NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and
cash flows at March 31, 2018, and for all periods presented herein, have been made.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2017
audited financial statements. The results of operations for the period ended March 31, 2017 are not necessarily indicative of
the operating results for the full year.
NOTE
2 - GOING CONCERN
The
Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable
to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced
to cease operations.
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan
is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet
its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that
the Company will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Consolidation
The
accompanying consolidated financial statements included all of the accounts of the Company and its wholly-owned subsidiaries,
C2R, Inc., a Nevada Corporation, and Jett Rink Oil, LLC, a Kansas Limited Liability Company. All intercompany transactions have
been eliminated.
Recent
Accounting Pronouncements
Management
has considered all recent accounting pronouncements issued since the last audit of the Company’s financial statements. The
Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial
statements.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash in banks and financial instruments which mature within six months of the date of purchase.
Oil
and Gas Properties
The
Company uses the full cost method of accounting for oil and natural gas properties. Under this method, all acquisition, exploration
and development costs, including certain payroll, asset retirement costs, other internal costs, and interest incurred for the
purpose of finding oil and natural gas reserves, are capitalized. Internal costs that are capitalized are directly attributable
to acquisition, exploration and development activities and do not include costs related to production, general corporate overhead
or similar activities. Costs associated with production and general corporate activities are expensed in the period incurred.
Proceeds from the sale of oil and natural gas properties are applied to reduce the capitalized costs of oil and natural gas properties
unless the sale would significantly alter the relationship between capitalized costs and proved reserves, in which case a gain
or loss is recognized.
Capitalized
costs associated with impaired properties and capitalized costs related to properties having proved reserves, plus the estimated
future development costs, and asset retirement costs under Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 410 “Asset Retirement and Environmental Obligations” (FASB
ASC 410), are amortized using the unit-of-production method based on proved reserves. Capitalized costs of oil and natural gas
properties, net of accumulated amortization and deferred income taxes, are limited to the total of estimated future net cash flows
from proved oil and natural gas reserves, discounted at ten percent, plus the cost of unevaluated properties. Under
certain specific conditions, companies could elect to use subsequent prices for determining the estimated future net cash flows.
The use of subsequent pricing is no longer allowed. There are many factors, including global events that may influence the production,
processing, marketing and price of oil and natural gas. A reduction in the valuation of oil and natural gas properties resulting
from declining prices or production could adversely impact depletion rates and capitalized cost limitations. Capitalized costs
associated with properties that have not been evaluated through drilling or seismic analysis, including exploration wells in progress
at March 31, 2018, are excluded from the unit-of-production amortization. Exclusions are adjusted annually based on drilling results
and interpretative analysis.
NOTE
3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Oil
and Gas Properties (Continued)
Sales
of oil and natural gas properties are accounted for as adjustments to the net full cost pool with no gain or loss recognized,
unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. If it is determined
that the relationship is significantly altered, the corresponding gain or loss will be recognized in the statements of operations.
Costs
of oil and gas properties are depleted using the unit-of-production method. For the three months ended March 31, 2018 and 2017,
the Company recognized $-0- and $-0-, respectively, of depletion expense related to oil and gas production during the period.
Ceiling
Test
In
applying the full cost method, the Company performs an impairment test (ceiling test) at each reporting date, whereby the carrying
value of property and equipment is compared to the value of its proved reserves discounted at a ten percent interest rate of future
net revenues, based on current economic and operating conditions, plus the cost of properties not being amortized, plus the lower
of cost or fair market value of unproved properties included in costs being amortized, less the income tax effects related to
book and tax basis differences of the properties.
Revenue
Recognition
Revenues
from the sale of oil and natural gas are recognized when the product is delivered at a fixed or determinable price, title has
transferred, and collectability is reasonably assured. For oil sales, this occurs when the customer takes delivery of oil
from the operators’ storage tanks.
Loss
per Share
The
Company has adopted ASC 260, “Earnings Per Share,” (“EPS”) which requires presentation of basic and diluted
EPS on the face of the income statement for all entities with complex capital structures, and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the
accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares
of common stock outstanding during the period. The Company had 1,200,000 potential dilutive shares of common stock as of September
30, 2017 that were excluded as their effect was anti-dilutive.
NOTE
4 – OIL AND GAS PROPERTIES
On
April 3, 2014, the Company signed an election to participate in the first of three wells with Toto Energy, LLC in Cowley County,
Kansas. The Company will earn a 30 percent working interest and a 24.45 percent net royalty interest in the well. The Company
capitalized $213,000 of cash payments made to commence operations development of the well.
NOTE
4 – OIL AND GAS PROPERTIES (Continued)
On
May 10, 2014, the Company signed an election to participate in the second of three wells with Toto Energy, LLC in Cowley County,
Kansas. The Company will earn a 30 percent working interest and a 24.45 percent net royalty interest in the well. The Company
capitalized $189,000 of cash payments made to commence operations development of the well.
On
July 23, 2016 the Company received $58,684 from the operator of two of its oil and gas leases. The payment received represented
a partial refund of the Company’s previous $404,837 in payments made to the operator pursuant to the terms of an Authorization
for Expenditures (“AFE”) Agreement. The Company’s original payments under the AFE were capitalized to oil and
gas properties in 2014. All capitalized costs pursuant to the AFE were fully impaired during the year ended December 31, 2015.
As the capitalized costs had been previously impaired, the $58,684 was recorded as a gain on property settlement for the period
ended December 31, 2016.
Oil
and gas properties are stated at cost. As of March 31, 2018 and December 31, 2017, oil and gas properties, net consisted of the
following:
|
|
|
March 31, 2018
|
|
December 31,
2017
|
|
|
|
|
|
|
|
Unproved properties
|
|
$
|
470,377
|
|
|
$
|
470,377
|
|
|
Impairment of oil and gas leases
|
|
|
(470,377
|
)
|
|
|
(470,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas properties, net
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE
5 – CONVERTIBLE NOTES PAYABLE
Chancery
Lane Notes
On
January 3, 2014, the Company received $600,000 in connection with a convertible note financing commitment, the terms of which
call for the Company to receive three tranches of $200,000 each on a callable convertible note wherein the Company borrows the
sum at five percent interest for one year and the investor can elect to continue to receive the interest on the note or have the
Company issue the investor shares of common stock of the Company at $0.50 per share to retire the debt. The notes came due on
December 12, 2014, and as of March 31, 2018 the notes were in default. At March 31, 2018 accrued interest on the notes totaled
$127,013.
Adar
Bay Note
On
January 22, 2018, the Company received $71,250 from a third-party lender pursuant to a convertible promissory note. The note bears
interest at a rate of 8.0 percent per annum, and is due in full on January 22, 2019. The note is convertible into shares of the
Company’s common stock at a strike price equal to 50 percent of the lowest bid price of the lower of a) the last 20 days
prior to conversion, or b) the 20 days immediately preceding the note closing date. As of March 31, 2018 the Company has recorded
$1,288 in accrued interest on the note, a net debt discount totaling $61,027, and a derivative liability totaling $169,781.
NOTE
5 – CONVERTIBLE NOTES PAYABLE (Continued)
Adar
Bay Note
On
January 24, 2018, the Company received $75,000 from a third-party lender pursuant to a convertible promissory note. The note bears
interest at a rate of 10.0 percent per annum, and is due in full on January 24, 2019. The note is convertible into shares of the
Company’s common stock at a strike price equal to 50 percent of the lowest bid price of the lower of the last 20 days prior
to conversion. As of March 31, 2018 the Company has recorded $1,085 in accrued interest on the note, a net debt discount totaling
$62,053, and a derivative liability totaling $171,626.
NOTE
6 – NOTES PAYABLE – RELATED PARTY
On
June 11, the Company borrowed $5,000 from a related-party entity. Pursuant to the terms of the note, the principal accrues interest
at a rate of five percent per annum, is unsecured, and was due in full on June 11, 2016. Subsequent to the initial borrowing the
Company borrowed an additional $57,500 from the same lender under the same terms. On July 25, 2016 the Company paid $40,000 against
the outstanding principal of the notes. Accrued interest totaling $1,340 was forgiven at the time of payment, and recorded as
additional paid-in capital. At March 3, 2018 the total outstanding principal balance due to the lender was $22,500, and aggregate
accrued interest on the notes totaled $1,865.
On
May 6, 2015 the Company borrowed $5,000 from an unrelated third-party entity. The note, accrued interest at a rate of five percent
per annum, was unsecured, and was due in full on May 6, 2016. On July 25, 2015 the note, inclusive of all unpaid principal and
interest, was transferred to and assumed by a different related party entity. On July 25, 2016 the Company repaid the full $5,000
principal balance due under the terms of the note. Accrued interest on the note totaling $305 was forgiven at the time of payment,
and recorded as additional paid-in capital. During the year ended December 31, 2017, the Company borrowed an additional $10,000
from the same entity. The outstanding principal balance on the note as of March 31, 2018 totaled $10,000 This note accrues interest
at a rate of five percent per annum, and is due twelve months from the note date. As of March 31, 2018, accrued interest on the
note totaled $214.
On
March 7, 2016 the Company borrowed $10,000 from a related-party. Pursuant to the terms of the note the principal accrues interest
at a rate of five percent per annum, is unsecured, and is due in full on May 6, 2017. On May 2, 2016 the Company borrowed an additional
$4,000 under the same terms. On October 4, 2016 the Company borrowed an additional $25,000 under the same terms. During the year
ended December 31, 2017, the Company borrowed an additional $10,000 under the same terms. During the three months ended March
3, 2018, the Company paid $25,000 against note principal. At March 31, 2018, the aggregate principal balance of the notes totaled
$24,000 and aggregate accrued interest on the notes totaled $3,607.
NOTE
7 – ASSET RETIREMENT OBLIGATIONS
The
total future asset retirement obligation is estimated by management based on the Company’s net working interests in all
wells and facilities, estimated costs to reclaim and abandon wells and facilities and the estimated timing of the costs to be
incurred in future periods. At March 31, 2018 the Company estimated the undiscounted cash flows related to asset retirement obligation
to total approximately $105,500. The actual costs to settle the obligation are expected to occur in approximately 25 years. Through
March 31, 2018, the Company established an asset retirement obligation of $9,860 for the wells
acquired
by the Company, which was capitalized to the value of the oil and gas properties. The fair value of the liability at March 31,
2018 and December 31, 2017 is estimated to be $13,394 and $13,178, respectively, using a risk free rate of 9.31 percent and inflation
rates between 3.87 and 4.81 percent. Total accretion expense on the asset retirement obligation was $216 and $198 for the three-month
periods ended March 31, 2018 and 2017, respectively.
NOTE
8 – STOCKHOLDERS’ DEFICIT
The
Company has 25,000,000 preferred shares authorized at a par value of $0.001 and 625,000,000 common shares authorized at par value
of $0.001. As of March 31, 2018 the Company has 22,013 shares of preferred stock and 37,105,062 shares of common stock
issued and outstanding.
On
July 29, 2016 the Company repaid in full the principal balance of multiple related-party notes payable. Pursuant to this transaction,
the note holders agreed to forgive an aggregate of $1,645 in accrued interest related to the notes. The Company recorded this
forgiveness as a credit to additional paid-in capital, as the note holders were related parties.
During
the year ended December 31, 2017, the Company cancelled 20,000 shares of preferred stock, and 5,623,097 shares of common stock.
NOTE
9 – SUBSEQUENT EVENTS
On
April 23, 2018 the Company resolved to issue 65,000,000 common shares to the Company’s president upon conversion of $6,500
in notes payable, at a rate of $0.0001 per share.
In
accordance with ASC 855-10, Company management reviewed all material events through the date of this report and there are no material
subsequent events to report other than those listed above.