired by the Company from Mr. Cohen. As noted above, the override was accounted for as a debt discount and amortized over the term of the debt. In connection with the January 2019 debt restructuring, Funding II assigned the 2% overriding interest to the Company.

As of April 30, 2019 and 2018, the outstanding balance, net of debt discount, was $0 and $1,354,938, respectively, and accrued interest on the November 2017 Secured Note due to related party was $0 and $120,548, respectively. As a result of the Secured Debt Exchange, the November 2017 Secured Note was terminated as of January 31, 2019.

8.	Derivative Liabilities

As discussed above in Note 1, on January 31, 2019, the Company sold and issued an aggregate of 178,101 units, for an aggregate purchase price of $3,562,015, to certain accredited investors and to certain debtholders. The units sold and issued in the Offering included five-year warrants to purchase 8,905,037 shares of Company common stock, at an exercise price of $0.50 per share.

The Company identified certain features embedded in the warrants requiring the Company to classify the warrants as a derivative liability; specifically, the warrants contain a fundamental transaction provision that permits their settlement in cash at fair value of the remaining unexercised portion of this Warrant at the option of the holder upon the occurrence of a change in control.

The fair value of the derivative feature of the warrants on the date of issuance and balance sheet date were calculated using a binomial option model valued with the following weighted average assumptions:

	April 30, 2019	April 30, 2018
Risk-free interest rate	2.63% to 3.15%	2.30% to 2.95%
Expected life of grants	4 – 10 years	4 – 10 years
Expected volatility of underlying stock	151% to 156%	159% to 168%
Dividends	0%	0%

As of April 30, 2019, the derivative liability of the warrants was $4,191,754. In addition, for the year ended April 30, 2019, the Company recorded $525,352 as additional interest expense on the statement of operations for the portion of the fair value of the warrant that exceeded face value of the Series A Preferred shares sold. The Company also recorded $41,410 as the change in the value of the derivative liabilities.

Stockholders’ Equity

On January 31, 2019, the Company filed the Series A COD with the Secretary of State with the State of Delaware, designating 500,000 shares of the Company’s preferred stock as Series A Preferred. On January 31, 2019, the Company sold and issued 178,101 shares of Series A Preferred to the New Investors and the Debt Holders in connection with the Series A Financing. In addition, the Company issued an aggregate of 257,302 shares of Series A Preferred to Funding Corp. and Funding Corp. II in connection with the Senior Secured Debt Exchange. See Note 1 for additional information regarding the Series A Financing and the Senior Secured Debt Exchange.

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In May 2018, the Company granted a total of 260,000 shares of restricted common stock to Scot Cohen and Steven Brunner in exchange for a reduction in cash compensation with a fair value of approximately $325,000, based on the market price of the Company’s common stock on the grant date. The shares vest monthly in equal installments over a 12-month period. During the year ended April 30, 2019, the Company recorded stock-based compensation of $297,916 related to these grants.

As discussed in Note 1, on October 2, 2018, pursuant to the LBE Purchase Agreement, the Company issued 300,000 shares of restricted common stock to ICO in exchange for a 66.67% interest in LBE Partners.

As discussed in Note 13, on October 4, 2018, the Company settled the dispute with its former landlord in exchange for the issuance of 68,807 shares of Company common stock, satisfying the $75,000 liability related to the lease.

During the year ended April 30, 2018, the Company issued 15,145 shares of common stock related to a cashless exercise of 35,000 options.

Stock Options

As of April 30, 2019, 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.

During the year ended April 30, 2019 and 2018, the Company computed the fair value of the option utilizing a Black-Scholes option-pricing model using the following assumptions:

	April 30, 2019	April 30, 2018
Risk-free interest rate	2.63% to 3.15%	2.30% to 2.95%
Expected life of grants	4 – 10 years	4 – 10 years
Expected volatility of underlying stock	151% to 156%	159% to 168%
Dividends	0%	0%

The expected stock price volatility for the Company’s stock options was estimated using the historical volatilities of the Company’s common stock. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods.

The following table summarizes the option activity for the years ended April 30, 2019 and 2018:

	Options	Weighted Average Exercise Prices

Outstanding – April 30, 2017	2,599,682	$ 2.13
Granted	25,703	1.40
Exercised	(35,000 )	1.38
Forfeited/Cancelled	(35,000 )	1.38
Outstanding – April 30, 2018	2,555,385	2.14
Granted	52,000	1.45
Outstanding – April 30, 2019	2,607,385	$ 2.13
Exercisable – April 30, 2019	2,566,619	$ 2.14

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The following table summarizes information about the options outstanding and exercisable at April 30, 2019:

	Options Outstanding		Options Exercisable
Exercise Price	Options	Weighted Avg. Life Remaining (years)	Options	Weighted Average Exercise Price
$ 1.30	12,000	0.04	12,000	$ 0.01
$ 1.38	1,795,958	7.34	1,775,192	$ 0.95
$ 1.40	25,703	8.64	25,703	$ 0.01
$ 1.50	40,000	9.25	20,000	$ 0.01
$ 1.98	5,000	7.27	5,000	$ 0.00
$ 2.00	457,402	6.17	457,402	$ 0.36
$ 2.87	65,334	5.81	65,334	$ 0.07
$ 3.00	51,001	6.66	51,001	$ 0.06
$ 3.39	12,000	6.89	12,000	$ 0.02
$ 6.00	10,000	5.74	10,000	$ 0.02
$ 12.00	132,987	4.52	132,987	$ 0.63
	2,607,385		2,566,619
Aggregate Intrinsic Value	$ -		$ -

During the years ended April 30, 2019 and 2018, the Company expensed an aggregate $199,752 and $906,591 to general and administrative expenses for stock-based compensation pursuant to employment and consulting agreements.

As of April 30, 2019, the Company has $33,089 in unrecognized stock-based compensation expense which will be amortized over a weighted average exercise period of 6.97 years.

Warrants

As discussed above, on January 31, 2019, the Company sold and issued an aggregate of 178,101 units to certain accredited investors and to certain debtholders. The units sold and issued in the Offering included five-year warrants to purchase 8,905,037 shares of Company common stock, at an exercise price of $0.50 per share. The relative fair value of the warrants were estimated to be $4,209,148 using the Black-Scholes option-pricing model.

The relative fair values of $952,056 for the 840,336 June 2017 Warrants granted in conjunction with the June 2017 Secured Note Financing and $1,051,171 for the 1.25 million November 2017 Warrants granted in connection with the November 2017 Secured Note Financing (as discussed in Note 7) were estimated on the date of grant using the Black-Scholes option-pricing model.

The assumptions used for the warrants granted during the years ended April 30, 2019 and 2018 were as follows:

	April 30, 2019	April 30, 2018
Exercise price	$ 0.50	$ 1.75 to 2.38
Risk-free interest rate	2.24% to 2.43%	1.49% to 1.73%
Expected volatility of underlying stock	141% to 144%	160% to 170%
Expected life of grants	4 – 10 years	3 years
Dividends	0%	0%

The following table summarizes the warrant activity for the years ended April 30, 2019 and 2018:

	Number of Warrants	Weighted Average Exercise Price	Weighted Average Life Remaining
Outstanding and exercisable – April 30, 2017	133,333	$ 50.00	2.83
Forfeited	-	-	-
Granted/Expired	2,090,336	2.15	2.57
Outstanding and exercisable – April 30, 2018	2,223,669	5.02	2.57
Forfeited	-	-	-
Granted/Expired	8,905,037	0.50	3.81
Outstanding and exercisable – April 30, 2019	11,128,706	$ 1.09	4.71

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The aggregate intrinsic value of the outstanding warrants was $659,772.

10.	Non-Controlling Interests

For the years ended April 30, 2019 and 2018, the changes in the Company’s non–controlling interest was as follows:

	Bandolier	MegaWest	LBE	Total
Non–controlling interests at May 1, 2017	$ (699,873 )	$ 13,310,343	$ -	$ 12,610,470
Contribution of real estate by non-controlling interest holders	785,298	(13,497,191 )	-	(12,711,893 )
Non–controlling interest share of income (losses)	(85,425 )	186,848	-	101,423
Non–controlling interests at April 30, 2018	-	-	-	-
Contribution by non-controlling interest holders	-	-	1,048,021	1,048,021
Non–controlling interest share of income (losses)	-	-	(396,859 )	(396,859 )
Non–controlling interests at April 30, 2019	$ -	$ -	651,162	$ 651,162

As discussed above, as a result of the MegaWest Transaction and the Membership Interest Assignment, the non-controlling interests in Bandolier and Fortis’ interest in MegaWest were written down to $0.

11.	Income Taxes

As of April 30, 2019, the Company had approximately $30.8 million of net operating loss carryovers (“ NOLs ”). The Federal NOLs generated will not expire due to NOLs having an indefinite life as enacted in the 2017 Tax Cuts and Jobs Act. 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-acquisition loss deduction due to a net built in loss in 2015 at the time of the ownership change.

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

	For the Year Ended April 30, 2019	For the Year Ended April 30, 2018
Foreign
Current	$ -	$ -
Deferred	-	-
U.S. Federal
Current
Deferred	(1,128,877 )	(4,217,889 )

U.S. State & Local
Current	-	-
Deferred	(160,836 )	(478,113 )

Change in valuation allowance	1,289,713	5,029,205
Income tax provision (benefit)	$ -	$ 333,203

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.

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

	April 30, 2019	April 30, 2018
U.S. net operating loss carryovers	$ 9,220,074	$ 8,449,933
Depreciation	2,316,141	2,156,408
Impairment of oil and gas assets	5,087,832	4,851,566
Accretion of asset retirement obligation	143,716	139,545
Stock-based compensation	2,359,308	2,239,907
Total deferred tax assets	19,127,071	17,837,358
Valuation allowance	(19,127,071 )	(17,837,358 )
Deferred tax asset, net of valuation allowance	$ -	$ -

	April 30, 2019	April 30, 2018
Tax liability – MegaWest	$ -	$ -
Total deferred tax liability	$ -	$ -

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, 2019	For the Year Ended April 30, 2018
U.S. federal statutory rate	(21.00 )%	(27.50 )%
State income tax, net of federal benefit	(2.99 )%	(3.12 )%
Change in rate	0.00 %	(1.20 )%
Other permanent differences	0.55 %	8.94 %
Change in valuation allowance	23.44 %	24.50 %
Income tax provision (benefit)	0.00 %	1.62 %

12.

Revenue from Contracts with Customers

Change in Accounting Policy. The Company adopted ASU 2014-09, “ Revenue from Contracts with Customers (Topic 606) ,” on May 1, 2018, using the modified retrospective method applied to contracts that were not completed as of May 1, 2018. Refer to Note 4 – Significant Accounting Policies for additional information.

Exploration and Production. There were no significant changes to the timing or valuation of revenue recognized for sales of production from exploration and production activities.

Disaggregation of Revenue from Contracts with Customers. The following table disaggregates revenue by significant product type for the year ended April 30, 2019 and 2018:

	For the Year Ended April 30, 2019	For the Year Ended April 30, 2018
Oil sales	$ 1,576,432	$ 713,109
Natural gas sales	45,645	10,300
Royalty revenue	23,093	-
Total revenue from customers	$ 1,645,170	$ 723,409

There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of April 30, 2019 and 2018.

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13.	Contingency and Contractual Obligations

Pending Litigation

On January 30, 2014, the landlord filed a Statement of Claim against the Company for rental arrears in the amount aggregating CAD $759,000 (approximately USD $564,000 as of April 30, 2019). The Company filed a defense and on October 20, 2014, it 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 CAD $665,000 (approximately USD $494,000 as of April 30, 2018). The applications were heard on June 25, 2015 and the court allowed both the Company’s summary judgment application and the landlord’s amendment application. Both of these orders were appealed though two levels of the Alberta courts and the appeals were dismissed at both levels. The net effect is that the landlord's claim for loss of prospective rent is to proceed. On October 4, 2018, the Company and the landlord entered into a settlement agreement under which all actions by the landlord and the Company were dismissed for a payment by the Company to the landlord of 68,807 shares of common stock.

(b) In September 2013, the Company was notified by the Railroad Commission of Texas (the “ Railroad Commission ”) that the Company was not in compliance with regulations promulgated by the Railroad 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 Railroad Commission therefore collected $25,000 from the Company, which was originally deposited with the Railroad Commission, to cover a portion of the estimated costs of $88,960 to plug the wells. In addition to the above, the Railroad Commission also reserved its right to separately seek any remedies against the Company resulting from its noncompliance.

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(d) MegaWest Energy Missouri Corp. (“ MegaWest Missouri ”), 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. MegaWest Energy Missouri and Petro River Oil Corp. , case number 13B4-CV00019) is a case for unlawful detainer, pursuant to which the plaintiffs contend that MegaWest Missouri oil and gas lease has expired and MegaWest Missouri 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. MegaWest Missouri filed an Answer and Counterclaims on November 26, 2013 and the plaintiffs filed a motion to dismiss the counterclaims. MegaWest Missouri filed a motion for Change of Judge and Change of Venue and the case was transferred to Barton County, Missouri . In September 2015, the parties reached a full and final settlement of the claims and allegations related to the lease agreements.

14.	Subsequent Events

[add any subsequent events in prior to filing]

15.	Supplemental Information on Oil and Gas Operations (Unaudited)

The Company retains qualified independent reserves evaluators to evaluate the Company’s proved oil reserves. For the year ended April 30, 2019, the reports by Cawley, Gillespie & Associate, Inc. (“ CGA ”) covered the percentage interest of the Company’s proved oil reserves. For the year ended April 30, 2018, the reports by Cawley, Gillespie & Associate, Inc. (“ CGA ”) covered 75% of the Company’s 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.

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The following tables summarize the Company’s proved developed and undeveloped reserves within the United States, net of royalties, as of April 30, 2019 and 2018:

Oil (MBbls)	2019	2018

Proved reserves as at May 1	496	167
Extensions, acquisitions and discoveries	-	-
Purchase of minerals	69	-
Production	(30 )	(12 )
Revisions of prior estimates	(168 )	341
Total Proved reserves as at April 30	368	496

Oil (MBbls)	2019	2018

Proved developed producing	196	214
Non-producing	28	30
Proved undeveloped	144	252
Total Proved reserves as at April 30	368	496

Gas (MCFs)	2019	2018

Proved reserves as at May 1	511	279
Extensions, acquisitions and discoveries	-	-
Dispositions	-	-
Production	(22 )	(6 )
Revisions of prior estimates	186	238
Total Proved reserves as at April 30	675	511

Gas (MCFs)	2019	2018

Proved developed producing	334	137
Non-producing	28	25
Proved undeveloped	313	349
Total Proved reserves as at April 30	675	511

Capitalized Costs Related to Oil and Gas Assets	2019	2018

Proved properties	$ 17,328,196	$ 12,729,430
Unproved properties	100,000	100,000
	17,428,196	12,829,430
Less: accumulated depletion and impairment	(11,459,264 )	(8,950,016 )
	$ 5,968,932	$ 3,879,414

Costs Incurred in Oil and Gas Activities:	2019	2018

Development (1)	$ 1,313,657	$ 3,665,851
Exploration	-	-
Acquisition	2,425,482
	$ 3,739,139	$ 3,665,851

(1)

The above development oil and gas costs includes the oil and gas assets totaling $2,425,482 acquired through the LBE Partners acquisition.

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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 ASC Topic 932 - “ Extractive Activities - Oil and Gas ”:

Future cash flows relating to proved reserves:	2019	2018
Future cash inflows	$ 24,636,000	$ 30,259,000
Future operating costs	(8,923,000 )	(8,239,000 )
Future development costs	(1,351,000 )	(1,759,000 )
Future income taxes	(1,749,000 )	(2,147,000 )
Future net cash flows	12,613,000	18,114,000
10% discount factor	(5,684,000 )	(8,133,000 )
Standardized measure	$ 6,929,000	$ 9,981,000

Summary of Changes in Standardized Measure of Discounted Future Net Cash Flows

The following table summarizes the principal sources of changes in standardized measure of discounted future estimated net cash flows at 10% per annum for the years ended April 30, 2019 and 2018:

	2019	2018
Standardized measure, beginning of year	$ 9,981,000	$ 2,024,000
Sales of oil produced, net of production costs	2,534,000	3,070,000
Net changes in sales and transfer prices and in production costs and production costs related to future production	(946,000 )	(3,091,000 )
Previously estimated development costs incurred during the period	-	-
Changes in future development costs	(408,000 )	1,144,000
Revisions of previous quantity estimates due to prices and performance	(671,000 )	5,216,000
Accretion of discount	69,000	100,000
Discoveries, net future production and development costs associated with these extensions and discoveries	-	-
Purchases and sales of minerals in place	2,839,000	-
Timing and other	(6,469,000 )	1,518,000
Standardized measure, end of year	$ 6,929,000	$ 9,981,000

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Table of Contents

S I GNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PETRO RIVER OIL CORP.

	By:	/s/ Scot Cohen
	Name:	Scot Cohen
	Title:	Executive Chairman

	By:	/s/ David Briones
	Name:	David Briones
	Title	Chief Financial Officer
Date: August 13, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Scot Cohen	Executive Chairman and Director	August 13, 2019
Scot Cohen	(Principal Executive Officer)

/s/ David Briones	Chief Financial Officer	August 13, 2019
David Briones	(Principal Accounting Officer)

/s/ Glenn C. Pollack	Director	August 13, 2019
Glenn C. Pollack

/s/ John Wallace	Director	August 13, 2019
John Wallace

/s/ Fred Zeidman	Director	August 13, 2019
Fred Zeidman

-35-

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