0001017386-12-000326.txt : 20121105 0001017386-12-000326.hdr.sgml : 20121105 20121105164153 ACCESSION NUMBER: 0001017386-12-000326 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20120930 FILED AS OF DATE: 20121105 DATE AS OF CHANGE: 20121105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: New Western Energy Corp CENTRAL INDEX KEY: 0001479488 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 263640580 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54343 FILM NUMBER: 121180529 BUSINESS ADDRESS: STREET 1: 20 TRUMAN STREET 2: SUITE 204 CITY: IRVINE STATE: CA ZIP: 92620 BUSINESS PHONE: 949-435-0977 MAIL ADDRESS: STREET 1: 20 TRUMAN STREET 2: SUITE 204 CITY: IRVINE STATE: CA ZIP: 92620 10-Q 1 newwestern_2012sept30-10q.htm SEPTEMBER 30, 2012 QUARTERLY REPORT

 

SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549  

 

Form 10-Q  

 

(Mark One)  
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  
   
  For the Quarterly Period Ended September 30, 2012  
 
OR  
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

 

For the transition period from ______________ to ______________

 

Commission File No. 333-125314

 

NEW WESTERN ENERGY CORPORATION

(Exact name of small business issuer as specified in its charter)

 

NEVADA

(State or other jurisdiction of

incorporation or organization)

7929

(Primary Standard Industrial

Classification Code Number)

26-3640580

(I.R.S. Employer

Identification No.)

 

20 Truman, Suite 204, Irvine, CA 92620

(Address of principal executive offices)

 

(949) 435-0977

(Registrant’s telephone number, including area code)  

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  þ No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  o Accelerated filer                     o
Non-accelerated filer     o Smaller reporting company      þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 

Yes  o No  þ

 

The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding at November 5, 2012 was 67,190,866.

 

 


 
 

 

 TABLE OF CONTENTS

 

PART I.     3  
         
Item 1. Financial Statements.     3  
         
Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011     3  
         
Condensed Consolidated Statements of Operations for the Three Months and Nine Months ended September 30, 2012 and 2011 (Unaudited)     4  
         
Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2012 and 2011 (Unaudited)     5  
         
Notes to Unaudited Condensed Consolidated Financial Statements     6  
         
Item 2. Management’s Discussion and Analysis or Plan of Operation     15  
         
Item 3. Quantitative and Qualitative Disclosures About Market Risks.     17  
         
Item 4. Controls and Procedures     17  
         
PART II.     18  
         
Item 1. Legal Proceedings.     18  
         
Item 1A. Risk Factors.     18  
         
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.     18  
         
Item 3. Defaults Upon Senior Securities.     18  
         
Item 4. Mine Safety Disclosures.     18  
         
Item 5. Other Information.     18  
         
Item 6. Exhibits.     18  
         
SIGNATURES     19  
         
EXHIBIT INDEX     19  
         

  

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

 

 Forward-looking statements may include the words “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “desire,” “goal,” “should,” “objective,” “seek,” “plan,” “strive” or “anticipate,” as well as variations of such words or similar expressions, or the negatives of these words. These forward-looking statements present our estimates and assumptions only as of the date of this Form 10-Q. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. We caution readers not to place undue reliance on any such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes will likely vary materially from those indicated.

2


 

 
 

 

 PART I.

Item 1.  Financial Statements.

 

New Western Energy Corporation and Subsidiaries
Condensed Consolidated Balance Sheets

 

 
 ASSETS   September 30, 2012  (Unaudited)   December 31, 2011
Current assets            
  Cash and cash equivalents   $ 33,763   $   16,403
  Accounts receivable       712       9,541
  Note receivable       30,000       30,000
  Prepaid expenses and other assets     1,350     156,968
Total current assets       65,825     212,912
             
Property and equipment, net       103,543       902
Oil and gas properties, net       554,241     470,770
Mineral properties       103,530     103,530
Deposits for business acquisition     -       35,000
Goodwill       333,799     -
Other assets       1,450       1,450
Total Assets   $   1,162,388   $ 824,564
             
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities            
  Accounts payable   $ 10,922   $   14,779
  Accrued expenses       23,568       4,550
  Accrued officer's compensation       90,000     -
  Oil and gas property obligations     -       60,000
  Notes payable, current portion        100,000     100,000
  Deposit on share purchase     47,299     -
  Payable to related party     11,252     143,252
Total current liabilities       283,041     322,581
             
Total liabilities       283,041     322,581
             
Commitments and contingencies (Note 8)            
             
Stockholders' Equity            
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively     -     -
Common stock, $0.0001 par value, 100,000,000 shares authorized, 66,890,866 and 64,226,866 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively       6,689       6,422
Additional paid in capital       2,610,094       1,911,161
Accumulated deficit       (1,737,436)     (1,415,600)
Total Stockholders' Equity       879,347     501,983
             
Total Liabilities and Stockholders' Equity   $   1,162,388   $ 824,564
             

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

 
 

 

New Western Energy Corporation and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Gain (Loss)
(Unaudited)
                       
    For the Three Months Ended September 30,     For the Nine Months Ended September 30,
    2012     2011     2012     2011
Revenues $  24,398   $ 42,567   $  76,043   $ 42,567
                       
Expenses                      
  Depreciation and depletion   6,234     426      18,752     1,278
  General and administrative    92,326      63,608      314,258      195,465
  Exploration expenses   -     1,287     -      40,541
  Oil and gas production    28,969      14,490      56,007      27,993
Total expenses    127,529      79,811      389,017      265,277
                       
Loss from operations     (103,131)       (37,244)       (312,974)       (222,710)
                       
Other income (expenses)                      
  Interest expense     (2,844)     (1,250)     (9,412)     (1,250)
  Interest income   450     -     1,350     -
  Gain on sale of oil and gas property   -      -     -      25,000
Total other income (expenses)   (2,394)      (1,250)     (8,062)      23,750
                       
Loss from operations before income tax     (105,525)      (38,494)       (321,036)       (198,960)
                       
Provision for income tax   -     -     800     -
                       
Net Loss $   (105,525)   $  (38,494)   $   (321,836)   $   (198,960)
                       
Other comprehensive gain (loss):                      
  Unrealized gain on marketable securities   -      52,500     -      -
                       
Comprehensive gain (loss) $   (105,525)   $   14,006   $   (321,836)   $   (198,960)
                       
Basic and diluted net gain (loss) per share $ (0.00)   $ 0.00   $ (0.00)   $ (0.00)
                       
Weighted average number of shares outstanding     66,890,866       64,201,504       66,315,377       64,156,219
                       
The accompanying notes are an integral part of these unaudited consolidated financial statements.
                                     

 

4


 
 

 

 

New Western Energy Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows

 (Unaudited)

    For the Nine Months Ended September 30,
Cash Flows from Operating Activities:  2012   2011
Reconciliation of net loss to net cash used in operating activities:          
Net Loss $ (321,836)   $ (198,960)
Adjustment to reconcile net loss to net cash used in operating activities:          
     Depreciation and depletion   18,752     1,278
Bad debt expense   -     5,000
Gain on sale of oil and gas property   -     (25,000)
Changes in operating assets and liabilities:          
     Accounts receivable   26,883     (26,290)
     Prepaid expenses and other assets   (7,477)     (109,943)
     Accounts payable   (13,296)     (1,994)
     Accrued expenses   16,812       7,250
     Accrued officer's compensation   90,000      60,000
Net cash used in operating activities   (190,162)     (288,659)
           
Cash Flows From Investing Activities:          
Purchase of property and equipment   (1,013)       -  
Proceeds from sale of property of equipment   5,000       -  
Payment of earnest deposit   -     (17,000)
Proceeds from sale of oil and gas property   -     17,500
Cash acquired as part of acquisition   12,058       -  
Cash paid for acquisition   (20,186)       -  
Cash paid for lease obligations   (60,000)     (15,312)
Purchase and capitalized cost of oils and gas properties, net   (35,749)     (36,973)
Net cash used in investing activities   (99,890)     (51,785)
           
Cash Flows From Financing Activities:          
Proceeds from sale of common stock   499,200     76,000
Proceeds from notes payable   -      100,000
Cash repayments for notes payable   (107,087)     -
Proceeds from a stockholder deposit   47,299     -
Proceeds from related party advances   57,000     120,000
Repayments of related party advances   (189,000)     (52,000)
Net cash provided by financing activities   307,412        244,000
           
Net increase (decrease) in cash and cash equivalents   17,360     (96,444)
           
Cash and cash equivalents, beginning of the period   16,403     109,655
           
Cash and cash equivalents, end of the period $ 33,763   $ 13,211
           
Supplemental disclosures of cash flow information:          
  Cash paid for income taxes $ 800   $   -  
  Cash paid for interest $ 1,912   $   -  
           
Supplemental disclosures of non-cash investing and financing activities:          
Sale of Doshier lease for a receivable and marketable securities $ -   $ 175,000
Acquisition of Royal Texan Energy Co. assets:          
  Accounts receivable $ 18,054   $   -  
  Property & equipment, net   123,849       -  
  Investment in oil and gas properties   49,252       -  
  Goodwill - non-cash portion   325,671       -  
  Accounts payable   (9,439)       -  
  Accrued expenses   (2,205)       -  
  Notes payable   (52,087)       -  
  Common stock   (100)       -  
  Additional paid in consideration   (199,900)       -  
  Pre-acquisition cash advances   (163,095)       -  
  Note payable to stockholders   (55,000)       -  
  Pre-acquisition deposit paid   (35,000)       -  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 
 

 

New Western Energy Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2012

(Unaudited)

 

NOTE 1: NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN

 

New Western Energy Corporation (the “Company”) was incorporated in the State of Nevada on September 25, 2008. The Company’s principal business is the acquisition, exploration and development of, and production from oil, gas and mineral properties located in the United States.

 

On December 1, 2010, the Company formed an entity named New Western Texas Oil and Gas Corporation (“New Western Texas”) incorporated in the State of Nevada, as its wholly-owned subsidiary. New Western Texas started its operations in January 2011.

 

On January 2, 2012, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. (“RTE”) (See Note 3).

 

Basis of presentation

 

The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments and business acquisition adjustments, necessary to present fairly the financial position at September 30, 2012, and the results of operations and cash flows for the three months and nine months periods ended September 30, 2012 and 2011. The balance sheet as of December 31, 2011 is derived from the Company’s audited financial statements.

 

Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto contained in the Company’s 2011 Annual Report filed with the SEC on Form 10-K on March 30, 2012.

 

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 earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. The Company currently has on ongoing private placement equity offering and has raised $499,200 during the nine months ended September 30, 2012 and through the date of this report. At September 30, 2012, the Company had a working capital deficit of $217,216, incurred a net loss of $321,836 during the nine months ended September 30, 2012 and used cash in operating activities of $190,162. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries New Western Texas Oil and Gas Corporation and Royal Texan Energy Co. All intercompany balances and transactions are eliminated in 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 marketable securities, valuation of accounts, notes and other receivables, valuation and purchase price allocation of assets acquired and liabilities assumed in business combinations, valuation of long-lived assets, goodwill and oil, gas and mineral properties, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

6


 
 


Fair value of Financial Instruments and Fair Value Measurements

 

ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable, notes payable, and amounts due to related parties. Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

Net Earnings (Loss) Per Share

 

The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At September 30, 2012, there were Class C Warrants outstanding for 2,090,666 common shares that were excluded from the computations of diluted loss per share since the effect was anti-dilutive. The warrants, if exercised, may dilute future earnings per share.

  

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

 

 

 

 

7


 
 

 

NOTE 3: ACQUISITION OF ROYAL TEXAN ENERGY CO.

 

On January 2, 2012, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. pursuant to a Plan and Agreement of Reorganization dated December 1, 2011, in exchange for (a) 1,000,000 shares of its common stock, (b) $35,000 in cash and (c) a Promissory Note of $55,000 payable to the two stockholders of RTE, payable at the rate of $10,000 per month commencing 30 days after closing of the acquisition.  In addition, pre-acquisition cash advances of $163,095 were applied as additional purchase price. In a supplemental agreement between the Company and the sellers, the Company agreed to let the sellers retain net monetary assets acquired totaling $20,186, which is treated as additional purchase price.  The Company also agreed to pay down the bank notes of approximately $50,000 within nine months of the acquisition closing date which notes had been previously personally guaranteed by the seller to the bank.  The shares issued to the owners of RTE were valued at $200,000 based on issuance of 1,000,000 shares of our common stock valued at $0.20 per share, based on the closing price per share on the date of closing of the transaction. The fair value of the total consideration paid for the acquisition of RTE amounted to $473,281. Upon completion of the acquisition, RTE became a wholly-owned subsidiary of the Company. As of September 30, 2012, the Company has paid $35,000 in cash to the stockholders of RTE, paid $55,000 towards the Promissory Note of $55,000, and issued 1,000,000 shares of its common stock.  In addition $52,087 has been paid towards the bank debt assumed by the Company.

 

Royal Texan Energy Co. principal business operations are acquisitions, exploration and development of, and production from oil and gas properties located in Texas. The Company acquired RTE primarily due to its lease ownership interests in oil and gas properties and the Company’s requirement to have an operator for exploration and production of oil and gas in Texas.

 

The purchase price of RTE was allocated to record identifiable assets and liabilities at their fair value and the remainder to goodwill as follows:

 

Assets acquired:    
Cash and cash equivalents $ 12,058
Accounts receivable   18,054
Property and equipment, net   123,849
Investment in oil and gas properties, net   49,252
Goodwill   333,799
 Total assets acquired $ 537,012
     
Liabilities assumed:    
Accounts payable $ (9,439)
Accrued expenses   (2,205)
Notes payable   (52,087)
 Total liabilities assumed   (63,731)
Net assets acquired $ 473,281
     
Purchase consideration:    
Common stock - 1,000,000 shares, valued at $0.20 per share $ 200,000
Pre-acquisition cash advances   163,095
Value of net monetary assets acquired assigned to seller   20,186
Cash consideration   35,000
Note payable to stockholders    55,000
Total Consideration Paid $ 473,281

 

  

 

8


 
 


NOTE 4: OIL AND GAS PROPERTIES AND RELATED OBLIGATIONS

 

The Company's aggregate capitalized costs related to oil properties consist of the following:

 

Name of the property   Type   September 30, 2012 (Unaudited)   December 31, 2011
Glass Lease   Oil   $ 221,000   $  210,000
Phillips Lease   Oil      130,000      130,000
Chautauqua Lease – B&W Ranch   Oil     75,000      75,000
Chautauqua Lease – Smith Lease   Oil     24,750     -
Swenson Lease   Oil     23,070      15,312
McLellan Lease   Oil     4,191     2,000
Reves Lease   Oil     6,555     2,000
Terry Heirs   Oil     9,722     -
Trice, W. G.   Oil     25,333     -
Uncompleted wells, equipment and facilities         36,972      36,973
           556,593      471,285
Accumulated depletion          (2,352)     (515)
        $ 554,241   $ 470,770

 

Changes in the Uncompleted Wells, Equipment and Facilities were as follows:

 

       

Nine Months Ended

September 30, 2012

(Unaudited)

Beginning Balance – December 31, 2011       $  36,972 
Additions         -
Sale of lease         -
Reclassification to proved properties         -
Costs charged to expense         -
Ending Balance – September 30, 2012       $  36,972 

 

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 during the nine months ended September 30, 2012.

 

Chautauqua Lease – Smith Lease, Chautauqua County, Kansas (“Chautauqua Lease”)

On May 11, 2012, the Company entered into an Assignment of Oil and Gas Lease with a third party for an oil and gas property in Kansas named as “Chautauqua Lease – Charles and Nancy Smith”, whereby the assignor(s) granted the rights to the Company to carry geographical and other exploratory work, including core drilling, and the drilling, mining and operating for, producing, and saving all of the oil, gas, including all associated hydrocarbons. The assignors agreed to transfer 90% of their rights, title, interest, and duties and obligations in the Chautauqua Lease to the Company for a total consideration of $24,750. The Company’s net revenue interest in Chautauqua Lease was calculated at 73.125% subject to the reserved 6.25% Overriding Royalty Interest after paying of the mineral owners and other fees. The Company has paid the total consideration of $24,750 as of April 26, 2012. The Company has not started any oil and gas exploration on Chautauqua Lease as of September 30, 2012.

 

 

 

9


 
 

 

Mrs. W.G. Trice, Trice and Methodist Home and Trice Methodist “400” Leases, Shackelford County, Texas (“Trice Lease”)

Mrs. W.G. Trice Lease and Trice and Methodist Home Lease

On January 2, 2012, as part of the RTE acquisition, we acquired an assignment of an oil and gas lease. This lease had been acquired by RTE on April 1, 2010, when they entered into an assignment of oil and gas lease agreement with Richard Windham, JR., individually and doing business as Tracker Mineral and Tracker Mineral, LLC (“Assignor”), whereby the Assignor agreed to sell, assign, and transfer all of their rights, title and interest in and to the leasehold estates covering one hundred percent (100%) of their rights, title and interest in the Mrs. W. G. Trice and Trice and Methodist Home leases. The W. G. Trice and Methodist Home leases consist of four tracts of 257.75 acres of land in Shackelford County in Texas. The assignment of lease includes from the surface and insofar as covers ground to a depth of one thousand (1,000) feet below the surface and insofar as covers and includes net revenue interests except, that Richard Windham, Jr., individually reserves to himself, his heirs, successors and assigns an overriding royalty interest payable on oil, gas and associated hydrocarbons produced, saved and sold from only the lands described as Trice and Methodist Home Lease equal to the difference between an 80 percent net revenue interest and all lease royalty burdens. This assignment covers and includes all of Assignor’s interest in all equipment, personal property, and fixtures located on or used in connection with the lease.

 

Trice Methodist “400” Lease

On January 2, 2012, as part of the RTE acquisition, we acquired an assignment of an oil and gas lease. This lease had been acquired by RTE on April 1, 2010, when they entered into an assignment agreement whereby, the assignor agreed to sell, assign, transfer all of their rights, title and interest in and to the leasehold estates covering one hundred percent (100%) of their rights, title and interest in Trice Methodist “400” lease effective September 1, 2010. Trice Methodist “400” consisted of 273.3 acres of land in Shackelford, Texas. Pursuant to the terms of the assignment of the lease, RTE has a net revenue interest of 77%, and the operator shall pay the assignor, its successors or assigns, based on their division of interest, less taxes required by law to be deducted and remitted by the purchaser for all oil and gas.

 

We recorded these leases as $25,333 investment in oil and gas properties and $50,667 lease and well equipment. On April 2, 2010, RTE executed a promissory note with a bank and obtained a loan for $76,000 to fund the payment to the Assignor for the sale, assignment and transfer of all of their rights including, the cost of the tangible equipment, personal property and fixtures on the Mrs. W.G. Trice, Trice and Methodist Home and Trice Methodist “400” Lease. The promissory note is secured by the debtor’s interest in and to the Mrs. W.G. Trice lease, Trice Methodist “400” lease and Trice and Methodist Home lease all located in Shackelford County, Texas. The promissory note bears 7% per annum interest, and is payable in 48 monthly payments of $1,820.25 beginning May 2, 2010. We recorded this assumed note at its book value, which approximates fair value, of $46,929 on the RTE acquisition date. On September 27, 2012, the Company paid $4,213 to pay off the total outstanding principal and interest due on the promissory note. The Company recorded an interest expense of $344 and $1,846 for the three months and nine months ended September 30, 2012.

 

Terry Heirs #1 and Lane #1, 2, 3 Shackelford County, Texas (“Terry Heirs”)

On January 2, 2012, as part of the RTE acquisition, we acquired an assignment of an oil and gas lease. We recorded this lease as $9,722 investment in oil and gas properties and $10,278 lease and well equipment. This lease had been acquired by RTE on October 12, 2009, when they entered into a Purchase and Sale Agreement and agreed to purchase the right, title and interest in, to and under the oil, gas and mineral leasehold interest in the oil and gas wells on properties located in Schackelford County, Texas. RTE purchased a 75.59667 percent net revenue interest in exchange for a purchase consideration of $20,000. RTE paid $4,583 in cash and executed a promissory note on November 4, 2009 of $15,417, payable on demand, but if no demand is made, then payable in 36 monthly installments of $486.63 bearing an interest rate of 8.5% per annum. We recorded this assumed note at its book value, which approximates fair value, of $5,159 on the RTE acquisition date. The Company recorded an interest expense of $0 and $66 for the three months and nine months ended September 30, 2012. On February 2, 2012, the Company paid $4,738 to pay off the principal balance and interest due on the promissory note. 

 

Doshier Lease, Nowata County, Oklahoma

On May 5, 2011, the Company sold its ownership interest in Doshier Lease to XnE, Inc., a third party, in exchange for a total consideration of $175,000, comprising of cash consideration of $25,000 and 7,500,000 shares of common stock of XnE, Inc. valued at $150,000. The common stock received was valued at its fair value on the date of issuance. As of December 31, 2011, the Company had received cash of $25,000 and sold the 7,500,000 shares of common stock of XnE, Inc. back to XnE, Inc. for $30,000 and received an unsecured promissory note of $30,000 bearing 6% interest, which was originally due on July 1, 2012 but extended to December 28, 2012. As a result, the Company recorded a gain of $25,000 from sale of Doshier Lease and a loss of $120,000 from sale of its investment in XnE shares as of December 31, 2011. The Company recorded interest income of $450 and $1,350 for the three months and nine months ended September 30, 2012. The principal balance due on the note receivable amounted to $30,000 at September 30, 2012.

 

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Swenson Lease, Jones County, Texas

On January 27, 2011, the Company’s subsidiary New Western Texas acquired a 50% working interest (39.66 % net revenue interest) in 160 acres of oil and gas leases in Jones County, Texas for $8,000 cash. Subsequently additional acquisition costs of $7,312 were incurred. The lease was purchased subject to a Venture Agreement with a third party (Venture Partner) who holds the other 50% working interest and will act as the operator for a stipulated fee. Both parties will evenly split operating expenses of the lease. Operating proceeds after royalty interests and expenses shall be distributed 50% to the Company. Additionally, a stipulated portion of the Venture Partner’s working interest proceeds shall also be distributed to the Company until the Company recovers its acquisition and development costs of the particular lease. Subsequent to any lease purchase under this Venture Agreement, the Company may decline to develop a property in which case the Venture Partner must repurchase the working interest from the Company at the then fair value of the lease working interest. The Company was required to provide the operator with a prepaid amount of $10,000 to be used to fund operating expenses within 3 days of a request by the Venture Partner. As of September 30, 2012, the Company incurred $36,972 of capitalizable equipment costs classified as uncompleted wells equipment and facilities and incurred $7,048 and $25,689 of non-capitalizable exploratory costs relating to the Texas lease for the three months and nine months ended September 30, 2012.

 

 NOTE 5: MINERAL PROPERTIES AND RELATED OBLIGATIONS

 

The Company’s aggregate capitalized costs related to mineral properties consist of the following:

 

                     
Unproved Properties:            
Name of Property Type  

September 30, 2012

(Unaudited)

  December 31, 2011
               
Wellsboro Lease Gravel   $ 103,530   $  103,530
        103,530     103,530
Accumulated depletion       -          -     
Impairment loss       -          -     
      $ 103,530   $  103,530


Since there was no production of minerals during the three months and nine months ended September 30, 2012 and 2011, no depletion expense relating to mineral properties has been recorded for the three months and nine months periods ended September 30, 2012 and 2011, respectively.

 

NOTE 6: NOTES PAYABLE

 

  September 30, 2012 (Unaudited)   December 31, 2011
           
Stockholder note payable, unsecured, bearing interest at 10% per annum, originally due on July 31, 2012 and extended to July 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans    50,000      50,000
           
Stockholder note payable, unsecured, bearing interest at 10% per annum, due on January 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans    50,000      50,000
           
     100,000      100,000
Notes payable - current portion   (100,000)      (100,000)
Notes payable – long term $ -   $ -

 

The Company recorded an interest expense of $2,844 and $9,412 for the three months and nine months ended September 30, 2012 and $1,250 and $1,250 for the comparable periods in 2011, respectively.

 

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NOTE 7: RELATED PARTY TRANSACTIONS AND BALANCES

 

Payable to Related party

 

At September 30, 2012 and December 31, 2011, advances, net of repayments, made to the Company by the Chief Executive Officer (“Officer”) for its working capital requirements amounted to $11,252 and $143,252, respectively. Amounts due to the Officer are unsecured, non-interest bearing and due on demand without specific repayment terms. In addition, compensation payable to the Officer pursuant to the terms of an employment agreement amounted to $90,000 and $0 as of September 30, 2012 and December 31, 2011, respectively.

 

 

NOTE 8: COMMITMENTS AND CONTINGENCIES

 

Legal Costs and Contingencies

 

In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received.

 

If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable. As of September 30, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

NOTE 9: STOCKHOLDERS' EQUITY

 

The Company’s capitalization at September 30, 2012 was 100,000,000 authorized common shares and 5,000,000 authorized preferred shares, both with a par value of $0.0001 per share.

 

Common Stock and Warrants

 From January 1, 2012 to September 30, 2012, the Company sold, pursuant to a private placement equity offering, 1,664,000 Units to accredited investors for cash proceeds of $499,200 or $0.30 per Unit, each Unit consisting of one share of common stock and one redeemable Class C Warrant to purchase one share of common stock at an exercise price of $1.00 per share. Such warrants expire on December 31, 2013. The Class C warrants are redeemable by the Company at a redemption price of $0.05 per warrant upon at least 30 days' prior written notice if the mean average of the closing bid price exceeds $2.00 per share for 20 consecutive business days ending prior to the date notice of redemption is given. On September 25, 2012, the Company received in cash $47,299 as a deposit from a stockholder towards purchase of 420,000 Units at $0.30 per Unit. The Company recorded the cash received as a current liability in the accompanying financial statements as of September 30, 2012.

 

On January 26, 2012, the Company issued to the owners of RTE 1,000,000 shares of its common stock valued at $200,000 or $0.20 per share, based on the closing price per share, in exchange for the acquisition of 100% of capital stock of RTE (See Note 3).

 

2012 Incentive Stock Plan

On August 30, 2012, the Board of Directors authorized and approved 2012 Incentive Stock Plan (the “2012 Plan”), subject to approval by the majority shareholders within 12 months of the date of approval by the Board of Directors, to issue up to 5,000,000 shares of common stock of the Company at $0.0001 par value per share. Pursuant to the terms of the 2012 Plan, the Company may award to officers, key employees and non-employee directors options to purchase Company’s common stock. As of September 30, 2012, the Company had not granted or issued any options to purchase shares of its common stock to officers, key employees and non-employee directors under the 2012 Plan.

 

As a result of all stock, options and warrant issuances as of September 30, 2012, the Company had 66,890,866 shares of common stock issued and outstanding and 2,090,666 Class C Warrants outstanding for conversion into common stock.

 

NOTE 10: CONCENTRATIONS

 

Concentration of Operators

The Company’s oil leases are obtained from two separate lessors who also act as the operator for all leased properties. One operator uses its own equipment to extract oil and gas, and therefore, the Company does not own or lease any production equipment related to these leases. 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, 2012.

 

Concentration of Customer

The Company sells its oil product to one customer.

 

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Concentration of Credit Risk

On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts.  Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions.  The unlimited insurance coverage is available to all depositors, including consumers, businesses, and governmental entities.  This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to a depositor’s other deposit accounts held at an FDIC-insured institution.  A noninterest-bearing transaction account is a deposit account where interest is neither accrued nor paid; depositors are permitted to make an unlimited number of transfers and withdrawals; and the bank does not reserve the right to require advance notice of an intended withdrawal.

  

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, 2012.  As of September 30, 2012, the Company’s bank balances did not exceed FDIC insured amounts.  

 

NOTE 11: SUBSEQUENT EVENTS

 

On October 1, 2012, the Board of Directors (the “Board”) authorized and issued 50,000 shares of its restricted common stock valued at $30,000 to a non-employee director as compensation for services. The common shares were valued at their fair value based upon the quoted trading price on the date of authorization by the Board for their issuance. The securities were issued without registration under The Securities Act (the “Act”) by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, and/or Rule 506 promulgated there under, as a transaction by an issuer not involving any public offering. These securities have not been and will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The investor delivered appropriate investment representations with respect to this issuance and consented to the imposition of restrictive legends upon the stock certificates representing the shares and represented that he did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. He represented that he was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction. No underwriting discounts or commissions were paid in connection with the sales of the shares.

 

On October 1, 2012, the Board authorized and issued 150,000 shares of its restricted common stock valued at $90,000 to a consultant providing public relations and corporate communication services over a three months period. The common shares were valued at their fair value based upon the quoted trading price on the date of authorization by the Board for their issuance and the expense will be recorded as a prepaid asset to be recognized over the 3-month term. The securities were issued without registration under the Act by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, and/or Rule 506 promulgated there under, as a transaction by an issuer not involving any public offering. These securities have not been and will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The investor delivered appropriate investment representations with respect to these issuances and consented to the imposition of restrictive legends upon the stock certificates representing the shares and represented that he did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. He represented that he was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction. No underwriting discounts or commissions were paid in connection with the sales of the shares.

 

On October 1, 2012, the Board authorized and issued 100,000 shares of its restricted common stock valued at $60,000 to a consultant for providing editorial and marketing services. The common shares were valued at their fair value based upon the quoted trading price on the date of authorization by the Board for their issuance and the expense will be recorded as a prepaid asset to be recognized over the 3-month term. The securities were issued without registration under the Act by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, and/or Rule 506 promulgated there under, as a transaction by an issuer not involving any public offering. These securities have not been and will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The investor delivered appropriate investment representations with respect to these issuances and consented to the imposition of restrictive legends upon the stock certificates representing the shares and represented that he did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. He represented that he was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction. No underwriting discounts or commissions were paid in connection with the sales of the shares.

 

 

 

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On October 1, 2012, the Board granted vested stock options under its 2012 Incentive Stock Plan, to purchase up to 200,000 shares of common stock to each of the four directors of the Company and to two consultants, for a total of 1,200,000 shares of common stock, with a three years term . The exercise price of the stock options to purchase common stock is $0.60 per share, which is the fair value of the Company stock on the grant date. The option to purchase common stock expires on October 31, 2015. The fair value of the options granted was $681,924, calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rate of 0.38%, volatility of 189%, 3 years term, and dividend yield of 0%. The expense was recognized immediately.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Item 2. Management’s Discussion and Analysis or Plan of Operation  

 

This 10-Q contains forward-looking statements. Our actual results could differ materially from those set forth as a result of general economic conditions and changes in the assumptions used in making such forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this report. The analysis set forth below is provided pursuant to applicable Securities and Exchange Commission regulations and is not intended to serve as a basis for projections of future events.

 

Overview

We are an oil and gas and mineral exploration and production company with current projects located in Kansa, Oklahoma and Texas.   Our principal business is in the acquisition, exploration and development of, and production from oil, gas and mineral properties. We have a limited operating history with nominal revenues. On December 1, 2010, we formed an entity named New Western Texas Oil and Gas Corporation (“New Western Texas”) incorporated in the State of Nevada, as our wholly-owned subsidiary. New Western Texas started its operations in January 2011. On January 2, 2012, we acquired 100% of the issued and outstanding capital stock of Royal Texas Energy Co. (“RTE”), a Texas corporation. RTE’s principal business operations are acquisitions, exploration and development of, and production from oil and gas properties located in Texas. We acquired RTE primarily due to its lease ownership interests in oil and gas properties and the Company’s requirement to have an operator for exploration and production of oil and gas in Texas.

 

 We were incorporated in the State of Nevada on September 25, 2008.  Our principal executive offices are located at 20 Truman, Suite 204, Irvine, California 92620.  Our telephone and fax numbers are (949) 435-0977 and (949) 861-3123, respectively.

 

Our Current Business

Our principal business strategy is to build our business through the acquisition of producing oil and natural gas wells, interests and leases. We plan to ultimately engage in the acquisition and exploration of oil and gas properties and to exploit oil and gas reserves we discover that demonstrate economic feasibility. We plan to explore new oil and natural gas wells and continue on recovery from stripper wells. A stripper well or “marginal well” is an oil well that is nearing the end of its economical life.  Oil wells are generally classified as stripper wells when they produce ten barrels per day or less for any twelve month period. We plan to acquire working interests in oil and natural gas production companies in the United States that are located in oil and gas producing areas.  We believe that there are opportunities in these areas for the development of additional oil and gas reserves. Such new reserves might come from the development of existing but as yet undeveloped reserves as well as from future success in exploration. We seek to add proved reserves and increase production through the use of advanced technologies, including detailed reservoir engineering analysis, drilling development wells utilizing sophisticated techniques and selectively recompleting existing wells. We also focus on reducing the operating costs associated with our properties. We believe that the properties we have acquired have significant potential and in certain cases have not been actively developed in the past.

 

Results of Operations

Our consolidated results of operations for the three months and nine months ended September 30, 2012 included the operation of the Company and our wholly-owned subsidiaries New Western Texas Oil and Gas Corporation and Royal Texan Energy Co. Our results of operations for the three months and nine months ended September 30, 2011 included the operations of the Company and our wholly-owned subsidiary New Western Texas Oil and Gas Corporation.

 

We reported net losses of $105,525 and $321,836 for the three months and nine months ended September 30, 2012, compared to net losses of $38,494 and $198,960 for the same periods ended September 30, 2011. The increase in losses was principally attributable to increase in (i) general and administrative expenses relating to payroll costs, legal, professional and consulting fees, (ii) oil and gas production costs and (iii) depreciation and depletion costs incurred by the Company.

 

Revenues

Revenues for the three months and nine months ended September 30, 2012 were $24,398 and $76,043 compared to $42,567 and $42,567 for the same comparable periods in 2011. Revenues increased for the nine months period ended September 30, 2012 as we focused on drilling and extracting oil from Swenson, Trice and Terry Heirs leases and expended funds to develop the acquired properties.

 

Operating Expenses

General and administrative expenses (G&A) for the three months and nine months ended September 30, 2012 were $92,326 and $314,258 compared to $63,608 and $195,465 for the same comparable periods in 2011. G&A expenses increased by $28,718 or 45% for the three months period ended September 30, 2012 compared to the same period in 2011, and $118,793 or 61% for the nine months ended September 30, 2012 as compared to the same periods in 2011, primarily due to increase in accounting and consulting fees, increase in payroll costs, increase in legal and professional fees, and increase in travel and other administrative expenses to manage the operations.

 

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Oil and gas production costs for the three months and nine months ended September 30, 2012 were $28,969 and $56,007 compared to $14,490 and $27,993 for the same periods in 2011. We incurred higher oil and gas production costs in 2012 compared to 2011 due to our expanded drilling operations for the nine months ended September 30, 2012 compared to the previous comparable period in 2011.

Depreciation and depletion expense for the three months and nine months ended September 30, 2012 was $6,234 and $18,752 compared to $426 and $1,278 for the same periods in 2011. Depreciation expense increased due to the receipt of lease and well equipment as a result of the acquisition of RTE.

Interest expense for the three months and nine months ended September 30, 2012 was $2,844 and $9,412 compared to $1,250 and $1,250 for the same periods in 2011. Interest expense increased as a result of the two promissory notes executed by us for our working capital needs, assumption of bank loans pursuant to the acquisition of RTE, and a note payable to the former stockholders of RTE.

 

Interest income for the three months and nine months ended September 30, 2012 was $450 and $1,350 compared to $0 for the same periods in 2011. Interest income consisted of interest earned on the note receivable from a third party for sale of marketable securities by us in December 2011. No interest income was earned during the three months and nine months ended September 30, 2011.

 

Liquidity and Capital Resources

Cash and cash equivalents were $33,763 at September 30, 2012 compared to $16,403 at December 31, 2011. As shown in the accompanying consolidated financial statements, we recorded a loss of $321,836 for the nine months ended September 30, 2012 compared to a loss of $198,960 for the same period in 2011. Our current liabilities exceeded our current assets by $217,216 at September 30, 2012 and net cash used in operating activities for the nine months ended September 30, 2012 was $190,162. These factors and our ability to meet our debt obligations from current operations, and the need to raise additional capital to accomplish our objectives raises doubt about our ability to continue as a going concern.

 

We expect our expenses will continue to increase during the foreseeable future as a result of increased operational expenses and the development of additional oil and gas wells. We anticipate generating only minimal revenues over the next twelve months. Consequently, we are dependent on the proceeds from future debt or equity investments to sustain our operations and implement our business plan. If we are unable to raise sufficient capital, we will be required to delay or forego some portion of our business plan, which would have a material adverse affect on our anticipated results from operations and financial condition. There is no assurance that we will be able to obtain necessary amounts of capital or that our estimates of our capital requirements will prove to be accurate.

 

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our historical operating losses, our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

 

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.

 

We have been successful in the past in raising capital, however, no assurance can be given that these sources of financing will continue to be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to us. If funding is insufficient at any time in the future, we may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of our planned service development and marketing efforts, any of which could have a negative impact on our business and operating results. In addition, insufficient funding may have a material adverse effect on our financial condition, which could require us to:

  • Curtail our operations significantly
  • Sell our oil, gas and mineral leases
  • Seek arrangements with strategic partners or other parties that may require us to relinquish significant rights to oil, gas and mineral leases or markets, or
  • Explore other strategic alternatives including a merger or sale of our Company.

 

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Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2012 was $190,162 which resulted primarily from our net loss of $321,836, decrease in accounts receivable of $26,883, increase in prepaid expenses and other current assets of $7,477, decrease in accounts payable of $13,296, increase in accrued expenses of $16,812, and increase in accrued officer’s compensation payable of $90,000.

 

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2012 was $99,890 due to cash paid for lease obligations of $60,000, cash acquired as part of acquisition of RTE amounting to $12,058, cash paid for acquisition pursuant to supplemental agreement of $20,186, purchase of property and equipment of $1,013, cash received from sale of property & equipment of $5,000, and purchase and capitalized costs of oil and gas properties of $35,749.

 

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2012 was $307,412. Proceeds from the sale of common stock were $499,200, cash repayments for notes payable was $107,087, deposit received from a stockholder for purchase of common stock amounting to $47,299, cash advances of $57,000 received from a related party for working capital requirements, and repayment of advances received from a related party were $189,000.

 

As a result of the above activities, we experienced a net increase in cash of $17,360 for the nine months ended September 30, 2012. Our ability to continue as a going concern is still dependent on our success in obtaining additional financing from investors or from sale of our common shares.

 

Off-balance Sheet Arrangements

 

Since our inception through September 30, 2012, we have not engaged in any off-balance sheet arrangements as defined in Item 303(c) of the SEC's Regulation S-B.

 

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risks.

 

Not Applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer, in order to allow timely consideration regarding required disclosures.

 

The evaluation of our disclosure controls by our principal executive officer included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Quarterly Report. Our management, including our Chief Executive Officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   

 

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As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Principle Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of September 30, 2012 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II.  

 

Item 1. Legal Proceedings.

 

None

 

Item 1A. Risk Factors.

 

Not Applicable

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures.

 

None

 

Item 5. Other Information.

 

None

 

Item 6. Exhibits.

 

 (a) Exhibits.

 

Exhibit   Item
31.1   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

18


 
 


 

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  NEW WESTERN ENERGY CORPORATION
   
Date: November 5, 2012 /s/ Javan Khazali
 

Javan Khazali, President

(Principal Executive Officer)

   
Date: November 5, 2012 /s/ Haris Baha
 

Haris Baha, Chief Financial Officer

(Principal Financial and Accounting Officer)

 

  

 

 

 

 

 

EXHIBIT INDEX

 

Exhibit   Item
31.1   Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
31.2   Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19


EX-31.1 2 exhibit_31-1.htm CEO CERTIFICATION PURSUANT TO PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A)

 

 

 

EXHIBIT 31.1

CERTIFICATION

 

I, Javan Khazali, certify that:

 

  1. I have reviewed this report on Form 10-Q of New Western Energy Corporation;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

  a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

/s/ Javan Khazali          
Javan Khazali
Principal Executive Officer
November 5, 2012

 

 

 

 

 

31.1


 

 

EX-31.2 3 exhibit_31-2.htm CFO CERTIFICATION PURSUANT TO PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A)

 

 

 

 

 EXHIBIT 31.2

CERTIFICATION

 

I, Haris Baha, certify that:

 

  1. I have reviewed this report on Form 10-Q of New Western Energy Corporation;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
       

 

  d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

  a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

/s/ Haris Baha        
Haris Baha
Chief Financial Officer
November 5, 2012

  

 

31.2


 

EX-32.1 4 exhibit_32-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the report of New Western Energy Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Javan Khazali          
Javan Khazali
Principal Executive Officer
November 5, 2012
 
 
/s/ Haris Baha        
Haris Baha
Chief Financial Officer
November 5, 2012
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1


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The fair value of the options granted was $681,924, calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rate of 0.38%, volatility of 189%, 3 years term, and dividend yield of 0%. The expense was recognized immediately.</p> 50000 150000 100000 30000 90000 60000 1200000 0.60 2015-10-31 681924 0.38 1.89 P3Y 0.00 1664000 499200 Pay down within nine months of the aquisition closing date Net revenue interest in Chautauqua Lease was calculated at 73.125% subject to the reserved 6.25% Overriding Royalty Interest after paying of the mineral owners and other fees. Richard Windham, Jr., individually reserves to himself, his heirs, successors and assigns an overriding royalty interest payable on oil, gas and associated hydrocarbons produced, saved and sold from only the lands described as Trice and Methodist Home Lease equal to the difference between an 80 percent net revenue interest and all lease royalty burdens. 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Lease Chautauqua Lease Trice Lease Trice Methodist Lease Doshier Lease Xne Inc New Western Texas Number Of Tracts Lease Covers Ground To Depth In Feet Below Surface Investment In Oil And Gas Properties Lease And Well Equipment Promissory Note Promissory Note Paid Off Principal And Interest Other Significant Noncash Transaction Consideration Received in Share Capitalized Costs Mineral Properties Text Block Stock holders Note Payable 1 Member Stock holders Note Payable 2 Member Stock holders Note Payable 3 Member Class Of Warrant Or Right Redemption Price Of Warrants Non-Employee Director Member Consultant for Public Relations and corporate communications services Member Consultant for Editorial and Marketing Member XML 11 R33.htm IDEA: XBRL DOCUMENT v2.4.0.6
Notes Payable (Details Narrative) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Debt Disclosure [Abstract]        
Interest Expense $ 2,844 $ 1,250 $ 9,412 $ 1,250
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Acquisition of Royal Texan Energy Co.(Details) (RTE Acquisition, USD $)
Sep. 30, 2012
Jan. 02, 2012
RTE Acquisition
   
Assets acquired:    
Cash and cash equivalents   $ 12,058
Accounts receivable   18,054
Property and equipment, net   123,849
Investment in oil and gas properties, net   49,252
Goodwill   333,799
Total assets acquired   537,012
Liabilities assumed:    
Accounts payable   (9,439)
Accrued expenses   (2,205)
Notes payable   (52,087)
Total liabilities assumed   (63,731)
Net assets acquired   473,281
Purchase consideration:    
Common stock - 1,000,000 shares, valued at $0.20 per share   200,000
Pre-acquisition cash advances   163,095
Value of net monetary assets acquired assigned to seller   20,186
Cash consideration 35,000 35,000
Note payable to stockholders 55,000 55,000
Total Consideration Paid   $ 473,281
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Subsequent Events Additional (Details Narrative) (USD $)
0 Months Ended
Oct. 02, 2012
Stock Option Plan  
Stock options 1,200,000 [1]
Exercise price $ 0.60
Expiration date Oct. 31, 2015
Fair Value of options granted $ 681,924
Risk-free discount rate 38.00%
Volatility 189.00%
Term 3 years
Dividend Yield 0.00%
[1] 200,000 shares of common stock to each of the four directors of the Company and two consultants, for a total of 1,200,000 shares
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Oil and Gas Properties and Related Obligations
9 Months Ended
Sep. 30, 2012
Extractive Industries [Abstract]  
Oil and Gas Properties and Related Obligations

NOTE 4: OIL AND GAS PROPERTIES AND RELATED OBLIGATIONS

 

The Company's aggregate capitalized costs related to oil properties consist of the following:

 

Name of the property   Type   September 30, 2012 (Unaudited)   December 31, 2011
Glass Lease   Oil   $ 221,000   $  210,000
Phillips Lease   Oil      130,000      130,000
Chautauqua Lease – B&W Ranch   Oil     75,000      75,000
Chautauqua Lease – Smith Lease   Oil     24,750     -
Swenson Lease   Oil     23,070      15,312
McLellan Lease   Oil     4,191     2,000
Reves Lease   Oil     6,555     2,000
Terry Heirs   Oil     9,722     -
Trice, W. G.   Oil     25,333     -
Uncompleted wells, equipment and facilities         36,972      36,973
           556,593      471,285
Accumulated depletion          (2,352)     (515)
        $ 554,241   $ 470,770

 

Changes in the Uncompleted Wells, Equipment and Facilities were as follows:

 

       

Nine Months Ended

September 30, 2012

(Unaudited)

Beginning Balance – December 31, 2011       $  36,972 
Additions         -
Sale of lease         -
Reclassification to proved properties         -
Costs charged to expense         -
Ending Balance – September 30, 2012       $  36,972 

 

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 during the nine months ended September 30, 2012.

 

Chautauqua Lease – Smith Lease, Chautauqua County, Kansas (“Chautauqua Lease”)

On May 11, 2012, the Company entered into an Assignment of Oil and Gas Lease with a third party for an oil and gas property in Kansas named as “Chautauqua Lease – Charles and Nancy Smith”, whereby the assignor(s) granted the rights to the Company to carry geographical and other exploratory work, including core drilling, and the drilling, mining and operating for, producing, and saving all of the oil, gas, including all associated hydrocarbons. The assignors agreed to transfer 90% of their rights, title, interest, and duties and obligations in the Chautauqua Lease to the Company for a total consideration of $24,750. The Company’s net revenue interest in Chautauqua Lease was calculated at 73.125% subject to the reserved 6.25% Overriding Royalty Interest after paying of the mineral owners and other fees. The Company has paid the total consideration of $24,750 as of April 26, 2012. The Company has not started any oil and gas exploration on Chautauqua Lease as of September 30, 2012.

 

  

Mrs. W.G. Trice, Trice and Methodist Home and Trice Methodist “400” Leases, Shackelford County, Texas (“Trice Lease”)

Mrs. W.G. Trice Lease and Trice and Methodist Home Lease

On January 2, 2012, as part of the RTE acquisition, we acquired an assignment of an oil and gas lease. This lease had been acquired by RTE on April 1, 2010, when they entered into an assignment of oil and gas lease agreement with Richard Windham, JR., individually and doing business as Tracker Mineral and Tracker Mineral, LLC (“Assignor”), whereby the Assignor agreed to sell, assign, and transfer all of their rights, title and interest in and to the leasehold estates covering one hundred percent (100%) of their rights, title and interest in the Mrs. W. G. Trice and Trice and Methodist Home leases. The W. G. Trice and Methodist Home leases consist of four tracts of 257.75 acres of land in Shackelford County in Texas. The assignment of lease includes from the surface and insofar as covers ground to a depth of one thousand (1,000) feet below the surface and insofar as covers and includes net revenue interests except, that Richard Windham, Jr., individually reserves to himself, his heirs, successors and assigns an overriding royalty interest payable on oil, gas and associated hydrocarbons produced, saved and sold from only the lands described as Trice and Methodist Home Lease equal to the difference between an 80 percent net revenue interest and all lease royalty burdens. This assignment covers and includes all of Assignor’s interest in all equipment, personal property, and fixtures located on or used in connection with the lease.

 

Trice Methodist “400” Lease

On January 2, 2012, as part of the RTE acquisition, we acquired an assignment of an oil and gas lease. This lease had been acquired by RTE on April 1, 2010, when they entered into an assignment agreement whereby, the assignor agreed to sell, assign, transfer all of their rights, title and interest in and to the leasehold estates covering one hundred percent (100%) of their rights, title and interest in Trice Methodist “400” lease effective September 1, 2010. Trice Methodist “400” consisted of 273.3 acres of land in Shackelford, Texas. Pursuant to the terms of the assignment of the lease, RTE has a net revenue interest of 77%, and the operator shall pay the assignor, its successors or assigns, based on their division of interest, less taxes required by law to be deducted and remitted by the purchaser for all oil and gas.

 

We recorded these leases as $25,333 investment in oil and gas properties and $50,667 lease and well equipment. On April 2, 2010, RTE executed a promissory note with a bank and obtained a loan for $76,000 to fund the payment to the Assignor for the sale, assignment and transfer of all of their rights including, the cost of the tangible equipment, personal property and fixtures on the Mrs. W.G. Trice, Trice and Methodist Home and Trice Methodist “400” Lease. The promissory note is secured by the debtor’s interest in and to the Mrs. W.G. Trice lease, Trice Methodist “400” lease and Trice and Methodist Home lease all located in Shackelford County, Texas. The promissory note bears 7% per annum interest, and is payable in 48 monthly payments of $1,820.25 beginning May 2, 2010. We recorded this assumed note at its book value, which approximates fair value, of $46,929 on the RTE acquisition date. On September 27, 2012, the Company paid $4,213 to pay off the total outstanding principal and interest due on the promissory note. The Company recorded an interest expense of $344 and $1,846 for the three months and nine months ended September 30, 2012.

 

Terry Heirs #1 and Lane #1, 2, 3 Shackelford County, Texas (“Terry Heirs”)

On January 2, 2012, as part of the RTE acquisition, we acquired an assignment of an oil and gas lease. We recorded this lease as $9,722 investment in oil and gas properties and $10,278 lease and well equipment. This lease had been acquired by RTE on October 12, 2009, when they entered into a Purchase and Sale Agreement and agreed to purchase the right, title and interest in, to and under the oil, gas and mineral leasehold interest in the oil and gas wells on properties located in Schackelford County, Texas. RTE purchased a 75.59667 percent net revenue interest in exchange for a purchase consideration of $20,000. RTE paid $4,583 in cash and executed a promissory note on November 4, 2009 of $15,417, payable on demand, but if no demand is made, then payable in 36 monthly installments of $486.63 bearing an interest rate of 8.5% per annum. We recorded this assumed note at its book value, which approximates fair value, of $5,159 on the RTE acquisition date. The Company recorded an interest expense of $0 and $66 for the three months and nine months ended September 30, 2012. On February 2, 2012, the Company paid $4,738 to pay off the principal balance and interest due on the promissory note. 

 

Doshier Lease, Nowata County, Oklahoma

On May 5, 2011, the Company sold its ownership interest in Doshier Lease to XnE, Inc., a third party, in exchange for a total consideration of $175,000, comprising of cash consideration of $25,000 and 7,500,000 shares of common stock of XnE, Inc. valued at $150,000. The common stock received was valued at its fair value on the date of issuance. As of December 31, 2011, the Company had received cash of $25,000 and sold the 7,500,000 shares of common stock of XnE, Inc. back to XnE, Inc. for $30,000 and received an unsecured promissory note of $30,000 bearing 6% interest, which was originally due on July 1, 2012 but extended to December 28, 2012. As a result, the Company recorded a gain of $25,000 from sale of Doshier Lease and a loss of $120,000 from sale of its investment in XnE shares as of December 31, 2011. The Company recorded interest income of $450 and $1,350 for the three months and nine months ended September 30, 2012. The principal balance due on the note receivable amounted to $30,000 at September 30, 2012.

 

 

Swenson Lease, Jones County, Texas

On January 27, 2011, the Company’s subsidiary New Western Texas acquired a 50% working interest (39.66 % net revenue interest) in 160 acres of oil and gas leases in Jones County, Texas for $8,000 cash. Subsequently additional acquisition costs of $7,312 were incurred. The lease was purchased subject to a Venture Agreement with a third party (Venture Partner) who holds the other 50% working interest and will act as the operator for a stipulated fee. Both parties will evenly split operating expenses of the lease. Operating proceeds after royalty interests and expenses shall be distributed 50% to the Company. Additionally, a stipulated portion of the Venture Partner’s working interest proceeds shall also be distributed to the Company until the Company recovers its acquisition and development costs of the particular lease. Subsequent to any lease purchase under this Venture Agreement, the Company may decline to develop a property in which case the Venture Partner must repurchase the working interest from the Company at the then fair value of the lease working interest. The Company was required to provide the operator with a prepaid amount of $10,000 to be used to fund operating expenses within 3 days of a request by the Venture Partner. As of September 30, 2012, the Company incurred $36,972 of capitalizable equipment costs classified as uncompleted wells equipment and facilities and incurred $7,048 and $25,689 of non-capitalizable exploratory costs relating to the Texas lease for the three months and nine months ended September 30, 2012.

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Oil and Gas Properties - Leases Acquired (Details) (USD $)
9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2012
Chautauqua Lease
Sep. 30, 2012
Trice Lease
RTE Acquisition
Sep. 30, 2012
Trice Methodist "400" Lease
RTE Acquisition
Sep. 30, 2012
Trice Methodist "400" Lease
RTE Acquisition
Sep. 30, 2012
Terry Heirs, Oil
RTE Acquisition
Sep. 30, 2012
Doshier Lease
Xne Inc
Sep. 30, 2012
Doshier Lease
Xne Inc
Jun. 30, 2012
Swenson Lease, Oil
New Western Texas
Sep. 30, 2012
Swenson Lease, Oil
New Western Texas
Date Acquired May 11, 2012 Jan. 02, 2012   Jan. 02, 2012 Jan. 02, 2012       Jan. 27, 2011
Date Sold             2011-05-05    
Ownership   100.00%   100.00%         50.00%
Number of Tracts   4              
Acres per tract   257.75 273.3 273.3         160
Lease Covers ground to depth, in feet below surface   1,000              
Net Revenue interest 90.00% [1] 80.00% [2] 77.00% 77.00% 75.59667%       39.66%
Purchase Consideration $ 24,750       $ 20,000       $ 8,000
Susequent Acquisition Costs                 7,312
Lease Acquistion Details                  
Investment in oil and gas properties     25,333 25,333 9,722        
Lease and well equipment     50,667 50,667 10,278        
Obligation Date       Apr. 02, 2010 Oct. 12, 2009        
Initial payment date       May 02, 2010 Nov. 04, 2009        
Bank note     76,000 76,000          
RTE Paid in cash         4,583        
Promissory note         15,417        
Interest Rate     7.00% 7.00% 8.50% 6.00% 6.00%    
Number of monthly payments       48 36        
Monthly payment amount       1,820 487        
Principal due on Promissory Note     4,213 4,213   30,000 30,000    
Bank note FMV     46,929 46,929 5,159        
Interest Expense     344 1,846 66 450 1,350    
Promissory note paid off, Principal and interest         4,738        
Consideration for sale of lease             175,000    
Cash Received             25,000    
Common Stock of XnE, Inc. received, Shares             7,500,000    
Common Stock of XnE, Inc. received, Value             150,000    
Common Stock of XnE, Inc. sold, Shares             (7,500,000)    
Common Stock of XnE, Inc. sold, Value             30,000    
Promissory note receivable           30,000 30,000    
Maturity date             Jul. 01, 2012    
Extended Maturity Date             Dec. 28, 2012    
Gain on sale of lease             25,000    
Loss on sale of equity (Common Stock of XnE, Inc. sold, Value)             (120,000)    
Capitalized Equipment costs, uncompleted wells and equipment                 36,972 [3]
Non-Capitalized Equipment costs, uncompleted wells and equipment, expense               $ 25,689 $ 7,048
[1] Net revenue interest in Chautauqua Lease was calculated at 73.125% subject to the reserved 6.25% Overriding Royalty Interest after paying of the mineral owners and other fees.
[2] Richard Windham, Jr., individually reserves to himself, his heirs, successors and assigns an overriding royalty interest payable on oil, gas and associated hydrocarbons produced, saved and sold from only the lands described as Trice and Methodist Home Lease equal to the difference between an 80 percent net revenue interest and all lease royalty burdens.
[3] The Company was required to provide operator with a prepaid amont of $10,000 to be used to fund operating expenses with in 3 days of a request by the Venture Partner.

XML 18 R28.htm IDEA: XBRL DOCUMENT v2.4.0.6
Oil and Gas Properties - Changes in Uncompleted Wells (Details) (Uncompleted Wells, USD $)
9 Months Ended
Sep. 30, 2012
Uncompleted Wells
 
Beginning Balance, December 31, 2011 $ 36,973
Additions 0
Sale of lease 0
Reclassification to proved properties 0
Costs charged to expense 0
Ending Balance, June 30, 2012 $ 36,972
XML 19 R30.htm IDEA: XBRL DOCUMENT v2.4.0.6
Mineral Properties and Related Obligations - Capitalized costs to mineral properties (Details) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Wellsboro Lease.Type:Gravel    
Unproved Property, Gross $ 103,530 $ 103,530
Accumulated depletion      
Impairment loss      
Unproved property, net $ 103,530 $ 103,530
XML 20 R31.htm IDEA: XBRL DOCUMENT v2.4.0.6
Notes Payable (Details) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Note Payable $ 100,000 $ 100,000
Note Payable - Current Portion (100,000) (100,000)
Note Payable - Long term Portion      
Stockholder #1 Note
   
Note Payable 50,000 50,000
Stockholder #2 Note
   
Note Payable $ 50,000 $ 50,000
XML 21 R8.htm IDEA: XBRL DOCUMENT v2.4.0.6
Acquisition of Royal Texan Energy Co.
9 Months Ended
Sep. 30, 2012
Business Combinations [Abstract]  
Acquisition of Royal Texan Energy Co.

NOTE 3: ACQUISITION OF ROYAL TEXAN ENERGY CO.

 

On January 2, 2012, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. pursuant to a Plan and Agreement of Reorganization dated December 1, 2011, in exchange for (a) 1,000,000 shares of its common stock, (b) $35,000 in cash and (c) a Promissory Note of $55,000 payable to the two stockholders of RTE, payable at the rate of $10,000 per month commencing 30 days after closing of the acquisition.  In addition, pre-acquisition cash advances of $163,095 were applied as additional purchase price. In a supplemental agreement between the Company and the sellers, the Company agreed to let the sellers retain net monetary assets acquired totaling $20,186, which is treated as additional purchase price.  The Company also agreed to pay down the bank notes of approximately $50,000 within nine months of the acquisition closing date which notes had been previously personally guaranteed by the seller to the bank.  The shares issued to the owners of RTE were valued at $200,000 based on issuance of 1,000,000 shares of our common stock valued at $0.20 per share, based on the closing price per share on the date of closing of the transaction. The fair value of the total consideration paid for the acquisition of RTE amounted to $473,281. Upon completion of the acquisition, RTE became a wholly-owned subsidiary of the Company. As of September 30, 2012, the Company has paid $35,000 in cash to the stockholders of RTE, paid $55,000 towards the Promissory Note of $55,000, and issued 1,000,000 shares of its common stock.  In addition $52,087 has been paid towards the bank debt assumed by the Company.

 

Royal Texan Energy Co. principal business operations are acquisitions, exploration and development of, and production from oil and gas properties located in Texas. The Company acquired RTE primarily due to its lease ownership interests in oil and gas properties and the Company’s requirement to have an operator for exploration and production of oil and gas in Texas.

 

The purchase price of RTE was allocated to record identifiable assets and liabilities at their fair value and the remainder to goodwill as follows:

 

Assets acquired:    
Cash and cash equivalents $ 12,058
Accounts receivable   18,054
Property and equipment, net   123,849
Investment in oil and gas properties, net   49,252
Goodwill   333,799
 Total assets acquired $ 537,012
     
Liabilities assumed:    
Accounts payable $ (9,439)
Accrued expenses   (2,205)
Notes payable   (52,087)
 Total liabilities assumed   (63,731)
Net assets acquired $ 473,281
     
Purchase consideration:    
Common stock - 1,000,000 shares, valued at $0.20 per share $ 200,000
Pre-acquisition cash advances   163,095
Value of net monetary assets acquired assigned to seller   20,186
Cash consideration   35,000
Note payable to stockholders    55,000
Total Consideration Paid $ 473,281

 

XML 22 R32.htm IDEA: XBRL DOCUMENT v2.4.0.6
Notes Payable (Details) (Parenthetical)
9 Months Ended
Sep. 30, 2012
Stockholder #1 Note
 
Maturity date Jul. 01, 2012
Interest Rate on Note 10.00%
Extension of Maturity Date Jul. 01, 2013
Stockholder #2 Note
 
Maturity date Jan. 31, 2013
Interest Rate on Note 10.00%
XML 23 R2.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Consolidated Balance Sheets (USD $)
Sep. 30, 2012
Dec. 31, 2011
Current assets    
Cash and cash equivalents $ 33,763 $ 16,403
Accounts receivable 712 9,541
Note receivable 30,000 30,000
Prepaid expenses and other assets 1,350 156,968
Total current assets 65,825 212,912
Property and equipment, net 103,543 902
Oil and gas properties, net 554,241 470,770
Mineral properties 103,530 103,530
Deposits for business acquisition    35,000
Goodwill 333,799   
Other assets 1,450 1,450
Total Assets 1,162,388 824,564
Current liabilities    
Accounts payable 10,922 14,779
Accrued expenses 23,568 4,550
Accrued officer's compensation 90,000   
Oil and gas property obligations    60,000
Notes payable, current portion 100,000 100,000
Deposit on share purchase 47,299  
Payable to related party 11,252 143,252
Total current liabilities 283,041 322,581
Total liabilities 283,041 322,581
Stockholders' Equity    
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively      
Common stock, $0.0001 par value, 100,000,000 shares authorized, 66,890,866 and 64,226,866 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively 6,689 6,422
Additional paid in capital 2,610,094 1,911,161
Accumulated deficit (1,737,436) (1,415,600)
Total Stockholders' Equity 879,347 501,983
Total Liabilities and Stockholders' Equity $ 1,162,388 $ 824,564
XML 24 R6.htm IDEA: XBRL DOCUMENT v2.4.0.6
NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN
9 Months Ended
Sep. 30, 2012
Accounting Policies [Abstract]  
Nature of Operations, Basis Of Presentation and Going Concern

NOTE 1: NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN

 

New Western Energy Corporation (the “Company”) was incorporated in the State of Nevada on September 25, 2008. The Company’s principal business is the acquisition, exploration and development of, and production from oil, gas and mineral properties located in the United States.

 

On December 1, 2010, the Company formed an entity named New Western Texas Oil and Gas Corporation (“New Western Texas”) incorporated in the State of Nevada, as its wholly-owned subsidiary. New Western Texas started its operations in January 2011.

 

On January 2, 2012, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. (“RTE”) (See Note 3).

 

Basis of presentation

 

The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments and business acquisition adjustments, necessary to present fairly the financial position at September 30, 2012, and the results of operations and cash flows for the three months and nine months periods ended September 30, 2012 and 2011. The balance sheet as of December 31, 2011 is derived from the Company’s audited financial statements.

 

Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the financial statements and the notes thereto contained in the Company’s 2011 Annual Report filed with the SEC on Form 10-K on March 30, 2012.

 

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 earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. The Company currently has on ongoing private placement equity offering and has raised $499,200 during the nine months ended September 30, 2012 and through the date of this report. At September 30, 2012, the Company had a working capital deficit of $217,216, incurred a net loss of $321,836 during the nine months ended September 30, 2012 and used cash in operating activities of $190,162. 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.

XML 25 R35.htm IDEA: XBRL DOCUMENT v2.4.0.6
Stockholders' Equity (Details Narrative) (USD $)
9 Months Ended
Sep. 30, 2012
Equity [Abstract]  
Equity Offering, units 1,664,000 [1]
Equity Offering, cash proceeds $ 499,200
Equity Offering, per unit $ 0.30
Class C Warrant exercise price 1.00
Class C Warrant redemption price 0.05
Expiration Date 12/31/2013
Class C Warrant redemption price $ 2.00 [2]
Deposit on share purchase $ 47,299
Units 420,000
Share price per unit $ 0.30
[1] Each Unit consits of one share of common stock and one redememable Class C Warrant to purchase one share of common stock
[2] Class C Warrants are redeemable by the company upon at least 30 days written notice if the mean average of the closing bid price exceeds $2.00 per share for 20 consecutive business days ending prior to the date notice of redemptions is given.
XML 26 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
Nature of Operations, Basis of Presentation and Going Concern (Details Narrative) (USD $)
9 Months Ended
Sep. 30, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Private Placement Equity Offering $ 499,200
Working Capital Deficit 217,216
Net Loss 321,836
Cash Used in Operating Activities $ 190,162
XML 27 R36.htm IDEA: XBRL DOCUMENT v2.4.0.6
Subsequent Events (Details Narrative) (USD $)
0 Months Ended
Oct. 02, 2012
Non-employee director
 
Restricted common stock issued for services 50,000
Restricted common stock issued for services, amount $ 30,000
Consultant-Public relations
 
Restricted common stock issued for services 150,000
Restricted common stock issued for services, amount 90,000
Consultant-Editoral and Marketing
 
Restricted common stock issued for services 100,000
Restricted common stock issued for services, amount $ 60,000
XML 28 R24.htm IDEA: XBRL DOCUMENT v2.4.0.6
Acquisition of Royal Texan Energy Co. (Details Narrative) (RTE Acquisition, USD $)
0 Months Ended 9 Months Ended
Jan. 02, 2012
Sep. 30, 2012
RTE Acquisition
   
Date of Acquisition Jan. 02, 2012  
Ownership of RTE 100.00%  
Common Stock, Shares 1,000,000  
Cash consideration $ 35,000 $ 35,000
Note payable to stockholders 55,000 55,000
Monthly payment on RTE notes 10,000  
Days payment due after acquisition of RTE 30  
Pre-Acquisition Cash Advances 163,095  
Net Monetary Assets 20,186  
Bank notes payable 50,000 [1]  
Common stock 200,000  
Common Stock, par value $ 0.20  
Fair Value of Acquisition 473,281  
Cash Paid 35,000 35,000
Paid towards Promissary notes   50,000
Promissary Notes 55,000 55,000
Paid towards bank debt   $ 52,087
[1] Pay down within nine months of the aquisition closing date
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XML 30 R7.htm IDEA: XBRL DOCUMENT v2.4.0.6
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2012
Accounting Policies [Abstract]  
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 and its wholly-owned subsidiaries New Western Texas Oil and Gas Corporation and Royal Texan Energy Co. All intercompany balances and transactions are eliminated in 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 marketable securities, valuation of accounts, notes and other receivables, valuation and purchase price allocation of assets acquired and liabilities assumed in business combinations, valuation of long-lived assets, goodwill and oil, gas and mineral properties, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.


Fair value of Financial Instruments and Fair Value Measurements

 

ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable, notes payable, and amounts due to related parties. Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

 

Net Earnings (Loss) Per Share

 

The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At September 30, 2012, there were Class C Warrants outstanding for 2,090,666 common shares that were excluded from the computations of diluted loss per share since the effect was anti-dilutive. The warrants, if exercised, may dilute future earnings per share.

  

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

XML 31 R3.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Stockholders' Equity    
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued      
Preferred stock, shares outstanding      
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 66,890,866 64,226,866
Common stock, shares outstanding 66,890,866 64,226,866
XML 32 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2012
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries New Western Texas Oil and Gas Corporation and Royal Texan Energy Co. All intercompany balances and transactions are eliminated in 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 marketable securities, valuation of accounts, notes and other receivables, valuation and purchase price allocation of assets acquired and liabilities assumed in business combinations, valuation of long-lived assets, goodwill and oil, gas and mineral properties, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Fair value of financial instruments of fair value measurements

Fair value of Financial Instruments and Fair Value Measurements

 

ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Net Earnings (Loss) Per Share

Net Earnings (Loss) Per Share

 

The Company computes net earnings (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At September 30, 2012, there were Class C Warrants outstanding for 2,090,666 common shares that were excluded from the computations of diluted loss per share since the effect was anti-dilutive. The warrants, if exercised, may dilute future earnings per share.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

XML 33 R1.htm IDEA: XBRL DOCUMENT v2.4.0.6
Document and Entity Information
9 Months Ended
Sep. 30, 2012
Nov. 05, 2012
Document And Entity Information    
Entity Registrant Name New Western Energy Corp.  
Entity Central Index Key 0001479488  
Document Type 10-Q  
Document Period End Date Sep. 30, 2012  
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   67,190,866
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2012  
XML 34 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
Acqusition of Royal Texan Energy Co.(Tables)
9 Months Ended
Sep. 30, 2012
Notes to Financial Statements  
RTE Acquisition
 
Assets acquired:    
Cash and cash equivalents $ 12,058
Accounts receivable   18,054
Property and equipment, net   123,849
Investment in oil and gas properties, net   49,252
Goodwill   333,799
 Total assets acquired $ 537,012
     
Liabilities assumed:    
Accounts payable $ (9,439)
Accrued expenses   (2,205)
Notes payable   (52,087)
 Total liabilities assumed   (63,731)
Net assets acquired $ 473,281
     
Purchase consideration:    
Common stock - 1,000,000 shares, valued at $0.20 per share $ 200,000
Pre-acquisition cash advances   163,095
Value of net monetary assets acquired assigned to seller   20,186
Cash consideration   35,000
Note payable to stockholders    55,000
Total Consideration Paid $ 473,281
XML 35 R4.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Consolidated Statements of Operations and Comprehensive Gain (Loss) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Income Statement [Abstract]        
Revenues $ 24,398 $ 42,567 $ 76,043 $ 42,567
Expenses        
Depreciation and depletion 6,234 426 18,752 1,278
General and administrative 92,326 63,608 314,258 195,465
Exploration expenses    1,287    40,541
Oil and gas production 28,969 14,490 56,007 27,993
Total expenses 127,529 79,811 389,017 265,277
Loss from operations (103,131) (37,244) (312,974) (222,710)
Other income (expenses)        
Interest expense (2,844) (1,250) (9,412) (1,250)
Interest income 450    1,350   
Gain on sale of oil and gas property          25,000
Total other income (expenses) (2,394) (1,250) (8,062) 23,750
Loss from operations before income tax (105,525) (38,494) (321,036) (198,960)
Provision for income tax       800   
Net Loss (105,525) (38,494) (321,836) (198,960)
Other Comprehensive (Gain) Loss:        
Unrealized loss on marketable securities    52,500      
Comprehensive gain (loss) $ (105,525) $ 14,006 $ (321,836) $ (198,960)
Basic and diluted net gain (loss) per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
Weighted average number of shares outstanding 66,890,866 64,201,504 66,315,377 64,156,219
XML 36 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
Related Party Transactions and balances
9 Months Ended
Sep. 30, 2012
Related Party Transactions [Abstract]  
Related Party Transactions and balances

NOTE 7: RELATED PARTY TRANSACTIONS AND BALANCES

 

Payable to Related party

 

At September 30, 2012 and December 31, 2011, advances, net of repayments, made to the Company by the Chief Executive Officer (“Officer”) for its working capital requirements amounted to $11,252 and $143,252, respectively. Amounts due to the Officer are unsecured, non-interest bearing and due on demand without specific repayment terms. In addition, compensation payable to the Officer pursuant to the terms of an employment agreement amounted to $90,000 and $0 as of September 30, 2012 and December 31, 2011, respectively.

XML 37 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Notes Payable
9 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
Notes Payable

NOTE 6: NOTES PAYABLE

 

  September 30, 2012 (Unaudited)   December 31, 2011
           
Stockholder note payable, unsecured, bearing interest at 10% per annum, originally due on July 31, 2012 and extended to July 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans    50,000      50,000
           
Stockholder note payable, unsecured, bearing interest at 10% per annum, due on January 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans    50,000      50,000
           
     100,000      100,000
Notes payable - current portion   (100,000)      (100,000)
Notes payable – long term $ -   $ -

 

The Company recorded an interest expense of $2,844 and $9,412 for the three months and nine months ended September 30, 2012 and $1,250 and $1,250 for the comparable periods in 2011, respectively.

XML 38 R23.htm IDEA: XBRL DOCUMENT v2.4.0.6
Summary of Accounting Policies (Details Narrative)
Sep. 30, 2012
Warrants and Rights Note Disclosure [Abstract]  
Class C Warrants Outstanding 2,090,666
XML 39 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
Oil and Gas Properties and Related Obligations (Tables)
9 Months Ended
Sep. 30, 2012
Extractive Industries [Abstract]  
Capitalized Costs related to oil properties
Name of the property   Type   September 30, 2012 (Unaudited)   December 31, 2011
Glass Lease   Oil   $ 221,000   $  210,000
Phillips Lease   Oil      130,000      130,000
Chautauqua Lease – B&W Ranch   Oil     75,000      75,000
Chautauqua Lease – Smith Lease   Oil     24,750     -
Swenson Lease   Oil     23,070      15,312
McLellan Lease   Oil     4,191     2,000
Reves Lease   Oil     6,555     2,000
Terry Heirs   Oil     9,722     -
Trice, W. G.   Oil     25,333     -
Uncompleted wells, equipment and facilities         36,972      36,973
           556,593      471,285
Accumulated depletion          (2,352)     (515)
        $ 554,241   $ 470,770
Uncompleted Wells, Equipment and Facilities
       

Nine Months Ended

September 30, 2012

(Unaudited)

Beginning Balance – December 31, 2011       $  36,972 
Additions         -
Sale of lease         -
Reclassification to proved properties         -
Costs charged to expense         -
Ending Balance – September 30, 2012       $  36,972 
XML 40 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6
Concentrations
9 Months Ended
Sep. 30, 2012
Risks and Uncertainties [Abstract]  
Concentrations

NOTE 10: CONCENTRATIONS

 

Concentration of Operators

The Company’s oil leases are obtained from two separate lessors who also act as the operator for all leased properties. One operator uses its own equipment to extract oil and gas, and therefore, the Company does not own or lease any production equipment related to these leases. 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, 2012.

 

Concentration of Customer

The Company sells its oil product to one customer.

 

Concentration of Credit Risk

On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts.  Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions.  The unlimited insurance coverage is available to all depositors, including consumers, businesses, and governmental entities.  This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to a depositor’s other deposit accounts held at an FDIC-insured institution.  A noninterest-bearing transaction account is a deposit account where interest is neither accrued nor paid; depositors are permitted to make an unlimited number of transfers and withdrawals; and the bank does not reserve the right to require advance notice of an intended withdrawal.

  

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, 2012.  As of September 30, 2012, the Company’s bank balances did not exceed FDIC insured amounts.  

XML 41 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
Commitments and Contingencies
9 Months Ended
Sep. 30, 2012
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 8: COMMITMENTS AND CONTINGENCIES

 

Legal Costs and Contingencies

 

In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received.

 

If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable. As of September 30, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

XML 42 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
Stockholders' Equity
9 Months Ended
Sep. 30, 2012
Equity [Abstract]  
Stockholders' Equity

NOTE 9: STOCKHOLDERS' EQUITY

 

The Company’s capitalization at September 30, 2012 was 100,000,000 authorized common shares and 5,000,000 authorized preferred shares, both with a par value of $0.0001 per share.

 

Common Stock and Warrants

 From January 1, 2012 to September 30, 2012, the Company sold, pursuant to a private placement equity offering, 1,664,000 Units to accredited investors for cash proceeds of $499,200 or $0.30 per Unit, each Unit consisting of one share of common stock and one redeemable Class C Warrant to purchase one share of common stock at an exercise price of $1.00 per share. Such warrants expire on December 31, 2013. The Class C warrants are redeemable by the Company at a redemption price of $0.05 per warrant upon at least 30 days' prior written notice if the mean average of the closing bid price exceeds $2.00 per share for 20 consecutive business days ending prior to the date notice of redemption is given. On September 25, 2012, the Company received in cash $47,299 as a deposit from a stockholder towards purchase of 420,000 Units at $0.30 per Unit. The Company recorded the cash received as a current liability in the accompanying financial statements as of September 30, 2012.

 

On January 26, 2012, the Company issued to the owners of RTE 1,000,000 shares of its common stock valued at $200,000 or $0.20 per share, based on the closing price per share, in exchange for the acquisition of 100% of capital stock of RTE (See Note 3).

 

2012 Incentive Stock Plan

On August 30, 2012, the Board of Directors authorized and approved 2012 Incentive Stock Plan (the “2012 Plan”), subject to approval by the majority shareholders within 12 months of the date of approval by the Board of Directors, to issue up to 5,000,000 shares of common stock of the Company at $0.0001 par value per share. Pursuant to the terms of the 2012 Plan, the Company may award to officers, key employees and non-employee directors options to purchase Company’s common stock. As of September 30, 2012, the Company had not granted or issued any options to purchase shares of its common stock to officers, key employees and non-employee directors under the 2012 Plan.

 

As a result of all stock, options and warrant issuances as of September 30, 2012, the Company had 66,890,866 shares of common stock issued and outstanding and 2,090,666 Class C Warrants outstanding for conversion into common stock.

XML 43 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
Subsequent Events
9 Months Ended
Sep. 30, 2012
Subsequent Events [Abstract]  
Subsequent Events

NOTE 11: SUBSEQUENT EVENTS

 

On October 1, 2012, the Board of Directors (the “Board”) authorized and issued 50,000 shares of its restricted common stock valued at $30,000 to a non-employee director as compensation for services. The common shares were valued at their fair value based upon the quoted trading price on the date of authorization by the Board for their issuance. The securities were issued without registration under The Securities Act (the “Act”) by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, and/or Rule 506 promulgated there under, as a transaction by an issuer not involving any public offering. These securities have not been and will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The investor delivered appropriate investment representations with respect to this issuance and consented to the imposition of restrictive legends upon the stock certificates representing the shares and represented that he did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. He represented that he was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction. No underwriting discounts or commissions were paid in connection with the sales of the shares.

 

On October 1, 2012, the Board authorized and issued 150,000 shares of its restricted common stock valued at $90,000 to a consultant providing public relations and corporate communication services over a three months period. The common shares were valued at their fair value based upon the quoted trading price on the date of authorization by the Board for their issuance and the expense will be recorded as a prepaid asset to be recognized over the 3-month term. The securities were issued without registration under the Act by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, and/or Rule 506 promulgated there under, as a transaction by an issuer not involving any public offering. These securities have not been and will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The investor delivered appropriate investment representations with respect to these issuances and consented to the imposition of restrictive legends upon the stock certificates representing the shares and represented that he did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. He represented that he was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction. No underwriting discounts or commissions were paid in connection with the sales of the shares.

 

On October 1, 2012, the Board authorized and issued 100,000 shares of its restricted common stock valued at $60,000 to a consultant for providing editorial and marketing services. The common shares were valued at their fair value based upon the quoted trading price on the date of authorization by the Board for their issuance and the expense will be recorded as a prepaid asset to be recognized over the 3-month term. The securities were issued without registration under the Act by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, and/or Rule 506 promulgated there under, as a transaction by an issuer not involving any public offering. These securities have not been and will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The investor delivered appropriate investment representations with respect to these issuances and consented to the imposition of restrictive legends upon the stock certificates representing the shares and represented that he did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting. He represented that he was afforded the opportunity to ask questions of our management and to receive answers concerning the terms and conditions of the transaction. No underwriting discounts or commissions were paid in connection with the sales of the shares.

  

On October 1, 2012, the Board granted vested stock options under its 2012 Incentive Stock Plan, to purchase up to 200,000 shares of common stock to each of the four directors of the Company and two consultants, for a total of 1,200,000 shares of common stock, with a three years term . The exercise price of the stock options to purchase common stock is $0.60 per share, which is the fair value of the Company stock on the grant date. The option to purchase common stock expires on October 31, 2015. The fair value of the options granted was $681,924, calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rate of 0.38%, volatility of 189%, 3 years term, and dividend yield of 0%. The expense was recognized immediately.

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Related Party Transactions and balances (Details Narrative) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Related Party Transactions [Abstract]    
Due to Officer $ 11,252 $ 143,252
Compensation due to officer $ 90,000 $ 0

XML 46 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Notes Payable (Tables)
9 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
Notes Payable
  September 30, 2012 (Unaudited)   December 31, 2011
           
Stockholder note payable, unsecured, bearing interest at 10% per annum, originally due on July 31, 2012 and extended to July 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans    50,000      50,000
           
Stockholder note payable, unsecured, bearing interest at 10% per annum, due on January 31, 2013, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans    50,000      50,000
           
     100,000      100,000
Notes payable - current portion   (100,000)      (100,000)
Notes payable – long term $ -   $ -
XML 47 R26.htm IDEA: XBRL DOCUMENT v2.4.0.6
Acquisition of Royal Texan Energy Co.(Details) (Parenthetical) (RTE Acquisition, USD $)
0 Months Ended
Jan. 02, 2012
RTE Acquisition
 
Common stock, issued shares 1,000,000
Common stock, par value $ 0.20
XML 48 R5.htm IDEA: XBRL DOCUMENT v2.4.0.6
Condensed Consolidated Statements of Cash Flows (USD $)
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Cash Flows from Operating Activities:    
Net Loss $ (321,836) $ (198,960)
Adjustment to reconcile net loss to net cash used in operating activities:    
Depreciation and depletion 18,752 1,278
Bad debt expense    5,000
Gain on sale of oil and gas property    (25,000)
Accounts receivable 26,883 (26,290)
Prepaid expenses and other assets (7,477) (109,943)
Accounts payable (13,296) (1,994)
Accrued expenses 16,812 7,250
Accrued officer's compensation 90,000 60,000
Net cash used in operating activities (190,162) (288,659)
Cash Flows From Investing Activities:    
Purchase of property and equipment (1,013)   
Proceeds from sale of property of equipment 5,000   
Payment of earnest deposit    (17,000)
Proceeds from sale of oil and gas property    17,500
Cash acquired as part of acquisition 12,058   
Cash paid for acquisition (20,186)   
Cash paid for lease obligations (60,000) (15,312)
Purchase and capitalized cost of oils and gas properties, net (35,749) (36,973)
Net cash used in investing activities (99,890) (51,785)
Cash Flows From Financing Activities:    
Proceeds from sale of common stock 499,200 76,000
Proceeds from notes payable    100,000
Cash repayments for notes payable (107,087)   
Proceeds from a stockholder deposit 47,299   
Proceeds from related party advances 57,000 120,000
Repayments of related party advances (189,000) (52,000)
Net cash provided by financing activities 307,412 244,000
Net increase (decrease) in cash and cash equivalents 17,360 (96,444)
Cash and cash equivalents, beginning of the period 16,403 109,655
Cash and cash equivalents, end of the period 33,763 13,211
Cash paid for income taxes 800   
Cash paid for interest 1,912   
Supplemental disclosures of non-cash investing and financing activities:    
Sale of Doshier lease for a receivable and marketable securities    175,000
Acquisition of Royal Texan Energy Co. assets:    
Accounts receivable 18,054   
Property & equipment, net 123,849   
Investment in oil and gas properties 49,252   
Goodwill - non-cash portion 325,671   
Accounts payable (9,439)   
Accrued expenses (2,205)   
Notes payable (52,087)   
Common stock (100)   
Additional paid in consideration (199,900)   
Pre-acquisition cash advances (163,095)   
Note payable to stockholders (55,000)   
Pre-acquisition deposit paid $ (35,000)   
XML 49 R10.htm IDEA: XBRL DOCUMENT v2.4.0.6
Mineral Properties and Related Obligations
9 Months Ended
Sep. 30, 2012
Extractive Industries [Abstract]  
Mineral Properties and Related Obligations

NOTE 5: MINERAL PROPERTIES AND RELATED OBLIGATIONS

 

The Company’s aggregate capitalized costs related to mineral properties consist of the following:

 

                     
Unproved Properties:            
Name of Property Type  

September 30, 2012

(Unaudited)

  December 31, 2011
               
Wellsboro Lease Gravel   $ 103,530   $  103,530
        103,530     103,530
Accumulated depletion       -          -     
Impairment loss       -          -     
      $ 103,530   $  103,530


Since there was no production of minerals during the three months and nine months ended September 30, 2012 and 2011, no depletion expense relating to mineral properties has been recorded for the three months and nine months periods ended September 30, 2012 and 2011, respectively.

XML 50 R27.htm IDEA: XBRL DOCUMENT v2.4.0.6
Oil and Gas Properties (Detail) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties $ 556,593 $ 471,285
Accumulated depletion (2,352) (515)
Capital Costs, net of depletion 554,241 470,770
Uncompleted Wells
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 36,972 36,973
Glass Lease, Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 221,000 210,000
Phillips Lease, Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 130,000 130,000
Chautauqua Lease- B and W Ranch, Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 75,000 75,000
Chautauqua Lease- Smith Lease. Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 24,750   
Swenson Lease, Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 23,070 15,312
McLellan Lease, Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 4,191 2,000
Reves Lease, Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 6,555 2,000
Terry Heirs, Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties 9,722   
Trice, W.G., Oil
   
Capitalized Costs Relating to Oil and Gas Producing Activities, by Geographic Area [Line Items]    
Capitalized Costs related to oil properties $ 25,333   
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Mineral Properties and Related Obligations (Tables)
9 Months Ended
Sep. 30, 2012
Extractive Industries [Abstract]  
Capitalized costs to mineral properties
                     
Unproved Properties:            
Name of Property Type  

September 30, 2012

(Unaudited)

  December 31, 2011
               
Wellsboro Lease Gravel   $ 103,530   $  103,530
        103,530     103,530
Accumulated depletion       -          -     
Impairment loss       -          -     
      $ 103,530   $  103,530