Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 18, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'New Western Energy Corp | ' |
Entity Central Index Key | '0001479488 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 69,005,866 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Current assets | ' | ' |
Cash and cash equivalents | $126,297 | $5,092 |
Accounts receivable | 39,588 | 13,339 |
Inventory | 29,938 | 0 |
Prepaid expenses and other assets | 17,333 | 30,000 |
Total current assets | 213,156 | 48,431 |
Property and equipment, net | 225,745 | 98,003 |
Oil and gas properties, net | 904,460 | 865,020 |
Mineral properties, net | 54,489 | 103,530 |
Deferred debt issuance cost | 35,000 | 0 |
Other assets | 1,930 | 1,450 |
Total Assets | 1,434,780 | 1,116,434 |
Accounts payable | 17,813 | 25,129 |
Accrued expenses | 52,438 | 29,069 |
Notes payable, current portion | 541,250 | 377,500 |
Convertible notes payable, net of discount of $111,569 at September 30, 2013 | 27,320 | 0 |
Embedded conversion option liability | 149,722 | 0 |
Payable to related party | 0 | 42,500 |
Total current liabilities | 788,543 | 474,198 |
Notes payable, long term portion | 0 | 22,500 |
Total Liabilities | 788,543 | 496,698 |
Stockholders' Equity | ' | ' |
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively | 0 | 0 |
Common stock, $0.0001 par value, 100,000,000 shares authorized, 69,005,866 and 68,010,866 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively | 6,901 | 6,801 |
Additional paid in capital | 4,172,021 | 3,375,611 |
Accumulated deficit | -4,075,984 | -2,762,676 |
Total New Western Energy Corporation and Subsidiaries Stockholders' Equity | 102,938 | 619,736 |
Noncontrolling interest in consolidated subsidiary | 543,299 | 0 |
Total Stockholders' Equity | 646,237 | 619,736 |
Total Liabilities and Stockholders' Equity | $1,434,780 | $1,116,434 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Convertible Note, discount | $111,569 | $0 |
Stockholder's Equity | ' | ' |
Preferred Stock Par Value | $0.00 | $0.00 |
Preferred Stock Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock Shares Issued | 0 | 0 |
Preferred Stock Shares Outstanding | 0 | 0 |
Common Stock Par Value | $0.00 | $0.00 |
Common Stock Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock Shares Issued | 69,005,866 | 68,010,866 |
Common Stock Shares Outstanding | 69,005,866 | 68,010,866 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Revenues | $37,876 | $24,938 | $68,870 | $76,043 |
Expenses | ' | ' | ' | ' |
Depreciation, depletion and amortization | 26,694 | 6,234 | 77,961 | 18,752 |
General and administrative | 508,079 | 92,326 | 961,961 | 314,258 |
Loss (Gain) on sale of oil leases | 0 | 0 | -77,594 | 0 |
Oil and gas production | -106,696 | 28,969 | 223,148 | 56,007 |
Total expenses | 431,077 | 127,529 | 1,185,474 | 389,017 |
Loss from operations | -393,201 | -103,131 | -1,116,605 | -312,974 |
Other income (expenses) | ' | ' | ' | ' |
Interest expense | 32,949 | 2,844 | 175,246 | 9,412 |
Change in fair value of embedded conversion option liability | -3,034 | 0 | -127,359 | 0 |
Interest income | 0 | 450 | 0 | 1,350 |
Total other income (expenses) | -35,983 | -2,394 | -302,604 | -8,062 |
Loss from operations before income tax | -429,184 | -105,525 | -1,419,209 | -321,036 |
Provision for income tax | 0 | 0 | 800 | 800 |
Net loss applicable to common stockholders before allocation to noncontrolling interest | -429,183 | -105,525 | -1,420,009 | -321,836 |
Net loss applicable to noncontrolling interest in consolidated subsidiary | 10,354 | 0 | 106,701 | 0 |
Net loss applicable to New Western Energy Corporation common stockholders | $418,830 | ($105,525) | ($1,313,308) | ($321,836) |
Basic and diluted net loss per share applicable to common stockholders | ($0.01) | $0 | ($0.02) | $0 |
Weighted average number of shares outstanding | 68,655,866 | 66,890,866 | 68,757,858 | 66,315,377 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Reconciliation of net loss to net cash used in operating activities: | ' | ' |
Net loss applicable to New Western Energy Corporation common shareholders | ($1,313,308) | ($321,836) |
Adjustment to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation and depletion | 28,919 | 18,752 |
Amortization of debt discount | 151,641 | 0 |
Amortization of mineral property | -49,041 | ' |
Amortization of stock based compensation expense | 139,667 | 0 |
Stock options compensation expense for services | 243,730 | 0 |
Modification of stock options exercise price | 42,412 | 0 |
Loss applicable to noncontrolling interest | -106,701 | 0 |
Gain on sale of oil and gas property and related equipment | -77,594 | 0 |
Change in fair value of embedded conversion option liability | 127,359 | 0 |
Accounts receivable | -26,248 | 26,883 |
Inventory | -29,938 | 0 |
Prepaid expenses and other current assets | 30,000 | -7,477 |
Other asset | -480 | 0 |
Accounts payable | -7,316 | -13,296 |
Accrued expenses | 23,366 | 16,812 |
Accrued officer's compensation | 0 | 90,000 |
Net cash used in operating activities | -725,450 | -190,162 |
Purchase of property and equipment | -152,868 | -1,013 |
Cash proceeds from sale of oil and gas property and related equipment | 410,000 | 5,000 |
Cash paid for expenses relating to sale of oil and gas property and related equipment | -99,680 | 0 |
Cash acquired as part of acquisition | 0 | 12,058 |
Cash paid for acquisition | 0 | -20,186 |
Cash paid for oil lease obligations | 0 | -60,000 |
Purchase and capitalized cost of oils and gas properties, net | -155,958 | -35,749 |
Net cash provided by (used in) investing activities | 1,494 | -99,890 |
Cash Flows From Financing Activities: | ' | ' |
Proceeds from sale of common stock and warrants | 158,000 | 499,200 |
Cash paid for offering costs | -52,700 | 0 |
Cash received from noncontrolling interest | 650,000 | 0 |
Cash received from promissory notes | 550,000 | 0 |
Cash proceeds from a stockholder deposit | 0 | 47,299 |
Cash repayments for notes payable | -417,639 | -107,087 |
Proceeds from related party advances | 6,000 | 57,000 |
Repayments of related party advances | -48,500 | -189,000 |
Net cash provided by financing activities | 845,161 | 307,412 |
Net increase in cash and cash equivalents | 121,205 | 17,360 |
Cash and cash equivalents, beginning of the period | 5,092 | 16,403 |
Cash and cash equivalents, end of the period | 126,297 | 33,763 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid for income taxes | 0 | 800 |
Cash paid for interest | 28,889 | 1,912 |
Supplemental disclosures of non-cash investing and financing activities: | ' | ' |
Embedded conversion option liability | -235,430 | 0 |
Debt discount | 27,778 | 0 |
Reclassification of derivative liability to equity | 213,068 | 0 |
Promissory notes issued for lease purchases | 120,000 | 0 |
Common shares issued to consultant as prepaid for services | 97,000 | 0 |
Common shares issued to director as prepaid for services | 60,000 | 0 |
Accounts receivable | 0 | 18,054 |
Property & equipment, net | 0 | 123,849 |
Investment in oil and gas properties | 0 | 49,252 |
Goodwill - non-cash portion | 0 | 325,671 |
Accounts payable | 0 | -9,439 |
Accrued expenses | 0 | -2,205 |
Notes payable | 0 | -52,087 |
Common stock | 0 | -100 |
Additional paid in consideration | 0 | -199,900 |
Pre-acquisition cash advances | 0 | -163,095 |
Note payable to stockholders | 0 | -55,000 |
Pre-acquisition deposits paid | $0 | ($35,000) |
NOTE_1_NATURE_OF_OPERATIONS_BA
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN | 9 Months Ended |
Sep. 30, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN | ' |
NOTE 1: NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN | |
New Western Energy Corporation (the “Company”) was incorporated in the State of Nevada on September 25, 2008. The Company’s principal business is the acquisition, exploration and development of, and production from oil, gas and mineral properties located in the United States. | |
On December 1, 2010, the Company formed an entity named New Western Texas Oil and Gas Corporation incorporated in the State of Nevada, as its wholly-owned subsidiary. New Western Texas Oil and Gas Corporation started its operations in January 2011. On May 3, 2013, New Western Texas Oil and Gas Corporation amended its Articles of Incorporation and changed its name to New Western Gas Corporation. | |
On January 2, 2012, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. (“RTE”) and RTE became our wholly-owned subsidiary and conducts business as a separate operating company. | |
On March 18, 2013, the Company formed an entity named 2013 NWE Drilling Program 1 LP (the “Limited Partnership”). The Company became the General Partner and owns 51% of the Limited Partnership. The Limited Partnership was specifically formed to drill three oil wells on the Company’s B&W Ranch lease in the Chautauqua County, Kansas (See Note 3). | |
Basis of presentation | |
The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments and business acquisition adjustments, necessary to present fairly the financial position at September 30, 2013, and the results of operations and cash flows for the three months and nine months ended September 30, 2013 and 2012. The balance sheet as of December 31, 2012 is derived from the Company’s audited consolidated financial statements. | |
Certain information and footnote disclosures normally included in consolidated financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto contained in the Company’s 2012 Annual Report filed with the Securities and Exchange Commission on Form 10-K on April 8, 2013. | |
Going Concern | |
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. The Company currently has on ongoing private placement equity offering and has raised $140,300, net of offering costs of $17,700, during the nine months ended September 30, 2013 and through the date of this report. At September 30, 2013, the Company had working capital deficit of $575,387, incurred a net loss applicable to New Western Energy Corporation common stockholders of $1,313,308 during the nine months ended September 30, 2013 and used cash in operating activities of $725,450. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
NOTE_2_SUMMARY_OF_SIGNIFICANT_
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||||||||||||
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||
Principles of Consolidation | |||||||||||||||||
The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries New Western Gas Corporation and Royal Texan Energy Co. and the Company’s 51% majority owned subsidiary 2013 NWE Drilling Program 1 LP. All intercompany balances and transactions are eliminated in consolidation. | |||||||||||||||||
Noncontrolling Interest | |||||||||||||||||
The Company accounts for its less than 100% interest in consolidated subsidiaries in accordance with Financial Accounting Standards Board – Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and accordingly, the Company presents noncontrolling interests as a component of equity on its unaudited condensed consolidated balance sheets and reports noncontrolling interest net income or loss under the heading “Net (income) loss applicable to noncontrolling interest in consolidated subsidiary” in the unaudited condensed consolidated statements of operations. | |||||||||||||||||
Use of Estimates | |||||||||||||||||
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of marketable securities, valuation of accounts, notes and other receivables, valuation and purchase price allocation of assets acquired and liabilities assumed in business combinations, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of long-lived assets, goodwill and oil, gas and mineral properties, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. | |||||||||||||||||
Derivative Instruments | |||||||||||||||||
ASC Topic 815, Derivatives and Hedging (“ASC Topic 815”), establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income (loss) depending upon the purpose of the derivatives and whether they qualify and have been designated for hedge accounting treatment. The Company does not have any derivative instruments for which it has applied hedge accounting treatment. | |||||||||||||||||
Fair value of Financial Instruments and Fair Value Measurements | |||||||||||||||||
ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: | |||||||||||||||||
Level 1 | |||||||||||||||||
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. | |||||||||||||||||
Level 2 | |||||||||||||||||
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | |||||||||||||||||
Level 3 | |||||||||||||||||
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. | |||||||||||||||||
The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable, notes payable, embedded conversion option liabilities, and amounts due to related parties. Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. | |||||||||||||||||
Assets and liabilities measured at fair value on a recurring and non-recurring basis consist of the following at September 30, 2013: | |||||||||||||||||
Fair Value Measurements at September 30, 2013 | |||||||||||||||||
Carrying Value at September 30, 2013 (Unaudited) | (Level 1) (Unaudited) | (Level 2) (Unaudited) | (Level 3) (Unaudited) | ||||||||||||||
Mineral Properties | $ | 54,489 | $ | — | $ | — | $ | 54,489 | |||||||||
Embedded Conversion Option Liability | $ | 149,722 | $ | — | $ | — | $ | 149,722 | |||||||||
The following is a summary of activity of Level 3 assets and liabilities for the period ended September 30, 2013: | |||||||||||||||||
Mineral Properties | |||||||||||||||||
Balance - December 31, 2012 | $ | 103,530 | |||||||||||||||
Additions | — | ||||||||||||||||
Change in fair value | (49,041 | ) | |||||||||||||||
Balance – September 30, 2013 | $ | 54,489 | |||||||||||||||
Embedded Conversion Option Liability | |||||||||||||||||
Balance - December 31, 2012 | $ | — | |||||||||||||||
Additions | 235,430 | ||||||||||||||||
Change in fair value | 127,359 | ||||||||||||||||
Reclassification to equity | (213,067 | ) | |||||||||||||||
Balance - September 30, 2013 | $ | 149,722 | |||||||||||||||
Changes in fair value of the embedded conversion liability are included in other income (expense) in the accompanying unaudited consolidated statements of operations. | |||||||||||||||||
Revenue Recognition | |||||||||||||||||
The Company sells crude oil and minerals under short-term agreements at prevailing market prices. Revenue, which is the Company's net revenue interest in the leased property, is recognized at the point of sale, when the crude oil and minerals are extracted from our storage units by the customer. This is at the point where the customer has taken title and has assumed the risks and rewards of ownership, the sales price is fixed or determinable and collectability is reasonably assured. | |||||||||||||||||
For sale of gas, the Company records revenue based on an estimate of the volumes delivered at the agreed-upon price and then adjusts revenue in subsequent periods based upon the data received from the purchaser that reflects actual volumes received. Generally, proceeds from gas production are received from one to three months after the actual delivery has occurred. Thus, it is usually necessary to estimate gas revenue based on prior months’ production volumes and current lease operating data, such as meter readings, in order to prepare financial statements on a timely basis. | |||||||||||||||||
Net Earnings (Loss) Per Share | |||||||||||||||||
The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At September 30, 2013, there were Class C Warrants outstanding for 2,510,666 common shares, Class D Warrants outstanding for 395,000 common shares, 3,000,000 stock options outstanding awarded to employees and consultants, and a promissory note convertible into 1,582,779 common shares that were excluded from the computations of diluted loss per share since the effect was anti-dilutive. These common stock equivalents may dilute future earnings per share. | |||||||||||||||||
Recent Accounting Pronouncements | |||||||||||||||||
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
NOTE_3_NONCONTROLLING_INTEREST
NOTE 3 - NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||
NOTE 3 - NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY | ' | ||||
NOTE 3: NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY | |||||
On March 18, 2013, the Company formed a new entity 2013 NWE Drilling Program 1 LP (the “Limited Partnership”). The Limited Partnership was specifically formed to drill three oil wells on the Company’s B&W Ranch lease in the Chautauqua County, Kansas. The Company became the General Partner and owns 51% of the Limited Partnership. The Limited Partnership closed upon receiving a cash contribution of $650,000 from one non-affiliate shareholder of the Company as the Limited Partner, and the Company’s contribution as the General Partner was $6,500 in cash and giving the rights and commitment to the Limited Partnership to drill three oil wells on the Company’s B&W Ranch lease. Pursuant to the terms of the partnership agreement, the Limited Partner will be entitled to receive 70% of the net income and cash available for distributions until such time an amount equal to the Limited Partner’s initial investment plus a 50% return on such initial investment is received by the Limited Partner. Thereafter, net income and cash available for distributions shall be allocated 20% to the Limited Partner and 80% to the General Partner. The Limited Partnership will enter into turnkey drilling agreement with the managing General Partner, to drill and complete the partnership wells. The turnkey price includes all ordinary costs of drilling, testing and completing the wells. When the wells begin producing, the General Partner, as operator of the wells will be reimbursed at actual cost for all direct expenses incurred on behalf of the Limited Partnership, and will receive a fixed fee of $250 per well per month for supervising, operating and maintaining the wells during production operations. The Limited Partnership recorded a loss of $10,354 and $106,701 for the three months and nine months ended September 30, 2013, and the Company allocated the Limited Partnership’s loss to its noncontrolling members in its consolidated financial statements as of September 30, 2013. | |||||
The following provides a summary of activity in the noncontrolling interest in consolidated subsidiary account for the nine months ended September 30, 2013: | |||||
Balance at December 31, 2012 | $ | — | |||
Contribution by noncontrolling interest member | 650,000 | ||||
Net loss applicable to noncontrolling interest | (106,701 | ) | |||
Balance at September 30, 2013 |
NOTE_4_OIL_AND_GAS_PROPERTIES
NOTE 4 - OIL AND GAS PROPERTIES | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Extractive Industries [Abstract] | ' | ||||||||||||
NOTE 4 - OIL AND GAS PROPERTIES | ' | ||||||||||||
NOTE 4: OIL AND GAS PROPERTIES | |||||||||||||
The Company's aggregate capitalized costs related to oil properties consist of the following: | |||||||||||||
Name of the Property | Type | September 30, | December 31, | ||||||||||
2013 | 2012 | ||||||||||||
(Unaudited) | |||||||||||||
Rogers County, OK - Glass Lease | Oil | $ | 221,000 | $ | 221,000 | ||||||||
Rogers County, OK - Phillips Lease | Oil | 130,000 | 130,000 | ||||||||||
Rogers County, OK (8) Leases | Oil | 281,100 | 420,000 | ||||||||||
Chautauqua County, KS - B&W Ranch Lease | Oil | 75,000 | 75,000 | ||||||||||
Chautauqua County, KS - Charles & Nancy Smith Lease | Oil | 24,750 | 24,750 | ||||||||||
Chautauqua County, KS - Lloyd & Patricia Fields Lease | Oil | 14,400 | 14,400 | ||||||||||
Chautauqua County, KS – Rinck Lease | Oil | 24,750 | — | ||||||||||
Wilson County, KS – Fredonia Prospects | Oil | 251,208 | — | ||||||||||
Jones County, TX - Swenson Lease | Oil | — | 23,070 | ||||||||||
Jones County, TX - McLellan Lease | Oil | — | 4,191 | ||||||||||
Jones County, TX - Reves Lease | Oil | — | 6,555 | ||||||||||
Shackelford County, TX - Terry Heirs | Oil | 9,722 | 9,722 | ||||||||||
Shackelford County, TX - Trice, W. G. | Oil | — | 25,333 | ||||||||||
Uncompleted wells, equipment and facilities | — | 36,973 | |||||||||||
1,031,930 | 990,994 | ||||||||||||
Accumulated depletion | (3,692 | ) | (2,196 | ) | |||||||||
Impairment allowance | (123,778 | ) | (123,778 | ) | |||||||||
$ | 904,460 | $ | 865,020 | ||||||||||
Impairment allowance is allocated as follows: | |||||||||||||
Glass Lease | $ | 123,778 | $ | 123,778 | |||||||||
Changes in the Uncompleted Wells, Equipment and Facilities were as follows: | |||||||||||||
For the nine months ended | |||||||||||||
September 30, | |||||||||||||
2013 | 2012 | ||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||
Beginning balance | $ | 36,973 | $ | 36,973 | |||||||||
Additions | — | — | |||||||||||
Sale of leases | (36,973 | ) | — | ||||||||||
Reclassification to proved properties | — | — | |||||||||||
Costs charged to expense | — | — | |||||||||||
Balance at end of the period | $ | — | $ | 36,973 | |||||||||
There were no exploration well costs capitalized for more than one year following the completion of drilling. | |||||||||||||
The following oil and gas leases were acquired and sold during the nine months ended September 30, 2013. | |||||||||||||
Acquisition of Rinck Oil and Gas Lease, Chautauqua County, Kansas | |||||||||||||
On March 7, 2013, the Company entered into an Assignment of Rinck Oil and Gas Lease with a third party to acquire an oil and gas property in Kansas named the “Rinck Lease”, whereby the assignor granted the rights to the Company to carry geographical and other exploratory work, including core drilling, and the drilling, mining and operating for, producing, and saving all of the oil and gas, including all associated hydrocarbons. The Rinck Lease consists of 553.4 acres of land in Chautauqua County, Kansas. The assignor agreed to transfer 100% of the assignor’s right, title and working interest in the Rinck Lease to the Company for a total consideration of $24,750. The Company’s net revenue interest in the Rinck Lease was calculated at 81.25% subject to the royalty of 18.75% payable to the landowners. The Company has paid the total consideration of $24,750 as of March 31, 2013. The Company has not started any oil and gas exploration on the Rinck Lease as of September 30, 2013. | |||||||||||||
Acquisition of Farwell Lease, Puckett Lease and Farwell/Eagle Lease, Wilson County, Kansas | |||||||||||||
On June 1, 2013, the Company entered into a Lease Purchase Agreement (“Agreement”) with two third parties to acquire all of their oil and gas lease interests in Farwell Lease consisting of 636 acres, Puckett Lease consisting of 240 acres, and Farwell/Eagle Lease including lease amendment consisting of 178 acres, for a total purchase consideration of $325,000. The purchase price was agreed to be paid to the third parties in the form of $205,000 cash and the balance $120,000 in the form of two promissory notes bearing 5% annual interest and payable in four (4) monthly installments commencing on July 15, 2013. The third parties assigned to the Company a one hundred percent (100%) working interest (85% net revenue interest) in and to the assets and oil and gas lease of the Farwell Lease and Farwell/Eagle Lease, and a one hundred percent (100%) working interest (87.5% net revenue interest) in and to the assets and oil and gas lease of the Puckett Lease. The Company has paid $205,000 cash and $86,250 towards the two promissory notes to the third parties for conveying their oil and gas interests in these leases as of September 30, 2013. The Company has recorded $49,674 in revenues from sale of gas on these leases as of September 30, 2013. | |||||||||||||
Sale of Swenson Lease, McLellan Lease and Reves Lease, Jones County, Texas | |||||||||||||
On February 28, 2013, the Company sold its 100% working interest in 402 acres of oil and gas leases in the Swenson, McLellan and Reves Leases in Jones County, Texas (collectively referred to as these “Leases”), to a third party for a cash payment of $280,000. The Company’s leasehold costs in these Leases amounted to $33,023 and capitalized lease and uncompleted wells equipment, and facilities costs of these Leases were $63,406 as of February 28, 2013. In addition, the Company paid legal fees and commissions of $29,000 to third parties for brokering the sale, incurred lease operating expenses of $13,847to get the Swenson Lease saleable, and paid $75,300 to Hatchett Energy for its 30% share in these Leases. The Company recorded a gain of $65,424 as a result of sale of these Leases in its consolidated financial statements as of September 30, 2013. | |||||||||||||
Sale of Mrs. W. G. Trice, Trice and Methodist Home and Trice Methodist “400” Lease, Shackelford County, Texas (“Trice Lease”) | |||||||||||||
On June 11, 2013, the Company sold its 100% working interest in oil and gas leases in Trice Lease to a third party for a cash payment of $130,000. The Company’s net investment leasehold costs in Trice Lease as of date of sale amounted to $23,828 and capitalized lease and well equipment cost net of accumulated depreciation was $45,833. The Company paid $13,000 in fees and commissions to a third party for brokering the sale, paid $35,100 to Hatchett Energy for its 30% share of profits in Trice Lease, and paid $68 in lease operating expenses as of the date of sale. The Company recorded a gain of $12,170 as a result of sale of Trice Lease in its consolidated financial statements as of September 30, 2013. |
NOTE_5_MINERAL_PROPERTIES
NOTE 5 - MINERAL PROPERTIES | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Extractive Industries [Abstract] | ' | ||||||||||||
NOTE 5 - MINERAL PROPERTIES | ' | ||||||||||||
NOTE 5: MINERAL PROPERTIES | |||||||||||||
The Company’s aggregate capitalized costs related to mineral properties consist of the following: | |||||||||||||
Unproved Mineral Property | |||||||||||||
Name of Property | Type | September 30, | December 31, | ||||||||||
2013 | 2012 | ||||||||||||
(Unaudited) | |||||||||||||
Wellsboro Lease | Gravel | $ | 103,530 | $ | 103,530 | ||||||||
103,530 | 103,530 | ||||||||||||
Less: Accumulated depletion | — | — | |||||||||||
103,530 | 103,530 | ||||||||||||
Less: Amortization | (49,041 | ) | — | ||||||||||
$ | 54,489 | $ | 103,530 | ||||||||||
The lease term of Wellsboro Lease expires on July 31, 2014. Since there was no production of minerals during the three months and nine months ended September 30, 2013 and 2012, no depletion expense relating to mineral properties has been recorded for the three months and nine months ended as of September 30, 2013 and 2012. The Company has taken a conservative position to amortize the lease acquisition cost over the remaining term of the lease. The Company recorded amortization expense of $16,347 and $49,041 for the three months and nine months ended September 30, 2013 compared to $0 and $0 for the same comparable periods in 2012, which is included in depreciation, depletion and amortization expenses in the consolidated financial statements. The Company has not started any gravel exploration on Wellsboro Lease as of September 30, 2013. |
NOTE_6_NOTES_PAYABLE
NOTE 6 - NOTES PAYABLE | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
NOTE 6 - NOTES PAYABLE | ' | ||||||||
NOTE 6: NOTES PAYABLE | |||||||||
Notes payable consist of: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(Unaudited) | |||||||||
Stockholder note payable of principal amount $50,000, unsecured, bearing interest at 10% per annum, originally due on July 31, 2012 and extended to December 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans | $ | 50,000 | $ | 50,000 | |||||
— | 50,000 | ||||||||
Stockholder note payable of principal amount $50,000, unsecured, bearing interest at 10% per annum, due on January 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans | |||||||||
300,000 | — | ||||||||
Stockholder note payable of principal amount $300,000, unsecured, bearing interest at 10% per annum, due on December 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount line of credit or loan | |||||||||
157,500 | 270,000 | ||||||||
Note payable to a third party of principal amount $270,000, unsecured, bearing interest at 5% per annum, due on February 10, 2014, is subordinated in right of payment to the prior payment in full of all future bank rediscount line of credit or loan | |||||||||
7,500 | — | ||||||||
Note payable to a related party of principal amount $15,000, unsecured, bearing interest at 5% per annum, payable in four (4) equal installments commencing on July 15, 2013, due on October 15, 2013 | |||||||||
26,250 | — | ||||||||
Note payable to a third party of principal amount $105,000, unsecured, bearing interest at 5% per annum, payable in four (4) equal installments commencing on July 15, 2013, due on October 15, 2013 | |||||||||
— | 30,000 | ||||||||
Note payable to a third party of principal amount $30,000, unsecured, bearing interest at 0% per annum, due on January 7, 2013 | |||||||||
541,250 | 400,000 | ||||||||
Total Notes payable | |||||||||
Notes payable - Current Portion | (541,250 | ) | (377,500 | ) | |||||
Notes payable - Long-term Portion | $ | — | $ | 22,500 | |||||
On January 7, 2013, the Company paid $30,000 due on the promissory note payable to a third party. On February 28, 2013, the Company paid $50,000 to the shareholder in full settlement of the promissory note and $7,500 in accrued interest due on January 31, 2013. The Company paid $112,500 to a third party due on the $270,000 promissory note during the nine months ended September 30, 2013. The Company paid $7,500 towards a promissory note due to a related party and $78,750 to a third party as of September 30, 2013. The Company recorded an interest expense of $11,335 and $23,606 for the three months and nine months ended September 30, 2013 compared to $2,844 and $9,412 for the comparable periods in 2012. |
NOTE_7_CONVERTIBLE_NOTES_PAYAB
NOTE 7 - CONVERTIBLE NOTES PAYABLE | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
NOTE 7 - CONVERTIBLE NOTES PAYABLE | ' | ||||||||
NOTE 7: CONVERTIBLE NOTES PAYABLE | |||||||||
Convertible notes payable consists of: | September 30, | December 31, | |||||||
2013 | 2012 | ||||||||
(Unaudited) | |||||||||
Note payable to a third party, bearing one-time interest of 12%, one year term, due on June 5, 2014 | $ | 83,333 | $ | — | |||||
Note payable to a third party, bearing one-time interest of 12%, one year term, due on September 26, 2014 | 55,556 | — | |||||||
Convertible notes payable | 138,889 | — | |||||||
Less: debt discount | (111,569 | ) | — | ||||||
Convertible notes payable, net | $ | 27,320 | $ | — | |||||
On February 20, 2013, the Company received $125,000 from a third party against a $500,000 Convertible Promissory Note (the “Note 1”) executed on February 15, 2013. The total consideration receivable against the Note 1 was $450,000, with the Note bearing $50,000 original issue discount (OID). The Company may repay the Note 1 at any time on or before 90 days from the delivery of the first payment of consideration by the lender (herein referred to as “Effective Date”), after which the Company may not make further payments on the Note 1 prior to the maturity date of February 15, 2014 without written approval from the lender. If the Company repays the Note 1 on or before 90 days from the Effective Date, the interest rate shall be 0%. If the Company does not repay the Note 1 on or before 90 days from the Effective date, a one-time interest charge of 12% shall be applied to the principal sum. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by the Company. The lender has the right at any time after the Effective Date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of fully paid and non-assessable shares of common stock of the Company as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is the lessor of $0.40 or 60% of the lowest trade price in the 25 trading days prior to the conversion. | |||||||||
In connection with the issuance of the Note 1, the Company recorded a loan discount related to the OID in the amount of $13,888 which will be amortized to interest expense over the life of the Note 1. In accordance with ASC 470, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $110,430 which will be amortized to interest expense over the life of the convertible notes. On May 17, 2013, the Company paid in full $138,888 of the principal sum due on Note 1. For the three months and nine months ended September 30, 2013, the Company has recognized interest expense of $0 and $13,888 related to the amortization of the OID and $0 and $110,429 related to the amortization of the beneficial conversion feature discount as it related to this Note 1. | |||||||||
On June 5, 2013, the Company received $75,000 (the “Draw”) from a third party against a $500,000 Convertible Promissory Note (the “Note 2”) executed on June 4, 2013 . The total consideration receivable against the Note 2 was $450,000, with the Note 2 bearing $50,000 original issue discount (OID). A one-time interest charge of 12% shall be applied to the principal sum. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by the Company. The maturity date is one year from the effective date of each payment and is the date upon which the principal sum of this promissory note, as well as any unpaid interest and other fees, shall be due and payable. The lender has the right at any time after the effective date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of fully paid and non-assessable shares of common stock of the Company as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is the lessor of $0.22 or 67.5% of the lowest trade price in the 25 trading days previous to the conversion. | |||||||||
In connection with the issuance of the Note 2, the Company recorded a loan discount related to the OID in the amount of $8,333 which will be amortized to interest expense over the term of the Draw. In accordance with ASC 470, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $117,591 which will be amortized to interest expense over the term of the Draw. For the three months and nine months ended September 30, 2013, the Company has recognized interest expense of $2,100 and $2,671 related to the amortization of the OID and $18,904 and $24,041 related to the amortization of the beneficial conversion feature discount as it related to this Note 2. | |||||||||
On September 26, 2013, the Company received $50,000 (the “Draw”) from a third party against a $500,000 Convertible Promissory Note (the “Note 3”) executed on September 25, 2013. The total consideration receivable against the Note 3 was $450,000, with the Note 3 bearing $50,000 original issue discount (OID). A one-time interest charge of 12% shall be applied to the principal sum. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable regardless of time and manner of payment by the Company. The maturity date is one year from the effective date of each payment and is the date upon which the principal sum of this promissory note, as well as any unpaid interest and other fees, shall be due and payable. The lender has the right at any time after the effective date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of fully paid and non-assessable shares of common stock of the Company as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is the lessor of $0.22 or 67.5% of the lowest trade price in the 25 trading days previous to the conversion. | |||||||||
In connection with the issuance of the Note 3, the Company recorded a loan discount related to the OID in the amount of $5,556 which will be amortized to interest expense over the term of the Draw. In accordance with ASC 470, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $67,511 which will be amortized to interest expense over the term of the Draw. For the three months and nine months ended September 30, 2013, the Company has recognized interest expense of $61 and $61 related to the amortization of the OID and $548 and $548 related to the amortization of the beneficial conversion feature discount as it related to this Note 3. | |||||||||
For the three months and nine months ended September 30, 2013, the Company has recognized and recorded an interest expense of $2,161 and $16,621 related to the amortization of OID of Note 1, Note 2 and Note 3, and $19,452 and $135,018 related to the amortization of the beneficial conversion feature discount of Note 1, Note 2 and Note 3. The Company did not have any convertible note instruments during the three months and nine months ended September 30, 2012. |
NOTE_8_RELATED_PARTY_TRANSACTI
NOTE 8 - RELATED PARTY TRANSACTIONS AND BALANCES | 9 Months Ended |
Sep. 30, 2013 | |
Related Party Transactions [Abstract] | ' |
NOTE 8 - RELATED PARTY TRANSACTIONS AND BALANCES | ' |
NOTE 8: RELATED PARTY TRANSACTIONS AND BALANCES | |
Payable to Related party | |
At September 30, 2013 and December 31, 2012, advances, net of repayments, made to the Company by the Chief Executive Officer (“Officer”) for its working capital requirements amounted to $0 and $42,500, respectively. Amounts due to the Officer are unsecured, non-interest bearing and due on demand without specific repayment terms. In addition, compensation paid to the Officer for the three months and nine months ended September 30, 2013 pursuant to the terms of an employment agreement amounted to $30,000 and $90,000, respectively. | |
On June 1, 2013, the Company executed a promissory note in the principal amount of $15,000 payable to an entity, owned by a director of the Company. The promissory note is unsecured, bearing interest at 5% per annum, and payable in four (4) equal installments of $3,750 commencing on July 15, 2013, due on October 15, 2013. The Company has paid $7,500 towards the principal note payable balance as of September 30, 2013. |
NOTE_9_COMMITMENTS_AND_CONTING
NOTE 9 - COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2013 | |
Commitments and contingencies (Note 9) | ' |
NOTE 9 - COMMITMENTS AND CONTINGENCIES | ' |
NOTE 9: COMMITMENTS AND CONTINGENCIES | |
Legal Costs and Contingencies | |
In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received. | |
If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable. As of September 30, 2013, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations. |
NOTE_10_STOCKHOLDERS_EQUITY
NOTE 10 - STOCKHOLDERS' EQUITY | 9 Months Ended | ||
Sep. 30, 2013 | |||
Equity [Abstract] | ' | ||
NOTE 10 - STOCKHOLDERS' EQUITY | ' | ||
NOTE 10: STOCKHOLDERS' EQUITY | |||
The Company’s capitalization at September 30, 2013 was 100,000,000 authorized common shares and 5,000,000 authorized preferred shares, both with a par value of $0.0001 per share. | |||
Common Stock and Warrants | |||
From January 1, 2013 to September 30, 2013, the Company sold 395,000 Units, pursuant to a November 8, 2012 Private Placement Equity Offering (“PPM”), for cash proceeds of $158,000 or $0.40 per Unit, each Unit consisting of one share of common stock and one redeemable Class D Warrant to purchase one share of common stock at an exercise price of $1.25 per share. Such warrants expire on December 31, 2014. The Class D warrants are redeemable by the Company at a redemption price of $0.05 per warrant upon at least 30 days' prior written notice, commencing on six months from the date of this PPM if the average of the closing bid price of the common stock exceeds $2.50 per share for 20 consecutive business days ending within 3 days of the date on which notice of redemption is given. | |||
On January 7, 2013, the Company issued 100,000 shares of its common stock to a consultant as prepaid consulting fees for services for the year ending December 31, 2013. In addition, on January 11, 2013, the Company issued 150,000 shares of its common stock as compensation to its non-executive director for services to be rendered for the nine months ending September 30, 2013. The common shares issued are valued at $0.40 per share fair value or $40,000 and $60,000, respectively, based upon cash sales of shares by the Company pursuant to a November 2012 PPM. | |||
On April 15, 2013, the Company entered into a consulting agreement for business advisory and consulting services effective April, 2013 for a six month period. Pursuant to the agreement, on May 6, 2013, the Company issued 250,000 shares of common stock to the consultant for such services. The common shares issued are valued at $0.14 per share or $35,000 based upon the closing price of the effective date of the consulting agreement. | |||
On June 3, 2013, the Company entered into a business consulting and marketing agreement with a consultant for a six months period, and issued 100,000 shares of its common stock valued at $22,000. The common shares issued are valued at the closing price of stock on the effective date of the consulting agreement. | |||
As a result of these issuances of common shares, the Company recorded $157,000 as a prepaid expense and amortized to stock-based compensation expense and consulting fees expense totaling $41,000 and $104,667 for the three months and nine months ended September 30, 2013 with $17,333 remaining as prepaid as of September 30, 2013. The Company will recognize the stock-based compensation expense and consulting fees expense as the services are rendered to the Company. | |||
2012 Incentive Stock Plan | |||
On August 30, 2012, the Board of Directors authorized and approved the 2012 Incentive Stock Plan (the “2012 Plan”), subject to approval by the majority shareholders within 12 months of the date of approval by the Board of Directors, to issue up to 5,000,000 shares of common stock of the Company at $0.0001 par value per share. Pursuant to the terms of the 2012 Plan, the Company may award to officers, key employees, consultants and non-employee directors options to purchase Company’s common stock. | |||
On October 1, 2012, the Board granted vested stock options under its 2012 Plan, to each of the four directors of the Company and to two consultants for past services, to purchase up to 200,000 shares of common stock for a total of 1,200,000 shares of common stock, with a three years term. The exercise price of the stock options to purchase common stock is $0.60 per share, which is the quoted market price of the Company stock on the grant date. The option to purchase common stock expires on October 1, 2015. The fair value of the options granted was $309,629, calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rate of 0.38%, volatility of 189%, 3 years term, and dividend yield of 0%. The Company recorded stock compensation expense of $309,629 for the year ended December 31, 2012. On August 1, 2013, the Board authorized to modify the grant price of options granted to purchase 1,200,000 shares of common stock from $0.60 per share to $0.20 per share and extend the expiration to expire on August 31, 2016. The Company recorded an expense of $42,412 as compensation expense for modifying the grant price of options and extending the expiration date. The value was computed as the increase in fair value on the modification date just before and after the modification using the following assumptions: | |||
Risk-free interest rate: | 0.38% | ||
Expected term: | 3 Years | ||
Expected dividend yield: | - | ||
Expected volatility: | 189.38% | ||
Valuation after modification | |||
Risk-free interest rate: | 0.65% | ||
Expected term: | 2.17 Years | ||
Expected dividend yield: | - | ||
Expected volatility: | 168.46% | ||
2013 Long-Term Incentive Plan | |||
On September 3, 2013, the Board granted vested stock options under its 2013 Long-Term Incentive Plan, to each of the four directors of the Company and to two consultants for past services, to purchase up to 1,800,000 shares of common stock. The exercise price of the stock options to purchase common stock is $0.20 per share. The option to purchase common stock expires on September 30, 2016. The fair value of the options granted was $243,730, calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rate of 0.83%, volatility of 170.66%, 3 years term, and dividend yield of 0%. The Company recorded stock compensation expense of $243,730 for the grant of such options for the three months ended September 30, 2013. | |||
As a result of all stock, options and warrant issuances as of September 30, 2013, the Company had 69,005,866 shares of common stock issued and outstanding, 2,510,666 Class C Warrants outstanding for conversion into common stock, 395,000 Class D Warrants for conversion into common stock, and 3,000,000 options for conversion into common stock. |
NOTE_11_DERIVATIVE_FINANCIAL_I
NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS | 9 Months Ended | ||
Sep. 30, 2013 | |||
Investments, All Other Investments [Abstract] | ' | ||
NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS | ' | ||
NOTE 11: DERIVATIVE FINANCIAL INSTRUMENTS | |||
Under the provisions of ASC 815-40, convertible instruments issued by the Company qualify for derivative treatment due to the variable conversion formula (Note 7). The embedded conversion features of the convertible note is bifurcated and recorded as a liability which is revalued at fair value each reporting date. If the fair value of the embedded conversion feature exceeds the face value of the related debt, net of other discounts, the excess is recorded as a change in fair value on the issuance date. Embedded conversion features are valued at their fair value, rather than by the intrinsic value method. | |||
The Company calculated the estimated fair values of the liabilities for embedded conversion feature at February 20, 2013 and March 31, 2013, June 5, 2013 and June 30, 2013, September 26, 2013 and September 30, 2013 with the Black-Scholes option pricing model using the closing price of the Company’s common stock at each respective date and the ranges for volatility, expected term and risk free interest indicated in the table below. As a result, the Company recorded a change in the fair value of the liabilities for embedded conversion option derivative instruments for the three months and nine months ended September 30, 2013 of $3,034 and $127,359 which was included in other expense (See Note 2 Fair Value Measurements). | |||
Embedded Conversion Options | |||
Black-Scholes Model Assumptions | |||
During Nine Months Ended September 30, 2013 | |||
Volatility | 168.46% - 189.38% | ||
Expected term | 2.17 years - 3 years | ||
Risk free interest rate | 0.38% - 0.83% |
NOTE_12_CONCENTRATIONS
NOTE 12 - CONCENTRATIONS | 9 Months Ended |
Sep. 30, 2013 | |
Risks and Uncertainties [Abstract] | ' |
NOTE 12 - CONCENTRATIONS | ' |
NOTE 12: CONCENTRATIONS | |
Concentration of Operators | |
As of September 30, 2013, the Company uses two operators for the leased properties for which the Company has current activities. The Company also has one mineral lease with another lessor. There has been no activity on the mineral lease other than initial lease acquisition costs relating to the mineral lease as of September 30, 2013. | |
Concentration of Customer | |
The Company sells its oil product to one customer and gas product to a separate customer. | |
Concentration of Credit Risk | |
The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2013. The Company’s bank balances exceeded FDIC insured amounts as of September 30, 2013. |
NOTE_13_SUBSEQUENT_EVENTS
NOTE 13 - SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2013 | |
Subsequent Events [Abstract] | ' |
NOTE 13 - SUBSEQUENT EVENTS | ' |
NOTE 13: SUBSEQUENT EVENTS | |
On October 31, 2013, the Company cancelled its Promissory Note (the “Note”) dated December 31, 2012 for $270,000 to a third party due on February 10, 2014. The principal balance on the Note due on October 31, 2013 was $147,500. The Company agreed to issue to the third party 300,000 shares of its common stock to extinguish $73,750 of the principal balance of the Note. The common shares were valued at $0.24 per share, the closing price on the date of amendment. In addition, the Company executed a New Promissory Note for $73,750, which is unsecured, bearing 5% interest, principal and interest due on September 30, 2015. This modification was treated as a debt extinguishment for accounting purposes with no gain or loss on extinguishment. | |
November 6, 2013 Offering | |
On November 6, 2013, the Company entered into a Definitive Agreement for a private offering with an Investor for sale of Company’s securities for total gross proceeds of $1,100,000. The securities are being sold pursuant to the Securities Purchase Agreement entered into by and among the Company and the Investor (the “Agreement”) and consists of (i) 8% original issue discount senior secured convertible promissory debentures in the issuance amount of $1,232,000 (the “Debentures”) and (ii) warrants to purchase approximately 5,319,516 shares of the Company’s common stock, $0.001 par value per share, which are exercisable at $0.2316 per share (each a “Warrant” and collectively, the “Warrants”). The offering is being made on a “best efforts” basis. The net proceeds from the offering will be used by the Company for drilling and rework of oil and gas wells and general working capital. The Agreement contained certain customary representations, warranties and covenants. The Company closed the offering on November 15, 2013 and received cash proceeds of $936,233, net of commissions and expenses related to the offering. | |
The Debentures will be issued with principal amount equal to 112% of the gross proceeds and are convertible into shares of Common Stock at any time prior to maturity at $0.193 per share (the “Conversion Price”), subject to certain conversion limitations set forth in the Debentures. The Company shall pay interest on the aggregate unconverted and then outstanding principal amount of the Debenture at the rate of 8% per annum, payable quarterly on February 1, May 1, August 1 and November 1, beginning on May 1, 2014. Interest is payable in cash or at the Company’s option in shares of Common Stock, provided certain conditions are met, based on a share value equal to the lesser of (a) 90% of the average of the volume weighted average price (the “VWAP”) for the 20 consecutive trading days prior to the applicable interest payment date and (b) 100% of the average of the VWAP for the 20 consecutive trading days prior to the applicable interest payment date less $0.01. On each of May 1, 2014, August 1, 2014, November 1, 2014, and February 1, 2015, the Company is obligated to redeem an amount equal to $308,000 (plus accrued but unpaid interest, liquidated damages and any other amounts then owing in respect of the Debentures) (collectively, the “Periodic Redemption Amount”). In lieu of a cash redemption and subject to the Company meeting certain equity conditions described in the Debentures, the Company may elect to pay the Periodic Redemption Amount in shares based on a conversion price equal to the lesser of (a) $0.193 per share, subject to adjustments upon certain events, and (b) 90% of the average of the VWAP for the 20 consecutive trading days prior to the applicable redemption date. Upon any Event of Default (as defined in the Debenture), the outstanding principal amount of the Debenture, plus liquidated damages and interest, shall become, at the Investors’ election, immediately due and payable in cash. Commencing five days after the occurrence of any Event of Default, the interest rate on the Debentures shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. At any time after the 6 month anniversary of the Closing Date, the Company may prepay any portion of the outstanding principal amount of any Debentures, plus liquidated damages, interest, a premium of 20% and other amounts owing in respect thereof through the applicable date of optional redemption, subject to notice to the Investor. The Debentures contain customary affirmative and negative covenants of the Company. The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections. The Warrants are exercisable for a period of three years and are subject to “weighted average” and other customary anti-dilution protections. | |
The Company engaged a placement agent with respect to the Offering. The Company will pay the placement agent upon receipt of the gross proceeds at the Closing, a commission of $95,000 plus 250,000 shares of the Company’s restricted common stock valued at $77,500 based on the fair value of common stock on the date of Agreement. As collateral security for all of the Company’s obligations under the Agreement and related documents executed in connection with the Offering, the Company and its subsidiaries (the “Subsidiaries”), will grant the Investor a first priority security interest in all of the Company’s and Subsidiaries assets pursuant to the terms of the Security Agreement, dated as of November 6, 2013 (the “Security Agreement”). To further secure the Company's obligations, the Subsidiaries also executed a Guarantee, dated as of November 6, 2013 (the “Guaranty”), pursuant to which the Subsidiaries have agreed to guaranty the Company’s obligations owed to the Investor. | |
Due to the “full ratchet” price protection in the convertible Debenture, the embedded conversion feature will be bifurcated and reflected as a derivative liability in the balance sheet at fair value. The initial recording of this derivative liability will be charged to- debt discount, to be amortized over the debt term of 1.22 years (November 14, 2013 to February 1, 2015). Furthermore, the relative fair value of the warrants and the original issuance discount will be recorded as debt discount and will be amortized over the debt term of 1.22 years. The $416,768 relative fair value of warrants to purchase 5,319,516 shares of common stock was derived from the $629,831 fair value computed using the Black-Scholes pricing model, with a risk free interest rate of 0.58%, a dividend yield rate of 0%, an expected volatility of 168% and an expected term of three years. | |
November 12, 2013 Offering | |
On November 12, 2013, the Company issued a 10% Secured Debenture for total gross proceeds of $1,200,000 (the “Gross Proceeds”). The securities were sold pursuant to the Securities Purchase Agreement entered into by and among the Company and the Investor (the “Agreement”) and consists of (i) 10% secured debentures in the issuance amount of $1,500,000 (the “Debenture”) and (ii) warrants to purchase 7,500,000 million shares of the Company’s common stock, $0.001 par value per common share, which are exercisable at $0.25 per share and expire three years from the date of grant. The issue amount of the Debenture includes $300,000 previously loaned to the Company that was due and payable on December 31, 2013 (the “Old Note”). By issuing the $1,500,000 issue amount, the Company and the Investor have effectively agreed to the extension of the due date of the Old Note, which corresponds to the Debenture due date of October 31, 2014. The Debenture is secured by future assets that are acquired by the Company with the Gross Proceeds. The net proceeds of the Offering will be used for acquiring oil and gas entities, oil and gas leases, drilling and rework of oil and gas wells and general working capital. The Agreement contains certain customary representations, warranties and covenants. The Company closed the offering on November 12, 2013. | |
The transfer of the $300,000 Old Note into the new Debenture of $1,500,000 is treated as a debt extinguishment with no gain or loss recorded. The $557,789 relative fair value of warrants to purchase 7,500,000 shares of common stock, was derived from the $888,000 fair value, computed using the Black-Scholes pricing model with a risk free interest rate of 0.65%, a dividend yield rate of 0%, an expected volatility of 168% and an expected term of three years. |
NOTE_2_SUMMARY_OF_SIGNIFICANT_1
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Principles of Consolidation | ' | ||||||||||||||||
Principles of Consolidation | |||||||||||||||||
The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries New Western Gas Corporation and Royal Texan Energy Co. and the Company’s 51% majority owned subsidiary 2013 NWE Drilling Program 1 LP. All intercompany balances and transactions are eliminated in consolidation. | |||||||||||||||||
Noncontrolling Interest | ' | ||||||||||||||||
Noncontrolling Interest | |||||||||||||||||
The Company accounts for its less than 100% interest in consolidated subsidiaries in accordance with Financial Accounting Standards Board – Accounting Standards Codification (“ASC”) Topic 810, Consolidation, and accordingly, the Company presents noncontrolling interests as a component of equity on its unaudited condensed consolidated balance sheets and reports noncontrolling interest net income or loss under the heading “Net (income) loss applicable to noncontrolling interest in consolidated subsidiary” in the unaudited condensed consolidated statements of operations. | |||||||||||||||||
Use of Estimates | ' | ||||||||||||||||
Use of Estimates | |||||||||||||||||
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of marketable securities, valuation of accounts, notes and other receivables, valuation and purchase price allocation of assets acquired and liabilities assumed in business combinations, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of long-lived assets, goodwill and oil, gas and mineral properties, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. | |||||||||||||||||
Derivative Instruments | ' | ||||||||||||||||
Derivative Instruments | |||||||||||||||||
ASC Topic 815, Derivatives and Hedging (“ASC Topic 815”), establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income (loss) depending upon the purpose of the derivatives and whether they qualify and have been designated for hedge accounting treatment. The Company does not have any derivative instruments for which it has applied hedge accounting treatment. | |||||||||||||||||
Fair value of Financial Instruments and Fair Value Measurements | ' | ||||||||||||||||
Fair value of Financial Instruments and Fair Value Measurements | |||||||||||||||||
ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value: | |||||||||||||||||
Level 1 | |||||||||||||||||
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. | |||||||||||||||||
Level 2 | |||||||||||||||||
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. | |||||||||||||||||
Level 3 | |||||||||||||||||
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. | |||||||||||||||||
The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable, notes payable, embedded conversion option liabilities, and amounts due to related parties. Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. | |||||||||||||||||
Assets and liabilities measured at fair value on a recurring and non-recurring basis consist of the following at September 30, 2013: | |||||||||||||||||
Fair Value Measurements at September 30, 2013 | |||||||||||||||||
Carrying Value at September 30, 2013 (Unaudited) | (Level 1) (Unaudited) | (Level 2) (Unaudited) | (Level 3) (Unaudited) | ||||||||||||||
Mineral Properties | $ | 54,489 | $ | — | $ | — | $ | 54,489 | |||||||||
Embedded Conversion Option Liability | $ | 149,722 | $ | — | $ | — | $ | 149,722 | |||||||||
The following is a summary of activity of Level 3 assets and liabilities for the period ended September 30, 2013: | |||||||||||||||||
Mineral Properties | |||||||||||||||||
Balance - December 31, 2012 | $ | 103,530 | |||||||||||||||
Additions | — | ||||||||||||||||
Change in fair value | (49,041 | ) | |||||||||||||||
Balance – September 30, 2013 | $ | 54,489 | |||||||||||||||
Embedded Conversion Option Liability | |||||||||||||||||
Balance - December 31, 2012 | $ | — | |||||||||||||||
Additions | 235,430 | ||||||||||||||||
Change in fair value | 127,359 | ||||||||||||||||
Reclassification to equity | (213,067 | ) | |||||||||||||||
Balance - September 30, 2013 | $ | 149,722 | |||||||||||||||
Changes in fair value of the embedded conversion liability are included in other income (expense) in the accompanying unaudited condensed consolidated statements of operations. | |||||||||||||||||
Revenue Recognition | ' | ||||||||||||||||
Revenue Recognition | |||||||||||||||||
The Company sells crude oil and minerals under short-term agreements at prevailing market prices. Revenue, which is the Company's net revenue interest in the leased property, is recognized at the point of sale, when the crude oil and minerals are extracted from our storage units by the customer. This is at the point where the customer has taken title and has assumed the risks and rewards of ownership, the sales price is fixed or determinable and collectability is reasonably assured. | |||||||||||||||||
For sale of gas, the Company records revenue based on an estimate of the volumes delivered at the agreed-upon price and then adjusts revenue in subsequent periods based upon the data received from the purchaser that reflects actual volumes received. Generally, proceeds from gas production are received from one to three months after the actual delivery has occurred. Thus, it is usually necessary to estimate gas revenue based on prior months’ production volumes and current lease operating data, such as meter readings, in order to prepare financial statements on a timely basis. | |||||||||||||||||
Net Earnings (Loss) Per Share | ' | ||||||||||||||||
Net Earnings (Loss) Per Share | |||||||||||||||||
The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At September 30, 2013, there were Class C Warrants outstanding for 2,510,666 common shares, Class D Warrants outstanding for 395,000 common shares, 3,000,000 stock options outstanding awarded to employees and consultants, and a promissory note convertible into 1,582,779 common shares that were excluded from the computations of diluted loss per share since the effect was anti-dilutive. These common stock equivalents may dilute future earnings per share. | |||||||||||||||||
Recent Accounting Pronouncements | ' | ||||||||||||||||
Recent Accounting Pronouncements | |||||||||||||||||
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
NOTE_2_SUMMARY_OF_SIGNIFICANT_2
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Fair value measurements | ' | ||||||||||||||||
Fair Value Measurements at September 30, 2013 | |||||||||||||||||
Carrying Value at September 30, 2013 (Unaudited) | (Level 1) (Unaudited) | (Level 2) (Unaudited) | (Level 3) (Unaudited) | ||||||||||||||
Mineral Properties | $ | 54,489 | $ | — | $ | — | $ | 54,489 | |||||||||
Embedded Conversion Option Liability | $ | 149,722 | $ | — | $ | — | $ | 149,722 | |||||||||
Summary of activity of Level 3 assets and liabilities | ' | ||||||||||||||||
Mineral Properties | |||||||||||||||||
Balance - December 31, 2012 | $ | 103,530 | |||||||||||||||
Additions | — | ||||||||||||||||
Change in fair value | (49,041 | ) | |||||||||||||||
Balance – September 30, 2013 | $ | 54,489 | |||||||||||||||
Embedded Conversion Option Liability | |||||||||||||||||
Balance - December 31, 2012 | $ | — | |||||||||||||||
Additions | 235,430 | ||||||||||||||||
Change in fair value | 127,359 | ||||||||||||||||
Reclassification to equity | (213,067 | ) | |||||||||||||||
Balance - September 30, 2013 | $ | 149,722 |
NOTE_3_NONCONTROLLING_INTEREST1
NOTE 3 - NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||||
Noncontrolling interest | ' | ||||
Balance at December 31, 2012 | $ | — | |||
Contribution by noncontrolling interest member | 650,000 | ||||
Net loss applicable to noncontrolling interest | (106,701 | ) | |||
Balance at September 30, 2013 |
NOTE_4_OIL_AND_GAS_PROPERTIES_
NOTE 4 - OIL AND GAS PROPERTIES (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Extractive Industries [Abstract] | ' | ||||||||||||
Aggregate capitalized costs related to oil properties | ' | ||||||||||||
Name of the Property | Type | September 30, | December 31, | ||||||||||
2013 | 2012 | ||||||||||||
(Unaudited) | |||||||||||||
Rogers County, OK - Glass Lease | Oil | $ | 221,000 | $ | 221,000 | ||||||||
Rogers County, OK - Phillips Lease | Oil | 130,000 | 130,000 | ||||||||||
Rogers County, OK (8) Leases | Oil | 281,100 | 420,000 | ||||||||||
Chautauqua County, KS - B&W Ranch Lease | Oil | 75,000 | 75,000 | ||||||||||
Chautauqua County, KS - Charles & Nancy Smith Lease | Oil | 24,750 | 24,750 | ||||||||||
Chautauqua County, KS - Lloyd & Patricia Fields Lease | Oil | 14,400 | 14,400 | ||||||||||
Chautauqua County, KS – Rinck Lease | Oil | 24,750 | — | ||||||||||
Wilson County, KS – Fredonia Prospects | Oil | 251,208 | — | ||||||||||
Jones County, TX - Swenson Lease | Oil | — | 23,070 | ||||||||||
Jones County, TX - McLellan Lease | Oil | — | 4,191 | ||||||||||
Jones County, TX - Reves Lease | Oil | — | 6,555 | ||||||||||
Shackelford County, TX - Terry Heirs | Oil | 9,722 | 9,722 | ||||||||||
Shackelford County, TX - Trice, W. G. | Oil | — | 25,333 | ||||||||||
Uncompleted wells, equipment and facilities | — | 36,973 | |||||||||||
1,031,930 | 990,994 | ||||||||||||
Accumulated depletion | (3,692 | ) | (2,196 | ) | |||||||||
Impairment allowance | (123,778 | ) | (123,778 | ) | |||||||||
$ | 904,460 | $ | 865,020 | ||||||||||
Impairment allowance is allocated as follows: | |||||||||||||
Glass Lease | $ | 123,778 | $ | 123,778 | |||||||||
Changes in the Uncompleted Wells, Equipment and Facilities | ' | ||||||||||||
For the nine months ended | |||||||||||||
September 30, | |||||||||||||
2013 | 2012 | ||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||
Beginning balance | $ | 36,973 | $ | 36,973 | |||||||||
Additions | — | — | |||||||||||
Sale of leases | (36,973 | ) | — | ||||||||||
Reclassification to proved properties | — | — | |||||||||||
Costs charged to expense | — | — | |||||||||||
Balance at end of the period | $ | — | $ | 36,973 |
NOTE_5_MINERAL_PROPERTIES_Tabl
NOTE 5 - MINERAL PROPERTIES (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Extractive Industries [Abstract] | ' | ||||||||||||
Capitalized Costs to Mineral Properties | ' | ||||||||||||
Unproved Mineral Property | |||||||||||||
Name of Property | Type | September 30, | December 31, | ||||||||||
2013 | 2012 | ||||||||||||
(Unaudited) | |||||||||||||
Wellsboro Lease | Gravel | $ | 103,530 | $ | 103,530 | ||||||||
103,530 | 103,530 | ||||||||||||
Less: Accumulated depletion | — | — | |||||||||||
103,530 | 103,530 | ||||||||||||
Less: Amortization | (49,041 | ) | — | ||||||||||
$ | 54,489 | $ | 103,530 |
NOTE_6_NOTES_PAYABLE_Tables
NOTE 6 - NOTES PAYABLE (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Notes payable | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
(Unaudited) | |||||||||
Stockholder note payable of principal amount $50,000, unsecured, bearing interest at 10% per annum, originally due on July 31, 2012 and extended to December 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans | $ | 50,000 | $ | 50,000 | |||||
— | 50,000 | ||||||||
Stockholder note payable of principal amount $50,000, unsecured, bearing interest at 10% per annum, due on January 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans | |||||||||
300,000 | — | ||||||||
Stockholder note payable of principal amount $300,000, unsecured, bearing interest at 10% per annum, due on December 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount line of credit or loan | |||||||||
157,500 | 270,000 | ||||||||
Note payable to a third party of principal amount $270,000, unsecured, bearing interest at 5% per annum, due on February 10, 2014, is subordinated in right of payment to the prior payment in full of all future bank rediscount line of credit or loan | |||||||||
7,500 | — | ||||||||
Note payable to a related party of principal amount $15,000, unsecured, bearing interest at 5% per annum, payable in four (4) equal installments commencing on July 15, 2013, due on October 15, 2013 | |||||||||
26,250 | — | ||||||||
Note payable to a third party of principal amount $105,000, unsecured, bearing interest at 5% per annum, payable in four (4) equal installments commencing on July 15, 2013, due on October 15, 2013 | |||||||||
— | 30,000 | ||||||||
Note payable to a third party of principal amount $30,000, unsecured, bearing interest at 0% per annum, due on January 7, 2013 | |||||||||
541,250 | 400,000 | ||||||||
Total Notes payable | |||||||||
Notes payable - Current Portion | (541,250 | ) | (377,500 | ) | |||||
Notes payable - Long-term Portion | $ | — | $ | 22,500 |
NOTE_7_CONVERTIBLE_NOTES_PAYAB1
NOTE 7 - CONVERTIBLE NOTES PAYABLE (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Convertible note payable | ' | ||||||||
Convertible notes payable consists of: | September 30, | December 31, | |||||||
2013 | 2012 | ||||||||
(Unaudited) | |||||||||
Note payable to a third party, bearing one-time interest of 12%, one year term, due on June 5, 2014 | $ | 83,333 | $ | — | |||||
Note payable to a third party, bearing one-time interest of 12%, one year term, due on September 26, 2014 | 55,556 | — | |||||||
Convertible notes payable | 138,889 | — | |||||||
Less: debt discount | (111,569 | ) | — | ||||||
Convertible notes payable, net | $ | 27,320 | $ | — |
NOTE_10_STOCKHOLDERS_EQUITY_Ta
NOTE 10 - STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended | ||
Sep. 30, 2013 | |||
Equity [Abstract] | ' | ||
Fair value modifications | ' | ||
Risk-free interest rate: | 0.38% | ||
Expected term: | 3 Years | ||
Expected dividend yield: | - | ||
Expected volatility: | 189.38% | ||
Valuation after modification | |||
Risk-free interest rate: | 0.65% | ||
Expected term: | 2.17 Years | ||
Expected dividend yield: | - | ||
Expected volatility: | 168.46% | ||
NOTE_11_DERIVATIVE_FINANCIAL_I1
NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended | ||
Sep. 30, 2013 | |||
Investments, All Other Investments [Abstract] | ' | ||
Embedded conversion options | ' | ||
Black-Scholes Model Assumptions | |||
During Nine Months Ended September 30, 2013 | |||
Volatility | 168.46% - 189.38% | ||
Expected term | 2.17 years - 3 years | ||
Risk free interest rate | 0.38% - 0.83% |
NOTE_2_SUMMARY_OF_SIGNIFICANT_3
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Assets and liabilities measured at fair value on a recurring and non-recurring basis (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Mineral Properties | $54,489 | $103,530 |
Embedded Conversion Option Liability | 149,722 | 0 |
Carrying Value | ' | ' |
Mineral Properties | 54,489 | ' |
Embedded Conversion Option Liability | 149,722 | ' |
Level 1 | ' | ' |
Mineral Properties | 0 | ' |
Embedded Conversion Option Liability | 0 | ' |
Level 2 | ' | ' |
Mineral Properties | 0 | ' |
Embedded Conversion Option Liability | 0 | ' |
Level 3 | ' | ' |
Mineral Properties | 54,489 | ' |
Embedded Conversion Option Liability | $149,722 | ' |
NOTE_2_SUMMARY_OF_SIGNIFICANT_4
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of activity of Level 3 assets and liabilities (Details) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Accounting Policies [Abstract] | ' |
Balance - December 31, 2012 | $103,530 |
Change in fair value | -49,041 |
Balance - September 30, 2013 | 54,489 |
Balance - December 31, 2012 | 0 |
Additions | 235,430 |
Change in fair value | 127,359 |
Reclassification to equity | -213,067 |
Balance - June 30, 2013 | $149,722 |
NOTE_3_NONCONTROLLING_INTEREST2
NOTE 3 - NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY - Summary of activity in the noncontrolling interest in consolidated subsidiary account (Details) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' | ' | ' |
Balance at December 31, 2012 | $543,299 | ' | $543,299 | ' | $0 |
Contribution by noncontrolling interest member | 650,000 | ' | 650,000 | ' | ' |
Net loss applicable to noncontrolling interest | -10,354 | 0 | -106,701 | 0 | ' |
Balance at June 30, 2013 | $543,299 | ' | $543,299 | ' | $0 |
NOTE_4_OIL_AND_GAS_PROPERTIES_1
NOTE 4 - OIL AND GAS PROPERTIES - Aggregate capitalized costs related to oil properties (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | $1,031,930 | $990,994 |
Accumulated depletion | -193 | 2,196 |
Impairment allowance | -123,778 | -123,778 |
Capital Costs, net of depletion | 907,959 | 865,020 |
Rogers County, OK - Glass Lease, Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | 221,000 | 221,000 |
Impairment allowance | 123,778 | 123,778 |
Rogers County, OK - (8) Leases | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | 281,100 | 420,000 |
Rogers County, OK - Phillips Lease, Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | 130,000 | 130,000 |
Chautaugua Lease - Rink | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | 24,750 | ' |
Chautauqua Lease- B and W Ranch, Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | 75,000 | 75,000 |
Uncompleted Wells | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | ' | 36,973 |
Chautauqua Lease- Smith Lease. Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | 24,750 | 24,750 |
Chautauqua Lease - Fields Lease, Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | 14,400 | 14,400 |
Swanson Lease | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | ' | 23,070 |
Trice, W.G., Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | ' | 25,333 |
McLellan Lease, Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | ' | 4,191 |
Wilson County, KS - Fredonia Prospects | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | 251,208 | ' |
Reves Lease, Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | ' | 6,555 |
Terry Heirs, Oil | ' | ' |
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items] | ' | ' |
Capitalized Costs related to oil properties | ' | $9,722 |
NOTE_4_OIL_AND_GAS_PROPERTIES_2
NOTE 4 - OIL AND GAS PROPERTIES - Changes in the Uncompleted Wells, Equipment and Facilities (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Extractive Industries [Abstract] | ' | ' |
Beginning Balance | $36,973 | $36,973 |
Additions | 0 | 0 |
Sale of lease | -36,973 | ' |
Reclassification to proved properties | 0 | 0 |
Costs charged to expense | 0 | 0 |
Ending Balance | $0 | $36,973 |
NOTE_5_MINERAL_PROPERTIES_Aggr
NOTE 5 - MINERAL PROPERTIES - Aggregate capitalized costs related to mineral properties (Details) (USD $) | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Total Minerals property | $54,489 | ' | $103,530 |
Less: Accumulated depletion | ' | ' | ' |
Less: Amortization | -49,041 | ' | ' |
Wellsboro Lease | ' | ' | ' |
Total Minerals property | $103,530 | ' | $103,530 |
NOTE_6_NOTES_PAYABLE_Notes_pay
NOTE 6 - NOTES PAYABLE - Notes payable (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Total Notes payable | $541,250 | $400,000 |
Notes payable - Current Portion | 541,250 | 377,500 |
Notes payable - Long-term Portion | ' | 22,500 |
Stockholder Note 1 | ' | ' |
Total Notes payable | 50,000 | 50,000 |
Stockholder Note 2 | ' | ' |
Total Notes payable | ' | 50,000 |
Stockholder Note 3 | ' | ' |
Total Notes payable | 300,000 | ' |
Note 1 | ' | ' |
Total Notes payable | 157,500 | 270,000 |
Note 2 | ' | ' |
Total Notes payable | 7,500 | ' |
Note 3 | ' | ' |
Total Notes payable | 26,250 | ' |
Note 4 | ' | ' |
Total Notes payable | ' | $30,000 |
NOTE_7_CONVERTIBLE_NOTES_PAYAB2
NOTE 7 - CONVERTIBLE NOTES PAYABLE - Convertible note payable (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Convertible notes payable | $138,889 | $0 |
Less: debt discount | 111,569 | 0 |
Convertible notes payable, net | 27,320 | 0 |
Convertible Note 1 | ' | ' |
Convertible notes payable | 83,333 | 0 |
Convertible Note 2 | ' | ' |
Convertible notes payable | $55,556 | $0 |
NOTE_10_STOCKHOLDERS_EQUITY_Fa
NOTE 10 - STOCKHOLDERS' EQUITY - Fair value modifications (Details) | 1 Months Ended | |
Aug. 31, 2013 | Jul. 31, 2013 | |
Equity [Abstract] | ' | ' |
Risk-free interest rate: | 0.65% | 0.38% |
Expected term: | '2 years 2 months 4 days | '3 years |
Expected dividend yield: | 0.00% | 0.00% |
Expected volatility: | 168.46% | 189.38% |
NOTE_11_DERIVATIVE_FINANCIAL_I2
NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS - Embedded conversion options (Details) | 9 Months Ended |
Sep. 30, 2013 | |
Investments, All Other Investments [Abstract] | ' |
Volatility minimum | 168.46% |
Volatility maximum | 189.38% |
Expected term minimum | '2 years 2 months 4 days |
Expected term maximum | '3 years |
Risk free interest rate minimum | 0.38% |
Risk free interest rate maximum | 0.83% |
NOTE_1_NATURE_OF_OPERATIONS_BA1
NOTE 1 - NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Jan. 02, 2012 | Sep. 30, 2013 | Mar. 18, 2013 | |
RTE | Limited Partnership | Limited Partnership | |||||
Ownership | ' | ' | ' | ' | 100.00% | 51.00% | 51.00% |
Private Placement Equity Offering | ' | ' | $140,300 | ' | ' | ' | ' |
Private Placement Offering Costs | ' | ' | 17,700 | ' | ' | ' | ' |
Working Capital Deficit | ' | ' | 575,387 | ' | ' | ' | ' |
Net Loss Applicable to New Western Energy Corporation common stockholders | -418,830 | 105,525 | 1,313,308 | 321,836 | ' | ' | ' |
Cash Used in Operating Activities | ' | ' | $725,450 | ' | ' | ' | ' |
NOTE_2_SUMMARY_OF_SIGNIFICANT_5
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 9 Months Ended | ||||||
Sep. 30, 2013 | Sep. 03, 2013 | Oct. 01, 2012 | Aug. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Mar. 18, 2013 | |
RTE | Limited Partnership | Limited Partnership | |||||
Ownership | ' | ' | ' | ' | 100.00% | 51.00% | 51.00% |
Class C Warrants Outstanding | $2,510,666 | ' | ' | ' | ' | ' | ' |
Class D Warrants Outstanding | 395,000 | ' | ' | ' | ' | ' | ' |
Stock Options | 3,000,000 | 1,800,000 | 1,400,000 | 5,000,000 | ' | ' | ' |
Convertible Notes to Common Stock | 1,582,779 | ' | ' | ' | ' | ' | ' |
NOTE_3_NONCONTROLLING_INTEREST3
NOTE 3 - NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' |
Cash Funding received | $650,000 | $650,000 |
Contribution to partnership | 6,500 | ' |
Net loss applicable to noncontrolling interest in consolidated subsidiary | 96,347 | 95,102 |
Fixed fee revenue per month | $250 | ' |
NOTE_4_OIL_AND_GAS_PROPERTIES_3
NOTE 4 - OIL AND GAS PROPERTIES (Details Narrative) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Extractive Industries [Abstract] | ' | ' |
Consideration for Sale of Lease | $410,000 | $5,000 |
NOTE_5_MINERAL_PROPERTIES_Deta
NOTE 5 - MINERAL PROPERTIES (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Extractive Industries [Abstract] | ' | ' | ' | ' |
Amortization Expense | $16,347 | $0 | $49,041 | $0 |
NOTE_6_NOTES_PAYABLE_Details_N
NOTE 6 - NOTES PAYABLE (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Interest Expense | $32,949 | $2,844 | $175,246 | $9,412 |
Note 4 | ' | ' | ' | ' |
Payments on Notes Payable | ' | ' | 30,000 | ' |
Stockholder Note 2 | ' | ' | ' | ' |
Payments on Notes Payable | ' | ' | 50,000 | ' |
Payments on Accrued Interest | ' | ' | 7,500 | ' |
Note 1 | ' | ' | ' | ' |
Payments on Notes Payable | ' | ' | 112,500 | ' |
Note 2 | ' | ' | ' | ' |
Payments on Notes Payable | ' | ' | 75,000 | ' |
Note 3 | ' | ' | ' | ' |
Payments on Notes Payable | ' | ' | $78,750 | ' |
NOTE_7_CONVERTIBLE_NOTES_PAYAB3
NOTE 7 - CONVERTIBLE NOTES PAYABLE (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | |
Consideration received | ' | $550,000 | $0 |
Embedded Conversion Option Liability | ' | -185,430 | ' |
Amortization of OID | 2,161 | 16,621 | ' |
Amortization of beneficial conversion feature discount | 19,452 | 135,018 | ' |
Note 1 | ' | ' | ' |
Proceeds from third party | ' | 75,000 | ' |
Convertible note, amount | 500,000 | 500,000 | ' |
Consideration received | ' | 450,000 | ' |
Original Issue discount(OID) | 50,000 | 50,000 | ' |
Effective date | ' | 5-Jun-13 | ' |
Interest rate after effective date | ' | 12.00% | ' |
Conversion price | $0.22 | $0.22 | ' |
Conversion to shares | ' | 726,216 | ' |
Unamortized Loan discount on OID | 8,333 | 8,333 | ' |
Embedded Conversion Option Liability | ' | 117,951 | ' |
Amortization of OID | ' | 13,888 | ' |
Amortization of beneficial conversion feature discount | ' | 110,429 | ' |
Note 2 | ' | ' | ' |
Proceeds from third party | ' | 125,000 | ' |
Convertible note, amount | 500,000 | 500,000 | ' |
Consideration received | ' | 450,000 | ' |
Original Issue discount(OID) | 50,000 | 50,000 | ' |
Effective date | ' | 15-Feb-14 | ' |
Interest Rate on Note | 0.00% | 0.00% | ' |
Interest rate after effective date | ' | 12.00% | ' |
Conversion price | $0.40 | $0.40 | ' |
Unamortized Loan discount on OID | 13,888 | 13,888 | ' |
Embedded Conversion Option Liability | ' | 110,430 | ' |
Paid Convertible note, principal plus OID | ' | 138,888 | ' |
Amortization of OID | ' | 13,888 | ' |
Amortization of beneficial conversion feature discount | ' | 110,429 | ' |
Note 3 | ' | ' | ' |
Proceeds from third party | ' | 50,000 | ' |
Convertible note, amount | 500,000 | 500,000 | ' |
Consideration received | ' | 450,000 | ' |
Original Issue discount(OID) | 50,000 | 50,000 | ' |
Interest rate after effective date | ' | 12.00% | ' |
Unamortized Loan discount on OID | 5,556 | 5,556 | ' |
Embedded Conversion Option Liability | ' | 67,511 | ' |
Amortization of OID | 61 | 61 | ' |
Amortization of beneficial conversion feature discount | 548 | 548 | ' |
Note 2 | ' | ' | ' |
Amortization of OID | 2,100 | ' | ' |
Amortization of beneficial conversion feature discount | 18,904 | ' | ' |
Note 1 | ' | ' | ' |
Amortization of OID | 0 | ' | ' |
Amortization of beneficial conversion feature discount | $0 | ' | ' |
NOTE_8_RELATED_PARTY_TRANSACTI1
NOTE 8 - RELATED PARTY TRANSACTIONS AND BALANCES (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Related Party Transactions [Abstract] | ' | ' | ' | ' |
Advances from Related Parties | $0 | $0 | ' | $42,500 |
Compensation to Officer | 30,000 | 90,000 | ' | ' |
Related Party Promissory Note | 15,000 | ' | ' | ' |
Related Party Interest Rate | 5.00% | ' | ' | ' |
Repayment of Related Party Note | $7,500 | ($48,500) | ($189,000) | ' |
NOTE_10_Stockholders_Equity_De
NOTE 10 - Stockholders' Equity (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||||||||||
Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 03, 2013 | Sep. 03, 2013 | Jun. 03, 2013 | 6-May-13 | Jan. 11, 2013 | Jan. 07, 2013 | Dec. 31, 2012 | Oct. 01, 2012 | Aug. 30, 2012 | |
Accounting Policies [Abstract] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued | 100,000,000 | 35,000 | 40,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued | 69,005,866 | 69,005,866 | 69,005,866 | ' | ' | ' | ' | ' | ' | ' | 68,010,866 | ' | ' |
Preferred shares authorized | 5,000,000 | 5,000,000 | 5,000,000 | ' | ' | ' | ' | ' | ' | ' | 5,000,000 | ' | ' |
Par value per share | $0.00 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Units Sold | ' | ' | 395,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Price Per Unit | $0.40 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Sale of Units | ' | ' | $158,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercise price per share | ' | ' | $1.25 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrant Redemption Price | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares issued as compensation | ' | ' | ' | ' | ' | ' | ' | ' | 150,000 | ' | ' | ' | ' |
Shares issued as compensation | 41,000 | ' | 104,667 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common shares value | ' | ' | ' | ' | ' | ' | ' | $0.14 | $0.40 | ' | ' | ' | ' |
Prepaid Expense | 157,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Prepaid Expense | 17,333 | 17,333 | 17,333 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2012 Incentive Stock Plan | 3,000,000 | 3,000,000 | 3,000,000 | ' | ' | 1,800,000 | ' | ' | ' | ' | ' | 1,400,000 | 5,000,000 |
2012 Incentive stock plan | '243,730 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Discount Rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0 | ' |
Compensation Expense | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 42,412 | ' |
Share Based Compensation | ' | ' | 22,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Modified Grant price | 0.83% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Volatility | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 189.00% | ' |
Dividend Yield | 0.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair Value of Options Granted | ' | ' | $243,730 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock Compensation Expense | ' | ' | $243,730 | $0 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Excise price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.20 | $0.60 | ' |
Risk Free Discount Rate | 17066.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock issued | 69,005,866 | 69,005,866 | 69,005,866 | 60,000 | 22,000 | ' | 100,000 | 250,000 | ' | 100,000 | ' | ' | ' |
Class C Warrants | 395,000 | 395,000 | 395,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
NOTE_11_DERIVATIVE_FINANCIAL_I3
NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | |
Investments, All Other Investments [Abstract] | ' | ' |
Embedded Conversion Option | $3,034 | $127,359 |
NOTE_13_SUBSEQUENT_EVENTS_Deta
NOTE 13 - SUBSEQUENT EVENTS (Details Narrative) (USD $) | 1 Months Ended | 2 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Aug. 31, 2013 | Jul. 31, 2013 | Nov. 18, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | |
Cancelled Promissory Note | ' | ' | ' | ' | ' | ' | $270,000 |
Note Principal Balance | ' | ' | ' | ' | ' | ' | 147,500 |
Shares issued to Reduce Debt | ' | ' | ' | ' | ' | ' | 300,000 |
Debt Reduction by Shares Issued | ' | ' | ' | ' | ' | ' | 73,750 |
Common Shares Issued to Reduce Debt, Value per Share | ' | ' | $0.24 | ' | ' | ' | ' |
Promissory Note, Value | ' | ' | ' | ' | ' | ' | 73,750 |
Promissory Note, Interest Rate | ' | ' | ' | ' | ' | ' | 5.00% |
Shares Issued, Services, Shares | ' | ' | ' | 100,000,000 | 35,000 | 40,000 | ' |
Risk Free Interest Rate | 0.65% | 0.38% | ' | ' | ' | ' | ' |
Dividend Yield | 0.00% | 0.00% | ' | ' | ' | ' | ' |
Expected Volatility | 168.46% | 189.38% | ' | ' | ' | ' | ' |
Term | '2 years 2 months 4 days | '3 years | ' | ' | ' | ' | ' |
Cash proceeds received | ' | ' | ' | ' | ' | 158,000 | ' |
Private Placement 110613 [Member] | ' | ' | ' | ' | ' | ' | ' |
Definitive Agreement, Private Offering, Total Gross Proceeds | ' | ' | 1,100,000 | ' | ' | ' | ' |
Securities Purchase Agreement Disclosure | ' | ' | ' | ' | ' | ' | ' |
The securities are being sold pursuant to the Securities | |||||||
Purchase Agreement entered into by and among the Company and the Investor (the “Agreement”) and consists of (i) 8% | |||||||
original issue discount senior secured convertible promissory debentures in the issuance amount of $1,232,000 (the “Debentures”) and (ii) warrants to purchase approximately 5,319,516 shares of the Company’s common stock, $0.001 par value per share, which are exercisable at $0.2316 per share (each a “Warrant” and collectively, the “Warrants”). The offering is being made on a “best efforts” basis. The net proceeds from the offering will be used by the Company for drilling and rework of oil and gas wells and general working capital. The Agreement contained certain customary representations, warranties and covenants. The Company closed the offering on November 15, 2013 and received cash proceeds of $936,233, net of commissions and expenses related to the offering. | |||||||
The Debentures will be issued with principal amount equal to 112% of the gross proceeds and are convertible into shares of Common Stock at any time prior to maturity at $0.193 per share (the “Conversion Price”), subject to certain conversion limitations set forth in the Debentures. The Company shall pay interest on the aggregate unconverted and then outstanding principal amount of the Debenture at the rate of 8% per annum, payable quarterly on February 1, May 1, August 1 and November 1, beginning on May 1, 2014. Interest is payable in cash or at the Company’s option in shares of Common Stock, provided certain conditions are met, based on a share value equal to the lesser of (a) 90% of the average of the volume weighted average price (the “VWAP”) for the 20 consecutive trading days prior to the applicable interest payment date and (b) 100% of the average of the VWAP for the 20 consecutive trading days prior to the applicable interest payment date less $0.01. On each of May 1, 2014, August 1, 2014, November 1, 2014, and February 1, 2015, the Company is obligated to redeem an amount equal to $308,000 (plus accrued but unpaid interest, liquidated damages and any other amounts then owing in respect of the Debentures) (collectively, the “Periodic Redemption Amount”). In lieu of a cash redemption and subject to the Company meeting certain equity conditions described in the Debentures, the Company may elect to pay the Periodic Redemption Amount in shares based on a conversion price equal to the lesser of (a) $0.193 per share, subject to adjustments upon certain events, and (b) 90% of the average of the VWAP for the 20 consecutive trading days prior to the applicable redemption date. Upon any Event of Default (as defined in the Debenture), the outstanding principal amount of the Debenture, plus liquidated damages and interest, shall become, at the Investors’ election, immediately due and payable in cash. Commencing five days after the occurrence of any Event of Default, the interest rate on the Debentures shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. At any time after the 6 month anniversary of the Closing Date, the Company may prepay any portion of the outstanding principal amount of any Debentures, plus liquidated damages, interest, a premium of 20% and other amounts owing in respect thereof through the applicable date of optional redemption, subject to notice to the Investor. The Debentures contain customary affirmative and negative covenants of the Company. The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections. The Warrants are exercisable for a period of three years and are subject to “weighted average” and other customary anti-dilution protections. | |||||||
Commission Paid | ' | ' | 95,000 | ' | ' | ' | ' |
Shares Issued, Services, Shares | ' | ' | 250,000 | ' | ' | ' | ' |
Shares Issued, Services, Value | ' | ' | 77,500 | ' | ' | ' | ' |
Warrants to Purchase Shares, Shares | ' | ' | 5,319,516 | ' | ' | ' | ' |
Fair Value of Warrants | ' | ' | 416,768 | ' | ' | ' | ' |
Risk Free Interest Rate | ' | ' | 0.58% | ' | ' | ' | ' |
Dividend Yield | ' | ' | 0.00% | ' | ' | ' | ' |
Expected Volatility | ' | ' | 168.00% | ' | ' | ' | ' |
Term | ' | ' | '3 years | ' | ' | ' | ' |
Cash proceeds received | ' | ' | 936,233 | ' | ' | ' | ' |
Fair Value, Assumptions | ' | ' | 629,831 | ' | ' | ' | ' |
Private Placement 111213 [Member] | ' | ' | ' | ' | ' | ' | ' |
Definitive Agreement, Private Offering, Total Gross Proceeds | ' | ' | 1,200,000 | ' | ' | ' | ' |
Securities Purchase Agreement Disclosure | ' | ' | ' | ' | ' | ' | ' |
The securities are being sold pursuant to the Securities Purchase Agreement entered into by and among the Company and the Investor (the “Agreement”) and consists of (i) 10% secured debentures in the issuance amount of $1,500,000 (the “Debenture”) and (ii) warrants to purchase 7,500,000 million shares of the Company’s common stock, $0.001 par value per common share, which are exercisable at $0.25 per share and expire three years from the date of grant. The issue amount of the Debenture includes $300,000 previously loaned to the Company that was due and payable on December 31, 2013 (the “Old Note”). By issuing the $1,500,000 issue amount, the Company and the Investor have effectively agreed to the extension of the due date of the Old Note, which corresponds to the Debenture due date of October 31, 2014. The Debenture is secured by future assets that are acquired by the Company with the Gross Proceeds. The net proceeds of the Offering will be used for acquiring oil and gas entities, oil and gas leases, drilling and rework of oil and gas wells and general working capital. The Agreement contains certain customary representations, warranties and covenants. The Company closed the offering on November 15, 2013 and received cash proceeds of $1,200,000. | |||||||
Warrants to Purchase Shares, Shares | ' | ' | 7,500,000 | ' | ' | ' | ' |
Fair Value of Warrants | ' | ' | 557,789 | ' | ' | ' | ' |
Risk Free Interest Rate | ' | ' | 0.65% | ' | ' | ' | ' |
Dividend Yield | ' | ' | 0.00% | ' | ' | ' | ' |
Expected Volatility | ' | ' | 168.00% | ' | ' | ' | ' |
Term | ' | ' | '3 years | ' | ' | ' | ' |
Debt Extinguishment | ' | ' | 300,000 | ' | ' | ' | ' |
Cash proceeds received | ' | ' | 1,200,000 | ' | ' | ' | ' |
Fair Value, Assumptions | ' | ' | $888,000 | ' | ' | ' | ' |