| ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a)
Organization GulfSlope
Energy, Inc. (the “Company”, “GulfSlope”, “us”, “we”, or “our”), is
an independent oil and natural gas exploration company whose interests are concentrated in the United States Gulf of Mexico federal
waters offshore Louisiana. The Company has leased 17 federal Outer Continental Shelf blocks (referred to as “prospect,”
“portfolio” or “leases”) and licensed three-dimensional (3-D) seismic data in its area of concentration. (b)
Basis of Presentation The
accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United
States (“GAAP”) and the instructions to Form 10-K and Regulation S-X published by the US Securities and Exchange Commission
(the “SEC”). The accompanying financial statements include the accounts of the Company. (c)
Cash and Cash Equivalents The
Company considers highly liquid investments with insignificant interest rate risk and original maturities to the Company of three
months or less to be cash equivalents. Cash equivalents consist primarily of interest-bearing bank accounts and money
market funds. The Company’s cash positions represent assets held in a checking account. These assets
are generally available on a daily or weekly basis and are highly liquid in nature. (d)
Restricted Cash At
September 30, 2016 and 2015 the Company has no restricted cash. (e)
Accounts Receivable The
Company records an accounts receivable for lease rental reimbursements due from joint interest lease holders. 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, it is immediately written off. An allowance
for bad debts has been provided based on estimated losses amounting to $128,024 as of September 30, 2016. (f)
Full Cost Method The
Company uses the full cost method of accounting for its oil and gas exploration and development activities as defined by the Securities
and Exchange Commission (“SEC”). 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 and overhead charges directly
related to acquisition, exploration and development activities. 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). The UOP calculation multiplies
the percentage of estimated proved reserves produced each quarter by the cost of those 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 considering, 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. 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 ceiling limits such pooled costs to the aggregate of the present
value of future net revenues attributable to proved crude oil and natural gas reserves discounted at 10% plus the lower of cost
or market value of unproved properties less any associated tax effects. 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. As
of September 30, 2016, the Company’s oil and gas properties consisted of unproved properties and no proved reserves. (g)
Capitalized Interest Interest
is capitalized on the cost of unevaluated oil and gas properties that are excluded from amortization and actively being evaluated,
if any. (h)
Property and Equipment Property
and equipment are carried at cost and include expenditures for new equipment and those expenditures that substantially increase
the productive lives of existing equipment and leasehold improvements. Maintenance and repair costs are expensed as incurred.
Property and equipment are depreciated on a straight-line basis over the assets’ estimated useful lives. Fully depreciated
property and equipment still in use are not eliminated from the accounts. The
Company assesses the carrying value of its property and equipment for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing estimated undiscounted cash
flows, expected to be generated from such assets, to their net book value. If net book value exceeds estimated cash flows,
the asset is written down to its fair value, determined by the estimated discounted cash flows from such asset. When an
asset is retired or sold, its cost and related accumulated depreciation and amortization are removed from the accounts. The difference
between the net book value of the asset and proceeds on disposition is recorded as a gain or loss in our statements of operations
in the period in which they occur. (i)
Income Taxes The
Company applies the provisions of FASB Accounting Standard Codification (ASC) 740 Income Taxes. This standard requires an asset
and liability approach for financial accounting and reporting for income taxes, and the recognition of deferred tax assets and
liabilities for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and
liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance is
provided if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The Company’s policy is to recognize potential interest and penalties accrued related
to unrecognized tax benefits as a component of income tax expense (benefit). (j)
Stock-Based Compensation The
Company records expenses associated with the fair value of stock-based compensation. For fully vested and restricted stock
grants, the Company calculates the stock based compensation expense based upon estimated fair value on the date of grant. For
stock warrants and options, the Company uses the Black-Scholes option valuation model to calculate stock based compensation at
the date of grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility.
Changes in these assumptions can materially affect the fair value estimate. (k)
Stock Issuance The
Company records the stock-based compensation awards issued to non-employees and other external entities for goods and services
at either the fair market value of the goods received or services rendered or the instruments issued in exchange for such services,
whichever is more readily determinable, using the measurement date guidelines enumerated in FASB ASC 505-50-30. (l)
Earnings per Share – Basic and Diluted Basic
earnings per share (EPS) is computed by dividing net income (loss) by the weighted average number of common shares outstanding
for the period. 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 restricted stock. The number of potential common shares outstanding relating to stock options, warrants,
and restricted stock is computed using the treasury stock method. As
the Company has incurred losses for the years ended September 30, 2016 and 2015, the potentially dilutive shares are anti-dilutive
and thus not added into the EPS calculations. As of September 30, 2016 and 2015, there were 109,893,291 and 51,824,819
potentially dilutive shares, respectively. (m)
Statement of Cash Flows For
purposes of the Statements of Cash Flows, the Company considers cash on deposit in the bank to be cash. The Company
had unrestricted cash of $64,114 as of September 30, 2016. The Company had $1,428,014 unrestricted cash as of September
30, 2015. (n)
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. (o)
Impact of New Accounting Standards In
May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU No. 2014-09”), which requires an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.
The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. As amended, the new standard
is effective for annual reporting periods beginning after December 15, 2017. Early application is not permitted. The standard
permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that
ASU No. 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method
nor has it determined the effect of the standard on its ongoing financial reporting. In
August 2014, the FASB issued Accounting Standard Update No. 2014-15 (“ASU No. 2014-15”), Presentation of Financial
Statements Going Concern (Subtopic 205-40) On
February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) In
March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”) In
March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments
(a consensus of the Emerging Issues Task Force) The
Company has evaluated all other recent accounting pronouncements and believes that none of them will have a significant effect
on the Company’s financial statements. |
