0001580695-17-000135.txt : 20170214 0001580695-17-000135.hdr.sgml : 20170214 20170214173128 ACCESSION NUMBER: 0001580695-17-000135 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 44 CONFORMED PERIOD OF REPORT: 20161231 FILED AS OF DATE: 20170214 DATE AS OF CHANGE: 20170214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GULFSLOPE ENERGY, INC. CENTRAL INDEX KEY: 0001341726 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 161689008 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-51638 FILM NUMBER: 17610721 BUSINESS ADDRESS: STREET 1: 2500 CITY WEST BLVD STREET 2: SUITE 800 CITY: HOUSTON STATE: TX ZIP: 77042 BUSINESS PHONE: 281-918-4100 MAIL ADDRESS: STREET 1: 2500 CITY WEST BLVD STREET 2: SUITE 800 CITY: HOUSTON STATE: TX ZIP: 77042 FORMER COMPANY: FORMER CONFORMED NAME: Plan A Promotions, Inc. DATE OF NAME CHANGE: 20051018 10-Q 1 gspe-10q_123116.htm QUARTERLY REPORT

 

 

U. S. SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, D.C. 20549


  

FORM 10-Q


 

☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended December 31, 2016

Commission File No. 000-51638

GULFSLOPE ENERGY, INC.

(Exact Name of Issuer as Specified in its Charter) 

             
Delaware   16-1689008
(State or Other Jurisdiction of   (I.R.S. Employer I.D. No.)
incorporation or organization)    

 

2500 CityWest Blvd., Suite 800

Houston, Texas 77042

 (Address of Principal Executive Offices)

(281) 918-4100

 (Issuer’s Telephone Number)

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 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes      No  

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer   Non-accelerated filer  Smaller reporting company 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

The number of shares outstanding of our common stock, as of February 14, 2017, was 684,152,225.

 

   

 

 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Report”) contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. All statements other than statements of historical facts included in this Report including, without limitation, statements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Report, regarding our financial condition, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “target”, “goal”, “plans”, “objective”, “should”, or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements including, but not limited to, economic conditions generally and in the markets in which we may participate, competition within our chosen industry, technological advances and failure by us to successfully develop business relationships. A more detailed discussion of possible risks is included in “Risk Factors” included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 27, 2016.

Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Report to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

2 
 

 

PART I - FINANCIAL STATEMENTS (Unaudited)

Item 1. Financial Statements.

CONTENTS

Condensed Unaudited Balance Sheets 4
Condensed Unaudited Statements of Operations 5
Condensed Unaudited Statements of Cash Flows 6
Notes to Condensed Unaudited Financial Statements 7

 

3 
 

 

GulfSlope Energy, Inc.

Condensed Balance Sheets

As of December 31, 2016 and September 30, 2016

(Unaudited)

         
   December 31,
2016
   September 30,
2016
 
           
Assets          
Current Assets          
Cash and Cash Equivalents  $51,804   $64,114 
Prepaid Expenses and Other Current Assets   175,332    38,311 
Accounts Receivable, Net       63,147 
Total Current Assets   227,136    165,572 
Property and Equipment, Net of Depreciation   16,720    24,288 
Oil and Natural Gas Properties, Full Cost Method of Accounting          
Unproved Properties   4,590,563    4,526,171 
Total Non-Current Assets   4,607,283    4,550,459 
Total Assets  $4,834,419   $4,716,031 
           
Liabilities and Stockholders’ Deficit          
Current Liabilities          
Accounts Payable  $466,199   $426,271 
Related Party Payable   280,713    265,834 
Accrued Interest Payable   938,560    812,383 
Accrued Expenses and Other Payables   1,321,927    1,352,929 
Loans from Related Parties   8,536,088    8,382,891 
Notes Payable   126,896    4,156 
Convertible Promissory Notes Payable   298,800    153,358 
Stock Payable   11,605    11,605 
Total Current Liabilities   11,980,788    11,409,427 
Total Liabilities   11,980,788    11,409,427 
Stockholders’ Deficit          
Preferred Stock; par value ($0.001); Authorized 50,000,000 shares none issued or outstanding        
Common Stock; par value ($0.001); Authorized 975,000,000 shares; 682,902,225 and 682,402,225 issued and 684,152,225 and 683,652,225 outstanding, respectively   682,902    682,402 
Additional Paid-in-Capital   26,250,666    26,151,376 
Accumulated Deficit   (34,079,937)   (33,527,174)
Total Stockholders’ Deficit   (7,146,369)   (6,693,396)
Total Liabilities and Stockholders’ Deficit  $4,834,419   $4,716,031 

 

The accompanying notes are an integral part to these condensed financial statements.

4 
 

 

 GulfSlope Energy, Inc.

Condensed Statements of Operations

For the Three Months Ended December 31, 2016 and 2015

(Unaudited)

         
   For the three
months ended
December 31,
2016
   For the three
months ended
December 31,
2015
 
Revenues  $    $  
Impairment of Oil and Natural Gas Properties          
General & Administrative Expenses     219,928    587,171 
Net Loss from Operations   (219,928)   (587,171)
Other Income/(Expenses):          
Interest Income        
Interest Expense   (332,835)   (103,376)
Net Loss Before Income Taxes   (552,763)   (690,547)
Provision for Income Taxes        
Net Loss  $(552,763)  $(690,547)
Loss Per Share - Basic and Diluted  $(0.00)  $(0.00)
Weighted Average Shares Outstanding – Basic and Diluted   682,407,660    672,198,474 

The accompanying notes are an integral part to these condensed financial statements.

 

5 
 

 

GulfSlope Energy, Inc.

 Condensed Statements of Cash Flows

For the Three Months Ended December 31, 2016 and 2015 

(Unaudited)

 

   For the three
months ended
December 31, 2016
   For the three
months ended
December 31, 2015
 
OPERATING ACTIVITIES          
Net Loss  $(552,763)  $(690,547)
Adjustments to reconcile net loss to net cash From Operating Activities:          
Depreciation   7,568    13,116 
Stock Issued for Services       91,697 
Debt Discount Amortization   205,430     
Changes in Operating Assets and Liabilities          
(Increase)/Decrease in Accounts Receivable   63,147     
(Increase)/Decrease in Prepaid Expenses   22,167    15,494 
Increase/(Decrease)  in Accounts Payable   3,462    25,883 
Increase/(Decrease) in Related Party Payable   14,880    14,880 
Increase/(Decrease) in Accrued Interest   126,176    101,647 
Increase/(Decrease) in Accrued Liabilities       39,515 
Net Cash From Operating Activities   (109,933)   (388,315)
           
INVESTING ACTIVITIES          
Exploration Costs   (58,929)   (855,590)
Purchase of Equipment        
Net Cash From Investing Activities   (58,929)   (855,590)
           
FINANCING ACTIVITIES          
Proceeds from Related Party Loans   143,000     
Proceeds from Convertible Promissory Notes and Warrants   50,000     
Stock Issued For Convertible Promissory Note        
Payments on Note Payable   (36,448)   (53,936)
Net Cash From Financing Activities   156,552    (53,936)
           
Net Increase/(Decrease) in Cash   (12,310)   (1,297,841)
Beginning Cash Balance   64,114    1,428,014 
Ending Cash Balance  $51,804   $130,173 
           
Supplemental Schedule of Cash Flow Activities          
Cash Paid for Interest  $2,015   $1,729 
Non-Cash Financing and Investing Activities          
Prepaid Asset Financed by Note Payable  $159,188   $240,848 
Capital Expenditures Included in Accounts Payable  $5,463   $188,019 
Capital Expenditures Included in Stock Payable  $   $11,605 
Stock-Based Compensation Capitalized to Unproved Properties  $   $113,697 

 The accompanying notes are an integral part to these condensed financial statements.

6 
 

 

GulfSlope Energy, Inc. 

Notes to Condensed Financial Statements

December 31, 2016

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

GulfSlope Energy, Inc. (the “Company,” “GulfSlope,” “our” and words of similar import), a Delaware corporation, is an independent crude oil and natural gas exploration company whose interests are concentrated in the United States Gulf of Mexico federal waters offshore Louisiana in less than 450 feet of water depth for 16 of our 17 prospects. The Company currently has under lease 17 federal Outer Continental Shelf blocks (referred to as “prospect,” “portfolio” or “leases” in this Report) and has licensed 2.2 million acres of three-dimensional (3-D) seismic data in its area of concentration.

Since March 2013, we have been singularly focused on identifying high-potential oil and gas prospects. We have licensed 3-D seismic data covering approximately 2.2 million acres and have evaluated this data using advanced interpretation technologies. As a result of these analyses, we have identified and acquired leases on 17 prospects that we believe may contain economically recoverable hydrocarbon deposits, and we plan to continue to conduct more refined analyses of our prospects as well as target additional lease and property acquisitions. Our activities have been focused exclusively in the federal waters of the Gulf of Mexico. We have given preference to areas with water depths of 450 feet or less where production infrastructure already exists, which we believe will allow for any discoveries to be developed faster and less expensively with the goal to reduce economic risk while increasing returns.

As of December 31, 2016, we have no proved reserves.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The condensed financial statements included herein are unaudited. However, these condensed financial statements include all adjustments (consisting of normal recurring adjustments) which in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. The results of operations for interim periods are not necessarily indicative of the results to be expected for an entire year. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed financial statements and accompanying notes. Actual results could differ materially from those estimates.

Certain information, accounting policies, and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted in this Form 10-Q pursuant to certain rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed financial statements should be read in conjunction with the audited financial statements for the year ended September 30, 2016, which were included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and filed with the Securities and Exchange Commission on December 27, 2016.

Cash and Cash Equivalents

GulfSlope considers highly liquid investments with insignificant interest rate risk and original maturities to the Company of three months or less to be cash equivalents. Cash equivalents consist primarily of interest-bearing bank accounts and money market funds. The Company’s cash positions represent assets held in checking and money market accounts. These assets are generally available on a daily or weekly basis and are highly liquid in nature.

Liquidity/Going Concern

The Company has incurred accumulated losses as of December 31, 2016 of $34.1 million. Further losses are anticipated in developing our business. As a result, our auditor expressed substantial doubt about our ability to continue as a going concern on its report for the year ended September 30, 2016. As of December 31, 2016, we had $0.05 million of unrestricted cash on hand. The Company estimates that it will need to raise a minimum of $4 million to meet its obligations and planned expenditures through February 2018. The Company plans to finance its operations through the issuance of equity, debt financings, joint ventures and the further sale of working interests in prospects.  Our policy has been to periodically raise funds through the sale of equity on a limited basis, to avoid undue dilution while at the early stages of execution of our business plan.  Short term needs have been historically funded through loans from executive management and other related parties. There are no assurances that financing will be available with acceptable terms, if at all.  If the Company is not successful in obtaining financing, operations would need to be curtailed or ceased. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 Full Cost Method

The Company uses the full cost method of accounting for its oil and gas exploration and development activities as defined by the Securities and Exchange Commission (“SEC”). Under the full cost method of accounting, all costs associated with successful and unsuccessful exploration and development activities are capitalized on a country-by-country basis into a single cost center (“full cost pool”). Such costs include property acquisition costs, geological and geophysical (“G&G”) costs, carrying charges on non-producing properties, costs of drilling both productive and non-productive wells and overhead charges directly related to acquisition, exploration and development activities. Proceeds from property sales will generally be credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs.  A significant alteration would typically involve a sale of 25% or more of the proved reserves related to a single full cost pool.

 

7

 

 

Proved properties are amortized on a country-by-country basis using the units of production method (UOP). The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the cost of those reserves. The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and amortization (DD&A), estimated future development costs (future costs to access and develop proved reserves), and asset retirement costs, less related salvage value.

 

The costs of unproved properties and related capitalized costs (such as G&G costs) are withheld from the amortization calculation until such time as they are either developed or abandoned. Unproved properties and properties under development are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions. In countries where proved reserves exist, exploratory drilling costs associated with dry holes are transferred to proved properties immediately upon determination that a well is dry and amortized accordingly. In countries where a reserve base has not yet been established, impairments are charged to earnings.

 

Companies that use the full cost method of accounting for oil and natural gas exploration and development activities are required to perform a ceiling test calculation each quarter. The full cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test is performed quarterly, on a country-by-country basis, utilizing the average of prices in effect on the first day of the month for the preceding twelve month period. The ceiling limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved crude oil and natural gas reserves discounted at 10% plus the lower of cost or market value of unproved properties less any associated tax effects. If such capitalized costs exceed the ceiling, the Company will record a write-down to the extent of such excess as a non-cash charge to earnings. Any such write-down will reduce earnings in the period of occurrence and results in a lower depreciation, depletion and amortization rate in future periods. A write-down may not be reversed in future periods even though higher oil and natural gas prices may subsequently increase the ceiling.

 

As of December 31, 2016, the Company’s oil and gas properties consisted of unproved properties and no proved reserves.

 

Basic and Dilutive Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) (the numerator) by the weighted average number of common shares outstanding for the period (denominator). Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include stock options, warrants, and restricted stock. The number of potential common shares outstanding relating to stock options, warrants, and restricted stock is computed using the treasury stock method.

As the Company has incurred losses for the three months ended December 31, 2016 and 2015, the potentially dilutive shares are anti-dilutive and are thus not added into the loss per share calculations. As of December 31, 2016 and 2015, there were 118,268,823 and 52,389,171 potentially dilutive shares, respectively.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU No. 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. As amended, the new standard is effective for annual reporting periods beginning after December 15, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU No. 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

In August 2014, the FASB issued Accounting Standard Update No. 2014-15 (“ASU No. 2014-15”), Presentation of Financial Statements Going Concern (Subtopic 205-40) which requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, ASU No. 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures when substantial doubt is not alleviated. ASU No. 2014-15 is effective for fiscal years ending after December 15, 2016, and interim periods within those years, and early application is permitted. We are currently evaluating the accounting implication and do not believe the adoption of ASU 2014-15 to have material impact on our financial statements, although there may be additional disclosures upon adoption. 

 

8

 

 

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early application is permitted for all organizations. The Company has not yet selected the period during which it will implement this pronouncement, and it is currently evaluating the impact the adoption of ASU 2016-02 will have on its financial statements.

 

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of accounting for share-based payment award transactions, including income tax consequences, classification of awards as either liability or equity, and classification on the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-09 will have on its financial statements.

 

In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force) (“ASU 2016-06”), which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts and requires that an entity assess the embedded call (put) options solely in accordance with the four-step decision sequence in ASC 815. ASU 2016-06 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact the adoption of ASU 2016-06 will have on its financial statements.

 

The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a significant effect on the Company’s financial statements.

NOTE 3 – OIL AND NATURAL GAS PROPERTIES

In March 2014, the Company was awarded 21 blocks in the Central Gulf of Mexico Lease Sale 231, conducted by the Bureau of Ocean Energy Management (“BOEM”). In March 2015, the Company was awarded two blocks in the Central Gulf of Mexico Lease Sale 235. During the quarter ended June 30, 2016, the Company relinquished six of the lease blocks acquired in 2014. The relinquished leases are Ewing Bank 904 and 945, Garden Banks 173, Eugene Island 395, Vermilion 393 and South Marsh Island 187. The capitalized lease costs of $2,610,678 associated with these blocks were recorded as impairment of oil and natural gas properties. The Company also deducted $280,000 as an impairment of certain capitalized exploration costs that were directly allocable to the relinquished blocks, for a total impairment deduction of $2,890,678. 

 

In March 2014, the Company entered into a farm-out letter agreement with Texas South Energy, Inc. (“Texas South”) relating to five prospects located within the blocks the Company bid on at the Central Gulf of Mexico Lease Sale 231.  Under the terms of the farm-out letter agreement, Texas South acquired a 20% working interest in these five prospects for $10 million.  In accordance with full cost requirements, the Company recorded the proceeds from the transaction as an adjustment to capitalized costs with no gain recognition. Texas South is obligated to pay its proportionate share of the net annual rental costs related to the prospects.  The Company will be the operator of record. 

 

In May 2016, the Company entered into a letter of intent (the “LOI”) with Texas South that sets out the terms and conditions of a proposed farm-out arrangement (the “Farm-out”) to develop two shallow-depth oil and gas prospects located on offshore Gulf of Mexico blocks currently leased by the Company. Through December 31, 2016 the Company received $400,000 under the terms of the LOI. In accordance with full cost requirements, the Company recorded the proceeds from the transaction as an adjustment to the capitalized costs of its oil & gas properties with no gain or loss recognition. The Company also received lease rental reimbursements of $63,147 under the terms of this letter of intent.

 

The Company paid $632,665 and $807,755 in gross annual lease rental payments to the BOEM for the year ended September 30, 2016 and 2015, respectively. The Company’s share of these amounts are included in unproved properties. 

 

For the year ended September 30, 2016, the Company incurred $1,354,674 in consulting fees and salaries and benefits associated with full-time geoscientists, and $463,497 associated with technological infrastructure, third party hosting services and seismic data. The Company capitalized these G&G costs because the Company owned specific unevaluated properties that these costs relate to.  At June 30, 2016, a portion of these costs, $280,000, specifically related to leases relinquished in June 2016 were immediately impaired.  These remaining capitalized amounts when added to the amount paid in 2016 for lease rental payments of $632,665 and netted with the 2016 receipts from sale of a working interest of $400,000 as well as the relinquished leases impairment amount of $2,610,678 subtracting lease rentals receivable of $191,171 results in unproved oil and gas properties of $4,526,171, reflected on our balance sheet at September 30, 2016.

 

9

 

 

For the quarter ended December 31, 2016, the Company incurred $56,679 in consulting fees and salaries and benefits associated with geoscientists, and $7,713 associated with technological infrastructure and third party hosting services. The Company capitalized these G&G costs because the Company owned specific unevaluated properties that these costs relate to. These amounts when added to unproved properties at September 30, 2016 result in $4,590,563 unproved properties at December 31, 2016.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

During April through September 2013, the Company entered into convertible promissory notes whereby it borrowed a total of $6,500,000 from John Seitz, its current chief executive officer.  The notes are due on demand, bear interest at the rate of 5% per annum, and are convertible into shares of common stock at a conversion price equal to $0.12 per share of common stock (the then offering price of shares of common stock to unaffiliated investors). In May 2013, John Seitz converted $1,200,000 of the aforementioned debt into 10,000,000 shares of common stock, which shares were issued in July 2013. Between June of 2014 and September 2016, the Company entered into promissory notes whereby it borrowed a total of $2,773,000 from Mr. Seitz. The notes are not convertible, due on demand and bear interest at a rate of 5% per annum. Additionally, during the quarter ended December 31, 2016, the Company entered into promissory notes with John Seitz whereby it borrowed a total of $93,000. The notes are not convertible, due on demand and bear interest at the rate of 5% per annum.  As of December 31, 2016 the total amount owed to John Seitz, our CEO, is $8,166,000. There was a total of $885,335 of unpaid interest associated with these loans included in accrued interest payable within our balance sheet as of December 31, 2016.

From August 2015 through February 2016 the Company entered into promissory notes whereby it borrowed a total of $267,000 from Dr. Ronald Bain, its current president and chief operating officer, and his affiliate ConRon Consulting, Inc. These notes are not convertible, due on demand and bear interest at the rate of 5% per annum. As of December 31, 2016, the total amount owed to Dr. Bain and his affiliate was $267,000. There was a total of $18,047 of accrued interest associated with these loans and the Company has recorded interest expense for the same amount. Interest expense for the quarter ended December 31, 2016 is $3,412. Dr. Ronald Bain also entered into a $92,000 convertible promissory note with associated warrants (“Bridge Financing”) under the same terms received by other investors (see Note 5).

Domenica Seitz, CPA, a related party, has provided accounting consulting services to the Company. During the three month period ended December 31, 2016, services provided were valued at $14,880 based on market-competitive salaries, time devoted and professional rates. The Company has accrued these amounts, and they are reflected in the December 31, 2016 condensed financial statements.

On November 15, 2016, a family member of the CEO, a related party, entered into a $50,000 convertible promissory note with associated warrants (“Bridge Financing”) under the same terms received by other investors (see Note 5).

John Seitz has not received a salary since May 31, 2013, the date he commenced serving as our chief executive officer and accordingly, no amount has been accrued on our financial statements.

Kevin Bain, son of Dr. Bain, is a geoscientist, employee of the Company.  

All employees of the Company (including executive management), who are all shareholders of the Company have been paid a reduced salary plus benefits beginning on January 1, 2016.

NOTE 5 – BRIDGE FINANCING – CONVERTIBLE PROMISSORY NOTES WITH ASSOCIATED WARRANTS

 

Between June and August 2016, the Company issued ten convertible promissory notes with associated warrants in a private placement to accredited investors for total gross proceeds of $787,000. Two of the notes were to related parties for proceeds totaling $172,000, including the extinguishment of $70,000 worth of related party payables. The convertible notes have a maturity of one year, bear an annual interest rate of 8% and can be converted at the option of the holder at a conversion price of $0.025 per share. In addition, the convertible notes will automatically convert if a qualified equity financing of at least $3 million occurs before maturity and such mandatory conversion price will equal the effective price per share paid in the qualified equity financing. In addition to the convertible notes, the investors received 26.2 million warrants (5.7 million to the above mentioned related parties) with an exercise price of $0.03 and a term of the earlier of three years or upon a change of control. The Company evaluated the various financial instruments under ASC 480 and ASC 815 and determined no instruments or features required fair value accounting. Therefore, in accordance with ASC 470-20-25-2, the Company allocated the proceeds between the convertible notes and warrants based on their relative fair values. This resulted in an allocation of $431,527 to the warrants and $355,473 to the convertible notes. After such allocation, the Company evaluated the conversion option to discern whether a beneficial conversion feature existed based upon comparing the effective exercise price of the convertible notes to the fair value of the shares they are convertible into. The Company concluded a beneficial conversion feature existed and measured such beneficial conversion feature at $355,473. Accordingly, the debt discount associated with these notes was $887,000. Such discount will be amortized using the effective interest rate method over the term (one year) of the convertible notes. For the quarter ended December 31, 2016 amortization of this discount totaled $198,367 and is included in interest expense in the statement of operations. Accrued interest expense at December 31, 2016 is $31, 333.

 

10

 

 

In November 2016 the Company issued a convertible promissory note with associated warrants in a private placement to a related party and an accredited investor for total gross proceeds of $50,000. The convertible note has a maturity of one year, bears an annual interest rate of 8% and can be converted at the option of the holder at a conversion price of $0.025 per share. In addition, the convertible notes will automatically convert if a qualified equity financing of at least $3 million occurs before maturity and such mandatory conversion price will equal the effective price per share paid in the qualified equity financing. In addition to the convertible note, the investor received 1.7 million warrants with an exercise price of $0.03 and a term of the earlier of three years or upon a change of control. The Company evaluated the various financial instruments under ASC 480 and ASC 815 and determined no instruments or features required fair value accounting. Therefore, in accordance with ASC 470-20-25-2, the Company allocated the proceeds between the convertible notes and warrants based on their relative fair values. This resulted in an allocation of $20,895 to the warrants and $29,105 to the convertible notes. After such allocation, the Company evaluated the conversion option to discern whether a beneficial conversion feature existed based upon comparing the effective exercise price of the convertible note to the fair value of the shares it is convertible into. The Company concluded a beneficial conversion feature existed and measured such beneficial conversion feature at $28,895. Accordingly, the debt discount associated with this note was $49,790. Such discount will be amortized using the effective interest rate method over the term (one year) of the convertible note. For the quarter ended December 31, 2016 amortization of this discount totaled $6,275 and is included in interest expense in the statement of operations. Accrued interest expense at December 31, 2016 is $511.

On December 28, 2016, the Company issued a convertible promissory note with 500,000 shares of restricted stock and 550,000 warrants in a private placement to an accredited investor for $50,000 in proceeds. The warrants have a five year term and an exercise price of $0.10. The promissory note has a face value of $55,555 and incurs a one-time upfront interest charge of six percent. The holder of the note has the option to convert the note into shares of common stock at a conversion price of $0.02 per share. Approximately $450,000 of additional funding is available under similar terms if the Company and the lender mutually agree to further tranches. The Company evaluated the various financial instruments under ASC 480 and ASC 815 and determined no material instruments or features required fair value accounting. Therefore, in accordance with ASC 470-20-25-2, the Company allocated the proceeds between the convertible note, restricted common stock, and warrants based on their relative fair values. This resulted in an allocation of $8,460 to the restricted stock, $7,969 to the warrants and $33,571 to the convertible note. After such allocation, the Company evaluated the conversion option to discern whether a beneficial conversion feature existed based upon comparing the effective exercise price of the convertible note to the fair value of the shares it is convertible into. The Company concluded a beneficial conversion feature existed and measured such beneficial conversion feature at $33,571. Accordingly, at December 28, 2016, the debt discount associated with these notes was $55,555. Such discount will be amortized using the effective interest rate method over the term (seven months) of the convertible note. For the three months ended December 31, 2016 amortization of this discount totaled $786 and is included in interest expense in the statement of operations. Accrued interest expense at December 31, 2016 is $3,333.

NOTE 6 – COMMON STOCK/PAID IN CAPITAL

In September 2014, the Company awarded 3,030,000 shares of restricted stock to six employees under the Company’s 2014 Omnibus Incentive Plan, one-half of which vested in September 2015 and the remaining half vested in September 2016

 

In March 2016, the Company issued 520,273 shares of common stock to one vendor as consideration for services rendered in the ordinary course of business.

  

As discussed in Note 5, between June and November 2016, the Company issued 27.9 million warrants in conjunction with convertible notes payable. The warrants have an exercise price of $0.03 and a term of the earlier of 3 years or upon a change of control. Based upon the allocation of proceeds between the convertible notes payable and the warrants, approximately $452,422 was allocated to the warrants.

 

The fair value of the warrants were determined using the Black Scholes valuation model with the following key assumptions:

  

  June 2016 July 2016 August 2016 November 2016
Number of Warrants Issued 12.9 million 10 million 3.3 million 1.6 million
Stock Price: $0.054 $0.040 $0.032 $0.029
Exercise Price: $0.03 $0.03 $0.03 $0.03
Term: 3 years 3 years 3 years 3 years
Risk Free Rate: .87% .80% .88% 1.28%
Volatility: 135% 138% 137% 131%

 

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In December 2016, 500,000 shares of restricted stock were issued in conjunction with a financing transaction (see Note 5).

As discussed in Note 5, in December 2016, the Company issued 550,000 warrants in conjunction with a convertible note payable. The warrants have an exercise price of $0.10 and a term of the earlier of 5 years or upon a change of control. Based upon the allocation of proceeds between the convertible note payable and the warrants, approximately $13,188 was allocated to the warrants.

 

The fair value of the warrants were determined using the Black Scholes valuation model with the following key assumptions:

  

   December 2016 
Number of Warrants Issued   550,000 
Stock Price:  $0.028 
Exercise Price:  $0.10 
Term:   5 years 
Risk Free Rate:   2.02%
Volatility:   155%

 

NOTE 7– STOCK-BASED COMPENSATION

Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized over the required vesting period. The Company recognized $0 and $205,395 in stock-based compensation during the three months ended December 31, 2016, and December 31, 2015, respectively. For the three months ended December 31, 2015, a portion of these costs, $113,697 were capitalized to unproved properties and the remainder were recorded as general and administrative expenses.

The following table summarizes the Company’s stock option activity during the three months ended December 31, 2016:

 

   Number
of Options
   Weighted
Average
Exercise Price
   Weighted Average
Remaining
Contractual Term
(In years)
 
Outstanding at September 30, 2015   2,000,000          
Granted             
Exercised             
Cancelled             
Outstanding at December 31, 2016   2,000,000   $0.12    2.55 
Vested and expected to vest   2,000,000   $0.12    2.55 
Exercisable at December 31, 2016   2,000,000         

 

As of December 31, 2016 there was no stock-based compensation cost. There was no intrinsic value for options outstanding as of December 31, 2016.  As of December 31, 2016 there was no unrecognized stock-based compensation.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

In March 2013, the Company licensed certain seismic data pursuant to two agreements. With respect to the first agreement, as of December 31, 2016, the Company has paid $6,135,500 in cash, with no additional amount due. With respect to the second agreement, as of December 31, 2016, the Company has paid $3,009,195 in cash and is obligated to pay $1,003,065 during fiscal 2017.

In October 2016, the Company purchased a directors and officers’ insurance policy for $170,850 and financed $155,010 of the premium by executing a note payable. The balance of the note payable at December 31, 2016 is $124,496.

NOTE 9 – SUBSEQUENT EVENTS

The company entered into a promissory note with John Seitz in January 2017 whereby it borrowed a total of $56,500. The note is due on demand, bears interest at the rate of 5% per annum, and the principal amount is convertible at the option of the holder into securities issued by the Company in a future offering, at the same price and terms received by investors.

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The Company awarded 33.5 million stock options to certain employees and directors on January 1, 2017 from the Company’s 2014 Omnibus Incentive Plan. The stock options vested 50% on January 1, 2017 and the remaining 50% will vest on January 1, 2018. The stock options have an exercise price of $0.0278 per share and a term of seven years.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking Statements

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. Please see “Forward-Looking Statements” above.

Historical Operations

GulfSlope Energy, Inc. is an independent oil and natural gas exploration company whose interests are concentrated in the United States, Gulf of Mexico federal waters offshore Louisiana.  The Company has leased 17 federal Outer Continental Shelf blocks (referred to as “leases” in this report) and licensed 2.2 million acres (440 blocks) of three-dimensional (3-D) seismic data in its area of concentration. All but one of our 17 prospects are located in 450 feet or less of water depth.

The Company has invested significant technical person hours in the proprietary interpretation and the associated high-end reprocessing of this seismic data. The result of this proprietary interpretation has been the identification of multiple prospects that we believe may have substantial potential hydrocarbon deposits. Based on this analysis, we currently have 17 blocks under lease in the federal waters of Offshore Gulf of Mexico. We believe the proprietary reprocessing and contiguous nature of our licensed 3-D seismic data gives us an advantage over other exploration and production (“E&P”) companies operating in our focus area. We have identified 17 prospects that are covered by our leases and throughout this Report we refer to these acquired leases as our “portfolio.”

In March 2014 and 2015, we competitively bid at the Central Gulf of Mexico Lease Sale 231 and 235 and were awarded 23 blocks.  After evaluating our leasehold position in 2016, we relinquished six lease blocks leaving the company with 17 Outer Continental Shelf blocks and 17 prospects that we believe may contain economically recoverable hydrocarbon deposits.

In March 2014, the Company entered into a farm-out letter agreement with Texas South Energy, Inc. (“Texas South”) relating to five prospects located within the blocks the Company bid on at the Central Gulf of Mexico Lease Sale 231 and received $8.2 million from Texas South. In September 2015, the Company completed the March 2014 farm-out agreement with Texas South. Texas South funded the final $1.8 million under the agreement for a total purchase price of $10 million and acquired a 20% working interest in five prospects. Texas South is obligated to pay its proportionate share of the net annual rental costs related to the prospects. The Company will be the operator of record. In accordance with full cost requirements, the Company recorded the proceeds from the transaction as an adjustment to capitalized costs with no gain recognition.

Through December 31, 2016, we have spent approximately $26.1 million on the acquisition, reprocessing, and interpretation of seismic data associated with our seismic license agreements and these costs were capitalized as oil and gas exploration costs which are subject to periodic evaluation for impairment. Approximately $18.2 million of these seismic-related expenses were incurred prior to the leasing of our offshore blocks and as a result, these capitalized costs were impaired for accounting purposes. Approximately $7.9 million of our exploration expenditures were incurred subsequent to the leasing of our offshore blocks and these expenses have been capitalized. These capitalized exploration costs when added with our lease acquisition and annual lease rental costs of $7.1 million and netted with the $10.4 million from the sale of working interest results in the $4.6 million reflected as Unproved Oil and Natural Gas Properties on our Condensed Balance Sheet as of December 31, 2016.

We have historically operated our business with working capital deficits and these deficits have historically been funded by equity investments and loans from management. As of December 31, 2016, we had $.05 million of unrestricted cash on hand. The Company estimates that it will need to raise a minimum of $4 million to meet its obligations and planned expenditures through February of 2018. This does not include any capital expenditures related to exploration drilling costs. The Company plans to finance its operations through the issuance of equity, debt financings or joint ventures. There are no assurances that financing will be available with acceptable terms, if at all.

Current Operations

In 2016, the Company completed the technical work on seven sub-salt prospects and has declared these to be drill ready. The Phase I drilling program consists of seven planned test wells and the Company estimates the current cost to drill these wells to be between $150 and $180 million. The recoverable resource potential of the Phase I program is estimated to be more than 800 mmboe (million barrels oil equivalent) on a gross (100% working interest) and unrisked basis. Additional prospects are expected to be advanced to the drill ready stage through new seismic reprocessing and/or additional seismic acquisition. The Company continues to be active in the evaluation of potential mergers and acquisitions that it deems to be attractive opportunities. Any such merger or acquisition is likely to be financed through a combination of debt and equity.

 

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As a result of the extensive reprocessing and mapping of its licensed 3D seismic data, the Company has also developed two shallow depth prospects with drilling depths of approximately 5,000 feet. In May 2016, the Company entered into a letter of intent (the “LOI”) with Texas South that sets out the terms and conditions of a proposed farm-out arrangement (the “Farm-out”) to develop these shallow-depth oil and gas prospects located on offshore Gulf of Mexico blocks currently leased by the Company. Through December 31, 2016 the Company received $400,000 under the terms of the LOI. In accordance with full cost requirements, the Company recorded the proceeds from the transaction as an adjustment to the capitalized costs of its oil & gas properties with no gain or loss recognition. The Company also received lease rental reimbursements of $63,147 under the terms of this letter of intent.

  

The Company has taken the preliminary steps to enable drilling operations to commence in 2017 for both the shallow and Phase I programs and plans to use consultants who are experienced in drilling and operations in the GOM. Accordingly, the Company has provided a draft of its Master Service Agreement (MSA) to potential vendors and solicited bids for essential services.

  

The Company has incurred accumulated losses for the period from inception to December 31, 2016 of approximately $34.1 million, and has a net capital deficiency.  Further losses are anticipated in developing its business.  As a result, the Company’s auditor expressed substantial doubt about its ability to continue as a going concern on its report for the year ended September 30, 2016.  As of December 31, 2016, the Company had approximately $0.05 million of unrestricted cash on hand.  The Company estimates that it will need to raise a minimum of $4 million to meet its obligations and planned expenditures through February 2018. These expenditures include lease rentals to the BOEM, general and administrative expenses, and costs associated with IT and seismic acquisition and processing.  The Company plans to extend the agreements associated with loans from related parties, the accrued interest payable on these loans, as well as the Company’s accrued liabilities. The Company plans to finance the Company through best-efforts equity and/or debt financings and farm-out agreements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  

Significant Accounting Policies

  

The Company uses the full cost method to account for its oil and gas exploration and development activities as defined by the Securities and Exchange Commission (“SEC”). Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, professional fees incurred for the lease acquisitions, capitalized interest costs relating to properties, geological and geophysical expenditures, and tangible and intangible development costs (including direct internal costs), are capitalized. All costs associated with successful and unsuccessful exploration and development activities are capitalized on a country-by-country basis into a single cost center (“full cost pool”). When the Company commences production from established proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, will be depleted on the units-of-production method (UOP), using estimates of proven reserves. Investments in unproved properties and major development projects, including capitalized interest if any, are not depleted until proven reserves associated with the projects can be determined.  If the future exploration of unproven properties is determined to be uneconomical, the amount of such properties is added to the capital costs to be depleted. Gain or loss on the sale or other disposition of oil and natural gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.

  

Proved properties are amortized on a country-by-country basis using the UOP. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the cost of those reserves. The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and amortization (DD&A), estimated future development costs (future costs to access and develop proved reserves), and asset retirement costs, less related salvage value.

  

The capitalized costs of unproved properties are withheld from the amortization calculation until such time as they are either developed or abandoned. Unproved properties and properties under development are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions. In countries where proved reserves exist, exploratory drilling costs associated with dry holes are transferred to proved properties immediately upon determination that a well is dry and amortized accordingly. In countries where a reserve base has not yet been established, impairments are charged to earnings.

 

Companies that use the full cost method of accounting for oil and natural gas exploration and development activities are required to perform a ceiling test calculation each quarter. The full cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test is performed quarterly, on a country-by-country basis, utilizing the average of prices in effect on the first day of the month for the preceding twelve month period. The ceiling limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved crude oil and natural gas reserves discounted at 10% plus the lower of cost or market value of unproved properties less any associated tax effects. If such capitalized costs exceed the ceiling, the Company will record a write-down to the extent of such excess as a non-cash charge to earnings. Any such write-down will reduce earnings in the period of occurrence and results in a lower depreciation, depletion and amortization rate in future periods. A write-down may not be reversed in future periods even though higher oil and natural gas prices may subsequently increase the ceiling.

 

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As of December 31, 2016, the Company’s oil and gas properties consisted of capitalized exploration and acquisition costs for unproved properties and no proved reserves. 

  

Property and equipment are carried at cost.  We assess the carrying value of our property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

A more complete discussion of our critical accounting policies is included in our annual report on Form 10-K as of September 30, 2016, which was filed with the Securities and Exchange Commission on December 27, 2016.

  

Factors Affecting Comparability of Future Results

  

Success in Acquiring Oil and Gas Leases or Prospects.  As a result of our 3-D seismic imaging and reprocessing, we have identified and acquired the leasing or drilling rights to a number of undrilled prospects, which we believe may potentially contain economically recoverable reserves.  We have successfully executed the initial phase of our lease acquisition strategy. 

We have No Proved Reserves.  While we have acquired most of the oil and gas properties that we pursued, we have no proved reserves.  We have identified prospects based on available seismic and geological information that indicate the potential presence of oil or gas, and we own the drilling and production rights for these prospects.  Some of our current prospects may require additional seismic data reprocessing and interpretation.  Even when properly used and interpreted, seismic data and visualization techniques are only tools used to assist geoscientists in identifying structures and hydrocarbon indicators and do not enable the interpreter to have certainty as to whether hydrocarbons are, in fact, present in those structures. We do not know if any prospect will contain oil or gas in sufficient quantities or quality to recover drilling and completion costs or to be economically viable. 

Success in the Discovery and Development of Reserves.  Because we have no operating history in the production of oil and gas, our future results of operations and financial condition will be directly affected by our ability to discover and develop reserves through our drilling activities.

Oil and Gas Revenue.  We have not yet commenced oil and gas production. If and when we do commence production, we expect to generate revenue from such production. No oil and gas revenue is reflected in our historical financial statements.

General and Administrative Expenses.  We expect that our general and administrative expenses will increase in future periods when we commence drilling operations.

Demand and Price.  The demand for oil and gas is susceptible to volatility related to, among other factors, the level of global economic activity and may also fluctuate depending on the performance of specific industries. We expect that a decrease in economic activity, in the United States and elsewhere, would adversely affect demand for any oil and gas we may produce. Since we have not generated revenues, these key factors will only affect us if and when we produce and sell hydrocarbons.

For a more complete discussion of the factors affecting comparability of our future results, see the risk factors included in Item 1A our annual report on Form 10-K as of September 30, 2016, which was filed with the Securities and Exchange Commission on December 27, 2016.

  

Three Months Ended December 31, 2016 Compared to Three Months Ended December 31, 2015

  

No revenue was recorded during the three months ended December 31, 2016 and 2015. General and administrative expenses were approximately $0.2 million for the three months ended December 31, 2016, compared to approximately $0.6 million for the three months ended December 31, 2015. This decrease is primarily due to decreased salary, stock compensation expense and legal and marketing expenses. Interest expense was $0.3 million for the three months ended December 31, 2016 compared to $0.1 million for the three months ended December 31, 2015. This increase is due to the increase in debt required to meet operating expenses.

  

Liquidity and Capital Resources

  

As of December 31, 2016, we had $0.05 million of cash on hand. The Company estimates that it will need to raise a minimum of $4 million to meet its obligations and planned expenditures through February 2018. The Company plans to finance its operations through the issuance of equity, debt financings, joint ventures and the further sale of working interests in prospects. Our policy has been to periodically raise funds through the sale of equity on a limited basis, to avoid undue dilution while at the early stages of execution of our business plan. Short term needs have been historically funded through loans from executive management. There are no assurances that financing will be available with acceptable terms, if at all. If the Company is not successful in obtaining financing, operations would need to be curtailed or ceased. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

  

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We have incurred losses from inception to December 31, 2016 of $34.1 million. Further losses are anticipated as we develop our business. As of December 31, 2016, we had $0.05 million of cash on hand. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

  

For the three months ended December 31, 2016, the Company used approximately $0.1 million of net cash in operating activities, compared with approximately $0.4 million of net cash used in operating activities for the three months ended December 31, 2015, due to reduced salary and stock compensation expense and reduced legal and marketing expenses. For the three months ended December 31, 2016 we used approximately $0.06 million of cash in investing activities compared with approximately $0.9 million of cash in investing activities for the three months ended December 31, 2015 primarily due to $0.8 million more of exploration costs for the three months ended December 31, 2015. For the three months ended December 31, 2016 we received approximately $0.2 million of net cash from financing activities, compared with approximately $0.05 million being used in financing activities for the three months ended December 31, 2015.

  

We will need to raise additional funds to cover expenditures planned after February 2017, as well as any additional, unexpected expenditures that we may encounter. Future equity financings may be dilutive to our stockholders. Alternative forms of future financings may include preferences or rights superior to our common stock. Debt financings may involve a pledge of assets and will rank senior to our common stock. We have historically financed our operations through private equity and debt financings. We do not have any credit or equity facilities available with financial institutions, stockholders or third party investors, and will continue to rely on best efforts financings. The failure to raise sufficient capital could cause us to cease operations.

  

Off-Balance Sheet Arrangements

  

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

  

Due to the historical volatility of commodity prices, if and when we commence production, our financial condition, results of operations and capital resources will be highly dependent upon the prevailing market prices of oil and natural gas. These commodity prices are likely to continue to be subject to wide fluctuations and market uncertainties due to a variety of factors that are beyond our control.  In the future, we may enter into various derivative instruments to manage our exposure to volatility of commodity market prices. We may use options (including floors and collars) and fixed price swaps to mitigate the impact of downward swings in commodity prices to our cash flow. All contracts will be settled with cash and would not require the delivery of physical volumes to satisfy settlement. While in times of higher commodity prices this strategy may result in our having lower net cash inflows than we would otherwise have if we had not utilized these instruments, management believes the risk reduction benefits of such a strategy would outweigh the potential costs.

  

At December 31, 2016, we had approximately $8.4 million of fixed-rate debt outstanding. All fixed-rate debt has a weighted average interest rate of 5%. We also had $.9 million of convertible debt with a weighted average interest rate of .079%. Although near term changes in interest rates may affect the fair value of our fixed-rate debt, they do not expose us to the risk of earnings or cash flow loss.

  

Item 4. Controls and Procedures.

  

Evaluation of Disclosure Controls and Procedures

  

Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive and principal financial officers, to allow timely decisions regarding required disclosures.

  

Under the supervision and with the participation of our principal executive and principal financial officers, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures.  Based upon that evaluation, our principal executive and principal financial officers concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

  

16 

 

 

Limitations on the Effectiveness of Controls

  

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Company’s financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Changes in Internal Control Over Financial Reporting

During the fiscal quarter covered by this Report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

17 

 

 

PART II - OTHER INFORMATION

  

Item 1. Legal Proceedings

From time to time, the Company may become involved in litigation relating to claims arising out of its operations in the normal course of business. No legal proceedings, government actions, administrative actions, investigations or claims are currently pending against us or involve the Company.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended September 30, 2016, which was filed with the Securities and Exchange Commission on December 27, 2016.

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

In December 2016, the Company issued 500,000 shares of restricted stock to a lender as part of a financing transaction.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

The following exhibits are attached hereto or are incorporated by reference:

 

Exhibit No. Description
   
3.1 Amended and Restated Certificate of Incorporation of GulfSlope Energy, Inc. incorporated by reference to Exhibit 3.1 of Form 8-K filed May 30, 2014.
   
3.2 Amended and Restated Bylaws of GulfSlope Energy, Inc., incorporated by reference to Exhibit 3.2 of Form 10-Q for the quarter ended June 30, 2014.
   
4.1 Common Stock Specimen, incorporated by reference to Exhibit 4.1 of Form 10-K for the year ended September 30, 2012.
   
31.1 (1) Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2 (1) Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1 (2) Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2 (2) Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.INS (3) XBRL Instance Document.
   
101.SCH (3) XBRL Schema Document.
   
101.CAL (3) XBRL Calculation Linkbase Document.
   
101.DEF (3) XBRL Definition Linkbase Document.
   
101.LAB (3) XBRL Label Linkbase Document.
   
101.PRE (3) XBRL Presentation Linkbase Document.

 

(1) Filed herewith.
   
(2) Furnished herewith.
   
(3) Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

  

19

 

 

SIGNATURES

  

Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

  

GULFSLOPE ENERGY, INC.

(Issuer)

       
Date: 02/14/2017 By: /s/ John N. Seitz                                              
      John N. Seitz, Chief Executive Officer,
      and Chairman

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

GULFSLOPE ENERGY, INC.

(Issuer)

       
Date: 02/14/2017 By: /s/ John  H. Malanga
      John H. Malanga, Chief Financial Officer,
      and Chief Accounting Officer

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EX-31.1 2 ex31-1.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
 

GulfSlope Energy, Inc. 10-Q

 

Exhibit 31.1

 

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 7241)

I, John N. Seitz, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended December 31, 2016 of GulfSlope Energy, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   
  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: February 14, 2017

 

/s/ John N. Seitz  
John N. Seitz, Principal Executive Officer  

 

22 

 

EX-31.2 3 ex31-2.htm CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
 

GulfSlope Energy, Inc. 10-Q

 

Exhibit 31.2

 

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 7241)

 

I, John H. Malanga, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended December 31, 2016 of GulfSlope Energy, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
   
  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: February 14, 2017

 

/s/ John H. Malanga  
John H. Malanga, Principal Financial Officer  

 

23 

 

EX-32.1 4 ex32-1.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
 

GulfSlope Energy, Inc. 10-Q

 

 Exhibit 32.1

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 1350)

In connection with this quarterly report on Form 10-Q of GulfSlope, Energy, Inc. (the “Company”), for the quarter ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), John N. Seitz, Chief Executive Officer, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

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

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

Date: February 14, 2017

/s/ John N. Seitz  
John N. Seitz, Principal Executive Officer  

 

24

EX-32.2 5 ex32-2.htm CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
 

GulfSlope Energy, Inc. 10-Q

 

Exhibit 32.2

 

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(18 U.S.C. Section 1350)

In connection with this quarterly report on Form 10-Q of GulfSlope, Energy, Inc. (the “Company”), for the quarter ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), John H. Malanga, Chief Financial Officer, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

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

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

Date: February 14, 2017

/s/ John H. Malanga  
John H. Malanga, Principal Financial Officer  

 

25

 

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(the &#8220;Company,&#8221; &#8220;GulfSlope,&#8221; &#8220;our&#8221; and words of similar import), a Delaware corporation, is an independent crude oil and natural gas exploration company whose interests are concentrated in the United States Gulf of Mexico federal waters offshore Louisiana in less than 450 feet of water depth for 16 of our 17 prospects. The Company currently has under lease 17 federal Outer Continental Shelf blocks (referred to as &#8220;prospect,&#8221; &#8220;portfolio&#8221; or &#8220;leases&#8221; in this Report) and has licensed 2.2 million acres of three-dimensional (3-D) seismic data in its area of concentration.</font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 7.5pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Since March 2013, we have been singularly focused on identifying high-potential oil and gas&#160;prospects. We have licensed 3-D seismic data covering approximately 2.2 million acres and have evaluated this data using advanced interpretation technologies. As a result of these analyses, we have identified and acquired leases on 17 prospects that we believe may contain economically recoverable hydrocarbon deposits, and we plan to continue to conduct more refined analyses of our prospects as well as target additional lease and property&#160;acquisitions. Our activities have been focused exclusively in the federal waters of the Gulf of Mexico. We have given preference to areas with water depths of 450 feet or less where production infrastructure already exists, which we believe will allow for any discoveries to be developed faster and less expensively with the goal to reduce economic risk while increasing returns.</font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 7.5pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">As of December 31, 2016, we have no proved reserves.</font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 7.5pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE 2 &#8211; SIGNIFICANT ACCOUNTING POLICIES</b></font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 7.5pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The condensed financial statements included herein are unaudited. 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The condensed financial statements should be read in conjunction with the audited financial statements for the year ended September 30, 2016, which were included in the Company&#8217;s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and filed with the Securities and Exchange Commission on December 27, 2016.</font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 7.5pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><u>Cash and Cash Equivalents</u></font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 7.5pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">GulfSlope considers highly liquid investments with insignificant interest rate risk and original maturities to the Company of three months or less to be cash equivalents.&#160;Cash equivalents consist primarily of interest-bearing bank accounts and money market funds. 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As of December 31, 2016, we had $0.05 million of unrestricted cash on hand.&#160;The Company estimates that it will need to raise a minimum of $4 million to meet its obligations and planned expenditures through February 2018.&#160;The Company plans to finance its operations through the issuance of equity, debt financings or joint ventures, further sale of working interests in prospects or bridge financing.&#160; Our policy has been to periodically raise funds through the sale of equity on a limited basis, to avoid undue dilution while at the early stages of execution of our business plan.&#160; Short term needs have been historically funded through loans from executive management and other related parties. There are no assurances that financing will be available with acceptable terms, if at all.&#160; If the Company is not successful in obtaining financing, operations would need to be curtailed or ceased. 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Such costs include property acquisition costs, geological and geophysical (&#8220;G&#38;G&#8221;) costs, carrying charges on non-producing properties, costs of drilling both productive and non-productive wells and overhead charges directly related to acquisition, exploration and development activities. 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The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and amortization (DD&#38;A), estimated future development costs (future costs to access and develop proved reserves), and asset retirement costs, less related salvage value.</font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">&#160;</font></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The costs of unproved properties and related capitalized costs (such as G&#38;G costs) are withheld from the amortization calculation until such time as they are either developed or abandoned.&#160;Unproved properties and properties under development are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions. 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The ceiling test is performed quarterly, on a country-by-country basis, utilizing the average of prices in effect on the first day of the month for the preceding twelve month period. The ceiling limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved crude oil and natural gas reserves discounted at 10% plus the lower of cost or market value of unproved properties less any associated tax effects. If such capitalized costs exceed the ceiling, the Company will record a write-down to the extent of such excess as a non-cash charge to earnings. Any such write-down will reduce earnings in the period of occurrence and results in a lower depreciation, depletion and amortization rate in future periods. 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Document and Entity Information - shares
3 Months Ended
Dec. 31, 2016
Feb. 14, 2017
Document And Entity Information    
Entity Registrant Name GULFSLOPE ENERGY, INC.  
Entity Central Index Key 0001341726  
Document Type 10-Q  
Trading Symbol GSPE  
Document Period End Date Dec. 31, 2016  
Amendment Flag false  
Current Fiscal Year End Date --09-30  
Entity a Well-known Seasoned Issuer No  
Entity a Voluntary Filer No  
Entity's Reporting Status Current Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   684,152,225
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2017  
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Condensed Balance Sheets (Unaudited) - USD ($)
Dec. 31, 2016
Sep. 30, 2016
Current Assets    
Cash and Cash Equivalents $ 51,804 $ 64,114
Prepaid Expenses and Other Current Assets 175,332 38,311
Accounts Receivable, Net   63,147
Total Current Assets 227,136 165,572
Property and Equipment, Net of Depreciation 16,720 24,288
Oil and Natural Gas Properties, Full Cost Method of Accounting, Unproved Properties 4,590,563 4,526,171
Total Non-Current Assets 4,607,283 4,550,459
Total Assets 4,834,419 4,716,031
Current Liabilities    
Accounts Payable 466,199 426,271
Related Party Payable 280,713 265,834
Accrued Interest Payable 938,560 812,383
Accrued Expenses and Other Payables 1,321,927 1,352,929
Loans from Related Parties 8,536,088 8,382,891
Notes Payable 126,896 4,156
Convertible Promissory Notes Payable 298,800 153,358
Stock Payable 11,605 11,605
Total Current Liabilities 11,980,788 11,409,427
Total Liabilities 11,980,788 11,409,427
Stockholders' Deficit    
Common Stock; par value ($0.001); Authorized 975,000,000 shares; 682,902,225 and 682,402,225 issued and 684,152,225 and 683,652,225 outstanding, respectively 682,902 682,402
Additional Paid-in-Capital 26,250,666 26,151,376
Accumulated Deficit (34,079,937) (33,527,174)
Total Stockholders' Deficit (7,146,369) (6,693,396)
Total Liabilities and Stockholders' Deficit $ 4,834,419 $ 4,716,031
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Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Dec. 31, 2016
Sep. 30, 2016
Statement of Financial Position [Abstract]    
Preferred Stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred Stock, shares authorized 50,000,000 50,000,000
Preferred Stock, shares issued 0 0
Preferred Stock, shares outstanding 0 0
Common Stock, par value (in dollars per share) $ 0.001 $ 0.001
Common Stock, shares authorized 975,000,000 975,000,000
Common Stock, shares issued 682,902,225 682,402,225
Common Stock, shares outstanding 684,152,225 683,652,225
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Condensed Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Income Statement [Abstract]    
General & Administrative Expenses $ 219,928 $ 587,171
Net Loss from Operations (219,928) (587,171)
Other Income/(Expenses):    
Interest Expense (332,835) (103,376)
Net Loss Before Income Taxes (552,763) (690,547)
Net Loss $ (552,763) $ (690,547)
Loss Per Share - Basic and Diluted (in dollars per share) $ 0.00 $ 0.00
Weighted Average Shares Outstanding - Basic and Diluted (in shares) 682,407,660 672,198,474
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Condensed Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Dec. 31, 2016
Dec. 31, 2015
OPERATING ACTIVITIES    
Net Loss $ (552,763) $ (690,547)
Adjustments to reconcile net loss to net cash From Operating Activities:    
Depreciation 7,568 13,116
Stock Issued for Services   91,697
Debt Discount Amortization 205,430  
Changes in Operating Assets and Liabilities    
(Increase)/Decrease in Accounts Receivable 63,147  
(Increase)/Decrease in Prepaid Expenses 22,167 15,494
Increase/(Decrease) in Accounts Payable 3,462 25,883
Increase/(Decrease) in Related Party Payable 14,880 14,880
Increase/(Decrease) in Accrued Interest 126,176 101,647
Increase/(Decrease) in Accrued Liabilities   39,515
Net Cash From Operating Activities (109,933) (388,315)
INVESTING ACTIVITIES    
Exploration Costs (58,929) (855,590)
Net Cash From Investing Activities (58,929) (855,590)
FINANCING ACTIVITIES    
Proceeds from Related Party Loans 143,000  
Proceeds from Convertible Promissory Notes and Warrants 50,000  
Payments on Note Payable (36,448) (53,936)
Net Cash From Financing Activities 156,552 (53,936)
Net Increase/(Decrease) in Cash (12,310) (1,297,841)
Beginning Cash Balance 64,114 1,428,014
Ending Cash Balance 51,804 130,173
Supplemental Schedule of Cash Flow Activities    
Cash Paid for Interest 2,015 1,729
Non-Cash Financing and Investing Activities    
Prepaid Asset Financed by Note Payable 159,188 240,848
Capital Expenditures Included in Accounts Payable $ 5,463 188,019
Capital Expenditures Included in Stock Payable   11,605
Stock-Based Compensation Capitalized to Unproved Properties   $ 113,697
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ORGANIZATION AND NATURE OF BUSINESS
3 Months Ended
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION AND NATURE OF BUSINESS

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

GulfSlope Energy, Inc. (the “Company,” “GulfSlope,” “our” and words of similar import), a Delaware corporation, is an independent crude oil and natural gas exploration company whose interests are concentrated in the United States Gulf of Mexico federal waters offshore Louisiana in less than 450 feet of water depth for 16 of our 17 prospects. The Company currently has under lease 17 federal Outer Continental Shelf blocks (referred to as “prospect,” “portfolio” or “leases” in this Report) and has licensed 2.2 million acres of three-dimensional (3-D) seismic data in its area of concentration.

Since March 2013, we have been singularly focused on identifying high-potential oil and gas prospects. We have licensed 3-D seismic data covering approximately 2.2 million acres and have evaluated this data using advanced interpretation technologies. As a result of these analyses, we have identified and acquired leases on 17 prospects that we believe may contain economically recoverable hydrocarbon deposits, and we plan to continue to conduct more refined analyses of our prospects as well as target additional lease and property acquisitions. Our activities have been focused exclusively in the federal waters of the Gulf of Mexico. We have given preference to areas with water depths of 450 feet or less where production infrastructure already exists, which we believe will allow for any discoveries to be developed faster and less expensively with the goal to reduce economic risk while increasing returns.

As of December 31, 2016, we have no proved reserves.

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SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Dec. 31, 2016
Accounting Policies [Abstract]  
SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The condensed financial statements included herein are unaudited. However, these condensed financial statements include all adjustments (consisting of normal recurring adjustments) which in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. The results of operations for interim periods are not necessarily indicative of the results to be expected for an entire year. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed financial statements and accompanying notes. Actual results could differ materially from those estimates.

Certain information, accounting policies, and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted in this Form 10-Q pursuant to certain rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed financial statements should be read in conjunction with the audited financial statements for the year ended September 30, 2016, which were included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016 and filed with the Securities and Exchange Commission on December 27, 2016.

Cash and Cash Equivalents

GulfSlope considers highly liquid investments with insignificant interest rate risk and original maturities to the Company of three months or less to be cash equivalents. Cash equivalents consist primarily of interest-bearing bank accounts and money market funds. The Company’s cash positions represent assets held in checking and money market accounts. These assets are generally available on a daily or weekly basis and are highly liquid in nature.

Liquidity/Going Concern

The Company has incurred accumulated losses as of December 31, 2016 of $34.1 million. Further losses are anticipated in developing our business. As a result, our auditor expressed substantial doubt about our ability to continue as a going concern on its report for they year ended September 30, 2016. As of December 31, 2016, we had $0.05 million of unrestricted cash on hand. The Company estimates that it will need to raise a minimum of $4 million to meet its obligations and planned expenditures through February 2018. The Company plans to finance its operations through the issuance of equity, debt financings or joint ventures, further sale of working interests in prospects or bridge financing.  Our policy has been to periodically raise funds through the sale of equity on a limited basis, to avoid undue dilution while at the early stages of execution of our business plan.  Short term needs have been historically funded through loans from executive management and other related parties. There are no assurances that financing will be available with acceptable terms, if at all.  If the Company is not successful in obtaining financing, operations would need to be curtailed or ceased. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 Full Cost Method

The Company uses the full cost method of accounting for its oil and gas exploration and development activities as defined by the Securities and Exchange Commission (“SEC”). Under the full cost method of accounting, all costs associated with successful and unsuccessful exploration and development activities are capitalized on a country-by-country basis into a single cost center (“full cost pool”). Such costs include property acquisition costs, geological and geophysical (“G&G”) costs, carrying charges on non-producing properties, costs of drilling both productive and non-productive wells and overhead charges directly related to acquisition, exploration and development activities. Proceeds from property sales will generally be credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs.  A significant alteration would typically involve a sale of 25% or more of the proved reserves related to a single full cost pool.

 

Proved properties are amortized on a country-by-country basis using the units of production method (UOP). The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the cost of those reserves. The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and amortization (DD&A), estimated future development costs (future costs to access and develop proved reserves), and asset retirement costs, less related salvage value.

 

The costs of unproved properties and related capitalized costs (such as G&G costs) are withheld from the amortization calculation until such time as they are either developed or abandoned. Unproved properties and properties under development are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions. In countries where proved reserves exist, exploratory drilling costs associated with dry holes are transferred to proved properties immediately upon determination that a well is dry and amortized accordingly. In countries where a reserve base has not yet been established, impairments are charged to earnings.

 

Companies that use the full cost method of accounting for oil and natural gas exploration and development activities are required to perform a ceiling test calculation each quarter. The full cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test is performed quarterly, on a country-by-country basis, utilizing the average of prices in effect on the first day of the month for the preceding twelve month period. The ceiling limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved crude oil and natural gas reserves discounted at 10% plus the lower of cost or market value of unproved properties less any associated tax effects. If such capitalized costs exceed the ceiling, the Company will record a write-down to the extent of such excess as a non-cash charge to earnings. Any such write-down will reduce earnings in the period of occurrence and results in a lower depreciation, depletion and amortization rate in future periods. A write-down may not be reversed in future periods even though higher oil and natural gas prices may subsequently increase the ceiling.

 

As of December 31, 2016, the Company’s oil and gas properties consisted of unproved properties and no proved reserves.

 

Basic and Dilutive Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) (the numerator) by the weighted average number of common shares outstanding for the period (denominator). Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include stock options, warrants, and restricted stock. The number of potential common shares outstanding relating to stock options, warrants, and restricted stock is computed using the treasury stock method.

As the Company has incurred losses for the three months ended December 31, 2016 and 2015, the potentially dilutive shares are anti-dilutive and are thus not added into the loss per share calculations. As of December 31, 2016 and 2015, there were 118,268,823 and 52,389,171 potentially dilutive shares, respectively.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU No. 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. As amended, the new standard is effective for annual reporting periods beginning after December 15, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU No. 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

In August 2014, the FASB issued Accounting Standard Update No. 2014-15 (“ASU No. 2014-15”), Presentation of Financial Statements Going Concern (Subtopic 205-40) which requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, ASU No. 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures when substantial doubt is not alleviated. ASU No. 2014-15 is effective for fiscal years ending after December 15, 2016, and interim periods within those years, and early application is permitted. We are currently evaluating the accounting implication and do not believe the adoption of ASU 2014-15 to have material impact on our financial statements, although there may be additional disclosures upon adoption. 

 

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early application is permitted for all organizations. The Company has not yet selected the period during which it will implement this pronouncement, and it is currently evaluating the impact the adoption of ASU 2016-02 will have on its financial statements.

 

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of accounting for share-based payment award transactions, including income tax consequences, classification of awards as either liability or equity, and classification on the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-09 will have on its financial statements.

 

In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force) (“ASU 2016-06”), which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts and requires that an entity assess the embedded call (put) options solely in accordance with the four-step decision sequence in ASC 815. ASU 2016-06 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact the adoption of ASU 2016-06 will have on its financial statements.

 

The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a significant effect on the Company’s financial statements.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.6.0.2
OIL AND NATURAL GAS PROPERTIES
3 Months Ended
Dec. 31, 2016
Oil and Gas Exploration and Production Industries Disclosures [Abstract]  
OIL AND NATURAL GAS PROPERTIES

NOTE 3 – OIL AND NATURAL GAS PROPERTIES

In March 2014, the Company was awarded 21 blocks in the Central Gulf of Mexico Lease Sale 231, conducted by the Bureau of Ocean Energy Management (“BOEM”). In March 2015, the Company was awarded two blocks in the Central Gulf of Mexico Lease Sale 235. During the quarter ended June 30, 2016, the Company relinquished six of the lease blocks acquired in 2014. The relinquished leases are Ewing Bank 904 and 945, Garden Banks 173, Eugene Island 395, Vermilion 393 and South Marsh Island 187. The capitalized lease costs of $2,610,678 associated with these blocks were recorded as impairment of oil and natural gas properties. The Company also deducted $280,000 as an impairment of certain capitalized exploration costs that were directly allocable to the relinquished blocks, for a total impairment deduction of $2,890,678. 

 

In March 2014, the Company entered into a farm-out letter agreement with Texas South relating to five prospects located within the blocks the Company bid on at the Central Gulf of Mexico Lease Sale 231.  Under the terms of the farm-out letter agreement, Texas South acquired a 20% working interest in these five prospects for $10 million.  In accordance with full cost requirements, the Company recorded the proceeds from the transaction as an adjustment to capitalized costs with no gain recognition. Texas South is obligated to pay its proportionate share of the net annual rental costs related to the prospects.  The Company will be the operator of record. 

 

In May 2016, the Company entered into a letter of intent (the “LOI”) with Texas South that sets out the terms and conditions of a proposed farm-out arrangement (the “Farm-out”) to develop two shallow-depth oil and gas prospects located on offshore Gulf of Mexico blocks currently leased by the Company. Through December 31, 2016 the Company received $400,000 under the terms of the LOI. In accordance with full cost requirements, the Company recorded the proceeds from the transaction as an adjustment to the capitalized costs of its oil& gas properties with no gain or loss recognition. The Company also received lease rental reimbursements of $63,147 under the terms of this letter of intent.

 

The Company paid $632,665 and $807,755 in gross annual lease rental payments to the BOEM for the year ended September 30, 2016 and 2015, respectively. The Company’s share of these amounts are included in unproved properties. 

 

For the year ended September 30, 2016, the Company incurred $1,354,674 in consulting fees and salaries and benefits associated with full-time geoscientists, and $463,497 associated with technological infrastructure, third party hosting services and seismic data. The Company capitalized these G&G costs because the Company owned specific unevaluated properties that these costs relate to.  At June 30, 2016, a portion of these costs, $280,000, specifically related to leases relinquished in June 2016 were immediately impaired.  These remaining capitalized amounts when added to the amount paid in 2016 for lease rental payments of $632,665 and netted with the 2016 receipts from sale of a working interest of $400,000 as well as the relinquished leases impairment amount of $2,610,678 subtracting lease rentals receivable of $191,171 results in unproved oil and gas properties of $4,526,171, reflected on our balance sheet at September 30, 2016.

 

For the quarter ended December 31, 2016, the Company incurred $56,679 in consulting fees and salaries and benefits associated with geoscientists, and $7,713 associated with technological infrastructure and third party hosting services. The Company capitalized these G&G costs because the Company owned specific unevaluated properties that these costs relate to. These amounts when added to unproved properties at September 30, 2016 result in $4,590,563 unproved properties at December 31, 2016.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.6.0.2
RELATED PARTY TRANSACTIONS
3 Months Ended
Dec. 31, 2016
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 4 – RELATED PARTY TRANSACTIONS

 

During April through September 2013, the Company entered into convertible promissory notes whereby it borrowed a total of $6,500,000 from John Seitz, its current chief executive officer.  The notes are due on demand, bear interest at the rate of 5% per annum, and are convertible into shares of common stock at a conversion price equal to $0.12 per share of common stock (the then offering price of shares of common stock to unaffiliated investors). In May 2013, John Seitz converted $1,200,000 of the aforementioned debt into 10,000,000 shares of common stock, which shares were issued in July 2013. Between June of 2014 and September 2016, the Company entered into promissory notes whereby it borrowed a total of $2,773,000 from Mr. Seitz. The notes are not convertible, due on demand and bear interest at a rate of 5% per annum. Additionally, during the quarter ended December 31, 2016, the Company entered into promissory notes with John Seitz whereby it borrowed a total of $93,000. The notes are not convertible, due on demand and bear interest at the rate of 5% per annum.  As of December 31, 2016 the total amount owed to John Seitz, our CEO, is $8,166,000. There was a total of $885,335 of unpaid interest associated with these loans included in accrued interest payable within our balance sheet as of December 31, 2016.

From August 2015 through February 2016 the Company entered into promissory notes whereby it borrowed a total of $267,000 from Dr. Ronald Bain, its current president and chief operating officer, and his affiliate ConRon Consulting, Inc. These notes are not convertible, due on demand and bear interest at the rate of 5% per annum. As of December 31, 2016, the total amount owed to Dr. Bain and his affiliate was $267,000. There was a total of $18,047 of accrued interest associated with these loans and the Company has recorded interest expense for the same amount. Interest expense for the quarter ended December 31, 2016 is $3,412. Dr. Ronald Bain also entered into a $92,000 convertible promissory note with associated warrants (“Bridge Financing”) under the same terms received by other investors (see Note 5).

Domenica Seitz, CPA, a related party, has provided accounting consulting services to the Company. During the three month period ended December 31, 2016, services provided were valued at $14,880 based on market-competitive salaries, time devoted and professional rates. The Company has accrued these amounts, and they are reflected in the December 31, 2016 condensed financial statements.

On November 15, 2016, a family member of the CEO, a related party, entered into a $50,000 convertible promissory note with associated warrants (“Bridge Financing”) under the same terms received by other investors (see Note 5).

John Seitz has not received a salary since May 31, 2013, the date he commenced serving as our chief executive officer and accordingly, no amount has been accrued on our financial statements.

Kevin Bain, son of Dr. Bain, is a geoscientist, employee of the Company.  

All employees of the Company (including executive management), who are all shareholders of the Company have been paid a reduced salary plus benefits beginning on January 1, 2016.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.6.0.2
BRIDGE FINANCING - CONVERTIBLE PROMISSORY NOTES WITH ASSOCIATED WARRANTS
3 Months Ended
Dec. 31, 2016
Bridge Financing - Convertible Promissory Notes With Associated Warrants  
BRIDGE FINANCING - CONVERTIBLE PROMISSORY NOTES WITH ASSOCIATED WARRANTS

NOTE 5 – BRIDGE FINANCING – CONVERTIBLE PROMISSORY NOTES WITH ASSOCIATED WARRANTS

 

Between June and August 2016, the Company issued ten convertible promissory notes with associated warrants in a private placement to accredited investors for total gross proceeds of $787,000. Two of the notes were to related parties for proceeds totaling $172,000, including the extinguishment of $70,000 worth of related party payables. The convertible notes have a maturity of one year, bear an annual interest rate of 8% and can be converted at the option of the holder at a conversion price of $0.025 per share. In addition, the convertible notes will automatically convert if a qualified equity financing of at least $3 million occurs before maturity and such mandatory conversion price will equal the effective price per share paid in the qualified equity financing. In addition to the convertible notes, the investors received 26.2 million warrants (5.7 million to the above mentioned related parties) with an exercise price of $0.03 and a term of the earlier of three years or upon a change of control. The Company evaluated the various financial instruments under ASC 480 and ASC 815 and determined no instruments or features required fair value accounting. Therefore, in accordance with ASC 470-20-25-2, the Company allocated the proceeds between the convertible notes and warrants based on their relative fair values. This resulted in an allocation of $431,527 to the warrants and $355,473 to the convertible notes. After such allocation, the Company evaluated the conversion option to discern whether a beneficial conversion feature existed based upon comparing the effective exercise price of the convertible notes to the fair value of the shares they are convertible into. The Company concluded a beneficial conversion feature existed and measured such beneficial conversion feature at $355,473. Accordingly, the debt discount associated with these notes was $887,000. Such discount will be amortized using the effective interest rate method over the term (one year) of the convertible notes. For the quarter ended December 31, 2016 amortization of this discount totaled $198,367 and is included in interest expense in the statement of operations. Accrued interest expense at December 31, 2016 is $31, 333.

 

In November 2016 the Company issued a convertible promissory note with associated warrants in a private placement to a related party and an accredited investor for total gross proceeds of $50,000. The convertible note has a maturity of one year, bears an annual interest rate of 8% and can be converted at the option of the holder at a conversion price of $0.025 per share. In addition, the convertible notes will automatically convert if a qualified equity financing of at least $3 million occurs before maturity and such mandatory conversion price will equal the effective price per share paid in the qualified equity financing. In addition to the convertible note, the investor received 1.7 million warrants with an exercise price of $0.03 and a term of the earlier of three years or upon a change of control. The Company evaluated the various financial instruments under ASC 480 and ASC 815 and determined no instruments or features required fair value accounting. Therefore, in accordance with ASC 470-20-25-2, the Company allocated the proceeds between the convertible notes and warrants based on their relative fair values. This resulted in an allocation of $20,895 to the warrants and $29,105 to the convertible notes. After such allocation, the Company evaluated the conversion option to discern whether a beneficial conversion feature existed based upon comparing the effective exercise price of the convertible note to the fair value of the shares it is convertible into. The Company concluded a beneficial conversion feature existed and measured such beneficial conversion feature at $28,895. Accordingly, the debt discount associated with this note was $49,790. Such discount will be amortized using the effective interest rate method over the term (one year) of the convertible note. For the quarter ended December 31, 2016 amortization of this discount totaled $6,275 and is included in interest expense in the statement of operations. Accrued interest expense at December 31, 2016 is $511.

On December 28, 2016, the Company issued a convertible promissory note with 500,000 shares of restricted stock and 550,000 warrants in a private placement to an accredited investor for $50,000 in proceeds. The warrants have a five year term and an exercise price of $0.10. The promissory note has a face value of $55,555 and incurs a one-time upfront interest charge of six percent. The holder of the note has the option to convert the note into shares of common stock at a conversion price of $0.02 per share. Approximately $450,000 of additional funding is available under similar terms if the Company and the lender mutually agree to further tranches. The Company evaluated the various financial instruments under ASC 480 and ASC 815 and determined no material instruments or features required fair value accounting. Therefore, in accordance with ASC 470-20-25-2, the Company allocated the proceeds between the convertible note, restricted common stock, and warrants based on their relative fair values. This resulted in an allocation of $8,460 to the restricted stock, $7,969 to the warrants and $33,571 to the convertible note. After such allocation, the Company evaluated the conversion option to discern whether a beneficial conversion feature existed based upon comparing the effective exercise price of the convertible note to the fair value of the shares it is convertible into. The Company concluded a beneficial conversion feature existed and measured such beneficial conversion feature at $33,571. Accordingly, at December 28, 2016, the debt discount associated with these notes was $55,555. Such discount will be amortized using the effective interest rate method over the term (seven months) of the convertible note. For the three months ended December 31, 2016 amortization of this discount totaled $786 and is included in interest expense in the statement of operations. Accrued interest expense at December 31, 2016 is $3,333.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.6.0.2
COMMON STOCK/PAID IN CAPITAL
3 Months Ended
Dec. 31, 2016
Stockholders' Equity Note [Abstract]  
COMMON STOCK/PAID IN CAPITAL

NOTE 6 – COMMON STOCK/PAID IN CAPITAL

In September 2014, the Company awarded 3,030,000 shares of restricted stock to six employees under the Company’s 2014 Omnibus Incentive Plan, one-half of which vested in September 2015 and the remaining half vested in September 2016

 

In March 2016, the Company issued 520,273 shares of common stock to one vendor as consideration for services rendered in the ordinary course of business.

  

As discussed in Note 5, between June and November 2016, the Company issued 27.9 million warrants in conjunction with convertible notes payable. The warrants have an exercise price of $0.03 and a term of the earlier of 3 years or upon a change of control. Based upon the allocation of proceeds between the convertible notes payable and the warrants, approximately $452,422 was allocated to the warrants.

 

The fair value of the warrants were determined using the Black Scholes valuation model with the following key assumptions:

  

  June 2016 July 2016 August 2016 November 2016
Number of Warrants Issued 12.9 million 10 million 3.3 million 1.6 million
Stock Price: $0.054 $0.040 $0.032 $0.029
Exercise Price: $0.03 $0.03 $0.03 $0.03
Term: 3 years 3 years 3 years 3 years
Risk Free Rate: .87% .80% .88% 1.28%
Volatility: 135% 138% 137% 131%

 

In December 2016, 500,000 shares of restricted stock were issued in conjunction with a financing transaction (see Note 5).

As discussed in Note 5, in December 2016, the Company issued 550,000 warrants in conjunction with a convertible note payable. The warrants have an exercise price of $0.10 and a term of the earlier of 5 years or upon a change of control. Based upon the allocation of proceeds between the convertible note payable and the warrants, approximately $13,188 was allocated to the warrants.

 

The fair value of the warrants were determined using the Black Scholes valuation model with the following key assumptions:

  

    December 2016  
Number of Warrants Issued     550,000  
Stock Price:   $ 0.028  
Exercise Price:   $ 0.10  
Term:     5 years  
Risk Free Rate:     2.02 %
Volatility:     155 %
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.6.0.2
STOCK-BASED COMPENSATION
3 Months Ended
Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION

NOTE 7– STOCK-BASED COMPENSATION

Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized over the required vesting period. The Company recognized $0 and $205,395 in stock-based compensation during the three months ended December 31, 2016, and December 31, 2015, respectively. For the three months ended December 31, 2015, a portion of these costs, $113,697 were capitalized to unproved properties and the remainder were recorded as general and administrative expenses.

The following table summarizes the Company’s stock option activity during the three months ended December 31, 2016:

 

    Number
of Options
    Weighted
Average
Exercise Price
    Weighted Average
Remaining
Contractual Term
(In years)
 
Outstanding at September 30, 2015     2,000,000                
Granted                    
Exercised                    
Cancelled                    
Outstanding at December 31, 2016     2,000,000     $ 0.12       2.55  
Vested and expected to vest     2,000,000     $ 0.12       2.55  
Exercisable at December 31, 2016     2,000,000              

 

As of December 31, 2016 there was no stock-based compensation cost. There was no intrinsic value for options outstanding as of December 31, 2016.  As of December 31, 2016 there was no unrecognized stock-based compensation.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.6.0.2
COMMITMENTS AND CONTINGENCIES
3 Months Ended
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 8 – COMMITMENTS AND CONTINGENCIES

In March 2013, the Company licensed certain seismic data pursuant to two agreements. With respect to the first agreement, as of December 31, 2016, the Company has paid $6,135,500 in cash, with no additional amount due. With respect to the second agreement, as of December 31, 2016, the Company has paid $3,009,195 in cash and is obligated to pay $1,003,065 during fiscal 2017.

In October 2016, the Company purchased a directors and officers insurance policy for $170,850 and financed $155,010 of the premium by executing a note payable. The balance of the note payable at December 31, 2016 is $124,496.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.6.0.2
SUBSEQUENT EVENTS
3 Months Ended
Dec. 31, 2016
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 9 – SUBSEQUENT EVENTS

The company entered into a promissory note with John Seitz in January 2017 whereby it borrowed a total of $56,500. The note is due on demand, bears interest at the rate of 5% per annum, and the principal amount is convertible at the option of the holder into securities issued by the Company in a future offering, at the same price and terms received by investors.

The Company awarded 33.5 million stock options to certain employees and directors on January 1, 2017 from the Company’s 2014 Omnibus Incentive Plan. The stock options vested 50% on January 1, 2017 and the remaining 50% will vest on January 1, 2018. The stock options have an exercise price of $0.0278 per share and a term of seven years.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.6.0.2
SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Cash and Cash Equivalents

Cash and Cash Equivalents

GulfSlope considers highly liquid investments with insignificant interest rate risk and original maturities to the Company of three months or less to be cash equivalents. Cash equivalents consist primarily of interest-bearing bank accounts and money market funds. The Company’s cash positions represent assets held in checking and money market accounts. These assets are generally available on a daily or weekly basis and are highly liquid in nature.

Liquidity/Going Concern

Liquidity/Going Concern

The Company has incurred accumulated losses as of December 31, 2016 of $34.1 million. Further losses are anticipated in developing our business. As a result, our auditor expressed substantial doubt about our ability to continue as a going concern on its report for they year ended September 30, 2016. As of December 31, 2016, we had $0.05 million of unrestricted cash on hand. The Company estimates that it will need to raise a minimum of $4 million to meet its obligations and planned expenditures through February 2018. The Company plans to finance its operations through the issuance of equity, debt financings or joint ventures, further sale of working interests in prospects or bridge financing.  Our policy has been to periodically raise funds through the sale of equity on a limited basis, to avoid undue dilution while at the early stages of execution of our business plan.  Short term needs have been historically funded through loans from executive management and other related parties. There are no assurances that financing will be available with acceptable terms, if at all.  If the Company is not successful in obtaining financing, operations would need to be curtailed or ceased. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Full Cost Method

Full Cost Method

The Company uses the full cost method of accounting for its oil and gas exploration and development activities as defined by the Securities and Exchange Commission (“SEC”). Under the full cost method of accounting, all costs associated with successful and unsuccessful exploration and development activities are capitalized on a country-by-country basis into a single cost center (“full cost pool”). Such costs include property acquisition costs, geological and geophysical (“G&G”) costs, carrying charges on non-producing properties, costs of drilling both productive and non-productive wells and overhead charges directly related to acquisition, exploration and development activities. Proceeds from property sales will generally be credited to the full cost pool, with no gain or loss recognized, unless such a sale would significantly alter the relationship between capitalized costs and the proved reserves attributable to these costs.  A significant alteration would typically involve a sale of 25% or more of the proved reserves related to a single full cost pool.

 

Proved properties are amortized on a country-by-country basis using the units of production method (UOP). The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the cost of those reserves. The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and amortization (DD&A), estimated future development costs (future costs to access and develop proved reserves), and asset retirement costs, less related salvage value.

 

The costs of unproved properties and related capitalized costs (such as G&G costs) are withheld from the amortization calculation until such time as they are either developed or abandoned. Unproved properties and properties under development are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions. In countries where proved reserves exist, exploratory drilling costs associated with dry holes are transferred to proved properties immediately upon determination that a well is dry and amortized accordingly. In countries where a reserve base has not yet been established, impairments are charged to earnings.

 

Companies that use the full cost method of accounting for oil and natural gas exploration and development activities are required to perform a ceiling test calculation each quarter. The full cost ceiling test is an impairment test prescribed by SEC Regulation S-X Rule 4-10. The ceiling test is performed quarterly, on a country-by-country basis, utilizing the average of prices in effect on the first day of the month for the preceding twelve month period. The ceiling limits such pooled costs to the aggregate of the present value of future net revenues attributable to proved crude oil and natural gas reserves discounted at 10% plus the lower of cost or market value of unproved properties less any associated tax effects. If such capitalized costs exceed the ceiling, the Company will record a write-down to the extent of such excess as a non-cash charge to earnings. Any such write-down will reduce earnings in the period of occurrence and results in a lower depreciation, depletion and amortization rate in future periods. A write-down may not be reversed in future periods even though higher oil and natural gas prices may subsequently increase the ceiling.

 

As of December 31, 2016, the Company’s oil and gas properties consisted of unproved properties and no proved reserves.

Basic and Dilutive Earnings Per Share

Basic and Dilutive Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) (the numerator) by the weighted average number of common shares outstanding for the period (denominator). Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include stock options, warrants, and restricted stock. The number of potential common shares outstanding relating to stock options, warrants, and restricted stock is computed using the treasury stock method.

As the Company has incurred losses for the three months ended December 31, 2016 and 2015, the potentially dilutive shares are anti-dilutive and are thus not added into the loss per share calculations. As of December 31, 2016 and 2015, there were 118,268,823 and 52,389,171 potentially dilutive shares, respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU No. 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. As amended, the new standard is effective for annual reporting periods beginning after December 15, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU No. 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

 

In August 2014, the FASB issued Accounting Standard Update No. 2014-15 (“ASU No. 2014-15”), Presentation of Financial Statements Going Concern (Subtopic 205-40) which requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, ASU No. 2014-15 provides a definition of the term substantial doubt and requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). It also requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans and requires an express statement and other disclosures when substantial doubt is not alleviated. ASU No. 2014-15 is effective for fiscal years ending after December 15, 2016, and interim periods within those years, and early application is permitted. We are currently evaluating the accounting implication and do not believe the adoption of ASU 2014-15 to have material impact on our financial statements, although there may be additional disclosures upon adoption. 

 

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early application is permitted for all organizations. The Company has not yet selected the period during which it will implement this pronouncement, and it is currently evaluating the impact the adoption of ASU 2016-02 will have on its financial statements.

 

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of accounting for share-based payment award transactions, including income tax consequences, classification of awards as either liability or equity, and classification on the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-09 will have on its financial statements.

 

In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force) (“ASU 2016-06”), which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts and requires that an entity assess the embedded call (put) options solely in accordance with the four-step decision sequence in ASC 815. ASU 2016-06 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact the adoption of ASU 2016-06 will have on its financial statements.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.6.0.2
COMMON STOCK/PAID IN CAPITAL (Tables)
3 Months Ended
Dec. 31, 2016
Stockholders' Equity Note [Abstract]  
Schedule of Fair Value Assumptions for Warrants

The fair value of the warrants were determined using the Black Scholes valuation model with the following key assumptions:

  

  June 2016 July 2016 August 2016 November 2016
Number of Warrants Issued 12.9 million 10 million 3.3 million 1.6 million
Stock Price: $0.054 $0.040 $0.032 $0.029
Exercise Price: $0.03 $0.03 $0.03 $0.03
Term: 3 years 3 years 3 years 3 years
Risk Free Rate: .87% .80% .88% 1.28%
Volatility: 135% 138% 137% 131%

 

The fair value of the warrants were determined using the Black Scholes valuation model with the following key assumptions:

  

    December 2016  
Number of Warrants Issued     550,000  
Stock Price:   $ 0.028  
Exercise Price:   $ 0.10  
Term:     5 years  
Risk Free Rate:     2.02 %
Volatility:     155 %
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.6.0.2
STOCK-BASED COMPENSATION (Tables)
3 Months Ended
Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of Stock Options Activity

The following table summarizes the Company’s stock option activity during the three months ended December 31, 2016:

 

    Number
of Options
    Weighted
Average
Exercise Price
    Weighted Average
Remaining
Contractual Term
(In years)
 
Outstanding at September 30, 2015     2,000,000                
Granted                    
Exercised                    
Cancelled                    
Outstanding at December 31, 2016     2,000,000     $ 0.12       2.55  
Vested and expected to vest     2,000,000     $ 0.12       2.55  
Exercisable at December 31, 2016     2,000,000              
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.6.0.2
ORGANIZATION AND NATURE OF BUSINESS (Details Narrative)
3 Months Ended
Dec. 31, 2016
a
Number
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Number of leased federal outer continental shelf blocks | Number 17
Concentration of 3-D seismic data | a 2,200,000
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.6.0.2
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
3 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Sep. 30, 2016
Sep. 30, 2015
Accounting Policies [Abstract]        
Accumulated losses $ 34,079,937   $ 33,527,174  
Unrestricted cash 51,804 $ 130,173 $ 64,114 $ 1,428,014
Minimum capital which company estimated to raise to meet its obligations and planned expenditures $ 4,000,000      
Shares excluded from the computation of diluted loss per share 118,268,823 52,389,171    
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.6.0.2
OIL AND NATURAL GAS PROPERTIES (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended
Dec. 31, 2016
Jun. 30, 2016
Dec. 31, 2015
Jun. 30, 2016
Sep. 30, 2016
Sep. 30, 2015
Deferred Costs, Capitalized, Prepaid And Other Assets [Line Items]            
Impairment of oil and natural gas properties       $ 2,610,678    
Impairment of capitalized exploration costs       280,000    
Unproved oil and gas properties $ 4,590,563       $ 4,526,171  
Proceeds from sale of working interest 400,000          
Decrease in lease rentals receivable 22,167   $ 15,494 $ 191,171    
Farm Out Letter Agreement Texas South [Member]            
Deferred Costs, Capitalized, Prepaid And Other Assets [Line Items]            
Lease rental reimbursements $ 63,147          
Ownership percentage by texas south 20.00%          
Proceeds to be received under farm out agreement $ 10,000,000          
Unproved oil and gas properties         4,526,171  
Consulting Fees And Salaries And Benefits [Member]            
Deferred Costs, Capitalized, Prepaid And Other Assets [Line Items]            
Exploration costs capitalized during the period 56,679       1,354,674  
Technological Infrastructure And Third Party Hosting Services [Member]            
Deferred Costs, Capitalized, Prepaid And Other Assets [Line Items]            
Exploration costs capitalized during the period $ 7,713       463,497  
Bureau Of Ocean Energy Management [Member]            
Deferred Costs, Capitalized, Prepaid And Other Assets [Line Items]            
Impairment of oil and natural gas properties   $ 2,610,678        
Impairment of capitalized exploration costs   $ 280,000        
Paid for lease         $ 632,665 $ 807,755
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.6.0.2
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Nov. 30, 2016
May 31, 2013
Dec. 31, 2016
Aug. 31, 2016
Sep. 30, 2016
Feb. 29, 2016
Jun. 30, 2013
Related Party Transaction [Line Items]              
Accrued expense     $ 938,560   $ 812,383    
Promissory Notes [Member]              
Related Party Transaction [Line Items]              
Interest rate       8.00%      
Debt conversion, price per share       $ 0.025      
Accrued expense     31,333        
Proceeds from issuance of convertible notes and warrants       $ 787,000      
John Seitz, CEO [Member]              
Related Party Transaction [Line Items]              
Note payable from related party, original amount     $ 93,000   $ 2,773,000   $ 6,500,000
Interest rate     5.00%   5.00%   5.00%
Debt conversion, price per share             $ 0.12
Amount owed to related party     $ 8,166,000        
Conversion of notes payable, shares   10,000,000          
Accrued Interest Payable     885,335        
Stock issued for debt   $ 1,200,000          
Dr. Ronald Bain, President [Member]              
Related Party Transaction [Line Items]              
Note payable from related party, original amount       $ 92,000   $ 267,000  
Interest rate           5.00%  
Amount owed to related party     267,000        
Accrued Interest Payable     18,047        
Interest expense     3,412        
Domenica Seitz, Consultant [Member]              
Related Party Transaction [Line Items]              
Accrued expense     14,880        
Related party [Member] | Promissory Notes [Member]              
Related Party Transaction [Line Items]              
Interest rate 8.00%            
Debt conversion, price per share $ 0.025            
Accrued expense     $ 511        
Proceeds from issuance of convertible notes and warrants $ 50,000            
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.6.0.2
BRIDGE FINANCING - CONVERTIBLE PROMISSORY NOTES WITH ASSOCIATED WARRANTS (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Dec. 28, 2016
Nov. 30, 2016
Dec. 31, 2016
Aug. 31, 2016
Nov. 30, 2016
Sep. 30, 2016
Debt discount amortization     $ 205,430      
Accrued interest expense     $ 938,560     $ 812,383
Warrants [Member]            
Number of warrants issued   1,700,000 26,200,000   27,900,000  
Warrant exercise price   $ 0.03 $ 0.03   $ 0.03  
Term   3 years 3 years   3 years  
Fair value of warrants   $ 20,895     $ 20,895  
Related Parties [Member] | Warrants [Member]            
Number of warrants issued     5,700,000      
Promissory Notes [Member]            
Proceeds from issuance of convertible notes and warrants       $ 787,000    
Maturity term       1 year    
Interest rate       8.00%    
Conversion price       $ 0.025    
Qualified equity financing amount       $ 3,000,000    
Fair value of debt       355,473    
Beneficial conversion feature       355,473    
Debt discount       887,000    
Debt discount amortization     $ 198,367      
Accrued interest expense     31,333      
Promissory Notes [Member] | Private Placement [Member]            
Proceeds from issuance of convertible notes and warrants $ 50,000          
Extinguishment of related party payables $ 33,571          
Interest rate 6.00%          
Conversion price $ 0.02          
Beneficial conversion feature $ 33,571          
Debt discount 55,555          
Debt discount amortization     786      
Accrued interest expense     3,333      
Face value 55,555          
Additional funding available 450,000          
Promissory Notes [Member] | Warrants [Member] | Private Placement [Member]            
Extinguishment of related party payables $ 7,969          
Number of warrants issued 550,000          
Warrant exercise price $ 0.10          
Term 5 years          
Fair value of warrants $ 13,188          
Promissory Notes [Member] | Restricted Stock [Member] | Private Placement [Member]            
Extinguishment of related party payables 8,460          
Number of shares issued $ 500,000          
Promissory Notes [Member] | Related Parties [Member]            
Proceeds from issuance of convertible notes and warrants       172,000    
Extinguishment of related party payables       $ 70,000    
Promissory Notes [Member] | Related party [Member]            
Proceeds from issuance of convertible notes and warrants   $ 50,000        
Maturity term   1 year        
Interest rate   8.00%     8.00%  
Conversion price   $ 0.025     $ 0.025  
Qualified equity financing amount   $ 3,000,000     $ 3,000,000  
Fair value of debt   29,105     29,105  
Beneficial conversion feature   28,895        
Debt discount   $ 49,790     $ 49,790  
Debt discount amortization     6,275      
Accrued interest expense     $ 511      
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.6.0.2
COMMON STOCK/PAID IN CAPITAL (Details Narrative)
1 Months Ended 3 Months Ended 6 Months Ended
Dec. 28, 2016
USD ($)
$ / shares
shares
Nov. 30, 2016
USD ($)
$ / shares
shares
Mar. 31, 2016
Number
shares
Sep. 30, 2014
Number
shares
Dec. 31, 2016
$ / shares
shares
Nov. 30, 2016
USD ($)
$ / shares
shares
Common Stock Issuance [Line Items]            
Shares of stock issued for services | shares     520,273      
Number of individuals to whom restricted stock awarded | Number     1      
Restricted Stock [Member] | Promissory Notes [Member] | Private Placement [Member]            
Common Stock Issuance [Line Items]            
Common stock issued for cash | $ $ 500,000          
Warrants [Member]            
Common Stock Issuance [Line Items]            
Number of warrants issued | shares   1,700,000     26,200,000 27,900,000
Warrant exercise price | $ / shares   $ 0.03     $ 0.03 $ 0.03
Term   3 years     3 years 3 years
Fair value of warrants | $   $ 20,895       $ 20,895
Warrants [Member] | Promissory Notes [Member] | Private Placement [Member]            
Common Stock Issuance [Line Items]            
Number of warrants issued | shares 550,000          
Warrant exercise price | $ / shares $ 0.10          
Term 5 years          
Fair value of warrants | $ $ 13,188          
June to November 2016 Warrants [Member]            
Common Stock Issuance [Line Items]            
Warrant exercise price | $ / shares   $ 0.03       $ 0.03
Fair value of warrants | $   $ 452,422       $ 452,422
Employees [Member] | Restricted Stock [Member] | 2014 Omnibus Incentive Plan [Member]            
Common Stock Issuance [Line Items]            
Shares of stock issued for services | shares       3,030,000    
Number of individuals to whom restricted stock awarded | Number       6    
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.6.0.2
COMMON STOCK/PAID IN CAPITAL (Details)
3 Months Ended
Dec. 31, 2016
USD ($)
$ / shares
June 2016 Warrants [Member]  
Number of Warrants Issued | $ $ 129,000,000
Stock Price: $ 0.054
Exercise Price $ 0.03
Term 3 years
Risk Free Rate 0.87%
Volatility 135.00%
July 2016 Warrants [Member]  
Number of Warrants Issued | $ $ 10,000,000
Stock Price: $ 0.040
Exercise Price $ 0.03
Term 3 years
Risk Free Rate 0.80%
Volatility 138.00%
August 2016 Warrants [Member]  
Number of Warrants Issued | $ $ 3,300,000
Stock Price: $ 0.032
Exercise Price $ 0.03
Term 3 years
Risk Free Rate 0.88%
Volatility 137.00%
November 2016 Warrants [Member]  
Number of Warrants Issued | $ $ 1,600,000
Stock Price: $ 0.029
Exercise Price $ 0.03
Term 3 years
Risk Free Rate 1.28%
Volatility 131.00%
December 2016 Warrants [Member]  
Number of Warrants Issued | $ $ 550,000
Stock Price: $ 0.028
Exercise Price $ 0.10
Term 5 years
Risk Free Rate 2.02%
Volatility 155.00%
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.6.0.2
STOCK-BASED COMPENSATION (Details Narrative) - USD ($)
3 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Stock-based compensation expense $ 0 $ 205,395
Stock-based compensation capitalized to unproved properties   $ 113,697
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.6.0.2
STOCK-BASED COMPENSATION (Details)
3 Months Ended
Dec. 31, 2016
$ / shares
shares
Number of Options  
Outstanding at beginning of period 2,000,000
Outstanding at end of period 2,000,000
Vested and expected to vest 2,000,000
Exercisable at end of period 2,000,000
Weighted Average Exercise Price  
Outstanding at beginning of period | $ / shares  
Outstanding at end of period | $ / shares $ 0.12
Vested and expected to vest | $ / shares $ 0.12
Weighted Average Remaining Contractual Term  
Outstanding at end of period 2 years 6 months 18 days
Vested and expected to vest 2 years 6 months 18 days
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.6.0.2
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Oct. 31, 2016
Dec. 31, 2016
Dec. 31, 2015
Purchase Commitment, Excluding Long-term Commitment [Line Items]      
Payments for exploration costs   $ 58,929 $ 855,590
Directors and Officers [Member]      
Purchase Commitment, Excluding Long-term Commitment [Line Items]      
Insurance policy purchased $ 170,850    
Insurance policy Premium $ 155,010    
Face value   124,496  
First Agreement [Member]      
Purchase Commitment, Excluding Long-term Commitment [Line Items]      
Payments for exploration costs   6,135,500  
Second Agreement [Member]      
Purchase Commitment, Excluding Long-term Commitment [Line Items]      
Payments for exploration costs   3,009,195  
Payment due during fiscal 2017   $ 1,003,065  
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.6.0.2
SUBSEQUENT EVENTS (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Jan. 31, 2017
Aug. 31, 2016
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2013
Promissory Notes [Member]          
Debt interest rate   8.00%      
Term of stock options   1 year      
John Seitz, CEO [Member]          
Borrowed amount     $ 93,000 $ 2,773,000 $ 6,500,000
Debt interest rate     5.00% 5.00% 5.00%
Subsequent Event [Member] | John Seitz, CEO [Member] | Promissory Notes [Member]          
Borrowed amount $ 56,500        
Debt interest rate 5.00%        
Term of stock options 7 years        
Subsequent Event [Member] | Employees and Directors [Member] | 2014 Omnibus Incentive Plan [Member]          
Number of shares granted 33,500,000        
Exercise price (in dollars per share) $ 0.0278        
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