NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
|
1.
|
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., a Texas corporation.
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.
Basis of presentation
The accompanying unaudited financial statements
have been prepared in accordance with accounting principles generally accepted in the United States (U.S.) for interim financial
information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and
Exchange Commission (“SEC”) and reflect all adjustments, consisting of normal recurring adjustments and other adjustments,
which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company,
for the respective periods presented. The results of operations for an interim period are not necessarily indicative of the results
that may be expected for any other interim period or the year as a whole. The accompanying unaudited financial statements should
be read in conjunction with the financial statements and notes for the year ended September 30, 2015.
Going concern
The accompanying 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 six months ended
March 31, 2016 and 2015, the Company incurred a net loss of $106,993 and $522,987, respectively. In addition, the Company had an
accumulative deficit of $2,487,325 and $2,380,332, as of March 31, 2016 and September 30, 2015, 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.
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.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
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
. In accordance
with ASC 360-10-35, long-lived assets are reviewed for events of changes in circumstances, which indicate that their carrying value
may not be recoverable.
Asset retirement obligations
ASC 410-20,
Asset Retirement Obligations
,
clarifies that a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional
on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity
is unconditional even though uncertainty exists about the timing and/or method of settlement. ASC 410-20 requires a liability to
be recognized for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably
estimated.
Except for the Eastland County investment,
the asset retirement obligations for the other properties are recognized by the operators of these properties and deducted against
the revenue interest of the Company.
Cash, cash equivalents, and other cash
flow statement supplemental information
Cash is commonly considered to consist
of currency and demand in 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 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. Accordingly, actual results could differ from
those 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 2012 to the present,
generally for three years after they are filed.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
The Company has not filed its income
tax returns for fiscal years 2012 to 2014. The Company plans to file these tax returns in second calendar quarter of 2016.
The Company believes that it should not have any material impact on the financials because the Company did not have any tax
liabilities due to net loss incurred for these years.
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 six months ended March 31, 2016 and 2015, 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. The Company has no awards with
market or performance conditions. Excess tax benefits will be recognized as an addition to additional paid-in-capital.
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 March 31, 2016 and September 30,
2015, 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.
Certain reclassifications have been made
to the prior year financial statements in order for them to be in conformity with the current year presentation.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
Recent accounting pronouncement
In May 2014, the FASB issued ASU No. 2014-09
" Revenue from Contracts with Customers " (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic
605, “Revenue Recognition”, including most industry-specific revenue recognition guidance throughout the Industry Topics
of the Codification. In addition, the amendments create a new Subtopic 340-40, “Other Assets and Deferred Costs—Contracts
with Customers”. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. For a public entity, the amendments in this Update are effective for annual reporting
periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted.
Management is currently evaluating the impact this guidance will have on Company’s financial position and statement of operations.
In June 2014, the FASB issued ASU No. 2014-12,
"Compensation - Stock Compensation (Topic 718)," which makes amendments to the codification topic 718, "Accounting
for Share-Based Payments.” when the terms of an award provide that a performance target could be achieved after the requisite
service period. The new guidance becomes effective for annual reporting periods beginning after December 15, 2015, early adoption
is permitted. Management is currently evaluating the impact this guidance will have on our financial position and results
of operations.
In August 2014, the FASB issued Accounting
Standards Update ("ASU") No. 2014-15, “Presentation of Financial Statements – Going Concern”, Subtopic
205-40, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The amendments
in this ASU apply to all entities and require management to assess an entity’s ability to continue as a going concern by
incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments
(1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods,
(3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when
substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and
other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date
that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual
period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Management
is currently evaluating the impact this guidance will have on Company’s financial position and results of operations.
|
2.
|
Oil and Gas Properties
|
|
Port Hudson Field, Baton Rouge Parish,
Louisiana
Effective April 1, 2013, the Company acquired
a 7.24625% working interest in the oil and gas leases, wells and attendant production in the Port Hudson field, Baton Rouge Parish,
Louisiana, for a total consideration of $702,900. The Company’s working interest was subject to certain overriding royalty
interests, subject to which it had a 5.65158% net revenue interest in the Port Hudson Field.
On April 5, 2014, the Company entered into
an agreement with EnTek Partners, LLC for the sale of 44.1% of the Company’s working interest in the Port Hudson field for
the total consideration of $290,000, less any payments received by the Company for production from the Port Hudson field occurring
after January 1, 2014. Pursuant to the Company’s agreement with EnTek Partners, the Company sold to EnTek an undivided 3.1956%
of 8/8
th
working interest (2.4926% net revenue interest) out of the working interests in the Port Hudson field owned
by the Company at that time. The transactions under the Entek Partners agreement closed on April 16, 2014, with an effective date
of January 1, 2014. After giving effect to the sale, the Company continued to hold a 4.0506% working interest (3.1595% net revenue
interest) in Port Hudson field. During the year ended September 30, 2014, the Company recorded a loss on sale of the working interest
of $19,983.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
Pursuant to the same agreement, EnTek Partners
had also agreed to provide to the Company $275,000 in non-recourse financing to pay for its share of a dual recompletion in the
D-1 well at West Cam 225 property in exchange for its agreement to provide EnTek Partners with 75% of the net profits derived by
the Company from the West Cam 225 property until such time as EnTek Partners has recouped 100% of the recompletion costs advanced
on the Company’s behalf and 50% of the net profits thereafter.
West Cam 225, Louisiana
On August 16, 2013, the Company entered
into an agreement with Enovation Resources, LLC to purchase a 10.0167% working interest (7.2120% net revenue interest) in an offshore
oil and gas field, known as West Cam 225, located in the shallow waters of the Gulf of Mexico near Cameron, Louisiana. The Company’s
purchase price for the working interest was $50,000. In addition to the purchase price, the Company paid $230,459 as advance for
costs for development.
Sunshine Prospect, Landry Parish, Louisiana
On August 1, 2014, the Company entered
into an agreement with Restech Resources, LLC to purchase a 15% (14.25% net revenue interest) in an oil and gas prospect located
in Landry Parish, Louisiana. The working interest concerns 248 gross acres and net acres in the Sunshine Prospect. Our purchase
price for the working interest was $76,500.
Birnie Field, Motley County,
Texas
On September 17, 2014, the Company entered
into an agreement with Escopeta Oil and Gas Corporation to purchase a 10% working interest (7.5% net revenue interest) in a natural
gas prospect located in the Birnie field in Motley County, Texas. The working interest concerns 5,760 leased acres in the Palo
Duro Basin prospect. Our purchase price for the working interest was $70,000. In 2014, the operator drilled an initial well on
the prospect, however the drilling was unsuccessful and resulted in a dry hole. The operator agreed to provide us, for no additional
consideration, a 1% working interest in the Stansell field prospect described below.
Stansell Field, Floyd County, Texas
We hold a 1% working interest in an oil
prospect located in Floyd County, Texas. The working interest comprises 15,000 leased acres in the southern section of the Palo
Duro basin. The initial project will be the re-entry of the Stansell #1-A well, an existing wellbore that was drilled in 2006.
The original drilling encountered oil shows in three separate reservoirs and the operator intends to re-enter and recomplete the
Stansell #1-A the Companying current fracture stimulation technology. We have a carried 1% working interest in the Stansell #1-A
well through the tanks. In April 2015, the operator has started the re-entry of the Stansell #1-A well.
Wolfcamp Field, Hale County, Texas
In June and July 2014, the Company acquired
non-operating leases covering approximately 1,070 gross mineral acre leases in the Wolfcamp field located in Hale County,
Texas. The leases were acquired for cash payments of $45,484. The leases have a primary term of five years with the Company option
to extend the term for another five years. The leased properties constitute the surface acreage comprising a natural gas prospect,
for which we hold 50% of the working interest and 40% net revenue interest. The leased properties are subject to a 20% royalty
interest held by the owners and a third party. The Company is currently evaluating the Company options for the exploitation of
the leased properties, including the Company sale of the leases or the Company farm-out of the leases to a natural gas operator.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
Sale of Port Hudson Field and West Cam
225
During the quarter ended March 31, 2015,
the Company decided to sell 100% of its interest in Port Hudson field and West Cam 225. The net investment of $653,376 was reclassed
as oil and gas properties held for sale and recorded at market value of $335,500. The Company recorded impairment loss of $317,876
due to reduction of the market value comparing to the cost of these investments.
On April 6, 2015, the Company entered into
agreements with Hi-Tech exploration, LLC to sell its entire interests in the Port Hudson field and the West Cam 225 for a total
consideration of $335,500. The Company completed the sale and paid $150,050 for outstanding costs and recorded it as loss on sale
of oil and gas interest.
Leased Properties from Kiowa Oil Company
On September 30, 2015, the Company entered
into an agreement with Kiowa Oil Company to lease 100% of interests, for a period of five years, of properties in North Dakota,
Florida, Illinois, and Kentucky. The total price for the subject interests under this lease agreement is $5,000 and a 15% royalty
interest in all the subject interests leased. The total price will be paid in the Company’s common shares at the per share
price of $0.50.
TW Lee Field, Gregg County, Texas
On March 3, 2016, the Company entered into
an agreement with Two Eagle Resources, a Texas corporation, to purchase 25% working interest / 18.75% net revenue interest in the
properties located in Gregg County, Texas. The purchase price for the subject interests under this agreement is $25,000, which
will be paid in the Company’s common shares at the per share price of $0.25.
As of March 31, 2016 and September 30,
2015, total oil and gas properties amounted to $242,433 and $217,433, respectively.
|
3.
|
Notes Payable – Related Parties
|
On August 14, 2013, the Company entered
into a loan agreement with a shareholder, Gary Bryant, pursuant to which Mr. Bryant loaned the Company $417,762, the proceeds of
which were used to partially finance the acquisition of the Port Hudson interest described in Note 2 above. The loan beared interest
on the unpaid principal amount at the rate of 8% per annum. All principal and interest were payable over a four year period, commencing
November 1, 2013, at the amortized rate of $10,198 per month. The Company’s obligations under the loan were secured by our
working interest in the Port Hudson field.
On September 6, 2013, the Company entered
into another loan agreement with Mr. Gary Bryant, pursuant to which Mr. Bryant loaned the Company $130,000, the proceeds of which
were used to partially finance the Company’s payment of its allocable expenses associated with its working interest in the
West Cam 225 field, described in Note 2 above. The loan beared interest on the unpaid principal amount at the rate of 6% per annum.
All principal and interest were payable on December 6, 2013 and were convertible into shares of the Company’s common stock,
at the option of the holder, at the rate of $0.50 per share. In December 2013, Mr. Bryant and the Company entered to an agreement
to extend the due date of the loan to February 6, 2016. The Company’s obligations under the loan were secured by its working
interest in the Port Hudson field. The Company also entered into an amendment to its loan agreement with Mr. Bryant dated August
14, 2013, in the original principal amount of $417,762, to provide that all principal and interest under that loan agreement were
convertible into shares of the Company’s common stock, at the option of the holder, at the rate of $0.50 per share.
On April 3, 2015, Mr. Bryant agreed to
release the security interest in the Port Hudson field as the Company engaged in negotiations to sell the property.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
The Company determined that the fair value
of the above conversion options and the warrants using the Black–Scholes model with the variables listed below:
|
|
·
|
Volatility: 160%
|
|
|
|
|
|
|
·
|
Risk free rate of return: 0.01% to 0.875%
|
|
|
|
|
|
|
·
|
Expected term: 0.25 to 4 years
|
On September 16, 2014, the Company entered
into a Note purchase agreement with Lake Oswego Oil Company, LLC, an Oregon limited liability company controlled by one of the
shareholders, pursuant to which the Company sold a secured promissory note in the principal amount of $50,000, for a purchase price
of $50,000. Interest accrues on the unpaid principal balance of the note at the rate of six percent per annum. This note was fully
paid off in the quarter ended December 31, 2014. As an inducement to the note holder to enter into this agreement, the Company
also granted the note holder a warrant to purchase 100,000 shares of the Company’s common stock, and exercisable at $0.50
per share over a two year period expiring on September 16, 2019.
The Company determined that the fair value
of the warrants using Black–Scholes model with the variable listed below:
|
|
·
|
Volatility: 340%
|
|
|
|
|
|
|
·
|
Risk free rate of return: 1.688%
|
|
|
|
|
|
|
·
|
Expected term: 2 years
|
On September 30, 2015, Mr. Bryant agreed
to convert the outstanding principal amounts of $325,146 and $130,000 and accrued interest to the Company’s common stock
at $0.5 and $0.5 per share respectively.
In connection with the issuance of the
above notes, the Company recorded a note discount of $50,000 and $647,762 for the years ended September 30, 2014 and 2013, respectively,
which are to be amortized over the lives of the notes. On September 30, 2015, due to conversion of the full outstanding principal
amount owed to Mr. Bryant, the related note discount was fully amortized.
During the year ended September 30, 2014
and 2013, a shareholder made advances to the Company to support its daily operations. These advances were due on demand and do
not bear any interest.
During the year ended September 30, 2015,
a shareholder paid a total amount of $15,000 for payment of legal fees on behalf of the Company through his personal credit line.
The outstanding balance was due on demand and bears variable interest of 25.99%. As of September 30, 2015, the total outstanding
amount due to the shareholder was $45,000.
The Company repaid $6,558 during the six
months ended March 31, 2016. In January 2016, the Company issued 450,000 shares of its common stock upon conversion of the outstanding
amount of $45,000. In addition, the shareholder retired 30,000 shares in exchange for $3,000 overpayment made to him. As of March
31, 2016, the Company had a receivable from shareholder of $3,558.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
The Company is authorized to issue 200,000,000
shares of common stock, par value of $0.001, and 10,000,000 shares of preferred stock, par value of $0.001.
In September 2015, the Company entered
into a subscription agreement with an accredited investor to sell 100,000 shares of the Company’s common stock at $0.25 per
share. The total amount of $25,000 was received and shares were issued in September 2015.
On September 30, 2015, Mr. Bryant, a shareholder
and convertible note holder, agreed to convert the outstanding principal amounts of $325,146 and $130,000 due to him to the Company’s
common stock at $0.50 per share. The Company issued 1,003,508 shares in February 2016 as repayment of the outstanding principal
and accrued interest.
In January 2016, the Company issued 450,000
shares of its common stock upon conversion of the outstanding amount of shareholder advances of $45,000. In addition, the shareholder
retired 30,000 shares in exchange for $3,000 overpayment made to him.
During the quarter ended March 31, 2016,
the Company entered into subscription agreements with various accredited investors to sell 191,000 shares of the Company’s
common stock at $0.25 per share. The total amount of $47,750 was received and recorded as common stock issuable.
On March 3, 2016, the Company entered into
an agreement with Two Eagle Resources, a Texas corporation, to purchase 25% working interest / 18.75% net revenue interest in the
properties located in Gregg County, Texas. The purchase price for the subject interests under this agreement is $25,000, which
will be paid in the Company’s common shares at the per share price of $0.25. As of March 31, 2016, the shares had not been
issued and were recorded as common stock issuable.
As of March 31, 2016 and September 30,
2015, the Company had 15,938,908 and 14,515,400 shares of common stock issued and outstanding and had not issued any of its preferred
stock.
On September 15, 2011, the Company adopted
the West Texas Resources, Inc. 2011 Stock Incentive Plan (the “Plan”) providing for the grant of non-qualified stock
options and incentive stock options to purchase its common stock and for grant of restricted and unrestricted grants. The Company
has reserved 3,000,000 shares of its common stock under the Plan. All officers, directors, employees and consultants to the Company
are eligible to participate under the Plan. The purpose of the Plan is to provide eligible participants with an opportunity to
acquire an ownership interest in the Company.
In 2011, the Company granted options to
certain consultants to purchase 400,000 shares of the Company’s common stock. The options vest immediately and expire on
September 15, 2016. The fair value of each share-based award was estimated using the Black-Scholes option pricing model or a lattice
model. The fair value of these options, determined to be $65,402, was included in general and administrative expenses for the year
ended September 30, 2011.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
The following assumptions were used in the fair value method
calculation:
|
|
·
|
Volatility: 83%
|
|
|
|
|
|
|
·
|
Risk free rate of return: 1%
|
|
|
|
|
|
|
·
|
Expected term: 5 years
|
On March 7, 2014, the Company granted
options to certain consultants to purchase 1,500,000 shares of the Company’s common stock, of which 200,000 options
vested upon the date of grant and the balance of 1,300,000 options expired in October 2014 in connection with the termination
of the consulting arrangement. The 200,000 vested options expire on March 7, 2019. The fair value of the vested options for
200,000 shares, determined to be $116,137, was recorded in general and administrative expenses for the year ended September
30, 2014.
On March 11, 2014, the Company granted
options to its officers to purchase a total of 200,000 shares of the Company’s common stock. The options expire on March
11, 2019 and vest immediately. The fair value of these options determined to be $116,119 and was included in general and administrative
expenses for the year ended September 30, 2014.
The following assumptions were used in
the fair value method calculation:
|
|
·
|
Volatility: 190%
|
|
|
|
|
|
|
·
|
Risk free rate of return: 1.5%
|
|
|
|
|
|
|
·
|
Expected term: 5 years
|
On April 16, 2015, the
Company granted options to Mr. Paul Brogan, the Company’s director, to purchase a total of 200,000 shares of
the Company’s common stock. The options have an exercise price of $0.5 per share and expire on April 16, 2020 and
66,667 shares vest immediately with the rest vest equally on April 16, 2016 and 2017. The fair value of these options was
determined to be $99,712, of which $18,048 was amortized and included in general and administrative expenses for the six
months ended March 31, 2016. As of March 31, 2016, the unrecognized compensation expense related the non-vested stock options
was $34,622, to be amortized over the vesting period.
The following assumptions were used in
the fair value method calculation:
|
|
·
|
Volatility: 266%
|
|
|
|
|
|
|
·
|
Risk free rate of return: 1.375%
|
|
|
|
|
|
|
·
|
Expected term: 5 years
|
The following information applies to all
options outstanding at March 31, 2016:
|
|
·
|
Weighted average exercise price: $0.44
|
|
|
|
|
|
|
·
|
Options outstanding and exercisable: 930,557
|
|
|
|
|
|
|
·
|
Average remaining life: 2.03 years
|
Based on the available information and
other factors, management believes it is more likely than not that the net deferred tax assets at September 30, 2015 and 2014 will
not be fully realizable. Accordingly, management has recorded a full valuation allowance against its net deferred tax assets at
September 30, 2015 and 2014. As of September 30, 2015 and 2014, the Company had federal net operating loss carry-forwards of approximately
$2,400,000 and $1,300,000, respectively, expiring beginning in 2032.
WEST
TEXAS RESOURCES, INC.
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
March
31, 2016 and 2015
Deferred tax assets
consist of the following components:
|
|
|
September 30, 2015
|
|
|
September 30, 2014
|
|
|
|
|
|
|
|
|
|
|
Net loss carryforward
|
|
$
|
840,000
|
|
|
$
|
455,000
|
|
|
Valuation allowance
|
|
|
(840,000
|
)
|
|
|
(455,000
|
)
|
|
Total deferred tax assets
|
|
$
|
–
|
|
|
$
|
–
|
|
Events subsequent to March 31, 2016 have
been evaluated through the date these financial statements were issued to determine whether they should be disclosed to keep the
financial statements from being misleading. Management noted the following subsequent events that should be disclosed:
|
|
·
|
On April 18, 2016, the Company entered into a subscription agreement with an accredited investor
to sell 20,000 shares of the Company’s common stock at $0.25 per share.
|
|
|
·
|
In April 2016, the Company entered into a non-binding letter of intent to acquire a
100% working interest (82.3% net revenue) in 57 wells on approximately 3,841 acres in the State of Louisiana for total consideration
of $60,000. The acquisition is subject to the Company’s continuing due diligence and approval of definitive agreement between
the parties. There can be no assurance that the Company will complete the acquisition.
|