Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 12, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | New Western Energy Corp | |
Entity Central Index Key | 1,479,488 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
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 | 77,357,086 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 60,900 | $ 11,000 |
Accounts receivable | 10,350 | 25,389 |
Inventory | 20,000 | 23,464 |
Notes receivable, net | 26,664 | 65,000 |
Prepaid expenses and other assets | 10,580 | 86,025 |
Total current assets | 128,494 | 210,878 |
Property and equipment, net | 42,543 | 210,752 |
Oil and gas properties, net | 473,566 | 248,827 |
Other assets | 21,930 | 1,930 |
Total Assets | 666,533 | 672,387 |
Current liabilities | ||
Accounts payable | 65,781 | 71,298 |
Accrued expenses | 279,564 | 139,651 |
Accrued interest payable | 15,842 | 143,397 |
Note payable, current portion, net of discount of $0 at September 30, 2015 and $536,841 at December 31, 2014 | 280,000 | $ 1,146,909 |
Convertible notes payable, current portion, net of premium and discount of $7,403 at September 30, 2015 | 360,700 | |
Embedded conversion option liability | 123,281 | |
Warrant liability | 176,555 | $ 291,003 |
Payable to related party | 100 | 100 |
Total current liabilities | 1,301,823 | $ 1,792,358 |
Long Term Liabilities | ||
Convertible notes payable, net of discount of $53,274 at September 30, 2015 | 1,726 | |
Accrued assets retirement obligation | 6,750 | $ 4,000 |
Total long term liabilities | 5,476 | 4,000 |
Total Liabilities | 1,310,299 | 1,796,358 |
New Western Energy Corporation and Subsidiaries Stockholders' Deficit | ||
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 351,500 shares and 294,100 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | 35 | 29 |
Common stock, $0.0001 par value, 250,000,000 shares authorized, 77,357,086 shares and 76,242,086 shares issued and to be issued and outstanding at September 30, 2015 and December 31, 2014, respectively | 7,736 | 7,625 |
Additional paid in capital | 9,780,642 | 7,130,199 |
Accumulated deficit | (10,924,976) | (8,525,719) |
Total New Western Energy Corporation and Subsidiaries Stockholders' Deficit | (1,136,563) | (1,387,866) |
Noncontrolling interest in consolidated subsidiaries | 492,797 | 263,895 |
Total Stockholders' Deficit | (643,766) | (1,123,971) |
Total Liabilities and Stockholders' Deficit | $ 666,533 | $ 672,387 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred Stock Par Value | $ 0.0001 | $ 0.0001 |
Preferred Stock Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock Shares Issued | 351,500 | 294,100 |
Preferred Stock Shares Outstanding | 351,500 | 294,100 |
Common Stock Par Value | $ 0.0001 | $ 0.0001 |
Common Stock Shares Authorized | 250,000,000 | 250,000,000 |
Common Stock Shares Issued | 77,357,086 | 76,242,086 |
Common Stock Shares Outstanding | 77,357,086 | 76,242,086 |
Note Payable, Discount Current | $ 0 | $ 536,841 |
Convertible Notes Payable, Discount and Premium, Current | 7,403 | |
Convertible Notes Payable, Discount, Noncurrent | 53,274 | |
Conversion Option Liability, Discount | $ 121,004 |
Statements of Operations (Unaud
Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues | ||||
Oil and gas sales | $ 18,452 | $ 131,660 | $ 77,801 | $ 313,782 |
Operating expenses | ||||
Depreciation, depletion and amortization | 3,932 | 18,904 | 12,271 | 76,785 |
General and administrative | 236,411 | $ 505,932 | 1,051,271 | $ 1,587,743 |
Impairment expense | $ 9,952 | 29,856 | ||
Loss on sale of oil leases | 33,886 | |||
Oil and gas production | $ 26,703 | $ 144,631 | 96,146 | $ 512,062 |
Total operating expenses | 276,998 | 669,467 | 1,223,430 | 2,176,590 |
Loss from operations | (258,546) | (537,807) | (1,145,629) | (1,862,808) |
Other income (expenses) | ||||
Interest expense | (167,725) | (91,140) | (496,349) | (1,288,617) |
Gain (loss) on settlement of debt | (888,916) | (128,168) | (860,226) | (128,168) |
Change in fair value of embedded conversion option and warrant liability income (expense) | $ (102,184) | $ 304,802 | 41,167 | $ 1,131,241 |
Other income | 10,000 | |||
Total other income (expenses) | $ (1,158,825) | $ (267,774) | (1,305,408) | $ (285,544) |
Loss from operations before income tax | (1,417,371) | $ (270,033) | (2,451,051) | $ (2,148,352) |
Provision for income tax | 1,925 | 1,925 | ||
Net loss | (1,419,296) | $ (270,033) | (2,452,962) | $ (2,148,352) |
Preferred stock dividend | (24,433) | (11,204) | (62,393) | (13,582) |
Net loss applicable to common stock before allocation to noncontrolling interest | (1,443,729) | (281,237) | (2,515,355) | (2,161,934) |
Net loss applicable to noncontrolling interest in consolidated subsidiaries | (28,571) | (81,672) | 116,098 | (211,170) |
Net loss applicable to New Western Energy Corporation common stock | $ (1,415,158) | $ (199,565) | $ (2,399,257) | $ (1,950,764) |
Basic and diluted net loss per share applicable to New Western Energy Corporation's common stock | $ (0.02) | $ 0 | $ (0.03) | $ (0.03) |
Weighted average number of shares outstanding - Basic and Diluted | 76,846,325 | 74,265,144 | 76,246,903 | 73,460,791 |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Reconciliation of net loss to net cash used in operating activities: | ||
Net loss applicable to New Western Energy Corporation common stock | $ (2,399,257) | $ (1,950,764) |
Adjustment to reconcile net loss to net cash used in operating activities: | ||
Depreciation, depletion and amortization | 12,271 | $ 38,642 |
Impairment expense | 29,856 | |
Amortization of debt discount | $ 181,647 | $ 966,951 |
Amortization of mineral property | $ 38,143 | |
Amortization and accretion of asset retirement obligations | $ 1,750 | |
Amortization of deferred debt issuance cost | 21,994 | $ 137,887 |
Amortization of embedded conversion option liability | 1,582 | |
Loss applicable to noncontrolling interest | 116,098 | $ (211,170) |
Loss on sale of oil and gas property and related equipment | 33,886 | |
(Gain) loss on settlement of convertible note payable | (28,690) | $ 128,168 |
Loss on conversion of preferred stock dividend to equity | 13,112 | |
Loss on conversion of promisory note to equity | 875,804 | |
Change in fair value of embedded conversion option liability | 73,281 | $ (654,692) |
Change in fair value of warrant liability | (114,448) | $ (471,201) |
Costs incurred in conjunction with issuance of convertible notes | 183,103 | |
Stock based investment expense | 27,600 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 25,039 | $ (10,700) |
Inventory | 3,464 | (9,833) |
Prepaid expenses and other current assets | 77,207 | 171,434 |
Accounts payable | (5,517) | 1,073 |
Accrued expenses | 107,761 | 89,746 |
Accrued interest payable | 122,522 | 55,684 |
Net cash used in operating activities | (872,131) | (1,680,632) |
Cash Flows From Investing Activities: | ||
Cash paid for purchase of property and equipment | (1,502) | $ (43,564) |
Cash proceeds from sale of oil and gas property and related equipment | 90,000 | |
Cash paid for security deposits | $ (20,262) | |
Cash advanced towards a note receviable | $ (75,000) | |
Cash received from a note receivable | $ 38,336 | 10,000 |
Cash paid for purchase and capitalized cost of oil and gas properties, net | (60,041) | (50,000) |
Net cash provided by (used in) investing activities | 46,531 | (158,564) |
Cash Flows From Financing Activities: | ||
Cash received from sale of preferred stock | 287,000 | $ 635,000 |
Cash received from a note payable | 55,000 | |
Cash received from convertible promissory notes | 238,500 | $ 20,000 |
Cash repayment of a note payable | (50,000) | $ (308,000) |
Cash received from sale of ownership interest in limited partnership | $ 345,000 | |
Repayments of related party advances | $ (1,922) | |
Net cash provided by financing activities | $ 875,500 | 345,078 |
Net increase (decrease) in cash and cash equivalents | 49,900 | (1,494,118) |
Cash and cash equivalents, beginning of the period | 11,000 | 1,523,181 |
Cash and cash equivalents, end of the period | 60,900 | $ 29,063 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | $ 1,925 | |
Cash paid for interest | $ 90,462 | |
Supplemental disclosures of non-cash investing and financing activities: | ||
Debt discount | $ 48,418 | 73,591 |
Promissory notes issued for lease purchases | $ 115,000 | 110,000 |
Exchange of oil and gas properties for settlement of convertible notes payable | 595,000 | |
Settlement of convertible note payable in exchange for oil lease properties | 924,000 | |
Settlement of debt by issuance of options to purchase common shares/issuance of common shares | $ 2,300,000 | 91,161 |
Common shares issued to consultant as prepaid for services | $ 259,000 | |
Settlement of preferred stock dividend by issuance of common shares | $ 47,847 |
1. NATURE OF OPERATIONS, BASIS
1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
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 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 March 9, 2015, New Western Gas Corporation changed its name to New Western Mineral Extraction Inc. 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 a wholly-owned subsidiary of the Company. RTE conducts its business as a separate operating company. On March 18, 2013, the Company formed 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 Chautauqua County, Kansas (See Note 3). On May 15, 2014, the Company formed New Western Operating LLC, as its wholly-owned subsidiary that will take over all operations for its leases, oil and gas exploration, drilling and production in the state of Kansas. On June 30, 2014, the Company formed NWDP Energy, LLC, as its wholly-owned subsidiary, registered in the state of Nevada, to explore, drill and produce oil and gas in Montana. On January 8, 2015, NWDP Energy, LLC changed its name to NWE/Forward Energy, LLC and registered in the state of Montana. On December 22, 2014, the Company formed New Western Montana Oil & Gas Corporation (the “New Western Montana”) as its wholly owned subsidiary, to enter into an operating agreement with Forward Energy, LLC, a Montana limited liability company. New Western Montana is the managing member of NWE/Forward Energy LLC owning a 51% interest and Forward Energy owning a 49% interest in the LLC. On April 9, 2015, the Company formed NWE Oil & Gas Program #1 LP, a California limited partnership, for the sole purpose of (a) acquiring and drilling, managing, owning, re-working and operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) acquisition of new oil and gas wells. The Company is the General Partner and shall own not less than a 51% ownership interests and the Limited Partners shall own up to 49% ownership interest in the California limited Partnership. The Company plans to sell up to 20 limited partner interests and each limited partner can purchase 2.45% interest in the limited partnership for $115,000. The Company has currently sold three units or 7.35% of the allocated limited partners’ interest. On May 1, 2015, the Company formed New Osage Energy Corporation, a wholly-owned subsidiary, registered in the state of Oklahoma, to operate and manage the Company’s oil and gas properties in Oklahoma. Basis of presentation The accompanying interim consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at September 30, 2015, and the results of operations and cash flows for the three months and nine months periods ended September 30, 2015. The balance sheet as of December 31, 2014 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 interim consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the consolidated financial statements and the Notes thereto contained in the Company’s 2014 Annual Report filed with the Securities and Exchange Commission on Form 10-K on April 15, 2015. 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, and the attainment of profitable operations. At September 30, 2015, the Company had working capital deficit of $1,173,329, incurred a net loss applicable to New Western Energy Corporation common stockholders of $2,399,257 for the nine months ended September 30, 2015 and used cash in operating activities of $872,131. 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. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
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 Mineral Extraction Corporation, Royal Texan Energy Co., New Western Operating LLC, New Western Montana Oil & Gas Corporation, New Osage Energy Corporation, the Company’s 51% majority owned subsidiary 2013 NWE Drilling Program 1 LP and NWE Oil & Gas 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” 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 accounts, Notes and other receivables, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of long-lived assets, oil, gas and mineral properties, stock-based compensation and deferred 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. Accounting for Derivatives The Company evaluates its convertible debt instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “ Derivatives and Hedging Fair value of Financial Instruments and Fair Value Measurements ASC 820, Fair Value Measurements and Disclosures, 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, accounts and notes receivable, accounts payable, Notes payable, warrant liabilities, embedded conversion option liabilities, and amounts due to related parties. Pursuant to ASC 820, Fair Value Measurements and Disclosures Financial Instruments Assets and liabilities measured at fair value on a recurring and non-recurring basis consist of the following at September 30, 2015: Fair Value Measurements at September 30, 2015 Carrying Value at September 30, 2015 (Unaudited) (Level 1) (Unaudited) (Level 2) (Unaudited) (Level 3) (Unaudited) Warrant Liabilities $ 176,555 $ $ $ 176,555 Embedded Conversion Option Liability $ 123,281 $ $ $ 123,281 The following is a summary of activity of Level 3 assets and liabilities for the period ended September 30, 2015: Warrant Liabilities Balance - December 31, 2014 $ 291,003 Additions Change in fair value (114,448 ) Balance September 30, 2015 $ 176,555 Embedded Conversion Option Liability Balance - December 31, 2014 $ Additions 50,000 Initial value of Embedded Conversion Option 62,082 Change in fair value 11,199 Balance September 30, 2015 $ 123,281 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. Oil and Gas Properties The Company uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire interest in oil and gas properties, to drill and equip exploratory wells that find proved reserves, to drill and equip development wells and related asset retirement costs are capitalized. Costs to drill exploratory wells, including equipment and facilities are capitalized as part of “Uncompleted Wells, Equipment and Facilities” pending determination of whether the well has found proved reserves. Costs to drill exploratory wells that find proved reserves are reclassified to proved oil and gas properties while costs that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining undeveloped properties are expensed. Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Management may also determine to initiate straight line amortization of a property over the remaining useful life of the lease if management is uncertain as to its ability to recover the asset value but immediate impairment is not indicated. Capitalized costs of producing oil and gas properties (proved or unproved), after considering estimated residual salvage values, are depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives. On the sale or retirement of a complete unit of a proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale of a partial unit of proved property, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in income. On the sale of an entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into consideration the amount of any recorded impairment if the property had been assessed individually. If a partial interest in an unproved property is sold, the amount received is treated as a reduction of the cost of the interest retained. Asset Retirement Obligations The Company follows the provisions of ASC 410, “ Asset Retirement and Environmental Obligations” The Company’s asset retirement obligations represent the present value of estimated future costs associated with the plugging and abandonment of oil and gas wells, in accordance with applicable local, state and federal laws. The Company follows FASB ASC Topic 410, “ Asset Retirement and Environmental Obligations” Net Earnings (Loss) Per Share The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings per Share Reclassification of Prior Period Amounts Certain amounts in comparative periods have been reclassified in the Company’s consolidated financial statements and related footnotes to conform to the current presentation. Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," 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 and not implemented that might have a material impact on its financial position or results of operations. Other a |
3. NONCONTROLLING INTEREST IN C
3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES | 9 Months Ended |
Sep. 30, 2015 | |
Noncontrolling Interest [Abstract] | |
3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES | NOTE 3: NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES 2013 NWE Drilling Program 1 LP 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. 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 entered into turnkey drilling agreement with the managing General Partner, to drill and complete the partnership wells. The turnkey price included 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 shall 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 $58,309 and $236,935 for the three months and nine months periods ended September 30, 2015 as compared to a loss of $166,678 and $430,960 for the same comparable periods in 2014. The Company allocated $28,571 and $116,098 of the limited partnership’s loss for the three months and nine months periods ended September 30, 2015, and $81,672 and $211,170 of the limited partnership’s loss for the three months and nine months periods ended September 30, 2014 to its noncontrolling member in its consolidated financial statements as of September 30, 2015 and 2014, respectively. As a result, the noncontrolling interest of the limited partner was reduced to $147,797 at September 30, 2015. The following provides a summary of activity in the noncontrolling interest (“NCI”) in Limited Partnership, a consolidated subsidiary account for the nine months ended September 30, 2015 and 2014: Balance NCI at December 31, 2013 $ 511,942 Contribution by noncontrolling interest Net loss applicable to noncontrolling interest for nine months ended September 30, 2014 49% (211,170 ) Balance NCI at September 30, 2014 $ 300,772 Balance NCI at December 31, 2014 $ 263,895 Contribution by noncontrolling interest Net loss applicable to noncontrolling interest for nine months ended September 30, 2015 49% (116,098 ) Balance NCI at September 30, 2015 $ 147,797 NWE Oil & Gas Program #1 LP On April 9, 2015, the Company formed an entity NWE Oil & Gas Program #1 LP, a California limited partnership (the “California Limited Partnership”), for the sole purpose of (a) acquiring and drilling, managing, owning, re-working and operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) new oil and gas wells. The Company became the General Partner and shall own 21 Units which shall represent 51% ownership of the California Limited Partnership. The Limited Partners shall own no more than 20 Units which shall represent 49% of the California Limited Partnership. As of June 30, 2015, the Company received cash contributions of $345,000 from three non-affiliated limited partners from the sale of three (3) Units of $115,000 each. The Company is obligated to contribute as General Partner $23,000 in cash for its ownership interest and the Company has not made its cash contribution as of September 30, 2015. The partnership commenced on April 9, 2015 and will continue for a term of 25 years unless sooner terminated in accordance with the terms of the agreement. Pursuant to the terms of the partnership agreement, the net income and distributions of the partnership shall be allocated 70% to the Limited Partners and 30% to the General Partner, until the Limited Partners has received in cash distributions an amount equal to their initial capital plus a 30% return on their original invested capital. Thereafter, net income and distributions shall be allocated 30% to the Limited Partners and 70% to the General Partner. Any net proceeds from the sale of any of the leases owned by the partnership shall be distributed 49% to the Limited Partners in accordance with each Limited Partner’s capital account and 51% to the General Partner. The following provides a summary of activity in the noncontrolling interest (“NCI”) in California Limited Partnership, a consolidated subsidiary account for the nine months ended September 30, 2015: Balance NCI at December 31, 2014 $ Contributions by NCI 345,000 Balance NCI at September 30, 2015 $ 345,000 Total noncontrolling interest in consolidated subsidiaries amounted to $492,797 and $263,895 as of September 30, 2015 and December 31, 2014, respectively. |
4. OIL AND GAS PROPERTIES
4. OIL AND GAS PROPERTIES | 9 Months Ended |
Sep. 30, 2015 | |
Extractive Industries [Abstract] | |
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, 2015 (Unaudited) December 31, 2014 Rogers County, OK - Glass Lease Oil $ - $ 221,000 Rogers County, OK - Phillips Lease Oil - 130,000 Rogers County, OK (9) Leases Oil - 378,600 Chautauqua County, KS - B&W Ranch Lease Oil & Gas 75,000 75,000 Chautauqua County, KS - Charles & Nancy Smith Lease Oil & Gas 24,750 24,750 Chautauqua County, KS - Lloyd & Patricia Fields Lease Oil & Gas 14,400 14,400 Chautauqua County, KS - Rinck Lease Oil & Gas 24,750 24,750 Osage County, OK – Branson Leases Oil & Gas 40,000 - Osage County, OK – (3) Renco Leases Oil & Gas 185,000 - Wilson County, KS – Farwell, Puckett & Farwell/Eagle Lease Oil & Gas 251,208 251,208 Doug & Wendy Strauch – Brown Lease, Montana Oil & Gas 5,040 - Nowata County, OK (4) Leases Gas - 35,000 Shackelford County, TX – Terry Heirs Oil 9,722 9,722 629,870 1,164,430 Asset Retirement Obligation 4,563 4,000 Impairment allowance (160,867 ) (919,603 ) Total $ 473,566 $ 248,827 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, 2015. Acquisition of Oil and Gas Leases in Montana In February 2015, the Company entered into a Lease Purchase Agreement with a third party to acquire oil and gas lease properties, wells and equipment located in Counties of Yellowstone, Golden Valley, Treasure, Musselshell and surrounding Counties of the Crooked Creek Field within South Central Montana. The Company has paid a purchase consideration of $4,000 to the third party for such acquisition of leases. On May 26, 2015, the Company extended the terms of the Lease Purchase Agreement and paid an additional consideration of $1,040 to the third party as additional acquisition cost. The Company has not started any exploration and production as of September 30, 2015. Assignment of Rogers County and Nowata County, Oklahoma Leases Glass Lease, and (9) Leases- Jackson Lease, Anna Lease, Kerrigan Lease, Everett Lease, Jameson Lease, Thomas Lease, Winchester Lease, Winchester II Lease, Roberts Lease, Roebuck Lease, Taylor Lease and Walker Lease (“Leases”) On January 22, 2015, the Company entered into an agreement with a third party to assigns all of its rights and ownership interests in these Leases for $100,000. The transaction closed on March 1, 2015 and the Company has received $90,000 of the sale price on March 3, 2015. The remaining balance of $10,000 will be received subject to completion of takeover of the Leases. As a result of assignment of these Leases, the Company has recorded a loss of $33,886 on assignment for the nine months ended September 30, 2015. Acquisition of Branson Leases in Osage County, Oklahoma On August 1, 2015, the Company entered into a Purchase of Leases Agreement (the “Agreement”) to purchase from PEMCO, LLC, an Oklahoma Limited Liability Company, the owner and operator of 17 Quarter Sections of oil and gas leases in Osage County, Oklahoma, (the “Branson Leases”) together with equipment, machinery, pipes and tools, subject to completion of due diligence period and certain agreed terms. PEMCO granted the Company the right to perform due diligence prior to the purchase of the Assets. The Company agreed to pay PEMCO a consideration of $40,000 as Initial Payment upon execution of the Agreement, and for the extension period, if applicable, $10,000 as Extension Payment within 10 days prior to the end of the initial period. The initial due diligence commenced on August 1, 2015 and shall continue for a period of 60 days, and may be extended by the Company for an additional 30 days consecutive after the expiration of the initial due diligence period. On July 31, 2015, the Company paid to PEMCO $40,000 as Initial payment for the purchase of leases. The Company has completed its due diligence as of September 30, 2015 and closed the purchase. The Company has not started any exploration and production as of September 30, 2015. Acquisition of Renco Leases in Osage County, Oklahoma On August 31, 2015, the Company entered into a Lease Purchase Agreement with Renco Energy, Inc., an Oklahoma corporation, to purchase three (3) 160 acre oil and gas leases located in Osage County, Oklahoma, together with equipment, machinery, pipes and tools located thereon for a purchase consideration of $185,000. The agreement required the purchase price to be paid $15,000 in cash, assumption of estimated $55,000 in debt owed by Renco Energy to third parties, and the balance of $115,000 in the form of a promissory Note bearing 5% per annum interest. The principal sum of the promissory Note and interest shall be payable in ten installments of $11,500 each plus accrued interest, commencing on with the first installment on October 15, 2015 and on the 15 th |
5. NOTE RECEIVABLE
5. NOTE RECEIVABLE | 9 Months Ended |
Sep. 30, 2015 | |
Receivables [Abstract] | |
5. NOTE RECEIVABLE | NOTE 5: NOTE RECEIVABLE On April 1, 2014, the Company made a short-term advance of $75,000 to Legend, an entity with whom the Company had previously entered into a merger agreement on January 23, 2014. The advance is non-interest bearing, unsecured and is to be returned to the Company by Legend by February 28, 2015 or within 60 days, if the merger between the Company and Legend is terminated, whichever first occurs. On April 30, 2014, the Company terminated the merger agreement with Legend. The Company received one payment of $10,000 from Legend during 2014 and the outstanding balance of short-term advance at December 31, 2014 amounted to $65,000. On January 7, 2015, the Company and Legend entered into a settlement agreement and mutual release of claims due to the disputes arising between the two parties. Pursuant to the terms of settlement, Legend agreed to pay the settlement amount of $65,000 of which amount $10,000 was paid on January 7, 2015 and agreed to make six (6) equal payments of $9,167 each month starting February 7, 2015 in satisfaction of full payment of short-term advance. The Company has received payments of $38,336 against the settlement amount as of September 30, 2015. Legend is in default of making its settlement payments of $26,664 as of September 30, 2015. The Company is evaluating its options to enforce a stipulated judgment against Legend. The Company has not provided an allowance for uncollected balances as of September 30, 2015. |
6. NOTES PAYABLE
6. NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
6. NOTES PAYABLE | NOTE 6: NOTES PAYABLE Notes payable consist of: September 30, December 31, 2015 2014 (Unaudited) Note payable to a third party, unsecured, bearing interest at 5% per annum, due on May 30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan $ $ 73,750 Stockholder Note payable, secured, bearing interest at 10% per annum, due on October 31, 2015, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans 1,500,000 Note payable to an entity owned by a director, secured, bearing interest at 5% per annum, due on August 31, 2015 110,000 110,000 Note payable to a third party, unsecured, bearing interest at 5% per annum, due on August 30, 2016, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan 55,000 Note payable to a third party, secured, bearing interest at 5% per annum, due on July 3, 2016 115,000 280,000 1,683,750 Notes payable - current portion 280,000 1,683,750 Notes payable long term portion Less: Unamortized debt discount and debt issuance costs (536,841 ) Notes payable current portion, net of debt discounts $ 280,000 $ 1,146,909 The Company is in default of a note payable of $110,000 due to an entity owned by a director of the Company. The note holder has not made a demand for the past due note balance as of the date of this report. The Company recorded interest expense on these Notes of $36,063 and $116,467 for the three months and nine months ended September 30, 2015 and $38,888 and $115,716 for the same comparable periods in 2014. |
7. CONVERTIBLE NOTES PAYABLE
7. CONVERTIBLE NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
7. CONVERTIBLE NOTES PAYABLE | NOTE 7: CONVERTIBLE NOTES PAYABLE Convertible Notes payable consist of: September 30, 2015 December 31, 2014 (Unaudited) Note payable to a third party, secured, bearing interest at 8% per annum, due December 30, 2015 (Note 1) $ 79,000 $ Note payable to a third party, secured, bearing interest at 8% per annum, due March 3, 2016 (Note 2) 54,000 Note payable to a third party, secured, bearing interest at 6% per annum, due July 1, 2016 (Note 3) 53,500 Note payable to a third party, secured, bearing interest at 8% per annum, due September 8, 2016 (Note 4) 27,000 Note payable to a third party, bearing interest at 12% per annum, due September 9, 2017 (Note 5) 55,000 Total 268,500 Convertible Note payable current portion 213,500 Premium on Note 1, Note 2, Note 3 and Note 4 payable 154,603 Less: Debt discount (7,403 ) Convertible Notes payable, current portion, net of premium and discount 360,700 Convertible Note payable long term portion 55,000 Less: Debt discount (53,274 ) Convertible Notes payable, long term, net of debt discount $ 1,726 $ Convertible Promissory Note 1 (“Note 1”) On March 26, 2015, the Company executed a Convertible Promissory Note (the “Note 1”) and received $75,000 (the “Draw”) net of $4,000 in legal fees, on April 20, 2015. The principal sum of $79,000 together with any interest on the unpaid balance at the rate of 8% per annum will become due on December 30, 2015. The Note 1 may not be prepaid in whole or in part. No amount of principal or interest on NOTE 1 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the NOTE 1 is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this Note 1and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this Note 1 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this Note 1 in excess of that portion of the Note 1 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 1 with respect to which the determination of this provision is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date. The net carrying value of Note 1 at September 30, 2015 and December 31, 2014 was $79,000 and $0, respectively. The Company recorded a premium of $57,207 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. In addition, the Company recorded an interest expense of $1,593 and $2,822 for the three months and nine months periods ended September 30, 2015. Convertible Promissory Note 2 (“Note 2”) On May 29, 2015, the Company executed a Convertible Promissory Note (the “Note 2”) of $54,000 and received cash proceeds of $43,500 (the “Draw”) net of disbursing $4,000 in legal fees and $6,500 in accounting fees on June 3, 2015. The principal sum of $54,000 together with any interest on the unpaid balance at the rate of 8% per annum will become due on December 30, 2015. The Note 2 may not be prepaid in whole or in part. No amount of principal or interest on Note 2 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the Note 2 is fully paid and shall be computed n the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this Note 2 and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this Note 2 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this Note 2 in excess of that portion of the Note 2 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 2 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date. The net carrying value of Note 2 at September 30, 2015 and December 31, 2014 was $54,000 and $0, respectively. The Company recorded a premium of $39,103 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. In addition, the Company recorded an interest expense of $1,089 and $1,408 for the three months and nine months periods ended September 30, 2015. Convertible Promissory Note 3 (“Note 3”) On July 1, 2015, the Company executed a Convertible Promissory Note (the “Note 3”) of $53,500 and received cash proceeds of $45,000 on July 14, 2015 (the “Draw”) net of fees of $7,000. The principal sum of $53,500 together with any interest on the unpaid balance at the rate of 6% per annum will become due and payable on July 1, 2016. The Note 3 may be prepaid pursuant to the following schedule: 1) Payment on Day 1-90 will result in 125% of the face value being owed 2) Payment on Day 91-180 will result in 145% of the face value being owed. Interest after the date of issuance shall be computed on the basis of a 365-day year and the actual number of days elapsed. The Holder shall have the right on or after 180 days from the date of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of common stock, as such common stock exists on the issue date, or any shares of capital stock or other securities of the Borrower into which such common stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided, however, that in no event shall the holder be entitled to convert any portion of this Note 3 in excess of that portion of this Note 3 upon conversion of which the sum of (1) the number of shares of common stock beneficially owned by the holder and its affiliates (other than shares of common stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Note 3 or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 3 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the outstanding shares of common stock. The shares to be issued pursuant to conversions are subject to the legal opinion letter, customary and satisfactory to parties hereto as provided by the holder.) The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the lowest Trading Price for the common stock during the fifteen trading day period ending on the latest complete trading day prior to the Conversion Date. The net carrying value of Note 3 at September 30, 2015 was $53,500. The Company recorded a premium of $38,741 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. For the three months ended September 30, 2015, the Company has recognized interest expense of (1) $1,477 related to the amortization of the OID, (2) $677 on the principal balance as it related to this Note 3. Convertible Promissory Note 4 (“Note 4”) On September 8, 2015, the Company executed a Convertible Redeemable Note (the “Note 4”) of a principal amount of $27,000, bearing an interest rate of 8% per annum, both the principal and interest due on September 8, 2016. The Company received cash proceeds of $25,000 upon execution of Note 4. The Note 4 may be prepaid with the following penalties: (i) < 30 days – 118% of principal plus accrued interest, (ii) 31-60 days – 124% of principal plus accrued interest, (iii) 61-90 days – 130% of principal plus accrued interest, (iv) 91-120 days – 136% of principal plus accrued interest, (v) 121-150 days – 142% of principal plus accrued interest, (vi) 151-180 days – 148% of principal plus accrued interest. Interest shall be paid by the Company in common stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for interest shares based on an agreed formula. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice. The Note 4 may not be prepaid after the 180 th The net carrying value of Note 4 at September 30, 2015 was $27,000. The Company recorded a premium of $19,552 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. For the three months ended September 30, 2015, the Company has recognized interest expense of (1) $121 related to the amortization of the OID, and (2) $130 on the principal balance as it related to this Note 4. Convertible Promissory Note 5 (“Note 5”) On September 3, 2015, the Company received $50,000 (the “Draw”) from a third party against a $250,000 Convertible Promissory Note (the “Note 5”) executed on September 8, 2015 (“the Effective Date”). The total consideration receivable against the Note 5 is $225,000, with the Note bearing $25,000 original issue discount (OID). The Company received a cash consideration of $50,000 from the investor upon closing of this Note. The principal sum due to the investor on Note 5 shall be $55,000 which included an OID of $5,000. The Maturity Date of Note 5 is two years from the date of receipt of cash consideration. The Conversion Price is the lesser of $0.05 or 60% of the lowest trade price in the 25 trading days previous to the conversion. Unless otherwise agreed in writing by both parties, at no time will the investor convert any amount of the Note 5 into common stock that would result in the Investor owning more than 4.99% of the common stock outstanding. The Company may repay Note 5 at any time on or before 90 days from the Effective Date, after which the Company may not make further payments on this Note 5 prior to the Maturity Date without written approval from the Investor. If the Company repays a payment of consideration on or before 90 days from the Effective Date of that payment, the interest rate on that payment of consideration shall be 0%. If the Company does not repay a payment of consideration 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 remains payable regardless of time and manner of payment by the Company. The investor 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. All conversions shall be cashless and not require further payment from the investor. If no objection is delivered from the Company to the investor regarding any variable or calculation of the conversion notice within 24 hours of delivery of the conversion notice, the Company shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Company shall deliver the shares from any conversion to the investor within three (3) business days of conversion notice delivery. In connection with the issuance of the Note 5, the Company recorded a loan discount related to the OID in the amount of $5,000 which will be amortized to interest expense over the term of the Draw. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $50,000 which will be amortized to interest expense over the term of the Draw and an initial change in fair value of $62,082 for a total initial embedded conversion option liability of $112,082. For the three months ended September 30, 2015, the Company has recognized interest expense of (i) $144 related to the amortization of the OID, (ii) $1,582 related to the amortization of the embedded conversion option liability discount, and (iii) $380 on the principal balance as it related to this NOTE 5. As a result of above issuance of Note 1, Note 2, Note 3, Note 4 and Note 5, the Company recorded a premium of $154,603 on the convertible Notes payable as the Notes are considered stock settled debt which was charged to interest expense as of September 30, 2015. For the three months and nine months periods ended September 30, 2015, the Company recorded interest expense of (i) $1,741 and $1,741 related to the amortization of OID, (ii) $1,582 and $1,582 related to the amortization of the embedded conversion option liability discount, and (iii) $3,869 and $5,418 on the principal balance as it related to the above Notes. |
8. RELATED PARTY TRANSACTIONS A
8. RELATED PARTY TRANSACTIONS AND BALANCES | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
8. RELATED PARTY TRANSACTIONS AND BALANCES | NOTE 8: RELATED PARTY TRANSACTIONS AND BALANCES At September 30, 2015 and December 31, 2014, advances, net of repayments, made to the Company by the Chief Executive Officer (“Officer”) for its working capital requirements amounted to $100 and $100, respectively. Amounts due to the Officer are unsecured, non-interest bearing and due on demand without specific repayment terms. On June 1, 2013, the Company entered into a business consulting and marketing agreement with its non-executive director for a twelve month period at the rate of $2,500 per month. The agreement terminated on May 31, 2014 and the non-executive director continued to provide services to the Company for adhoc fees. The Company recorded an expense of $22,000 and $77,000 as consulting fees for the three and nine months ended September 30, 2015 as compared to $15,000 and $35,000 for the same periods ended September 30, 2014. On July 1, 2014, the Company entered into a business advisory and consulting agreement for a twelve months term, with a management company related to the Chief Executive Officer. The Company agreed to pay $5,000 monthly cash payment and issued 400,000 shares of its common stock valued at $56,000. The common shares issued are valued at the closing price of stock on the effective date of the consulting agreement and the value is recorded as a prepaid expense to be amortized over the service period. The Company recorded an expense of $0 and $58,000 as consulting expense for the three and nine months ended September 30, 2015 as compared to $29,000 and $29,000 for the same periods in 2014. The Company engages an entity owned by a director of the Company to be the operator on its oil and gas lease properties in Wilson County, Kansas. The Company has recorded an expense of $24,240 and $82,350 for lease operating expenses and administration for these oil and gas leases for the three and nine months ended September 30, 2015. The Company paid the operator $493,582 and $737,156 for lease operating expenses and administration for these oil and gas leases for the same periods ended on September 30, 2014. Amount payable to the entity owned by the director was $16,609 and $26,635 at September 30, 2015 and December 31, 2014, respectively. On August 31, 2014, the Company acquired the remaining 12.5% working interest in Volunteer and Lander Leases in Wilson County, Kansas (Leases), from an entity owned by a director for $125,000 and obtained the 100% working interest in the Leases. The Company paid $15,000 in cash and executed a promissory Note for $110,000 (See NOTE 6). The Company recorded an interest expense of $1,375 and $4,125 for the three and nine months ended September 30, 2015. Interest payable to the director amounted to $5,958 as of September 30, 2015 and $1,833 as of December 31, 2014. The Company recorded director fee expense of $12,000 and $36,000 for the three and nine months ended September 30, 2015 and $12,000 and $36,000 for the three and nine months ended September 30, 2014. Director fees of $69,000 and $44,000 remain payable as of September 30, 2015 and December 31, 2014, respectively. |
9. COMMITMENTS AND CONTINGENCIE
9. COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and contingencies (Note 9) | |
9. COMMITMENTS AND CONTINGENCIES | NOTE 9: COMMITMENTS AND CONTINGENCIES Employment Agreement On January 1, 2014, the Company entered into an employment agreement with its Chief executive Officer to retain his services through the year ended December 31, 2018. As an inducement to enter into the employment agreement, the Company paid a signing bonus of cash payment of $50,000 on January 6, 2014. Pursuant to the terms of the employment agreements, total minimum compensation commitments for years ended December 31, 2014 through 2018 are $240,000, $252,000, $264,600, $277,830 and $291,722, respectively. The Company recorded a compensation expense of $63,000 and $189,000 for the three and nine months ended September 30, 2015 and $60,000 and $180,000 for the same periods ended September 30, 2014. Contingencies On November 12, 2013, a complaint was filed in the District Court of Taylor County, Texas, captioned Brent and Brook Hatchett v. New Western Energy Corporation, Case No. 25,863-B. The complaint asserts breach of contract on the part of the Company relating to a Plan and Agreement of Reorganization (the “Contract”) wherein the Company acquired all of the issued and outstanding capital stock of Royal Texan Energy Co. from the Hatchetts. The Hatchetts are seeking the remaining consideration of 600,000 common shares of New Western Energy Corporation payable to them for the acquisition by New Western Energy Corporation of Royal Texan Energy Co. in addition to general damages. On February 10, 2015, the Company entered into a Settlement Agreement and Mutual Release of Claims (the “Agreement”) with Brent and Brook Hatchett in full settlement of all legal actions and disputes between the parties, including the dismissal with prejudice of the pending lawsuit in Texas. In accordance with the settlement, on March 4, 2015, the Company (a) agreed to cancel 600,000 shares of previously issued but not distributed shares and returning it to authorized but unissued status, thus reducing the Company’s current number of shares outstanding by 600,000 shares (See Note 10), (b) agreed to pay 30% of the proceeds from sale of Royal Texan Energy oil and gas properties in Texas, and (c) agreed to get the $50,000 bond at the railroad commission reduced to $25,000 and thereafter post a bond of $25,000 to release the current bond of Bill Windhem and Brent Hatchett. The Company has not issued and distributed to Hatchetts the remaining 100,000 shares of common stock as of the date of this report. The Company has not posted a bond of $25,000 to release the current bond of Mr. Windhem and Mr. Brent Hatchett. On March 10, 2015, the Company entered into a Securities Purchase Agreement (the “SPA”) with Fodere Titanium Limited for the assignment of a license to a patent for a new process for the extraction of minerals from tailings in the United Sates (the “License) in exchange for the issuance of 5,000,000 shares of the Company’s common stock (the “Shares”). The transaction was never consummated. The License was never assigned and the Shares were never issued. On May 11, 2015, the parties entered into a Cancellation of Agreement and Mutual Releases agreement (the “Agreement”). The Agreement formally cancelled and terminated the SPA and each party to the SPA released the other party from any liabilities relating to entering into the SPA. 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. |
10. STOCKHOLDERS' EQUITY
10. STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
10. STOCKHOLDERS' EQUITY | NOTE 10: STOCKHOLDERS' EQUITY The Company’s authorized common shares and preferred shares at September 30, 2015 were 250,000,000 and 5,000,000 shares respectively, both with a par value of $0.0001 per share. Common Stock Pursuant to the settlement of litigation with Brent and Brook Hatchett on February 10, 2015, the Company cancelled 600,000 shares of previously issued but not distributed shares of its common stock and returning it to authorized but unissued status, thus reducing the Company’s current number of shares outstanding by 600,000 shares (See Note 9). The Company has not issued and distributed to Hatchetts the remaining 100,000 shares of common stock as of the date of this report. The Company agreed to issue to investors 115,000 shares of its common stock, as an inducement to purchase one Unit for $115,000 in NWE Oil & Gas Program #1 LP, a limited partnership ( the “Partnership”) of which the Company is the General Partner and owns 51% of the total Partnership’s interest. During the nine months ended September 30, 2015, the Company issued 345,000 shares of its common stock and valued the shares at the closing price of common stock on the date the investor purchased a Unit in the Partnership. For the three months and nine months periods ended September 30, 2015, the Company recorded the fair value of 345,000 shares of common stock as investment expense of $27,600 and $27,600, respectively, as compared to $0 and $0, respectively, for the same comparable periods ended September 30, 2014. On August 6, 2015, the Company issued 1,270,000 shares of common stock valued at $47,847 in settlement of preferred stock dividend payable to Series A Preferred Stockholders as of June 30, 2015. Preferred stock On April 1, 2014, the Company offered to sell pursuant to a private placement, under a Regulation S offering to non-US investors only, 1,500,000 Units to raise $7,500,000. The minimum investment in this offering is for 5,000 Units for $25,000. Each Unit consists of two (2) shares of Series A 7% Convertible Preferred Stock, par value $0.0001 per share and one (1) redeemable Class F Warrant of the Company to purchase ten (10) shares of common stock. Each share of Series A Preferred Stock pays a 7% annual dividend for the first year ending March 31, 2015 and thereafter, a 10% dividend payable, at the option of the Company, in cash or in the Company’s common stock. Each Class F Warrant entitles the holder thereof to purchase, at any time until the expiration date of March 31, 2017, ten (10) shares of Common Stock at an exercise price of $0.30 per share, subject to adjustment. The Class F Warrants are redeemable by the Company, at a redemption price of $0.05 per Warrant, upon at least 30 days’ prior written notice, commencing six months after the date of this private placement, if the average of the closing bid price of the Common Stock, as reported on the Over-The-Counter or other exchange, shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive business days prior to the notice of redemption. The Units are being offered on a “best effort basis” by the Company through its officers and directors and selected finders and broker/dealers. The Company has sold 127,000 Units and raised $635,000 as of September 30, 2015. The Company has issued 254,000 Series A 7% convertible Preferred Shares, par value $0.0001 per share, and warrants to purchase 2,540,000 shares of common shares at an exercise price of $0.30 per share as of September 30, 2015. The Company has recorded preferred stock dividend expense of $15,832 and $38,893 for Series A Preferred Stockholders for the three months and nine months ended September 30, 2015, and $11,204 and $13,582 for the same comparable periods ended September 30, 2014. On August 6, 2015, Series A Preferred Stockholders agreed to receive 1,270,000 common shares to settle $47,848 of preferred stock dividend payable to them as of June 30, 2015. The Company issued 1,270,000 shares of common stock valued at their fair value of $60,960 to settle the preferred stock dividend payable to Series A Preferred shareholders and recorded a loss of $13,112 upon settlement of preferred stock dividend to Series A Preferred Stockholders for the three months ended September 30, 2015. Series A Preferred Stock dividend payable at September 30, 2015 and December 31, 2014 was $15,832 and $24,786, respectively. On September 25, 2014, the Company offered to sell pursuant to a private placement, under a Regulation S offering to non-US investors only, 400,000 Units to raise $2,000,000. The minimum investment in this offering is for 5,000 Units for $25,000. Each Unit consists of one (1) share of Series B 7% Convertible Preferred Stock, par value $0.0001 per share and one (1) redeemable Class G Warrant of the Company to purchase twenty-five (25) shares of common stock. Each share of Series B Preferred Stock pays a 7% annual dividend for the first year ending September 30, 2015 and thereafter, a 10% dividend payable, at the option of the Company, in cash or in the Company’s common stock. Each Class G Warrant entitles the holder thereof to purchase, at any time until the expiration date of September 30, 2017, twenty-five (25) shares of Common Stock at an exercise price of $0.20 per share, subject to adjustment. The Class G Warrants are redeemable by the Company, at a redemption price of $0.05 per Warrant, upon at least 30 days’ prior written notice, commencing six months after the date of this private placement, if the average of the closing bid price of the Common Stock, as reported on the Over-The-Counter or other exchange, shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive business days prior to the notice of redemption. The Units are being offered on a “best effort basis” by the Company through its officers and directors and selected finders and broker/dealers. The Company has sold 97,500 Units and raised $487,500 as of September 30, 2015. The Company has issued 97,500 Series B 7% convertible Preferred Shares, par value $0.0001 per share, and warrants to purchase 2,437,500 shares of common shares at an exercise price of $0.20 per share as of September 30, 2015. The Company has recorded preferred stock dividend expense of $8,601 and $23,500 for Series B Preferred Stockholders for the three months and nine months ended September 30, 2015, and $0 for the same comparable periods ended September 30, 2014. Series B preferred stock dividend payable at September 30, 2015 and December 31, 2014 was $26,213 and $2,713, respectively. As a result of all stocks, options and warrant issuances as of September 30, 2015, the Company had 77,357,086 shares of common stock issued and outstanding, 351,500 shares of preferred stock issued and outstanding, 3,000,000 stock options convertible into common stock, 7,500,000 Class E Warrants, 8,923,420 Class F Warrants, 2,437,000 Class G Warrants for conversion into common stock. |
11. CONCENTRATIONS
11. CONCENTRATIONS | 9 Months Ended |
Sep. 30, 2015 | |
Risks and Uncertainties [Abstract] | |
11. CONCENTRATIONS | NOTE 11: CONCENTRATIONS Concentration of Operators As of September 30, 2015, the Company used 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, 2015. Concentration of Customer The Company sells its oil product to two separate customers and gas products to two separate customers. 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, 2015. The Company’s bank balances did not exceed FDIC insured amounts as of September 30, 2015. |
12. SUBSEQUENT EVENTS
12. SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
12. SUBSEQUENT EVENTS | NOTE 12: SUBSEQUENT EVENTS On October 21, 2015, the Company converted $12,000 of the debt by issuance of 736,196 shares of its common stock valued at $0.0163 per share. The Conversion Price is 58% of the lowest trade price of $0.028 in the 10 trading days previous to the conversion date. On October 21, 2015, the Company issued 345,000 shares of its common stock to three investors valued at $10,695 at their fair value on the date of issuance. During May 2015 and June 2015, these investors purchased three Units for $345,000 in NWE Oil & Gas Program #1 LP, a limited partnership (Partnership), of which the Company is the General Partner and owns 51% of the total Partnerships interest. The Company recorded $10,695 as additional expense for investing in the Partnership. On October 21, 2015, the Company issued 1,000,000 shares of its common stock valued at $31,000 at their fair value on the date of issuance, to a non-executive director as compensation for negotiating settlement of its debt with a shareholder. |
1. NATURE OF OPERATIONS, BASI18
1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | Basis of presentation The accompanying interim consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at September 30, 2015, and the results of operations and cash flows for the three months and nine months periods ended September 30, 2015. The balance sheet as of December 31, 2014 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 interim consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the consolidated financial statements and the Notes thereto contained in the Company’s 2014 Annual Report filed with the Securities and Exchange Commission on Form 10-K on April 15, 2015. |
Going Concern | 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, and the attainment of profitable operations. At September 30, 2015, the Company had working capital deficit of $1,206,500, incurred a net loss applicable to New Western Energy Corporation common stockholders of $2,431,025 for the nine months ended September 30, 2015 and used cash in operating activities of $872,131. 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. |
2. SUMMARY OF SIGNIFICANT ACC19
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
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 Mineral Extraction Corporation, Royal Texan Energy Co., New Western Operating LLC, New Western Montana Oil & Gas Corporation, New Osage Energy Corporation, the Company’s 51% majority owned subsidiary 2013 NWE Drilling Program 1 LP and NWE Oil & Gas 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” |
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 accounts, Notes and other receivables, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of long-lived assets, oil, gas and mineral properties, stock-based compensation and deferred 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. |
Accounting for Derivatives | Accounting for Derivatives The Company evaluates its convertible debt instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “ Derivatives and Hedging |
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, 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, accounts and notes receivable, accounts payable, Notes payable, warrant liabilities, embedded conversion option liabilities, and amounts due to related parties. Pursuant to ASC 820, Fair Value Measurements and Disclosures Financial Instruments Assets and liabilities measured at fair value on a recurring and non-recurring basis consist of the following at September 30, 2015: Fair Value Measurements at September 30, 2015 Carrying Value at September 30, 2015 (Unaudited) (Level 1) (Unaudited) (Level 2) (Unaudited) (Level 3) (Unaudited) Warrant Liabilities $ 176,555 $ $ $ 176,555 Embedded Conversion Option Liability $ 123,281 $ $ $ 123,281 The following is a summary of activity of Level 3 assets and liabilities for the period ended September 30, 2015: Warrant Liabilities Balance - December 31, 2014 $ 291,003 Additions Change in fair value (114,448 ) Balance September 30, 2015 $ 176,555 Embedded Conversion Option Liability Balance - December 31, 2014 $ Additions 50,000 Initial value of Embedded Conversion Option 62,082 Change in fair value 11,199 Balance September 30, 2015 $ 123,281 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 | 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. |
Oil and Gas Properties | Oil and Gas Properties The Company uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire interest in oil and gas properties, to drill and equip exploratory wells that find proved reserves, to drill and equip development wells and related asset retirement costs are capitalized. Costs to drill exploratory wells, including equipment and facilities are capitalized as part of “Uncompleted Wells, Equipment and Facilities” pending determination of whether the well has found proved reserves. Costs to drill exploratory wells that find proved reserves are reclassified to proved oil and gas properties while costs that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining undeveloped properties are expensed. Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Management may also determine to initiate straight line amortization of a property over the remaining useful life of the lease if management is uncertain as to its ability to recover the asset value but immediate impairment is not indicated. Capitalized costs of producing oil and gas properties (proved or unproved), after considering estimated residual salvage values, are depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives. On the sale or retirement of a complete unit of a proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale of a partial unit of proved property, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in income. On the sale of an entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into consideration the amount of any recorded impairment if the property had been assessed individually. If a partial interest in an unproved property is sold, the amount received is treated as a reduction of the cost of the interest retained. |
Asset Retirement Obligations | Asset Retirement Obligations The Company follows the provisions of ASC 410, “ Asset Retirement and Environmental Obligations” The Company’s asset retirement obligations represent the present value of estimated future costs associated with the plugging and abandonment of oil and gas wells, in accordance with applicable local, state and federal laws. The Company follows FASB ASC Topic 410, “ Asset Retirement and Environmental Obligations” |
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 |
Reclassification of Prior Period Amounts | Reclassification of Prior Period Amounts Certain amounts in comparative periods have been reclassified in the Company’s consolidated financial statements and related footnotes to conform to the current presentation. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," 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 and not implemented that might have a material impact on its financial position or results of operations. Other a |
2. SUMMARY OF SIGNIFICANT ACC20
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Assets and Liabilities Measured at Fair Value on Recurring and NonRecurring Basis | Fair Value Measurements at September 30, 2015 Carrying Value at September 30, 2015 (Unaudited) (Level 1) (Unaudited) (Level 2) (Unaudited) (Level 3) (Unaudited) Warrant Liabilities $ 176,555 $ $ $ 176,555 Embedded Conversion Option Liability $ 123,281 $ $ $ 123,281 |
Level 3 Assets and Liabilities | Warrant Liabilities Balance - December 31, 2014 $ 291,003 Additions Change in fair value (114,448 ) Balance September 30, 2015 $ 176,555 Embedded Conversion Option Liability Balance - December 31, 2014 $ Additions 50,000 Initial value of Embedded Conversion Option 62,082 Change in fair value 11,199 Balance September 30, 2015 $ 123,281 |
3. NONCONTROLLING INTEREST IN21
3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Noncontrolling Interest [Abstract] | |
Noncontrolling Interest in Consolidated Subsidiaries | Balance NCI at December 31, 2013 $ 511,942 Contribution by noncontrolling interest Net loss applicable to noncontrolling interest for nine months ended September 30, 2014 49% (211,170 ) Balance NCI at September 30, 2014 $ 300,772 Balance NCI at December 31, 2014 $ 263,895 Contribution by noncontrolling interest Net loss applicable to noncontrolling interest for nine months ended September 30, 2015 49% (116,098 ) Balance NCI at September 30, 2015 $ 147,797 NWE Oil & Gas Program #1 LP On April 9, 2015, the Company formed an entity NWE Oil & Gas Program #1 LP, a California limited partnership (the “California Limited Partnership”), for the sole purpose of (a) acquiring and drilling, managing, owning, re-working and operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) new oil and gas wells. The Company became the General Partner and shall own 21 Units which shall represent 51% ownership of the California Limited Partnership. The Limited Partners shall own no more than 20 Units which shall represent 49% of the California Limited Partnership. As of June 30, 2015, the Company received cash contributions of $345,000 from three non-affiliated limited partners from the sale of three (3) Units of $115,000 each. The Company is obligated to contribute as General Partner $23,000 in cash for its ownership interest and the Company has not made its cash contribution as of September 30, 2015. The partnership commenced on April 9, 2015 and will continue for a term of 25 years unless sooner terminated in accordance with the terms of the agreement. Pursuant to the terms of the partnership agreement, the net income and distributions of the partnership shall be allocated 70% to the Limited Partners and 30% to the General Partner, until the Limited Partners has received in cash distributions an amount equal to their initial capital plus a 30% return on their original invested capital. Thereafter, net income and distributions shall be allocated 30% to the Limited Partners and 70% to the General Partner. Any net proceeds from the sale of any of the leases owned by the partnership shall be distributed 49% to the Limited Partners in accordance with each Limited Partner’s capital account and 51% to the General Partner. The following provides a summary of activity in the noncontrolling interest (“NCI”) in California Limited Partnership, a consolidated subsidiary account for the nine months ended September 30, 2015: Balance NCI at December 31, 2014 $ Contributions by NCI 345,000 Balance NCI at September 30, 2015 $ 345,000 |
4. OIL AND GAS PROPERTIES (Tabl
4. OIL AND GAS PROPERTIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Extractive Industries [Abstract] | |
Oil and Gas Properties | Name of the Property Type September 30, 2015 (Unaudited) December 31, 2014 Rogers County, OK - Glass Lease Oil $ - $ 221,000 Rogers County, OK - Phillips Lease Oil - 130,000 Rogers County, OK (9) Leases Oil - 378,600 Chautauqua County, KS - B&W Ranch Lease Oil & Gas 75,000 75,000 Chautauqua County, KS - Charles & Nancy Smith Lease Oil & Gas 24,750 24,750 Chautauqua County, KS - Lloyd & Patricia Fields Lease Oil & Gas 14,400 14,400 Chautauqua County, KS - Rinck Lease Oil & Gas 24,750 24,750 Osage County, OK – Branson Leases Oil & Gas 40,000 - Osage County, OK – (3) Renco Leases Oil & Gas 185,000 - Wilson County, KS – Farwell, Puckett & Farwell/Eagle Lease Oil & Gas 251,208 251,208 Doug & Wendy Strauch – Brown Lease, Montana Oil & Gas 5,040 - Nowata County, OK (4) Leases Gas - 35,000 Shackelford County, TX – Terry Heirs Oil 9,722 9,722 629,870 1,164,430 Asset Retirement Obligation 4,563 4,000 Impairment allowance (160,867 ) (919,603 ) Total $ 473,566 $ 248,827 |
6. NOTES PAYABLE (Tables)
6. NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
Notes Payable | September 30, December 31, 2015 2014 (Unaudited) Note payable to a third party, unsecured, bearing interest at 5% per annum, due on May 30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan $ $ 73,750 Stockholder Note payable, secured, bearing interest at 10% per annum, due on October 31, 2015, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans 1,500,000 Note payable to an entity owned by a director, secured, bearing interest at 5% per annum, due on August 31, 2015 110,000 110,000 Note payable to a third party, unsecured, bearing interest at 5% per annum, due on August 30, 2016, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan 55,000 Note payable to a third party, secured, bearing interest at 5% per annum, due on July 3, 2016 115,000 280,000 1,683,750 Notes payable - current portion 280,000 1,683,750 Notes payable long term portion Less: Unamortized debt discount and debt issuance costs (536,841 ) Notes payable current portion, net of debt discounts $ 280,000 $ 1,146,909 |
7. CONVERTIBLE NOTES PAYABLE (T
7. CONVERTIBLE NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Convertible Debt | September 30, 2015 December 31, 2014 (Unaudited) Note payable to a third party, secured, bearing interest at 8% per annum, due December 30, 2015 (Note 1) $ 79,000 $ Note payable to a third party, secured, bearing interest at 8% per annum, due March 3, 2016 (Note 2) 54,000 Note payable to a third party, secured, bearing interest at 6% per annum, due July 1, 2016 (Note 3) 53,500 Note payable to a third party, secured, bearing interest at 8% per annum, due September 8, 2016 (Note 4) 27,000 Note payable to a third party, bearing interest at 12% per annum, due September 9, 2017 (Note 5) 55,000 Total 268,500 Convertible Note payable current portion 213,500 Premium on Note 1, Note 2, Note 3 and Note 4 payable 154,603 Less: Debt discount (7,403 ) Convertible Notes payable, current portion, net of premium and discount 360,700 Convertible Note payable long term portion 55,000 Less: Debt discount (53,274 ) Convertible Notes payable, long term, net of debt discount $ 1,726 $ |
1. NATURE OF OPERATIONS, BASI25
1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Working Capital Deficit | $ (1,173,329) | ||
Net Loss Applicable to New Western Energy Corporation common stockholders | $ 2,399,257 | $ 1,950,764 | |
Limited Partnership Interests for Sale | 20 | ||
Limited Partnership Interest Purchasable | 2.45% | ||
Limited Partnership Purchase Price | $ 115,000 | ||
Limited Partnership Units Sold | 3 | ||
Limited Partnership Interest Sold | 7.35% | ||
Net Cash Used in Operating Activities | $ (872,131) | $ (1,680,632) | |
New Western Montana | |||
Ownership | 51.00% | ||
Forward Energy | |||
Ownership | 49.00% |
2. SUMMARY OF SIGNIFICANT ACC26
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Assets and Liabilities Measured at Fair Value on Recurring and NonRecurring Basis (Details) | Sep. 30, 2015USD ($) |
Warrant Liabilities | $ 176,555 |
Embedded Conversion Option Liability | $ 123,281 |
Level 1 | |
Warrant Liabilities | |
Embedded Conversion Option Liability | |
Level 2 | |
Warrant Liabilities | |
Embedded Conversion Option Liability | |
Level 3 | |
Warrant Liabilities | $ 176,555 |
Embedded Conversion Option Liability | $ 123,281 |
2. SUMMARY OF SIGNIFICANT ACC27
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Level 3 Assets and Liabilities (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Initial value of Embedded Conversion Option | $ (102,184) | $ 304,802 | $ 41,167 | $ 1,131,241 |
Balance, Ending | (1,173,329) | (1,173,329) | ||
Warrant [Member] | ||||
Balance, Beginning | $ 291,003 | |||
Additions | ||||
Change in fair value | $ (114,448) | |||
Balance, Ending | 176,555 | $ 176,555 | ||
Options Held [Member] | ||||
Balance, Beginning | ||||
Additions | $ 50,000 | |||
Initial value of Embedded Conversion Option | 62,082 | |||
Change in fair value | 11,199 | |||
Balance, Ending | $ 123,281 | $ 123,281 |
2. SUMMARY OF SIGNIFICANT ACC28
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | Sep. 30, 2015USD ($)shares |
Accounting Policies [Abstract] | |
Warrants Outstanding, Common Shares | 18,860,920 |
Stock Options Outstanding | 3,000,000 |
Reduction of Assets and Liabilities, Recent Accounting Pronouncements | $ | $ (12,000) |
3. NONCONTROLLING INTEREST IN29
3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES - Noncontrolling Interest in Consolidated Subsidiaries (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2013 | |
Beginning Balance | $ 263,895 | ||
Contribution by noncontrolling interest member | $ 650,000 | ||
Ending Balance | $ 492,797 | ||
2013 NWE Drilling Program 1 LP | |||
Beginning Balance | $ 511,942 | ||
Contribution by noncontrolling interest member | |||
Net loss applicable to noncontrolling interest | $ (211,170) | ||
Ending Balance | $ 147,797 | $ 300,772 | $ 511,942 |
NWE Oil and Gas Program 1 LP | |||
Beginning Balance | |||
Contribution by noncontrolling interest member | $ 345,000 | ||
Ending Balance | $ 345,000 |
3. NONCONTROLLING INTEREST IN30
3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2014 | Mar. 18, 2013 | |
Cash Funding received | $ 650,000 | ||||||
Contribution to partnership | 6,500 | ||||||
Fixed fee revenue per month | $ 250 | ||||||
Noncontrolling Interest of Limited Partner | $ 491,536 | $ 491,536 | $ 263,895 | ||||
Limited Partnership Interests for Sale | 20 | 20 | |||||
Limited Partnership Interest Purchasable | 2.45% | ||||||
Limited Partnership Purchase Price | $ 115,000 | $ 115,000 | |||||
Limited Partnership Units Sold | 3 | ||||||
Limited Partnership Interest Sold | 7.35% | ||||||
2013 NWE Drilling Program 1 LP | |||||||
Ownership | 51.00% | ||||||
Cash Funding received | |||||||
Loss on partnership | $ (62,504) | $ (83,114) | $ (236,935) | $ (430,960) | |||
Allocation of Limited Partnership's Loss | 30,627 | $ 40,725 | 116,098 | $ 211,170 | |||
Noncontrolling Interest of Limited Partner | $ 147,797 | 147,797 | |||||
NWE Oil and Gas Program 1 LP | |||||||
Cash Funding received | $ 345,000 | ||||||
Limited Partnership Interests for Sale | 20 | 20 | |||||
Limited Partnership Interest Purchasable | 2.45% | ||||||
Limited Partnership Purchase Price | $ 115,000 | $ 115,000 | |||||
Limited Partnership Units Sold | 3 | ||||||
Limited Partnership Interest Sold | 7.35% |
4. OIL AND GAS PROPERTIES - Oil
4. OIL AND GAS PROPERTIES - Oil and Gas Properties (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Unproved Properties | $ 629,870 | $ 1,164,430 |
Asset Retirement Obligation | 4,563 | 4,000 |
Impairment allowance | 160,867 | 919,603 |
Unproved Properties, Net | $ 473,566 | 244,827 |
Rogers County - Glass Lease | ||
Type | Oil | |
Unproved Properties | 221,000 | |
Rogers County - Phillips Lease | ||
Type | Oil | |
Unproved Properties | 130,000 | |
Rogers County - Nine Leases | ||
Type | Oil | |
Unproved Properties | 378,600 | |
Chautauqua County BW Ranch Lease | ||
Type | Oil & Gas | |
Unproved Properties | $ 75,000 | 75,000 |
Chautauqua County Charles and Nancy Smith Lease | ||
Type | Oil & Gas | |
Unproved Properties | $ 24,750 | 24,750 |
Chautauqua County Lloyd and Patricia Fields Lease | ||
Type | Oil & Gas | |
Unproved Properties | $ 14,400 | 14,400 |
Chautauqua County Rinck Lease | ||
Type | Oil & Gas | |
Unproved Properties | $ 24,750 | 24,750 |
Wilson County Farwell Puckett and Farwell Eagle Lease | ||
Type | Oil & Gas | |
Unproved Properties | $ 251,208 | $ 251,208 |
Doug and Wendy Strauch Montana Lease | ||
Type | Oil | |
Unproved Properties | $ 5,040 | |
Nowata County Four Leases | ||
Type | Gas | |
Unproved Properties | $ 35,000 | |
Shackelford County Terry Heirs Lease | ||
Type | Oil | |
Unproved Properties | $ 9,722 | $ 9,722 |
Osage County Branson Leases | ||
Type | Oil & Gas | |
Unproved Properties | $ 40,000 | |
Osage County 3 Renco Leases | ||
Type | Oil & Gas | |
Unproved Properties | $ 185,000 |
4. OIL AND GAS PROPERTIES (Deta
4. OIL AND GAS PROPERTIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended |
Mar. 31, 2015 | Sep. 30, 2015 | |
Doug and Wendy Strauch Montana Lease | ||
Payment to Acquire Oil and Gas Property | $ 4,000 | $ 1,040 |
Rogers County - Nine Leases | ||
Proceeds from Sale of Oil and Gas Property | 100,000 | |
Gain on Sale of Oil and Gas Property | (33,886) | |
Osage County Branson Leases | ||
Payment to Acquire Oil and Gas Property | 40,000 | |
Osage County 3 Renco Leases | ||
Payment to Acquire Oil and Gas Property | $ 185,000 |
5. NOTE RECEIVABLE (Details Nar
5. NOTE RECEIVABLE (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Dec. 31, 2014 | Mar. 30, 2014 | |
Receivables [Abstract] | |||
Short Term Advance | $ 65,000 | $ 75,000 | |
Settlement Payment | $ 38,336 |
6. NOTES PAYABLE - Notes Payabl
6. NOTES PAYABLE - Notes Payable (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | |
Notes Payable, Gross | $ 280,000 | $ 1,683,750 | |
Notes payable - Current Portion | $ 280,000 | $ 1,683,750 | |
Notes payable - Long term Portion | |||
Less: Unamortized discount and debt issuance costs | $ (536,841) | ||
Notes Payable, Net | $ 280,000 | 1,146,909 | |
Third Party Unsecured 1 | |||
Notes Payable, Gross | [1] | 73,750 | |
Stockholder Note | |||
Notes Payable, Gross | [2] | 1,500,000 | |
Entity Owned by Director | |||
Notes Payable, Gross | [3] | $ 110,000 | $ 110,000 |
Third Party Unsecured 2 | |||
Notes Payable, Gross | [4] | 55,000 | |
Secured Note | |||
Notes Payable, Gross | [5] | $ 115,000 | |
[1] | Note payable to a third party, unsecured, bearing interest at 5% per annum, due on May 30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan | ||
[2] | Stockholder note payable, secured, bearing interest at 10% per annum, due on October 31, 2015, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans | ||
[3] | Note payable to an entity owned by a director, secured, bearing interest at 5% per annum, due on August 31, 2015 | ||
[4] | Note payable to a third party, unsecured, bearing interest at 5% per annum, due on September 30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan | ||
[5] | Note payable to a third party, secured, bearing interest at 5% per annum, due on July 3, 2016 |
6. NOTES PAYABLE (Details Narra
6. NOTES PAYABLE (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Payables and Accruals [Abstract] | ||||
Interest Expense | $ 36,063 | $ 38,888 | $ 116,467 | $ 115,716 |
7. CONVERTIBLE NOTES PAYABLE -
7. CONVERTIBLE NOTES PAYABLE - Convertible Debt (Details) - USD ($) | Sep. 30, 2015 | May. 29, 2015 | Mar. 26, 2015 | Dec. 31, 2014 |
Convertible notes payable - current | $ 360,700 | |||
Debt Discount | $ (536,841) | |||
Note 1 | ||||
Convertible notes payable - current | $ 79,000 | |||
Premium on convertible notes payable | 96,310 | $ 57,207 | ||
Note 2 | ||||
Convertible notes payable - current | 54,000 | |||
Premium on convertible notes payable | 96,310 | $ 39,103 | ||
Note 3 | ||||
Convertible notes payable - current | 53,500 | |||
Premium on convertible notes payable | 7,000 | |||
Note 4 | ||||
Convertible notes payable - current | 27,000 | |||
Premium on convertible notes payable | 2,000 | |||
Note 5 | ||||
Convertible notes payable - current | 55,000 | |||
Premium on convertible notes payable | 5,000 | |||
Convertible Debt [Member] | ||||
Convertible notes payable - current | 213,500 | |||
Premium on convertible notes payable | 154,603 | |||
Debt Discount | 53,274 | |||
Notes payable, net of premium | $ 1,726 |
7. CONVERTIBLE DEBT (Details Na
7. CONVERTIBLE DEBT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2015 | Sep. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | May. 29, 2015 | Mar. 26, 2015 | Dec. 31, 2014 | |
Interest Expense | $ 36,063 | $ 38,888 | $ 116,467 | $ 115,716 | |||||
Note 1 | |||||||||
Promissory Note, Draw | $ 75,000 | ||||||||
Promissory Note, Legal Fees | $ 4,000 | ||||||||
Promissory Note, Principal Sum | $ 79,000 | ||||||||
Promissory Note, Interest Rate | 8.00% | ||||||||
Net Carrying Value | 79,000 | $ 79,000 | 79,000 | $ 0 | |||||
Premium | 96,310 | 96,310 | 96,310 | $ 57,207 | |||||
Interest Expense | 1,593 | 2,822 | |||||||
Promissory Note Disclosure | The NOTE 1 may not be prepaid in whole or in part. No amount of principal or interest on NOTE 1 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the NOTE 1 is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this NOTE 1 and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this NOTE 1 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this NOTE 1 in excess of that portion of the NOTE 1 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this NOTE 1 with respect to which the determination of this provision is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date. | ||||||||
Note 2 | |||||||||
Promissory Note, Draw | 43,500 | ||||||||
Promissory Note, Legal Fees | 10,500 | ||||||||
Promissory Note, Principal Sum | $ 54,000 | ||||||||
Promissory Note, Interest Rate | 8.00% | ||||||||
Net Carrying Value | 54,000 | 54,000 | 54,000 | $ 0 | |||||
Premium | 96,310 | 96,310 | 96,310 | $ 39,103 | |||||
Interest Expense | $ 1,089 | 1,408 | |||||||
Promissory Note Disclosure | The NOTE 2 may not be prepaid in whole or in part. No amount of principal or interest on NOTE 2 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the NOTE 2 is fully paid and shall be computed n the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this NOTE 2 and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this NOTE 2 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this NOTE 2 in excess of that portion of the NOTE 2 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this NOTE 2 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date. | ||||||||
Note 3 | |||||||||
Promissory Note, Draw | 45,000 | ||||||||
Promissory Note, Legal Fees | 7,000 | ||||||||
Promissory Note, Principal Sum | $ 53,500 | $ 53,500 | $ 53,500 | ||||||
Promissory Note, Interest Rate | 6.00% | 6.00% | 6.00% | ||||||
Premium | $ 7,000 | $ 7,000 | $ 7,000 | ||||||
Initial Embedded Conversion Feature | 73,963 | ||||||||
Interest Expense | $ 1,477 | ||||||||
Promissory Note Disclosure | The Note 3 may be prepaid pursuant to the following schedule: 1) Payment on Day 1-90 will result in 125% of the face value being owed 2) Payment on Day 91-180 will result in 145% of the face value being owed. Interest after the date of issuance shall be computed on the basis of a 365-day year and the actual number of days elapsed. The Holder shall have the right on or after 180 days from the date of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of common stock, as such common stock exists on the issue date, or any shares of capital stock or other securities of the Borrower into which such common stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided, however, that in no event shall the holder be entitled to convert any portion of this Note 3 in excess of that portion of this Note 3 upon conversion of which the sum of (1) the number of shares of common stock beneficially owned by the holder and its affiliates (other than shares of common stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Note 3 or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 3 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the outstanding shares of common stock. The shares to be issued pursuant to conversions are subject to the legal opinion letter, customary and satisfactory to parties hereto as provided by the holder.) The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the lowest Trading Price for the common stock during the fifteen trading day period ending on the latest complete trading day prior to the Conversion Date. The net carrying value of Note 3 at September 30, 2015 was $53,500. The Company recorded a premium of $38,741 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. | ||||||||
Note 4 | |||||||||
Promissory Note, Draw | $ 25,000 | ||||||||
Promissory Note, Legal Fees | 2,000 | ||||||||
Promissory Note, Principal Sum | $ 27,000 | $ 27,000 | $ 27,000 | ||||||
Promissory Note, Interest Rate | 8.00% | 8.00% | 8.00% | ||||||
Premium | $ 2,000 | $ 2,000 | $ 2,000 | ||||||
Initial Embedded Conversion Feature | 59,671 | ||||||||
Interest Expense | $ 121 | ||||||||
Promissory Note Disclosure | The Note 4 may be prepaid with the following penalties: (i) < 30 days – 118% of principal plus accrued interest, (ii) 31-60 days – 124% of principal plus accrued interest, (iii) 61-90 days – 130% of principal plus accrued interest, (iv) 91-120 days – 136% of principal plus accrued interest, (v) 121-150 days – 142% of principal plus accrued interest, (vi) 151-180 days – 148% of principal plus accrued interest. Interest shall be paid by the Company in common stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for interest shares based on an agreed formula. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice. The Note 4 may not be prepaid after the 180 th The net carrying value of Note 4 at September 30, 2015 was $27,000. The Company recorded a premium of $19,552 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. For the three months ended September 30, 2015, the Company has recognized interest expense of (1) $121 related to the amortization of the OID, and (2) $130 on the principal balance as it related to this Note 4. | ||||||||
Note 5 | |||||||||
Promissory Note, Draw | $ 50,000 | ||||||||
Promissory Note, Legal Fees | 25,000 | ||||||||
Promissory Note, Principal Sum | 225,000 | 225,000 | 225,000 | ||||||
Premium | 5,000 | $ 5,000 | $ 5,000 | ||||||
Initial Embedded Conversion Feature | 112,082 | ||||||||
Interest Expense | $ 144 | ||||||||
Promissory Note Disclosure | The Company may repay Note 5 at any time on or before 90 days from the Effective Date, after which the Company may not make further payments on this Note 5 prior to the Maturity Date without written approval from the Investor. If the Company repays a payment of consideration on or before 90 days from the Effective Date of that payment, the interest rate on that payment of consideration shall be 0%. If the Company does not repay a payment of consideration 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 remains payable regardless of time and manner of payment by the Company. The investor 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. All conversions shall be cashless and not require further payment from the investor. If no objection is delivered from the Company to the investor regarding any variable or calculation of the conversion notice within 24 hours of delivery of the conversion notice, the Company shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Company shall deliver the shares from any conversion to the investor within three (3) business days of conversion notice delivery. |
8. RELATED PARTY TRANSACTIONS38
8. RELATED PARTY TRANSACTIONS AND BALANCES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Related Party Transactions [Abstract] | |||||
Advances to the Company, Working Capital | $ 100 | $ 100 | |||
Professional Fees | $ 0 | $ 29,000 | 58,000 | $ 29,000 | |
Lease Operating Expenses | 24,240 | 493,582 | 82,350 | 737,156 | |
Consulting Monthly Compensation | $ 5,000 | ||||
Consulting, Compensation, Shares | 400,000 | ||||
Consulting Compensation, Value of Shares Issued | $ 56,000 | ||||
Consulting Compensation, Payable | 10,000 | ||||
Property Acquired from Entity Owned by Director, Cash | 15,000 | ||||
Property Acquired from Entity Owned by Director, Note | 110,000 | ||||
Director, Compensation | 16,609 | 26,635 | |||
Director Fee Expense | 12,000 | $ 12,000 | 36,000 | $ 36,000 | |
Director Fee Expense Payable | $ 69,000 | 69,000 | $ 35,000 | ||
Periodic Payment | $ 2,500 |
9. COMMITMENTS AND CONTINGENC39
9. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Jan. 06, 2014 | |
Commitments and contingencies (Note 9) | ||||||
Compensation Expense | $ 63,000 | $ 60,000 | $ 189,000 | $ 180,000 | ||
Employment Signing Bonus | $ 50,000 | |||||
Total Minimum Compensation Commitments, Current Year | $ 240,000 | |||||
Total Minimum Compensation Commitments, Year Two | 252,000 | |||||
Total Minimum Compensation Commitments, Year Three | 264,600 | |||||
Total Minimum Compensation Commitments, Year Four | 277,830 | |||||
Total Minimum Compensation Commitments, Year Five | $ 291,722 | |||||
Contingency Detail | On November 12, 2013, a complaint was filed in the District Court of Taylor County, Texas, captioned Brent and Brook Hatchett v. New Western Energy Corporation, Case No. 25,863-B. The complaint asserts breach of contract on the part of the Company relating to a Plan and Agreement of Reorganization (the “Contract”) wherein the Company acquired all of the issued and outstanding capital stock of Royal Texan Energy Co. from the Hatchetts. The Hatchetts are seeking the remaining consideration of 600,000 common shares of New Western Energy Corporation payable to them for the acquisition by New Western Energy Corporation of Royal Texan Energy Co. in addition to general damages. On February 10, 2015, the Company entered into a Settlement Agreement and Mutual Release of Claims (the “Agreement”) with Brent and Brook Hatchett in full settlement of all legal actions and disputes between the parties, including the dismissal with prejudice of the pending lawsuit in Texas. In accordance with the settlement, on March 4, 2015, the Company (a) agreed to cancel 600,000 shares of previously issued but not distributed shares and returning it to authorized but unissued status, thus reducing the Company’s current number of shares outstanding by 600,000 shares (See Note 10), (b) agreed to pay 30% of the proceeds from sale of Royal Texan Energy oil and gas properties in Texas, and (c) agreed to get the $50,000 bond at the railroad commission reduced to $25,000 and thereafter post a bond of $25,000 to release the current bond of Bill Windhem and Brent Hatchett. The Company has not issued and distributed to Hatchetts the remaining 100,000 shares of common stock as of the date of this report. The Company has not posted a bond of $25,000 to release the current bond of Mr. Windhem and Mr. Brent Hatchett. | |||||
Securities Purchase Agreement, Shares | 5,000,000 |
10. STOCKHOLDERS EQUITY (Detail
10. STOCKHOLDERS EQUITY (Details Narrative) - USD ($) | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Preferred Stock Par Value | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Preferred Stock Shares Authorized | 5,000,000 | 5,000,000 | 5,000,000 | 5,000,000 | 5,000,000 |
Preferred Stock Shares Issued | 351,500 | 254,000 | 351,500 | 294,100 | 0 |
Preferred Stock Shares Outstanding | 351,500 | 254,000 | 351,500 | 294,100 | 0 |
Common Stock Par Value | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 |
Common Stock Shares Authorized | 250,000,000 | 250,000,000 | 250,000,000 | 250,000,000 | 250,000,000 |
Common Stock Shares Issued | 77,357,086 | 74,806,448 | 75,742,086 | 76,242,086 | 72,185,866 |
Common Stock Shares Outstanding | 77,357,086 | 74,806,448 | 75,742,086 | 76,242,086 | 72,185,866 |
Units Offered in Private Placement | 1,500,000 | ||||
Goal of Private placement | $ 7,500,000 | ||||
Minimum Investment, Units | 5,000 | ||||
Minimum Investment, Value | $ 25,000 | ||||
Private Placement, Unit Description | Each Unit consists of two (2) shares of Series A 7% Convertible Preferred Stock, par value $0.0001 per share and one (1) redeemable Class F Warrant of the Company to purchase ten (10) shares of common stock. Each share of Series A Preferred Stock pays a 7% annual dividend for the first year ending March 31, 2015 and thereafter, a 10% dividend payable, at the option the Company, in cash or in the Company’s common stock. | ||||
Exercise Price | $ 0.30 | ||||
Redemption Price | $ 0.05 | ||||
Shares Sold in Private Placement | 127,000 | ||||
Consideration Received during Private Placement | $ 635,000 | ||||
Stock Options Outstanding, Shares | 3,000,000 | 3,000,000 | |||
Limited Partnership Interests for Sale | 20 | ||||
Limited Partnership Interest Purchasable | 2.45% | ||||
Limited Partnership Purchase Price | $ 115,000 | ||||
Limited Partnership Units Sold | 3 | ||||
Limited Partnership Interest Sold | 7.35% | ||||
Class E Warrants [Member] | |||||
Stock Options Outstanding, Shares | 7,500,000 | ||||
Class F Warrants [Member] | |||||
Stock Options Outstanding, Shares | 8,923,420 |
12. SUBSEQUENT EVENTS (Details
12. SUBSEQUENT EVENTS (Details Narrative) | 3 Months Ended |
Nov. 13, 2015USD ($)shares | |
Debt Converted, Value | $ 12,000 |
Debt Converted, Shares | shares | 736,196 |
Debt Converted, Info | The Conversion price is 58% of the lowest trade price of $0.028 in the 10 trading days previous to the conversion date. |
Investors | |
Stock Issued, Shares | shares | 345,000 |
Stock Issued, Face Value | $ 10,695 |
Units Sold, Value | 345,000 |
Additional Expense from Investment | $ 10,695 |
Non Executive Director | |
Stock Issued, Shares | shares | 1,000,000 |
Stock Issued, Face Value | $ 31,000 |