| Summary of Significant Accounting Policies | Note 2 – Summary of Significant
Accounting Policies Principles of Consolidation The accompanying consolidated balance
sheets at December 31, 2016 and 2015 and the consolidated statement of operations and cash flows for the nine months ended December
31, 2016 include the accounts of Terex Energy Corporation, T-Rex Oil, Inc., Western Interior Oil and Gas Corporation and T-Rex
Oil LLC #3. All intercompany balances have been eliminated during consolidation. The Company owns a 14.29% equity interest
in T-Rex Oil, LLC #3, the remaining 85.71% is held by a former director and shareholder of the Company. The Company has identified
T-Rex Oil LLC #3 as a Variable Interest Entity (VIE). We hold current rights that gives us the power to direct the activities of
the VIE that most significantly impact the VIE’s economic performance convened with provisions that give us the right to
receive potentially significant benefits. As a result, we consolidate the accounts of T-Rex Oil, LLC #3, eliminating all intercompany
balances during consolidation. We continuously evaluate whether we
have a controlling financial interest in T-Rex Oil LLC#3. Where we are a general partner, we consider substantive removal rights
held by other partners in determining if we hold a controlling financial interest. We reevaluate whether we have a controlling
financial interest in these entities when our voting or substantive participating rights change. Use of Estimates in the Preparation
of Consolidated Financial Statements The preparation of consolidated financial
statements in conformity with generally accepted accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates. Significant estimates include the fair value of assets and liabilities, oil and
natural gas reserves, income taxes and the valuation allowances related to deferred tax assets, asset retirement obligations and
contingencies. Cash and Cash Equivalents The Company considers all liquid investments
purchased with an initial maturity of three months or less to be cash equivalents. Cash and cash equivalents include demand deposits
and money market funds carried at cost which approximates fair value. The Company maintains its cash in institutions insured by
the Federal Deposit Insurance Corporation (“FDIC”), although such deposits are in excess of the insurance coverage.
At December 31, 2016, the Company did not have cash deposits in excess of FDIC insured limits. Concentration of Credit Risk The Company’s producing properties
are primarily located in Wyoming and the oil and gas production is sold to various purchasers based on market index prices. The
risk of non-payment by these purchasers is considered minimal and the Company does not generally obtain collateral for sales. The
Company continually monitors the credit standing of the primary purchasers. During the nine months ended December
31, 2016, we sold oil from our fields to two different purchasers, accounted for 55.01% of our sales, while the other accounted
for 44.99%. Accounts Receivable Accounts receivable are stated at their
cost less any allowance for doubtful accounts. The allowance for doubtful accounts is based on the management’s assessment
of the collectability of specific customer accounts and the aging of the accounts receivable. If there is deterioration in a major
customer’s creditworthiness or if actual defaults are higher than the historical experience, the management’s estimates
of the recoverability of amounts due to the Company could be adversely affected. Based on the management’s assessment, there
is no reserve recorded at December 31, 2016 and 2015. Prepaid Expenses Prepaid Expenses consisted of the
following, at December 31, 2016:
Deposits $ 57,501
Insurance 27,667
Retainers 15,000
$ 100,168 Oil and Gas Producing Activities The Company uses the successful efforts
method of accounting for oil and gas activities. Under this method, the costs of productive exploratory wells, all development
wells, related asset retirement obligation assets, and productive leases are capitalized and amortized, principally by field, on
a units-of-production basis over the life of the remaining proved reserves. Exploration costs, including personnel costs, geological
and geophysical expenses, and delay rentals for oil and gas leases are charged to expense as incurred. Exploratory drilling costs
are initially capitalized, but charged to expense if and when the well is determined not to have found reserves in commercial quantities.
The sale of a partial interest in a proved property is accounted for as a cost recovery, and no gain or loss is recognized as long
as this treatment does not significantly affect the units-of-production amortization rate. A gain or loss is recognized for all
other sales of producing properties. There were capitalized costs of $11,754,817 and $11,368,626 at December 31, 2016 and March
31, 2016, respectively. Unproved oil and gas properties are
assessed annually to determine whether they have been impaired by the drilling of dry holes on or near the related acreage or other
circumstances, which may indicate a decline in value. When impairment occurs, a loss is recognized. When leases for unproved properties
expire, the costs thereof, net of any related allowance for impairment, is removed from the accounts and charged to expense. During
the nine months ended December 31, 2016 and 2015, there was no impairment to unproved properties. The sale of a partial interest
in an unproved property is accounted for as a recovery of cost when substantial uncertainty exists as to the ultimate recovery
of the cost applicable to the interest retained. A gain on the sale is recognized to the extent that the sales price exceeds the
carrying amount of the unproved property. A gain or loss is recognized for all other sales of unproved properties. There were capitalized
costs of $4,761,535 and $4,745,917 at December 31, 2016 and March 31, 2016, respectively. Costs associated with development wells
that are unevaluated or are waiting on access to transportation or processing facilities are reclassified into developmental wells-in-progress
(“WIP”). These costs are not put into a depletable field basis until the wells are fully evaluated or access is gained
to transportation and processing facilities. Costs associated with WIP are included in the cash flows from investing as part of
investment in oil and gas properties. At December 31, 2016 and March 31, 2016, no capitalized development costs were included in
WIP. Depreciation, depletion and amortization
of proved oil and gas properties is calculated using the units-of-production method based on proved reserves and estimated salvage
values. For the nine months ended December 31, 2016 and 2015, the Company recorded depreciation, depletion and amortization expense
on oil and gas properties in the amount of $142,551 and $709,844, respectively; $30,725 and $279,945 for the three months ended
December 31, 2016 and 2015, respectively. The Company reviews its proved oil and
natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of its carrying
value may have occurred. It estimates the undiscounted future net cash flows of its oil and natural gas properties and compares
such undiscounted future cash flows to the carrying amount of the oil and natural gas properties to determine if the carrying amount
is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying
amount of the oil and natural gas properties to fair value. There was no impairment to prove properties for the nine months ended
December 31, 2016 and 2015, respectively. During the nine months ended December
31, 2016, the Company instituted the first stages of its Recompletion Program, which has included geologic survey work, such seismic
reinterpretations and environmental work. In December 31, 2016, the Company began it first recompletion work on an existing well
bore. The Company has recognized an exploration expense of $ 148,954 and $(59,464) during the nine months ended December 31, 2016
and 2015, respectively as a result of these activities. Other Property and Equipment Other property and equipment, such as
computer hardware and software, are recorded at cost. Costs of renewals and improvements that substantially extend the useful lives
of the assets are capitalized. Maintenance and repair costs are expensed when incurred. When other property and equipment is sold
or retired, the capitalized costs and related accumulated depreciation are removed from their respective accounts. Depreciation
expense of other property and equipment for the nine months ended December 31, 2016 and 2015 was $29,282 and $29,197, respectively
($31,947 and $9,404 for the three months ended December 31, 2016 and 2015, respectively). Asset Retirement Obligations The Company records estimated future
asset retirement obligations (“ARO”) related to its oil and gas properties. The Company records the estimated fair
value of a liability for ARO in the period in which it is incurred with a corresponding increase in the carrying amount of the
related long-lived asset. The increased carrying value is depleted using the units-of-production method, and the discounted liability
is increased through accretion over the remaining life of the respective oil and gas properties. The estimated liability is based on
historical industry experience in abandoning wells, including estimated economic lives, external estimates as to the cost to abandon
the wells in the future, and federal and state regulatory requirements. The Company’s liability is discounted using management’s
best estimate of its credit-adjusted, risk-free rate. Revisions to the liability could occur due to changes in estimated abandonment
costs, changes in well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells.
For the Nine Months Ended
December 31,
2016 2015
ARO - beginning of period $ 1,197,143 $ 459,294
Additions 133,311 -
Deletions - (15,190 )
Accretion expense 64,431 23,906
1,394,885 468,010
Less current portion 176,587 173,878
ARO - end of period $ 1,218,298 $ 294,132 Impairment of Long-Lived Assets In accordance with authoritative guidance
on accounting for the impairment or disposal of long-lived assets, as set forth in Topic 360 of the ASC, the Company assesses the
recoverability of the carrying value of its non-oil and gas long-lived assets when events occur that indicate an impairment in
value may exist. An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than the
carrying amount of the assets. If this occurs, an impairment loss is recognized for the amount by which the carrying amount of
the assets exceeds the estimated fair value of the assets. Revenue Recognition The Company recognizes revenue when
it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered to the customer, the price to the buyer is fixed or determinable and
collectability is reasonably assured. For goods, this is the point at which title and risk of loss is transferred and when payment
has either been received or collection is reasonably assured. Revenues for services are recorded when the services have been provided.
Revenue that does not meet these criteria is deferred until the criteria are met. Other Comprehensive Loss The Company has no material components
of other comprehensive loss and accordingly, net loss is equal to comprehensive loss for the period. Income Taxes The Company uses the liability method
of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of
temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities. The deferred
tax assets and liabilities are computed using enacted tax rates in effect for the year in which the temporary differences are expected
to reverse. The Company’s deferred income
taxes include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income
tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of
the deferred income tax asset will not be realized. As a result of this analysis, the deferred tax asset in the amount of $4,944,484has
been fully reserved at December 31, 2016. The Company has adopted ASC guidance
regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the
minimum recognition threshold an income tax position is required to meet before being recognized in the consolidated financial
statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination
is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits,
upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the
benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50% likely to be realized
upon its ultimate settlement. At December 31, 2016, there were no uncertain tax positions that required accrual. Business Combination The Company accounts for acquisitions
in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent
consideration, assets acquired and liabilities assumed to be valued at their fair values at the date of acquisition. The guidance
further provides that acquisition costs will generally be expenses as incurred and changes in deferred tax asset valuations and
income tax uncertainties after the acquisition date generally will affect income tax expense. ASC 805 requires that any excess of
purchase price over the fair value of assets acquired, including identifiable intangibles and liabilities assumed be recognized
as goodwill and any excess of fair value of acquired net assets, including identifiable intangible assets over the acquisition
consideration results in a gain from bargain purchase. Prior to recording a gain, the acquiring entity must reassess whether ass
acquired assets and assumed liabilities have been identified and recognized and perform re-measurements to verify that the consideration
paid, assets acquired and liabilities assumed have been properly valued. Net Loss per Share Basic net loss per common share of stock
is calculated by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding
during each period. Diluted net loss per common share is
calculated by dividing net loss by the weighted-average number of common shares outstanding, including the effect of other dilutive
securities. The Company’s potentially dilutive securities consist of in-the-money outstanding options and warrants to purchase
the Company’s common stock. Diluted net loss per common share does not give effect to dilutive securities as their effect
would be anti-dilutive. The treasury stock method is used to
measure the dilutive impact of stock options and warrants. The following table details the weighted-average dilutive and anti-dilutive
securities related to stock options and warrants for the periods presented:
For the Nine months Ended
December 31,
2016 2015
Dilutive - -
Anti Dilutive 3,942,300 1,878,088 Equity Based Payments The Company recognizes compensation
cost for equity based awards based on estimated fair value of the award and records capitalized cost or compensation expense over
the requisite service period. See Note 9 – Equity Based Payments. Major Customers During the nine months ended December
31, 2016 and 2015, we sold oil from our fields to two different purchasers, Rocky Mountain Crude Oil accounted for 55.01% of our
purchasers, while Sinclair Oil accounted for 44.99%. Beneficial Conversion Feature and
Deemed Dividend Related to Series A Shares Pursuant to ASC 470-20, when the $558,171
of convertible Series A Shares of preferred stock were issued at a discount from the if-converted $682,989 fair value as of the
issuance date, the Company recognized this difference between the fair value per share of its common stock and the conversion price,
multiplied by the number of shares issuable upon conversion. This total Beneficial Conversion Feature of $124,818 will be recorded
as additional paid-in-capital for common shares. In July 2016, the Series A shares were converted into shares of the Company’s
common stock. The offsetting amount was amortized to over the period from the issue date to the first conversion date or 9 months.
As a result of the conversion, the Company has amortized the full amount of the deemed dividend recognizing, $56,988 during the
nine months ended December 31, 2016 and $69,829 during the year ended March 31, 2015. As the Company is in an accumulated deficit
position, the deemed dividend of has been charged against additional paid-in-capital for common shares as there being no retained
earnings from which to declare a dividend. Off-Balance Sheet Arrangements As part of its ongoing business, the
Company has not participated in transactions that generate relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established
for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. From its incorporation
on February 11, 2014 through December 31, 2016, the Company has not been involved in any unconsolidated SPE transactions. Recent Accounting Pronouncements In June 2014, the FASB issued ASU No.
2014-10, Development Stage Entities (Topic915) – Elimination of Certain Financial Reporting Requirements, Including an
Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation In August 2014, the FASB issued Update
No. 2014-15 - Presentation of Financial Statements – Going Concern In November 2015, the FASB issued ASU
No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes In February 2016, the FASB issued ASU
No. 2016-02, Leases (Topic 842). In March 2016, the FASB issued ASU No.
2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting In August 2016, the FASB issued ASU
No. 2016-15, Statement of Cash Flows (Topic 230) There were other accounting standards
and interpretations issued during the nine months ended December 31, 2016 none of which are expected to have a material impact
on the Company’s financial position, operations or cash flows. Subsequent Events The Company evaluates events and transactions
after the balance sheet date but before the financial statements are issued. |
