Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data file required to be submitted
pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files)
Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check One).
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate by check mark whether the registrant
has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a court. Not Applicable
On March 31, 2017, 13,341,467 shares
of common stock were held by non-affiliates and had a value of $13,608,297 based on the average closing price of $1.02.
There were 17,697,621 shares issued
and outstanding of the registrant’s Common Stock as of March 31, 2017.
PART I
ITEM 1. BUSINESS
General
The following is a summary of some
of the information contained in this document. Unless the context requires otherwise, references in this document to “T-Rex”
or the “Company” are to T-Rex Oil, Inc.
NOTE: This report is as of March
31, 2017. Subsequent to such date, due to the depressed oil prices, the business of the Company has been determined to be unsustainable
due to lack of capital, and the Company is liquidating its assets and seeking a new business.
Corporate History
T-Rex Oil, Inc. was organized under
the laws of the State of Nevada as Rancher Energy Corp. (“Rancher”). On October 8, 2014, as approved by our board of
directors and a written consent of our majority shareholder, an amendment to the Articles of Incorporation was filed in order to
authorize a reverse split of the common stock issued and outstanding on a one (1) new share for three hundred fifty (350) old shares
basis. At the same time, the Articles of Incorporation were amended to change our authorized capital to 275,000,000 shares of $0.001
par value common stock and 50,000,000 shares of $0.01 par value preferred stock. The Financial Industry Regulatory Authority (“FINRA”)
approved the amendment, effective October 29, 2014.
On October 17, 2014, we merged into
our wholly owned subsidiary, T-Rex Oil, Inc., a Colorado corporation and as a result were re-domiciled in the state of Colorado.
On October 28, 2015, T-Rex Oil, Inc.
(“the Company”) filed an Amendment to its Articles of Incorporation to designate the Series A Convertible Preferred
Stock.
The Amendment designates 5,000,000 shares
of the authorized 50,000,000 shares of the Company’s $0.001 par value preferred stock as the Series A Convertible Preferred
Stock (“the Series A Shares.”) The Series A Shares are convertible into common shares of the Company’s stock
9 months after the date of issuance. Further, the Series A Shares have a conversion price based upon 80% of the 10 day average
of the Company’s closing market price. The Series A Shares do not accrue dividends and have a deemed purchase price of $2.00
per share.
In October 2015, the Company commenced
a private placement financing of $7,000,000 in Units, a Unit consisting of 1 share of its Series A Shares and a Unit Warrant. The
Unit Warrant has an exercise price of $3.00 per share and a term of 3 years. The Unit Warrant is exercisable 9 months after issuance
and is callable by the Company upon the Company’s common stock closing at a market price of $5.00 or above for a period of
10 days.
At March 31, 2016, the Company had received
$793,038 of cash in exchange for the issuance of 409,019 shares of its Series A Preferred Stock and Unit Warrants exercisable for
409,019 shares of common stock.
On July 11, 2016, Nexfuels, Inc. was incorporated
as a wholly-owned subsidiary of the Company in the State of Colorado (“Nexfuels”). Nexfuels was created to develop
the Company’s Carbon Dioxide Recovery Project. The Carbon Dioxide Recovery Project (“the Project”) is focused
on the development of exhaust stack supplies of carbon dioxide for use in enhanced oil recovery. The project involves the development,
build out and operation of a commercial scale carbon capture systems on existing coal fueled electric power plants in the United
States, specifically in Wyoming.
The Company’s Board of Directors determined
that to focus and better implement these strategies necessary to financing and build the Project, the Board of Directors approved
the spin-off of Nexfuels on July 15, 2016.
Shareholders of T-Rex, as of the Record Date
of August 19, 2016, received one share of Nexfuels common stock for every two shares (2) of T-Rex common stock owned. The stock
dividend was based upon 17,097,622 shares of the Company’s common stock that were issued and outstanding as of the Record
Date.
As part of the spin-off of Nexfuels, the Company’s
Chief Executive Officer and Chairman, Mr. Donald Walford and a director of the Company Mr. Sears were appointed to the Board of
Directors of Nexfuels.
On August 19, 2016, the Company
assigned to Nexfuels the following:
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1.
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The idea, concept and plan to capture and sell CO2 generated by the Dave Johnston power plant located in Converse County, Wyoming and/or any other power plants owned by PacifiCorp.
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2.
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The Memorandum of Understanding (“MOU”) by and between T-Rex and PacifiCorp Energy the owner/operator of the power plant.
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3.
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The existing contract by and between Sargent Lundy LLC to perform the feasibility study.
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4.
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Any and all other valid and subsisting contracts, agreement, and instruments, rights or other interest that the Company may have in the Project.
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5.
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All valid and subsisting easements, permits, licenses, servitudes, rights of way and other surface rights that directly relate to or are otherwise directly applicable to the Project.
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An analysis of the properties assigned
to Nexfuels by the Company showed that the Company in accordance with its accounting policies had not capitalized any of the direct
or indirect costs associated with the MOUs, the feasibility study or any of the other interests in the project. As such, the Company
did not recognize a gain or loss in connection with the Nexfuels spin-off.
ORGANIZATIONAL STRUCTURE
Part of our strategy includes the use
of partnerships to not only own individual projects, but to handle the drilling, completion, operation and raising of capital for
the funding of such prospects. The Company or one of its subsidiaries will then handle the operation and management of the partnership.
Terex Energy Corporation
Terex Energy Corporation (“Terex”)
was incorporated in the State of Colorado in February 2014. Terex has interests in oil and gas properties.
On December 22, 2014, we entered into
Exchange Agreements with the Terex shareholders for 100% of the shares of Terex. Pursuant to the Exchange Agreements, we agreed
to issue 7,385,700 shares of our restricted common stock for 100% of the issued and outstanding common stock of Terex. The shares
were exchanged on a one for one basis. As a result, Terex became a wholly-owned subsidiary of the Company.
The effective date of the acquisition
was December 22, 2014, with T-Rex being the legal acquirer. However, since T-Rex is a public company, which had nominal activity,
the acquisition was treated as a recapitalization of Terex. Though T-Rex was the legal acquirer in the acquisition, Terex was the
accounting acquirer since its shareholders gained control of T-Rex. Therefore, at the date of the acquisition the historical financial
statements of Terex became those of T-Rex. As a result, the historical financial statements of Terex supersede any prior financial
statements of T-Rex.
Prior to the share exchange with T-Rex,
Terex had acquired interests in oil and gas prospects and properties discussed herein. Terex also is an operator of oil and gas
properties and as such operates the various properties owned by the Company and its subsidiaries.
Western Interior Oil & Gas Corporation.
Western Interior Oil & Gas Corporation
(“Western Interior”) was incorporated in the State of Wyoming in August 2005. Western Interior has producing and developmental
oil and gas properties in southwest central Wyoming.
On February 24, 2015, we entered into
a Share Exchange Agreement with Western Interior and the shareholders of Western Interior. Under the Share Exchange Agreement we
exchanged shares of our common stock for 83% of the issued and outstanding common stock of Western Interior. The acquisition was
closed on March 28, 2015 and was effective March 31, 2015. At the time of closing, we issued 7,465,168 shares of our restricted
common stock in exchange for shares of Western Interior.
On March 31, 2015, we entered into an
amendment to the Share Exchange Agreement whereby we assumed certain repurchase agreements between Western Interior and its dissident
shareholders and as a result acquired the remaining 17% of Western Interior. As part of these agreements, we assumed certain promissory
notes issued to the dissenting
shareholders in the total amount of
$1,770,047 that are collateralized by Western Interior’s assets. As a result, Western Interior has become a wholly-owned
subsidiary of the Company.
JK Minerals, Inc.
In January 2016, we were assigned 100%
of the equity interest issued and outstanding in JK Minerals, Inc. (“JK Minerals”) by its sole shareholder, Blue Tip
Energy Wyoming, Inc. At the time of the assignment, JK Minerals had no outstanding liabilities and its only asset was a license
to a 3-D Seismology Report performed in 2004 on the Cole Creek Property acquired by T-Rex #3. JK Minerals was incorporated in Wyoming
in July 1991 and has no operations.
T-Rex Oil LLC #3
T-Rex Oil, LLC #3 (“T-Rex #3”)
is a Colorado limited liability company organized in January 2016. T-Rex #3 is managed by the Company and T-Rex has a 16.67% equity
interest in T-Rex #3 with the remaining 83.33% equity interest being owned by Mr. VanderPloeg who is a former director and shareholder
of the Company. Per its Operating Agreement, T-Rex #3 acts and is the holder in title to any and all assets and any related liabilities
as well as operations on behalf of the Company.
Therefore, in accordance with authoritative
guidance on accounting for consolidation, as set forth in Topic 810-10-15 of the ASC, the Company has included in these consolidated
financial statements as of and for the year ended March 31, 2017 any such assets, liabilities, revenues, costs and expenses of
T-Rex #3.
T-Rex #3 owns 13,328 gross, 10,000
net acres in the Powder River Basin of Wyoming (the “Cole Creek Property”). Effective September 1, 2018, the Company
sold its 100% working interest in the Cole Creek Property for $3,500,000 in cash.
T-Rex Oil LLC #1
T-Rex Oil LLC #1 (“T-Rex #1”)
is a Colorado limited liability company organized in December 2014. Terex is the Manager of T-Rex #1 and is the operator of the
Sioux County, Nebraska project and the Company has no equity interest in T-Rex #1.
The Company in December 2014 entered
into put agreements with the members of T-Rex #1 whereby the Company granted a right to put the purchase of their interest of T-Rex
#1 in the amount of $425,000 back to the Company at an exercise price of $2.00 per share or a total of 212,500 shares of the Company’s
common stock. During the fiscal year ended March 31, 2017, the Company issued to the members of LLC #1 a total of 425,000 shares
of its restricted common stock at an exercise price of $1 per share valued at $425,000.
Our Company
NOTE: This report is as of March
31, 2017. Subsequent to such date, due to the depressed oil prices, the business of the Company has been determined to be unsustainable
due to lack of capital, and the Company is liquidating its assets and seeking a new business.
We are an independent oil and gas exploration
and production company focused on the acquisition, enhancement and development of oil and gas assets primarily in the Rocky Mountain
region of Wyoming. Based on a 2007 research study conducted by the Enhanced Oil Recovery Institute at the University of Wyoming
using reservoir production data provided by the Wyoming Oil and Gas Conservation Commission (“WOGCC”), Wyoming has
produced 7,024 million barrels of oil from 1,237 producing fields with the top 400 fields producing 97.7% of the total produced
oil, or 6,865 million barrels of oil.
We believe that there remain several
under-developed or mismanaged oil and gas properties in Wyoming that with proper field management, application of modern exploration
and development techniques, enhanced recovery methods and in-field drilling will increase current production and the ultimate recovery
factor of oil and gas reserves from these fields. In addition, while we are focusing on the acquisition of proven properties that
we believe can be economically enhanced in this current commodity price environment, in certain market conditions, we believe there
could be
additional upside realized through the
development of deeper productive horizons, or applying tertiary recovery applications to these acquired fields.
To date, we have focused our activities
in Eastern Wyoming along the Salt Creek/Big Muddy trend. Starting with the Salt Creek field in Natrona County, following the Salt
Creek/Big Muddy trend down to the South Glenrock field in Converse County, we believe there are a series of analogous fields that
could provide ideal targets for us to execute this business strategy. The following fields are located along this trend, which
we refer to as the “String of Pearls”.
Field
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Operators (1)
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County
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Salt Creek
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FDL Operating
Fossil Energy
Chapman
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Natrona County
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Teapot Naval Reserve (aka Teapot Dome)
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Natrona County Holdings
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Natrona County
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Sage Spring Creek
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Black Bear Oil Corporation
Matrix Production Company
Strachen Exploration Company
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Natrona/Converse County
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Burke Ranch
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Griffiths Oil LLC
Terex Energy Corporation (2)
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Natrona County
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Cole Creek
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Blue Tip Energy (3)
Linc Energy Petroleum WYO
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Natrona/Converse County
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Cole Creek South
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Blue Tip Energy (3)
Linc Energy Petroleum WYO
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Converse County
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Big Muddy
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Vortex Petroleum
Bass Petroleum
Linc Energy Petroleum WYO
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Converse County
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Big Muddy East
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Linc Energy Petroleum WYO
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Converse County
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Glenrock South
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Linc Energy Petroleum WYO
Muddy Mineral Exploration
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Converse County
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Glenrock
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Linc Energy Petroleum WYO
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Converse County
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(1)
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During the year ended December 31, 2015, as identified by the WOGCC website.
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(2)
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Terex Energy Corporation is a wholly-owned subsidiary of T-Rex Oil, Inc.
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(3)
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In January 2016, T-Rex #3, an equity investment, acquired an 82% working interest in the Blue Tip Energy Properties in Cole Creek and Cole Creek South. In April 2016, T-Rex #3 acquired the remaining 18% working interest in the Blue Tip Energy Properties in Cole Creek and South Creek. T-Rex #3 holds 100% working interest in these properties.
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According to the WOGCC, these fields
range in size, but generally produce from similar stacked horizons ranging from the Deep Tensleep to the Wall/Creek/Frontier formations.
We acquired our first assets in 2014
and currently operate wells and properties in the Burke Ranch and Cole Creek Fields. We have identified areas of enhancements available
to increase the production and recovery factors of these fields, including well recompletion, stimulation activities, pressure
maintenance improvement, down spacing and
enhanced recovery. We believe that several
other fields in the area provide evidence of the potential of these operated assets given similar geology and productive horizons.
For instance, the Salt Creek field has achieved a nearly 40% recovery factor, developed down to 20 acre spacing utilizing a C02
(Carbon Dioxide) flood. The Cole Creek field by contrast has achieved a modest 23% recovery factor, based on 80 acre well
development. We have identified several behind pipe recompletion opportunities targeting undeveloped productive formations that
are currently producing in the Salt Creek field.
As a result, we believe that there remains
significant work to be completed in our currently operated fields that match our business strategy, while we continue to seek opportunity
to acquire additional assets along this trend.
Our Properties
We are initially focused on the Salt
Creek/Big Muddy trend in the State of Wyoming. This trend covers approximately 8 miles running from Natrona County in the north
down to Converse County in the south.
We were attracted to this area based
upon the available information of hydrocarbon production, including primary, secondary and in some cases tertiary recovery results.
While the size and recovery factors associated with the various fields within the area vary, the general geologic setting is considered
to be consistent. We identify the Salt Creek field, which has achieved a 40% recovery factor, as an indicator of the potential
of these fields that are less developed at this point in time.
Cole Creek Oil Field, Wyoming
Located in the southwest margin
of the Powder River Basin in Natrona and Converse Counties, approximately 20 miles to the northeast of Casper, Wyoming. Our Leasehold
historically produces from 4 Cretacious sand formations, the Shannon, the Frontier, the Dakota and the Lakota. Additionally, there
is potential in the Muddy and the Tensleep or Minnelusa formations. We are currently reprocessing and reinterpreting Seismic data
previously performed on parts of the property.
Production in the field at
this time is from the 2nd Frontier and the Dakota and averages 60 BOPD. We have identified several behind pipe opportunities and
plan to develop them in the near term.
Covering approximately 13,400
gross acres and 19 producing wells and 23 existing well bores.
We intend to focus on the
re-development of the Shannon and Frontier formation using new technology and 3-D seismic re-work methods. We intend to drill edge
and infill wells initially then develop the property for tertiary recovery using polymer floods, surfactants and possibly CO2
injection.
Burke Ranch Project, Natrona County,
Wyoming
The Burke Ranch Field of Wyoming
consists of approximately 4,500 acres located in the southwest corner of the Powder River Basin. The project has a potential for
40+ development and exploratory wells. Historically, the Dakota Formation has been the primary objective. The Burke Ranch Unit
was originally developed on 80 acre spacing. Downsizing the spacing to 40 acres and drilling infill and edge wells offers low risk
and high potential production.
We are currently permitting
a small 3 D seismic project on our acreage to enable us to better define the best development opportunities. There could be additional
potential in the Frontier (Wall Creek), Second Frontier, Niobrara, Mowry, and Tensleep Formations.
Burke Ranch Field offers a
variety of drilling and development opportunities.
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Tensleep Formation - new drilling on seismic anomaly
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Dakota Formation – additional development of the Dakota Formation to re-work the field to increase existing production
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Frontier Formation
- to recomplete the existing wells to access existing reserves behind pipe.
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Big Horn Basin Prospect
The Big Horn Basin, located
in north-central Wyoming, is a geological structural basin of sedimentary rocks dating from the Cambrian to Miocene. The principal
productive reservoir of oil in the Big Horn Basin to date has been the Pennsylvanian Tensleep Formation. Other producing horizons
include the Mississippian Madison Limestone, Permian Phosphoria and the Cretaceous Frontier Sandstone.
Our Big Horn Basin projects
currently produce from the Triassic Crow Mountain, Permian Phosphoria and Frontier formations. They provide us with both development
and exploration opportunities.
The Big Horn Basin Prospect
properties have a combination of development and exploration projects. We expect to drill, subject to reasonable financing, between
16 and 36 wells on the properties over the next two years.
Rawhide - This is an
opportunity for development of existing production and exploration for deeper reserves. Cumulative historical production to date
is approximately 147.0 MBO.
Meeteetse “Deep”
- This is an opportunity to develop a large Phosphoria-Tensleep oil field. This is the largest project in the Western Interior
portfolio. In mid-2008, the Carter 1 discovery well was re-entered and recompleted in the Phosphoria formation to restore production.
Extensive testing and analysis have established Phosphoria 2P reserves on the 240 acre lease block.
Baird Peak - Baird Peak
is a well-defined structure with 200’ of closure, with multiple pay objectives. Historically, it has produced 128,000 BO.
Nebraska
Sioux and Kimball County, Nebraska
We have development of the
project through T-Rex #1. The project consists of:
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We have a 100% WI and a 75% NRI in the well and key acreage of 240 acres.
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We have sufficient acreage to drill two new wells in an up-dip direction structurally.
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The Company has a 31.25% WI until payout, at which time the Company would get an additional 25% working interest for a total of 56.25% in a water injection-disposal project.
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Water injection well application for permit was submitted and in early April 2015 it was approved for injection rates of 5,000 barrels of water per day, pending appeal.
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Water injection well has been drilled and cased with 7 inch pipe.
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NOTE : THESE NEBRASKA PROPERTIES WERE
ALL SOLD TO OPEN RANGE, LLC IN JUNE 2017.
Drilling Program and Field Activities
We initiated our operations in Wyoming
with the acquisition of the acreage in the Burke Ranch in 2014. Since closing the Cole Creek acquisition, we have focused the majority
of our activities in this field and developing a recompletion program and 3D Seismic reprocessing and interpretation program.
We believe there remain a number of
activities to complete in the field, including further re-completions, down-spaced drilling and enhanced oil recovery techniques
which will most likely start with CO2 “huff and puff” treatments.
Asset Impairment Analysis – March 31, 2017
The Company as of March 31, 2017
reviewed its assets including long-term assets under ASC Topic 360 and concluded the following realizations.
Property and Equipment – Oil
and Gas:
Cole Creek Properties
The Company based upon an analysis
of its Cole Creek properties and the realization of the eventual disposition of these properties in October 2018 in the amount
of $3,500,000 in cash determined that the carrying amount of $80,145 did not require impairment.
Other Properties
The Company, based upon an analysis
of its other oil and gas properties and that there was no realization of expected undiscounted future net cash flows from these
assets, determined that the carrying amount of $307,948 [net of accumulated DDD&A and asset retirement obligations] be totally
impaired as of March 31, 2017.
Investment in T-Rex Oil LLC #1 –
Effective August 18, 2016, the Company acquired 100% of the outstanding membership interest in T-Rex Oil LLC #1, a Colorado limited
liability company (“LLC #1”) as part of a put agreement with the members of LLC #1, and recorded the investment in
LLC #1 at $425,000 as per the put agreement. Thus, due to the significance of this event, the investment was tested under ASC 360
as to its recoverability and recorded at fair value if impairment was required under the accounting guidance. The Company used
Level 3 inputs and after reviewing the assets of LLC #1, there was no recoverability in the Company’s investment. As such,
there was an impairment of $425,000 during the year ended March 31, 2017.
Business Strategies
Our objective is to create shareholder
value by identifying and assembling a portfolio of low-risk assets with attractive economic profiles and leveraging our technical
and managerial expertise to deliver industry-leading results. We seek to achieve this objective by executing the following strategies:
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Pursue Out of Favor Fields. We believe that many of our peers are currently looking to exit Wyoming to pursue other areas of operations. We attribute this trend to either the smaller size of their respective holdings, the fact that the majority of these assets represent conventional oil and/or natural gas production or the possibility that they currently lack the resources to focus on the best management of these assets. By contrast, given our management experience in this area, we seek to aggregate these assets, to achieve economies of scale, driving down our per unit operating costs, while increasing production by detailed field management and enhancement.
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Seek Held by Production Acreage that Can Provide Future Upside. Our acquisition strategy is based on identifying and acquiring producing properties that we believe can be enhanced. However, given our experience in Wyoming, we anticipate that there will be further upside achieved if commodity prices improve through the exploration of deeper productive horizons. While we do not quantify this upside value, we seek acquisitions where we can secure this upside optionality while executing our core business strategy.
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Competitive Strengths
We possess a number of competitive strengths
that we believe will allow us to successfully execute our business strategies:
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Management Experience. Our management has a total combined experience of 100+ years in the oil and gas industry with a particular focus on Wyoming. We believe that this firsthand knowledge of our management, which includes having drilled numerous wells in Wyoming, and our ownership of acres of surface land, provide us with a competitive advantage when executing our acquisition strategy, in addition to our planned field enhancement operations. As a result of this experience, we believe that we will be able to produce our fields in Wyoming much more efficiently than many of our peers.
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Multi-Year, Low-Risk Development Drilling Inventory. We have identified a number of field enhancements that could be conducted across our current asset base including 7 initial recompletions, the development of 61 PUD drilling locations (56 in Cole Creek and 5 in the Big Horn Basin) and additional locations should we determine to down-space to 40 acre well spacing. Likewise, we believe there are 18 to 20 behind pipe zones that provide us with additional reserves.
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Proven Acquisition Strategy. Given the experience of our management team, we have been successful in identifying and closing on acquisitions within the Salt Creek/Big Muddy trend that fit our business strategy. This firsthand knowledge provides us with insight into possible asset transactions before many of our peers are aware of them. Coupled with our knowledge related to the geologic and operational setting of these assets, we believe we have a strong advantage in determining the price to pay for these potential acquisitions, while also having a clear understanding of how to enhance value prior to closing the transaction.
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COMPETITION, MARKETS, REGULATION
AND TAXATION
Competition
There are a large number of companies
and individuals engaged in the exploration for oil and gas; accordingly, there is a high degree of competition for desirable properties.
However, the staff at T-Rex is experienced and knowledgeable about the Rocky Mountain region and can evaluate potential acquisitions
and opportunities with greater efficiency.
Markets
The availability of a ready market for
newly discovered oil and gas reserves will depend on numerous factors beyond our control, including the proximity and capacity
of refineries and pipelines, the effect of state regulation of production and of federal regulation of products sold in interstate
commerce and recent intrastate sales. The market price of oil and gas is volatile and beyond our control.
Global Oil Supply
In the last two years, the
produced global oil supply is outpacing oil demand which, in part, has resulted in declining oil prices. It is only in the last
several months that production has come into line with demand and pricing has seen a relatively stable period, though prices have
not rebound to pre-2014 levels.
Despite this, the industry
continues to work on a production decline curve, and the industry continues to focus on trying to replace depleting reserves with
more conventional and cost effective production techniques.
Effect of Changing Industry
Conditions on Drilling Activity
Lower oil and gas prices
have caused a decline in drilling activity in the U.S. recently. However, such reduced activity will normally result in a decline
in drilling, lease acquisition and equipment costs, and an improvement in the terms under which drilling prospects are generally
available. We cannot predict what oil and gas prices will be in the future and what effect those prices may have on drilling activity
in general, or on our ability to generate economic drilling prospects or to raise the necessary funds with which to drill them.
Effect of Technology
Evolving scientific and technological
developments in the last five years have not only provided access to previously unreachable and large reserves, but in many cases
have made the production of such reserves highly profitable. In addition, these developments have taken previously shut in fields/wells
and made them once again economically viable and in some cases, greatly so.
Government Regulations
Our operations are subject to various
federal, state and local laws and regulations that change from time to time. Many of these regulations are intended to prevent
pollution and protect environmental quality, including regulations related to permit requirements for the drilling of wells, bonding
requirements to drill or operate wells, the location of wells, the method of drilling, completing and casing wells, the surface
use and restoration of properties upon which wells are drilled, the sourcing and disposal of water used in the drilling and completion
process, groundwater testing, air emissions, noise, lighting and traffic abatement and the plugging and abandonment of wells. Other
regulations are intended to prevent the waste of oil and gas and to protect the rights among owners in a common reservoir. These
include regulation of the size of drilling and spacing units or proration units, the number, or density, of wells which may be
drilled in an area, the unitization or pooling of oil and natural gas wells and regulations that generally prohibit the venting
or flaring of natural gas and that impose certain requirements regarding the ratability or fair apportionment of production from
fields and individual wells. In addition, our operations are subject to regulations governing the pipeline gathering and transportation
of oil and natural gas, as well as various federal, state and local tax laws and regulations.
Failure to comply with applicable laws
and regulations can result in substantial penalties. Our competitors in the oil and natural gas industry are generally subject
to the same regulatory requirements and restrictions that affect our operations. The regulatory burden on the industry increases
the cost of doing business and affects profitability. Although we believe we are in substantial compliance with all applicable
laws and regulations, such laws and regulations are frequently amended or reinterpreted. Therefore, we are unable to predict the
future costs or impact of compliance.
Regulation of Production
Federal, state and local agencies have
promulgated extensive rules and regulations applicable to our oil and natural gas exploration, production and related operations.
Most states require drilling permits, drilling and operating bonds and the filing of various reports and impose other requirements
relating to the exploration and production of oil and natural gas. Many states also have statutes or regulations addressing conservation
matters including provisions governing the size of drilling and spacing units or proration units, the density of wells and the
unitization or pooling of oil and natural gas properties. Some states like Wyoming and Colorado allow the forced pooling or integration
of tracts to facilitate exploration while other states rely primarily or exclusively on the voluntary pooling of lands and leases.
In areas with voluntary pooling, it may be more difficult to develop a project if the operator owns less than 100% of the leasehold.
The statutes and regulations of some states limit the rate at which oil and gas is produced from properties, prohibit the venting
or flaring of natural gas and impose certain requirements regarding the ratability of production. This may limit the amount of
oil and gas we can produce from our wells and may limit the number of wells or locations at which we can drill. The federal and
state regulatory burden on the oil and natural gas industry increases our cost of doing business and affects our profitability.
Because these rules and regulations are amended or reinterpreted frequently, we are unable to predict the future cost or impact
of complying with these laws.
The Wyoming Oil and Gas Conservation
Commission is the primary regulator of exploration and production of oil and gas resources in the principal area in which we operate.
The WOGCC regulates oil and gas operators through rules, policies, written guidance, orders, permits and inspections. Among other
criteria, the WOGCC enforces specifications regarding drilling, development, production, abandonment, enhanced recovery, safety,
aesthetics, noise, waste, flowlines and wildlife.
Regulation of sales and transportation
of natural gas
Historically, the transportation and
sales for resale of natural gas in interstate commerce have been regulated pursuant to the Natural Gas Act of 1938 (“NGA”),
the Natural Gas Policy Act of 1978 and the Federal Energy Regulatory Commission (“FERC”) regulations. Effective January
1, 1993, the Natural Gas Wellhead Decontrol Act deregulated the price for all “first sales” of natural gas. Thus, all
of our sales of gas may be made at market prices, subject to applicable contract provisions. Sales of natural gas are affected
by the availability, terms and cost of pipeline transportation. Since 1985, the FERC has implemented regulations intended to make
natural gas transportation more accessible to gas buyers and sellers on an open-access, non-discriminatory basis. We cannot predict
what further action the FERC will take on these matters. Some of the FERC’s more recent proposals may, however, adversely
affect the
availability and reliability of interruptible
transportation service on interstate pipelines. We do not believe that we will be affected by any action taken materially differently
than other natural gas producers, gatherers and marketers with which we compete.
Regulation of sales and transportation
of oil
Our sales of crude oil are affected
by the availability, terms and cost of transportation. Interstate transportation of oil by pipeline is regulated by the FERC pursuant
to the Interstate Commerce Act (“ICA”), the Energy Policy Act of 1992 and the rules and regulations promulgated under
those laws. The ICA and its implementing regulations require that tariff rates for interstate service on oil pipelines, including
interstate pipelines that transport crude oil and refined products (collectively referred to as “petroleum pipelines”)
be just and reasonable and non-discriminatory and that such rates and terms and conditions of service be filed with the FERC.
Intrastate oil pipeline transportation
rates are subject to regulation by state regulatory commissions. The basis for intrastate oil pipeline regulation, and the degree
of regulatory oversight and scrutiny given to intrastate oil pipeline rates, varies from state to state. Insofar as effective interstate
and intrastate rates are equally applicable to all comparable shippers, we do not believe that the regulation of oil transportation
rates will affect our operations in any way that is materially different than those of our competitors who are similarly situated.
Environmental Laws.
Oil and gas exploration and development
are specifically subject to existing federal and state laws and regulations governing environmental quality and pollution control.
Such laws and regulations may substantially increase the costs of exploring for, developing or producing oil and gas and may prevent
or delay the commencement or continuation of a given operation.
All of our operations involving the
exploration for or the production of any minerals are subject to existing laws and regulations relating to exploration procedures,
safety precautions, employee health and safety, air quality standards, pollution of stream and fresh water sources, odor, noise,
dust and other environmental protection controls adopted by federal, state and local governmental authorities as well as the right
of adjoining property owners. We may be required to prepare and present to federal, state or local authorities data pertaining
to the effect or impact that any proposed exploration for or production of minerals may have upon the environment. All requirements
imposed by any such authorities may be costly and time consuming and may delay commencement or continuation of exploration or production
operations.
It may be anticipated that future legislation
will significantly emphasize the protection of the environment, and that, as a consequence, our activities may be more closely
regulated to further the cause of environmental protection. Such legislation, as well as future interpretation of existing laws,
may require substantial increases in equipment and operating costs to us and delays, interruptions or a termination of operations,
the extent of which cannot now be predicted.
Title to Properties.
We are not the record owner of our interest
in our properties and rely instead on contracts with the owner or operator of the property, pursuant to which, among other things,
we have the right to have our interest placed of record. As is customary in the oil and gas industry, a preliminary title examination
generally will be conducted prior to the time unproved properties or interests are acquired by us. Prior to commencement of drilling
operations on such acreage and prior to the acquisition of proved properties, we usually will conduct a thorough title examination
and will remedy any significant defects before proceeding with operations or the acquisition of proved properties, as we may deem
appropriate.
Our properties are subject to royalty,
overriding royalty and other interests customary in the industry, liens incident to agreements, current taxes and other burdens,
minor encumbrances, easements and restrictions. Although we are not aware of any material title defects or disputes with respect
to our undeveloped acreage, to the extent such defects or disputes exist, we would suffer title failures.
BACKLOG OF ORDERS.
We currently have no orders for sales.
GOVERNMENT CONTRACTS.
We have no government contracts.
COMPANY SPONSORED RESEARCH AND
DEVELOPMENT.
We are not conducting any research.
NUMBER OF PERSONS EMPLOYED
As of March 31, 2017, T-Rex had 7 full-time
employees. Allen Heim, an officer and director of T-Rex, has an Employment Agreement with our subsidiary, Terex. Don Walford and
Martin Gottlob, officers and directors of T-Rex, have Employment Agreements with the Company. All officers of the Company work
40 hours a week. All other employees are at will employees.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet
arrangements.
ITEM 1A. RISK FACTORS
FORWARD LOOKING STATEMENTS
This document includes forward-looking
statements, including, without limitation, statements relating to T-Rex’s plans, strategies, objectives, expectations, intentions
and adequacy of resources. These forward-looking statements involve known and unknown risks, uncertainties and other factors that
may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. These factors include, among others, the following: our
ability of to implement our business strategy; our ability to obtain additional financing; T-Rex’s limited operating history;
unknown liabilities associated with future acquisitions; our ability to manage growth; significant competition; our ability to
attract and retain talented employees; future government regulations; and other factors described in this filing or in other of
T-Rex’s filings with the Securities and Exchange Commission. T-Rex is under no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise.
RISK FACTORS RELATED TO OUR COMPANY
Our business has an operating
history of only three years after Bankruptcy emergence and is unproven and therefore risky.
We began operations under the business
plan discussed herein about three years ago. Potential investors should be made aware of the risk and difficulties encountered
by a new enterprise in the oil and gas industry, especially in view of the intense competition from existing businesses in the
industry and current industry conditions. Due to the economics in the industry, and our uneconomical production, in October 2018
we ceased operations in the oil and gas industry.
We have a limited revenue history
and have a short history of operations.
We began operations in the oil and gas
industry. During the year ended March 31, 2017, we recognized a net loss of $4,306,264 compared to $15,767,831 during the year
ended March 31, 2016. Due to the economics in the industry, and our uneconomical production, we have ceased operations in the oil
and gas industry.
We are not profitable and the business
effort is considered to be in an early stage of operations. We must be regarded as a new or development venture with all of the
unforeseen costs, expenses, problems, risks and difficulties to which such ventures are subject.
We are not diversified and we
will be dependent on only one business.
Because of our limited financial resources,
it is unlikely that we will be able to diversify our operations. Our probable inability to diversify our activities into more than
one area will subject us to economic fluctuations within the energy industry and therefore increase the risks associated with our
operations due to lack of diversification.
If we complete the proposed transaction
with Norris, we will have diversified our operations to include both manufacturing and threading for both the oil and gas industry
and the horizontal directional drilling trenchless industry. However, these operations will still be reliant on the oil and gas
industry and, in addition, there is no assurance that the acquisition will be completed.
We can give no assurance of success
or profitability to our investors.
There is no assurance that we will ever
operate profitably. There is no assurance that we will generate revenues or profits, or that the market price of our common stock
will be increased thereby.
We may have a shortage of working
capital in the future which could jeopardize our ability to carry out our business plan.
Our capital needs consist primarily
of expenses related to geological evaluation, general and administrative and potential exploration participation and such funds
are not currently committed.
If we find oil and gas reserves to exist
on a prospect, we will need substantial additional financing to fund the necessary exploration and development work. Furthermore,
if the results of that exploration and development work are successful, we will need substantial additional funds for continued
development. We will need to obtain the necessary funds either through debt or equity financing, some form of cost-sharing arrangement
with others or the sale of all or part of the property. There is no assurance that we will be successful in obtaining any financing.
These various financing alternatives may dilute the interest of our shareholders and/or reduce our interest in the properties.
We will need additional financing
for which we have no commitments, and this may jeopardize execution of our business plan.
We have limited funds, and such funds
may not be adequate to carry out the business plan in the oil and gas industry. Our ultimate success depends upon our ability to
raise additional capital. We have not investigated the availability, source or terms that might govern the acquisition of additional
capital and will not do so until we determine a need for additional financing. If we need additional capital, we have no assurance
that funds will be available from any source or, if available, that they can be obtained on terms acceptable to us. If not available,
our operations will be limited to those that can be financed with our modest capital.
We may in the future issue more
shares, which could cause a loss of control by our present management and current shareholders.
We may issue further shares out of our
authorized but unissued common stock that would, upon issuance, represent a majority of the voting power and equity of our Company.
The result of such an issuance would be that those new shareholders and management would control our Company, and persons unknown
could replace our current management. Such an occurrence would result in a greatly reduced percentage of ownership of our Company
by our current shareholders, which could present significant risks to investors.
We have warrants and options issued
and outstanding which are convertible into our common stock. A conversion of such equity instruments could have a dilutive effect
on existing shareholders.
At March 31, 2017, we have warrants
issued and outstanding exercisable into 1,851,877 shares of our common stock at ranges from $0.25 to $3.50 per share and options
issued and outstanding exercisable into 1,372,750 shares of common stock at ranges from $0.62 to $1.00 per share. They are exercisable
in whole or in part. The exercise of the warrants and/or options into shares of our common stock could have a dilutive effect to
the holdings of our existing shareholders.
We will depend upon management,
but we may at times have limited participation of management.
Our directors are also acting as our
officers. We will be heavily dependent upon their skills, talents and abilities, as well as several consultants to us, to implement
our business plan, and may, from time to time, find that the inability of the officers, directors and consultants to devote their
full-time attention to our business results in a delay in progress toward implementing our business plan. Consultants may be employed
on a part-time basis under a contract to be determined.
Our directors and officers are, or may
become, in their individual capacities, officers, directors, controlling shareholder and/or partners of other entities engaged
in a variety of businesses. Thus, our officers and directors may have potential conflicts including their time and efforts involved
in participation with other business entities. Each officer and director of our business may be engaged in business activities
outside of our business, and the amount of time they devote as officers and directors to our business will be up to 40 hours per
week. Investors in the Company should critically assess all of the information concerning our officers and directors.
We do not know of any reason other than
outside business interests that would prevent our officers and directors from devoting full-time to our Company when the business
may demand such full-time participation.
Our officers and directors may
have conflicts of interest as to corporate opportunities in which we may not be able or allowed to participate.
Presently there is no requirement contained
in our Articles of Incorporation, Bylaws or minutes which requires officers and directors of our business to disclose to us business
opportunities which come to their attention. Our officers and directors do, however, have a fiduciary duty of loyalty to us to
disclose to us any business opportunities which come to their attention in their capacity as an officer and/or director or otherwise.
Excluded from this duty would be opportunities which the person learns about through his involvement as an officer and director
of another company.
We have agreed to indemnification
of officers and directors as is provided by Colorado Statute.
Colorado Revised Statutes provide for
the indemnification of our directors, officers, employees and agents, under certain circumstances, against attorney’s fees
and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities
on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees or agents, upon
such person’s promise to repay us therefor if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial expenditures by us that we will be unable to recoup.
Our directors’ liability
to us and to our shareholders is limited.
Colorado Revised Statutes exclude personal
liability of our directors and our shareholders for monetary damages for breach of fiduciary duty except in certain specified circumstances.
Accordingly, we will have a much more limited right of action against our directors than otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable state securities laws.
RISK FACTORS RELATING TO OUR BUSINESS
Our business, the oil and gas
business, has numerous risks which could render us unsuccessful.
The search for new oil and gas reserves
frequently results in unprofitable efforts, not only from dry holes, but also from wells which, though productive, will not produce
oil or gas in sufficient quantities to return a profit on the costs incurred. There is no assurance we will find or produce oil
or gas from any of the wells we have acquired or which may be acquired by us, nor are there any assurances that if we ever obtain
any production it will be profitable.
We have substantial competitors
who have an advantage over us in resources and management.
We are and will continue to be an insignificant
participant in the oil and gas business. Most of our competitors have significantly greater financial resources, technical expertise
and managerial capabilities than us and, consequently, we will be at a competitive disadvantage in identifying and developing or
exploring suitable prospects. Competitors’ resources could overwhelm our restricted efforts to acquire and explore oil and
gas prospects and cause failure of our business plan.
We will be subject to all of the
market forces in the energy business, many of which could pose a significant risk to our operations.
The marketing of natural gas and oil
which may be produced by our prospects will be affected by a number of factors beyond our control. These factors include the extent
of the supply of oil or gas in the market, the availability of competitive fuels and alternative energy sources, crude oil imports,
the world-wide political situation, price regulation and other factors. Current economic and market conditions have created dramatic
fluctuations in oil prices. Any significant decrease in the market prices of oil and gas could materially affect our profitability
from oil and gas activities.
There generally are only a limited number
of gas transmission companies with existing pipelines in the vicinity of a gas well or wells. In the event that producing gas properties
are not subject to purchase contracts or that any such contracts terminate and other parties do not purchase our gas production,
there is no assurance that we will be able to enter into purchase contracts with any transmission companies or other purchasers
of natural gas or regarding the price which such purchasers would be willing to pay for such gas. There may, on occasion, be an
oversupply of gas in the marketplace or in pipelines; the extent and duration of such oversupply may affect prices adversely. Such
oversupply may result in reductions of purchases and prices paid to producers by principal gas pipeline purchasers. (See “Item
1. Business - Competition, Markets Regulation and Taxation.”)
We believe investors should consider
certain negative aspects of our operations.
Dry Holes: We
may expend substantial funds acquiring and potentially participating in exploring properties which we later determine not to be
productive. All funds so expended will be a total loss to us.
Technical Assistance:
We will find it necessary to employ technical assistance in the operation of our business. As of the date of this annual report,
we have not contracted for any technical assistance. When we need it, such assistance is likely to be available at compensation
levels we would be able to pay. However, there is no assurance that such assistance will be available or, if available, that it
will be at an acceptable compensation level.
Uncertainty of Title:
We will attempt to acquire leases or interests in leases by option, lease, farmout or by purchase. The validity of title to oil
and gas property depends upon numerous circumstances and factual matters (many of which are not discoverable of record or by other
readily available means) and is subject to many uncertainties of existing law and our application.
Government Regulations:
The area of exploration of natural resources has become significantly regulated by state and federal governmental agencies, and
such regulation could have an adverse effect on our operations. Compliance with statutes and regulations governing the oil and
gas industry could significantly increase the capital expenditures necessary to develop our prospects.
Nature of our Business:
Our business is highly speculative, involves the commitment of high-risk capital and exposes us to potentially substantial
losses. In addition, we will be in direct competition with other organizations which are significantly better financed and staffed
than we are.
General Economic and
Other Conditions: Our business may be adversely affected from time to time by such matters as changes in general economic,
industrial and international conditions; changes in taxes, oil and gas prices and costs; excess supplies and other factors of a
general nature.
Our business is subject to significant
weather interruptions.
Our activities may be subject to periodic
interruptions due to weather conditions. Weather-imposed restrictions during certain times of the year on roads accessing properties
could adversely affect our ability to benefit from production on such properties or could increase the costs of drilling new wells
because of delays.
Reserve estimates depend on many
assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions
will materially affect the quantities and present value of our reserves. The Company’s current estimates of reserves could
change, potentially in material amounts, in the future, in particular due to the recent significant decline in commodity prices.
The process of estimating crude oil
and natural gas reserves is complex and inherently imprecise. It requires interpretation of available technical data and many assumptions,
including assumptions relating to current and future economic conditions, production rates, drilling and operating expenses and
commodity prices. Any significant inaccuracy in these interpretations or assumptions could materially affect our estimated quantities
and present value of our reserves. See Part I, Item 2 for information about our estimated crude oil and natural gas reserves,
PV-10 and Standardized Measure of discounted future net cash flows as of March 31, 2017.
In order to prepare reserve estimates,
we must project production rates and the amount and timing of development expenditures. Our booked proved undeveloped reserves
must be developed within five years from the date of initial booking under SEC reserve rules. Changes in the timing of development
plans that impact our ability to develop such reserves in the required time frame could result in fluctuations in reserves between
periods as reserves booked in one period may need to be removed in a subsequent period.
We must also analyze available geological,
geophysical, production and engineering data in preparing reserve estimates. The extent, quality and reliability of this data can
vary with the uncertainty of decline curves and the ability to model heterogeneity of the porosity, permeability and pressure relationships
in unconventional resources. The process also requires economic assumptions, based on historical data but projected into the future,
about matters such as crude oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability
of funds.
The prices used in calculating our estimated
proved reserves are, in accordance with SEC requirements, calculated by determining the unweighted arithmetic average of the first-day-of-the-month
commodity prices for the preceding 12 months. Commodity prices declined significantly in the fourth quarter of calendar year 2016
and were unstable during fiscal year 2016 and if such prices do not increase significantly, our future calculations of estimated
proved reserves will be based on lower commodity prices which could result in our having to remove non-economic reserves from our
proved reserves in future periods, and our properties will be uneconomical.
Actual future production, crude oil
and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable crude oil and
natural gas reserves will vary and could vary significantly from our estimates. Any significant variance could materially affect
the estimated quantities and present value of our reserves, which in turn could have an adverse effect on the value of our assets.
In addition, we may adjust estimates of proved reserves, potentially in material amounts, to reflect production history, results
of exploration and development, prevailing crude oil and natural gas prices and other factors, many of which are beyond our control.
We are required to write down
the carrying values of our crude oil and natural gas properties if crude oil prices remain at their current levels or decline further.
Accounting rules require that we periodically
review the carrying values of our crude oil and natural gas properties for possible impairment. Based on specific market factors,
prices and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production
data, economics and other factors, we may be required to write down the carrying values of our crude oil and natural gas properties.
A write-down results in a non-cash charge to earnings. We have incurred impairment charges in the past and may incur additional
impairment charges in the future, particularly if crude oil prices remain at their currently low levels or decline further, which
could have a material adverse effect on our results of operations for the periods in which such charges are taken. We have impaired
all of our properties.
We are subject to significant
operating hazards and uninsured risk in the energy industry.
Our proposed operations will be subject
to all of the operating hazards and risks normally incident to exploring, drilling for and producing oil and gas, such as encountering
unusual or unexpected formations and pressures, blowouts, environmental pollution and personal injury. We will maintain general
liability insurance, but we have not obtained insurance against such things as blowouts and pollution risks because of the prohibitive
expense. Should we sustain an uninsured loss or liability, or a loss in excess of policy limits, our ability to operate may be
materially adversely affected.
We are subject to federal income
tax laws and changes therein which could adversely impact us.
Federal income tax laws are of particular
significance to the oil and gas industry in which we engage. Legislation has eroded various benefits of oil and gas producers and
subsequent legislation could continue this trend. Congress is continually considering proposals with respect to federal income
taxation which could have a material adverse effect on our future operations and on our ability to obtain risk capital which our
industry has traditionally attracted from taxpayers in high tax brackets.
We are subject to substantial
government regulation in the energy industry which could adversely impact us.
The production and sale of oil and gas
are subject to regulation by state and federal authorities, the spacing of wells and the prevention of waste. There are both federal
and state laws regarding environmental controls which may necessitate significant capital outlays, resulting in extended delays,
materially affect our earnings potential and cause material changes in the in our proposed business. We cannot predict what legislation,
if any, may be passed by Congress or state legislatures in the future, or the effect of such legislation, if any, on us. Such regulations
may have a significant effect on our operating results.
RISK FACTORS RELATED TO OUR STOCK
The regulation of penny stocks
by SEC and FINRA may discourage the tradability of our securities.
We are a “penny stock” company.
Our securities are subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers
who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase
“accredited investors” means, in general terms, institutions with assets in excess of $5,000,000, or individuals having
a net worth in excess of $1,000,000, excluding the primary residence, or having an annual income that exceeds $200,000 (or that,
when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make
a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior
to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect
the ability of investors to sell their securities in any market that might develop therefor because it imposes additional regulatory
burdens on penny stock transactions.
In addition, the Securities and Exchange
Commission has adopted a number of rules to regulate “penny stocks”. Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7 and 15g-9 under the Securities Exchange
Act of 1934, as amended (the “Exchange
Act”). Because our securities constitute “penny stocks” within the meaning of the rules, the rules would apply
to us and to our securities. The rules will further affect the ability of owners of shares to sell our securities in any market
that might develop for them because it imposes additional regulatory burdens on penny stock transactions.
Shareholders should be aware that, according
to the Securities and Exchange Commission, the market for penny stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to
the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading
press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections
by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired
level and consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock
market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate
in the market, management will strive within the confines of practical limitations to prevent the described patterns from being
established with respect to our securities.
We will pay no foreseeable dividends
in the future.
We have not paid dividends on our common
stock and do not ever anticipate paying such dividends in the foreseeable future.
Our investors may suffer future
dilution due to issuances of shares for various considerations in the future.
There may be substantial dilution to
our shareholders as a result of future decisions of the Board to issue shares without shareholder approval for cash, services or
acquisitions.
At March 31, 2017, we have warrants
issued and outstanding exercisable for 1,851,877 shares of our common stock at ranges from $0.25 to $3.50 per share. In addition,
we have options exercisable into 1,372,750 shares of our common stock at ranges from $0.62 to $1.00 per share. The warrants and
options are exercisable in whole or in part. The exercise of the warrants and/or options into shares of our common stock could
have a dilutive effect to the holdings of our existing shareholders.
Rule 144 sales in the future may
have a depressive effect on our stock price.
All of the outstanding shares of common
stock held by our present officers, directors, and affiliate shareholders are “restricted securities” within the meaning
of Rule 144 under the Securities Act of 1933, as amended. As restricted securities, these shares may be resold only pursuant to
an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under
the Act and as required under applicable state securities laws. Rule 144 provides in essence that a person who has held restricted
securities for six months, under certain conditions, may sell every three months, in brokerage transactions, a number of shares
that does not exceed the greater of 1.0% of the company’s outstanding common stock or the average weekly trading volume during
the four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by a nonaffiliate
after the owner has held the restricted securities for a period of six months. A sale under Rule 144 or under any other exemption
from the Act, if available, or pursuant to subsequent registration of shares of common stock of present shareholders, may have
a depressive effect upon the price of the common stock in any market that may develop.
Our common stock may be volatile,
which substantially increases the risk that you may not be able to sell your shares at or above the price that you have paid for
the shares.
Because of the limited trading market
for our common stock and because of the possible price volatility, you may not be able to sell your shares of common stock when
you desire to do so. The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss
because of such illiquidity and because the price for our securities may suffer greater declines because of our price volatility.
The price of our common stock that will
prevail in the market at any given time may be higher or lower than the price you paid. Certain factors, some of which are beyond
our control, that may cause our share price to fluctuate significantly include, but are not limited to the following:
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Variations in our quarterly operating results;
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Loss of a key relationship or failure to complete significant transactions;
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Additions or departures of key personnel; and
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Fluctuations in stock market price and volume.
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Additionally, in recent years the stock
market in general, and the over-the-counter markets in particular, have experienced extreme price and volume fluctuations. In some
cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market
and industry factors may materially and adversely affect our stock price, regardless of our operating performance. In the past,
class action litigation often has been brought against companies following periods of volatility in the market price of those companies’
common stock. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion
of management attention and resources, which could have a further negative effect on your investment in our stock.
Any new potential investors will
suffer a disproportionate risk and there will be immediate dilution of existing investor’s investments.
Our present shareholders have acquired
their securities at a cost significantly less than that which future purchasers in the market may pay. Therefore, any new potential
investors will bear most of the risk of loss.
Our business is highly speculative
and the investment is therefore risky.
Due to the speculative nature of our
business, it is probable that the investment in shares will result in a total loss to the investor. Investors should be able to
financially bear the loss of their entire investment. Investment should, therefore, be limited to that portion of discretionary
funds not needed for normal living purposes or for reserves for disability and retirement.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2. PROPERTIES
REAL ESTATE.
None.
PATENTS AND PATENT APPLICATIONS.
None.
OIL AND GAS PROPERTIES.
Our oil and natural gas properties are
located in the states of Wyoming and Nebraska.
Title to Properties
As is customary in the oil and natural
gas industry, we generally conduct a preliminary title examination prior to the acquisition of properties or leasehold interests.
Prior to commencement of operations on such acreage, a thorough title examination will usually be conducted and any significant
defects will be remedied before proceeding with operations.
We believe the title to our leasehold
properties is good, defensible and customary with practices in the oil and natural gas industry, subject to such exceptions that
we believe do not materially detract from the use of such properties. With respect to our properties of which we are not the record
owner, we rely instead on contracts with the owner or operator of the property or assignment of leases, pursuant to which, among
other things, we generally have the right to have our interest placed on record.
Our properties are generally subject
to royalty, overriding royalty and other interests customary in the industry, liens incident to agreements, current taxes and other
burdens, minor encumbrances, easements and restrictions. We do not believe any of these burdens will materially interfere with
our use of these properties.
Summary of Oil and Natural Gas Reserves
We have not obtained a reserve report
for the fiscal year ended March 31, 2017 because oil prices declined so significantly that our properties are uneconomical and
therefore no projected reserve value can be recognized.
Reserves attributable to our Nebraska,
Burke Ranch, Wyoming, and certain undeveloped properties at Western Interior were not considered in any reserves, as those properties
are undeveloped and non-producing at this time.
Reserves
We do not compute reserves for this
year, because our production is uneconomical, and it would be misleading to suggest that we can even compute reserves, due to impairment
from the economics of the industry.
Proved developed oil reserves are reserves
that can be recovered through existing wells with existing equipment and operating methods and are based upon multiple assumptions,
including prices, and production costs.
There are no proved undeveloped oil
reserves at March 31, 2017. Proved undeveloped oil reserves are reserves that are expected to be recovered from new wells on undrilled
acreage, or from existing wells where a relatively major expenditure is required for completion. Proved undeveloped reserves on
undrilled acreage are limited to those directly offsetting development spacing areas that are reasonably certain of production
when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic productivity at
greater distances. We have no plans at this time as to when we will develop these proved undeveloped locations.
Estimates of proved developed and undeveloped
reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration
and development, price and production cost changes and other factors. See “— Qualifications of Technical Persons and
Internal Controls Over Reserves Estimation Process.”
Qualifications of Technical Persons
and Internal Controls Over Reserves Estimation Process
Our internal staff of geoscience professionals
work closely with our independent petroleum engineers to ensure the integrity, accuracy and timeliness of data furnished to them
in their reserves estimation process. We review with them our properties and discuss methods and assumptions used in their preparation
of our fiscal year-end reserves estimates. While we have no formal committee specifically designated to review reserves reporting
and the reserves estimation process, a copy of each of the NSAI reserve reports is reviewed with representatives of NSAI and our
internal technical staff before we disseminate any of the information. Additionally, our senior management reviews and approves
the final reserve report and any significant internally estimated changes to our proved reserves on an annual basis.
Estimates of oil and natural gas reserves
are projections based on a process involving an independent third party engineering firm’s collection of all required geologic,
geophysical, engineering and economic data, and such firm’s complete external preparation of all required estimates and are
forward-looking in nature. These reports rely upon various assumptions, including assumptions required by the SEC, such as constant
oil and natural gas prices, operating expenses and future capital costs. The process also requires assumptions relating to availability
of funds and timing of capital expenditures for development of our proved undeveloped reserves. These reports should not be construed
as the current market value of our reserves. The process of estimating oil and natural gas reserves is also dependent on geological,
engineering and economic data for each reservoir. Because of the uncertainties inherent in the
interpretation of this data, we cannot
be certain that the reserves will ultimately be realized. Our actual results could differ materially. See “Note 14 —
Supplemental Information Relating to Oil and Natural Gas Producing Activities (Unaudited)” to our audited consolidated financial
statements for additional information regarding our oil and natural gas reserves. (Note: We have impaired our properties and do
not compute reserves due to the uneconomic conditions, resulting from low prices and high production costs.)
Under SEC rules, proved reserves are
those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable
certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions,
operating methods and government regulations. (See note at the end of the previous paragraph.) The term “reasonable certainty”
implies a high degree of confidence that the quantities of oil and/or natural gas actually recovered will equal or exceed the estimate.
To achieve reasonable certainty, NSAI employs technologies consistent with the standards established by the Society of Petroleum
Engineers. The technologies and economic data used in the estimation of our proved reserves include, but are not limited to, well
logs, geologic maps and available downhole and production data, and well test data.
Summary of Oil and Natural Gas Properties
and Projects
Production, Price and Cost History
During the fiscal year ended March 31,
2017, we had production from and sold oil from our properties in the Big Horn Basin and in the Cole Creek Field and for the fiscal
year ended March 31, 2016 we had production from and sold oil from our properties in the Big Horn Basin and during the fourth quarter
of the fiscal year ended March 31, 2016 we recognized production from and sales of oil from our properties in the Cole Creek Field.
We determined that none of this production was economical under current market conditions.
Developed and Undeveloped Acreage
The following table presents our total gross and net developed
and undeveloped acreage by region as of March 31, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
|
|
Developed Acres
|
|
|
Undeveloped Acres
|
|
|
Developed Acres
|
|
|
Undeveloped Acres
|
|
|
|
Gross
|
|
|
Net
|
|
|
Gross
|
|
|
Net
|
|
|
Gross(1)
|
|
|
Net(2)
|
|
|
Gross
|
|
|
Net
|
|
Wyoming (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Big Horn Basin
|
|
|
480
|
|
|
|
425
|
|
|
|
4,726
|
|
|
|
2,025
|
|
|
|
480
|
|
|
|
425
|
|
|
|
4,726
|
|
|
|
2,025
|
|
Wind River Basin
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
South Central
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cole Creek
|
|
|
6,057
|
|
|
|
4,647
|
|
|
|
6,514
|
|
|
|
4,998
|
|
|
|
6,057
|
|
|
|
4,647
|
|
|
|
6,514
|
|
|
|
4,998
|
|
Burke Ranch
|
|
|
-
|
|
|
|
-
|
|
|
|
4.222
|
|
|
|
3,378
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4.222
|
|
|
|
3,378
|
|
Nebraska (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sioux County
|
|
|
80
|
|
|
|
80
|
|
|
|
160
|
|
|
|
160
|
|
|
|
80
|
|
|
|
80
|
|
|
|
160
|
|
|
|
160
|
|
Kimball County
|
|
|
40
|
|
|
|
26
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40
|
|
|
|
26
|
|
|
|
-
|
|
|
|
-
|
|
Utah (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covenant Mondo
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
6,657
|
|
|
|
5,178
|
|
|
|
15,622
|
|
|
|
26,183
|
|
|
|
6,657
|
|
|
|
5,178
|
|
|
|
15,622
|
|
|
|
26,183
|
|
|
(1)
|
“Gross” means the total number of acres in which we have a working interest.
|
|
|
|
|
(2)
|
“Net” means the sum of the fractional working interests that we own in gross acres.
|
|
|
|
|
(3)
|
Approximately 2,896 gross of the total 4,726 undeveloped gross acres at the Big Horn Basis, are held through leases by production. The remaining gross acres are held by leases with terms expiring in 2020.
|
|
|
|
|
|
The 6,514 gross undeveloped acres at Cole Creek are held by production and the 3,622 gross acres at Burke Ranch are also held by production.
|
|
|
|
|
(4)
|
The 160 acres are held by production.
|
|
|
|
|
(5)
|
The undeveloped acres at Covenant Mondo are held by production and two wells were drilled during the year ended March 31, 2015. Both wells were dry holes.
|
Productive Wells
The following table presents the total
gross and net productive wells by area and by oil or natural gas completion as of March 31, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
|
|
Oil Wells
|
|
|
Natural Gas Wells
|
|
|
Oil Wells
|
|
|
Natural Gas Wells
|
|
|
|
Gross
|
|
|
Net
|
|
|
Gross
|
|
|
Net
|
|
|
Gross(1)
|
|
|
Net(2)
|
|
|
Gross
|
|
|
Net
|
|
Wyoming
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Big Horn Basin
|
|
|
6
|
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
Wind River Basin
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
South Central
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Cole Creek
|
|
|
13
|
|
|
|
8.66
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13
|
|
|
|
8.66
|
|
|
|
-
|
|
|
|
-
|
|
Burke Ranch
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Nebraska
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sioux County
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
Kimball County
|
|
|
1
|
|
|
|
.65
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
.65
|
|
|
|
-
|
|
|
|
-
|
|
Utah
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covenant Mondo
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
21
|
|
|
|
16.31
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21
|
|
|
|
16.31
|
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
“Gross” means the total number of wells in which we have a working interest.
|
|
|
|
|
(2)
|
“Net” means the sum of the fractional working interests that we own in gross wells.
|
Oil Production, Production Prices
and Production Costs
|
|
Year Ended March 31,
|
|
|
2107
|
|
2016
|
Revenue
|
|
$
|
1,182,683
|
|
|
$
|
547,000
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Production costs
|
|
|
1,036,389
|
|
|
|
539,673
|
|
Depreciation, depletion, amortization and valuation
|
|
|
|
|
|
|
|
|
Allowance
|
|
|
538,627
|
|
|
|
14,942,000
|
|
Exploration
|
|
|
152,854
|
|
|
|
4,705
|
|
|
|
|
|
|
|
|
|
|
Results of operations of oil and gas producing activities
|
|
$
|
(545,187
|
)
|
|
$
|
(14,939,378
|
)
|
Drilling Activity
The Company’s operational activities
were focused on re-work of existing wells for production purposes.
At March 31, 2017, the Company had no
wells being drilled.
ITEM 3. LEGAL PROCEEDINGS
T-Rex anticipates that it (including
current and any future subsidiaries) will from time to time become subject to claims and legal proceedings arising in the ordinary
course of business. It is not feasible to predict the outcome of any such proceedings and we cannot assure that their ultimate
disposition will not have a materially adverse effect on the Company’s business, financial condition, cash flows or results
of operations. The Company is a party to pending legal proceedings as follows as of the date of this filing:
On September 3, 2016, a suit was filed
in the Supreme Court of the State of New York, BMO Holding, LLC vs. T-Rex Oil, Inc. That case was dismissed in early 2016.
A new suit was filed in the United States
District Court for the District of Colorado in early 2017 and was voluntarily dismissed on August 21, 2017. Each sought $100,000,000.
A suit was filed in District Court El
Paso County, State of Colorado styled Stephen Calandrella vs. T-Rex Oil, Inc. and a judgement was entered on July 16, 2018 for
$275,000 and satisfaction of judgement was filed on November 14, 2018.
A suit was filed in the District Court
Broomfield County, State of Colorado on August 21, 2017 styled BMO Holding, LLC vs T-Rex Oil and Donald Walford. That suit was
dismissed with Prejudice on April 8, 2019.
A suit was filed October 26, 2016 in
the District Court for the City and County of Denver by Jon Nicolaysen to collect a $50,000 note. That case was settled in August
2017.
ITEM 4. MINING AND SAFETY DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information
as to persons who currently serve as T-Rex Energy, Inc. directors or executive officers, including their ages as of March 31, 2017.
Name
|
|
Age
|
|
Position
|
|
Term
|
|
|
|
|
|
|
|
Donald Walford
|
|
71
|
|
Chairman, Chief Executive Officer & Acting CFO
|
|
Annual
|
Martin Gottlob
|
|
66
|
|
Vice President of Geology and Director
|
|
Annual
|
Allen Heim
|
|
59
|
|
Vice President of Operations
|
|
Annual
|
Herbert T Sears
|
|
69
|
|
Director
|
|
Annual
|
The officers are elected by the board
of directors at the first meeting after each annual meeting of the Company’s shareholders and hold office until their successors
are duly elected and qualified under T-Rex’s bylaws.
The directors named above will serve
until the next annual meeting of T-Rex’s shareholders. Thereafter, directors will be elected for one-year terms at the annual
shareholders’ meeting. Officers will hold their positions at the pleasure of the board of directors absent any employment
agreement. There is no arrangement or understanding between the directors and officers and any other person pursuant to which any
director or officer was or is to be selected as a director or officer.
Biographical Information
DONALD WALFORD, Age 71, Chairman,
CEO & Acting CFO
Mr. Walford has served as a director
and an officer of several corporations among a variety of industries during the 46 years of his business experience. They have
included oil and gas companies, real estate development and sales companies, medical research and clinical medical companies, as
well as registered broker-dealers.
He is a founder and has served as Chief
Executive Officer and director of Terex Energy Corporation, prior to its merger with T-Rex Oil, Inc., starting in February 2014.
In December 2014, he became the Chief Executive Officer and Chairman of T-Rex Oil, Inc. From October 22, 2013 to January 28, 2014,
he served as the Chairman and Chief Executive Officer of Three Forks, Inc. From 2011 to March 2012, he served as a Vice President
and Chief Executive Officer of Gulfstar Energy Corp. and from February 2012 through March 2012, a director of Gulfstar Energy Corp.
In recent years, he served as Founder, Chairman, CEO, and in various other capacities of Eveia Medical, Boulder County Paramedics.
He has been licensed as a broker-dealer
in every state, as a principal in the NYSE and FINRA. He has been a principal licensed in commodities and in municipal bonds and
was an Allied Member of the NYSE. Mr. Walford has been a consultant to the US Department of Justice as well as an expert in three
Federal Court Jurisdictions and in numerous arbitration matters. He has been a principal and or underwriter of securities in industries
such as agri-business, electronics, engineering, consumer manufacturing, construction/home building and oil and gas. Mr. Walford
has been principal or an underwriter of twelve oil and gas public companies.
He received a B.A. in Liberal Arts from
Harpur College, State University of New York (fka Binghamton University) in 1967, where he was a full scholarship, N.Y.S. Regents
Scholar.
Mr. Walford brings to the board of directors both his experience
in the oil and gas industry and his knowledge and experience in funding smaller reporting companies.
MARTIN R. GOTTLOB, Age 66, Director
and Vice President of Geology of T-Rex
Mr. Gottlob is an experienced Rocky
Mountain States geologist, oil finder, driller and operator of oil and gas wells. Mr. Gottlob was appointed as the Vice President
of Geology and a director of T-Rex in August 2014; he has served in the same positions with Terex since February 2014.
He is the owner of Independence Oil
II, LLC, where he has developed, drilled, completed and operated wells on behalf of clients.
From 2003 until he commenced working
with Terex, he was responsible for exploration and operations for Davis Oil Co. oil properties, where he was responsible for most
phases of multiple field discoveries in the D-J Basin, in Colorado, Wyoming and Nebraska.
Between 1979 and 2003, he worked in
similar capacities for Petrogulf, Minnoco, Decalta, Resource Technology and Mountain Minerals, all in Colorado.
He has a B.A. in Geology from the University
of Colorado with an emphasis in petroleum exploration and sedimentary basin analysis, and a Master of Science from the Colorado
School of Mines, in oil and gas operations research, and management science of oil and gas investment projects.
As a disclosure item, Mr. Gottlob, in
1999, was convicted of domestic violence felony in the state of Colorado.
Mr. Gottlob provides the board of directors
with a perspective and experience in the operational and exploration aspects of the oil and gas industry.
ALLEN HEIM, Age 59, Director,
Vice President of Operations
Mr. Heim has served as the Vice President
of Operations and a director of Terex since February 2014. He has served as a director of T-Rex since August 1, 2015.
Mr. Heim has devoted most of his 30
year career to a variety of oil field disciplines including leasing, dealing in working interests, drilling wells, fracking and
managing hands-on all phases of post drilling, including completions and follow on operations through plug and abandon.
He is experienced in location construction
of oil well properties, pumping and long term well operations, as well as directional drilling and fracking operations planning
and execution.
Prior to working with T-Rex, he was
retained by Davis Oil Co. Prior to that he has worked with Bic Petroleum, Smith Oil, Petro West, Bolling Oil, Pease Oil and Gas,
Pan Western Energy, Paladin Energy, Charterhall, Haines Oil Field Services, New Tech Energy, O’Brien Energy, Peterson Energy,
Sunburst Inc., Markus Production, Lyco Energy and Wanda Madden Oil.
He is the owner of Allen’s Pumping
Service in Kimball, Nebraska.
Mr. Heim provides the board of directors
with both in the field oil operations expertise and guidance.
HERBERT T. SEARS, age 69, Director
Mr. Sears is an attorney with about
40 years of domestic and international experience related to energy and technology projects. He served as Vice President and Counsel
to Stone & Webster Engineering Corporation, an operating affiliate of Stone & Webster, Inc., an international multi-billion
dollar engineering and construction firm; General Counsel to Badger Engineers, a leader in the petrochemical industry; International
Counsel to Washington Group International, a global Engineering and Construction organization; Chairman to General Environmental
Corporation (nka NT Technologies, Inc.), General Counsel to Seaflow Systems, a former leader in deep sea oil well connections,
and Consultant to Powerspan, a CO-2 injection technology company. Mr. Sears currently is the court appointed Trustee of the Stone
and Webster Liquidating Trust with responsibility for liquidating the global assets of the former Stone & Webster operating
companies.
In 2000, Mr. Sears formed Sears &
Associates, a business and legal consulting firm based out of Exeter, New Hampshire from which he still operates. Through Sears
& Associates, he advises owners and engineering companies with respect to their projects and legal activities. Mr. Sears is
recognized in the industry for his expertise and creativity in negotiations, internal corporate governance and claims resolution.
Mr. Sears served as the Chief Financial
Officer and a director of Bedrock Energy (nka Gulfstar Energy Corporation) from 2008 through May 2010.
Mr. Sears is a member of the state bar
in Massachusetts and the International Bar Association. He graduated from Boston University School of Management with a B.S/B.A
in International Business and earned his law degree from Washington University School of Law.
Mr. Sears not only brings management
experience to the board of directors, he also provides oil and gas operational management experience.
Committees of the Board of Directors
The Company is managed under the direction
of its board of directors.
Executive Committee
The Company does
not have an executive committee, at this time.
Audit Committee
The Company does
not have an audit committee at this time.
Conflicts of Interest – General.
The Company’s directors and officers
are, or may become, in their individual capacities, officers, directors, controlling shareholders and/or partners of other entities
engaged in a variety of businesses. Thus, there exist potential conflicts of interest including, among other things, time, efforts
and corporate opportunity, resulting from participation with such other business entities. While each officer and director of the
Company’s business is engaged in business activities outside of the Company’s business, the amount of time each of
them devotes to our business will be up to approximately 40 hours per week.
Conflicts of Interest – Corporate
Opportunities
Presently no requirement contained in
the Company’s Articles of Incorporation, Bylaws or minutes requires officers and directors of the Company’s business
to disclose to T-Rex business opportunities which come to their attention. The Company’s officers and directors do, however,
have a fiduciary duty of loyalty to T-Rex to disclose to it any business opportunities which come to their attention, in their
capacity as an officer and/or director or otherwise. Excluded from this duty would be opportunities which the person learns about
through his involvement as an officer and director of another company. The Company has no intention of merging with or acquiring
an affiliate, associate person or business opportunity from any affiliate or any client of any such person.
(REMAINDER OF PAGE LEFT BLANK INTENTIONALLY)
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation
paid to officers and directors during the fiscal years ended March 31, 2017, 2016 and 2015. The table sets forth this information
for T-Rex Energy, Inc. including salary, bonus and certain other compensation to the directors and named executive officers for
the past three fiscal years.
SUMMARY EXECUTIVES COMPENSATION TABLE
Name & Position
|
|
Year
|
|
|
Salary($)
|
|
|
Bonus
($)
|
|
|
Stock awards
($)
|
|
|
Option awards
($)
|
|
|
Non-equity incentive plan compensation
($)
|
|
|
Non-qualified deferred compensation
earnings
($)
|
|
|
All other compensation
($) (1)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Walford, CEO & CFO (2)
|
|
|
2017
|
|
|
|
161,331
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,300
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,700
|
|
|
|
212,331
|
|
|
|
|
2016
|
|
|
|
192,795
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,200
|
|
|
|
199,995
|
|
|
|
|
2015
|
|
|
|
186,000
|
|
|
|
26,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,594
|
|
|
|
222,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin Gottlob, VP of Geology (3)
|
|
|
2017
|
|
|
|
122,914
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,045
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,700
|
|
|
|
160,659
|
|
|
|
|
2016
|
|
|
|
161,496
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,200
|
|
|
|
168,696
|
|
|
|
|
2015
|
|
|
|
108,562
|
|
|
|
-
|
|
|
|
-
|
|
|
|
115
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,350
|
|
|
|
110,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allen Heim, VP of Operations
|
|
|
2017
|
|
|
|
153,073
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,045
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
|
|
191,118
|
|
|
|
|
2016
|
|
|
|
194,436
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
194,436
|
|
|
|
|
2015
|
|
|
|
173,865
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,629
|
|
|
|
177,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon Nicolaysen, Executive Vice President (4)
|
|
|
2017
|
|
|
|
69,245
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,045
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,600
|
|
|
|
104,890
|
|
|
|
|
2016
|
|
|
|
151,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,200
|
|
|
|
159,000
|
|
|
|
|
2015
|
|
|
|
127,500
|
|
|
|
-
|
|
|
|
750,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
106
|
|
|
|
877,606
|
|
|
(1)
|
All other compensation for the officers listed above consists of an auto allowance plus medical reimbursement.
|
|
|
|
|
(2)
|
In February 2014, Mr. Walford was issued 1,100,000 shares of Terex valued at $0.001 per share for services. As part of the T-Rex/Terex Acquisition these shares were exchanged for T-Rex shares and options in December 2014.
|
|
|
|
|
(3)
|
In February 2014, Mr. Gottlob was issued 750,000 shares of Terex which was valued at $0.001 for services. In April 2014, Mr. Gottlob was issued an option exercisable for shares of Terex with an exercise price of $0.10 per share, which was expensed at $115. As part of the T-Rex/Terex Acquisition these shares and option were exchanged for T-Rex shares and options in December 2014.
|
|
|
|
|
(4)
|
Mr. Nicolaysen served as the CEO of T-Rex until December 2014, at which time he was appointed Executive Vice President. In December 2013, he was granted fully-vested options to purchase 7,412 shares of the Company’s common stock with an exercise price of $3.50 per share. In August 2014 such option was canceled. In August 2014, he was issued 750,000 shares of restricted common stock for his services. These shares were valued at $1.00 per share. Mr. Nicolaysen resigned as a director in October 2016.
|
OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR END
The following table sets forth certain
information concerning outstanding equity awards held by the Chief Executive and Financial Officer and the Company’s most
highly compensated executive officers for the fiscal year ended March 31, 2017 (the “Named Executive Officers”):
|
|
Option Awards
|
|
Stock awards
|
Name
|
|
Number of securities underlying unexercised options (#) exercisable
|
|
Number of securities underlying unexercised options (#) unexercisable
|
|
Equity incentive plan awards: Number of securities underlying unexercised unearned options
(#)
|
|
Option exercise price
($)
|
|
Option expiration date
|
|
Number of shares or units of stock that have not vested
(#)
|
|
Market value of shares of units of stock that have not vested
($)
|
|
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)
|
|
Equity incentive plan awards: Market or payout value of unearned shares, units or others rights that have not vested
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Walford
|
|
|
150,000
|
|
|
|
175,000
|
|
|
|
—
|
|
|
$
|
0.62
|
|
|
|
8
|
|
|
|
|
/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin Gottlob
|
|
|
125,000
|
|
|
|
100,000
|
|
|
|
—
|
|
|
$
|
0.62
|
|
|
|
8
|
|
|
|
|
/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allen Heim
|
|
|
125,000
|
|
|
|
100,000
|
|
|
|
—
|
|
|
$
|
0.62
|
|
|
|
8
|
|
|
|
|
/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon Nicolaysen
|
|
|
100,000
|
|
|
|
125,000
|
|
|
|
—
|
|
|
$
|
0.62
|
|
|
|
8
|
|
|
|
|
/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
2013 Stock Incentive Plan
Effective March 29, 2013, the Company’s
2013 Stock Option and Award Plan (the “2013 Stock Incentive Plan”) was approved by its board of directors. Under the
2013 Stock Incentive Plan, the board of directors may grant options or rights to purchase common stock to officers, employees and
other persons who provide services to the Company or any related company. The participants to whom awards are granted, the type
of awards granted, the number of shares covered for each award and the purchase price, conditions and other terms of each award
are determined by the board of directors, except that the term of the options shall not exceed ten years. A total of 12 million
shares of our common stock are subject to the 2013 Stock Incentive Plan. The shares issued for the 2013 Stock Incentive Plan may
be either treasury or authorized and unissued shares. During the years ended March 31, 2017 and 2016, no options were granted,
expired or exercised under the 2013 Stock Incentive Plan. At March 31, 2017, no options were issued and outstanding under the 2013
Stock Incentive Plan.
2014 Stock Incentive Plan
Effective October 1, 2014, Terex’s
2014 Stock Option and Award Plan (the “2014 Stock Incentive Plan”) was approved by its board of directors. As part
of the acquisition of Terex by T-Rex, the 2014 Stock Option Plan was renamed the T-Rex 2014 Stock Option and Award Plan.
Under the 2014 Stock Incentive Plan,
the board of directors may grant options or rights to purchase common stock to officers, employees and other persons who provide
services to the Company or any related company. The participants to whom awards are granted, the type of awards granted, the number
of shares covered for each award and the purchase price, conditions and other terms of each award are determined by the board of
directors, except that the term of the options shall not exceed ten years. A total of 2 million shares of our common stock are
subject to the 2014 Stock Incentive Plan. The shares issued for the 2014 Stock Incentive Plan may be either treasury or authorized
and unissued shares. During the year ended March 31, 2017, there were 1,165,000 options granted under the 2014 Stock Incentive
Plan and 1,070,000 were canceled. No options expired or were exercised. At March 31, 2017, there were 2,285,250options issued and
outstanding under the 2014 Stock Incentive Plan.
EMPLOYMENT AGREEMENTS WITH OFFICERS
AND DIRECTORS OF T-REX AND TEREX
Messrs. Donald Walford, Allen Heim and
Jon Nicolaysen have entered into Employment Agreements with our subsidiary, Terex. Mr. Martin Gottlob has entered into an Employment
Agreement with T-Rex.
All of our officers and/or directors
will continue to be active in other companies. All officers and directors have retained the right to conduct their own independent
business interests.
Donald Walford Employment Agreement
with T-Rex
In August 2016, Mr. Walford entered
into an Employment Agreement with T-Rex for his services as its Chief Executive Officer, President and director. The Employment
Agreement has a term of 3 years and provides for an annual compensation of $265,000 and a monthly car allowance of $600. Mr. Walford
is eligible for annual bonuses as determined by the board of directors.
Allen Heim Employment Agreement with
Terex
In August 2016, Mr. Heim entered into
an Employment Agreement with Terex for his services as its Vice President of Operations and director. The Employment Agreement
has a term of 3 years and provides for an annual compensation of $195,000. Mr. Heim resigned and terminated his Employment Agreement
July 10, 2017.
Jon Nicolaysen Employment Agreement
with Terex
In November 2014, Mr. Nicolaysen entered
into an Employment Agreement with Terex for his services as its Vice President of Geology and director. The Employment Agreement
has a term of 3 years and provides for an annual compensation of $150,000. Mr. Nicolaysen terminated his Employment Agreement and
resigned from the Board in August 2016 and a severance agreement was executed in September 2016.
Martin Gottlob Employment Agreement
with T-Rex
In August 2016, Mr. Gottlob entered
into an Employment Agreement with T-Rex for his services as its Vice President of Geology and director. The Employment Agreement
has a term of 3 years and provides for an annual compensation of $195,000 and a monthly car allowance of $600. Mr. Gottlob resigned
and terminated his Employment Agreement January 3, 2018.
General Terms of All Employment Agreements
Termination
for Cause
All Employment Agreements
provide for termination for cause. Cause is defined as:
|
●
|
Conviction of a felony, crime of moral turpitude or commission of an act of embezzlement or fraud against the Company and/or its subsidiaries;
|
|
|
|
|
●
|
Deliberate dishonesty resulting in damages to the Company; and
|
|
|
|
|
●
|
Dereliction of duty.
|
If terminated for cause, the
employee is not entitled to any bonus for the period preceding the termination or any benefits thereunder.
Termination
At Will
All Employment Agreements
provide for termination at will by the Company with 60 days written notice. As part of any such termination, the Company is required
to repurchase 50% of the shares held by the employee up to 1,000,000 shares at a price equal to 90% of the average trading price
over the 60 days preceding the notice. Such repurchase shall happen within 30 days of the notice.
Change of Control
In the event of a change of
control, the Employment Agreement is treated the same as if the Employment Agreement was terminated without cause. If the Employment
Agreement is terminated for a change of control, severance payments are payable on the 15th day after the Company gives
notice of the termination. Such severance pay will consist of:
|
●
|
Full salary through termination specified in the termination notice.
|
|
|
|
|
●
|
An amount equal to the amount of salary and benefits equal to a 6 month period.
|
|
|
|
|
●
|
Full vestment of any outstanding stock and/or option grants.
|
As a result of the acquisition
of Terex by T-Rex, the change in control clause in Messrs. Walford, Heim and Nicolaysen’s employment agreements was activated.
All agreed to waive such clause as it pertains to the change of control event of Terex by T-Rex.
It is possible that situations may arise
in the future where the personal interests of the officers and directors may conflict with our interests. Such conflicts could
include determining what portion of their working time will be spent on our business and what portion on other business interests.
To the best ability and in the best judgment of our officers and directors, any conflicts of interest between us and the personal
interests of our officers and directors will be resolved in a fair manner which will protect our interests. Any transactions between
us and entities affiliated with our officers and directors will be on terms which are fair and equitable to us. Our board of directors
intends to continually review all corporate opportunities to further attempt to safeguard against conflicts of interest between
their business interests and our interests.
We have no intention of merging with
or acquiring an affiliate, associated person or business opportunity from any affiliate or any client of any such person.
DIRECTOR COMPENSATION
All of the Company’s officers
and/or directors will continue to be active in other companies. All officers and directors have retained the right to conduct their
own independent business interests.
The Company does not pay any directors
fees for meeting attendance.
The following table sets forth certain
information concerning compensation paid to the Company’s directors during the fiscal year ended March 31, 2017:
DIRECTORS’ COMPENSATION
Name
|
|
Fees earned or paid in cash
($)
|
|
|
Stock awards
($)
|
|
|
Option awards
($)
|
|
|
Non-equity incentive plan compensation
($)
|
|
|
Non-qualified deferred compensation earnings
($)
|
|
|
All other compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald Walford(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
212,331
|
|
|
|
212,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin Gottlob (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
160,659
|
|
|
|
160,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon Nicolaysen (1)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
104,890
|
|
|
|
104,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allen Heim (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,118
|
|
|
|
191,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Bennett(2)(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,163
|
|
|
|
12,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew VanderPloeg(3)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,941
|
|
|
|
9,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herbert T Sears(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,941
|
|
|
|
9,941
|
|
(1)
|
Mr. Walford’s, Gottlob’s, Nicolaysen’s and Heim’s compensation as discussed in the table above and in this footnote were paid for their services as officers of the Company as discussed in the Executive Compensation table. Mr. Nicolaysen resigned as a director of the Company in August 2016. Mr. Gottlob resigned as a director of the Company January 3, 2018.
|
|
|
(2)
|
Mr. Bennett resigned as a director of the Company on April 1, 2016.
|
|
|
(3)
|
Messrs. Bennett, VanderPloeg and Sears compensation as discussed in the table above and in this footnote were paid for their services as consultants of the Company. Mr. VanderPloeg resigned as a director of the Company in October 2016.
|
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth information
with respect to the beneficial ownership of T-Rex’s outstanding common stock by:
|
●
|
each person who is known by T-Rex to be the beneficial owner of five percent (5%) or more of T-Rex common stock;
|
|
|
|
|
●
|
T-Rex chief financial officer, its other executive officers and each director as identified in the “Management — Executive Compensation” section; and
|
|
|
|
|
●
|
all of the Company’s directors and executive officers as a group.
|
Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect
to securities. Shares of common stock and options, warrants and convertible securities that are currently exercisable or convertible
within 60 days of the date of this document into shares of the Company’s common stock are deemed to be outstanding and to
be beneficially owned by the person holding the options, warrants or convertible securities for the purpose of computing the percentage
ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other
person.
The information below is based on the
number of shares of T-Rex’s common stock that we believe was beneficially owned by each person or entity as of March 31,
2017.
Name and Address of Beneficial Owner *
|
|
Amount and
Nature of
Beneficial
Owner
Common Stock
|
|
|
Warrants
and/or
Options
|
|
|
Percent of
Common
Stock Issued
and
Outstanding (1)
|
|
Donald Walford, CEO, Acting CFO & Chairman
|
|
|
1,080,000
|
|
|
|
150,000
|
|
|
|
6.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin Gottlob, VP of Geology & Director (2)
|
|
|
850,000
|
|
|
|
125,000
|
|
|
|
5.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allen Heim, VP of Operations & Director (6)
|
|
|
755,000
|
|
|
|
525,000
|
|
|
|
7.23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Herb Sears, Director
|
|
|
66,667
|
|
|
|
25,000
|
|
|
|
0.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Bennett, Former Executive VP of Drilling Operations (3)
|
|
|
-
|
|
|
|
89,286
|
|
|
|
-0-
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew VanderPloeg, Former Director (4)
|
|
|
324,528
|
|
|
|
150,000
|
|
|
|
2.68
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon Nicolaysen, Former Executive VP & Director (7)
|
|
|
1,050,000
|
|
|
|
100,000
|
|
|
|
6.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5% Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Schwaben Kapital GmbH
|
|
|
1,480,152
|
|
|
|
-
|
|
|
|
8.36
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMI GmbH (5)
|
|
|
1,487,442
|
|
|
|
-
|
|
|
|
8.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rainier Mayerhofer (5)
|
|
|
1,926,463
|
|
|
|
-
|
|
|
|
10.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Directors and Executive Officers as a Group (4 persons)
|
|
|
2,751,667
|
|
|
|
825,000
|
|
|
|
20.21
|
%
|
*The Address for the above individuals
and entities was c/o T-Rex Oil, Inc., 520 S. Zang Street, Suite 209, Broomfield, Colorado 80021.
|
(1)
|
Based upon 17,697,621 shares of issued and outstanding common stock at March 31, 2017. Warrants and options not exercised in the 60 days after March 31, 2017 are not included in this number of shares of issued and outstanding common stock but the percent of common stock issued and outstanding is computed as if the options and warrants exercisable within 60 days,were exercised.
|
|
|
|
|
(2)
|
Mr. Gottlob holds options exercisable for 125,000 shares of common stock with an exercise price of $0.62 per share and a term of 3 years. The options are fully vested.
|
|
|
|
|
(3)
|
Mr. Bennett holds a warrant exercisable for 14,286 shares of common stock with an exercise price of $3.50 per share and a term of 3 years and an option exercisable for 75,000 shares of common stock with an exercise price of $0.62 per share and a term of 3 years. The option is fully vested. Mr. Bennet resigned as a director of the Company effective April 1, 2016.
|
|
|
|
|
(4)
|
Mr. VanderPloeg holds a warrant exercisable for 125,000 shares of common stock with an exercise price of $3.00 and a term of 3 years and an option exercisable for 25,000 shares of common stock with an exercise price of $0.62 per share and a term of 3 years. The option is fully vested. Mr. VanderPloeg resigned as a director of the Company in October 2016.
|
|
|
|
|
(5)
|
Mr. Mayerhofer is the controlling officer of RMI GmbH and as such holds voting control of the 1,487,442 shares held by RMI GmbH. He holds 439,021 shares of stock directly and beneficially. He has voting control over a total of 1,430,649 shares of stock or 10.25% of the Company’s common stock.
|
|
|
|
|
(6)
|
Mr. Heim resigned July 10, 2017.
|
|
|
|
|
(7)
|
Mr. Nicolaysen resigned August 2016.
|
Rule 13d-3 under the Exchange Act governs
the determination of beneficial ownership of securities. That rule provides that a beneficial owner of a security includes any
person who directly or indirectly has or shares voting power and/or investment power with respect to such security. Rule 13d-3
also provides that a beneficial owner of a security includes any person who has the right to acquire beneficial ownership of such
security within 60 days, including through the exercise of any option, warrant or conversion of a security. Any securities not
outstanding which are subject to such options, warrants or conversion privileges are deemed to be outstanding for the purpose of
computing the percentage of outstanding securities of the class owned by such person. Those securities are not deemed to be outstanding
for the purpose of computing the percentage of the class owned by any other person.
ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Other than the stock transactions discussed
below, the Company has not entered into any transaction nor is there any proposed transaction in which any of the founders, directors,
executive officers, shareholders or any members of the immediate family of any of the foregoing had or are to have a direct or
indirect material interest.
Equity Issuances to Officers and
Directors
Year Ended March 31, 2017
Common Stock
In March 2017, the Company issued
100,000 shares of its common stock in exchange for payment of a debt owed to Mr. Gottlob in exercising his option to purchase shares
at an exercise price of $.05 per share.
Options
During July and August 2016, the
Company issued Messrs. Walford, Gottlob, Nicolaysen, Sears, Heim, Bennet and VanderPloeg fully vested options exercisable for 150,000,
125,000, 100,000, 25,000, 125,000, 75,000 and 25,000 shares of the Company’s common stock, respectively all with an exercise
price of $0.62 per share and a term of 3 years.
Year Ended March 31, 2016
Series A Preferred Stock
In October 2015, Mr. VanderPloeg, a
director, purchased 125,000 Series A Shares and $3 Warrants exercisable for 125,000 shares in exchange for $250,000.
Convertible Promissory Notes
On January 14, 2016, in exchange for
$100,000 cash we issued convertible promissory notes in the amount of $50,000 each to Mr. Nicolaysen and Mr. Bennett. The convertible
promissory notes have a term of 9 months and accrue interests at a rate of 5%. The notes are convertible into shares of our restricted
common stock at a discount of 30% of the 5-day trading closing market.
Common Stock
In March 2016, two of our directors,
Mr. VanderPloeg and Mr. Sears, purchased shares of restricted common stock from the Company, 300,000 and 66,667 shares, respectively,
at $0.75 per share.
Year Ended March 31, 2015
Shares for Services
In August 2014, Mr. Nicolaysen, an officer
and director of Terex, was issued 750,000 shares of the common stock of Terex for services with a value of $750,000 that were expensed.
Such shares were exchanged for shares of T-Rex as part of the acquisition of Terex by T-Rex. In addition, Mr. Nicolaysen, a director
and officer of T-Rex, returned to T-Rex an option exercisable for 7,142 shares of common stock. T-Rex cancelled such option.
Warrants and Options
In August 2014, T-Rex issued warrants
in the following amounts and terms to its then officers and directors as follows. All amounts have been adjusted for the October
2014 reverse split.
Name
|
|
Number of Shares
|
|
|
Exercise Price
|
|
|
Term
|
|
Jeffrey Bennett
|
|
|
14,285
|
|
|
$
|
3.50
|
|
|
|
3 years
|
|
Mathijs van Houweninge
|
|
|
14,285
|
|
|
$
|
3.50
|
|
|
|
3 years
|
|
Al “Sid” Overton
|
|
|
14,285
|
|
|
$
|
3.50
|
|
|
|
3 years
|
|
In April 2014, Mr. Gottlob was issued
an option exercisable for 100,000 shares of Terex’s common stock with an exercise price of $0.10 per share and a term of
3 years. The option is fully vested and had a value of $115 at the time of issuance that was expensed. As part of the acquisition
of Terex by T-Rex, this option has been exchanged for an option exercisable for 100,000 shares of T-Rex.
Director Independence
Our board of directors undertook its
annual review of the independence of the directors and considered whether any director had a material relationship with us or our
management that could compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result
of this review, the board of directors affirmatively determined that Mr. Bennett was “independent” as such term is
used under the rules and regulations of the Securities
and Exchange Commission. Messrs. Walford,
Nicolaysen and Gottlob, as officers of the Company, are not considered to be “independent.”
ITEM 14. PRINCIPAL ACCOUNTING
FEES AND SERVICES
GENERAL.
BF Borgers CPA PC (“Borgers”)
is the Company’s principal auditing accountant firm. The Company’s board of directors has determined that the provision
of audit services is compatible with maintaining their independence.
The following table represents aggregate
fees billed to the Company for the years ended March 31, 2017 and 2016.
|
|
Year Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Audit Fees
|
|
$
|
89,380
|
|
|
$
|
146,560
|
|
|
|
|
|
|
|
|
|
|
Audit-related Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
Tax Fees
|
|
$
|
0
|
|
|
$
|
3,240
|
|
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
89,380
|
|
|
$
|
149,800
|
|
All audit work was performed by the
auditors’ full time employees.
Pre-approval Policies and Procedures
The board of directors on an annual
basis reviews audit and non-audit services performed by the independent auditor. All audit and non-audit services are preapproved
by the board of directors, which considers, among other things, the possible effect of the performance of such services on the
auditors’ independence. The board of directors has considered the role of Borgers in providing services to us for the fiscal
years ended March 31, 2017 and 2016 and has concluded that such services are compatible with their independence as our auditors.
The board has considered the services rendered and fees billed to the date of this report by Borgers and are satisfied as to their
services being rendered on a basis of independence.
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Note 1 – Organization and History
T-Rex Oil, Inc. (the “Company”)
was incorporated in Colorado on September 2, 2014. Rancher Energy Corp was incorporated in Nevada on February 2, 2004. Effective
October 20, 2014, T-Rex Oil, Inc. and Rancher Energy Corp were merged under the laws of the State of Colorado and T-Rex Oil, Inc.
became the surviving entity. Effective October 29, 2014, the Company authorized 50,000,000 shares of preferred stock in addition
to its common stock and completed a reverse split of its common stock, issued and outstanding, on a one (1) new share for three
hundred fifty (350) old shares basis.
The Company has been engaged in
the acquisition, exploration, and development of oil and gas prospects in the Rocky Mountain region of Wyoming.
Cole Creek
On January 15, 2016, T-Rex Oil LLC
#3 (“LLC #3) entered into a Purchase and Sale Agreement with Blue Tip Energy Wyoming, Inc. and Cole Creek Recompletions LLC
and acquired approximately 82% of the working interest in certain leases located in the state of Wyoming known as the Cole Creek
properties in exchange for $1,200,000 in cash plus the assumption of liabilities in the amount of $833,382 for a total purchase
price of $2,033,382. On April 20, 2016, the LLC #3 entered into a Purchase and Sale Agreement with Black Hills Exploration &
Production, Inc. and acquired the remaining approximately 18% working interest in the Cole Creek properties in exchange for $250,000
in cash plus the assumption of liabilities in the amount of $133,311 for a total purchase price of $383,311. These leases are proved
developed and undeveloped leaseholds and include producing crude oil wells totaling approximately 13,328 gross acres. See Note
2 – Principles of Consolidation.
Nexfuels Spin Off
On July 11, 2016, Nexfuels, Inc. was incorporated
as a wholly-owned subsidiary of the Company in the State of Colorado (“Nexfuels”). Nexfuels was created to develop
the Company’s Carbon Dioxide Recovery Project. The Carbon Dioxide Recovery Project (“the Project”) is focused
on the development of exhaust stack supplies of carbon dioxide for use in enhanced oil recovery. The project involves the development,
build out and operation of a commercial scale carbon capture systems on existing coal fueled electric power plants in the United
States, specifically in Wyoming.
The Company’s Board of Directors determined
that to focus and better implement these strategies necessary to financing and build the Project, the Board of Directors approved
the spin-off of Nexfuels on July 15, 2016.
Shareholders of T-Rex, as of the Record Date
of August 19, 2016, received one share of Nexfuels common stock for every two shares (2) of T-Rex common stock owned. The stock
dividend was based upon 17,097,622 shares of the Company’s common stock that were issued and outstanding as of the Record
Date.
As part of the spin-off of Nexfuels, the Company’s
Chief Executive Officer and Chairman, Mr. Donald Walford and a director of the Company Mr. Sears were appointed to the Board of
Directors of Nexfuels.
On August 19, 2016, the Company
assigned to Nexfuels the following:
|
1.
|
The idea, concept and plan to capture and sell CO2 generated by the Dave Johnston power plant located in Converse County, Wyoming and/or any other power plants owned by PacifiCorp.
|
|
|
|
|
2.
|
The Memorandum of Understanding (“MOU”) by and between T-Rex and PacifiCorp Energy the owner/operator of the power plant.
|
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
|
|
|
|
3.
|
The existing contract by and between Sargent Lundy LLC to perform the feasibility study.
|
|
|
|
|
4.
|
Any and all other valid and subsisting contracts, agreement, and instruments, rights or other interest that the Company may have in the Project.
|
|
|
|
|
5.
|
All valid and subsisting easements, permits, licenses, servitudes, rights of way and other surface rights that directly relate to or are otherwise directly applicable to the Project.
|
An analysis of the properties assigned
to Nexfuels by the Company showed that the Company in accordance with its accounting policies had not capitalized any of the direct
or indirect costs associated with the MOUs, the feasibility study or any of the other interests in the project. As such, the Company
did not recognize a gain or loss in connection with the Nexfuels spin-off.
Note 2 – Summary of Significant
Accounting Policies
Principles of Consolidation
The accompanying consolidated financial
statements include the accounts of T-Rex Oil, Inc. and its wholly owned subsidiaries. All intercompany balances have been eliminated
during consolidation.
The Company owns a 14.29% interest in T-Rex
Oil, LLC #3, a Colorado limited liability company (LLC #3”) and the remaining 85.71% economic interest is held by a former
director and shareholder of the Company. The Company has identified LLC #3 as a variable interest entity (VIE). The Company holds
current rights that gives it the power to direct the activities of the VIE which most significantly impact the VIE’s economic
performance including provisions that give the Company the right to receive potentially significant benefits. As member manager
of LLC #3, the Company continuously evaluates whether it has a controlling interest in LLC#3. Therefore, the Company has included
LLC #3 as a wholly owned subsidiary eliminating all intercompany balances during consolidation.
Use of Estimates in the Preparation
of Consolidated Financial Statements
The preparation of consolidated
financial statements in conformity with generally accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, 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 periods.
Actual results could differ from those estimates. Significant estimates include the fair value of assets and liabilities, oil and
natural gas reserves, income taxes and the valuation allowances related to deferred tax assets, asset retirement obligations and
contingencies.
Cash and Cash Equivalents
The Company considers all liquid
investments purchased with an initial maturity of three months or less to be cash equivalents. Cash and cash equivalents include
demand deposits and money market funds carried at cost which approximates fair value. The Company maintains its cash in institutions
insured by the Federal Deposit Insurance Corporation (“FDIC”), although such deposits are in excess of the insurance
coverage. At March 31, 2016, the Company had $111,641 of cash deposits in excess of FDIC insured limits.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Concentration of Credit Risk
The Company’s producing properties
are primarily located in Wyoming and the oil and gas production is sold to various purchasers based on market index prices. The
risk of non-payment by these purchasers is considered minimal and the Company does not generally obtain collateral for sales. The
Company continually monitors the credit standing of the primary purchasers. During the year ended March 31, 2017 and 2016, two
purchasers accounted for all of the total revenues.
Oil and Gas Producing Activities
The Company uses the successful
efforts method of accounting for oil and gas activities. Under this method, the costs of productive exploratory wells, all development
wells, related asset retirement obligation assets, and productive leases are capitalized and amortized, principally by field, on
a units-of-production basis over the life of the remaining proved reserves. Exploration costs, including personnel costs, geological
and geophysical expenses, and delay rentals for oil and gas leases are charged to expense as incurred. Exploratory drilling costs
are initially capitalized, but charged to expense if and when the well is determined not to have found reserves in commercial quantities.
The sale of a partial interest in a proved property is accounted for as a cost recovery, and no gain or loss is recognized as long
as this treatment does not significantly affect the units-of-production amortization rate. A gain or loss is recognized for all
other sales of producing properties. There were capitalized costs of $11,679,817 and $11,368,626 at March 31, 2017 and 2016, respectively.
Unproved oil and gas properties
are assessed annually to determine whether they have been impaired by the drilling of dry holes on or near the related acreage
or other circumstances, which may indicate a decline in value. When impairment occurs, a loss is recognized. When leases for unproved
properties expire, the costs thereof, net of any related allowance for impairment, is removed from the accounts and charged to
expense. During the years ended March 31, 2017 and 2016, there was impairment to unproved properties in the amount of $18,715 and
$3,096,931, respectively. The sale of a partial interest in an unproved property is accounted for as a recovery of cost when substantial
uncertainty exists as to the ultimate recovery of the cost applicable to the interest retained. A gain on the sale is recognized
to the extent that the sales price exceeds the carrying amount of the unproved property. A gain or loss is recognized for all other
sales of unproved properties. There were capitalized costs of $4,758,798 and $4,745,917 at March 31, 2017 and 2016, respectively.
Costs associated with development
wells that are unevaluated or are waiting on access to transportation or processing facilities are reclassified into developmental
wells-in-progress ("WIP"). These costs are not put into a depletable field basis until the wells are fully evaluated
or access is gained to transportation and processing facilities. Costs associated with WIP are included in the cash flows from
investing as part of investment in oil and gas properties. At March 31, 2017 and 2016, no capitalized developmental costs were
included in WIP.
Depreciation, depletion and amortization
of proved oil and gas properties is calculated using the units-of-production method based on proved reserves and estimated salvage
values. For the years ended March 31, 2017 and 2016, the Company recorded depreciation, depletion and amortization expense on oil
and gas properties in the amount of $134,726 and $3,359,966, respectively.
The Company reviews its proved
oil and natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of
its carrying value may have occurred. It estimates the undiscounted future net cash flows of its oil and natural gas properties
and compares such undiscounted future cash flows to the carrying amount of the oil and natural gas properties to determine if the
carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust
the carrying amount of the oil and natural gas properties to fair value. For the years ended March 31, 2017 and 2016, there was
impairment to proved properties of $289,233 and $4,807,536, respectively.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Other Property and Equipment
Other property and equipment, such
as computer hardware and software, are recorded at cost. Costs of renewals and improvements that substantially extend the useful
lives of the assets are capitalized. Maintenance and repair costs are expensed when incurred. When other property and equipment
is sold or retired, the capitalized costs and related accumulated depreciation are removed from their respective accounts. Depreciation
expense of other property and equipment for the years ended March 31, 2017 and 2016 was $51,395 and $42,591, respectively.
Asset Retirement Obligations
The Company records estimated future
asset retirement obligations ("ARO") related to its oil and gas properties. The Company records the estimated fair value
of a liability for ARO in the period in which it is incurred with a corresponding increase in the carrying amount of the related
long-lived asset. The increased carrying value is depleted using the units-of-production method, and the discounted liability is
increased through accretion over the remaining life of the respective oil and gas properties.
The estimated liability is based
on historical industry experience in abandoning wells, including estimated economic lives, external estimates as to the cost to
abandon the wells in the future, and federal and state regulatory requirements. The Company's liability is discounted using management's
best estimate of its credit-adjusted, risk-free rate. Revisions to the liability could occur due to changes in estimated abandonment
costs, changes in well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells.
|
|
Year Ended March 31,
|
|
|
2017
|
|
2016
|
ARO - beginning of period
|
|
$
|
1,197,143
|
|
|
$
|
459,294
|
|
Additions
|
|
|
133,311
|
|
|
|
721,860
|
|
Deletions
|
|
|
—
|
|
|
|
(15,190
|
)
|
Accretion expense
|
|
|
89,793
|
|
|
|
31,179
|
|
|
|
|
1,420,247
|
|
|
|
1,197,143
|
|
|
|
|
|
|
|
|
|
|
Less current portion
|
|
|
183,731
|
|
|
|
176,587
|
|
|
|
|
|
|
|
|
|
|
ARO - end of period
|
|
$
|
1,236,516
|
|
|
$
|
1,020,556
|
|
Impairment of Long-Lived Assets
In accordance with authoritative
guidance on accounting for the impairment or disposal of long-lived assets, as set forth in Topic 360 of the ASC, the Company assesses
the recoverability of the carrying value of its non-oil and gas long-lived assets when events occur that indicate an impairment
in value may exist. An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than
the carrying amount of the assets. If this occurs, an impairment loss is recognized for the amount by which the carrying amount
of the assets exceeds the estimated fair value of the assets.
Revenue Recognition
The Company recognizes oil revenues
when production is sold to the purchaser, delivery occurs and title is transferred and recognizes natural gas revenues when the
title and risk of loss pass to the purchaser. The Company records its share of revenues based on its net revenue interest. The
Company sells the majority of its products soon after production at various locations, including the wellhead.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Other Comprehensive Loss
The Company has no material components
of other comprehensive loss and accordingly, net loss is equal to comprehensive loss for the period.
Income Taxes
The Company uses the liability method
of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of
temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities. The deferred
tax assets and liabilities are computed using enacted tax rates in effect for the year in which the temporary differences are expected
to reverse.
The Company's deferred income taxes include
certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets
when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred
income tax asset will not be realized.
The Company has adopted ASC guidance
regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the
minimum recognition threshold an income tax position is required to meet before being recognized in the consolidated financial
statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination
is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits,
upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the
benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50% likely to be realized
upon its ultimate settlement. At March 31, 2017 and 2016, there were no uncertain tax positions that required accrual.
Net Loss per Share
Basic net loss per common share
of stock is calculated by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding
during each period.
Diluted net loss per common share
is calculated by dividing net loss by the weighted-average number of common shares outstanding, including the effect of other dilutive
securities. The Company’s potentially dilutive securities consist of in-the-money outstanding options and warrants to purchase
the Company’s common stock. Diluted net loss per common share does not give effect to dilutive securities as their effect
would be anti-dilutive.
The treasury stock method is used
to measure the dilutive impact of stock options and warrants. The following table details the weighted-average dilutive and anti-dilutive
securities related to stock options and warrants for the periods presented:
|
|
Year Ended March 31,
|
|
|
2017
|
|
2016
|
Dilutive
|
|
-
|
|
-
|
Anti Dilutive
|
|
|
3,840,024
|
|
|
|
2,494,571
|
|
Equity Based Payments
The Company recognizes compensation
cost for equity based awards based on estimated fair value of the award and records capitalized cost or compensation expense over
the requisite service period. See Note 9 – Equity Based Payments.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Major Customers
During the year ended March 31,
2017 and 2016, two purchasers accounted for all of the Company’s revenues.
Beneficial Conversion Feature and Deemed Dividend
Related to Series A Shares
Pursuant to ASC 470-20, when the
$558,171 of convertible Series A Shares of preferred stock were issued at a discount from the if-converted $682,989 fair value
as of the issuance date, the Company recognized this difference between the fair value per share of its common stock and the conversion
price, multiplied by the number of shares issuable upon conversion. This total Beneficial Conversion Feature of $124,818 will be
recorded as additional paid-in-capital for common shares. The offsetting amount was amortizable over the period from the issue
date to the first conversion date or 9 months. Therefore, since the 409,019 Series A Shares of preferred stock are convertible
between July and December of 2016, a deemed dividend of $56,988 and $67,830 to the Series A Shares of preferred stock was recorded
during the years ended March 31, 2017 and 2016, respectively. As the Company is in an accumulated deficit position, the deemed
dividends were charged against additional paid-in-capital for common shares as there being no retained earnings from which to declare
a dividend.
Off-Balance Sheet Arrangements
As part of its ongoing business,
the Company has not participated in transactions that generate relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established
for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. From its incorporation
on February 11, 2014 through March 31, 2017, the Company has not been involved in any unconsolidated SPE transactions.
Recent Accounting Pronouncements
In November 2015, the FASB issued
ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes ASU 2015-17"). ASU 2015-17
is part of the FASB's initiative to reduce the complexity in accounting standards. ASU 2015-17 requires entities to present deferred
tax assets and deferred tax liabilities as non-current in a classified balance sheet. The amendments in this ASU simplify current
guidance in ASC 740-10-45-4 that requires separate presentation of deferred tax assets and liabilities as current and non-current
in a classified balance sheet based on the classification of the related asset or liability. ASU 2015-17 is effective for public
companies for annual periods beginning after December 15, 2017 and interim periods beginning after December 15, 2018. Earlier application
is permitted as of the beginning of an interim or annual reporting period. The Company adopted this ASU as of March 31, 2016. The
adoption of this ASU did not have a material impact on our consolidated balance sheets as of March 31, 2016 and 2015.
In February 2016, the FASB issued
ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases, including operating leases, on
the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional
disclosures regarding leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December
15, 2018, and early application is permitted. The Company is in the process of determining the method of adoption and the impact
this guidance will have on its financial condition, results of operations and cash flows.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet
as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding
leasing arrangements. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018, and early
application is permitted. The Company is in the process of determining the method of adoption and the impact this guidance will
have on its financial condition, results of operations and cash flows.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”).
ASU 2016-09 simplifies several aspects of the
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement
of cash flows. ASU 2016-09 is effective for the Company beginning April 1, 2017 and early adoption is permitted. The Company is
currently evaluating the effect that the adoption will have on the Company’s Consolidated Financial Statements.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230) (“ASU 2016-15”). ASU 2016-15 clarifies the classification of certain cash
receipts and cash payments within the statement of cash flows to reduce diversity in practice. ASU 2016-15 is effective for the
Company beginning January 1, 2018 and early adoption is permitted. The Company is currently evaluating the effect that the adoption
will have on the Company’s Consolidated Financial Statements.
There were other accounting standards
and interpretations issued during the year ended March 31, 2017, none of which are expected to have a material impact on the Company’s
financial position, operations or cash flows.
Subsequent Events
The Company evaluates events and
transactions after the balance sheet date but before the financial statements are issued.
Note 3 – Going Concern
and Managements’ Plan
The Company’s consolidated
financial statements for the years ended March 31, 2017 and 2016 have been prepared on a going concern basis, which contemplates
the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported
a net loss of $4,249,276 and $15,700,001 for the years ended March 31, 2017 and 2016, respectively, and an accumulated deficit
of $31,006,249 as of March 31, 2017. At March 31, 2017, the Company had a working capital deficit of $1,317,589.
The future success of the Company
is dependent on its ability to attract additional capital and ultimately, upon its ability to develop future profitable operations.
There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash
flow from operations. Management believes that actions presently being taken to revise the Company’s operating and financial
requirements provide the opportunity for the Company to continue as a going concern.
Note 4 – Fair Value Measurements
The Company applies the authoritative
guidance applicable to all financial assets and liabilities required to be measured and reported on a fair value basis, as well
as to non-financial assets and liabilities measured at fair value on a non-recurring basis, including impairments of proved oil
and gas properties and other long-lived assets and AROs initially measured at fair value. The fair value of an asset or liability
is the amount that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction
between market participants at the measurement date. The Company maximizes the use of observable inputs and minimizes the use of
unobservable inputs when measuring fair value. Observable inputs are inputs that market participants would use in valuing the asset
or liability based on market data obtained from sources independent of the Company. Unobservable input are inputs that reflect
the Company’s assumptions of what market participants would use in valuing the asset or liability based on the information
available in the circumstances.
Financial and non-financial assets
and liabilities are classified within the valuation hierarchy based upon the lowest level of input that is significant to the fair
value measurement. The Company’s policy is to recognize transfers in and out of the fair value hierarchy as of the end of
the reporting period in which the event or change in circumstances caused the transfer. The Company has consistently applied the
valuation techniques discussed below in all periods presented. The hierarchy is organized into three levels based on the reliability
of the inputs as follows:
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Level 1: Quoted
prices in active markets for identical assets or liabilities; or
Level 2: Quoted prices in
active markets for similar assets and liabilities and inputs, quoted prices for identical or similar assets or liabilities in markets
that are not active and model-derived valuations whose inputs or significant value drivers are observable; or
Level 3: Unobservable pricing
inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
The following table presents the
Company’s non-financial assets and liabilities that were measured at fair value on a non-recurring basis at March 31, 2017
by level within the fair value hierarchy:
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas properties
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
307,948
|
|
|
$
|
307,948
|
|
Investment in limited liability company
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
425,000
|
|
|
$
|
425,000
|
|
Effective March 31, 2017, the Company’s
oil and gas properties were tested under ASC 360 as to their recoverability to determine if impairment is required under the accounting
guidance. The Company used Level 3 inputs to measure the fair value of the oil and gas properties. As such, there was an impairment
of $307,948 to the oil and gas properties during the year ended March 31, 2017.
Effective August 18, 2016, the Company
acquired 100% of the outstanding membership interest in T-Rex Oil LLC #1, a Colorado limited liability company (“LLC #1”)
as part of a put agreement with the members of LLC #1, and recorded the investment in LLC #1 at $425,000 as per the put agreement.
Thus, due to the significance of this event, the investment was tested under ASC 360 as to its recoverability and recorded at fair
value if impairment was required under the accounting guidance. The Company used Level 3 inputs and after reviewing the assets
of LLC #1, there was no recoverability in the Company’s investment. As such, there was an impairment of $425,000 during the
year ended March 31, 2017.
The following table presents the
Company’s non-financial assets and liabilities that were measured at fair value on a non-recurring basis at March 31, 2016
by level within the fair value hierarchy:
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas properties
|
|
$
|
—
|
|
|
$
|
930,238
|
|
|
$
|
—
|
|
|
$
|
930,238
|
|
Effective January 1, 2016, the
Company acquired approximately 82% of the working interest in certain leases located in the state of Wyoming known as the Cole
Creek properties and recorded the oil and gas properties at a fair value of $2,033,382. Thus, due to the significance of this
event, the oil and gas properties were tested under ASC 360 as to their recoverability. Therefore, the oil and gas properties
were recorded at fair value if impairment is required under the accounting guidance. The Company used Level 2 inputs and the income
valuation techniques of undiscounted oil and gas future net cash flows to measure the fair value of the oil and gas properties
and thus the model forecast including discount rates and commodity prices were selected by the independent engineers of Netherland,
Sewell & Associates, Inc. As such, there was an impairment of $1,103,144 to the oil and gas properties during the year ended
March 31, 2016.
Note 5 – Significant Acquisitions
Effective as of January 1, 2016,
the Company acquired 82% of the working interest in certain leases located in the state of Wyoming known as the Cole Creek properties.
The following table presents the
allocation of the consideration given to the assets acquired and liabilities assumed, based on their fair values at January 1,
2016:
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Consideration Given
|
|
|
Cash
|
|
$
|
1,200,000
|
|
Total purchase price
|
|
$
|
1,200,000
|
|
|
|
|
|
|
Allocation of Consideration Given
|
|
|
|
|
Oil and gas properties
|
|
|
|
|
Proved
|
|
$
|
2,033,382
|
|
Total assets
|
|
|
2,033,382
|
|
|
|
|
|
|
Current liabilities
|
|
|
111,522
|
|
Long-term liabilities
|
|
|
721,860
|
|
Total liabilities
|
|
|
833,382
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
1,200,000
|
|
Effective April 29, 2016, the Company
acquired the remaining 18% of the leases known as Cole Creek properties.
The following table presents the
allocation of the consideration given to the assets acquired and the liabilities assumed:
Consideration Given
|
|
|
Cash
|
|
$
|
250,000
|
|
Total purchase price
|
|
$
|
250,000
|
|
|
|
|
|
|
Allocation of Consideration Given
|
|
|
|
|
Oil and gas properties
|
|
|
|
|
Proved
|
|
$
|
383,311
|
|
Total assets
|
|
|
383,311
|
|
|
|
|
|
|
Current liabilities
|
|
|
—
|
|
Long-term liabilities
|
|
|
133,311
|
|
Total liabilities
|
|
|
133,311
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
250,000
|
|
Note 6 – Nexfuels Warrant
On October 15, 2016, Nexfuels issued a warrant
to the Company exercisable for 1,056,000 shares of Nexfuels shares of common stock in return for the Company performing staff services
and office space over a six-month period (“Nexfuels Warrant”). The Nexfuels Warrant has an exercise price of $1.25
per share. The Nexfuels Warrant is both assignable and transferable. The Company valued the warrant at $45,000 or $7,500 per month.
In November 2016, the Company assigned part
of the warrant to acquire 50,000 shares of Nexfuels shares of common stock to a third party as part of the issuance of a convertible
promissory note in the amount of $300,000. The Nexfules warrant expired on February 15, 2017.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Note 7 – Debt
Promissory Notes
On February 28, 2017, the Company
borrowed $55,000 from the former operator of its Cole Creek properties in exchange for a promissory note including interest at
the rate of 8% per annum with accrued and unpaid interest due at August 31, 2017. The proceeds from the loan were used to acquire
a bond from the State of Wyoming for purposes of the Company to continue to operate the Cole Creek properties. On November 1, 2018,
the Company paid the note holder $58,000 in complete satisfaction of the debt.
On November 3, 2016, the Company borrowed $300,000
in exchange for a convertible promissory note at the rate of 12% per annum with accrued and unpaid interest and principal due January
31, 2017. The due date of the promissory note was extended to May 1, 2017. The promissory note is convertible into shares of the
Company’s common stock at $0.80 per share. In addition, the Company issued the holder of the promissory note 75,000 shares
of the Company’s common stock valued at $49,752 and a warrant to acquire 50,000 shares of Nexfuels shares of common stock.
At March 31, 2017, the Company owes $300,000 on the promissory note plus accrued interest of $14,597. On November 1, 2018, the
Company paid the note holder $275,000 in complete satisfaction of the debt.
On August 11, 2016, the Company
borrowed $100,000 from a former director of the Company, who owns a 85.71% interest in LLC#3 in exchange for a promissory note
including interest at the rate of 15% per annum with accrued and unpaid interest and principal due on August 11, 2017. During the
term of the promissory note the Company agreed to pay the holder 30% of the net revenues received from the sale of oil from the
Cole Creek properties, starting August 2016. At March 31, 2017, the Company owes $100,000 on the promissory note plus accrued interest
of $7,459. On November 1, 2018, the Company paid the note holder $1,600,000 as complete satisfaction of the debt including repayment
of the $1,400,000 that the note holder contributed to LLC #3.
On April 25, 2016, the Company borrowed
$50,000 from a director of the Company in exchange for an unsecured promissory note including interest at the rate of 5% per annum
with accrued and unpaid interest and principal due at December 31, 2016. On September 15, 2016, the holder of the note agreed to
extend the due date of the promissory note to March 31, 2017, with all other terms remaining in effect. At March 31, 2017, the
Company owes $50,000 on the promissory note plus accrued interest of $5,573. On November 5, 2018, the Company paid the note holder
$68,000 in complete satisfaction of the debt.
During the year ended March 31, 2016,
the Company paid $341,405 in principal towards the repayment of promissory notes relative to the repurchase of 18,717 shares of
Western Interior common stock owned by dissident shareholders as part of agreements effective March 31, 2015 to repurchase a total
of 33,085 shares of Western Interior common stock. At March 31, 2017, the Company owes $488,298 on a promissory note plus accrued
interest at the rate of 3.5% per annum of $29,873. The During the year ended March 31, 2019, the Company transferred certain oil
and gas properties in complete satisfaction of the debt.
On January 14, 2016, the Company borrowed $50,000
from a director and officer of the Company who resigned from the Company on September 14, 2016 in exchange for a secured promissory
note including interest at the rate of 5% per annum with accrued and unpaid interest and principal due at September 30, 2016. The
note is currently in default. The default interest rate is 8%. The promissory note is collateralized by certain oil and gas properties
located in the State of Wyoming. The Holder may, at any time prior to payment of the promissory notes elect to convert all or any
portion of the promissory note, including accrued interest, into common shares of the Company at a price determined by the average
ten consecutive day trading closing price less 30%. On October 2016, the holder of the promissory note filed suit against the Company
for payment of the promissory. At March 31, 2017, the Company owes $50,000 on the promissory note plus accrued interest of $3,026.
In August 2017, the Company settled with the former director and officer of the Company by transferring certain oil and gas properties
in complete satisfaction of the debt.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
On January 14, 2016, the Company borrowed $50,000
from a then director, in exchange for a secured promissory note including interest at the rate of 5% per annum with accrued and
unpaid interest and principal due at September 30, 2016. On September 15, 2016, the holder of the note agreed to extend the due
date of the promissory note to December 31, 2016, with all other terms remaining in effect. The note is currently in default. The
default interest rate is 8%. The promissory note is collateralized by certain oil and gas properties located in the State of Wyoming.
The Holder may, at any time prior to payment of the promissory notes elect to convert all or any portion of the promissory note,
including accrued interest, into common shares of the Company at a price determined by the average ten consecutive day trading
closing price less 30%. At March 31, 2017, the Company owes $50,000 on the promissory note plus accrued interest of $3,206. On
November 5, 2018, the Company paid the note holder $50,000 in complete satisfaction of the debt.
On August 1, 2015, the Company, relative to
the repurchase by the Company on March 31, 2015 of the remaining 14,368 shares of Western Interior common stock entered into an
agreement with the note holder to settle the amount owed under the promissory note. As such, the parties agreed the amount owed
on such promissory note by the Company would be reduced from $768,715 to $393,795 and the difference of $374,920 be considered
a reduction in the purchase price by the Company of the 14,368 shares of Western Interior common stock. In addition, the $393,795
was paid in full effective August 1, 2015 by the transfer to the note holder of certain oil and gas properties owned by Western
Interior which resulted in the Company reporting a gain on disposal of assets in the amount of $44,100.
Line-of-Credit
The Company has a line-of-credit
with a bank in the original amount of $350,000 collateralized by certain oil and gas properties of the Company. Annual interest
is at prime plus 2.50% with a floor of 7%. At March 31, 2017, the Company owes $111,914 plus accrued interest of $4,092. The line-of-credit
matured in November 2016 and is in default.
Note 8 – Stockholders’
Equity
The Company’s capital stock
at March 31, 2017 consists of 325,000,000 authorized shares of which 50,000,000 shares are $0.001 par value preferred stock and
275,000,000 shares are $0.001 par value common stock.
Preferred Shares
At March 31, 2017 and 2016, there
are a total of 0 and 409,019 shares of preferred stock issued and outstanding, respectively.
On October 28, 2015, the Company
filed an Amendment to its Articles of Incorporation to designate a class of preferred stock as the Series A Convertible Preferred
Stock.
The Amendment sets aside 5,000,000
shares of the authorized 50,000,000 shares of the Company's $0.001 par value preferred stock as the Series A Convertible Preferred
Stock ("the Series A Shares.") The Series A Shares are convertible at the option of the Holder into common shares
of the Company's stock 9 months after the date of issuance. Further, the Series A Shares have a conversion price based upon
80% of the 10 day average of the Company's closing market price.
In October 2015, the Company commenced
a private placement financing of $7,000,000 in Units, a Unit consisting of one share of its Series A Shares and a Unit Warrant.
The Unit Warrant has an exercise price of $3.00 per share and a term of 3 years. The Unit Warrant is exercisable 9 months
after issuance and is callable by the Company upon the Company's common stock closing at a market price of $5.00 or above for a
period of 10 days.
Pursuant to ASC 470-20, when the
$558,171 of convertible Series A Shares of preferred stock were issued at a discount from the if-converted $682,989 fair value
as of the issuance date, the Company recognized this difference between the fair value per share of its common stock and the conversion
price, multiplied by the number of shares issuable upon conversion. This total Beneficial Conversion Feature of $124,818 will be
recorded as additional paid-in-capital for common shares. The offsetting amount will be amortizable over the period from the issue
date to the first conversion date or 9 months. Therefore, since the 409,019 Series A Shares of preferred stock are convertible
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
between July and December of 2016,
a deemed dividend to the Series A Shares of preferred stock has been recorded during the years ended March 31, 2017 and 2016 in
its statement of operations of $56,988 and $67,830, respectively. As the Company is in an accumulated deficit position, the deemed
dividend has been charged accordingly against additional paid-in-capital for common shares as there being no retained earnings
from which to declare a dividend.
During the year ended March 31,
2016, the Company received $818,038, including cash of $793,037, in exchange for the issuance of 409,019 shares of its Series A
Preferred Stock and Unit Warrants exercisable for shares of common stock.
We apply the guidance enumerated
in ASC 480 "Distinguishing Liabilities from Equity" when determining the classification and measurement of preferred
shares. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair
value. We classify conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption
rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely
within our control, as equity. At all other times, we classified our preferred shares in stockholders' equity.
We have applied the guidance of
ASC 470 "Debt" in accounting for the unit warrants and as such have valued the Unit Warrants using the Black-Scholes
option pricing model. The option-pricing model requires a number of assumptions, of which the most significant are the stock price
at the valuation date that was at a range of $1.10 to $1.50 per share as well as the following assumptions:
Volatility
|
82.00% - 134.00%
|
Expected Option/Warrant Term
|
3 years
|
Risk-free interest rate
|
25%
|
Expected dividend yield
|
0.00%
|
The expected term of the Unit Warrants
granted were estimated to be the contractual term. The expected volatility was based on an average of the volatility disclosed
based upon comparable companies who had similar expected option and warrant terms. The risk-free rate was based on the one-year
U.S. Treasury bond rate.
On August 18, 2016, the Board of
Directors approved a conversion of the Series A Preferred Shares at a conversion price of $1.43, based upon the 5-day average.
The 409,019 shares of Series A Preferred Shares were converted for 572,055 shares of the Company’s common stock.
Common Shares
At March 31, 2017 and 2016, there
are a total of 17,697,621 and 15,480,882 shares of common stock issued and outstanding, respectively.
During the year ended March 31,
2017, the Company sold 652,888 shares of its restricted common stock for $669,278 in cash. In addition, the Company issued 50,000
shares of its common stock for services valued at $89,500, issued 50,000 shares of its common stock for the exercise of an option
in cash at $0.10 per share, issued 450,000 shares of its common stock for the exercise of options through the payment of debt at
between $0.04 and $0.10 per share, and issued 75,000 shares of its common stock for consideration of a loan to the Company valued
at $49,752. Also, the Company issued 572,055 shares of its common stock in connection with the conversion of 409,019 shares of
its Series A Preferred Shares at a price of $1.43 per share. Further, and as part of the Company entering into put agreements in
December 2014 with the members of T-Rex Oil, LLC#1 (“LLC #1) whereby the Company granted a right to put the purchase of their
interest of LLC #1 in the amount of $425,000 back to the Company. Thus, the Company issued to the members of LLC #1 a total of
425,000 shares of its restricted common stock at an exercise price of $1 per share valued at $425,000.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
During the year ended March 31,
2016, the Company as part of a private placement sold 680,536 shares of its restricted common stock for $509,133 in cash and 11,000
shares for $27,000 in cash. In April 2015, the Company entered into a Subscription Agreement to sell up to 2,800,000 shares of
its restricted common stock pursuant to Regulation S of the Securities Act in exchange for funds totaling $6,020,000. In July 2015,
the Company and Schwaben Kapital GmbH amended their Subscription Agreement pursuant to Regulation S of the Securities Act to extend
the expiration of the Subscription Agreement from June 30, 2015 to September 30, 2015.The Agreement was terminated as of September
30, 2015 and during the year ended March 31, 2016, the Company sold 664,050 shares of its restricted common stock as part of the
Subscription Agreement for $1,345,000 in cash or $2.15 per share. In addition, the Company issued 8,000 shares of its restricted
common stock as payment of an accounts payable in the amount of $20,000 and the Company recognized no gain or loss between the
face value of the accounts payable and the fair value of the restricted common stock.
Additional Paid-in Capital
During the years ended March 31,
2017 and 2016, as the Company is in an accumulated deficit position, the deemed dividends in the amount of $56,988 and $67,830,
respectively were charged against additional paid-in-capital as there being no retained earnings from which to declare a dividend.
During the year ended March 31, 2017, the Company
realized additional paid in capital relative to the fair value of equity based payments in the total amount of $503,700 of which
$298,063 was expensed and $205,637 was capitalized. The $205,637 is the valuation of warrants issued for payment in full for services
as part of agreements with a term of one year and the Company will amortize the value of the warrants over the term of the life
of the agreements. See Note 10 – Equity Based Payments.
The Company also recognized $226,298 in equity compensation as part
of the granting of stock options to officers, directors and employees. See Note 10 – Equity Based Payments.
Retirement of Common Shares
During the year ended March 31,
2016, the Company entered into settlement agreements with four of its shareholders to settle certain claims valued at $1,531,047
in exchange for the shareholders returning to the Company 1,177,729 shares of their common stock.
Note 9 – Income Taxes
The effective income tax rate for
the years ended March 31, 2017 and 2016 differs from the U.S. Federal statutory rate due to the following:
|
|
2017
|
|
2016
|
Federal statutory income tax rate
|
|
$
|
1,488,000
|
|
|
$
|
5,492,000
|
|
State income taxes, net of federal benefit
|
|
|
128,000
|
|
|
|
472,000
|
|
Permanent items
|
|
|
(285,000
|
)
|
|
|
(3,231,000
|
)
|
Change in valuation allowance
|
|
|
(1,331,000
|
)
|
|
|
(2,733,000
|
)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
The components of the deferred tax
assets and liabilities at March 31, 2017 and 2016 are as follows:
|
|
2017
|
|
2016
|
Long-term deferred tax assets:
|
|
|
|
|
|
|
|
|
Federal net operating loss carryforwards
|
|
$
|
4,823,000
|
|
|
$
|
3,580,000
|
|
Equity based compensation
|
|
|
478,000
|
|
|
|
391,000
|
|
Long-term deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
4,000
|
|
|
|
4,000
|
|
Valuation allowance
|
|
|
(5,305,000
|
)
|
|
|
(3,975,000
|
)
|
Net long-term deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
For Income Tax Return Purposes
Only
On August 19, 2014, Terex Energy
Corporation acquired 52% of the outstanding common stock of T-Rex Oil Inc. and thus T-Rex had a change of control event under IRC
section 382, which will limit T-Rex’s ability to utilize its deferred tax assets, including net operating loss carryforwards,
to offset future taxable income. T-Rex has net operating loss carryforwards of approximately $52,000,000 which will begin to expire
in 2024.
On December 22, 2014, T-Rex acquired
100% of the outstanding common stock of Terex and Terex did not have a change of control event under IRC section 382. Terex has
net operating loss carryforwards of approximately $425,000 which will begin to expire in 2034.
On March 31, 2015, T-Rex acquired
100% of the outstanding common stock of Western Interior and Western Interior had a change of control event under IRC section 382
which will limit T-Rex’s ability to utilize its deferred tax assets, including net operating loss carryforwards of approximately
$12,000,000 (limited to approximately $560,000 per year) which will begin to expire in 2027, to offset future taxable income.
Note 10 – Equity Based
Payments
The Company accounts for equity
based payment accruals under authoritative guidance as set forth in the Topics of the ASC. The guidance requires all equity based
payments to employees and non-employees, including grants of employee and non-employee stock options and warrants, to be recognized
in the consolidated financial statements based at their fair values.
The Black-Scholes option-pricing
model is used to estimate the option and warrant fair values. The option-pricing model requires a number of assumptions, of which
the most significant are the stock price at the valuation date that ranged from $0.01 to $3.50 per share as well as the following
assumptions:
Volatility
|
82.00% - 134.00%
|
Expected Option/Warrant Term
|
9 months - 3 years
|
Risk-free interest rate
|
.12% - .25%
|
Expected dividend yield
|
0.00%
|
The expected term of the options
and warrants granted were estimated to be the contractual term. The expected volatility was based on an average of the volatility
disclosed based upon comparable companies who had similar expected option and warrant terms. The risk-free rate was based on the
one-year U.S. Treasury bond rate.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
2014 Stock Incentive Plan
Effective October 1, 2014,
the Company’s 2014 Stock Option and Award Plan (the “2014 Stock Incentive Plan”) was approved by its Board of
Directors. Under the 2014 Stock Incentive Plan, the Board of Directors may grant options or purchase rights to purchase common
stock to officers, employees, and other persons who provide services to the Company or any related company. The participants to
whom awards are granted, the type of awards granted, the number of shares covered for each award, and the purchase price, conditions
and other terms of each award are determined by the Board of Directors, except that the term of the options shall not exceed 10
years. A total of 2 million shares of the Company’s common stock are subject to the 2014 Stock Incentive Plan. The shares
issued for the 2014 Stock Incentive Plan may be either treasury or authorized and unissued shares.
The following table summarizes the
non-qualified stock option and warrant activity for the years ended March 31, 2017 and 2016:
|
|
2017
|
|
2016
|
|
|
Number of
|
|
|
|
Number of
|
|
|
|
|
Options/
|
|
Weighted Average
|
|
Options/
|
|
Weighted Average
|
|
|
Warrants
|
|
Exercise Price
|
|
Warrants
|
|
Exercise Price
|
Outstanding at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,127,750
|
|
|
$
|
0.039
|
|
|
|
935,000
|
|
|
$
|
0.018
|
|
Warrants
|
|
|
1,351,877
|
|
|
$
|
1.462
|
|
|
|
942,858
|
|
|
$
|
0.0800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,480,000
|
|
|
$
|
0.620
|
|
|
|
1,262,750
|
|
|
$
|
0.100
|
|
Warrants
|
|
|
825,000
|
|
|
$
|
2.000
|
|
|
|
409,019
|
|
|
$
|
3.000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
(625,000
|
)
|
|
$
|
0.054
|
|
|
|
—
|
|
|
$
|
—
|
|
Warrants
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
—
|
|
|
$
|
—
|
|
|
|
(1,070,000
|
)
|
|
$
|
0.010
|
|
Warrants
|
|
|
(325,000
|
)
|
|
$
|
2.000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,982,750
|
|
|
$
|
0.491
|
|
|
|
1,127,750
|
|
|
$
|
0.039
|
|
Warrants
|
|
|
1,851,877
|
|
|
$
|
1.610
|
|
|
|
1,351,877
|
|
|
$
|
1.462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,372,750
|
|
|
$
|
0.433
|
|
|
|
1,127,750
|
|
|
$
|
0.039
|
|
Warrants
|
|
|
1,851,877
|
|
|
$
|
1.610
|
|
|
|
1,351,877
|
|
|
$
|
1.462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
remaining contractual life
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Aggregate
|
|
|
|
|
Life
|
|
|
|
Intrinsic Value
|
|
|
|
Life
|
|
|
|
Intrinsic Value
|
|
Options
|
|
|
2.79
|
|
|
$
|
—
|
|
|
|
1.13
|
|
|
$
|
1,115,084
|
|
Warrants
|
|
|
1.69
|
|
|
$
|
—
|
|
|
|
1.21
|
|
|
$
|
511,500
|
|
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
The aggregate intrinsic value of
outstanding securities is the amount by which the fair value of underlying (common) shares exceed the amount paid for and the exercise
price of the options and warrants issued and outstanding.
Note 11 – Commitments and
Contingencies
Operating Lease
The Company leased an office space
in Colorado at the rate of $4,572 per month and the lease expired during the year ended March 31, 2017. The Company currently leases
an office space in Colorado on a month to month basis at the rate of $5,451 plus expenses. In addition, the Company leased an office
space in Wyoming at the rate of $5,838 per month and the Company terminated from the lease as of March 31, 2017. Total rent expense
under these leases was $113,819 and $128,340 for the years ended March 31, 2017 and 2016.
The Company has no minimum future
rental annual payments.
Employment Agreements
In August 2014, Terex entered into
an Employment Agreement for services with its Chief Executive Officer, President and director. The Employment Agreement had a term
of 3 years and provided for an annual compensation of $204,000 and a monthly car allowance of $600. It also provided for an annual
bonus as determined by the board of directors. As of November 30, 2017, the parties entered into a settlement agreement where the
Company issued 750,000 shares of its common stock to Terex’s former CEO, President and director towards effectuating a full
compromise, settlement and release of any and all claims between the parties.
In November 2014, Terex entered
into an Employment Agreement for services with its Vice President of Operations and director. The Employment Agreement had a term
of 3 years and provided for an annual compensation of $150,000. It also provided for an annual bonus as determined by the board
of directors. As of November 30, 2017, the parties entered into a settlement agreement where the Company issued 750,000 shares
of its common stock to Terex’s former Vice President and director towards effectuating a full compromise, settlement and
release of any and all claims between the parties.
In January 2015, T-Rex entered
into an Employment Agreement for services with its Vice President of Operations and director. The Employment Agreement had a term
of 3 years and provided for an annual compensation of $150,000. It also provided for an annual bonus as determined by the board
of directors. In September 2016, the Employment Agreement was terminated.
Consulting Agreement
The Company entered into a three-year
agreement effective September 1, 2014 with a consultant to perform services at the base rate of $150,000 per year under certain
terms and conditions including an auto allowance of $600 per month. As of August 1, 2016, the parties entered into a revised three-year
agreement to perform services at the base rate of $195,000 per year. In addition, the consultant has been granted cashless options
to acquire up to 500,000 shares of T-Rex’s common stock at an option price of $0.10 per share for a period of three years
from April 1, 2014. The options vested ratably over the year ended March 31, 2016. See Note 9 – Equity Based Payments.
Litigation
BMO Holdings Litigation
On October 31, 2016, BMO Holding, LLC (“BMO
Holding”) filed suit against the Company in the Supreme Court of the State of New York, New York County, alleging a breach
of alleged contract resulting from certain business negotiations with the Company revolving around the purchase of oil and gas
properties in Wyoming by an affiliated entity of BMO Holding. The suit seeks the fulfillment of the alleged contract and unspecified
damages to be determined by jury. At the time of this filing, the Company has filed a Motion to Dismiss due to a lack of jurisdiction
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
and failure to state a claim. The suit was
dismissed on August 21, 2017. Subsequently, BMO Holding filed suit against the Company in the District Court of the County of Broomfield,
Colorado and such suit was dismissed in April 2019.
Note 12 – Related Party
Transactions
Equity for Debt
During the year ended March 31,
2017, the Company issued 100,000 shares of its common stock in exchange for payment of a debt owed to an officer of the Company
in exercising their option to purchase shares at an exercise price of $.05 per share.
T-Rex Oil LLC #1
The Company in December 2014 entered
into put agreements with the members of T-Rex #1 whereby the Company granted a right to put the purchase of their interest of T-Rex
#1 in the amount of $425,000 back to the Company at an exercise price of $2.00 per share or a total of 212,500 shares of the Company’s
common stock. In August 2016, the Company issued to the members of LLC #1 a total of 425,000 shares of its restricted common stock
at an exercise price of $1 per share valued at $425,000.
T-Rex Oil LLC #3
The Company is the manager of T-Rex
Oil LLC #3 that was formed in January 2016 for the purpose of acquiring and developing oil and gas leases known as the Cole Creek
properties in Wyoming. T-Rex Oil LLC #3 is included as part of the consolidated financial statements as of and for the year ended
March 31, 2017 and 2016. See Note 2 –Summary of Significant Accounting Policies – Principles of Consolidation.
Note 13 – Subsequent Events
Cole Creek
Effective September 1, 2018, the
Company sold its 100% working interest in the Cole Creek properties for $3,500,000 in cash.
Note 14 - Supplemental Oil And Gas Disclosure (Unaudited)
Estimated Net Quantities of Oil
and Gas Reserves (Unaudited)
There are numerous uncertainties
inherent in estimating quantities of proved crude oil and natural gas reserves. Crude oil and natural gas reserve engineering is
a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be precisely measured. The
accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation
and judgment. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of such estimate.
Accordingly, reserves estimates are often different from the quantities of crude oil and natural gas that are ultimately recovered.
Proved oil and gas reserves are
those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty
to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions,
operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire,
unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are
used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain
that it will commence the project within a reasonable time.
The area of the reservoir considered
as proved includes all of the following: (a) the area identified by drilling and limited by fluid contacts, if any, and (b) adjacent
undrilled portions of the reservoir that can, with reasonable certainty,
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
be judged to be continuous with
it and to contain economically producible oil or gas on the basis of available geoscience and engineering data. In the absence
of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons as seen in a well penetration
unless geoscience, engineering, or performance data and reliable technology establish a lower contact with reasonable certainty.
Reserves that can be produced
economically through application of improved recovery techniques (including but not limited to, fluid injection) are included in
the proved classification when both of the following occur: (a) successful testing by a pilot project in an area of the reservoir
with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir of an
analogous reservoir, or other evidence of reliable technology establishes the reasonable certainty of the engineering analysis
on which the project or program was based, and (b) the project has been approved for development by all necessary parties and entities,
including governmental entities.
Existing economic conditions include
prices and costs at which economic productivity from a reservoir is to be determined. The price shall be the average price during
the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average
of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding
escalations based upon future conditions.
Proved developed oil and gas reserves
are proved reserves that can be expected to be recovered: (i) through existing wells with existing equipment and operating methods
or in which the cost of the required equipment is relatively minor compared to the costs of a new well; and (ii) through installed
extraction equipment and infrastructure operational at the time of the reserve estimate if the extraction is by means not involving
a well.
Proved undeveloped oil and gas
reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where
a relatively major expenditure is required for recompletion. Reserves on undrilled acreage shall be limited to those directly offsetting
development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists
that establishes reasonable certainty of economic productivity at greater distances. Undrilled locations can be classified as having
undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years,
unless the specific circumstances, justify a longer time. Under no circumstances shall estimates for undeveloped reserves be attributable
to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques
have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable
technology establishing reasonable certainty.
“Prepared” reserves
are those quantities of reserves which were prepared by an independent petroleum consultant. “Audited” reserves are
those quantities of revenues which were estimated by the Company’s employees and audited by an independent petroleum consultant.
An audit is an examination of a company’s proved oil and gas reserves and net cash flow by an independent petroleum consultant
that is conducted for the purpose of expressing an opinion as to whether such estimates, in aggregate, are reasonable and have
been determined using methods and procedures widely accepted within the industry and in accordance with SEC rules.
Estimates of the Company’s
oil and natural gas reserves and present values at March 31, 2016 were prepared by Netherland, Sewell & Associates Inc., independent
reserve engineers.
Oil and Gas Reserves
The following table sets forth our
net proved oil and gas reserves, including the changes therein at March 31, 2017 and 2016.
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Net Proved Developed and Undeveloped
Oil Reserves:
|
|
|
|
Natural
|
|
|
Oil
|
|
Gas
|
|
|
(MBbls)
|
|
(MMcf) [1]
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
Estimated proved reserves
|
|
|
|
|
|
|
|
|
at March 31, 2015
|
|
|
488
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Purchase of proved reserves [2]
|
|
|
76
|
|
|
|
—
|
|
Revisions of previous estimates
|
|
|
(425
|
)
|
|
|
—
|
|
Production
|
|
|
(16
|
)
|
|
|
—
|
|
Disposition of properties
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Estimated proved reserves
|
|
|
|
|
|
|
|
|
at March 31, 2016
|
|
|
123
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Purchase of proved reserves
|
|
|
17
|
|
|
|
—
|
|
Revisions of previous estimates
|
|
|
—
|
|
|
|
—
|
|
Production
|
|
|
(30
|
)
|
|
|
—
|
|
Disposition of properties
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Estimated proved reserve
|
|
|
|
|
|
|
|
|
at March 31, 2017
|
|
|
110
|
|
|
|
—
|
|
Net Proved Oil and Gas Reserves
Consisted of the Following at March 31, 2017 and 2016:
Proved developed reserves:
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
123
|
|
|
|
—
|
|
March 31, 2017
|
|
|
110
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Proved undeveloped reserves:
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
—
|
|
|
|
—
|
|
March 31, 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Base pricing, before adjustments
|
|
|
|
|
|
|
|
|
for contractual differentials:
|
|
|
$/bbl WTI Posted
|
|
|
|
|
|
March 31, 2016
|
|
$
|
42.77
|
|
|
$
|
0.00
|
|
March 31, 2017
|
|
$
|
44.81
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
[1] Mboe is based on a ratio of 6 Mcf to 1 barrel.
|
|
|
|
|
|
|
|
|
[2] The Company purchased 82% of the Cole Creek properties in Wyoming effective January 1, 2016.
|
|
[3] The Company purchased 18% of the Cole Creek properties in Wyoming effective April 1, 2016.
|
|
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Results of Operations for Oil
and Gas Producing Activities for the Years Ended March 31, 2017 and 2016:
|
|
Year Ended March 31,
|
|
|
2107
|
|
2016
|
|
|
(unaudited)
|
|
(unaudited)
|
Revenue
|
|
$
|
1,182,683
|
|
|
$
|
547,000
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Production costs
|
|
|
1,036,389
|
|
|
|
539,673
|
|
Depreciation, depletion, amortization and valuation
|
|
|
|
|
|
|
|
|
allowance
|
|
|
538,627
|
|
|
|
14,942,000
|
|
Exploration
|
|
|
152,854
|
|
|
|
4,705
|
|
|
|
|
|
|
|
|
|
|
Results of operations of oil and gas producing activities
|
|
$
|
(545,187
|
)
|
|
$
|
(14,939,378
|
)
|
Cost Incurred for Oil and Gas
Property Acquisition, Exploration and Development Activities
|
|
Year Ended March 31,
|
|
|
2017
|
|
2016
|
|
|
(unaudited)
|
|
(unaudited)
|
Property acquisition:
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
386,191
|
|
|
$
|
1,285,313
|
|
Unproved
|
|
|
15,619
|
|
|
|
154,214
|
|
Exploration
|
|
|
4,705
|
|
|
|
4,705
|
|
Development
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total costs incurred
|
|
$
|
406,515
|
|
|
$
|
1,444,232
|
|
Aggregate Capitalized Costs
Capitalized costs relating to oil
and gas activities for the years ended March 31, 2017 and 2016 are as follows:
|
|
March 31,
|
|
|
2017
|
|
2016
|
|
|
(unaudited)
|
|
(unaudited)
|
Proved
|
|
$
|
11,679,817
|
|
|
$
|
11,368,626
|
|
Unproved
|
|
|
4,758,798
|
|
|
|
4,745,917
|
|
|
|
|
|
|
|
|
|
|
Total capitalized costs
|
|
|
16,438,615
|
|
|
|
16,114,543
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation, depletion,
|
|
|
|
|
|
|
|
|
and valuation allowance
|
|
|
14,945,058
|
|
|
|
14,495,132
|
|
|
|
|
|
|
|
|
|
|
Net capitalized costs
|
|
$
|
1,493,557
|
|
|
$
|
1,619,411
|
|
T-REX OIL,
INC. AND SUBSIDIARIES
Notes to The
Consolidated Financial Statements
March 31, 2017
and 2016
Standardized Measure of Discounted
Future Net Cash Flows
Information with respect to the
standardized measure of discounted future net cash flows relating to proved reserves is summarized below. The price used to estimate
the reserves is held constant over the life of the reserve. Future production and development costs are derived based on current
costs assuming continuing of existing economic conditions.
The discounted future net cash flows
related to proved oil and gas reserves at March 31, 2017 and 2016 (in millions):
|
|
March 31,
|
|
|
2017
|
|
2016
|
Future cash inflows
|
|
$
|
3.11
|
|
|
$
|
4.29
|
|
Less future costs:
|
|
|
|
|
|
|
|
|
Production
|
|
|
1.82
|
|
|
|
3.24
|
|
Development and abandonment
|
|
|
0.98
|
|
|
|
0.88
|
|
Income taxes [1]
|
|
|
—
|
|
|
|
—
|
|
Future net cash flows
|
|
|
0.31
|
|
|
|
0.17
|
|
10% discount factor
|
|
|
—
|
|
|
|
—
|
|
Standardized measure of discounted
|
|
|
|
|
|
|
|
|
future net cash flows
|
|
$
|
0.31
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
[1] No income tax provision is included in the standardized measure calculation shown above as the Company does not project to be taxable or pay cash income taxes based on its available tax assets and tax assets generated in the development of its reserves because the tax basis of its oil and gas properties and NOL carryforwards exceed the amount of discounted future net earnings
|
Changes in Discounted Future
Net Cash Flows
The following summarizes the principal
sources of change in standardized measure of discounted future net cash flows during the years ended March 31, 2017 and 2016 (in
millions):
|
|
Year Ended March 31,
|
|
|
2017
|
|
2016
|
Beginning of the period
|
|
$
|
0.17
|
|
|
$
|
2.81
|
|
Purchase of reserves
|
|
|
0.15
|
|
|
|
0.69
|
|
Changes in costs and prices
|
|
|
—
|
|
|
|
(3.32
|
)
|
Sales of oil and natural gas produced during
|
|
|
|
|
|
|
|
|
the period, net of production costs
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
0.31
|
|
|
$
|
0.17
|
|