| Organization and Summary of Significant Accounting Policies | Organization and
business West
Texas Resources, Inc. (the “Company”) was incorporated under the laws of Nevada on December 9, 2010 under the name
Texas Resources Energy, Inc. On June 30, 2011, the Company changed its name to West Texas Resources, Inc. The Company intends
to engage in the acquisition, exploration and development of oil and gas properties in North America. From its inception, the
Company has devoted its activities to developing a business plan, raising capital and acquiring operating assets. On August 5,
2016, the Company formed a wholly owned subsidiary in the State of Texas, WTXR Operating (Texas) Inc., to operate oil and gas
wells in Texas. This subsidiary was incorporated to operate oil and gas wells in which West Texas Resources, Inc. owns interests.
The subsidiary began the operation of several leases in South Texas and a lease in East Texas, with operations beginning in December
2016. Going
concern The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States (GAAP) that contemplate continuation of the Company as a going concern. The Company has not earned any significant
revenues since inception. During the nine months ended June 30, 2017 and 2016, the Company incurred a net operating loss of $242,488
and $139,971, respectively. In addition, the Company had an accumulative deficit of $2,847,208 and $2,604,720, as of June 30,
2017 and September 30, 2016, respectively. These factors raise substantial doubt about the Company’s ability to continue
as a going concern. The
Company will require up to $1 million of additional capital in order to fund its proposed operations over the next 12 months.
Management plans to continue to seek sources of financing on favorable terms; however, there are no assurances that any such financing
can be obtained on favorable terms, if at all. Management expects to monitor and control the Company’s operating costs until
cash is available through financing or operating activities. There are no assurances that the Company will be successful in achieving
these plans. The Company anticipates that losses will continue until such time, if ever, as the Company is able to generate sufficient
revenues to support its operations. Unaudited
Interim Financial Information We
have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange
Commission (the ‘SEC”) for interim financial reporting. These consolidated financial statements are unaudited and,
in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation
of our consolidated balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods
presented are not necessarily indicative of the results that may be expected for 2017 due to seasonal and other factors. Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of
the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements
and accompanying notes in Item 8 of Part VI, “ Financial Statements and Supplementary Data,” of our 2016 Annual Report
on Form 10-K. Oil
and gas properties The
Company uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire mineral interests
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 that do not find proved reserves, geological
and geophysical costs, and costs of carrying and retaining unproved 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. Other unproved properties are amortized based on the Company's
experience of successful drilling and average holding period. Capitalized costs of producing oil and gas properties, after considering
estimated residual salvage values, are depreciated and depleted by the unit-of-production method. 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. Impairment
of long-lived assets The
Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360-10-35, Impairment or Disposal
of Long-Lived Assets Asset
retirement obligations ASC
410-20, Asset Retirement Obligations In general, our future
asset retirement obligations relate to future costs associated with plugging and abandoning our oil and natural gas wells, removing
equipment and facilities from leased acreage, and returning land to its original condition. The fair value of a liability for
an asset retirement obligation is recorded in the period in which it is incurred, discounted to its present value using our credit-adjusted-risk-free
interest rate, and a corresponding amount capitalized by increasing the carrying amount of the related long-lived asset. The liability
is accreted each period, and the capitalized cost is depreciated over the useful life of the related asset. Revisions to estimated
retirement obligations will result in an adjustment to the related capitalized asset and corresponding liability. If the liability
for an oil or natural gas well is settled for an amount other than the recorded amount, the difference is recorded to current
period earnings, unless significant. Cash,
cash equivalents, and other cash flow statement supplemental information Cash
is commonly considered to consist of currency and demand deposits. The Company considers all liquid investments with an original
maturity of three months or less that are readily convertible into cash to be cash equivalents. The Company places its cash with
high credit quality financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation
(FDIC) up to $250,000. The Company performs ongoing evaluations of these institutions to limit its concentration of risk exposure.
Management believes this risk is not significant due to the financial strength of the financial institutions utilized by the Company. Use
of estimates The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Management
believes its estimates and assumptions are reasonable; however, such estimates and assumptions are subject to a number of risks
and uncertainties that may cause actual results to differ materially from such estimates. Income
taxes The
Company reports certain expenses differently for financial and tax reporting purposes and, accordingly, provides for the related
deferred taxes. Income taxes are accounted for under the liability method in accordance with ASC 740, Income Taxes. Management
has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns
are more likely than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax
authorities from 2013 to the present, generally for three years after they are filed. The
Company has not filed its income tax return for fiscal year 2016. The Company plans to file this tax return in the third quarter
2017. The Company believes that it should not have a material impact on the financials because the Company did not have any tax
liabilities due to the net loss incurred in fiscal year 2016. Basic
and diluted net income (loss) per share Basic
net income (loss) per share is based upon the weighted average number of common shares outstanding. Diluted net income (loss)
per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution
is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the
beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common
stock at the average market price during the period. For the nine months ended June 30, 2017 and 2016, all common stock equivalents
were anti-dilutive. Stock-based
payments Compensation costs
for all share-based awards are measured based on the grant date fair value and are recognized over the vesting period. Expense
related to awards with performance conditions is recognized when it becomes probable that the performance conditions will be met,
at which time the grant date fair value will be amortized over any requisite service period, net of estimated pre-vesting forfeitures. Revenue recognition In
accordance with the requirements ASC topic 605 “Revenue Recognition”, revenues are recognized at such time as (1)
persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller’s
price to the buyer is fixed or determinable and (4) collectability is reasonably assured. Fair
value of financial instruments The
accounting standards regarding fair value of financial instruments and related fair value measurements defines financial instruments
and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount
of cash and other current assets and liabilities to approximate their fair values because of the short period of time between
the origination of such instruments and their expected realization. The
Company has also adopted ASC 820-10 which defines fair value, establishes a three-level valuation hierarchy for disclosures of
fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
· Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets
or liabilities in active markets.
· Level 2 inputs to the
valuation methodology include quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the assets or liability, either directly
or indirectly, for substantially the full term of the financial instruments.
· Level
3 inputs to the valuation methodology are unobservable and significant to the fair value. As
of June 30, 2017 and September 30, 2016, the Company did not identify any assets or liabilities that are required to be presented
on the balance sheet at fair value in accordance with ASC 820-10. New Accounting Pronouncements In August 2016, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity
in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic
230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal
years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including
adoption in an interim period. We adopted this ASU in 2016 and the implementation did not have a material impact on our financial
position or statement of operations. In March 2016, the FASB
issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718) (“ASU 2016-09”), which simplified certain
aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification
in the statement of cash flows. ASU 2016-09 will be effective for the Company beginning in its first quarter of 2018. We are currently
evaluating the impact of adopting the new stock compensation standard on our consolidated financial statements. In August 2014, the
FASB issued Accounting Standards Update No. 2014-15, “ Presentation of Financial Statements – Going Concern” Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” substantial doubt, In May 2014, the FASB
issued ASU No. 2014-09 “ Revenue from Contracts with Customers “Revenue
Recognition” “Other Assets and Deferred Costs—Contracts
with Customers”. |
