| SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES The condensed financial statements included
herein are unaudited. However, these condensed financial statements include all adjustments (consisting of normal recurring adjustments),
which, in the opinion of management are necessary for a fair presentation of financial position, results of operations and cash
flows for the interim periods. The results of operations for interim periods are not necessarily indicative of the results to be
expected for an entire year. The preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America (“GAAP”)
requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed financial
statements and accompanying notes. Actual results could differ materially from those estimates. Certain information, accounting policies,
and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted pursuant
to certain rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed financial statements
should be read in conjunction with the audited financial statements for the year ended September 30, 2021, which were included in
the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 and filed with the Securities and
Exchange Commission on December 29, 2021. Cash GulfSlope considers highly liquid investments
with original maturities to the Company of three months or less to be cash equivalents. There were no cash equivalents at March
31, 2022 and September 30, 2021. Liquidity / Going Concern The Company has incurred accumulated losses
as of March 31, 2022 of $ 64.6 million 13.3 million 4.4 million 0.5 million 10.0 million 12.3 million Accounts Receivable The Company records an accounts receivable
for operations expense reimbursements due from joint interest partners, and also from normal operations. The Company estimates
allowances for doubtful accounts based on the aged receivable balances and historical losses. If the Company determines any account
to be uncollectible based on significant delinquency or other factors, the receivable and the underlying asset are assessed for
recovery. As of March 31, 2022 and September 30, 2021, there was no allowance for doubtful accounts receivable. Gross accounts
receivable was nil Full Cost Method The Company uses the full cost method of
accounting for its oil and gas exploration and development activities. Under the full cost method of accounting, all costs associated
with successful and unsuccessful exploration and development activities are capitalized on a country-by-country basis into a single
cost center (“full cost pool”). Such costs include property acquisition costs, geological and geophysical (“G&G”)
costs, carrying charges on non-producing properties, costs of drilling both productive and non-productive wells. Overhead costs,
which includes employee compensation and benefits including stock-based compensation, incurred that are directly related to acquisition,
exploration and development activities are capitalized. Interest expense is capitalized related to unevaluated properties and wells
in process during the period in which the Company is incurring costs and expending resources to get the properties ready for their
intended purpose. For significant investments in unproved properties and major development projects that are not being currently
depreciated, depleted, or amortized and on which exploration or development activities are in progress, interest costs are capitalized.
Proceeds from property sales will generally be credited to the full cost pool, with no gain or loss recognized, unless such a sale
would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs. A significant
alteration would typically involve a sale of 25% or more of the proved reserves related to a single full cost pool. Proved properties are amortized on a country-by-country
basis using the units of production method (“UOP”), whereby capitalized costs are amortized over total proved reserves.
The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and
amortization (“DD&A”), estimated future development costs (future costs to access and develop proved reserves),
and asset retirement costs, less related salvage value. The costs of unproved properties and related
capitalized costs (such as G&G costs) are withheld from the amortization calculation until such time as they are either developed
or abandoned. Unproved properties and properties under development are reviewed for impairment at least quarterly and are determined
through an evaluation that considers, among other factors, seismic data, requirements to relinquish acreage, drilling results,
remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions. In countries where
proved reserves exist, exploratory drilling costs associated with dry holes are transferred to proved properties immediately upon
determination that a well is dry and amortized accordingly. In countries where a reserve base has not yet been established, impairments
are charged to earnings. For the quarter ended March 31, 2022, the Company has taken an impairment of approximately $3.1 million
for all of the costs associated with one of the Tau Prospect leases that will expire within the next ninety days. The Company continues
to actively pursue the development of its remaining unproved properties. Companies that use the full cost method
of accounting for oil and natural gas exploration and development activities are required to perform a ceiling test calculation
each quarter. The full cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test is
performed quarterly, on a country-by-country basis, utilizing the average of prices in effect on the first day of the month for
the preceding twelve-month period. The cost center ceiling is defined as the sum of (a) estimated future net revenues, discounted
at 10% per annum, from proved reserves, (b) the cost of properties not being amortized, if any, and (c) the lower of cost or market
value of unproved properties included in the cost being amortized. If such capitalized costs exceed the ceiling, the Company will
record a write-down to the extent of such excess as a non-cash charge to earnings. Any such write-down will reduce earnings in
the period of occurrence and results in a lower depreciation, depletion and amortization rate in future periods. A write-down may
not be reversed in future periods even though higher oil and natural gas prices may subsequently increase the ceiling. The Company capitalizes exploratory well
costs into oil and gas properties until a determination is made that the well has either found proved reserves or is impaired.
If proved reserves are found, the capitalized exploratory well costs are reclassified to proved properties. The well costs are
charged to expense when the exploratory well costs are determined to be impaired. Capitalized exploratory well costs have been
pending the outcome of exploration activities involving the drilling of the Tau No. 2 well (twin well). During the quarter ended
March 31, 2022 approximately $3.1 million of these suspended well costs have been impaired. The
impairment charge was recorded because without the commencement of drilling the Tau #2 well or a lease extension being granted,
one of the Tau Prospect lease blocks will expire on June 30, 2022. As of March 31, 2022, the Company’s
oil and gas properties consisted of unproved properties, wells in process and no proved reserves. A
combination of Biden administration actions regarding oil and gas
exploration on federal lands and world events have placed tremendous pressures on
the global supply-demand balance for crude oil and related products resulting in volatile commodity prices. The Company has evaluated
the effect of these factors on its business and notes these factors have caused a delay in the plans for the Company’s 2022
drilling program. The Company continues to monitor the economic environment and evaluate the impact on the business Asset Retirement Obligations The Company’s asset retirement obligations
will represent the present value of the estimated future costs associated with plugging and abandoning oil and natural gas wells,
removing production equipment and facilities and restoring the seabed in accordance with the terms of oil and gas leases and applicable
state and federal laws. Determining asset retirement obligations requires estimates of the costs of plugging and abandoning oil
and natural gas wells, removing production equipment and facilities and restoring the sea bed as well as estimates of the economic
lives of the oil and gas wells and future inflation rates. The resulting estimate of future cash outflows will be discounted using
a credit-adjusted risk-free interest rate that corresponds with the timing of the cash outflows. Cost estimates will consider historical
experience, third party estimates, the requirements of oil and natural gas leases and applicable local, state and federal laws,
but do not consider estimated salvage values. Asset retirement obligations will be recognized when the wells drilled reach total
depth or when the production equipment and facilities are installed or acquired with an associated increase in proved oil and gas
property costs. Asset retirement obligations will be accreted each period through depreciation, depletion and amortization to their
expected settlement values with any difference between the actual cost of settling the asset retirement obligations and recorded
amount being recognized as an adjustment to proved oil and gas property costs. Cash paid to settle asset retirement obligations
will be included in net cash provided by operating activities from continuing operations in the statements of cash flows. On a
quarterly basis, when indicators suggest there have been material changes in the estimates underlying the obligation, the Company
reassesses its asset retirement obligations to determine whether any revisions to the obligations are necessary. At least annually,
the Company will assess all of its asset retirement obligations to determine whether any revisions to the obligations are necessary.
Future revisions could occur due to changes in estimated costs or well economic lives, or if federal or state regulators enact
new requirements regarding plugging and abandoning oil and natural gas wells. The Company drilled two well bores in 2018 and 2019
and these wellbores were both plugged with no further cost required and as such, the asset retirement obligation was completely
extinguished. Derivative Financial Instruments The accounting treatment of derivative
financial instruments requires that the Company the Company Prior to November 19, 2020, the Company
had a certain note payable which contained a variable conversion feature with no floor, and accordingly, the
Company Basic and Dilutive Earnings Per Share Basic income (loss) per share (“EPS“)
is computed by dividing net income (loss) (the numerator) by the weighted average number of common shares outstanding for the period
(denominator). Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares and potential
common shares outstanding (if dilutive) during each period. Potential common shares include stock options, warrants, and convertible
notes payable. The number of potential common shares outstanding relating to stock options and warrants, is computed using the
treasury stock method. The number of potential common shares related to convertible notes payable is determined using the if-converted
method. As the Company has incurred losses for
the three and six months ended March 31, 2022 and 2021, the potentially dilutive shares are anti-dilutive and are thus not added
into the loss per share calculations. As of March 31, 2022 and 2021, there were 288,070,151 298,285,026 Use of Estimates The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. Recent Accounting Pronouncements In August 2020, the Financial Accounting
Standards Board (“FASB”) issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity, including convertible instruments and contracts in an entity’s own equity. Additionally, ASU 2020-06 requires
the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS),
which is consistent with the Company’s accounting treatment under the current standard. ASU 2020-06 is effective for fiscal
years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020. ASU
No. 2020-06 can be adopted on either a fully retrospective or modified retrospective basis. The adoption of ASU 2020-06 is
not expected to have a material impact on the Company’s financial statements or disclosures. In May 2021, the FASB issued ASU 2021-04,
Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic
718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain
Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 provides clarification and reduces
diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options
(such as warrants) that remain equity classified after modification or exchange. An issuer measures the effect of a modification
or exchange as the difference between the fair value of the modified or exchanged warrant and the fair value of that warrant immediately
before modification or exchange. ASU 2021-04 introduces a recognition model that comprises four categories of transactions and
the corresponding accounting treatment for each category (equity issuance, debt origination, debt modification, and modifications
unrelated to equity issuance and debt origination or modification). ASU 2021-04 is effective for all entities for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the guidance provided
in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. Early adoption is permitted
for all entities, including adoption in an interim period. If an entity elects to early adopt ASU 2021-04 in an interim period,
the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The adoption of ASU 2021-04
is not expected to have a material impact on the Company’s financial statements or disclosures. The Company has evaluated all other recent
accounting pronouncements and believes either they are not applicable or that none of them will have a significant effect on the
Company’s financial statements. |
