Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
Note
1 – Organization and Business Operations
PetroTerra
Corp. was incorporated under the laws of the State of Nevada, on July 25, 2008 and prior to the reverse merger discussed below,
was inactive.
Save
On Transport Inc. (“Save On”) was incorporated in the state of Florida and started business on July 12, 2016 (“Inception
Date”). Save On is a provider of integrated transportation management solutions consisting of brokerage and logistic services
such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other
freight. As an early stage company, Petroterra’s current operations are subject to all risks inherent in the establishment
of a new business enterprise.
On
March 30, 2017 (the “Closing Date”), Petroterra Corp. and Save On entered into a Share Exchange Agreement, dated as
of the same date (the “Share Exchange Agreement”). Pursuant to the terms of the Share Exchange Agreement, Save On
became a wholly-owned subsidiary of Petroterra Corp. on the Closing Date (the “Reverse Merger”). The Combined companies
are hereafter referred to as the “Company”.
The
transaction is being accounted for as a reverse merger between a private company and an inactive public company in which Save
On, the private company, is considered to be the acquirer of Petroterra Corp. since the sole shareholder of Save On obtained approximately
80% voting control and management and board control. Accordingly, the reverse merger is accounted for as a recapitalization of
Save On in which the assets and liabilities of both companies, on the transaction date, are recorded at their historical book
values, the equity of Save On is retroactively restated to give effect to the exchange of the Save On shares for Petroterra Corp.
shares, the historical activity of the combined entity is that of Save On and the activity of Petroterra Corp. is recorded only
from the date of the transaction.
Note
2 – Going Concern
The
accompanying unaudited consolidated financial statements are prepared assuming the Company will continue as a going concern, which
contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is in an
early stage and the net income and cash used in operations for the three months ended March 31, 2018 was $60,925 and $13,309,
respectively. The company had a working capital deficit, accumulated deficit and stockholders’ deficit of $714,212, $683,854,
and $714,212 as of March 31, 2018, respectively, and further losses are anticipated in the development of its business. Furthermore,
on December 31, 2017, the Company failed to make a required maturity date payment of principal and interest on a $240,000 note.
In accordance with the note, the Company entered into default on January 3, 2018, which increased the interest rate to 2% per
month. As of the date of this report the lender has not notified the Company of default and has not exercised any of its
remedies provided for in the note. One of the remedies the lender may request is an immediate repayment of the loan at 125% of
the principal balance, which would result in the recording of $60,000 penalty expense and the related liability. In addition,
on April 25, 2018, the Company failed to make its required maturity date payment of principal and interest on a convertible promissory
note of $100,000. In accordance with the note, the Company entered into default on April 27, 2018, which increased the interest
rate to 1.5% per month. As of the date of this report the lender has not notified the Company of default and has not exercised
any of its remedies provided for in the note. One of the remedies the lender may request is an immediate repayment of the loan
at 125% of the principal balance, which would result in the recording of $25,000 penalty expense and the related liability.
It
is management’s opinion that these matters raise substantial doubt about the Company’s ability to continue as a going
concern for twelve months from the issuance date of this report. The ability of the Company to continue as a going concern is
dependent upon increasing revenues both organically, with increased marketing efforts, and potential acquisition targets, which
would be accretive to the Company. Additional capital may be required for the Company to meet its revenue growth plans. Our future
financial results are also uncertain due to a number of factors, some of which are outside our control. These risk factors include,
but are not limited to, our ability to raise additional funding and the results of our proposed operations. The consolidated financial
statements do not include any adjustments relating to recovery of recorded assets or classification of liabilities should the
Company be unable to continue as a going concern.
PETROTERRA
CORP.
Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
Note
3 – Summary of Significant Accounting Policies
Basis
of Presentation
The
consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles
in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim
financial information. Accordingly, they do not include all the information and disclosures necessary for comprehensive presentation
of financial position, results of operations or cash flow. However, these unaudited consolidated financial statements reflect
all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation
of the information contained therein. It is suggested that these unaudited interim consolidated financial statements be read in
conjunction with the financial statements of the Company for the year ended December 31, 2017, and notes thereto included in the
Company’s annual report on Form 10-K, filed on April 17, 2018. The Company follows the same accounting policies in the preparation
of its annual and interim reports. The results of operations in interim periods are not necessarily an indication of operating
results to be expected for the full year.
Principles
of Consolidation
The
unaudited consolidated financial statements of the Company include the accounts of Petroterra Corp. and its wholly owned subsidiary,
Save On. All intercompany accounts and transactions have been eliminated in consolidation.
Use
of Estimates
The
preparation of the audited consolidated financial statements, in accordance with US-GAAP, requires management to make estimates
and assumptions about future events that affect the amounts reported in the Company’s consolidated financial statements
and accompanying notes. On an ongoing basis, management evaluates and periodically adjusts its estimates and assumptions, based
on historical experience, the impact of the current economic environment, and other key factors. Volatile energy markets, as well
as changes in consumer spending have increased the inherent uncertainty in such estimates and assumptions. As future events and
their effects cannot be determined with precision, actual results could differ significantly from these estimates. Significant
estimates included in the accompanying consolidated financial statements and footnotes include the valuation of accounts receivable,
valuation of intangible assets, the valuation of derivative instruments and valuation of deferred tax assets.
Revenue
Recognition and Cost of Revenue
On January 1, 2018, we
adopted ASC 606, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements
in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition. This ASC is based on the principle that revenue is
recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. This ASC also requires additional disclosure about the
nature, amount, timing, and uncertainty of revenue and cash flows arising from customer service orders, including significant
judgments. Our payment terms are net 30 days from acceptance of delivery. We do not incur incremental costs obtaining service
orders from our customers, however, if we did, because all of our contracts are less than a year in duration, any contract
costs incurred would be expensed rather than capitalized. Our adoption of this ASC, resulted in no cumulative effect at January
1, 2018 and no change prospectively to our results of operations or financial condition.
PETROTERRA
CORP.
Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
The
Company recognizes operating revenues and the related direct costs of such revenue which included carrier fees and dispatch costs
as of the date the freight is delivered by the carrier which is when the performance obligation is satisfied. Customer payments
received prior to delivery are recorded as a deferred revenue liability and related carrier fees if paid prior to delivery are
recorded as a deferred expense asset. In accordance with ASC Topic 606, the Company recognizes revenue on a gross basis.
Derivative
Financial Instruments
The
Company evaluates all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities,
the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in
the fair value reported as charges or credits to income.
For
option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative
instruments at inception and subsequent valuation dates. 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. Upon conversion
of a note where the embedded conversion option has been bifurcated and accounted for as a derivative liability, the Company records
the shares at fair value, relieves all related notes, derivatives and debt discounts and recognizes a net gain or loss on debt
extinguishment.
Fair
Value of Financial Instruments
The
carrying amounts reported in the balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximate
their fair values based on the short-term maturity of these instruments. The carrying amount of the Company’s promissory
note obligations approximate fair value, as the terms of these notes are consistent with terms available in the market for instruments
with similar risk.
We
account for our derivative financial instruments, consisting of certain conversion options embedded in our convertible instruments,
at fair value using level 3 inputs. We determine the fair value of these derivative liabilities using the Black-Scholes option
pricing model when appropriate, and in certain circumstances using binomial lattice models or other accepted valuation practices.
When
determining the fair value of our financial assets and liabilities using the Black-Scholes option pricing model, we are required
to use various estimates and unobservable inputs, including, among other things, expected terms of the instruments, expected volatility
of our stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable
inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected
dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases
in fair value.
Basic
and Diluted Income (Loss) Per Share
The
Company computes income (loss) per share in accordance with ASC-260, “Earnings per Share” which requires presentation
of both basic and diluted earnings per share on the face of the statement of operations. Basic income (loss) per share is computed
by dividing net income (loss) by the weighted average number of outstanding shares of common stock during the period. Diluted
income (loss) per share gives effect to all dilutive potential shares of common stock outstanding during the period. Dilutive
income (loss) per share excludes all potential shares of common stock if their effect is anti-dilutive.
PETROTERRA
CORP.
Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
Recent
Accounting Pronouncements
In
July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives
and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement
of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests with a Scope Exception. For public business entities, the amendments in Part I of this Update
are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other
entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim
periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption
in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of
the beginning of the fiscal year that includes that interim period. The amendments in Part II of this Update do not require any
transition guidance because those amendments do not have an accounting effect. The Company is currently in the process of evaluating
the impact of the adoption on its consolidated financial statements.
There
are currently no other accounting standards that have been issued but not yet adopted that we believe will have a significant
impact on our consolidated financial position, results of operations or cash flows upon adoption.
Note
4 – Accounts Receivable
The
following table presents the accounts receivable:
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Accounts receivable
|
|
$
|
343,625
|
|
|
$
|
254,150
|
|
Allowance for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
Accounts Receivable
|
|
$
|
343,625
|
|
|
$
|
254,150
|
|
Note
5 - Accounts Payable and Accrued Liabilities
The
following table presents the composition of accounts payable and accrued liabilities:
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Accounts payable
|
|
$
|
231,805
|
|
|
$
|
154,278
|
|
Accrued interest
|
|
|
55,668
|
|
|
|
33,168
|
|
Other accrued expenses
|
|
|
47,501
|
|
|
|
36,748
|
|
Accounts payable and accrued expense
|
|
$
|
334,974
|
|
|
$
|
224,194
|
|
PETROTERRA
CORP.
Condensed Notes To The Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)
Note
6 – Convertible Promissory Notes Payable
Convertible
promissory notes at March 31, 2018 and December 31, 2017 are as follows:
|
|
2018
|
|
|
2017
|
|
Red Diamond Partners, LLC, net of derivative debt discount of $51,795 and $118,370, respectively
|
|
$
|
218,205
|
|
|
$
|
151,630
|
|
RDW Capital, LLC., net of original issuance discount of $52,356 and $104,137 and derivative debt discount of $7,479 and $14,877, respectively
|
|
|
180,165
|
|
|
|
120,986
|
|
Convertible promissory notes payable, net
|
|
$
|
398,370
|
|
|
$
|
272,616
|
|
We
evaluated the convertible promissory notes transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined
that the conversion feature of the convertible promissory notes were not afforded the exemption for conventional convertible instruments
due to their respective variable conversion rate and price protection provision. The Company recorded a derivative liability which
is adjusted at each reporting period to its fair value (See Note 11).
All
convertible promissory notes contain cross default provisions whereby a default in any one note greater than $25,000 will cause
a default in all the notes, however, this provision is only effective if there is a formal notice of default by the lender.
Red
Diamond Partners LLC
On
April 25, 2017, the Company entered into a Securities Purchase Agreement with RedDiamond Partners LLC (“RedDiamond”)
pursuant to which the Company would issue to RedDiamond Convertible Promissory Notes in an aggregate principal amount of up to
$355,000, which includes a purchase price of $350,000 and transaction costs of $5,000. On April 25, 2017, the Company received
the initial Tranche of $95,000, which is a loan amount of $100,000, net of the $5,000 fee, recorded as convertible note payable.
The initial Tranche matured on April 25, 2018 and each tranche will mature 1 year after the date of such funding. The second Tranche
was received on June 2, 2017 for $85,000 and the third Tranche for $85,000 was received on August 8, 2017 upon filing of the Registration
Statement. The fourth Tranche will be for $85,000 and was to occur ninety (90) days after the First Closing, however, as of the
date of this filing, the fourth tranche has not yet been received. The Purchaser shall not be required to fund any Tranche subsequent
to the first Tranche if there is an event of default as described in the promissory notes. The RedDiamond Notes bear interest
at a rate of 12% per annum and are convertible into shares of the Company’s common stock at RedDiamond’s option at
65% of the lowest VWAP for the previous ten trading days preceding the conversion.
On
April 25, 2018, the Company failed to make its required maturity date payment of principal and interest on a Convertible Promissory
Note of $100,000. In accordance with the note, the Company entered into default on April 27, 2018, which increased the interest
rate to 1.5% per month. As of the date of this report the lender has not notified the Company of default and has not exercised
any of its remedies provided for in the note. One of the remedies the lender may request is an immediate repayment of the loan
at 125% of the principal balance, which would result in the recording of $25,000 penalty expense and the related liability.
In
connection with the issuance of the Convertible Promissory Note above, the Company determined that the terms of the Convertible
Promissory Note included a down-round provision under which the conversion price could be affected by future equity offerings
undertaken by the Company.
Accordingly,
under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”,
the embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date
of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion
option derivatives were determined using the Black-Scholes valuation model. On the initial measurement dates of tranches received
prior to March 31, 2018, the fair value of the embedded conversion option derivatives of $376,841 was recorded as derivative liabilities
and was allocated as a debt discount up to the net proceeds of the Convertible Promissory Notes of $265,000 with the remainder
of $111,841 charged as initial derivative expense.
On
the three initial measurement dates, the fair value of the derivative liabilities was estimated using the Black-Scholes valuation
model with the following assumptions: dividend rate 0%, expected term 1.0 year, expected volatility ranging from 319% to 526%,
risk-free interest rate ranging from 1.09% to 1.24%.
PETROTERRA
CORP.
Condensed Notes To The Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)
The
balance of the note payable as of March 31, 2018 and December 31, 2017 amounted to $218,205 and $151,630, comprised of principal
balance of $270,000, net of debt discount relating to the bifurcated derivative of $51,795 and $118,370, respectively.
RDW
Capital, LLC.
On
June 30, 2017, the Company issued RDW Capital, LLC a senior convertible note in the aggregate principal amount of $240,000, for
an aggregate purchase price of $30,000 of which $15,000 had been recorded as advance from lender as of March 31, 2017 and the
remaining $15,000 received on June 30, 2017. The principal due under the Note accrues interest at a rate of 12% per annum. All
principal and accrued interest under the Note is due six months following the issue date of the Note, and is convertible into
shares of the Company’s common stock, at a conversion price equal to fifty (50%) of the lowest volume-weighted average price
for the previous ten trading days immediately preceding the conversion. The Note includes anti-dilution protection, including
a down-round provision under which the conversion price could be affected by future equity offerings undertaken by the Company,
as well as customary events of default, including non-payment of the principal or accrued interest due on the Note. Upon an event
of default, all obligations under the Note will become immediately due and payable and the Company will be required to make certain
payments to the Lender.
Accordingly,
under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”,
the embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date
of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion
option derivatives were determined using the Black-Scholes valuation model. On the initial measurement date, the fair value of
the embedded conversion option derivatives of $527,477 was recorded as derivative liabilities and was allocated as a debt discount
up to the net proceeds of the Convertible Promissory Notes of $30,000 with the remainder of $497,477 charged as initial derivative
expense.
On
June 30, 2017, initial measurement date, the fair value of the derivative liabilities was estimated using the Black-Scholes valuation
model with the following assumptions: dividend rate 0%, expected term 1.0 year, expected volatility of 404%, risk-free interest
rate of 1.24%.
The
balance as of March 31, 2018 and December 31, 2017 amounted to $180,165 and $120,986, comprised of principal balance of $240,000,
and net of Original Issue Discount (OID) of $52,356 and $104,137 and debt discount relating to the bifurcated derivative of $7,479
and $14,877, respectively.
On
December 31, 2017 the Company failed to make its required maturity date payment of principal and interest. In accordance with
the note, the Company entered into default on January 3, 2018, which increased the interest rate to 2% per month. As of the date
of this report the lender has not notified the Company of default and has not exercised any of its remedies provided for
in the note. One of the remedies the lender may request is an immediate repayment of the loan at 125% of the principal balance,
which would result in the recording of $60,000 penalty expense and the related liability.
PETROTERRA
CORP.
Condensed Notes To The Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)
RDW
Capital, LLC.
On
March 30, 2017, we assumed a convertible note payable to RDW Capital, LLC which was dated February 16, 2017. The $4,000 note payable
bears interest at 12% per annum. The note matures on August 16, 2017 and is secured by the share reservation of 300% of the number
of shares of common stock issuable upon a conversion. The note is convertible into shares of common stock at a price equal to
a variable conversion price of fifty percent (50%) of the volume-weighted averages for the ten (10) days preceding the date of
conversion and contains price protection on the conversion rate. On August 10, 2017, the principal of $4,000, accrued interest
of $225 and prepayment fees of $634 were paid.
On
March 30, 2017, we assumed a convertible note payable to RDW Capital, LLC which was dated March 15, 2017. The $2,464 note payable
bears interest at 12% per annum. The note matured on September 15, 2017 and is secured by the share reservation of 300% of the
number of shares of common stock issuable upon a conversion. The note is convertible into shares of common stock at a price equal
to a variable conversion price of fifty percent (50%) of the volume-weighted averages for the ten (10) days preceding the date
of conversion and contains price protection on the conversion rate. On August 10, 2017, the principal of $2,464, accrued interest
of $116 and prepayment fees of $387 were paid.
Note
7 – Commitments and Contingencies
Related
Party – Lease
The
Company executed a sublease agreement with an affiliate for office space for a one-year term. The sublease commenced on August
1, 2016 at a rate of $300 per month. The sublease was extended on August 1, 2017 and terminated on December 14, 2017, at which
point the Company signed a new one-year term lease with the third-party landlord directly for the entire space previously occupied
by the affiliate. The monthly rent under the renewed lease is $1,600 plus maintenance charges and taxes.
Common
stock ownership
As
a result of the Company’s non-effectiveness of the 1 for 30 reverse stock-split, which was previously represented to have
been effective prior to the March 30, 2017 reverse merger, the Company’s Chief Executive Officer’s post reverse merger
common stock ownership percentage has been reduced from approximately 99% to approximately 80%. The Company and the Chief Executive
Officer are exploring remedies, which may include capital stock or other consideration, to correct this situation.
Other
From
time to time, we may be involved in litigation relating to claims arising out of our operation in the normal course of business.
As of March 31, 2018, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect
on results of our operations.
PETROTERRA
CORP.
Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
Note
8– Stockholders’ Equity
Preferred
The
preferred stock is designated Series A Convertible Preferred Stock. Each share of preferred stock has a par value of $.001 and
a stated value of $1.00. Dividends are payable at the rate per share of 7% per annum cumulative based on the stated value. The
Series A preferred shares have no voting rights, except as required by law. Each share of preferred stock is convertible based
on the stated value at a conversion price of $.0833 at the option of the holder; provided, however, if a triggering event occurs,
as defined in the document, the conversion price shall thereafter be reduced, and only reduced, to equal forty percent of the
lowest VWAP during the thirty consecutive trading day period prior to the conversion date. The beneficial ownership limitation
attached to conversion is 4.99%, which can be decreased or increased, upon not less than 61 days notice to the Company, but in
no event exceeding 19.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance
of common stock upon conversion of the preferred stock. After 36 months the Company has the right to redeem all, but not less
than all, of the outstanding preferred shares in cash at a price equal to 130% of the stated value plus any accrued but unpaid
dividends thereon. Undeclared cumulative preferred stock dividends were approximately $350,000 as of March 31, 2018.
NOTE
9 – Revenue Recognition
The revenue that we recognize
arises from service orders we receive from our customers. Our performance obligations under the service orders correspond to each
delivery of vehicle that we make to our customer under the service orders; as a result, each service order generally
contains only one performance obligation based on the delivery to be completed. Control of the delivery transfers to our customers
when the customer is able to direct the use of, and obtain substantially all of the benefits from, our service, which generally
occurs at the later of when the customer obtains title to vehicle or when the customer assumes risk of loss of the vehicle. The
transfer of control generally occurs at a point of delivery. Once this occurs, we have satisfied our performance obligation and
we recognize revenue.
Transaction
Price
We
agree with our customers on the selling price of each transaction. This transaction price is generally based on the agreed upon
delivery fee. In our contracts with customers, we allocate the entire transaction price to the delivery fee to the customer, which
is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales
tax, value added tax, and other tax we collect concurrently with our revenue-producing activities are excluded from revenue.
If
we continued to apply legacy revenue recognition guidance for the first three months of 2018, our revenues, gross margin, and
net loss would not have changed. See Note 1—Revenue Recognition for the impact of our adoption of ASC No. 2014-09.
Disaggregation of Revenue:
The following table summarizes the percentage of revenues with our customers for the three months ended
March 31, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Corporate customers
|
|
|
98
|
%
|
|
|
0
|
%
|
Individual customers
|
|
|
2
|
%
|
|
|
100
|
%
|
Total Revenue
|
|
|
100
|
%
|
|
|
100
|
%
|
The
Company reports as a single segment and in the disaggregation above, the Company categorizes revenue by type.
PETROTERRA
CORP.
Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
Note
10 – Net Income (loss) per share
The
Company computes loss per share using two different methods, basic and diluted, and presents per share data for all periods in
which statements of operations are presented. Basic loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted
average number of common stock and common stock equivalents outstanding during the period so long as the effect of including the
common stock equivalents is not anti-dilutive.
The
following tables provide a reconciliation of the numerators and denominators used in calculating basic and diluted loss per share
for the three months ended March 31, 2018 and 2017:
|
|
Three
Months
|
|
|
Three
Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March
31, 2018
|
|
|
March
31, 2017
|
|
|
|
|
|
|
|
|
Basic loss per share
calculation:
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations to common shareholders
|
|
$
|
60,925
|
|
|
$
|
(26,658
|
)
|
Net
income (loss) to common shareholders
|
|
$
|
60,295
|
|
|
$
|
(26,658
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
142,526,532
|
|
|
|
114,213,434
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share from continuing operations
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
Basic
net income (loss) per common share
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Diluted loss per share
calculation:
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations to common shareholders
|
|
$
|
60,925
|
|
|
$
|
(26,658
|
)
|
Net
income (loss) to common shareholders
|
|
$
|
60,925
|
|
|
$
|
(26,658
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
142,526,532
|
|
|
|
114,213,434
|
|
Dilutive securities
|
|
|
139,584,504
|
|
|
|
-
|
|
Weighted average dilutive common shares outstanding
|
|
|
282,111,036
|
|
|
|
114,213,434
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share from continuing operations
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
Diluted
net income (loss) per common share
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
Dilutive
securities as of March 31, 2018 and 2017 include convertible notes which were convertible into approximately 87,384,336 and 446,398
common shares as of March 31, 2018 and 2017 and Series A convertible preferred stock which were convertible into 52,200,168 and
48,875,654 common shares as of March 31, 2018 and 2017, respectively.
PETROTERRA
CORP.
Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
NOTE
11 – Fair Value of Financial Instruments
Disclosures
about fair value of financial instruments requires disclosure of the fair value information, whether or not recognized in the
balance sheet, where it is practicable to estimate that value. As of March 31, 2018, the amounts reported for cash, accrued interest
and other expenses, notes payables, and derivative liability approximate the fair value because of their short maturities.
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes
the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
These tiers include:
●
|
Level
1, defined as observable inputs such as quoted prices for identical instruments in active markets;
|
|
|
●
|
Level
2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as
quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that
are not active; and
|
|
|
●
|
Level
3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own
assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value
drivers are unobservable.
|
We
measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring
basis are as follows at March 31, 2018:
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability
|
|
|
385,167
|
|
|
|
-
|
|
|
|
-
|
|
|
|
385,167
|
|
Total liabilities measured at fair value
|
|
$
|
385,167
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
385,167
|
|
The
following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair
value:
Beginning balance as of December 31, 2017
|
|
$
|
601,615
|
|
(Gain) Loss on change in derivative liability
|
|
|
(216,448
|
)
|
Ending balance as of March 31, 2018
|
|
$
|
385,167
|
|
PETROTERRA
CORP.
Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
Convertible
Debentures
The
derivative liabilities related to the embedded conversion features were valued using the Black-Scholes option valuation model
and the following assumptions on the following dates:
|
|
March 31, 2018
|
|
|
|
Embedded Conversion Feature
|
|
Risk free interest rate
|
|
|
1.93
|
%
|
Expected volatility
|
|
|
276.5
|
%
|
Expected life (in years)
|
|
|
0.07 to .36
|
|
Expected dividend yield
|
|
|
-
|
|
Note
12– Related Party Transactions
The
Company executed a sublease agreement with an affiliate for office space for a one-year term. The sublease commenced on August
1, 2016 at a rate of $300 per month. The sublease was extended on August 1, 2017 and terminated on December 14, 2017, at which
point the Company signed a new one-year term lease with the third-party landlord directly for the entire space previously occupied
by the affiliate. Rent expense to the affiliate was $0 in the three months ended March 31, 2018 and $900 in the three months ended
March 31, 2017.
The
Company utilized the affiliate as one of the carriers, providing auto transportation, in the normal course of business. The carrier
fees incurred to the affiliate were $3,600 for the three months ended March 31, 2018.
During
2017 certain revenue and related costs initially recorded by the Company were deemed as affiliate revenue and related costs and
were therefore reversed. This was caused by either customers who had not yet approved the Company as a vendor or remittances which
were made to the affiliate directly. Such remittances were then remitted from the affiliate back to the Company. The outcome resulted
in a net due to affiliate of $32,751 as of March 31, 2018 and $23,551 as of December 31, 2017.
The
Company utilized various ancillary services of the affiliate including software and certain technology without any charge by the
affiliate.
Note
13 –Concentrations
For the three months ended March 31, 2018,
one customer represented 12% of the Company’s total net revenues. For the three months ended March 31, 2017, no single
customer accounted for more than 10% of the Company’s total net revenues.
For the three months
ended March 31, 2018, one customer represented 10% of the Company’s net accounts receivable. As of December 31, 2017,
two customers represented 12% and 10% of the Company’s net accounts receivable.
For
the three months ended
March 31, 2018 and 2017, we had no carriers
that were in excess of 10% in either carrier fees or as part of accounts payable.
All
revenues are derived from customers in the United States.
PETROTERRA
CORP.
Condensed
Notes To The Consolidated Financial Statements
March
31, 2018 and 2017
(Unaudited)
Note
14 – Subsequent Events
In
accordance with ASC 855-10, the Company has analyzed its operations subsequent to March 31, 2018 to the date these financial statements
were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements,
except as noted below;
On
April 25, 2018, the Company failed to make its required maturity date payment of principal and interest on a RedDiamond Convertible
Promissory Note of $100,000. In accordance with the note, the Company entered into default on April 27, 2018, which increased
the interest rate to 1.5% per month. As of the date of this report the lender has not notified the Company of default and has
not exercised any of its remedies provided for in the note. One of the remedies the lender may request is an immediate repayment
of the loan at 125% of the principal balance, which would result in the recording of $25,000 penalty expense and the related liability
(See Note 6).
FORWARD
LOOKING STATEMENTS
Statements
made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to
the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section
21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements often can be identified
by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,”
“estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking
statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s
best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and
important factors beyond our control that could cause actual results and events to differ materially from historical results of
operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or
unanticipated events.