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 March 31, 2015

2017

OR

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

For transition period ______________ to ____________

____

Commission file number: 333-196409

AMERICA RESOURCES EXPLORATION INC.
(Name of registrant in its charter)

Nevada98- 1153516

PETROGAS COMPANY

(Name of registrant in its charter)

Nevada

98-1153516

(State or jurisdiction of incorporation or organization) 

(IRS Employer Identification No.) 

2800 Post Oak Boulevard

Suite 4100

Houston, TX 77056

(Address of principal executive offices)

(832) 390-2273

899-8597

(Registrant's telephone number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF

THE EXCHANGE ACT:

None.

None.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF

THE EXCHANGE ACT:

None.

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨ Nox.

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes¨ Nox

.

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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. x

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

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

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

As of September 30, 2014,2016, the aggregate market value of the shares of the Registrant’s common stock held by non-affiliates (based upon the closing price of such shares as reported on the OTC Bulletin Board) was $0, as there was no public market for$2,836,860. This amount does not reflect any changes caused by the registrant’s common stock as of September 30, 2014.

split described below.

At July 8, 2015,June 13, 2017, there were 129,400,00029,683,931 shares of the registrant's common stock issued and outstanding.



TABLE OF CONTENTS

ITEM NUMBER AND CAPTION
PAGE

PART I 
 
ITEM 1.DESCRIPTION OF BUSINESS3
ITEM 1A.RISK FACTORS8
ITEM 1B.UNRESOLVED STAFF COMMENTS 16
ITEM 2.PROPERITES16
ITEM 3.LEGAL PROCEEDINGS16
ITEM 4.MINE SAFETY DISCLOSURE16
PART II 
 

TABLE OF CONTENTS

ITEM NUMBER AND CAPTION

PAGE

PART I

ITEM 1.

BUSINESS

3

ITEM 1A.

RISK FACTORS

 7

ITEM 1B.

UNRESOLVED STAFF COMMENTS

 13

ITEM 2.

PROPERITES

 13

ITEM 3.

LEGAL PROCEEDINGS

 13

ITEM 4.

MINE SAFETY DISCLOSURE

 13

PART II

ITEM 5.

MARKET FOR REGISTRANTS COMMON EQUITY & RELATED STOCKHOLDER MATTERS

17

 14

ITEM 6.

SELECTED FINANCIAL DATA

18

 15

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

18

 15

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

21

 19

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

21

 F-1

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

30

 20

ITEM 9A.

CONTROLS AND PROCEDURES

30

 20

ITEM 9B.

OTHER INFORMATION

31

 21

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

31

 22

ITEM 11.

EXECUTIVE COMPENSATION

33

 23

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

33

 24

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

34

 25

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

34

 26

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

35

 27

2


2
Table of Contents

PART I


ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

As described below Company filed a Certificate of Amendment with the Nevada Secretary of State in January 2016 whereby it amended its Articles of Incorporation by decreasing all of its issued and outstanding shares of common stock at a ratio of one (1) share for every one hundred (100) shares held. The share amounts herein are adjusted to reflect such decrease.

America Resources Exploration Inc. (the "Company") was incorporated on January 24, 2014, under the laws of the State of Nevada to engage in any lawful corporate undertaking, with the specific intended business activity of operating photo booth rentals. The Company was incorporated under the name “Alazzio Entertainment Corp.” and changed its name to America Resources Exploration Inc. on April 29,17, 2015.


On April 3, 2015, a change in control of Alazzio Entertainment Corp. (the "Company") occurred by virtue of the Company's largest shareholder, Dmitri Kapsumun selling 90,000,000900,000 shares (split adjusted) of the Company's common stock to Rise Fast Limited, a Hong Kong corporation. Such shares represent 71.77% of the Company's total issued and outstanding shares of common stock. As part of the sale of the shares, Rise Fast Limited arranged with the resigning member of the Company's Board of Directors, to appoint Mr. Huang Yu as the sole officer and director of the Company.

On April 16, 2015, the Company filed a Certificate of Amendment with the Nevada Secretary of State (the "Nevada SOS") whereby it amended its Articles of Incorporation by increasing the Company's authorized number of shares of common stock from 75 million to 300 million (not adjusted for the one (1) for one hundred (100) stock split) and increasing all of its issued and outstanding shares of common stock at a ratio of fifteen (15) shares for every one (1) share held. The Company's Board of Directors approved this amendment on April 15, 2015 and shareholders holding 71.77% of the Company's issued and outstanding shares approved this amendment via a written consent executed on April 16, 2015.  All share amounts in this Form 10-K have been adjusted to reflect this stock split.


On April 17, 2015, the Company filed Articles of Merger with the Nevada SOS whereby it entered into a statutory merger with its wholly-owned subsidiary, America Resources Exploration Inc. pursuant to Nevada Revised Statutes 92A.200 et. seq. The effect of such merger is that the Company was the surviving entity and changed its name to "America Resources Exploration Inc."


On June 10, 2015, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Zheng Xiangwu, a resident of Guang Dong Province, China, whereby the Company issued 440,000 million shares of its common stock in exchange for rights to certain oil and gas leases located in Frio and Atascosa Counties, Texas, consisting of a total of 714 total acres of land, two (2) working wells and a total of seven (7) wells (the “Leases”).


On June 12, 2015, the Company completed the acquisition of the Leases pursuant to the Asset Purchase Agreement. As a result of the completion of this acquisition, 4 million40,000 shares of the Company’s common stock were issued to Mr. Zheng Xiangwu, who owns the Company’s largest shareholder, Rise Fast Limited. The number of shares issued to Mr. Zheng was determined by valuing the Leases at $160,000 and valuing the Company’s stock at $0.04 per share.

Mr. Zheng is the owner of Rise Fast Limited, a Hong Kong corporation (“Rise Fast”), which is the majority shareholder of the Company. Rise Fast owns 90,000,000900,000 shares of the Company’s common stock. As a result of the transaction consummated pursuant to the Asset Purchase Agreement, Mr. Zheng controlscontrolled a total of 94,000,000940,000 shares, which representsrepresented 72.64% of the Company’s issued and outstanding shares.


shares at that time.

In addition to a change in control of its management and shareholders and entering into the Asset Purchase Agreement, the Company's operations prior to entering into the Asset Purchase Agreement were limited to attempting to implement its business plan, issuing shares and filing a registration statement on Form S-1 pursuant to the Securities Act of 1934.


3
Table of Contents

In connection with the completion of the acquisition of the Leases pursuant to the Asset Purchase Agreement, the Company has elected to enter into the oil and gas industry. Our primary objective is to enter the oil and gas industry by acquiring active oil and gas fields. This first step will allow us to enter the market in the U.S. and create immediate cash flow from producing wells. The Company intends to take advantage of currently depressed energy prices by taking over fields from companies that are unable to service their excessive debt due to falling oil prices.

3

On June 11, 2015 the Company entered into various assignment agreements with Mr. Zheng for the acquisition of multiple oil and gas leases and overriding royalty interests (“ORR’s”) as set out in the table below. From July 6, 2015 through July 9, 2015, the Company completed the acquisition of such oil and gas leases and ORR’s, whereby the Company issued a total of 6,500 shares of its common stock to Mr. Zheng. The Company valued the transaction at the market price of the shares as at the date of issue, or $0.15 per share for a total value of $97,500. The Company capitalized the historical cost of the acquired assets totaling $51,263 and recorded a loss on acquisition of $46,237.

Assignment Date

Name of The Property

Type of Property

Location

June 11th, 2015

Ellis County

Overriding Royalty Int.

Oklahoma

June 11th, 2015

Hemphill County

Overriding Royalty Int

Texas

June 11th, 2015

Madison County

Wellbore Interest

Texas

June 11th, 2015

Shelby County

Wellbore Interest

Texas

June 11th, 2015

Emergy County

Lease Purchase

Utah

On August 13, 2015 the Company entered into an Asset Purchase Agreement with Inceptus Resources, LLC whereunder the Company acquired a 78% net revenue interest in 200 acres located in Callahan County, Texas, and a 78% net revenue interest in 522 acres also located in Callahan County, Texas. In respect of the acquired leases the Company issued a total of 5,000 shares of common stock on the closing date, August 19, 2015, which shares were valued at market price on the date of the transaction, totaling $448,500, which amount was capitalized. As at September 30, 2015 the Company evaluated the capitalized value of the leases and determined to impair the amount in full due to the fact that the Company had no historical cost basis for the leases, and no immediate development plans for the lease land. A total of $448,500 has been expensed as Impairment loss on oil and gas lease in the third quarter.

In order to assist the Company’s entry into the oil and gas industry, the Company has added to two (2) membersJoe M. Seabourn and Robert Wiener to its Board of Directors in June 2015. Mr. Weiner resigned from the Board of Directors in November 2015 and Mr. Seabourn resigned from the Board of Directors in December 2015. The resignations of Messrs. Weiner and Seabourn were not due to any disagreements of any nature with the Company.

On January 20, 2016, the Company filed a Certificate of Amendment with the Nevada Secretary of State (the "Nevada SOS") whereby it amended its Articles of Incorporation by decreasing all of its issued and outstanding shares of common stock at a ratio of one (1) share for every one hundred (100) shares held. The Company's Board of Directors approved this amendment on January 13, 2016 and shareholders holding 68.65% of the Company's issued and outstanding shares approved the amendment via a written consent executed on January 14, 2016.

On January 20, 2016, the Company filed Articles of Merger with the Nevada SOS whereby it entered into a statutory merger with its wholly-owned subsidiary, PetroGas Company pursuant to Nevada Revised Statutes 92A.200 et. seq. The effect of such merger is that provide, collectively, over sixty (60) years of experiencethe Company was the surviving entity and changed its name from America Resources Exploration Inc. to "PetroGas Company".

Both the reverse stock split and name change described above were effected in the exploration, development and production of oil and gas properties.


Mr. Joe M. Seabourn has over 30 years of experience working refinery up-grade design flow process and feasibility studies for Nigeria, Ecuador, Mongolia and Republic of Congo. He is currently using his strategic alliancesmarket by FINRA effective March 7, 2016, which also resulted in changing the Company’s ticker symbol to establish working joint ventures and partnerships in Congo, Central Africa.
Mr. Robert Wiener is our lead geologist and has over 30 years of experience in the industry. He worked on finding some of the most important fields in the world. While working for Conoco Egypt he generated prospects in the Gulf of Suez. Two (2) wells were subsequently drilled successfully. One of his other large finds is also while working for Conoco, Norway. He was deeply involved in interpreting seismic data in the Northern North Sea and Moere Basin. He also developed exploration projects in Russia, West Africa, Vietnam and countless other countries with huge oil potential. We believe that with Mr. Wiener as our lead geologist we will be able to maximize our return on investment and get the most out of our Leases.

Additional information regarding Mr. Seabourn’s and Mr. Wiener’s business experience is provided below under Item 10. Directors, Executive Officers and Corporate Governance“PTCO”.

4
Table of Contents

CURRENT INVESTMENTS


On June 12, 2015, thethe Company acquired three (3) producing leases covering 714 acres situated in Atascosa and Frio Counties, Texas, located in the Eagle Ford Shale formation - the Jane Burns “C” (“Burns”), the Theo Rogers “C”, and the Theo Rogers “A” & “D” (“Rogers”) Leases. The Company acquired a 99.5% working interest (74.625% net revenue interest) in each lease.  We estimate the Burns and Rogers Leases contain 68,272 net barrels of proved oil reserves having a PV-10 value of approximately $1,007,000 as of April 1, 2015.


The Burns and Rogers Leases provide exploration and production opportunities in the Kyote Field pay zone, very near the Eagle Ford Shale play with access to available rig crews and other vendor-servicers, due to their close proximity to San Antonio, Texas.


The Rogers Lease currently has one (1) operating well, which provides between two to three (2-3) barrels of oil per day (“BOPD”). The Burns Lease also currently has one (1) operating well, which provides one to two (1-2) BOPD. The Company’s management and industry professionals believe that the Company can double or triple existing production on the Burns and Rogers Leases by bringing online 5 available, inactive wells on the Leases and potentially increase total production 2-3 BOPD per well.


The Rogers and Burns Leases hold collectively seven (7) oil wells, but none of which do produce saltwaterare operating wells. Although Company’s management and industry professionals believed at the time that must be disposed of. Currently, there are available off-lease options to disposes of the saltwater butthey were acquired that the Company will consider enhancing future operations by utilizing an injection wellcould double or wells on this property for disposal of saltwater.

The following table shows, as of July 8, 2015, our producing wells, developed acreage, and undeveloped acreage, excluding service (injection and disposal) wells:
  Productive Wells  Developed Acreage  Undeveloped Acreage (1) 
State Gross  Net  Gross  Net  Gross  Net 
                   
Texas  2   1.9   190   189.0   305   303.5 


4


(1) Undeveloped acreage includes leasehold interests on which wells have not been drilled or completed to the point that would permit thetriple previous production of commercial quantities of natural gas and oil regardless of whether the leasehold interest is classified as containing proved undeveloped reserves.

The following table shows, as of July 8, 2015, the status of our gross acreage:

StateHeld by ProductionNot Held by Production
Texas495

Acres that are Held by Production remain in force so long as oil or gas is produced from one or more wells on the particular lease. Leased acres that are not Held by Production requires annual rental payments to maintain the lease until the first to occur of the following: the expiration of the lease or the time oil or gas is produced from one or more wells drilled on the leased acreage. At the time oil or gas is produced from wells drilled on the leased acreage, the lease is considered to be Held by Production.

Proved Reserves

Proved reserves on these leases have been demonstrated consistently forwells, depressed oil prices indicate that the past several decades as thecost to bring these wells were initially drilled and completed by Texaco, and are still producing commercial quantities of oil.  Below are estimates of our net proved reserves as of July 8, 2015, netonline an uneconomical venture.

Future Operations

Management continues to our interest. All of our proved reserves are located in Texas.


Estimates of volumes of proved reserves at July 8, 2015, are presented in barrels (Bbls) for oil and, for natural gas, in millions of cubic feet (Mcf) at the official temperature and pressure bases of the areas in which the gas reserves are located.

Oil
(Bbls)
Gas
(Mcf)
Proved Developed:
Producing4,536
    Non-Producing8,546
Proved Undeveloped55,190
68,272

"Bbl" refers to one stock tank barrel, or 42 U.S. gallons liquid volume, in reference to crude oil or other liquid hydrocarbons. "Mcf" refers to one thousand cubic feet. A BOE (i.e., barrel of oil equivalent) combines Bbls of oil and Mcf of gas by converting each six Mcf of gas to one Bbl of oil.

Below are estimates of our present value of estimated future net revenues from our proved reserves based upon the standardized measure of discounted future net cash flows relating to proved oil and gas reserves in accordance with the provisions of Accounting Standards Codification Topic 932, Extractive Activities — Oil and Gas. The standardized measure of discounted future net cash flows is determined by using estimated quantities of proved reserves and the periods in which they are expected to be developed and produced based on period-end economic conditions. The estimated future production is based upon benchmark prices that reflect the unweighted arithmetic average of the first-day-of-the-month price for oil and gas during the twelve months period ended April 1, 2015.  The resulting estimated future cash inflows are then reduced by estimated future costs to develop and produce reserves based on period-end cost levels. No deduction has been made for depletion, depreciation or for indirect costs, such as general corporate overhead. Present values were computed by discounting future net revenues by 10% per year.

5

Future gross revenue $5,043,929 
Deductions (including estimated taxes)  (3,580,148)
     
Future net cash flow $1,463,781 
     
Discounted future net cash flow $1,006,861 

Lee Keeling and Associates, Inc. (Lee Keeling) prepared the estimates of our proved reserves, future production and income attributable to our leasehold interests as of April 1, 2015.  Lee Keeling is an independent petroleum engineering firm that provides petroleum consulting services to the oil and gas industry. The estimates of drilled reserves, future production and income attributable to certain leasehold and royalty interests are based on technical analysis conducted by engineers employed at Lee Keeling.

Mr. Phillip W. Grice was the technical person primarily responsible for overseeing the preparation of the reserve report. Mr. Grice earned a Bachelor's Degree in Petroleum Engineering from the University of Tulsa and has more than 33 years of practical experience in the estimation and evaluation of petroleum reserves. Mr. Grice is a licensed Professional Engineer in the State of Texas.  We do not have a reserve committee and we do not have any specific internal controls regarding the estimates of our reserves.

Our proved reserves include only those amounts which we reasonably expect to recover in the future from known oil and gas reservoirs under existing economic and operating conditions, at current prices and costs, under existing regulatory practices and with existing technology. Accordingly, any changes in prices, operating and development costs, regulations, technology or other factors could significantly increase or decrease estimates of proved reserves.
Proved reserves were estimated by performance methods, the volumetric method, analogy, or a combination of methods utilizing present economic conditions and limited to those proved reserves economically recoverable. The performance methods include, decline curve analysis that utilize extrapolations of historical production and pressure data available through April 1, 2015, in those cases where such data were considered to be definitive.
Forecasts for future production rates are based on historical performance from wells currently on production in the region with an economic cut-off for production based upon the projected net revenue being equal to the projected operating expenses. No further reserves or valuation were given to any wells beyond their economic cut-off. Where no production decline trends have been established due to the limited historical production records from wells on the properties, surrounding wells historical production records were used and extrapolated to wells of the property. Where applicable, the actual calculated present decline rate of any well was used to determine future production volumes to be economically recovered. The calculated present rate of decline was then used to determine the present economic life of the production from the reservoir.
For wells currently on production, forecasts of future production rates were based on historical performance data. If no production decline trend has been established, future production rates were held constant, or adjusted for the effects of curtailment where appropriate, until a decline in ability to produce was anticipated. An estimated rate of decline was then applied to economic depletion of the reserves. If a decline trend has been established, this trend was used as the basis for estimating future production rates.
Proved developed non-producing and undeveloped reserves were estimated primarily by the performance and historical extrapolation methods. Test data and other related information were used to estimate the anticipated initial production rates from those wells or locations that are not currently producing. For reserves not yet on production, sales were estimated to commence at a date we determined to be reasonable.
In general, the volume of production from our oil and gas properties declines as reserves are depleted. Except to the extent we acquire additional properties containing proved reserves or conduct successful exploration and development activities, or both, our proved reserves will decline as reserves are produced. Accordingly, volumes generated from our future activities are highly dependent upon the level of success in acquiring or finding additional reserves and the costs incurred in doing so.
6

Future Operations

Management is consideringconsider plans to reactivatereactive the inactive wells through a rework program on the Leases. Additional rights may be leased out from mineral ownersowner to deeper zones near 5,000 feet and below. However, such plans are subject to raising financing of $500,000 to pay for such rework plans and an analysis of potential income based on projected oil prices in the future.

During the last thirty-six (36) months, the wells located on the Leases have undergone some reworking, which includes the following:

-Electrical infrastructure overhaul by installation of 1,200 feet of underground cable to the wells to connect electricity.
-Replace belts on pumping unit/motor.
-Firewall improvements and earth work cleanup.
-Rebuilt down hole pump.
-Installed 5 HP motor to bring well online.

Burns 6C:
-Propane tanks & motor installed.

Rogers 9D:

-Hauled off dirt and rebuilt firewalls.
-Brought electricity to well site-electrical infrastructure improvements.
-Pulled rods, tubing, & installed pump.
-Acidization with chemicals down hole to stimulate production.
-Tank battery overhauled and cleaned up. Old tanks removed. New tank installed.
-Repaired old flow lines.
-Pressure tested tubing down hole.
-Repaired pumping unit, rebuilt insert pump.
-Rebuilt down hole pump, replaced tubing Ts and stuffing box.

Rogers 3A, 7A, & 8A:
-Performed RRC required H-15s to keep inactive wells in compliance.

Lease Data

Burns Lease

Acreage: 160

Working Interest: 99.5%; Net Revenue Interest: 74.625%

1 active well with 1-2 BOPD.

Depth of wells is from 3,550 to 3,639 ft.

Field: Kyote; Zone: Olmos “D” Reservoir.

Inventory: 2 pumping units, 2 oil tanks, 1 separator, 2 wells w/tubing & rods downhole, 2 downhole pumps in wells, 3 packers in wells; 2 wells w/electrical connection; 2 propane motors; 1 propane tank; 1 unused well head.


7


Rogers Lease

Acreage: 355

Working Interest: 99.5%; Net Revenue Interest: 74.625%

Has 1 active well doing 2-3 BOPD

Depth of wells is from 3,518 to 3,590 ft.

Field: Kyote; Zone: Olmos “D” Reservoir.

Inventory: 1 pumping unit, 1 oil tank (400 bbls), 1 well w/tubing & rods downhole, 1 downhole pump in well, 1 well w/electrical connection

connection.

5
Table of Contents

On June 11, 2015 the Company entered into various assignment agreements with Mr. Zheng for the acquisition of multiple oil and gas leases and overriding royalty interests (“ORR’s”) as set out in the table below. From July 6, 2015 through July 9, 2015, the Company completed the acquisition of such oil and gas leases and ORR’s, whereby the Company issued a total of 6,500 shares of its common stock to Mr. Zheng. The Company valued the transaction at the market price of the shares as at the date of issue, or $0.15 per share for a total value of $97,500. The Company capitalized the historical cost of the acquired assets totaling $51,263 and recorded a loss on acquisition of $46,237.

Assignment Date

Name of The Property

Type of Property

Location

June 11th, 2015

Ellis County

Overriding Royalty Int.

Oklahoma

June 11th, 2015

Hemphill County

Overriding Royalty Int

Texas

June 11th, 2015

Madison County

Wellbore Interest

Texas

June 11th, 2015

Shelby County

Wellbore Interest

Texas

June 11th, 2015

Emergy County

Lease Purchase

Utah

On August 13, 2015 the Company entered into an Asset Purchase Agreement with Inceptus Resources, LLC whereunder the Company acquired a 78% net revenue interest in 200 acres located in Callahan County, Texas, and a 78% net revenue interest in 522 acres also located in Callahan County, Texas. In respect of the acquired leases the Company issued a total of 5,000 shares of common stock on the closing date, August 19, 2015, which shares were valued at market price on the date of the transaction, totaling $448,500, which amount was capitalized. As at September 30, 2015 the Company evaluated the capitalized value of the leases and determined to impair the amount in full due to the fact that the Company had no historical cost basis for the leases, and no immediate development plans for the lease land. A total of $448,500 has been expensed as Impairment loss on oil and gas lease in the third quarter.

During the fiscal year ended March 31, 2016 the Company entered into certain agreements whereunder they acquired 94% control of Seabourn Oil Company, LLC, a company that holds a100% working interest and an 80% net revenue interest in a total of 960 acres located in two tracts in Callahan County, Texas.

On November 30, 2016, the Company acquired various royalty interests in Texas for $10,485. On December 14, 2016, the Company acquired two oil and gas leases in Ohio for $2,705. On January 1, 2017, the Company acquired the lease for three oil and gas properties for $4,975. As of March 31, 2017, a total of $28,023 is recorded as Unproved Property.

Future Expansion

The Company is actively seeking to acquire producing and non-producing leases that will allow us to explore and drill in high-profile pay zones.

We intend to raise capital at a low cost from private placements so that we may acquire numerous additional leases, and to commence drilling, and taking advantage of the inevitable uptick in oil prices to come.

In the current climate, the Company believes that there are a very large number of oil & gas leases under distress due to the depressed gas prices and that we can strategically position the Company to acquire as many of these leases as possible at a discount to market value, hence creating shareholder value.

On the Burns and Rogers Leases, we intend to rework all current wells in order to increase production three to four fold.

We are planning an exploration strategy to drill new wells on the current Leases, as well as acquire deeper rights in order to drill some of the wells at great depths. We expect that reservoirs at those depths could yield a very high daily output of oil.

Historic Production
Taking into consideration the current low prices of oil, we believe that we have a viable strategy as our company is currently debt-free and already owns rights to substantial revenue generating leases and assets. We are confident in our team of geologists and engineers to identify the appropriate distressed leases for further acquisitions and believe, if we can raise sufficient capital from the sale of equity, that we will be able to substantially increase current production from existing wells on all our acquisitions.

6
Table of Contents

ITEM 1A. RISK FACTORS


Risks Related to Our Oil and Gas Operations


If our exploration and development programs prove unsuccessful, we may not be able to continue operations.

An investment in our company should be considered highly speculative due to the nature of our involvement in the exploration, development and production of oil and natural gas. Oil and gas exploration involves a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Exploratory drilling is subject to numerous risks, including the risk that no commercially productive oil and natural gas reservoirs will be encountered. The cost to drill, complete and operate wells is often uncertain, and drilling operations may be curtailed, delayed or cancelled as a result of a variety of factors including unexpected drilling conditions, abnormal pressures, equipment failures, premature declines of reservoirs, blow-outs, sour gas releases, fires, spills or other accidents, as well as weather conditions, compliance with governmental requirements, delays in receiving governmental approvals or permits, unexpected environmental issues and shortages or delays in the delivery of equipment. Our inability to drill wells that produce commercial quantities of oil and natural gas would have a material adverse effect on our business, financial condition and results of operations.

8

Future oil and gas acquisitions or exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after exploration, drilling, operating and other costs. Completion of wells does not ensure a profit on the investment or recovery of exploration, drilling, completion and operating costs. Drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may adversely affect production. Adverse conditions include delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity or other geological and mechanical conditions.


Fluctuations in commodity prices could have a material impact on our revenues, which would affect our profitability.


Commodity price risk related to conventional crude oil prices could become our most significant market risk exposure if we achieve oil and natural gas production. Crude oil prices are influenced by such worldwide factors as the Organization of the Petroleum Exporting Countries actions, political events and supply and demand fundamentals. At this time, we cannot accurately predict these fluctuations because we do not know when we will commence generating revenues from our oil and gas operations. Furthermore, we cannot estimate, at this time, the impact of commodity price fluctuations until we can predict the level of revenues.


Application, interpretation and enforcement of government tax and other legislation is inconsistent making it difficult for us to ensure that we are compliant which could lead to penalties.


The tax environment in the United States is subject to change, inconsistent application, interpretation and enforcement. Non-compliance with US laws and regulations can lead to the imposition of penalties and interest. We intend to make every effort to conform to these laws and regulations. However, our interpretations and those of our advisors may not be the same as those of government officials, which could lead to penalties and interest.


We face competition which could adversely affect our ability to significantly penetrate the oil and gas market in the U.S., which may make it difficult to attain profitability.


The oil and gas market in the U.S. is highly competitive. Most of the competitors are major international energy industry operators. These competitors have various advantages over us, including:

-

Substantially greater financial resources, which gives them greater access to the types of distressed properties that we are targeting and flexibility when developing their exploration and drilling programs;

-

greater recognition in the industry, which influences a potential partners’ decision to participate in programs;

-

larger operations, which provides economies of scale and operating efficiencies not available to us;

-

longer operating histories; and

-

more established relationships with strategic partners.

We may be unable to successfully compete with these established competitors, which may adversely affect our ability to acquire additional properties and thus impact our ability to generate revenue.


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Compliance, interpretation and enforcement with evolving environmental laws and regulations may impact our expenses in a negative manner, which would directly impact our profit margins.


Extensive national, regional and local environmental laws and regulations in the U.S. will affect our operations. These laws and regulations set various standards regulating certain aspects of health and environmental quality which provide for user fees, penalties and other liabilities for the violation of these standards and establish, in some circumstances, obligations to remediate current and former facilities and off-site locations. We believe we are currently in compliance with all existing environmental laws and regulations. However, as new environmental laws and legislation are enacted and the old laws are repealed, interpretation, application and enforcement of the laws may become inconsistent. Compliance in the future could require significant expenditures, which would directly impact our profit margins.

9

Drilling, exploring for and producing oil is a high risk activity with many uncertainties that could adversely affect our business, financial condition and results of operations.

Our future financial condition and results of operations will depend on the success of our drilling, exploration and production activities. These activities are subject to numerous risks beyond our control, including the risk that drilling will not result in economic oil production or increases in reserves. Many factors may curtail, delay or cancel our scheduled development projects, including:

·          

decline in oil prices;

·          

compliance with governmental regulations, which may include limitations on hydraulic fracturing, access to water or the discharge of greenhouse gases;

·  

·

inadequate capital resources;

·  

·

inability to attract and retain qualified personnel;

·  

·

unavailability or high cost of drilling and completion equipment, services or materials;

·  

·

unexpected drilling conditions, pressure or irregularities in formations, equipment failures or accidents;

·  

·

adverse weather conditions;

·  

·

surface access restrictions;

·

mechanical difficulties.

·  mechanical difficulties.

Oil prices are volatile, and a decline in oil prices could significantly affect our business, financial condition and results of operations and our ability to meet our capital expenditure requirements and financial commitments.

Our revenues, profitability and cash flow will depend substantially upon the prices and demand for oil. The markets for this commodity are volatile, and even relatively modest drops in prices can affect significantly our financial results and impede our growth. Prices for oil fluctuate widely in response to relatively minor changes in the supply and demand for these commodities, market uncertainty and a variety of additional factors beyond our control, such as:


·          

domestic and foreign supply of oil;

·          

domestic and foreign consumer demand for oil;

·  

·

overall United States and global economic conditions;

·  

·

price and availability of alternative fuels;

·  

·

governmental regulations;

·  

·

technological advances affecting oil consumption.

Further, oil prices continue to be volatile. Advanced drilling and completion technologies, such as horizontal drilling and hydraulic fracturing, have resulted in increased investment by oil and gas producers in developing U.S. shale gas and, more recently, tight oil projects. The results of higher investment in the exploration for and production of oil and gas and other factors, such as global economic and financial conditions discussed below, may cause the price of oil to fall. Lower oil prices may not only cause our revenues to decrease but also may reduce the amount of oil that we can produce economically. Substantial decreases inContinue depressed oil prices would render uneconomic some or all of our drilling locations. This may result in ourhave resulted is us having to impair our estimated proved reserves and could havehas had a material adverse effect on our business, financial condition and results of operations. Further, if oil prices significantly decline for an extended period of time, we may, among other things, be unable to have any borrowing capacity, repay future debt or obtain additional capital on attractive terms, all of which can affect the value of our common stock.


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Future economic conditions in the U.S. and international markets could materially and adversely affect our business, financial condition and results of operations.

The U.S. and other world economies continue to experience the after-effects of a global recession and credit market crisis. More volatility may occur before a sustainable growth rate is achieved either domestically or globally. Even if such growth rate is achieved, such a rate may be lower than the U.S. and international economies have experienced in the past. Global economic growth drives demand for energy from all sources, including fossil fuels. A lower, future economic growth rate will result in decreased demand for our oil production and lower commodity prices, and consequently reduce our revenues, cash flows from operations and our profitability.


We are subject to complex governmental laws and regulations that may adversely affect the cost, manner and feasibility of doing business.

Our oil drilling, production and gathering operations are subject to complex and stringent laws and regulations. To operate in compliance with these laws and regulations, we must obtain and maintain numerous permits and approvals from various federal, state and local governmental authorities. We may incur substantial costs to comply with these existing laws and regulations. In addition, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted, or if new laws and regulations apply to our operations. Such costs could have a material adverse effect on our business, financial condition and results of operations. Failure to comply with laws and regulations applicable to our operations, including any evolving interpretation and enforcement by government authorities, could have a material adverse effect on our business, financial condition and results of operations.

Environmental laws and regulations may expose us to significant costs and liabilities.

There is inherent risk of incurring significant environmental costs and liabilities in our oil operations due to the handling of petroleum hydrocarbons and generated wastes, the occurrence of air emissions and water discharges from work-related activities and the legacy of pollution from historical industry operations and waste disposal practices. We may incur joint and several or strict liability under these environmental laws and regulations in connection with spills, leaks or releases of petroleum hydrocarbons and wastes on, under or from our properties and facilities, some of which have been used for exploration, production or development activities for many years and by third parties not under our control. In particular, the number of private, civil lawsuits involving hydraulic fracturing has risen in recent years. Since late 2009, multiple private lawsuits alleging ground water contamination have been filed in the U.S. against oil and gas companies, primarily by landowners who leased oil and gas rights to defendants, or by landowners who live close to areas where hydraulic fracturing has taken place. In addition, changes in environmental laws and regulations occur frequently, and any such changes that result in more stringent and costly waste handling, storage, transport, disposal or remediation requirements could have a material adverse effect on our business, financial condition and results of operations. We may not be able to recover some or any of these costs from insurance.

Our business requires significant capital expenditures and we may not be able to obtain needed capital or financing on satisfactory terms or at all.

Our exploration, development and acquisition activities require substantial capital expenditures. We intend to fund our capital expenditures through a combination of private or public equity financings. We may not be able to obtain equity financing on favorable terms or at all. The failure to obtain financing could cause us to scale back our exploration and development operations, which in turn could lead to a decline in our oil production and reserves, and in some areas a loss of properties.

Currently, all of our properties are located in two (2)eleven (11) counties, in the State of Texas, making us vulnerable to risks associated with having our production concentrated in a small area.

All of our estimated proved reservesproperties are concentrated in fourteen (14) counties comprised of seven (7) counties in Texas (Atascosa, Frio, Hemphill, Madison, Shelby, Callahan and Roberts Counties), four (4) counties in Oklahoma (Ellis, Payne, Cleveland, and Harper Counties), one (1) county in Utah (Emergy County), and two (2) counties in Texas: AtascosaOhio (Monroe and Frio Counties.Washington Counties). As a result of this concentration, we are disproportionately exposed to the natural decline of production from these fields as well as the impact of delays or interruptions of production from these wells, which could be caused by significant governmental regulation, transportation capacity constraints, curtailments of production, service delays, natural disasters or other events that impact this area.

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Market conditions or transportation and infrastructure impediments may hinder our access to oil markets or delay our production or sales.

Market conditions or the unavailability of satisfactory oil processing and transportation services and infrastructure may hinder our access to oil markets or delay our production or sales. The availability of a ready market for our oil production depends on a number of factors, including market demand and the proximity of our reservesany producing wells that we may operate in the future to pipelines or trucking and rail terminal facilities. In addition, the amount of oil that can be produced and sold is subject to curtailment in certain circumstances, such as pipeline interruptions due to maintenance, physical damage to the gathering or transportation system or lack of contracted capacity on such systems. The curtailments arising from these and similar circumstances may last from a few days to several months, and in many cases, we are provided with limited, if any, notice as to when these circumstances will arise and their duration. As a result, we may not be able to sell, or may have to transport by more expensive means, the oil that we produce, or we may be required to shut in oil wells or delay initial production until the necessary gathering and transportation systems are available. Any significant curtailment in gathering system, transportation, pipeline capacity or significant delay in construction of necessary gathering and transportation facilities, could adversely affect our business, financial condition and results of operations.

The unavailability or high cost of drilling rigs, equipment, materials, personnel and oilfield services could adversely affect our ability to execute our drilling and development plans on a timely basis and within our budget.

Our industry is cyclical and, from time to time, there is a shortage of drilling rigs, equipment, supplies or qualified personnel. During these periods, the costs and delivery times of equipment, oilfield services and supplies are substantially greater. In addition, the demand for, and wage rates of, qualified drilling and completion crews rise as the number of active rigs in service increases. Increasing levels of exploration and production will increase the demand for oilfield services, and the costs of these services may increase, while the quality of these services may suffer. If the availability of equipment, crews, materials and services in Atascosa and/or Frio Countycounties in which our properties are located is particularly severe, our business, results of operations and financial condition could be materially and adversely affected because our properties are located solely in those counties.

Competition in the oil and gas industry is intense, and most of our competitors have resources that are greater than ours.

We operate in a highly competitive environment for acquiring prospects and productive properties, marketing oil and securing equipment and skilled personnel. Most of our competitors are major and large independent oil and gas companies that have financial, technical and personnel resources substantially greater than ours. Those companies may be able to develop and acquire more prospects and productive properties than our financial or personnel resources permit. Our ability to develop and operate our current project,projects, acquire additional prospects and discover reserves in the future will depend on our ability to hire and retain qualified personnel, evaluate and select suitable properties and consummate transactions and in a highly competitive environment. Also, there is substantial competition for capital available for investment in the oil and gas industry. Larger competitors may be better able to withstand sustained periods of unsuccessful drilling and absorb the burden of changes in laws and regulations more easily than we can, which would adversely affect our competitive position. We may not be able to compete successfully in the future in attracting and retaining qualified personnel, acquiring prospective reserves, developing reserves, marketing oil and raising additional capital.

Unless we replace our oil reserves, our reserves and production will decline.
Our future oil production depends on our success in finding or acquiring additional reserves. If we fail to replace reserves through reworking, drilling or acquisitions, our production, revenues and cash flows will be adversely affected. In general, production from oil and gas properties declines as reserves are depleted, with the rate of decline depending on reservoir characteristics. Our total proved reserves will decline as reserves are produced, unless we conduct other successful exploration and development activities or acquire properties containing proved reserves, or both. Our ability to make the necessary capital investment to maintain or expand our asset base of oil and gas reserves would be limited to the extent cash flow from operations is reduced and external sources of capital become limited or unavailable. We may not be successful in exploring for, developing or acquiring additional reserves.
12

Our actual production, revenues and expenditures related to our reserves are likely to differ from our estimates of our proved reserves. We may experience production that is less than estimated and drilling costs that are greater than estimated in our reserve reports. These differences may be material.
The proved oil reserves data included in this report and the Lee Keeling and Associates Report are estimates. Petroleum engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact manner. Estimates of economically recoverable oil reserves and of future net cash flows necessarily depend upon a number of variable factors and assumptions, including:
·  historical production from the area compared with production from other similar producing areas;
·  the assumed effects of regulations by governmental agencies;
·  assumptions concerning future oil prices; and
·  assumptions concerning future operating costs, severance and excise taxes, development costs and workover and remedial costs.
Because all reserves estimates are to some degree subjective, each of the following items may differ materially from those assumed in estimating proved reserves:
·  the quantities of oil that is ultimately recovered;
·  the production and operating costs incurred;
·  the amount and timing of future development expenditures; and
·  future oil  prices.

As of July 8, 2015, 82% of our proved reserves were proved undeveloped. Estimates of proved undeveloped reserves are even less reliable than estimates of proved developed reserves. Furthermore, different reserve engineers may make different estimates of reserves and future net revenues based on the same available data. Our actual production, revenues and expenditures with respect to reserves will likely be different from estimates and the differences may be material.
The PV-10 included in this report should not be considered as the current market value of the estimated oil and gas reserves attributable to our properties.
The non-GAAP financial measure, PV-10, in this report is based on an estimated $73.88/Bbl for oil. This pricing was based upon benchmark prices that reflect the unweighted arithmetic average of the first-day-of-the-month price for oil and gas during the twelve (12) month period ended April 1, 2015, as required under SEC rules and regulations. Actual future net revenues will be affected by factors such as the amount and timing of actual production, prevailing operating and development costs, supply and demand for oil and gas, increases or decreases in consumption and changes in governmental regulations or taxation.

Operating hazards or other interruptions of our operations could result in potential liabilities, for which we do not have insurance.


The oil and gas business involves certain operating hazards such as well blowouts, cratering, explosions, uncontrollable flows of gas, oil or well fluids, fires, surface and subsurface pollution and contamination, and releases of toxic gas. The occurrence of one of the above may result in injury, loss of life, suspension of operations, environmental damage and remediation and/or governmental investigations and penalties. We do not currently have insurance and if we do acquire insurance at the commencement of operations, then consistent with insurance coverage generally available to the industry, we expect that our insurance policies will provide limited coverage for losses or liabilities relating to pollution, with broader coverage for sudden and accidental occurrences. Our insurance, when acquired, might be inadequate to cover our liabilities. The insurance market in general and the energy insurance market in particular have been difficult markets over the past several years. Insurance costs are expected to continue to increase over the next few years, and we may decrease coverage and retain more risk to mitigate future cost increases. If we incur substantial liability and the damages are not covered by insurance or are in excess of policy limits, or if we incur liability at a time when we are not able to obtain liability insurance, then our business, results of operations and financial condition could be materially adversely affected.

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Our results are subject to quarterly and seasonal fluctuations.

Our quarterly operating results may fluctuate and could be negatively impacted in the future as a result of a number of factors, including seasonal variations in oil prices, variations in levels of production, if an when production commences, and the completion of development projects.

Risks Relating to an Investment in our Securities

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. Any failure of these controls could also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds. Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting. The standards that must be met for management to assess the internal control over financial reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively impacted.

In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting, or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. For example, on January 30, 2009, the SEC adopted rules requiring companies to provide their financial statements in interactive data format using the eXtensible Business Reporting Language, or XBRL. We currently have to comply with these rules. Our management team will need to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of its development. We have not generated any revenues nor have we realized a profit from our -operations to date and there is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon our ability to market the products developed under our licensing agreement and to source other acquisitions in the industry we have chosen either additional technologies or exploration projects. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to continue our business operations.


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We may, in the future, issue additional common shares that would reduce investors’ percent of ownership and may dilute our share value.

The future issuance of common shares may result in substantial dilution in the percentage of our common shares held by our then existing stockholders. We may value any common shares issued in the future on an arbitrary basis. The issuance of common shares for future services or acquisitions or other corporate actions may have the effect of diluting the value of the common shares held by our investors, and might have an adverse effect on any trading market for our common shares.

Broker-dealers may be discouraged from effecting transactions in our shares because they are considered penny stocks and are subject to the penny stock rules thereby potentially limiting the liquidity of our shares.

Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934, as amended, impose sales practice and disclosure requirements on NASD broker-dealers who make a market in "penny stocks". A penny stock generally includes any non-NASDAQ equity security that has a market price of less than $5.00 per share. Our shares are quoted on the OTC/BB, however none of our shares have ever traded.OTC Pink Marketplace. NASD broker-dealers who act as market makers for our shares generally facilitate purchases and sales of our shares. The additional sales practice and disclosure requirements imposed upon broker-dealers may discourage broker-dealers from effecting transactions in our shares, which could severely limit the market liquidity of the shares and impede the sale of our shares in the secondary market.

Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor" (generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.


In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

Our common stock may experience extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.

Our common stock may be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including (but not necessarily limited to): (i) the trading volume of our shares; (ii) the number of securities analysts, market-makers and brokers following our common stock; (iii) changes in, or failure to achieve, financial estimates by securities analysts; (iv) actual or anticipated variations in quarterly operating results; (v) conditions or trends in our business industries; (vi) announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; (vii) additions or departures of key personnel; (viii) sales of our common stock; and (ix) general stock market price and volume fluctuations of publicly-trading and particularly, microcap companies.

Investors may have difficulty reselling shares of our common stock, either at or above the price they paid for our stock, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, there is a history of securities class action litigation following periods of volatility in the market price of a company’s securities. Although there is no such shareholder litigation currently pending or threatened against the Company, such a suit against us could result in the incursion of substantial legal fees, potential liabilities and the diversion of management’s attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the OTC-BBOTC Pink Marketplace and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.

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A decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our ability to continue operations and we may go out of business.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, or convertible debt instruments, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer, and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business.


ITEM 1B. UNRESOLVED STAFF COMMENTS


Not Applicable.


ITEM 2. PROPERTIES


TRACT 1: Roger f Theo "A" and "D" Lease 335 acres of land, more or less, being all of the Leopold Menetrier Survey No 1347, A-510 and A-583, Frio and Atascosa Counties, Texas, more commonly referred to as the Rogers "A" Lease, Wells #3, #7, and #8, and the Rogers "D" Lease, Well #9, as to and only as to those rights from the surface down to 100 feet below the base of the Olmos-D-Reservoir as encountered at the subsurface depth of 3,566 feet in The Texaco Jane Burns "B" Well No. 28; Subject to Oil, Gas and Mineral Lease, dated November 2, 1946, from K. T. Tidwell and wife Olga Tidwell, and Theo Rogers and wife Veta Rogers to Shell Oil Co„ recorded in Volume 184, Page 358, Deed Records of Atascosa County, Texas, as amended by instrument dated July 27, 1951, recorded in Volume 208, Page 511 of the Deed Records of Atascosa County, Texas.

Rogers, Theo “C”: 219 acres of land, more or less, being all of the Irene L. Menetrier Survey No. 1346, A-584, Cert 48 , Pat 330 Vol. 29, Atascosa County, Texas, more commonly referred to as the Rogers “C” Lease, Well #5, as to and only as to those rights from the surface down to 100 feet below the base of the Olmos-D-Reservoir as encountered at the subsurface depth of 3,566 feet in The Texaco Jane Burns “B” Well No. 28, save and except the northeast 102.4 acres thereof, the southwest line of which is parallel with the northeast line of said survey; Subject to Oil, Gas and Mineral Lease, dated July 27, 1951, from Theo Rogers and wife Veta Rogers, and K.T. Tidwell and wife Olga Tidwell and to Miller Royalty Company and C.C. Dauchy, recorded in Volume 209, page 581, Deed Records of Atascosa County, Texas.

TRACT 2: Jane Burns "C" Lease Tract 2: 160 acres of land, more or less. being the north 160 acres. in the form of a square, of the Francis Oerelling Survey No. 1336, A-532 and A-654, Frio and Atascosa Counties, Texas, and the northeast and northwest lines of this 160-acre tract lying upon the northeast and northwest lines respectively of said survey, and the southeast and southwest lines of the 160-acre tract being parallel with the northwest and northeast lines respectively, of said survey, as to and only as to those rights from the surface down to 100 feet below the base of the Olmos -D- Reservoir as encountered at the subsurface depth of 3,566 feet in the Texaco Jane Burns "B" Well No. 28.


On November 30, 2016, the Company acquired various royalty interests in Texas for $10,485. On December 14, 2016, the Company acquired two oil and gas leases in Ohio for $2,705. On January 1, 2017, the Company acquired the lease for three oil and gas properties for $4,975.

ITEM 3. LEGAL PROCEEDINGS


Not Applicable.

None.

ITEM 4. MINE SAFETY DISCLOSURES


Not Applicable.


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PART II


ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


Market Information

There has been no establishedis a limited public trading market for our common shares. Our common shares are quoted on the OTC Pink Sheets at this time. Trading in stocks quoted on the OTC Pink Sheets is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s operations or business prospects.

OTC Pink Sheet securities are not listed or traded on the floor of an organized national or regional stock exchange. Instead, OTC Pink Sheet securities transactions are conducted through a telephone and computer network connecting dealers in stocks. OTC Pink Sheet issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a public trading market may never develop,regional or if any market does develop, itnational stock exchange.

All OTC Pink Sheets quotations reproduced herein reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not be sustained. Ournecessarily represent actual transactions.

The following table sets forth, for each quarter during the period commencing April 1, 2015 through March 31, 2017, the reported high and low bid prices of our common stock started trading on the OTCQB ofOTC. These prices have not been adjusted to take into consideration the 1:100 reverse stock split that was effected in the market on March 7, 2016. Our stock was first quoted on the OTC Markets GroupPink Sheets in June 2015 and previously was not traded on any exchange or on the over-the-counter market.


Quarter Ended

 

High

 

 

Low

 

 

 

 

 

 

 

 

March 31, 2017

 

$5.65

 

 

$0.15

 

December 31, 2016

 

$1.545

 

 

$0.22

 

September 30, 2016

 

$0.55

 

 

$0.21

 

June 30, 2016

 

$1.30

 

 

$0.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2016

 

$2.10

 

 

$0.025

 

December 31, 2015

 

$8.30

 

 

$1.05

 

September 30, 2015

 

$0

 

 

$0

 

June 30, 2015

 

$0

 

 

$0

 

Holders


As of July 8, 2015,June 13, 2017, we had fourteen (14)seven (7) shareholders of record of our common stock and believe that there may be additional beneficial holders of our common stock.


Dividends


We have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.


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Equity Compensation Plans


The company has not adopted any equity compensation plans and does not anticipate adopting any equity compensation plans in the near future. Notwithstanding the foregoing, because the company has limited cash resources at this time, it may issue shares or options to or enter into obligations that are convertible into shares of common stock with its employees and consultants as payment for services or as discretionary bonuses.  The

On November 2, 2015, the Company issued 10,000 shares to Mr. Joe Seabourn in connection with his consulting contract with the Company (which were reduced to 10,000 shares as a result of the decrease of issued and outstanding shares at a ratio of one (1) share for every one hundred shares held, on January 20, 2016). Except for the issuance to Mr. Seabourn described above, the company does not have any arrangements for such issuances or arrangements at this time.


Recent Sales of unregistered securities


On February 19, 2014, the Company issued 90,000,000 shares of common stock (split adjusted) to Dmitri Kapsamun, who was a director of the Company at the time, for cash proceeds of $6,000 at $.001 per share.   No underwriters were utilized in connection with this sale of securities.  On April 3, 2015, Mr. Kapsamun sold all such shares to

Effective July 1, 2016, Rise Fast Limited, a Hong Kong corporation, which, afterCorporation and the Company’s controlling shareholder, converted a 15 for 1 stock split represented 90 millionpromissory note issued by the Company in the face amount of $16,598.17 into 16,598,730 shares of the Company’s common stock.


On June 10, 2015,stock, and converted a promissory note issued by the Company enteredin the face amount of $5,037.00 into an Asset Purchase Agreement (the “Share Exchange Agreement”) with Mr. Zheng Xiangwu, a resident5,037,000 shares of Guang Dong Province, China, wherebythe Company’s common stock.

Effective July 11, 2016, each of Chen Sheng Song, Li Yun Xi, Lian Zu Qin, Wei Rui Shan, and Zhu Ling converted promissory notes issued by the Company, issued 4 million shareseach in the face amount of its common stock on June 12, 2015 in exchange for one hundred percent interest in certain oil and gas leases giving the holder the right to produce oil and gas from an aggregate of 714 acres located in Frio and Atascosa Counties, Texas.  Mr. Zheng is the sole owner of Rise Fast Limited, a Hong Kong corporation, which is the majority shareholder of the Company and, prior to this transaction, owned a total of 90 million$6,721.92, into 1,344,384 shares of the Company’s common stock. The numberresult of these conversions is that an aggregate of 6,721,920 shares issued to Mr. Zheng was determined by valuing the oil and gas leases at $160,000 and valuingof the Company’s common stock at $0.04 per share.


On June 12, 2015,were issued in the Company accepted a Subscription Agreement forsettlement of convertible promissory notes in the saleaggregate amount of up to 2.55 million shares of its common stock. No underwriters were utilized in connection with this sale of securities.  The Subscription Agreement provides that the shares shall be sold as follows: (i) upon execution thereof, the purchase irrevocably agrees to purchase 1million at $0.15 per share; (ii) within sixty (60) days of the date of the Subscription Agreement, the purchaser has the right to purchase an additional 750,000 shares at the price of $0.20 per share; and (iii) within one hundred twenty (120) days of the date of the Subscription Agreement, the purchaser has the right to purchase an additional 800,000 shares at the price of $0.20 per share.  On June 19, 2015, the Company received payment of $150,000 for the first tranche described above.

17


EXEMPTION FROM REGISTRATION. $33,609.60.

The foregoing issuances of securities were exempt from registration pursuant to Section 4(2)Rule 506 of the Securities Act for transactions by an issuer not involving a public offering and Regulation D promulgated thereunder.D. Neither we nor any person acting on our behalf offered or sold these securities by any form of general solicitation or general advertising. The shares sold are restricted securities and the certificates representing these shares have been affixed with a standard restrictive legend, which states that the securities cannot be sold without registration under the Securities Act of 1933 or an exemption therefrom. The purchaser represented to the Company that they were purchasing the securities for their own account and not for the account of any other persons. The purchasers were provided with written disclosure that the securities have not been registered under the Securities Act of 1933 and therefore cannot be sold without registration under the Securities Act of 1933 or an exemption therefrom.

Issuer Purchases of Equity Securities


There were no repurchases of common stock for the year ended March 31, 2015.


Stock Transfer Agent

Our transfer agent is Globex Transfer, LLC, 780 Deltona Blvd., Suite 202, Deltona, FL 32725.

2017.

ITEM 6. SELECTED FINANCIAL DATA


Not Applicable.


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


This annual report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,” “management believes” and similar language. Except for the historical information contained herein, the matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this current report on Form 10-K are forward-looking statements that involve risks and uncertainties. The factors listed in the section captioned “Risk Factors,” as well as any cautionary language in this current report on Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from those projected. Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this current report on Form 10-K.


15
Table of Contents

Overview


We intend for this discussion to provide information that will assist in understanding our financial statements, the changes in certain key items in those financial statements, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements.


The Company has experienced net losses to date, and it has not generated revenue from operations, we will need additional working capital to service debt and for ongoing operations, which raises substantial doubt about our ability to continue as a going concern. Management of the Company has developed a strategy to meet operational shortfalls which may include equity funding, short term or long term financing or debt financing, to enable the Company to reach profitable operations. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans

Corporate History


America Resources Exploration Inc. was incorporated on January 24, 2014, under the laws of the State of Nevada to engage in any lawful corporate undertaking, with the specific intended business activity of operating photo booth rentals. The Company was incorporated under the name “Alazzio Entertainment Corp.” and changed its name to America Resources Exploration Inc. on April 17, 2015.


In addition to a change in control of its management and shareholders, the Company's operations to date have been limited to attempting to implement its business plan, issuing shares and filing a registration statement on Form S-1 pursuant to the Securities Act of 1934.


18


Subsequent to the Company’s fiscal year end of March 31, 2015, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), dated June 10, 2015, with Zheng Xiangwu, a resident of Guang Dong Province, China, whereby the Company issued 4 million40,000 shares of its common stock in exchange for rights to certain oil and gas leases located in Frio and Atascosa Counties, Texas, consisting of a total of 714 total acres of land, two (2) working wells and a total of seven (7) wells (the “Leases”).


Mr. Zheng is the owner of Rise Fast Limited, a Hong Kong corporation (“Rise Fast”), which is the majority shareholder of the Company. Rise Fast owns 90,000,000 shares of the Company’s common stock. As a result of this transaction, Mr. Zheng controls a total of 94,000,000 shares, which represents 72.64% of the Company’s issued and outstanding shares.


The transaction was completed on June 12, 2015 and accounted for a business combination as the Company is under control of Mr. Zheng.

The three (3) producing leases acquired by the Company are situated in Atascosa and Frio Counties, Texas, located in the Eagle Ford Shale formation - the Jane Burns “C” (“Burns”), the Theo Rogers “C”, and the Theo Rogers “A” & “D” (“Rogers”) Leases. The Company acquired a 99.5% working interest (74.625% net revenue interest) in each lease.  We estimate

On June 11, 2015 the BurnsCompany entered into various assignment agreements with Mr. Zheng for the acquisition of multiple oil and Rogers Leases contain 68,272 net barrelsgas leases and overriding royalty interests (“ORR’s”) as set out in the table below. From July 6, 2015 through July 9, 2015, the Company completed the acquisition of provedsuch oil reserves havingand gas leases and ORR’s, whereby the Company issued a PV-10total of 6,500 shares of its common stock to Mr. Zheng. The Company valued the transaction at the market price of the shares as at the date of issue, or $0.15 per share for a total value of approximately $1,007,000$97,500. The Company capitalized the historical cost of the acquired assets totaling $51,263 and recorded a loss on acquisition of $46,237.

Assignment Date

Name of The Property

Type of Property

Location

June 11th, 2015

Ellis County

Overriding Royalty Int.

Oklahoma

June 11th, 2015

Hemphill County

Overriding Royalty Int

Texas

June 11th, 2015

Madison County

Wellbore Interest

Texas

June 11th, 2015

Shelby County

Wellbore Interest

Texas

June 11th, 2015

Emergy County

Lease Purchase

Utah

16
Table of Contents

On August 13, 2015 the Company entered into an Asset Purchase Agreement with Inceptus Resources, LLC whereunder the Company acquired a 78% net revenue interest in 200 acres located in Callahan County, Texas, and a 78% net revenue interest in 522 acres also located in Callahan County, Texas. In respect of the acquired leases the Company issued a total of 5,000 shares of common stock on the closing date, August 19, 2015, which shares were valued at market price on the date of the transaction, totaling $448,500, which amount was capitalized. As at September 30, 2015 the Company evaluated the capitalized value of the leases and determined to impair the amount in full due to the fact that the Company had no historical cost basis for the leases, and no immediate development plans for the lease land. A total of $448,500 has been expensed as Impairment loss on oil and gas lease in the third quarter.

On January 20, 2016, the Company filed a Certificate of AprilAmendment with the Nevada Secretary of State (the "Nevada SOS") whereby it amended its Articles of Incorporation by decreasing all of its issued and outstanding shares of common stock at a ratio of one (1) shares for every one hundred (100) shares held. The Company's Board of Directors approved this amendment on January 13, 2016 and shareholders holding 68.65% of the Company's issued and outstanding shares approved this amendment via a written consent executed on January 14, 2016.

On January 20, 2016, the Company filed Articles of Merger with the Nevada SOS whereby it entered into a statutory merger with its wholly-owned subsidiary, PetroGas Company pursuant to Nevada Revised Statutes 92A.200 et. seq. The effect of such merger is that the Company was the surviving entity and changed its name from America Resources Exploration Inc. to "PetroGas Company".

On November 30, 2016, the Company acquired various royalty interests in Texas for $10,485. On December 14, 2016, the Company acquired two oil and gas leases in Ohio for $2,705. On January 1, 2015.


2017, the Company acquired the lease for three oil and gas properties for $4,975. As of March 31, 2017, a total of $28,023 is recorded as Unproved Property.

Business Overview


The Burns and Rogers Leases provide exploration and production opportunities in the Kyote Field pay zone, very near the Eagle Ford Shale play with access to available rig crews and other vendor-servicers, due to their close proximity to San Antonio, Texas.


The Rogers Lease currently has one (1)no operating well, which provides between two to three (2-3) barrels of oil per day (“BOPD”). The Burns Lease also currently has one (1) operating well, which provides one to two (1-2) BOPD. The Company’s management and industry professionals believe that the Company can double or triple existing production on the Burns and Rogers Leases by bringing online 5 available, inactive wells on the Leases and potentially increase total production 2-3 BOPD per well.


wells. The Rogers and Burns Leases hold collectively seven (7) oil wells which have a long history of producing a favorable oil to water ratio, such that an injection well is not needed for disposal of saltwater.

Management is considering plans to reactive the inactive wells through a rework program on the Leases should oil prices recover. Additional rights may be leased out from mineral owner to deeper zones near 5,000 feet and below. However, such plans are subject to raising financing of $500,000 to pay for such rework plans and an analysis of potential income based on projected oil prices in the future.

Fiscal Years Ended March 31, 2017 and 2016

The following discussion and analysis should be read in conjunction with the Company’s audited financial statements for the fiscal years ended March 31, 2017 and 2016 and accompanying notes appended thereto that are included in this annual report.

17
Table of Contents

Results of Operations for the Year Ended March 31, 2017

Revenue for the year ended March 31, 2017 was $2,484 compared to $0 for the year ended March 31, 2016. Revenue was comprised of royalty revenue.

The Company’s operating expenses for the year ended March 31, 2017 decreased to $105,994 from $391,815 for the year ended March 31, 2016. For the year ended March 31, 2017 the Company had $0 in lease operating expense and accretion expense compared to $59,370 and $83,580, respectively, for the year ended March 31, 2016.

The Company’s general and administrative expenses for the year ended March 31, 2017 decreased to $105,994 from $248,865 for the year ended March 31, 2016.

Other expenses for the year ended March 31, 2017 decreased to $1,793 for the year ended March 31, 2017 from $816,811 for the year ended March 31, 2016. The decrease is driven by decreases in impairment of oil and gas leases, interest expense, and loss on acquisition of royalty interest and unproven property.

Plan of Operation

Management is considering plans to reactive its inactive wells through a rework program on the Leases. Additional rights may be leased out from mineral owner to deeper zones near 5,000 feet and below. However, such plans are subject to raising financing of $500,000 to pay for such rework plans and an analysis of potential income based on projected oil prices in the future.


Due to the fact that the acquisition of the Burns and Rogers Leases occurred subsequent to the Company’s fiscal year ended March 31, 2015, the analysis provided below is based on the Company’s condition as at its fiscal year end and does not take into account the Company’s current assets and operations.

Fiscal Years Ended March 31, 2015 and 2014

The following discussion and analysis should be read in conjunction with the Company’s audited financial statements for the fiscal years ended March 31, 2015 and 2014 and accompanying notes appended thereto that are included in this annual report.

Results of Operations for the Year Ended March 31, 2015

The Company’s operating expenses for the year ended March 31, 2015 increased to $29,976 from $57 for the year ended March 31, 2014.   The Company was incorporated on January 24, 2014, and had not begun any business prior to its year end in 2014. Subsequent to March 31, 2014, the Company began its operations and filed a registration statement on Form S-1 with the Securities and Exchange Commission, resulting in incurring expenses for transfer agent fees, accounting and audit fees, bank charges, legal fees and regulatory filing fees.
19

Plan of Operation

The Company’s prior business plan, as of May 2014, was to develop a photo booth rental business. The Company’s twelve (12) month plan was to raise funds from its public offering of shares of its common stock to establish an office, develop a website, purchase one (1) photo booth along with equipment and supplies, commence a marketing campaign and pay for professional and legal fees associated with its public offering. The Company sold 35,400,000 (split adjusted) shares under its public offering for cash proceeds of $23,519. As a result of the acquisition of the assets described above, the Company’s operations moved into the oil and gas sector and its plan of operations therefore has been amended.

Management is considering plans to reactive the inactive wells through a rework program on the Leases. Additional rights may be leased out from mineral owner to deeper zones near 5,000 feet and below. However, such plans are subject to raising financing of $500,000 to pay for such rework plans and an analysis of potential income based on projected oil prices in the future.

The Company is actively seeking to acquire producing and non-producing leases that will allow us to explore and drill in high-profile pay zones.


We intend to raise capital at a low cost from private placements so that we may acquire numerous additional leases, and to commence drilling, and taking advantage of the inevitable uptick in oil prices to come.


In the current climate, the Company believes that there are a very large number of oil & gas leases under distress due to the depressed gas prices and that we can strategically position the Company to acquire as many of these leases as possible at a discount to market value, hence creating shareholder value.


On the Burns and Rogers Leases, we intend to rework all current wells and bring them back to production once oil prices are in order to increase production three to four fold.a suitable range. We are planning an exploration strategy to drill new wells on the current Leases, as well as acquire deeper rights in order to drill some of the wells at great depths. We expect that reservoirs at those depths could yield a very high daily output of oil.


Liquidity and Capital Resources


Working Capital

The

As of March 31, 2017, the Company had cash and cash equivalents of $1,016 and a negative working capital of $29 at$20,628.

For the twelve months ended March 31, 2015, compared2017, we used $97,596 of cash for operations primarily as a result of the net loss of $105,303 offset by an increase in accounts payable of $7,836 and an increase in prepaid expenses of $129.

Net cash used in investing activities of $28,023 for the twelve months ended March 31, 2017 was due to working capitalpurchase and improvements of $5,943 asunproven oil and gas assets.

For the twelve months ended March 31, 2017, the Company had $126,635 in net cash provided by financing activities comprised of a decrease in advances from a related party in the amount of $114,014 and an increase in promissory notes of $240,683.

18
Table of Contents

Off-Balance Sheet Arrangements

As of March 31, 2014. The decrease in our working capital was due to the accrual of $5,600 of expenses during the fiscal year ended March 31, 2015.


Off-Balance Sheet Arrangements

As of December 31, 2015,2017, the Company had no off-balance sheet arrangements.

Critical Accounting Policies


We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operation.


Use of Estimates


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


20


These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. The estimates on depreciation were based on the estimated useful lives of the Company's assets. Any estimates during the period have had an immaterial effect on earnings.

Recent Accounting Pronouncements


The Company has implemented all new accounting pronouncements and does not believe that there are any other accounting pronouncements that have been issued that may have a material impact on its financial statements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not Applicable.


19
Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

AMERICA RESOURCES EXPLORATION INC.
FORMERLY ALAZZIO ENTERTAINMENT CORP.

TABLE

REPORT OF CONTENTS



Report of Independent Registered Public Accounting Firm22
Balance Sheets as of March 31, 2015 and 201423
Statements of Operations for the year ended  March 31, 2015 and period from January 24, 2014 (Date of Inception) to March 31, 201424
Statements of Changes in Stockholders’ (Deficit) Equity for the year ended  March 31, 2015 and period from January 24, 2014 (Date of Inception) to March 31, 201425
Statements of Cash Flows for the year ended  March 31, 2015 and period from January 24, 2014 (Date of Inception) to March 31, 201426
Notes to the Financial Statements27

21


Report of Independent Registered Public Accounting Firm

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

America Resources Exploration, Inc., formerly Alazzio Entertainment Corp.

Petrogas Company:

We have audited the accompanying consolidated balance sheets of America Resources Exploration, Inc., formerly Alazzio Entertainment Corp.  ("Petrogas Company (“the Company"Company”) as of March 31, 20152017 and 20142016 and the related statementsstatement of operations, changes in stockholders'stockholders’ equity (deficit) equity, and cash flows for the year ended March 31, 2015 and for the period from inception (January 24, 2014) to March 31, 2014.years then ended. These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based uponon our audits.


audit. 

We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion. 

In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Petrogas Company, as of March 31, 2017 and 2016, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in the United States of America.

The Companycompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our auditsaudit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2015 and 2014, and the results of its operations and its cash flows for the year ended March 31, 2015 and for the period from inception (January 24, 2014) to March 31, 2014, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 12 to the financial statements, the Company has insufficient working capital,suffered recurring losses from operations and has a stockholders’ deficit and recurring net losses, which raisessignificant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about itsthe Company's ability to continue as a going concern. Management’sManagement's plans in regardsregard to these matters are also discusseddescribed in Note 1 to the financial statements.1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ Briggs & Veselka, Co.         


Briggs & Veselka Co.
Houston, Texas
July 14, 2015

22


AMERICA RESOURCES EXPLORATION INC.
FORMERLY ALAZZIO ENTERTAINMENT CORP.
BF Borgers CPA PC

BF Borgers CPA PC

Lakewood, CO

June 29, 2017

F-1

PETROGAS COMPANY

CONSOLIDATED BALANCE SHEETS



  March 31, 2015  March 31, 2014 
ASSETS      
       
Current assets      
Cash and cash equivalents $5,971  $178 
Total current assets  5,971   178 
         
Fixed assets        
Equipment  -   8,565 
Total fixed assets  -   8,565 
         
Total assets $5,971  $8,743 
         
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY        
         
Liabilities        
Current liabilities        
Accounts payable $400  $- 
Loan from director  -   2,800 
Accrued expenses  5,600   - 
Total liabilities  6,000   2,800 
         
Commitments and contingencies  -   - 
         
Stockholders’ (deficit) equity        
    Common stock,  par value $0.001; 300,000,000 shares authorized, 125,400,000 and 90,000,000        
shares issued and outstanding as of March 31, 2015 and 2014 (1)  8,360   6,000 
Additional paid in capital  21,159   - 
Retained deficit  (29,548)  (57)
Total stockholders’ (deficit) equity  (29)  5,943 
         
Total liabilities and stockholders’ (deficit) equity $5,971  $8,743 


(1)  All common share amounts and per share amounts in these financial statements reflect the 15-for-1 split of the issued and outstanding shares of common stock of the Company, effective April 29, 2015, including retroactive adjustment of common share amounts.  See Note 7.


 

 

March 31,

 

 

March 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

ASSETS

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

 

1,016

 

 

$-

 

Prepaid expenses

 

 

129

 

 

 

-

 

Total Current Assets

 

 

1,145

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Oil and gas, on the basis of full cost accounting

 

 

 

 

 

 

 

 

Unproved Property

 

 

28,023

 

 

 

-

 

TOTAL ASSETS

 

$29,168

 

 

$-

 

 

 

 

 

 

 

 

 

 

LIABILITIES & SHAREHOLDERS' EQUITY

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$17,388

 

 

$9,552

 

Advances from related party

 

 

4,385

 

 

 

118,433

 

Convertible notes

 

 

-

 

 

 

55,245

 

Total Current Liabilities

 

 

21,773

 

 

 

183,230

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

83,580

 

 

 

83,580

 

Promissory note

 

 

240,683

 

 

 

-

 

Total long-term liabilities

 

 

324,263

 

 

 

83,580

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

346,036

 

 

 

266,810

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Common stock: 300,000,000 authorized; $0.001 par value 29,684,381 and 1,326,281 shares issued and outstanding as of March 31, 2017 and 2016

 

 

29,684

 

 

 

1,326

 

Additional paid in capital

 

 

996,925

 

 

 

970,038

 

Accumulated deficit

 

 

(1,343,477)

 

 

(1,238,174)

TOTAL SHAREHOLDERS' EQUITY (DEFICIT)

 

 

(316,868)

 

 

(266,810)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY

 

$29,168

 

 

$-

 

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


23


AMERICA RESOURCES EXPLORATION INC.
 FORMERLY ALAZZIO ENTERTAINMENT CORP.

F-2
Table of Contents

PETROGAS COMPANY

CONSOLIDATEDSTATEMENTS OF OPERATIONS



  
 
Fiscal Year
Ended
March 31, 2015
  
For the period from
January 24, 2014
(Inception) to
March 31, 2014
 
       
Revenues $-  $- 
         
Operating expenses        
General and Administrative Expenses  29,976   57 
         
Total operating expenses  29,976   57 
         
Net loss from operations  (29,976)  (57)
         
Other income (expense)        
Gain on debt extinguishment  9,050   - 
Loss on disposal of equipment  (8,565)  - 
Total other income  485   - 
         
Net loss $(29,491) $(57)
         
Net loss per share – basic and diluted $-  $- 
         
Weighted average number of shares outstanding – basic and diluted (1)  109,950,000   90,000,000 


(1)  All common share amounts and per share amounts in these financial statements reflect the 15-for-1 split of the issued and outstanding shares of common stock of the Company, effective April 29, 2015, including retroactive adjustment of common share amounts.  See Note 7.


 

 

Year ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty Revenue

 

$2,484

 

 

$-

 

Gross Profit

 

 

2,484

 

 

 

-

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Lease Operating expense

 

 

-

 

 

 

59,370

 

Accretion expense

 

 

-

 

 

 

83,580

 

General and administrative expense

 

 

105,994

 

 

 

248,865

 

TOTAL OPERATING EXPENSES

 

 

105,994

 

 

 

391,815

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER EXPENSES

 

 

 

 

 

 

 

 

Loss on acquisition of royalty interest and unproven property

 

 

-

 

 

 

46,238

 

Impairment of oil and gas leases

 

 

-

 

 

 

713,550

 

Interest expenses

 

 

1,793

 

 

 

57,023

 

Total other expenses

 

 

1,793

 

 

 

816,811

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(105,303)

 

 

(1,208,626)

 

 

 

 

 

 

 

 

 

NET LOSS PER SHARE, BASIC AND DILUTED

 

$(0.01)

 

$(0.92)

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED

 

 

15,781,056

 

 

 

1,308,325

 

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


24


AMERICA RESOURCES EXPLORATION INC.
FORMERLY ALAZZIO ENTERTAINMENT CORP.

F-3
Table of Contents

PETROGAS COMPANY

STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY



  Common Stock  
Additional
Paid-in
  Retained  
Total
Stockholders’
(Deficit)
 
  Shares (1)  Amount  Capital  Deficit  Equity 
                
Inception, January 24, 2014  -  $-  $-  $-  $- 
                     
Shares issued for cash  90,000,000   6,000   -   -   6,000 
                     
Net loss              (57)  (57)
Balance, March 31, 2014  90,000,000   6,000   -   (57)  5,943 
                     
Shares issued for cash  35,400,000   2,360   21,159   -   23,519 
                     
Net loss              (29,491)  (29,491)
                     
Balance, March 31, 2015  125,400,000  $8,360  $21,159  $(29,548) $(29)


(1)  All common share amounts and per share amounts in these financial statements reflect the 15-for-1 split of the issued and outstanding shares of common stock of the Company, effective April 29, 2015, including retroactive adjustment of common share amounts.  See Note 7.


 

 

Common Stock

 

 

Additional

 

 

 

 

 

Total

 

 

 

Number of
Shares

 

 

Amount

 

 

Paid in

Capital

 

 

Accumulated

Deficit

 

 

Stockholder's

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2015

 

 

1,254,781

 

 

$1,254

 

 

$28,265

 

 

$(29,548)

 

$(29)

Debt discount

 

 

-

 

 

 

 

 

 

 

55,245

 

 

 

 

 

 

$55,245

 

Shares issued for cash

 

 

10,000

 

 

 

10

 

 

 

149,990

 

 

 

 

 

 

 

150,000

 

Shares issued for stock-based compensation

 

 

10,000

 

 

 

10

 

 

 

30,590

 

 

 

 

 

 

 

30,600

 

Shares issued for acquisitions

 

 

51,500

 

 

 

52

 

 

 

705,948

 

 

 

 

 

 

 

706,000

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,208,626)

 

 

(1,208,626)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance - March 31, 2016

 

 

1,326,281

 

 

$1,326

 

 

$970,038

 

 

$(1,238,174)

 

$(266,810)

Shares issued for conversion

 

 

28,357,650

 

 

 

28,358

 

 

 

26,888

 

 

 

-

 

 

 

55,245

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(105,303)

 

 

(105,303)

Balance - March 31, 2017

 

$29,683,931

 

 

$29,684

 

 

$996,926

 

 

$(1,343,477)

 

$(316,868)

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


25


AMERICA RESOURCES EXPLORATION INC.
FORMERLY ALAZZIO ENTERTAINMENT CORP.
STATEMENTS

F-4
Table of Contents

PETROGAS COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS


  
Fiscal Year
Ended
March 31, 2015
  
For the period from
January 24, 2014
(Inception) to
March 31, 2014
 
Cash flows from operating activities      
Net loss $(29,491) $(57)
Adjustments to reconcile net loss to net cash from operating activities:
        
Gain on debt extinguishment  (9,050)  - 
Loss on disposal of asset  8,565   - 
Change in operating assets and liabilities:        
Accounts payable  400   - 
Accrued interest payable  5,600   - 
Net cash from operating activities  (23,976)  (57
         
Cash flows from investing activities        
Purchase of equipment  -   (8,565)
Net cash from investing activities  -   (8,565)
         
Cash flows from financing activities        
Proceeds from loan from director  6,250   2,800 
Proceeds from Sale of common stock  23,519   6,000 
Net cash from financing activities  29,769   8,800 
         
Net change in cash and cash equivalents  5,793   178 
         
Cash and cash equivalents        
Beginning of period  178   - 
End of period $5,971  $178 




 

 

Year ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net Loss

 

$(105,303)

 

$(1,208,626)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Asset retirement obligation accretion

 

 

-

 

 

 

83,580

 

Impairment of oil and gas leases

 

 

-

 

 

 

713,550

 

Loss on acquisition of royalty interest on unproven property

 

 

-

 

 

 

46,237

 

Amortization of debt discount

 

 

 

 

 

 

55,245

 

Share based compensation

 

 

-

 

 

 

30,600

 

Changes in operating assets and liabilities:

 

 

-

 

 

 

 

 

Accounts payable

 

 

7,836

 

 

 

4,777

 

Prepaid expenses

 

 

(129)

 

 

-

 

Net cash used in Operating Activities

 

 

(97,596)

 

 

(274,637)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Improvements to proven oil and gas assets

 

 

-

 

 

 

(77,044)

Purchase and improvements of unproven oil and gas assets

 

 

(28,023)

 

 

-

 

Refund on assets

 

 

-

 

 

 

23,257

 

Net cash used in investing activities

 

 

(28,023)

 

 

(53,787)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Advances from related party

 

 

(114,048)

 

 

118,433

 

Proceeds from notes payable

 

 

-

 

 

 

110,000

 

Repayment on notes payable

 

 

-

 

 

 

(55,980)

Promissory note

 

 

240,683

 

 

 

-

 

Proceeds from sale of common stock

 

 

-

 

 

 

150,000

 

Net cash provided by Financing Activities

 

 

126,635

 

 

 

322,453

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

1,016

 

 

 

(5,971)

Cash and cash equivalents, beginning of period

 

 

-

 

 

 

5,971

 

Cash and cash equivalents, end of period

 

$1,016

 

 

$-

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$-

 

 

$-

 

Cash paid for taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Non-cash transactions:

 

 

 

 

 

 

 

 

Issuance of common stock to settle certain convertible notes

 

$55,245

 

 

$-

 

Issuance of common stock for acquisition of oil and gas properties

 

$-

 

 

$160,000

 

Issuance of common stock for acquisition of overriding royalties and unproved property

 

$-

 

 

$97,500

 

Issuance of common stock for unproven oil and gas property

 

$-

 

 

$448,500

 

Asset retirement obligations incurred

 

$-

 

 

$83,580

 

Loan payable to convertible notes

 

$-

 

 

$54,020

 

Accrued interest to convertible notes

 

$-

 

 

$1,225

 

The accompanying notes are an integral part of these financial statements


26


AMERICA RESOURCES EXPLORATION INC.
FORMERLY ALAZZIO ENTERTAINMENT CORP.
statements.

F-5
Table of Contents

PETROGAS COMPANY

NOTES TO THECONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 – ORGANIZATIONDESCRIPTION OF BUSINESS AND NATUREBASIS OF BUSINESS


PERSENTATION

Organization and nature of business

PetroGas Company (Formerly America Resources Exploration Inc. (the “Company”)), was incorporated in the State of Nevada on January 24, 2014. The Company was incorporated under the name Alazzio Entertainment Corp. and changed its name to America Resources Exploration Inc. on April 17, 2015. Alazzio Entertainment Corp. was a photo booth rental business, whichSubsequently, on January 20, 2016, the Company has exited.changed its name to PetroGas Company. On June 12, 2015, the Company completed an acquisition of working interests in certain oil & gas properties as discussed in Note 8.


Going Concern4 below.

On April 16, 2015, the Company filed a Certificate of Amendment with the Nevada Secretary of State whereby it amended its Articles of Incorporation by increasing the Company's authorized number of shares of common stock from 75 million to 300 million and increasing all of its issued and outstanding shares of common stock at a ratio of fifteen (15) shares for every one (1) share held.

On January 20, 2016, the Company filed a Certificate of Amendment with the Nevada Secretary of State (the “Nevada SOS”) whereby decreasing all of its issued and outstanding shares of common stock at a ratio of one (1) share for every one hundred (100) shares held. The Company’s Board of Directors approved this amendment on January 13, 2016 and shareholders holding 68.65% of the Company’s issued and outstanding shares approved this amendment via a written consent executed on January 14, 2016.

All share amounts in these financial statements have been prepared assuming thatadjusted to reflect this stock split.

NOTE 2 – GOING CONCERN

The Company had no significant revenues from the inception through March 31, 2017. As of March 31, 2017, the Company has an accumulated deficit of $1,343,477. We will continue as a going concern,need additional working capital to service debt and for ongoing operations, which contemplates, among other things, the realization of assets and satisfaction of liabilities over the normal course business. The Company has incurred cumulative net losses since its inception and will require capital for future operating activities to take place.  The Company’s ability to raise funding through the future issuance of debt or common stock is unknown.  The obtainment of additional financing, the successful development of a plan of operations, and its transition, ultimately, to attainment of profitable operations are necessary for the Company to continue operations.  The ability to successfully resolve these factors raiseraises substantial doubt about the Company’sits ability to continue as a going concern.


Management of the Company has developed a strategy to meet operational shortfalls which may include equity funding, short term or long term financing or debt financing, to enable the Company to reach profitable operations.

The accompanying consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If we fail to generate positive cash flow or obtain additional financing, when required, we may have to modify, delay, or abandon some or all of our business and expansion plans.

NOTE 23 – SUMMARY OF SIGNIFCANTSIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation

The Company's March 31. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”). Because a precise determination of many assets and pursuant toliabilities is dependent upon future events, the accountingpreparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgment. Actual results may vary from these estimates.

The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and disclosure rules and regulations ofwithin the U.S. Securities and Exchange Commission ("SEC"). A summaryframework of the significant accounting policies appliedsummarized below:

Basis of Consolidation

These consolidated financial statements include the accounts of the Company and its 94% owned subsidiary, Seabourn Oil Company, LLC. All intercompany balances and transactions have been eliminated in consolidation.

F-6
Table of Contents

Fiscal Year End

The Company has selected March 31 as its fiscal year end.

Cash and Cash Equivalents

Cash and cash equivalents consist of commercial accounts and interest-bearing bank deposits and are carried at cost, which approximates current value. Items are considered to be cash equivalents if the original maturity is three months or less.

Equipment and Facilities

Equipment and facilities are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the related assets, ranging from one to twenty-five years.

Oil and Gas Properties – Full Cost Method

The Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the preparationacquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to operations.

The capitalized costs of oil and gas properties, excluding unevaluated and unproved properties, are amortized as depreciation, depletion and amortization expense using the units-of-production method based on estimated proved recoverable oil and gas reserves.

The costs associated with unevaluated and unproved properties, initially excluded from the amortization base, relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the accompanyingexistence of proved reserves, together with capitalized interest costs for these projects. Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease. Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry wells are transferred to the amortization base immediately upon determination that the well is unsuccessful.

All items classified as unproved property are assessed on a quarterly basis for possible impairment or reduction in value. Properties are assessed on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of various factors, including, but not limited to, the following: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; assignment of proved reserves; and economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization.

Under full cost accounting rules for each cost center, capitalized costs of evaluated oil and gas properties, including asset retirement costs, less accumulated amortization and related deferred income taxes, may not exceed an amount (the "cost ceiling") equal to the sum of (a) the present value of future net cash flows from estimated production of proved oil and gas reserves, based on current prices and operating conditions, discounted at ten percent (10%), plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged to operations. For purposes of the ceiling test calculation, current prices are defined as the unweighted arithmetic average of the first day of the month price for each month within the 12-month period prior to the end of the reporting period. Prices are adjusted for basis or location differentials. Unless sales contracts specify otherwise, prices are held constant for the productive life of each well. Similarly, current costs are assumed to remain constant over the entire calculation period.

F-7
Table of Contents

The Company’s proved properties have not operated for in excess of two years and under present circumstances, cannot be placed on production. Given the decline and continuing volatility of oil and gas prices which has prevented the Company from bringing its proven wells online, an estimate of discounted future net cash flows from proved oil and gas reserves is indeterminable. In addition, development of certain unproved properties is not viable, nor are revenues from the Company’s ORR’s related to these projects. As a result, the Company evaluated its proved and unproven assets as at March 31, 2016 and has fully impaired these assets. We recognized a cumulative total of $713,550 impairment costs during the year ended March 31, 2016, as well as a loss on acquisition of royalty interest and unproven property of $46,238 during the year ended March 31, 2016.

During the year ended March 31, 2017, the Company has capitalized a total of $28,023 in Unproved Property. Based on the Company’s analysis, no impairment has been recorded on the Unproved Property.

Impairment

FASB ASC 360-10-35-21 requires that assets to be held and used be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Oil and gas properties accounted for using the full cost method of accounting (which the Company uses) are excluded from this requirement but continue to be subject to the full cost method's impairment rules.

Revenue Recognition

Oil and gas sales result from undivided interests held by the Company in oil and gas properties and royalty revenues. Sales of oil and gas produced from oil and gas operations are recognized when the product is delivered to the purchaser and title transfers to the purchaser. Charges for gathering and transportation are included in production expenses. The Company had no sales of oil and gas during the nine months ended December 31, 2016 and 2015.

Revenue from royalties is recognized as they are earned, when collection is reasonably assured. Royalty revenue is recorded in the same period as the sales that generate the royalty payment.

Asset Retirement Obligations

The Company records a liability for asset retirement obligations ("ARO") associated with its oil and gas wells when those assets are placed in service. The corresponding cost is capitalized as an asset and included in the carrying amount of oil and gas properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value.

Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with the requirements of ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information,

F-8
Table of Contents

The carrying value of all assets and liabilities approximated their fair values as December 31, 2016 and March 31, 2016, respectively.

Stock-Based Compensation

The Company follows the guidance included in ASC 718 Compensation-Stock Compensation (“ASC 718”) using the modified prospective transition method. The Company recognizes compensation expense in the financial statements follows.


for share-based awards based on the grant date fair value of those awards.

Income Taxes

The Company accounts for income taxes pursuant to ASC 740, Income Taxes . Deferred tax assets and liabilities are recorded for differences between the financial statements and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.

Use of Estimates

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


Cash These estimates are reviewed periodically, and, Cash Equivalentsas adjustments become necessary, they are reported in earnings in the period in which they become known. The Company considers all highly liquid instruments with the original maturities of three months or less to be cash equivalents.

Income Taxes Income taxes are providedestimates on depreciation were based on the liability method for financial reporting purposes. Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.

Uncertain tax positions are recognized in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical meritsestimated useful lives of the position. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company is required to file federal income tax returns inCompany's assets. Any estimates during the United States and in various state and local jurisdictions. The Company's tax returns filed since inception are subject to examination by taxing authorities in the jurisdictions in which it operates inperiod have had an immaterial effect on earnings.

Earnings or Loss Per Share

In accordance with ASC Topic 280 – “Earnings Per Share”, the normal statutes of limitations in the applicable jurisdiction.


Revenue Recognition – The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

Earnings (Loss) Per Share – Basic income (loss)basic loss per common share is calculatedcomputed by dividing the Company’s net loss applicableavailable to common shareholdersstockholders by the weighted average number of common shares during the period.outstanding. Diluted earningsloss per common share is calculated by dividingcomputed similar to basic loss per common share except that the Company’s net income availabledenominator is increased to common shareholders byinclude the diluted weighted average number of additional common shares that would have been outstanding duringif the year. The diluted weighted average number ofpotential common shares outstanding ishad been issued and if the basic weighted number ofadditional common shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of March 31, 2015 and 2014.

27


were dilutive.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that maymight have a material impact on its financial statements.


position or results of operations. The Company regularly reviews and analyses the recent accounting pronouncements.

F-9
Table of Contents

NOTE 34DISPOSAL OF ASSET


InOIL AND GAS PROPERTIES

During the fiscal year ended March 2014,31, 2016 the Company purchasedentered into certain agreements whereunder they acquired 94% control of Seabourn Oil Company, LLC, a photo booth which was never placedcompany that holds a100% working interest and an 80% net revenue interest in service.  At March 31,a total of 960 acres located in two tracts in Callahan County, Texas.

On June 10, 2015, the Company disposedentered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) where under it acquired the rights to certain oil and gas leases located in Frio and Atascosa Counties, Texas, consisting of the asset upon the exita total of that line714 total acres of business.


NOTE 4 – LOAN FROM DIRECTOR

The Directorland, two (2) working wells and a total of seven (7) wells (the “Leases”).

Further, on June 11, 2015 the Company made loans toentered into additional assignment agreements for the acquisition of multiple oil and gas leases and overriding royalty interests (“ORR’s”) in various counties in Oklahoma, Texas and Utah.

During the fiscal year ended March 31, 2016, the Company completed various workovers and other improvements to certain of its existing wellbores, which amounts totaling $53,687 were unsecured, non-interest bearingcapitalized under Proved Properties. As at the fiscal year ended March 31, 2016, the Company expensed these costs as the Company has not yet determined when the wells will be brought online. Further a total of $211,363 in proven and due on demand.unproven oil and gas assets acquired as set out above, including ORR’s were fully impaired at March 31, 2016 following an evaluation by the Company’s management which determined recovery of costs was not likely to occur during the foreseeable future as a result of current industry economics.

On November 30, 2016, the Company acquired various royalty interests in Texas for $10,485. On December 14, 2016, the Company acquired two oil and gas leases in Ohio for $2,705. On January 1, 2017, the Company acquired the lease for three oil and gas properties for $4,975. As of March 31, 2014,2017, a total of $28,023 is recorded as Unproved Property.

NOTE 5 – ASSET RETIREMENT OBLIGATIONS

The Company has asset retirement obligations for any wells that are permanently removed from service. The primary obligations involve the balance due on demand toremoval and disposal of surface equipment, plugging and abandoning the Director was $2,800. Duringwells and site restoration. For the purpose of determining the fair value of ARO incurred during the fiscal year ended March 31, 2015,2017, the Director made additional loans of $6,250 due on demand. Company used the following assumptions.

Inflation Rate

3%

Estimated asset life

20 years

Credit adjusted risk free interest rate

18%

As ofat March 31, 2015,2016, the total loan balance was forgiven byCompany determined to fully impair its shut in wells given a lack of production over a period in excess of two years, and the Directoruncertainty in connection withreturning the exit of the photo booth line of business.  A gain on debt extinguishment was recorded for $9,050, which is reportedwells to production in the other income in the statements of operations.  


NOTE 5 – COMMITMENTS AND CONTINGENCIES

The Company neither owns nor leases any real or personal property. An officer has provided office services without charge.  There is no obligation for the officer to continue this arrangement.  Such costs are immaterial to the financial statements and accordingly are not reflected herein.  The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

NOTE 6 – INCOME TAXES

As of March 31, 2015 and 2014, based on the results of the Company’s operations there were no provision for income taxes. As of March 31, 2015 and 2014, the Company had net operating loss carryforward of approximately $29,548 and $57, respectively, of net operating loss carryforwards available to offset future federal income taxes expiring beginning in 2034.

Future tax benefits which may arise as a result, of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance forlong term liability equal to the deferred tax asset relating to these tax loss carry-forwards. It is noted that when afull value of the ARO.

F-10
Table of Contents

The following table shows the change in ownership occurs the net operating loss carryforwards may be limited as toCompany’s ARO during the use in the future years.


Atfiscal year ended March 31, 20152016:

Asset retirement obligations at March 31, 2016

 

$83,580

 

Asset retirement obligations incurred

 

 

-

 

Accretion expense

 

 

-

 

Adjust obligation to reflect impairment of non producing wells

 

 

-

 

Asset retirement obligations at March 31, 2017

 

$83,580

 

NOTE 6 – PROMISSORY NOTE

On December 31, 2016, the Company entered into a promissory note with a majority shareholder, Rise Fast Limited, for an amount of $240,683. The promissory note bears interest at a rate of 2% per annum, and 2014 a reconciliation of income tax (expense) benefit at the statutory rate to the Company’s actual income tax expense is shown below:


  2015  2014 
       
Computed at the statutory rate (34%) $(10,006) $(19)
Increase resulting from:        
Changes in the deferred tax asset valuation allowance  10,006   19 
         
ACTUAL TAX (EXPENSE) BENEFIT $-  $- 

payable on December 31, 2019.

NOTE 7 – COMMON STOCK


On April 16, 2015, the Company filed a Certificate of Amendment with the Nevada Secretary of State whereby it amended its Articles of Incorporation by increasing the Company's authorized number of shares of common stock from 75 million to 300 million and increasing all of its issued and outstanding shares of common stock at a ratio of fifteen (15) shares for every one (1) share held.

On January 20, 2016, the Company filed a Certificate of Amendment with the Nevada Secretary of State (the “Nevada SOS”) whereby decreasing all of its issued and outstanding shares of common stock at a ratio of one (1) share for every one hundred (100) shares held. The Company’s Board of Directors approved this amendment on January 13, 2016 and shareholders holding 68.65% of the Company’s issued and outstanding shares approved this amendment via a written consent executed on January 14, 2016.

All share amounts in these financial statements have been adjusted to reflect this stock split.


During

Shares issued during the fiscal year ended March 31, 2014,2017

On July 1, 2016 the Company issued 90,000,00021,635,730 shares (split adjusted) of common stock to a Director for cash proceedssettle certain convertible notes in the principal amount of $6,000 at $0.001 per share.


28


During$21,635.

On July 11, 2016 the Company issued 6,721,920 shares of common stock to settle certain convertible notes in the principal amount of $33,610.

F-11
Table of Contents

Shares issued during the fiscal year ended March 31, 2015, the Company issued 35,400,000 shares (split adjusted) of common stock for cash proceeds of $23,519 at $0.01 per share.


There were 125,400,000 shares (split adjusted) of common stock issued and outstanding as of March 31, 2015. There were 90,000,000 shares (split adjusted) of common stock issued and outstanding as of March 31, 2014.

NOTE 8 – SUBSEQUENT EVENTS

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.   Management determined that the following were reportable subsequent events.

On April 3, 2015, a change in control of Alazzio Entertainment Corp. (the "Company") occurred by virtue of the Company's largest shareholder, Dmitri Kapsumun selling 90,000,000 shares (split adjusted) of the Company's common stock to Rise Fast Limited, a Hong Kong corporation. Such shares represent 71.77% of the Company's total issued and outstanding shares of common stock. As part of the sale of the shares, Rise Fast Limited arranged with the resigning member of the Company's Board of Directors, to appoint Mr. Huang Yu as the sole officer and director of the Company. 

On April 17, 2015, the Company changed its corporate name from Alazzio Entertainment Corp to America Resources Exploration Inc.  The Company’s stock symbol was changed to “AREN” as of April 20, 2015.

On June 10, 2015, Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Zheng Xiangwu, a resident of Guang Dong Province, China, whereby the Company issued 4,000,000 shares of its common stock in exchange for rights to certain oil and gas leases located in Frio and Atascosa Counties, Texas, consisting of a total of 714 total acres of land, two (2) working wells and a total of seven (7) wells (the “Leases”).

2016

On June 12, 2015, the Company completedissued 40,000 shares of common stock related to the acquisition of the Leases pursuantoil and gas property to the Asset Purchase Agreement. As a result of the completion of this acquisition, 4 million shares of the Company’s common stock were issued to Mr.(see Note 4) Zheng Xiangwu, which owns the Company’s largest shareholder, Rise Fast Limited. The number of shares issued to Mr. Zheng was determined by valuing the Leases at $160,000 and valuing the Company’s stock at $0.04 per share.


Xiangwu. Mr. Zheng is the owner of Rise Fast Limited, a Hong Kong corporation (“Rise Fast”), which is the majority shareholder of the Company. Rise Fast owns 90,000,000owned 900,000 shares of the Company’s common stock. As a result of this transaction, Mr. Zheng controls a total of 94,000,000 shares, which represents 72.64%stock representing 68.94% of the Company’s issued and outstanding shares.

In additioncommon stock at the date of the transaction.

On June 12, 2015, the Company accepted a Subscription Agreement for the sale of up to a change in control25,500 shares of its management and shareholders and entering intocommon stock from the Asset PurchaseCompany’s majority shareholder, Rise Fast. No underwriters were utilized in connection with this sale of securities. The Subscription Agreement provides that the shares shall be sold as follows: (i) upon execution thereof, the purchase irrevocably agrees to purchase 10,000 at $15 per share; (ii) within sixty (60) days of the date of the Subscription Agreement, the Company's operations priorpurchaser has the right to entering intopurchase an additional 7,500 shares at the Asset Purchaseprice of $20 per share; and (iii) within one hundred twenty (120) days of the date of the Subscription Agreement, were limitedthe purchaser has the right to attemptingpurchase an additional 8,000 shares at the price of $20 per share. On July 23, 2015, the Company approved the issuance of 10,000 shares of common stock for cash proceeds of $150,000.

Between July 6 and July 9, 2015 the Company issued a further 6,500 shares of common stock to implement its business plan, issuing shares and filing a registration statement on Form S-1 pursuantMr. Zheng Xiangwu related to the Securities Actacquisition of 1934.


In connection withcertain lease land and ORR’s. (see Note 4).

On August 19, 2015 the completionCompany issued a total of 5,000 shares to Hans Johnson, owner of Inceptus Resources LLC in respect of the acquisition of the Leases pursuant to the Asset Purchase Agreement,certain lease lands. (see Note 4).

On November 2, 2015, the Company has electedissued 10,000 shares of common stock to enter intoMr. Joe Seabourn as part of an employee compensation agreement, which shares were valued at market price on the oildate of the transaction, totaling $30,600.

As at March 31, 2017 and gas industry. The Company’s primary objective is to enter the oil and gas industry by acquiring active oil and gas fields. This first step will allowMarch 31, 2016, the Company had a total of 29,684,381 and 1,326,281 shares issued and outstanding, respectively.

NOTE 8 – RELATED PARTY TRANSACTIONS

On December 31, 2016, the Company issued a promissory note for amount owing to enterRise Fast, a majority shareholder of $240,683, which replaced the marketfull amount of $240,683 previous amounts advanced up to December 31, 2016.

NOTE 9 – INCOME TAXES

The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the U.S.various jurisdictions in which the Company operates. Statutory tax rate changes and create immediate cash flow from producing wells.other significant or unusual items are recognized as discrete items in the quarter in which they occur. The Company intends to take advantage of currently depressed energy prices by taking over fields from companies that are unable to service their excessive debt due to falling oil prices.


In order to assistrecorded no income tax expense for the Company’s entry into the oilnine months ended December 31, 2016 and gas industry, the2015. The Company has added to two (2) members to its Board of Directorsa valuation allowance that provide, collectively, over sixty (60) years of experience in the exploration, development and production of oil and gas properties.
29

fully offsets net deferred tax assets.

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


Not Applicable.


ITEM 9A. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required disclosure.


The Company’s management, with the participation of our principal executive and principal financial officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.


Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Management has employed a framework consistent with Exchange Act Rule 13a-15(c), to evaluate internal control over financial reporting described below. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.

Management, including our principal executive officer Mr. Huang Yu who is also our principal financial officer, conducted an evaluation of the design and operation of our internal control over financial reporting as of and for the year ended March 31, 2015.2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in2013 Internal Control-Integrated Framework (“COSO”). As a result of this assessment, Mr. Huang Yu concluded that, as of and for the year ended March 31, 2015,2017, our internal control over financial reporting was not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles as of the year ended March 31, 2015.


2017.

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The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under COSO and SEC rules were: (1) lack of a majority of independent directors on the Company’s board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) limited number of staff, not allowing for complete segregation of incompatible duties; and (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements. The aforementioned material weaknesses were identified by the Company’s management in connection with the preparation of our financial statements as of March 31, 2015.


2017.

Management believes that the appointment of one or more independent directors, will remedy the lack of a majority of outside directors on the Company’s Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of IFRS and SEC disclosure requirements.


30


Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result in proper segregation of duties.

Any effort to increase the size of the Board of Directors, appoint independent directors or personnel is conditional upon the Company raising additional capital.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.

During the Company’s last fiscal quarter there were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION


There

On January 1, 2017, the Company acquired the lease for three oil and gas properties in Payne County, Cleveland County and Harper County, Oklahoma for $4,975.

Except as provided above, there is no information to be disclosed in a report on Form 8-K during the fourth quarter of the year covered by this Form 10-K that has not been previously filed with the Securities and Exchange Commission.


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PART III


ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


(a) – (b) Identification of Directors and Executive Officers.

The Company:The following individuals are current members of the Company’s Board of Directors and executive officers; all of the members of the Board are appointed until their respective successor is elected or until their resignation.

Name

Age

Positions Held

Date of

Appointment

Huang Yu

32

34

Member of the Board of Directors; President,  Secretary and Treasurer

April 3, 2015

Joe M. Seabourn64Member of the Board of DirectorsJune 12, 2015
Robert A. Wiener65Member of the Board of DirectorsJune 12, 2015

(c) Identification of certain significant employees.

The Company currently does not have any significant employees. However, the Company will hire Mr. Seabourn as the Company’s Head Geologist and be paid a salary of $3,000 per month.

(d) Family relationships. None.


31


(e) Business experience.

Mr. Huang Yu


From July 2010 through January 2015, Mr. Huang was employed, in different capacities, by the Chinese Construction Third Construction Company Limited, a construction company based in Guang Xi, China. From July 2010 through September 2012, he was an Assistant Engineer for the company; from October 2012 through October 2013, he worked as an Engineer; and from November 2013 through January 2015, Mr. Huang was the Chief Engineer and Operating Officer. Mr. Huang graduated from the Inner Mongolia University of Science and Technology with a Bachelor's Degree in 2009. Mr. Huang has not served as an officer or director of any other SEC registered company.


Mr. YuHuang has not held a directorship in any company with a class of securities registered pursuant to section 12 of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”) or subject to the requirements of section 15(d) of the Exchange Act.


Mr. Joe M. Seabourn – Member of the Board of Directors

Mr. Seabourn, age 64, has been an officer of U.S. Energy – Resources LLC, based in Abilene, Texas, since 2000, which presently is acquiring land holds and leases to drill near Sylvester, Texas. Mr. Seabourn has over 30 years of experience working refinery up-grade design flow process and feasibility studies for Nigeria, Ecuador, Mongolia and Republic of Congo. He is currently using his strategic alliances to establish working joint ventures and partnerships in Libya, North Africa. Mr. Seabourn also served in the US Army 101st Airborne from 1968 to 1972 and was awarded four Bronze Stars. Mr. Seabourn also received a patent for Diverter Valve for Offshore Drilling Applications.

Mr. Seabourn has not held a directorship in any company with a class of securities registered pursuant to section 12 of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”) or subject to the requirements of section 15(d) of the Exchange Act. Mr. Seabourn will be employed by the Company as Head Geologist and will receive a salary of $3,000 per month.
Mr. Robert A. Wiener – Member of the Board of Directors

Mr. Wiener, age 65, received his Bachelors in Science, Geology, in 1973, University of Rhode Island. He spent his senior year at the Middle East Technical University, Ankara, Turkey in a cooperative program with the University of Rhode Island.

From October 2012, Mr. Wiener has been President of Goh Exploration, Inc., which is in the business of interpreting new 3D data set on-shore Southern Basin for Petrotrin (a petroleum company of Trinidad and Tobago) with Getz Exploration Consultants that generates significant overthrust and subthrust prospects. The focus of his work through Goh Exploration is the development of techniques to interpret poor data and develop new models of tectonic framework. Mr. Wiener has worked with a wide range of international companies, from some that are in the start-up phase and up to meeting the President of Republic of Congo to propose industrial and exploration projects. He has worked with private businessman to review Niger’s Agadem Area as well as other international projects. From October 2009 to October 2012, Mr. Wiener worked to generate Hackberry and Miocene prospects in southwest Louisiana and helped sell leases.
Mr. Wiener has not held a directorship in any company with a class of securities registered pursuant to section 12 of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”) or subject to the requirements of section 15(d) of the Exchange Act. The Company has agreed to engage Mr. Wiener as a consultant on a continuing basis, reviewing all rework projects on the wells and new lease purchases, at his ongoing rate of $200 per hour.

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(f) Involvement in certain legal proceedings.

None of the Company’s executive officers or directors have been involved in any legal proceedings during the past five (5) years.


32


(g) Promoters and control persons.

Mr. Zheng Xiangwu is the Company’s controlling shareholder. Mr. Zheng has not been a party to any legal proceedings at any time during the past five (5) years


years.

Section 16(a) Beneficial Ownership Reporting Compliance


Not applicable.


Code of Ethics


We do not currently have a Code of Ethics in place for the Company. Our business operations are not complex and are very limited. The Company seeks advice and counsel from outside experts such as our lawyers and accountants on matters relating to corporate governance and financial reporting.


Audit Committee


We do not have an Audit Committee. The Company's board of directors performs some of the same functions of an Audit Committee, such as; recommending a firm of independent certified public accountants to audit the financial statements; reviewing the auditors' independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.


ITEM 11. EXECUTIVE COMPENSATION


The Company previously entered into a consulting agreement with Mr. Seabourn which was amended effective October 1, 2015 to provide that he would cease charging a monthly fee for services and accepted 10,000 shares of the Company’s common stock as consideration for services between October 2015 and June 30, 2016. The Company has not paid any other compensation to any of its officers or directors and does not have any agreements in place or understandings to pay any compensation to its officers and directors


directors.

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Table of Contents

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of July 8, 2015June 13, 2017 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) members of our Board of Directors, and or (iii) our executive officers. Unless otherwise indicated, the stockholder listed possesses sole voting and investment power with respect to the shares shown.


Title of Class 
Name and Address
of beneficial owner
 
Amount and nature of
beneficial ownership (1)
 
Percent
of class
       
Common Stock 
Zheng Xiang Wu (2)
Central office at 9th Floor
Amtel Building
148 Des Voeux Road
Central, Hong Kong China
 94,000,000 72.64%
       
Common Stock 
Huang Yu
Gao Xin Kai Fa Qu Gao Xin Si Lu Zhong
Jian San Ju Rong He Tian Yu Xiang Mu Bu,
Liu Zhou
Guang Xi, China
 -0- -
       
Common Stock 
Joe M. Seabourn
2925 Robertson Dr.
Abilene, Texas 79606
 -0- -
33

Title of Class

 

Name and Address

of beneficial owner

 

Amount and nature of

beneficial ownership(1)

 

 

Percent

of class

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Zheng Xiangwu (2)

Central Office at 9th Floor

Amtel Building

148 Des Voeux Road

Central, Hong Kong China

 

 

22,592,230

 

 

 

76.11%

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Huang Yu

Gao Xin Kai Fa Qu Gao Xin Si Lu Zhong

Jian San Ju Rong He Tian Yu Xiang Mu Bu,

Liu Zhou

Guang Xi, China

 

 

-0-

 

 

 

-

 

_______________ 

Common Stock

(1)

Robert A. Wiener
2537 s. Gessner, #201
Houston, Texas 77063
-0--


(1)

A beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person'sperson’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on July 8, 2015.June 13, 2017. As of July 8, 2015,June 13, 2017, there were 129,400,00029,683,931 shares of our common stock issued and outstanding.

(2)

(2)

Zheng Xiangwu is the sole owner of Rise Fast Limited, a Hong Kong corporation, which owns 90 million22,545,730 shares of the Company’s common stock. Mr. Zheng owns 4,000,00046,500 shares in his own name.


The companyCompany has not adopted any equity compensation plans and does not anticipate adopting any equity compensation plans in the near future. Notwithstanding the foregoing, because the company has limited cash resources at this time, it may issue shares or options to or enter into obligations that are convertible into shares of common stock with its employees and consultants as payment for services or as discretionary bonuses. The company does not have any arrangements for such issuances or arrangements at this time.


24
Table of Contents

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE


Other than as described below, the Company has not engaged in any transactions with any of its related persons.

On April 3, 2015, a change in control of the Company occurred by virtue of Dmitri Kapsumun selling 900,000 shares (split adjusted) of the Company's common stock to Rise Fast Limited, a Hong Kong corporation. Such shares represented 71.77% of the Company's total issued and outstanding shares of common stock at the time of the transaction. As part of the sale of the shares, Rise Fast Limited arranged with the resigning member of the Company's Board of Directors, to appoint Mr. Huang Yu as the sole officer and director of the Company

On June 10, 2015, the Company entered into an Asset Purchase Agreement (the “Share Exchange“Asset Purchase Agreement”) with Mr. Zheng Xiangwu, a resident of Guang Dong Province, China, whereby the Company issued 4 million40,000 shares of its common stock in exchange for one hundred percent interest inrights to certain oil and gas leases giving the holder the right to produce oil and gas from an aggregate of 515 acres located in Frio and Atascosa Counties, Texas.

Texas, consisting of a total of 714 total acres of land, two (2) working wells and a total of seven (7) wells (the “Leases”).

On June 12, 2015, the Company completed the acquisition of the Leases pursuant to the Asset Purchase Agreement. As a result of the completion of this acquisition, 40,000 shares of the Company’s common stock were issued to Mr. Zheng, iswho owns the sole ownerCompany’s largest shareholder, Rise Fast Limited. The number of shares issued to Mr. Zheng was determined by valuing the Leases at $160,000 and valuing the Company’s stock at $0.04 per share.

On June 11, 2015 the Company entered into various assignment agreements with Mr. Zheng for the acquisition of multiple oil and gas leases and overriding royalty interests (“ORR’s”). From July 6, 2015 through July 9, 2015, the Company completed the acquisition of such oil and gas leases and ORR’s, whereby the Company issued a total of 6,500 shares of its common stock to Mr. Zheng. The Company valued the transaction at the market price of the shares as at the date of issue, or $0.15 per share for a total value of $97,500. The Company capitalized the historical cost of the acquired assets totaling $51,263 and recorded a loss on acquisition of $46,237.

On June 12, 2015, the Company accepted a Subscription Agreement for the sale of up to 25,500 shares of its common stock from the Company’s majority shareholder, Rise Fast. No underwriters were utilized in connection with this sale of securities. The Subscription Agreement provides that the shares shall be sold as follows: (i) upon execution thereof, the purchase irrevocably agrees to purchase 10,000 at $15 per share; (ii) within sixty (60) days of the date of the Subscription Agreement, the purchaser has the right to purchase an additional 7,500 shares at the price of $20 per share; and (iii) within one hundred twenty (120) days of the date of the Subscription Agreement, the purchaser has the right to purchase an additional 8,000 shares at the price of $20 per share. On July 23, 2015, the Company approved the issuance of 10,000 shares of common stock for cash proceeds of $150,000. The shares were issued subsequent to the period covered by this report.

Effective July 1, 2016, Rise Fast Limited, a Hong Kong corporation, which isCorporation and the majorityCompany’s controlling shareholder, ofconverted a promissory note issued by the Company and, prior to this transaction, owned a totalin the face amount of 90 million$16,598.17 into 16,598,730 shares of the Company’s common stock, and converted a promissory note issued by the Company in the face amount of $5,037.00 into 5,037,000 shares of the Company’s common stock.


As a result of the above transactions, Mr. Zheng controls a total of 22,592,230 shares, which represents 76.11% of the Company’s issued and outstanding shares.

On June 24, 2015 the Company approved a consulting contract with Mr. Joe Seabourn, a former member of the Company’s Board of Directors, for a monthly fee of $3,000, payable on the first of each month, commencing July 1, 2015. During the period ended September 30, 2015 Mr. Seabourn was paid $9,000 under the terms of the contract. Effective October 1, 2015 the Company entered into an amendment to the consulting agreement with Mr. Joe Seabourn. Under the terms of the Amendment, Mr. Seabourn shall cease charging a monthly fee for services and accepted 10,000 shares of the Company’s common stock as consideration for services between October 2015 and June 30, 2016. On November 2, 2015, the Company issued 10,000 shares of common stock to Mr. Joe Seabourn, which shares were valued at market price on the date of the transaction, totaling $30,600

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Table of Contents

During the fiscal year ended March 31, 2016, the Company received a total of $110,000 in gross proceeds from its majority shareholder which amounts were payable on December 31, 2017 and bore interest at a rate of 5% per annum. During the year a total of $55,980 was repaid to reduce the loan balance and subsequently a total of $54,020 in principal and $1,225 in accrued interest were converted into several 4% convertible notes with varying prices of conversion.

During the fiscal year ended March 31, 2016 the Company received advances totaling $108,433 from its majority shareholder in order to fund ongoing operations in the normal course. The amounts are unsecured, non-interest bearing and have no specific terms of repayment.

On December 31, 2016, the Company issued a promissory note for amount owing to Rise Fast Limited, the majority shareholder of $240,683, which replaced the full amount of $240,683 previous amounts advanced up to December 31, 2016.

During the year ended March 31, 2017, Rise Fast Limited, the majority shareholder, paid expenses on behalf of the Company of $4,385. As of March 31, 2017 and 2016, advances from this shareholder were $4,385 and $0.

On August 13, 2015 the Company entered into an Asset Purchase Agreement with Inceptus Resources, LLC whereunder the Company acquired a 78% net revenue interest in 200 acres located in Callahan County, Texas, and a 78% net revenue interest in 522 acres also located in Callahan County, Texas. In respect of the acquired leases the Company issued a total of 5,000 shares of common stock on the closing date, August 19, 2015 which shares were valued at market price on the date of the transaction, totaling $448,500, which amount was capitalized. As at September 30, 2015 the Company evaluated the capitalized value of the leases and determined to impair the amount in full due to the fact that the Company had no historical cost basis for the leases, and no immediate development plans for the lease land. A total of $448,500 has been expensed as Impairment loss on oil and gas lease in the third quarter.

ITEM 14. PRINCIPAL ACCOUNTANTACCOUNTING FEES AND SERVICES


The aggregate fees billed by our prior independent auditors, Harris & Gillespie, CPA’s, PLLC,B F Borgers CPA PC, for professional services rendered for the audit of our annual financial statements for the yearyears ended March 31, 2014,2017 and 2016, included in our Form S-1 Registration Statement and amendments theretoherein, are providedset forth below. As of the filing date of this annual report, we have not been billed by our current independent auditors, Briggs & Veselka Co.,  for professional services rendered for the audit of our annual financial statements for the year ended March 31, 2015, included herein.


34



Fee Category 
Year Ended
March 31, 2015
  
Year Ended
March 31, 2014
 
       
Audit Fees $-  $3,000 
Audit-Related Fees  -   - 
Tax Fees  -   - 
All Other Fees  -   - 
Total Fees $-  $3,000 

Fee Category

 

Year Ended
March 31,
2017

 

 

Year Ended
March 31,
2016

 

 

 

 

 

 

 

 

Audit Fees

 

$24,480

 

 

$17,500

 

Audit-Related Fees

 

 

-

 

 

 

-

 

Tax Fees

 

 

-

 

 

 

-

 

All Other Fees

 

 

-

 

 

 

-

 

Total Fees

 

$-

 

 

$-

 

Audit committee policies & procedures


The company does not currently have a standing audit committee. The above services were approved by the company’s Board of Directors.


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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements


See Part II, Item 8 for the index of the financial statements.

(2) Schedules


The following financial statement schedule is submitted herewith:


Other schedules are omitted because they are not required or are not applicable or because the required information is included in the financial statements listed above.

(3) Exhibits


Certain of the following exhibits are incorporated by reference from prior filings.  The form with which each exhibit was filed and the date of filing are as indicated below; the reports described below are filed as Commission File No. 333-196409 unless otherwise indicated.

3.1

Articles of Incorporation of the Registrant incorporated by reference to Exhibit 3.1 to the Registrant’s registration statement on Form S-1 filed with the SEC on May 20, 2014, file number 333-196409.

3.2

Bylaws of Registrant incorporated by reference to Exhibit 3.2 to the Registrant’s registration statement on Form S-1 filed with the SEC on May 20, 2014, file number 333-196409.

10.1

Asset Purchase Agreement, among the Registrant, Zheng Xiangwu and Nelaco Operating Inc., dated June 10, 2015 incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 16, 2015, file number 333-196409.

31.1

Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (1)

32.1

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). (1)

101.INS

XBRL INSTANCE DOCUMENT (1)

101.INS

101.INS

XBRL TAXONOMY EXTENSION SCHEMA (1)

101.INS

101.INS

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE (1)

101.INS

101.INS

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE (1)

101.INS

101.INS

XBRL TAXONOMY EXTENSION LABEL LINKBASE (1)

101.INS

101.INS

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE (1)


(1) Filed herewith electronically.
35

(1)

Filed herewith electronically.

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SIGNATURES


Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to the registration statement on Form 10 to be signed on its behalf by the undersigned, thereunto duly authorized.


AMERICA RESOURCES EXPLORATION INC.

By: /s/ Huang YuDated July 14, 2015PETROGAS COMPANY
Name: Title

Dated June 30, 2017By:/s/ Huang Yu

Name

Huang Yu 
Title:President and Chief Financial Officer 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signatures

Title

Date

/s/ Huang Yu

President, Secretary, Treasurer, and Sole Director

July 14, 2015

June 30, 2017

Huang Yu

/s/ Joe M. SeabournDirectorJuly 14, 2015
Joe M. Seabourn
/s/ Robert A. WeinerDirectorJuly 14, 2015
Robert A. Weiner



36


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