| SIGNIFICANT ACCOUNTING POLICIES | Basis of presentation This summary of significant accounting policies
is presented to assist in understanding the financial statements. The financial statements and notes are representations of the
Company’s management, which is responsible for their integrity and objectivity. The accompanying unaudited financial statements
have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information, as well as the instructions to Form 10-Q. Accordingly, the financial statements
do not include all of the information and footnotes required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, the accompanying unaudited financial statements contain
all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of
January 31, 2019, and its results of operations for the three and six months ended January 31, 2019 and 2018, and cash flows for
the six months ended January 31, 2019 and 2018. The balance sheet at July 31, 2018, was derived from audited annual financial statements
but does not contain all of the footnote disclosures from the annual financial statements. All amounts presented are in U.S. dollars.
For further information, refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K
for the year ended July 31, 2018. The financial statements are presented on a
consolidated basis and include all of the accounts of Amazing Energy Oil and Gas, Co. and its wholly owned subsidiaries, Amazing
Energy, LLC, Amazing Energy, Inc., and Jilpetco, Inc., All significant intercompany balances and transactions have been eliminated. Going Concern These consolidated financial statements have
been prepared in accordance with U.S. GAAP to a going concern, which assumes that the Company will be able to meet its obligations
and continue its operations for its next fiscal year. As shown in the accompanying financial statements,
the Company has incurred operating losses since inception. As of January 31, 2019, the Company has limited financial resources
with which to achieve the objectives and obtain profitability and positive cash flows. As shown in the accompanying Consolidated
Balance Sheet, the Company has an accumulated deficit of $35,258,778. At January 31, 2019, the Company’s working capital
deficit was $3,391,491 compared to $786,560 at July 31, 2018. The increase in the working capital deficit was primarily due to
the net increase in accounts payable and the new financing of $1,900,000 related to the New Mexico asset acquisition in January
2019. Achievement of the Company’s objectives will be dependent upon its ability to obtain additional financing, to locate
profitable mineral properties and generate revenue from current and planned business operations, and control costs. The Company
plans to fund its future operations by joint venturing, obtaining additional financing from investors, and/or lenders, and attaining
additional production. However, there is no assurance that the Company will be able to achieve these objectives; therefore, therefore
substantial doubt about its ability to continue as a going concern exists. Although management believes that it will be able to
obtain the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no
assurances that such methods will prove successful. The financial statements do not include adjustments relating to the recoverability
of recorded assets nor the implications of associated bankruptcy costs should the Company be unable to continue as a going concern. Revenue Recognition The Company
recognizes revenues from the sales of oil and natural gas to its customers and presents them disaggregated on the Company’s
Consolidated Statements of Operations. The Company enters into contracts with customers to sell its oil and natural gas production.
Revenue on these contracts is recognized in accordance with the five-step revenue recognition model prescribed in Accounting Standard
Codification (“ASC”) 606. Specifically, revenue is recognized when the Company’s performance obligations under
these contracts are satisfied, which generally occurs with the transfer of control of the oil and natural gas to the purchaser.
Control is generally considered transferred when the following criteria are met: (i) transfer of physical custody, (ii) transfer
of title, (iii) transfer of risk of loss and (iv) relinquishment of any repurchase rights or other similar rights. Given the nature
of the products sold, revenue is recognized at a point in time based on the amount of consideration the Company expects to receive
in accordance with the price specified in the contract. Consideration under the oil and natural gas marketing contracts is typically
received from the purchaser one to two months after production. At January 31, 2019, the Company had receivables related to contracts
with customers of $30,056. Detailed
revenue for the six and three months ended January 31, 2019 and 2018 is as follows:
Six months ended January 31,
2019 2018
Oil sales revenue $ 224,754 $ 93,452
Gas sales revenue 1,074 33,290
Total $ 225,828 $ 126,742
Three months ended January 31,
2019 2018
Oil sales revenue $ 95,803 $ 45,746
Gas sales revenue - 10,402
Total $ 95,803 $ 56,148 Receivables Production revenue receivable consist of oil
and natural gas revenues due under normal trade terms. Receivables are carried at original amounts on joint interest billings less
an estimate for doubtful accounts. Management determines the allowance by regularly evaluating individual working interest owner
receivables and considering their financial condition, credit history and current economic conditions. Due to Working Interest Owners The Company provides oilfield services which
includes interest owner accounting and subsequent disbursement of the interest owners’ pro-rata share of oil proceeds from
a given lease. Generally, the pro-rata share of oil proceeds, less any applicable pro-rata share of operating expenses, is distributed
to the interest owner within two months of sale of oil and natural gas. Revenues suspended for specific reasons are released as
those matters are resolved. The Due to working interest owners balance is comprised of those proceeds which have yet to be distributed
to interest owners as a result of the time required to process administrative functions and process payment and any revenue suspense. Asset Retirement Obligations The fair value of a liability for an asset’s
retirement obligation (“ARO”) is recognized in the period in which a contractual obligation is created and if a reasonable
estimate of fair value can be made. A corresponding charge is capitalized as part of the carrying amount of the related long-lived
asset. The liability is accreted to its then-present value each subsequent period, and the capitalized cost is depleted over the
useful life of the related asset. Abandonment costs incurred are recorded as a reduction of the ARO liability. 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. Use of estimates The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and certain assumptions that affect the amounts reported in these consolidated
financial statements and accompanying notes. Management’s estimates include estimates of impairment in carrying value of
assets and liabilities, and collectability of recorded oilfield services receivables, stock-based compensation, deferred income
taxes, asset retirement obligations, oil and gas property ceiling tests, and depreciation, depletion and amortization. Actual results
could differ from these estimates. Risks and uncertainties The Company’s operations are subject to
significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating
an emerging oil and gas business, including the potential risk of business failure. Concentration of risks The Company’s cash is placed with a highly
rated financial institution, and the Company periodically reviews the credit worthiness of the financial institutions with which
it does business. At times, the Company’s cash balances are in excess of amounts guaranteed by the Federal Deposit Insurance
Corporation. Historically, the Company’s oil and gas
revenues originated from production from its properties in Texas. Beginning February 1, 2019, the Company will also begin generating
oil and gas from its newly acquired properties in New Mexico. Each revenue stream is sold to a single customer through month to
month contracts. While this creates a customer concentration, there are alternative buyers of the production in the event the limited
number of customers are unable or unwilling to purchase. During the six months ended January 31, 2019,
the Company sold its oil and gas production to only two customers. Oil production was sold to Rio Energy International, Inc. and
natural gas production was sold to Trans-Pecos Natural Gas Company, LLC. During the six months ended January 31, 2018, oil and
gas production was sold to Sunoco, LP and Trans-Pecos Natural Gas Company, LLC, respectively. Beginning February 1, 2019, oil production
in New Mexico will be sold to Plains Marketing, LP, while natural gas production will be sold to Targa Resources. Cash and Cash Equivalents The Company considers all highly liquid investments
purchased with a remaining maturity of three months or less when acquired to be cash equivalents. Restricted Cash As of January 31, 2019, the Company has a letter
of credit in the amount of $50,000 in favor of the Texas Railroad Commission as a bond for reclamation on its oil and gas properties.
The amount is presented in other assets on the Consolidated Balance Sheet. Income Taxes The Company accounts for income taxes using
the liability method. The liability method requires the recognition of deferred tax assets and liabilities for the expected future
tax consequences of (i) temporary differences between financial statement carrying amounts of assets and liabilities and their
basis for tax purposes and (ii) operating loss and tax credit carry-forwards for tax purposes. Deferred tax assets are reduced
by a valuation allowance when management concludes that it is more likely than not that a portion of the deferred tax assets will
not be realized in a future period. The Company recognizes a tax benefit from an uncertain position when it is more likely than
not that the position will be sustained upon examination, based on the technical merits of the position and will record the largest
amount of tax benefit that has a greater than 50% chance of being realized upon settlement with a taxing authority. The Company
classifies any interest and penalties associated with income taxes as income tax expense. Fair value of financial instruments Financial instruments consist of cash and various
notes payable. The fair value of these financial instruments approximates the carrying values. Property, plant, and equipment Property, plant, and equipment are stated at
cost. Improvements which significantly increase an asset’s value or significantly extend its useful life are capitalized
and depreciated over the asset’s remaining useful life. When property, plant or equipment is sold at a price either higher
or lower than its carrying amount, or un-depreciated cost at the date of disposal, the difference between the sale proceeds over
the carrying amount is recognized as gain, while a loss is recognized when the carrying amount exceeds the sale proceeds. Property,
plant, and equipment are depreciated on a straight-line basis over their useful lives, which are typically five to seven years
for equipment. Realization of the carrying value of other property and equipment is reviewed for possible impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are determined to be impaired if a
forecast of undiscounted estimated future net operating cash flows directly related to the asset, including disposal value, if
any, is less than the carrying amount of the asset. If any asset is determined to be impaired, the loss is measured as the amount
by which the carrying amount of the asset exceeds its fair value. Repairs and maintenance costs are expensed in the period incurred. Oil and gas properties The Company uses the full cost method of accounting
for oil and gas properties. Under this method of accounting, all costs incurred in the acquisition, exploration and development
of oil and natural gas properties, including unproductive wells, are capitalized. This includes any internal costs that are directly
related to property acquisition, exploration and development activities but does not include any costs related to production, general
corporate overhead or similar activities. Gain or loss on the sale or other disposition of oil and natural gas properties is not
recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves. Oil and natural gas properties include costs
that are excluded from costs being depleted or amortized. Excluded costs represent investments in unproved and unevaluated properties
and include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests and exploration
drilling costs. These costs are excluded until the project is evaluated and proved reserves are established or impairment is determined.
Excluded costs are reviewed periodically to determine if impairment has occurred. The amount of any evaluated or impaired oil and
gas properties is transferred to capitalized costs being amortized. Depletion and amortization The depletion base for oil and natural gas properties
includes the sum of all capitalized costs net of accumulated depreciation, depletion, and amortization (“DD&A”),
estimated future development costs and asset retirement costs not included in oil and natural gas properties, less costs excluded
from amortization. The depletion base of oil and natural gas properties is amortized on a units-of-production method. Limitation on Capitalized Costs Under the full-cost method of accounting, the
Company is required, at the end of each fiscal quarter, to perform a test to determine the limit on the book value of our oil and
natural gas properties (the “Ceiling Test”). If the capitalized costs of our oil and gas properties, net of accumulated
amortization and related deferred income taxes, exceed the “Ceiling”, this excess or impairment is charged to expense
and reflected as additional accumulated depreciation, depletion and amortization or as a credit to oil and natural gas properties.
The expense may not be reversed in future periods, even though higher oil and natural gas prices may subsequently increase the
Ceiling. The Ceiling is defined as the sum of: (a) the present value, discounted at 10 percent, and assuming continuation of existing
economic conditions, of 1) estimated future gross revenues from proved reserves, which is computed using oil and natural gas prices
determined 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 (with consideration of price changes only to the extent provided by contractual arrangements
including hedging arrangements), less 2) estimated future expenditures (based on current costs) to be incurred in developing and
producing the proved reserves; plus (b) the cost of properties not being amortized; plus (c) the lower of cost or estimated fair
value of unproven properties included in the costs being amortized; and net of (d) the related tax effects related to the difference
between the book and tax basis of our oil and natural gas properties. The Ceiling Tests did not result in an impairment of our
oil and natural properties at January 31, 2019 or July 31, 2018. The determination of oil and gas reserves is
a subjective process, and the accuracy of any reserve estimate depends on the quality of available data and the application of
engineering and geological interpretation and judgment. Estimates of economically recoverable reserves and future net cash flows
depend on a number of variable factors and assumptions that are difficult to predict and may vary considerably from actual results.
In particular, reserve estimates for wells with limited or no production history are less reliable than those based on actual production.
Subsequent re-evaluation of reserves and cost estimates related to future development of proved oil and gas reserves could result
in significant revisions to proved reserves. Other issues, such as changes in regulatory requirements, technological advances,
and other factors, which are difficult to predict, could also affect estimates of proved reserves in the future. Stock-based compensation Compensation cost for equity awards is based
on the fair value of the equity instrument on the date of grant. The Company estimates the fair value of options and warrants to
purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions
include estimating the length of time employees will retain their vested stock options before exercising them (“expected
life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”),
employee forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially
affect the estimate of fair value of stock-based compensation. Options granted have a ten-year maximum term and varying vesting
periods as determined by the Board of Directors. For options issued with service vesting conditions,
compensation cost is recognized over the vesting period. For options issued with performance conditions, compensation cost is recognized
if and when the Company concludes that the performance condition will be achieved, net of an estimate of pre-vesting forfeitures.
For options issued with market conditions, compensation cost is recognized over the requisite service period and discounted by
the probability of the condition thereof being met. Environmental laws and regulations The Company is subject to extensive federal,
state, and local environmental laws and regulations. Environmental expenditures are expensed or capitalized depending on their
future economic benefit. The Company believes that it is in compliance with existing laws and regulations. Fair value measurements When required to measure assets or liabilities
at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs
used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall.
The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable
inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in
earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held
at the reporting date. At January 31, 2019 and January 31, 2018, the Company had no assets or liabilities accounted for at fair
value on a recurring basis. Recent accounting pronouncements In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue Recognition, replacing guidance
currently codified in Subtopic 605-10 Revenue Recognition-Overall with various SEC Staff Accounting Bulletins providing interpretive
guidance. The guidance establishes a new five step principle-based framework in an effort to significantly enhance comparability
of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The Company adopted the new standard
on August 1, 2018 using the modified retrospective method. The adoption resulted in no changes in the timing of revenue recognition
compared to the prior methodology. In February 2016 the FASB issued ASU, No. 2016-02,
Leases. The ASU requires companies to recognize on the Consolidated Balance Sheet, the assets and liabilities for the rights and
obligations created by leased assets. ASU No. 2016-02 will be effective for the Company on August 1, 2019, with early adoption
permitted. The Company is currently evaluating the impact that the adoption of ASU No. 2016-02 will have on the Company’s
consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU No. 2016-15
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on
classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning
after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The adoption of this update
on August 1, 2018 had no impact to the consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18
Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during
the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.
The Company adopted this update as of August 1, 2018. Cash, cash equivalents, and restricted cash and cash equivalents on the Consolidated
Statement of Cash Flows includes restricted cash of $50,000 and $50,000 as of January 31, 2019 and July 31, 2018. In June 2018, the FASB issued ASU No. 2018-07,
Compensation-Stock Compensation, Improvements to Nonemployee Share-Based Payment Accounting. ASU No. 2018-07 expands the scope
of the standard for stock-based compensation to include share-based payment transactions for acquiring goods and services from
nonemployees. ASU No. 2018-07 will become effective for the Company on August 1, 2019 and early adoption is permitted. The Company
is currently evaluating the impact of this update on its consolidated financial statements and related disclosures. Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated
financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact
on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
