10-Q

SECURITIES AND EXCHANGE COMMISSION  

Washington, D.C. 20549  

Form 10-Q  

(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended September 30, 2015
OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File No. 0-54343

NEW WESTERN ENERGY CORPORATION

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

NEVADA (State or other jurisdiction of incorporation or organization) 7929 (Primary Standard Industrial Classification Code Number) 26-3640580 (I.R.S. Employer Identification No.)

300 Spectrum Center Drive, Suite 400, Irvine, CA 92618

(Address of principal executive offices)

(949) 435-0977

(Registrant’s telephone number, including area code)  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]  No [ ]

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

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[X]

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

The number of shares of Common Stock, $0.0001 par value, of the registrant outstanding at November 16, 2015 was 79,438,282.

TABLE OF CONTENTS

  Page No.

PART I.
Item 1. Financial Statements.	1
Consolidated Balance Sheets as of September 30, 2015 (Unaudited) and December 31, 2014	3
Consolidated Statements of Operations for the Three Months and Nine Months ended September 30, 2015 and 2014 (Unaudited)	4
Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2015 and 2014 (Unaudited)	6
Condensed Notes to Unaudited  Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis or Plan of Operation	26
Item 3. Quantitative and Qualitative Disclosures About Market Risks.	31
Item 4. Controls and Procedures	32
PART II.	33
Item 1. Legal Proceedings.	33
Item 1A. Risk Factors.	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	33
Item 3. Defaults Upon Senior Securities.	33
Item 4. Mine Safety Disclosures.	33
Item 5. Other Information.	33
Item 6. Exhibits.	33
SIGNATURES	34
EXHIBIT INDEX	35

FORWARD-LOOKING STATEMENTS

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

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

PART I

Item 1.  Financial Statements.

New Western Energy Corporation and Subsidiaries
Consolidated Balance Sheets
	September 30, 2015		December 31, 2014
ASSETS		(Unaudited)
Current assets
Cash and cash equivalents	$	60,900	$	11,000
Accounts receivable		10,350		25,389
Inventory		20,000		23,464
Notes receivable, net		26,664		65,000
Prepaid expenses and other assets		10,580		86,025
Total current assets		128,494		210,878
Property and equipment, net		42,543		210,752
Oil and gas properties, net		473,566		248,827
Other assets		21,930		1,930
Total Assets	$	666,533	$	672,387
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable	$	65,781	$	71,298
Accrued expenses		279,564		139,651
Accrued interest payable		15,842		143,397
Note payable, current portion, net of discount of $0 at September 30, 2015 and $536,841 at December 31, 2014		280,000		1,146,909
Convertible notes payable, current portion, net of premium and discount of $7,403 at September 30, 2015		360,700		—
Embedded conversion option liability		123,281		—
Warrant liability		176,555		291,003
Payable to related party		100		100
Total current liabilities		1,301,823		1,792,358
Convertible notes payable, net of discount of $53,274 at September 30, 2015		1,726		—
Accrued assets retirement obligation		6,750		4,000
Total long term liabilities		8,476		4,000
Total Liabilities		1,310,299		1,796,358
Commitments and contingencies (Note 9)
Stockholders' Deficit
New Western Energy Corporation and Subsidiaries Stockholders' Deficit
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 351,500 shares and 294,100 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively		35		29
Common stock, $0.0001 par value, 250,000,000 shares authorized, 77,357,086 shares and 76,242,086 shares issued and to be issued and outstanding at September 30, 2015 and December 31, 2014, respectively		7,736		7,625

Table of Contents  1

New Western Energy Corporation and Subsidiaries
Consolidated Balance Sheets (Continued)
	September 30, 2015			December 31, 2014
Additional paid in capital		9,780,642			7,130,199
Accumulated deficit		(10,924,976	)		(8,525,719	)
Total New Western Energy Corporation and Subsidiaries Stockholders' Deficit		(1,136,563	)		(1,387,866	)
Noncontrolling interest in consolidated subsidiaries		492,797			263,895
Total Stockholders' Deficit		(643,766	)		(1,123,971	)
Total Liabilities and Stockholders' Deficit	$	666,533		$	672,387

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

Table of Contents  2

New Western Energy Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
	For the three months ended September 30,						For the nine months ended September 30,
	2015			2014			2015			2014
Revenues
Oil and gas sales	$	18,452		$	131,660		$	77,801		$	313,782
Operating expenses
Depreciation, depletion and amortization		3,932			18,904			12,271			76,785
General and administrative		236,411			505,932			1,051,271			1,587,743
Impairment expense		9,952			—			29,856			—
Loss on sale of oil leases		—			—			33,886			—
Oil and gas production		26,703			144,631			96,146			512,062
Total operating expenses		276,998			669,467			1,223,430			2,176,590
Loss from operations		(258,546	)		(537,807	)		(1,145,629	)		(1,862,808	)
Other income (expenses)
Interest expense		(167,725	)		91,140			(496,349	)		(1,288,617	)
Gain (loss) on settlement of debt		(888,916	)		(128,168	)		(860,226	)		(128,168	)
Change in fair value of embedded conversion option and warrant liability income (expense)		(102,184	)		304,802			41,167			1,131,241
Other income		—			—			10,000			—
Total other income (expenses)		(1,158,825	)		267,774			(1,305,408	)		(285,544	)
Loss from operations before income tax		(1,417,371	)		(270,033	)		(2,451,051	)		(2,148,352	)
Provision for income tax		1,925			—			1,925			—
Net loss		(1,419,296	)		(270,033	)		(2,452,962	)		(2,148,352	)
Preferred stock dividend		(24,433	)		(11,204	)		(62,393	)		(13,582	)
Net loss applicable to common stock before allocation to noncontrolling interest		(1,443,729	)		(281,237	)		(2,515,355	)		(2,161,934	)
Net loss applicable to noncontrolling interest in consolidated subsidiaries		(28,571	)		(81,672	)		(116,098	)		(211,170	)
Net loss applicable to New Western Energy Corporation common stock	$	(1,415,158	)	$	(199,565	)	$	(2,399,257	)	$	(1,950,764	)
Basic and diluted net loss per share applicable to New Western Energy Corporation's common stock	$	(0.02	)	$	(0.00	)	$	(0.03	)	$	(0.03	)
Weighted average number of shares outstanding - Basic and Diluted		76,846,325			74,265,144			76,246,903			73,460,791

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

Table of Contents  3

New Western Energy Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
	For the nine months ended September 30,
	2015			2014
Cash Flows from Operating Activities:
Reconciliation of net loss to net cash used in operating activities:
Net loss applicable to New Western Energy Corporation common stock	$	(2,399,257	)	$	(1,950,764	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization		12,271			38,642
Impairment expense		29,856			—
Amortization of debt discount		181,647			966,951
Amortization of mineral property		—			38,143
Amortization and accretion of asset retirement obligations		1,750			—
Amortization of deferred debt issuance cost		21,994			137,887
Amortization of embedded conversion option Liability		1,582
Loss applicable to noncontrolling interest		(116,098	)		(211,170	)
Loss on sale of oil and gas property and related equipment		33,886			—
(Gain) loss on settlement of convertible note payable		(28,690	)		128,168
Loss on conversion of preferred stock dividend to equity		13,112			—
Loss on conversion of promissory note to equity		875,804			—
Change in fair value of embedded conversion option liability		73,281			(654,692	)
Change in fair value of warrant liability		(114,448	)		(471,201	)
Costs incurred in conjunction with issuance of convertible notes		183,103			—
Stock based investment expense		27,600			—
Changes in operating assets and liabilities:
Accounts receivable		25,039			(10,700	)
Inventory		3,464			(9,833	)
Prepaid expenses and other current assets		77,207			171,434
Accounts payable		(5,517	)		1,073
Accrued expenses		107,761			89,746
Accrued interest payable		122,522			55,684
Net cash used in operating activities		(872,131	)		(1,680,632	)
Cash Flows From Investing Activities:
Cash paid for purchase of property and equipment		(1,502	)		(43,564	)
Cash proceeds from sale of oil and gas property and related equipment		90,000			—
Cash paid for security deposits		(20,262	)		—
Cash advanced towards a note receivable		—			(75,000	)
Cash received from a note receivable		38,336			10,000
Cash paid for purchase and capitalized cost of oil and gas properties, net		(60,041	)		(50,000	)
Net cash provided by (used in) investing activities		46,531			(158,564	)
Cash Flows From Financing Activities:
Cash received from sale of preferred stock		287,000			635,000
Cash received from a note payable		55,000			—
Cash received from convertible promissory notes		238,500			20,000
Cash repayment of a note payable		(50,000	)		(308,000	)
Cash received from sale of ownership interest in limited partnership		345,000			—
Repayments of related party advances		—			(1,922	)
Net cash provided by financing activities		875,500			345,078

Table of Contents  4

New Western Energy Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
	For the nine months ended September 30,
	2015		2014
Net increase (decrease) in cash and cash equivalents		49,900		(1,494,118	)
Cash and cash equivalents, beginning of the period		11,000		1,523,181
Cash and cash equivalents, end of the period	$	60,900	$	29,063
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	1,925	$	—
Cash paid for interest	$	—	$	90,462
Supplemental disclosures of non-cash investing and financing activities:
Debt discount	$	48,418	$	73,591
Promissory notes issued for lease purchases	$	115,000	$	110,000
Exchange of oil and gas properties for settlement of convertible notes payable	$	—	$	595,000
Settlement of convertible note payable in exchange for oil lease properties	$	—	$	924,000
Settlement of debt by issuance of options to purchase common shares/issuance of common shares	$	2,300,000	$	91,161
Common shares issued to consultant as prepaid for services	$	—	$	259,000
Settlement of preferred stock dividend by issuance of common shares	$	47,847	$	—

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

Table of Contents  5

New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

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

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

On December 1, 2010, the Company formed New Western Texas Oil and Gas Corporation, incorporated in the State of Nevada, as its wholly-owned subsidiary. New Western Texas Oil and Gas Corporation started its operations in January 2011. On May 3, 2013, New Western Texas Oil and Gas Corporation amended its Articles of Incorporation and changed its name to New Western Gas Corporation. On March 9, 2015, New Western Gas Corporation changed its name to New Western Mineral Extraction Inc.

On January 2, 2012, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. (“RTE”) and RTE became a wholly-owned subsidiary of the Company. RTE conducts its business as a separate operating company.

On March 18, 2013, the Company formed 2013 NWE Drilling Program 1 LP (the “Limited Partnership”). The Company became the General Partner and owns 51% of the Limited Partnership. The Limited Partnership was specifically formed to drill three oil wells on the Company’s B&W Ranch lease in Chautauqua County, Kansas (See Note 3).

On May 15, 2014, the Company formed New Western Operating LLC, as its wholly-owned subsidiary that will take over all operations for its leases, oil and gas exploration, drilling and production in the state of Kansas.

On June 30, 2014, the Company formed NWDP Energy, LLC, as its wholly-owned subsidiary, registered in the state of Nevada, to explore, drill and produce oil and gas in Montana. On January 8, 2015, NWDP Energy, LLC changed its name to NWE/Forward Energy, LLC and registered in the state of Montana.

On December 22, 2014, the Company formed New Western Montana Oil & Gas Corporation (the “New Western Montana”) as its wholly owned subsidiary, to enter into an operating agreement with Forward Energy, LLC, a Montana limited liability company. New Western Montana is the managing member of NWE/Forward Energy LLC owning a 51% interest and Forward Energy owning a 49% interest in the LLC.

On April 9, 2015, the Company formed NWE Oil & Gas Program #1 LP, a California limited partnership, for the sole purpose of (a) acquiring and drilling, managing, owning, re-working and operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) acquisition of new oil and gas wells. The Company is the General Partner and shall own not less than a 51% ownership interests and the Limited Partners shall own up to 49% ownership interest in the California limited Partnership. The Company plans to sell up to 20 limited partner interests and each limited partner can purchase 2.45% interest in the limited partnership for $115,000. The Company has currently sold three units or 7.35% of the allocated limited partners’ interest.

On May 1, 2015, the Company formed New Osage Energy Corporation, a wholly-owned subsidiary, registered in the state of Oklahoma, to operate and manage the Company’s oil and gas properties in Oklahoma.

Table of Contents  6

New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Basis of presentation

The accompanying interim consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at September 30, 2015, and the results of operations and cash flows for the three months and nine months ended September 30, 2015. The balance sheet as of December 31, 2014 is derived from the Company’s audited consolidated financial statements.

Certain information and footnote disclosures normally included in consolidated financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these interim consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the consolidated financial statements and the Notes thereto contained in the Company’s 2014 Annual Report filed with the Securities and Exchange Commission on Form 10-K on April 15, 2015.

Going Concern

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing, and the attainment of profitable operations.

At September 30, 2015, the Company had working capital deficit of $1,173,329, incurred a net loss applicable to New Western Energy Corporation common stockholders of $2,399,257 for the nine months ended September 30, 2015 and used cash in operating activities of $872,131. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries New Western Mineral Extraction Corporation, Royal Texan Energy Co., New Western Operating LLC, New Western Montana Oil & Gas Corporation, New Osage Energy Corporation, the Company’s 51% majority owned subsidiaries 2013 NWE Drilling Program 1 LP, and the Company’s 92.65% majority owned subsidiary NWE Oil & Gas Program #1 LP. All intercompany balances and transactions are eliminated in consolidation.  

Noncontrolling Interest

The Company accounts for its less than 100% interest in consolidated subsidiaries in accordance with Financial Accounting Standards Board - Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”, and accordingly, the Company presents noncontrolling interests as a component of equity on its consolidated balance sheets and presents noncontrolling interest net income or loss under the heading “Net loss applicable to noncontrolling interest in consolidated subsidiaries” in the unaudited consolidated statements of operations.

Table of Contents  7

New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of accounts, Notes and other receivables, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of long-lived assets, oil, gas and mineral properties, stock-based compensation and deferred tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Accounting for Derivatives

The Company evaluates its convertible debt instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense).  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. The Company does not have any derivative instruments for which it has applied hedge accounting treatment.

Fair value of Financial Instruments and Fair Value Measurements

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

Level 1

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

Level 2

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

Level 3

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

Table of Contents  8

New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

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

Assets and liabilities measured at fair value on a recurring and non-recurring basis consist of the following at September 30, 2015: 

			Fair Value Measurements at September 30, 2015
	Carrying Value at September 30, 2015 (Unaudited)		(Level 1) (Unaudited)		(Level 2) (Unaudited)		(Level 3) (Unaudited)
Warrant Liabilities	$	176,555	$	—	$	—	$	176,555
Embedded Conversion Option Liability	$	123,281	$	—	$	—	$	123,281

The following is a summary of activity of Level 3 assets and liabilities for the period ended September 30, 2015:

Warrant Liabilities
Balance - December 31, 2014	$	291,003
Additions		—
Change in fair value		(114,448	)
Balance – September 30, 2015	$	176,555
Embedded Conversion Option Liability
Balance - December 31, 2014	$	—
Additions		50,000
Initial value of Embedded Conversion Option		62,082
Change in fair value		11,199
Balance – September 30, 2015	$	123,281

Changes in fair value of the embedded conversion liability are included in other income (expense) in the accompanying unaudited consolidated statements of operations.

Revenue Recognition

The Company sells crude oil and minerals under short-term agreements at prevailing market prices. Revenue, which is the Company's net revenue interest in the leased property, is recognized at the point of sale, when the crude oil and minerals are extracted from our storage units by the customer. This is at the point where the customer has taken title and has assumed the risks and rewards of ownership, the sales price is fixed or determinable and collectability is reasonably assured.

For sale of gas, the Company records revenue based on an estimate of the volumes delivered at the agreed-upon price and then adjusts revenue in subsequent periods based upon the data received from the purchaser that reflects actual volumes received. Generally, proceeds from gas production are received from one to three months after the actual delivery has occurred. Thus, it is usually necessary to estimate gas revenue based on prior months’ production volumes and current lease operating data, such as meter readings, in order to prepare financial statements on a timely basis.

Table of Contents  9

New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire interest in oil and gas properties, to drill and equip exploratory wells that find proved reserves, to drill and equip development wells and related asset retirement costs are capitalized. Costs to drill exploratory wells, including equipment and facilities are capitalized as part of “Uncompleted Wells, Equipment and Facilities” pending determination of whether the well has found proved reserves. Costs to drill exploratory wells that find proved reserves are reclassified to proved oil and gas properties while costs that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining undeveloped properties are expensed.

Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Management may also determine to initiate straight line amortization of a property over the remaining useful life of the lease if management is uncertain as to its ability to recover the asset value but immediate impairment is not indicated. Capitalized costs of producing oil and gas properties (proved or unproved), after considering estimated residual salvage values, are depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives.

On the sale or retirement of a complete unit of a proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale of a partial unit of proved property, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in income.

On the sale of an entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into consideration the amount of any recorded impairment if the property had been assessed individually. If a partial interest in an unproved property is sold, the amount received is treated as a reduction of the cost of the interest retained.

Asset Retirement Obligations

The Company follows the provisions of ASC 410, “Asset Retirement and Environmental Obligations”, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. We record a liability for asset retirement obligations at fair value in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The associated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset. Subsequently, the asset retirement cost is allocated to expense using a systematic and rational method over the asset’s useful life. Our recognized asset retirement obligation exclusively relates to the plugging and abandonment of oil and natural gas wells and decommissioning of our Fredonia gas wells in Kansas. Management periodically reviews the estimates of the timing of well abandonments as well as the estimated plugging and abandonment costs, which are discounted at the credit adjusted risk free rate. These retirement costs are recorded as a long-term liability on the consolidated balance sheets with an offsetting increase in oil and natural gas properties. An ongoing accretion expense is recognized for changes in the value of the liability as a result of the passage of time, which we record in lease operating expenses in the statements of operations.

The Company’s asset retirement obligations represent the present value of estimated future costs associated with the plugging and abandonment of oil and gas wells, in accordance with applicable local, state and federal laws.  The Company follows FASB ASC Topic 410, “Asset Retirement and Environmental Obligations”, to determine its asset retirement obligation amounts by calculating the present value of the estimated future cash outflows associated with its plug and abandonment obligations.  Revisions to the liability typically occur due to changes in estimated abandonment costs or well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Net Earnings (Loss) Per Share

The Company computes net earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible Notes and preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At September 30, 2015, there were Class E, F and G Warrants outstanding for 18,860,920 common shares that if exercised, may dilute future earnings per share, 3,000,000 stock options outstanding awarded to employees and consultants, and stock options issued to a stockholder convertible into 50,000,000 shares of common stock.

Reclassification of Prior Period Amounts

Certain amounts in comparative periods have been reclassified in the Company’s consolidated financial statements and related footnotes to conform to the current presentation.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which changes the presentation of debt issuance costs in financial statements. Under this guidance such costs would be presented as a direct deduction from the related debt liability rather than as an asset. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. Retrospective application is required. The Company has evaluated the impact this guidance on its Consolidated Balance Sheet as of September 30, 2015 which resulted in the reduction of assets and liabilities by approximately $12,000.

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

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

NOTE 3: NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES

2013 NWE Drilling Program 1 LP

On March 18, 2013, the Company formed a new entity 2013 NWE Drilling Program 1 LP (the “Limited Partnership”). The Limited Partnership was specifically formed to drill three oil wells on the Company’s B&W Ranch lease in the Chautauqua County, Kansas. The Company became the General Partner and owns 51% of the Limited Partnership. The Limited Partnership closed upon receiving a cash contribution of $650,000 from one non-affiliate shareholder of the Company as the Limited Partner. The Company’s contribution as the General Partner was $6,500 in cash and giving the rights and commitment to the Limited Partnership to drill three oil wells on the Company’s B&W Ranch lease. Pursuant to the terms of the partnership agreement, the Limited Partner will be entitled to receive 70% of the net income and cash available for distributions until such time an amount equal to the Limited Partner’s initial investment plus a 50% return on such initial investment is received by the Limited Partner. Thereafter, net income and cash available for distributions shall be allocated 20% to the Limited Partner and 80% to the General Partner. The Limited Partnership entered into turnkey drilling agreement with the managing General Partner, to drill and complete the partnership wells. The turnkey price included all ordinary costs of drilling, testing and completing the wells. When the wells begin producing, the General Partner, as operator of the wells, will be reimbursed at actual cost for all direct expenses incurred on behalf of the Limited Partnership, and shall receive a fixed fee of $250 per well per month for supervising, operating and maintaining the wells during production operations.

The Limited Partnership recorded a loss of $58,309 and $236,935 for the three months and nine months periods ended September 30, 2015 as compared to a loss of $166,678 and $430,960 for the same comparable periods in 2014. The Company allocated $28,571 and $116,098 of the limited partnership’s loss for the three months and nine months periods ended September 30, 2015, and $81,672 and $211,170 of the limited partnership’s loss for the three months and nine months periods ended September 30, 2014 to its noncontrolling member in its consolidated financial statements as of September 30, 2015 and 2014, respectively. As a result, the noncontrolling interest of the limited partner was reduced to $147,797 at September 30, 2015.

The following provides a summary of activity in the noncontrolling interest (“NCI”) in Limited Partnership, a consolidated subsidiary account for the nine months ended September 30, 2015 and 2014:

Balance NCI at December 31, 2013	$	511,942
Contribution by noncontrolling interest		—
Net loss applicable to noncontrolling interest for nine months ended September 30, 2014 – 49%		(211,170	)
Balance NCI at September 30, 2014	$	300,772
Balance NCI at December 31, 2014	$	263,895
Contribution by noncontrolling interest		—
Net loss applicable to noncontrolling interest for nine months ended September 30, 2015 – 49%		(116,098	)
Balance NCI at September 30, 2015	$	147,797

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

NWE Oil & Gas Program #1 LP

On April 9, 2015, the Company formed an entity NWE Oil & Gas Program #1 LP, a California limited partnership (the “California Limited Partnership”), for the sole purpose of (a) acquiring and drilling, managing, owning, re-working and operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) new oil and gas wells. The Company became the General Partner and shall own 21 Units which shall represent 51% ownership of the California Limited Partnership. The Limited Partners shall own no more than 20 Units which shall represent 49% of the California Limited Partnership. As of June 30, 2015, the Company received cash contributions of $345,000 from three non-affiliated limited partners from the sale of three (3) Units of $115,000 each. The Company is obligated to contribute as General Partner $23,000 in cash for its ownership interest and the Company has not made its cash contribution as of September 30, 2015. The partnership commenced on April 9, 2015 and will continue for a term of 25 years unless sooner terminated in accordance with the terms of the agreement. Pursuant to the terms of the partnership agreement, the net income and distributions of the partnership shall be allocated 70% to the Limited Partners and 30% to the General Partner, until the Limited Partners has received in cash distributions an amount equal to their initial capital plus a 30% return on their original invested capital. Thereafter, net income and distributions shall be allocated 30% to the Limited Partners and 70% to the General Partner. Any net proceeds from the sale of any of the leases owned by the partnership shall be distributed 49% to the Limited Partners in accordance with each Limited Partner’s capital account and 51% to the General Partner.

The following provides a summary of activity in the noncontrolling interest (“NCI”) in California Limited Partnership, a consolidated subsidiary account for the nine months ended September 30, 2015:

Balance NCI at December 31, 2014	$	—
Contributions by NCI		345,000
Balance NCI at September 30, 2015	$	345,000

Total noncontrolling interest in consolidated subsidiaries amounted to $492,797 and $263,895 as of September 30, 2015 and December 31, 2014, respectively.

NOTE 4: OIL AND GAS PROPERTIES

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

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Name of the Property	Type		September 30, 2015 (Unaudited)			December 31, 2014
Rogers County, OK - Glass Lease		Oil	$	-		$	221,000
Rogers County, OK - Phillips Lease		Oil		-			130,000
Rogers County, OK (9) Leases		Oil		-			378,600
Chautauqua County, KS - B&W Ranch Lease		Oil & Gas		75,000			75,000
Chautauqua County, KS - Charles & Nancy Smith Lease		Oil & Gas		24,750			24,750
Chautauqua County, KS - Lloyd & Patricia Fields Lease		Oil & Gas		14,400			14,400
Chautauqua County, KS - Rinck Lease		Oil & Gas		24,750			24,750
Osage County, OK – Branson Leases		Oil & Gas		40,000			-
Osage County, OK – (3) Renco Leases		Oil & Gas		185,000			-
Wilson County, KS – Farwell, Puckett & Farwell/Eagle Lease		Oil & Gas		251,208			251,208
Doug & Wendy Strauch – Brown Lease, Montana		Oil & Gas		5,040			-
Nowata County, OK (4) Leases		Gas		-			35,000
Shackelford County, TX – Terry Heirs		Oil		9,722			9,722
				629,870			1,164,430
Asset Retirement Obligation				4,563			4,000
Impairment allowance				(160,867	)		(919,603	)
Total			$	473,566		$	248,827

There were no exploration well costs capitalized for more than one year following the completion of drilling.

The following oil and gas leases were acquired and sold during the nine months ended September 30, 2015.

Acquisition of Oil and Gas Leases in Montana

In February 2015, the Company entered into a Lease Purchase Agreement with a third party to acquire oil and gas lease properties, wells and equipment located in Counties of Yellowstone, Golden Valley, Treasure, Musselshell and surrounding Counties of the Crooked Creek Field within South Central Montana. The Company has paid a purchase consideration of $4,000 to the third party for such acquisition of leases. On May 26, 2015, the Company extended the terms of the Lease Purchase Agreement and paid an additional consideration of $1,040 to the third party as additional acquisition cost. The Company has not started any exploration and production as of September 30, 2015.

Assignment of Rogers County and Nowata County, Oklahoma Leases

Glass Lease, and (9) Leases- Jackson Lease, Anna Lease, Kerrigan Lease, Everett Lease, Jameson Lease, Thomas Lease, Winchester Lease, Winchester II Lease, Roberts Lease, Roebuck Lease, Taylor Lease and Walker Lease (“Leases”)

On January 22, 2015, the Company entered into an agreement with a third party to assigns all of its rights and ownership interests in these Leases for $100,000. The transaction closed on March 1, 2015 and the Company has received $90,000 of the sale price on March 3, 2015. The remaining balance of $10,000 will be received subject to completion of takeover of the Leases. As a result of assignment of these Leases, the Company has recorded a loss of $33,886 on assignment for the nine months ended September 30, 2015.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Acquisition of Branson Leases in Osage County, Oklahoma

On August 1, 2015, the Company entered into a Purchase of Leases Agreement (the “Agreement”) to purchase from PEMCO, LLC, an Oklahoma Limited Liability Company, the owner and operator of 17 Quarter Sections of oil and gas leases in Osage County, Oklahoma, (the “Branson Leases”) together with equipment, machinery, pipes and tools, subject to completion of due diligence period and certain agreed terms. PEMCO granted the Company the right to perform due diligence prior to the purchase of the Assets. The Company agreed to pay PEMCO a consideration of $40,000 as Initial Payment upon execution of the Agreement, and for the extension period, if applicable, $10,000 as Extension Payment within 10 days prior to the end of the initial period. The initial due diligence commenced on August 1, 2015 and shall continue for a period of 60 days, and may be extended by the Company for an additional 30 days consecutive after the expiration of the initial due diligence period. On July 31, 2015, the Company paid to PEMCO $40,000 as Initial payment for the purchase of leases. The Company has completed its due diligence as of September 30, 2015 and closed the purchase. The Company has not started any exploration and production as of September 30, 2015.

Acquisition of Renco Leases in Osage County, Oklahoma

On August 31, 2015, the Company entered into a Lease Purchase Agreement with Renco Energy, Inc., an Oklahoma corporation, to purchase three (3) 160 acre oil and gas leases located in Osage County, Oklahoma, together with equipment, machinery, pipes and tools located thereon for a purchase consideration of $185,000. The agreement required the purchase price to be paid $15,000 in cash, assumption of estimated $55,000 in debt owed by Renco Energy to third parties, and the balance of $115,000 in the form of a promissory Note bearing 5% per annum interest. The principal sum of the promissory Note and interest shall be payable in ten installments of $11,500 each plus accrued interest, commencing on with the first installment on October 15, 2015 and on the 15^th day of each month thereafter until paid in full. The transaction closed on September 1, 2015. Upon closing, the Company made a cash payment of $15,000, executed a promissory Note of $115,000 and is currently in negotiations to settle the third parties debt of $55,000. The Company has not started any exploration and productions as of September 30, 2015.

NOTE 5: NOTE RECEIVABLE

On April 1, 2014, the Company made a short-term advance of $75,000 to Legend, an entity with whom the Company had previously entered into a merger agreement on January 23, 2014. The advance is non-interest bearing, unsecured and is to be returned to the Company by Legend by February 28, 2015 or within 60 days, if the merger between the Company and Legend is terminated, whichever first occurs. On April 30, 2014, the Company terminated the merger agreement with Legend. The Company received one payment of $10,000 from Legend during 2014 and the outstanding balance of short-term advance at December 31, 2014 amounted to $65,000. On January 7, 2015, the Company and Legend entered into a settlement agreement and mutual release of claims due to the disputes arising between the two parties. Pursuant to the terms of settlement, Legend agreed to pay the settlement amount of $65,000 of which amount $10,000 was paid on January 7, 2015 and agreed to make six (6) equal payments of $9,167 each month starting February 7, 2015 in satisfaction of full payment of short-term advance. The Company has received payments of $38,336 against the settlement amount as of September 30, 2015. Legend is in default of making its settlement payments of $26,664 as of September 30, 2015. The Company is evaluating its options to enforce a stipulated judgment against Legend. The Company has not provided an allowance for uncollected balances as of September 30, 2015.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

NOTE 6: NOTES PAYABLE

Notes payable consist of:

	September 30,		December 31,
	2015		2014
	(Unaudited)
Note payable to a third party, unsecured, bearing interest at 5% per annum, due on May  30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan	$	—	$	73,750
Stockholder Note payable, secured, bearing interest at 10% per annum, due on October 31, 2015, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans		—		1,500,000
Note payable to an entity owned by a director, secured, bearing interest at 5% per annum, due on August 31, 2015		110,000		110,000
Note payable to a third party, unsecured, bearing interest at 5% per annum, due on August 30, 2016, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan		55,000		—
Note payable to a third party, secured, bearing interest at 5% per annum, due on July 3, 2016		115,000		—
		280,000		1,683,750
Notes payable - current portion		280,000		1,683,750
Notes payable – long term portion		—		—
Less: Unamortized debt discount and debt issuance costs		—		(536,841	)
Notes payable – current portion, net of debt discounts	$	280,000	$	1,146,909

The Company is in default of a note payable of $110,000 due to an entity owned by a director of the Company. The note holder has not made a demand for the past due note balance as of the date of this report.

The Company recorded interest expense on these Notes of $36,063 and $116,467 for the three months and nine months ended September 30, 2015 and $38,888 and $115,716 for the same comparable periods in 2014.  

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

NOTE 7: CONVERTIBLE NOTES PAYABLE

Convertible Notes payable consist of:

	September 30, 2015			December 31, 2014
	(Unaudited)
Note payable to a third party, secured, bearing interest at 8% per annum, due December 30, 2015 (Note 1)	$	79,000		$	—
Note payable to a third party, secured, bearing interest at 8% per annum, due March 3, 2016 (Note 2)		54,000			—
Note payable to a third party, secured, bearing interest at 6% per annum, due July 1, 2016 (Note 3)		53,500			—
Note payable to a third party, secured, bearing interest at 8% per annum, due September 8, 2016 (Note 4)		27,000			—
Note payable to a third party, bearing interest at 12% per annum, due September 9, 2017 (Note 5)		55,000			—
Total		268,500			—
Convertible Note payable – current portion		213,500			—
Premium on Note 1, Note 2, Note 3 and Note 4 payable		154,603			—
		368,103
Less: Debt discount		(7,403	)
Convertible Notes payable, current portion, net of premium and discount		360,700			—
Convertible Note payable – long term portion		55,000			—
Less: Debt discount		(53,274	)		—
Convertible Notes payable, long term, net of debt discount	$	1,726		$	—

Convertible Promissory Note 1 (“Note 1”)

On March 26, 2015, the Company executed a Convertible Promissory Note (the “Note 1”) and received $75,000 (the “Draw”) net of $4,000 in legal fees, on April 20, 2015. The principal sum of $79,000 together with any interest on the unpaid balance at the rate of 8% per annum will become due on December 30, 2015. The Note 1 may not be prepaid in whole or in part. No amount of principal or interest on Not 1 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the Note 1 is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this Note 1and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this Note 1 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this Note 1 in excess of that portion of the Note 1 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 1 with respect to which the determination of this provision is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

The net carrying value of Note 1 at September 30, 2015 and December 31, 2014 was $79,000 and $0, respectively. The Company recorded a premium of $57,207 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. In addition, the Company recorded an interest expense of $1,593 and $2,822 for the three months and nine months periods ended September 30, 2015.

Convertible Promissory Note 2 (“Note 2”)

On May 29, 2015, the Company executed a Convertible Promissory Note (the “Note 2”) of $54,000 and received cash proceeds of $43,500 (the “Draw”) net of disbursing $4,000 in legal fees and $6,500 in accounting fees on June 3, 2015. The principal sum of $54,000 together with any interest on the unpaid balance at the rate of 8% per annum will become due on December 30, 2015. The Note 2 may not be prepaid in whole or in part. No amount of principal or interest on Note 2 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the Note 2 is fully paid and shall be computed n the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this Note 2 and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this Note 2 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this Note 2 in excess of that portion of the Note 2 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 2 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date.

The net carrying value of Note 2 at September 30, 2015 and December 31, 2014 was $54,000 and $0, respectively. The Company recorded a premium of $39,103 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. In addition, the Company recorded an interest expense of $1,089 and $1,408 for the three months and nine months periods ended September 30, 2015.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Convertible Promissory Note 3 (“Note 3”)

On July 1, 2015, the Company executed a Convertible Promissory Note (the “Note 3”) of $53,500 and received cash proceeds of $45,000 on July 14, 2015 (the “Draw”) net of fees of $7,000. The principal sum of $53,500 together with any interest on the unpaid balance at the rate of 6% per annum will become due and payable on July 1, 2016. The Note 3 may be prepaid pursuant to the following schedule: 1) Payment on Day 1-90 will result in 125% of the face value being owed 2) Payment on Day 91-180 will result in 145% of the face value being owed. Interest after the date of issuance shall be computed on the basis of a 365-day year and the actual number of days elapsed. The Holder shall have the right on or after 180 days from the date of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of common stock, as such common stock exists on the issue date, or any shares of capital stock or other securities of the Borrower into which such common stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided, however, that in no event shall the holder be entitled to convert any portion of this Note 3 in excess of that portion of this Note 3 upon conversion of which the sum of (1) the number of shares of common stock beneficially owned by the holder and its affiliates (other than shares of common stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Note 3 or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 3 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the outstanding shares of common stock. The shares to be issued pursuant to conversions are subject to the legal opinion letter, customary and satisfactory to parties hereto as provided by the holder.) The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the lowest Trading Price for the common stock during the fifteen trading day period ending on the latest complete trading day prior to the Conversion Date.

The net carrying value of Note 3 at September 30, 2015 was $53,500. The Company recorded a premium of $38,741 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. For the three months ended September 30, 2015, the Company has recognized interest expense of (1) $1,477 related to the amortization of the OID, and (2) $677 on the principal balance as it related to this Note 3.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Convertible Promissory Note 4 (“Note 4”)

On September 8, 2015, the Company executed a Convertible Redeemable Note (the “Note 4”) of a principal amount of $27,000, bearing an interest rate of 8% per annum, both the principal and interest due on September 8, 2016. The Company received cash proceeds of $25,000 upon execution of Note 4. The Note 4 may be prepaid with the following penalties: (i) < 30 days – 118% of principal plus accrued interest, (ii) 31-60 days – 124% of principal plus accrued interest, (iii) 61-90 days – 130% of principal plus accrued interest, (iv) 91-120 days – 136% of principal plus accrued interest, (v) 121-150 days – 142% of principal plus accrued interest, (vi) 151-180 days – 148% of principal plus accrued interest. Interest shall be paid by the Company in common stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for interest shares based on an agreed formula. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice. The Note 4 may not be prepaid after the 180^th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void. The holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock at a price (“Conversion Price”) for each share of common stock equal to 58% of the lowest trading of the common stock as reported on the National Quotation Bureau OTCQB exchange for the 15 prior trading days including the day upon which a notice of conversion is received by the Company. To the extent the Conversion Price of the Company’s common stock closed below the par value per share, the Company will take steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In no event shall the holder be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the holder and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company.

The net carrying value of Note 4 at September 30, 2015 was $27,000. The Company recorded a premium of $19,552 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. For the three months ended September 30, 2015, the Company has recognized interest expense of (1) $121 related to the amortization of the OID, and (2) $130 on the principal balance as it related to this Note 4.

Convertible Promissory Note 5 (“Note 5”)

On September 3, 2015, the Company received $50,000 (the “Draw”) from a third party against a $250,000 Convertible Promissory Note (the “Note 5”) executed on September 8, 2015 (“the Effective Date”). The total consideration receivable against the Note 5 is $225,000, with the Note bearing $25,000 original issue discount (OID). The Company received a cash consideration of $50,000 from the investor upon closing of this Note. The principal sum due to the investor on Note 5 shall be $55,000 which included an OID of $5,000. The Maturity Date of Note 5 is two years from the date of receipt of cash consideration. The Conversion Price is the lesser of $0.05 or 60% of the lowest trade price in the 25 trading days previous to the conversion. Unless otherwise agreed in writing by both parties, at no time will the investor convert any amount of the Note 5 into common stock that would result in the Investor owning more than 4.99% of the common stock outstanding.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

The Company may repay Note 5 at any time on or before 90 days from the Effective Date, after which the Company may not make further payments on this Note 5 prior to the Maturity Date without written approval from the Investor. If the Company repays a payment of consideration on or before 90 days from the Effective Date of that payment, the interest rate on that payment of consideration shall be 0%. If the Company does not repay a payment of consideration on or before 90 days from the Effective Date, a one-time interest charge of 12% shall be applied to the principal sum. Any interest payable is in addition to the OID, and that OID remains payable regardless of time and manner of payment by the Company. The investor has the right, at any time after the Effective Date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of fully paid and non-assessable shares of common stock of the Company as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. All conversions shall be cashless and not require further payment from the investor. If no objection is delivered from the Company to the investor regarding any variable or calculation of the conversion notice within 24 hours of delivery of the conversion notice, the Company shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Company shall deliver the shares from any conversion to the investor within three (3) business days of conversion notice delivery.

In connection with the issuance of the Note 5, the Company recorded a loan discount related to the OID in the amount of $5,000 which will be amortized to interest expense over the term of the Draw. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $50,000 which will be amortized to interest expense over the term of the Draw and an initial change in fair value of $62,082 for a total initial embedded conversion option liability of $112,082. For the three months ended September 30, 2015, the Company has recognized interest expense of (i) $144 related to the amortization of the OID, (ii) $1,582 related to the amortization of the embedded conversion option liability discount, and (iii) $380 on the principal balance as it related to this Note 5.

As a result of above issuance of Note 1, Note 2, Note 3, Note 4 and Note 5, the Company recorded a premium of $154,603 on the convertible Notes payable as the Notes are considered stock settled debt which was charged to interest expense as of September 30, 2015. For the three months and nine months periods ended September 30, 2015, the Company also recorded interest expense of (i) $1,741 and $1,741 related to the amortization of OID, (ii) $1,582 and $1,582 related to the amortization of the conversion option liability discount, and (iii) $3,869 and $5,418 on the principal balance as it related to the above Notes.

NOTE 8: RELATED PARTY TRANSACTIONS AND BALANCES

At September 30, 2015 and December 31, 2014, advances, net of repayments, made to the Company by the Chief Executive Officer (“Officer”) for its working capital requirements amounted to $100 and $100, respectively. Amounts due to the Officer are unsecured, non-interest bearing and due on demand without specific repayment terms.

On June 1, 2013, the Company entered into a business consulting and marketing agreement with its non-executive director for a twelve month period at the rate of $2,500 per month. The agreement terminated on May 31, 2014 and the non-executive director continued to provide services to the Company for adhoc fees. The Company recorded an expense of $22,000 and $77,000 as consulting fees for the three and nine months ended September 30, 2015 as compared to $15,000 and $35,000 for the same periods ended September 30, 2014.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

On July 1, 2014, the Company entered into a business advisory and consulting agreement for a twelve months term, with a management company related to the Chief Executive Officer. The Company agreed to pay $5,000 monthly cash payment and issued 400,000 shares of its common stock valued at $56,000. The common shares issued are valued at the closing price of stock on the effective date of the consulting agreement and the value is recorded as a prepaid expense to be amortized over the service period. The Company recorded an expense of $0 and $58,000 as consulting expense for the three and nine months ended September 30, 2015 as compared to $29,000 and $29,000 for the same periods in 2014.

The Company engages an entity owned by a director of the Company to be the operator on its oil and gas lease properties in Wilson County, Kansas. The Company has recorded an expense of $24,240 and $82,350 for lease operating expenses and administration for these oil and gas leases for the three and nine months ended September 30, 2015. The Company paid the operator $493,582 and $737,156 for lease operating expenses and administration for these oil and gas leases for the same periods ended on September 30, 2014. Amount payable to the entity owned by the director was $16,609 and $26,635 at September 30, 2015 and December 31, 2014, respectively.

On August 31, 2014, the Company acquired the remaining 12.5% working interest in Volunteer and Lander Leases in Wilson County, Kansas (“Leases”), from an entity owned by a director for $125,000 and obtained the 100% working interest in the Leases. The Company paid $15,000 in cash and executed a promissory Note for $110,000 (See NOTE 6). The Company recorded an interest expense of $1,375 and $4,125 for the three and nine months ended September 30, 2015. Interest payable to the director amounted to $5,958 as of September 30, 2015 and $1,833 as of December 31, 2014.

The Company recorded director fee expense of $12,000 and $36,000 for the three and nine months ended September 30, 2015 and $12,000 and $36,000 for the three and nine months ended September 30, 2014. Director fees of $69,000 and $44,000 remain payable as of September 30, 2015 and December 31, 2014, respectively.

NOTE 9: COMMITMENTS AND CONTINGENCIES

Employment Agreement

On January 1, 2014, the Company entered into an employment agreement with its Chief Executive Officer to retain his services through the year ended December 31, 2018. As an inducement to enter into the employment agreement, the Company paid a signing bonus of cash payment of $50,000 on January 6, 2014. Pursuant to the terms of the employment agreements, total minimum compensation commitments for years ended December 31, 2014 through 2018 are $240,000, $252,000, $264,600, $277,830 and $291,722, respectively. The Company recorded a compensation expense of $63,000 and $189,000 for the three and nine months ended September 30, 2015 and $60,000 and $180,000 for the same periods ended September 30, 2014. 

Contingencies

On November 12, 2013, a complaint was filed in the District Court of Taylor County, Texas, captioned Brent and Brook Hatchett v. New Western Energy Corporation, Case No. 25,863-B. The complaint asserts breach of contract on the part of the Company relating to a Plan and Agreement of Reorganization (the “Contract”) wherein the Company acquired all of the issued and outstanding capital stock of Royal Texan Energy Co. from the Hatchetts. The Hatchetts are seeking the remaining consideration of 600,000 common shares of New Western Energy Corporation payable to them for the acquisition by New Western Energy Corporation of Royal Texan Energy Co. in addition to general damages.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

On February 10, 2015, the Company entered into a Settlement Agreement and Mutual Release of Claims (the “Agreement”) with Brent and Brook Hatchett in full settlement of all legal actions and disputes between the parties, including the dismissal with prejudice of the pending lawsuit in Texas. In accordance with the settlement, on March 4, 2015, the Company (a) agreed to cancel 600,000 shares of previously issued but not distributed shares and returning it to authorized but unissued status, thus reducing the Company’s current number of shares outstanding by 600,000 shares (See Note 10), (b) agreed to pay 30% of the proceeds from sale of Royal Texan Energy oil and gas properties in Texas, and (c) agreed to get the $50,000 bond at the railroad commission reduced to $25,000 and thereafter post a bond of $25,000 to release the current bond of Bill Windhem and Brent Hatchett. The Company has not issued and distributed to Hatchetts the remaining 100,000 shares of common stock as of the date of this report. The Company has not posted a bond of $25,000 to release the current bond of Mr. Windhem and Mr. Brent Hatchett.

On March 10, 2015, the Company entered into a Securities Purchase Agreement (the “SPA”) with Fodere Titanium Limited for the assignment of a license to a patent for a new process for the extraction of minerals from tailings in the United Sates (the “License) in exchange for the issuance of 5,000,000 shares of the Company’s common stock (the “Shares”). The transaction was never consummated. The License was never assigned and the Shares were never issued. On May 11, 2015, the parties entered into a Cancellation of Agreement and Mutual Releases agreement (the “Agreement”). The Agreement formally cancelled and terminated the SPA and each party to the SPA released the other party from any liabilities relating to entering into the SPA.

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

NOTE 10: STOCKHOLDERS' EQUITY

The Company’s authorized common shares and preferred shares at September 30, 2015 were 250,000,000 and 5,000,000 shares respectively, both with a par value of $0.0001 per share.

Common Stock

Pursuant to the settlement of litigation with Brent and Brook Hatchett on February 10, 2015, the Company cancelled 600,000 shares of previously issued but not distributed shares of its common stock and returning it to authorized but unissued status, thus reducing the Company’s current number of shares outstanding by 600,000 shares (See NOTE 9). The Company has not issued and distributed to Hatchetts the remaining 100,000 shares of common stock as of the date of this report.

The Company agreed to issue to investors 115,000 shares of its common stock, as an inducement to purchase one Unit for $115,000 in NWE Oil & Gas Program #1 LP, a limited partnership ( the “Partnership”) of which the Company is the General Partner and owns 51% of the total Partnership’s interest. During the nine months ended September 30, 2015, the Company issued 345,000 shares of its common stock and valued the shares at the closing price of common stock on the date the investor purchased a Unit in the Partnership. For the three months and nine months periods ended September 30, 2015, the Company recorded the fair value of 345,000 shares of common stock as investment expense of $27,600 and $27,600, respectively, as compared to $0 and $0, respectively, for the same comparable periods ended September 30, 2014.

On August 6, 2015, the Company issued 1,270,000 shares of common stock valued at $47,847 in settlement of preferred stock dividend payable to Series A Preferred Stockholders as of June 30, 2015.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

Preferred stock

On April 1, 2014, the Company offered to sell pursuant to a private placement, under a Regulation S offering to non-US investors only, 1,500,000 Units to raise $7,500,000. The minimum investment in this offering is for 5,000 Units for $25,000. Each Unit consists of two (2) shares of Series A 7% Convertible Preferred Stock, par value $0.0001 per share and one (1) redeemable Class F Warrant of the Company to purchase ten (10) shares of common stock. Each share of Series A Preferred Stock pays a 7% annual dividend for the first year ending March 31, 2015 and thereafter, a 10% dividend payable, at the option of the Company, in cash or in the Company’s common stock. Each Class F Warrant entitles the holder thereof to purchase, at any time until the expiration date of March 31, 2017, ten (10) shares of Common Stock at an exercise price of $0.30 per share, subject to adjustment. The Class F Warrants are redeemable by the Company, at a redemption price of $0.05 per Warrant, upon at least 30 days’ prior written notice, commencing six months after the date of this private placement, if the average of the closing bid price of the Common Stock, as reported on the Over-The-Counter or other exchange, shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive business days prior to the notice of redemption. The Units are being offered on a “best effort basis” by the Company through its officers and directors and selected finders and broker/dealers.

The Company has sold 127,000 Units and raised $635,000 as of September 30, 2015. The Company has issued 254,000 Series A 7% convertible Preferred Shares, par value $0.0001 per share, and warrants to purchase 2,540,000 shares of common shares at an exercise price of $0.30 per share as of September 30, 2015. The Company has recorded preferred stock dividend expense of $15,832 and $38,893 for Series A Preferred Stockholders for the three months and nine months ended September 30, 2015, and $11,204 and $13,582 for the same comparable periods ended September 30, 2014. On August 6, 2015, Series A Preferred Stockholders agreed to receive 1,270,000 common shares to settle $47,848 of preferred stock dividend payable to them as of June 30, 2015. The Company issued 1,270,000 shares of common stock valued at their fair value of $60,960 to settle the preferred stock dividend payable to Series A Preferred shareholders and recorded a loss of $13,112 upon settlement of preferred stock dividend to Series A Preferred Stockholders for the three months ended September 30, 2015. Series A Preferred Stock dividend payable at September 30, 2015 and December 31, 2014 was $15,832 and $24,786, respectively.

On September 25, 2014, the Company offered to sell pursuant to a private placement, under a Regulation S offering to non-US investors only, 400,000 Units to raise $2,000,000. The minimum investment in this offering is for 5,000 Units for $25,000. Each Unit consists of one (1) share of Series B 7% Convertible Preferred Stock, par value $0.0001 per share and one (1) redeemable Class G Warrant of the Company to purchase twenty-five (25) shares of common stock. Each share of Series B Preferred Stock pays a 7% annual dividend for the first year ending September 30, 2015 and thereafter, a 10% dividend payable, at the option of the Company, in cash or in the Company’s common stock. Each Class G Warrant entitles the holder thereof to purchase, at any time until the expiration date of September 30, 2017, twenty-five (25) shares of Common Stock at an exercise price of $0.20 per share, subject to adjustment. The Class G Warrants are redeemable by the Company, at a redemption price of $0.05 per Warrant, upon at least 30 days’ prior written notice, commencing six months after the date of this private placement, if the average of the closing bid price of the Common Stock, as reported on the Over-The-Counter or other exchange, shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive business days prior to the notice of redemption. The Units are being offered on a “best effort basis” by the Company through its officers and directors and selected finders and broker/dealers.

The Company has sold 97,500 Units and raised $487,500 as of September 30, 2015. The Company has issued 97,500 Series B 7% convertible Preferred Shares, par value $0.0001 per share, and warrants to purchase 2,437,500 shares of common shares at an exercise price of $0.20 per share as of September 30, 2015. The Company has recorded preferred stock dividend expense of $8,601 and $23,500 for Series B Preferred Stockholders for the three months and nine months ended September 30, 2015, and $0 for the same comparable periods ended September 30, 2014. Series B preferred stock dividend payable at September 30, 2015 and December 31, 2014 was $26,213 and $2,713, respectively.

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New Western Energy Corporation and Subsidiaries

Condensed Notes to Consolidated Financial Statements

September 30, 2015 and 2014

(Unaudited)

As a result of all stocks, options and warrant issuances as of September 30, 2015, the Company had 77,357,086 shares of common stock issued and outstanding, 351,500 shares of preferred stock issued and outstanding, 3,000,000 stock options convertible into common stock, 7,500,000 Class E Warrants, 8,923,420 Class F Warrants, 2,437,000 Class G Warrants for conversion into common stock.

NOTE 11: CONCENTRATIONS

Concentration of Operators

As of September 30, 2015, the Company used two operators for the leased properties for which the Company has current activities. The Company also has one mineral lease with another lessor. There has been no activity on the mineral lease other than initial lease acquisition costs relating to the mineral lease as of September 30, 2015.

Concentration of Customer

The Company sells its oil product to two separate customers and gas products to two separate customers.

Concentration of Credit Risk

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2015. The Company’s bank balances did not exceed FDIC insured amounts as of September 30, 2015.

NOTE 12: SUBSEQUENT EVENTS

On October 21, 2015, the Company converted $12,000 of the debt by issuance of 736,196 shares of its common stock valued at $0.0163 per share. The Conversion Price is 58% of the lowest trade price of $0.028 in the 10 trading days previous to the conversion date.

On October 21, 2015, the Company issued 345,000 shares of its common stock to three investors valued at $10,695 at their fair value on the date of issuance. During May 2015 and June 2015, these investors purchased three Units for $345,000 in NWE Oil & Gas Program #1 LP, a limited partnership (“Partnership”), of which the Company is the General Partner and owns 51% of the total Partnership’s interest. The Company recorded $10,695 as additional expense for investing in the Partnership.

On October 21, 2015, the Company issued 1,000,000 shares of its common stock valued at $31,000 at their fair value on the date of issuance, to a non-executive director as compensation for negotiating settlement of its debt with a shareholder. 

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

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

Overview

We are an oil and gas and mineral exploration and production company with current projects located in Kansas, Montana, Oklahoma and Texas. Our principal business is in the acquisition, exploration and development of, and production from oil, gas and mineral properties. We have a limited operating history with nominal revenues. On December 1, 2010, we formed an entity named New Western Texas Oil and Gas Corporation (“New Western Texas”) incorporated in the State of Nevada, as our wholly-owned subsidiary. New Western Texas started its operations in January 2011. On May 3, 2013, we changed the name of New Western Texas to New Western Gas Corporation (“New Western Gas”), and on March 9, 2015, we again changed the name of New Western Gas to New Western Mineral Extraction, Inc. On January 2, 2012, we acquired 100% of the issued and outstanding capital stock of Royal Texan Energy Co. (“RTE”), a Texas corporation. RTE’s principal business operations are acquisitions, exploration and development of, and production from oil and gas properties located in Texas. We acquired RTE primarily due to its lease ownership interests in oil and gas properties and the Company’s requirement to have an operator for exploration and production of oil and gas in Texas. On March 12, 2013, we formed 2013 NWE Drilling Program 1 LP, a California Limited Partnership (the “Limited Partnership”). We became the General Partner and own 51% of the Limited Partnership. A shareholder of the Company became the limited partner holding 49% of the Limited Partnership. The Limited Partnership was specifically formed to drill three oil wells on the Company’s B&W Ranch lease in the Chautauqua County, Kansas. On May 28, 2014, we formed New Western Operating LLC, our wholly-owned subsidiary, to handle all operational duties for managing our leases and oil and gas exploration, drilling and production in the state of Kansas. On June 30, 2014, we formed NWDP Energy, LLC, a wholly-owned subsidiary registered in the state of Nevada, to explore, drill and produce oil and gas in Montana. On December 22, 2014, the Company formed an entity New Western Montana Oil & Gas Corporation (the “New Western Montana”) to enter into an agreement with Forward Energy, LLC, a Montana limited liability company, and formed an entity NWE/Forward Energy LLC, incorporated in the State of Montana by changing the name of NWDP Energy, LLC to NWE/Forward Energy, LLC on January 8, 2015 and register in the state of Montana. New Western Montana, a wholly-owned subsidiary of the Company, and managing member of NWE/ Forward Energy LLC, owns 51% interest in NWE/Forward Energy LLC and Forward Energy owns 49% interest in NWE/Forward Energy LLC. On April 9, 2015, we formed an entity NWE Oil & Gas Program #1 LP, a California limited partnership for the sole purpose of ownership, drilling and management of (a) all currently operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) new oil and gas wells. The Company is the General Partner and shall own not less than a 51% ownership interests and the Limited Partners shall own up to 49% ownership interests in the California Limited Partnership. On May 1, 2015, we formed an entity New Osage Energy Corporation, a wholly-owned subsidiary, registered in the state of Oklahoma to operate and manage Company’s oil and gas properties in Oklahoma.

We were incorporated in the State of Nevada on September 25, 2008. Our principal executive offices are located at 300 Spectrum center Drive, Suite 400, Irvine, California 92618. Our telephone and fax numbers are (949) 435-0977 and (949) 861-3123, respectively.

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Our Current Business

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

From time to time management has been engaged in preliminary discussions with potential investors and merger candidates in this industry. However, no letter of intent or other document has been prepared in connection with these preliminary discussions. There are currently no agreements or arrangements with respect to any merger or similar transaction.

Results of Operations

Our consolidated results of operations for the three months and nine months ended September 30, 2015 included the operation of the Company, our wholly-owned subsidiaries New Western Mineral Extraction, Inc., Royal Texan Energy Co., New Western Operating LLC, New Western Montana Oil & Gas Corporation, New Osage Energy Corporation and our 51% majority owned subsidiary 2013 NWE Drilling Program 1 LP, and our 92.65% majority owned subsidiary NWE Oil & Gas Program #1, LP. Our consolidated results of operations for the three months and nine months periods ended September 30, 2014 included the operation of the Company, our wholly-owned subsidiaries New Western Mineral Extraction, Inc., Royal Texan Energy Co., New Western Operating, LLC, NWDP Energy, LLC and our 51% majority owned subsidiary 2013 NWE Drilling Program 1 LP.

We reported a net loss applicable to the Company’s common stockholders of $1,415,158 and $2,399,257 for the three months and nine months ended September 30, 2015 as compared to a net loss of $199,565 and $1,950,764 for the same periods in 2014. The increase in loss of $1,215,593 for the three months ended September 30, 2015 as compared to 2014 was primarily due to the loss on settlement of convertible promissory notes of $875,804, increase in fair value of embedded conversion option and warrant liability expense of $406,986, and increase in interest expense of $258,865. The increase in loss was offset by reduction in general and administrative expenses of $269,521, reduction in depreciation, depletion and amortization of $14,972, reduction in oil and gas production costs of $117,928 due to sale of oil and gas leases in Rogers County and Nowata County in Oklahoma, reduction in loss applicable to noncontrolling interest of $53,101and increase in preferred stock dividend of $13,230. The increase in loss applicable to the Company’s common stockholders of $448,493 for the nine months ended September 30, 2015 was primarily due to increase in losses of $732,058 on settlement of promissory notes, and increase in loss of $1,090,074 due to change in fair value of embedded conversion option and warrant liability expense. The increase in loss was offset by reduction in depreciation, depletion and amortization of $64,514 due to the sale of oil and gas leases in January 2015 located in Rogers County and Nowata County in Oklahoma, reduction in general and administrative expenses of $536,472, reduction in oil and gas production costs of $415,916 due to sale of oil and gas leases in Oklahoma, reduction in interest expense of $792,268 due to settlement of promissory notes, increase in preferred stock dividend of $48,811, and reduction in loss applicable to noncontrolling interest of $95,072.

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Revenues

Revenues for the three and nine months periods ended September 30, 2015 were $18,452 and $77,801 as compared to $131,660 and $313,782 for the same comparable periods in 2014. Revenues for the three months ended September 2015 primarily consisted of gas sales of $18,453 from Farwell and Puckett leases in Kansas, as compared to revenues for the three months ended September 30, 2014 which consisted of oil sales of $78,611 from Volunteer, Lander and Puckett leases in Kansas, Winchester II and Anna lease in Oklahoma, and $51,649 in gas sales from Farwell and Puckett leases in Kansas, and Moab leases in Oklahoma, and $1,400 from disposal of salt water.

Revenues for the nine months ended September 30, 2015 consisted of oil sales of $6,469 from Farwell lease in Kansas and Winchester II lease in Oklahoma, $69,232 in gas sales from Farwell and Puckett leases in Kansas, and $2,100 from disposal of salt water. Revenues decreased by $113,207 for the three months ended September 30, 2015 and $235,981 for the nine months ended September 30, 2015 as compared to the comparable prior year periods primarily due to the Company assigning its ownership interest in Volunteer and Lander leases to settle its debt in August 2014 and sale of Rogers County, Oklahoma and Nowata County, Oklahoma oil and gas leases in January 2015.

Operating Expenses

Operating expenses for the three and nine months ended September 30, 2015 were $276,998 and $1,223,430 as compared to $669,467 and $2,176,590 for the same comparable periods in 2014. Operating expenses consisted of depreciation, depletion and amortization expense, general and administrative expense, impairment expense, loss on sale of oil and gas leases, and oil and gas production expense.

Depreciation, depletion and amortization expense for the three and nine months ended September 30, 2015 was $3,932 and $12,271 as compared to $18,904 and $76,785 for the same periods ended in 2014. Depreciation expense decreased by $6,315 and $16,839 for the three and nine months periods ended in September 2015 as compared to the same comparable period in 2014 as a result of the Company selling in January 2015, oil and well equipment placed in oil and gas leases in Rogers County and Nowata County in Oklahoma. Depletion expense decreased by $3,375 and $9,970 for the three and nine months ended September 30, 2015 as compared to the same comparable periods in 2014 primarily due to the assigning of Company’s ownership interest in oil and gas properties in Rogers County and Nowata County in Oklahoma resulting in reduced production of oil and gas. Amortization expense on the unproved oil and gas properties for the three and nine months periods ended September 30, 2015 was $0 since the management took a conservation position in January 2013 to amortize the lease acquisition costs of all unproved oil and gas properties over the remaining lease term. No amortization expense was recorded on unproved mineral properties for the three and nine months periods ended September 30, 2015 since the lease acquisition cost of mineral properties was fully amortized in 2014. We recorded amortization expense on unproved mineral properties of $5,449 and $38,143 for the three months and nine months periods ended September 30, 2014. For the three and nine months ended September 30, 2015, we recorded $156 and $438 as amortization cost as the cost of plugging oil wells over the remaining estimated life of the wells. No such amortization expense of cost to plug wells was recorded in 2014.

General and administrative expenses (G&A) for the three and nine months ended September 30, 2015 were $236,411 and $1,051,271 as compared to $505,932 and $1,587,743 for the same periods ended September 30, 2014. G&A expenses decreased by $269,521 and $536,472 for the three and nine months periods ended September 30, 2015 as compared to the same comparable periods in 2014 as the Company recorded a reduction in commission expense in fees for raising capital, a reduction in insurance expense for directors and officers insurance coverage, reduction in business advisory, consulting, accounting, legal and professional fees, reduction in officer’s compensation expense, reduction in marketing fees, and a reduction in shareholders services fees.

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Impairment expense for the three and nine months ended September 30, 2015 was $9,952 and $29,856 as compared to $0 and $0 for the same periods in 2014. Since the oil and gas properties are classified as unproved properties, management took a conservative position to impair the lease acquisition costs of unproved properties over their remaining lease term and recorded the impairment expense.

On January 22, 2015, the Company entered into an agreement with a third party to assigns all of its rights and ownership interests in Rogers County and Nowata County leases in Oklahoma for $100,000. The transaction closed on March 1, 2015 and the Company received $90,000 of the sale price on March 3, 2015. The remaining balance of $10,000 will be received subject to completion of takeover of the leases. The Company recorded a loss of $0 and $33,886 for the three and nine months periods ended September 30, 2015 on assigning its ownership interest in oil & gas properties located in Rogers County and Nowata County in Oklahoma.

Oil and gas production expenses for the three and nine months ended September 30, 2015 were $26,703 and $96,146, as compared to $144,631 and $512,062 for the same periods in 2014. Oil and gas production expenses decreased by $117,928 and $415,916 for the three and nine months ended September 30, 2015 as compared to the same comparable period in 2014, primarily because the Company incurred expenses on exploration, drilling and production costs of new wells associated with Farwell gas lease, and Volunteer and Landers oil lease during the three and nine months ended September 30, 2014 and did not incur any drilling and exploration costs for the same comparable months ended in 2015 as the Company assigned its ownership interest in Volunteer and Landers lease in August 2014 to settle its debt on a convertible promissory Note, and sold its ownership interest in oil & gas properties located in Rogers County and Nowata County in Oklahoma in January 2015.

Interest expense for the three and nine months ended September 30, 2015 was $167,725 and $496,349 as compared to ($91,140) and $1,288,617 for the same comparable periods ended in 2014. Interest expense decreased by $258,865 and $792,268 for the three and nine months periods ended September 30, 2015 as compared to the same comparable periods in 2014 as a result of (i) interest expense of $39,932 and $122,522 for the three and nine months ended September 30, 2015 as compared to $57,840 and $182,407 for the same comparable periods ended in 2014, on the promissory notes and convertible notes payable executed by us for our working capital needs and acquisitions, (ii) interest expense of $1,741 and $1,741 for the three and nine months ended September 30, 2015 as compared to $87,674 and $289,599 for the same periods ended in 2014 related to the amortization of original issue discount, (iii) interest expense of $14,496 and $14,496 for the three and nine months periods ended September 30, 2015 as compared to $(435,820) and $69,264 for the same periods in 2014 related to the amortization of the debt discount due to embedded conversion option liabilities on convertible Notes, (iv) interest expense of $6,742 and $118,304 for the three and nine months periods ended September 30, 2015 as compared to $38,130 and $137,888 for the same periods in 2014 related to the amortization of debt issue costs, and (v) interest expense of $0 and $0 for the three and nine months ended September 30, 2015 as compared to $161,036 and $609,459 for the same periods in 2014 relating to the amortization of debt discount on warrants and lender fees on a convertible Note

The convertible promissory notes issued by us on (i) June 5, 2013 for $75,000, (ii) September 26, 2013 for $50,000, (iii) November 6, 2013 for $1,232,000, and (iv) November 5, 2013 promissory note to a stockholder for $1,500,000 with warrants attached, and (v) September 8, 2015 for $55,000, qualifies for derivative accounting treatment due to the variable conversion formula. As a result, we recorded an expense of $102,184 for the three months ended September 30, 2015 and an income of $41,167 for the nine months ended September 30, 2015 due to a change in the fair value of the liabilities for the embedded conversion option derivative instrument, as compared to an income due to a change in the fair value of the liabilities for the embedded conversion option derivative instrument of $304,802 and $1,131,241 for the same periods in 2014. The change in the fair value of embedded conversion option and warrant liability was included in other income (expenses) as of September 30, 2015 and 2014, respectively.

Preferred stock dividend expense for the three and nine months ended September 30, 2015 was $24,433 and $62,393 as compared to $11,204 and $13,582 for the same periods in 2014. Dividend was calculated at an annual rate of 7% per annum in the first year and 10% per annum in the second year for the contributions received from the preferred stockholders. The Company has received in cash $287,000 from the sale of preferred shares for the nine months ended September 30, 2015 and $635,000 for the same comparable period in 2014. On August 6, 2015, the Company issued 1,270,000 shares of common stock valued at their fair value of $60,960 to settle the preferred stock dividend payable to Series A Preferred shareholders and recorded a loss of $13,112 upon settlement of preferred stock dividend to Series A Preferred Stockholders for the three months ended September 30, 2015. 

Table of Contents  29

Our 51% owned subsidiary 2013 NWE Drilling Program 1 LP recorded a loss of $58,309 and $236,935 for the three and nine months periods ended September 30, 2015 as compared to a loss of $166,678 and $430,960 for the same periods ended in 2014. We allocated limited partnership’s loss of $28,571 and $116,098 for the three months and nine months ended September 30, 2015 and a loss of $81,672 and $211,170 for the same comparable periods in 2014 to its noncontrolling member in our consolidated financial statements as of September 30, 2015 and 2014, respectively. As a result, the noncontrolling interest of the limited partner was reduced to $147,797 at September 30, 2015.

Liquidity and Capital Resources

Cash and cash equivalents were $60,900 at September 30, 2015 as compared to $11,000 at December 31, 2014. As shown in the accompanying consolidated financial statements, we recorded a loss of $2,399,257 applicable to New Western Energy Corporation common stockholders for the nine months ended September 30, 2015 as compared to a loss of $1,950,764 for the same period in 2014. At September 30, 2015, our working capital deficit was $1,173,329. Net cash used in operating activities for the nine months ended September 30, 2015 was $872,131. These factors and our ability to meet our debt obligations from current operations, and the need to raise additional capital to accomplish our objectives, raises doubt about our ability to continue as a going concern.

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

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

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

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

Table of Contents  30

• Curtail our operations significantly

• Sell our oil, gas and mineral leases

• Seek arrangements with strategic partners or other parties that may require us to relinquish significant rights to oil, gas and mineral leases or markets, or

• Explore other strategic alternatives including a merger or sale of our Company.

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2015 was $872,131 which resulted primarily from our net loss of $2,399,257, depreciation, depletion and amortization expense of $12,271, impairment of oil and gas properties of $29,856, amortization of debt discount of $181,647, amortization and accretion of asset retirement obligations of $1,750, amortization of deferred debt issuance cost of $21,994, amortization of embedded conversion option liability of $1,582, loss applicable to non-controlling interest of $116,098, loss on sale of oil and gas property and related equipment of $33,886, gain on settlement of a note payable of $28,690, loss on conversion of preferred stock dividend to equity of $13,112, loss on conversion of promissory notes by issuance of cashless stock options and common stock of $875,804, change in the fair value of embedded conversion option liabilities of $73,281, change in fair value of warrant liability of $114,448, costs incurred in conjunction with issuance of convertible promissory notes of $183,103, stock based investment expense of $27,600, decrease in accounts receivable of $25,039, decrease in inventory of $3,464, decrease in prepaid expenses and other current assets of $77,207, decrease in accounts payable of $5,517, increase in accrued expenses of $107,761, and increase in accrued interest payable of $122,522.

Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2015 was $46,531 primarily due to cash paid for purchase of property and equipment of $1,502, cash proceeds of $90,000 received from sale of oil and gas property and related equipment in Rogers and Nowata Counties in Oklahoma, cash paid for security deposit for bonds and rent of $20,262, cash received from a note receivable of $38,336, and cash paid for paid for acquisition of oil and gas properties of $60,041.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2015 was $875,500 primarily due to cash received from sale of preferred stock of $287,000, cash received from a promissory note of $55,000, cash received from convertible promissory notes of $238,500, and cash repayment of a promissory note payable of $50,000 to Pioneer Oil Development, and cash received from sale of 3 Units to limited partners in NWE Oil and Gas Program #1 LP for $345,000.

As a result of the above activities, we experienced a net increase in cash of $49,900 for the nine months ended September 30, 2015. Our ability to continue as a going concern is still dependent on our success in obtaining additional financing from investors or from sale of our common shares.

Off-balance Sheet Arrangements

Since our inception through September 30, 2015, we have not engaged in any off-balance sheet arrangements as defined in Item 303(c) of the SEC's Regulation S-B.

Item 3. Quantitative and Qualitative Disclosures About Market Risks.

Not Applicable.

Table of Contents  31

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

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

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of September 30, 2015 were ineffective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no material changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the quarterly period ended September 30, 2015.

Management has identified a material weakness as follows: we lack the expertise in determining the classification of oil and gas reserves.

To address and remediate this material weakness set forth above, management intends to retain the services of an oil and gas expert to help identify and categorize the types of oil and gas reserves for proper disclosure in accordance with the SEC’s Rule 4-10(a) of Regulation S-X and its Compliance and Disclosure Interpretations of the Oil and Gas Rules.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents  32

PART II

Item 1. Legal Proceedings.

We are not a party to any legal proceedings.

Item 1A. Risk Factors.

Not Applicable

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

None

Item 3.

Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

None

Item 5. Other Information.

None

Item 6. Exhibits.

(a) Exhibits.

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

Table of Contents  33

SIGNATURES

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

	NEW WESTERN ENERGY CORPORATION
Date: November 16, 2015	/s/ Javan Khazali
	Javan Khazali, President (Principal Executive Officer)
Date: November 16, 2015	/s/ Haris Baha
	Haris Baha, Chief Financial Officer (Principal Financial and Accounting Officer)

Table of Contents  34

 EXHIBIT INDEX

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

Table of Contents  35

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Javan Khazali, certify that:

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

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

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

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

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

/s/ Javan Khazali

President (Principal Executive Officer)

November 16, 2015

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Haris Baha, certify that:

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

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

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

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

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

/s/ Haris Baha

Chief Financial Officer

November 16, 2015

EX-32.1

EXHIBIT 32.1

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

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

In connection with the report of New Western Energy Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

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

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

/s/ Javan Khazali

Javan Khazali

President (Principal Executive Officer)

November 16, 2015

/s/ Haris Baha

Chief Financial Officer

November 16, 2015

XML

9. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

Dec. 31, 2014

Jan. 06, 2014

Commitments and contingencies (Note 9)

Compensation Expense

$ 63,000

$ 60,000

$ 189,000

$ 180,000

Employment Signing Bonus

$ 50,000

Total Minimum Compensation Commitments, Current Year

$ 240,000

Total Minimum Compensation Commitments, Year Two

252,000

Total Minimum Compensation Commitments, Year Three

264,600

Total Minimum Compensation Commitments, Year Four

277,830

Total Minimum Compensation Commitments, Year Five

$ 291,722

Contingency Detail

On November 12, 2013, a complaint was filed in the District Court of Taylor County, Texas, captioned Brent and Brook Hatchett v. New Western Energy Corporation, Case No. 25,863-B. The complaint asserts breach of contract on the part of the Company relating to a Plan and Agreement of Reorganization (the “Contract”) wherein the Company acquired all of the issued and outstanding capital stock of Royal Texan Energy Co. from the Hatchetts. The Hatchetts are seeking the remaining consideration of 600,000 common shares of New Western Energy Corporation payable to them for the acquisition by New Western Energy Corporation of Royal Texan Energy Co. in addition to general damages.

 On February 10, 2015, the Company entered into a Settlement Agreement and Mutual Release of Claims (the “Agreement”) with Brent and Brook Hatchett in full settlement of all legal actions and disputes between the parties, including the dismissal with prejudice of the pending lawsuit in Texas. In accordance with the settlement, on March 4, 2015, the Company (a) agreed to cancel 600,000 shares of previously issued but not distributed shares and returning it to authorized but unissued status, thus reducing the Company’s current number of shares outstanding by 600,000 shares (See Note 10), (b) agreed to pay 30% of the proceeds from sale of Royal Texan Energy oil and gas properties in Texas, and (c) agreed to get the $50,000 bond at the railroad commission reduced to $25,000 and thereafter post a bond of $25,000 to release the current bond of Bill Windhem and Brent Hatchett. The Company has not issued and distributed to Hatchetts the remaining 100,000 shares of common stock as of the date of this report. The Company has not posted a bond of $25,000 to release the current bond of Mr. Windhem and Mr. Brent Hatchett.

Securities Purchase Agreement, Shares

5,000,000

XML

5. NOTE RECEIVABLE (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014	Mar. 30, 2014
Receivables [Abstract]
Short Term Advance		$ 65,000	$ 75,000
Settlement Payment	$ 38,336

XML

1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Working Capital Deficit	$ (1,173,329)
Net Loss Applicable to New Western Energy Corporation common stockholders	$ 2,399,257	$ 1,950,764
Limited Partnership Interests for Sale	20
Limited Partnership Interest Purchasable	2.45%
Limited Partnership Purchase Price	$ 115,000
Limited Partnership Units Sold	3
Limited Partnership Interest Sold	7.35%
Net Cash Used in Operating Activities	$ (872,131)	$ (1,680,632)
New Western Montana
Ownership			51.00%
Forward Energy
Ownership			49.00%

XML

7. CONVERTIBLE DEBT (Details Narrative) - USD ($)

3 Months Ended

9 Months Ended

Sep. 30, 2015

Sep. 30, 2015

Mar. 31, 2015

Sep. 30, 2014

Sep. 30, 2015

Sep. 30, 2014

May. 29, 2015

Mar. 26, 2015

Dec. 31, 2014

Interest Expense

$ 36,063

$ 38,888

$ 116,467

$ 115,716

Note 1

Promissory Note, Draw

$ 75,000

Promissory Note, Legal Fees

$ 4,000

Promissory Note, Principal Sum

$ 79,000

Promissory Note, Interest Rate

8.00%

Net Carrying Value

79,000

$ 79,000

79,000

$ 0

Premium

96,310

96,310

96,310

$ 57,207

Interest Expense

1,593

2,822

Promissory Note Disclosure

The NOTE 1 may not be prepaid in whole or in part. No amount of principal or interest on NOTE 1 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the NOTE 1 is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this NOTE 1 and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this NOTE 1 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this NOTE 1 in excess of that portion of the NOTE 1 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this NOTE 1 with respect to which the determination of this provision is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date.

Note 2

Promissory Note, Draw

43,500

Promissory Note, Legal Fees

10,500

Promissory Note, Principal Sum

$ 54,000

Promissory Note, Interest Rate

8.00%

Net Carrying Value

54,000

54,000

54,000

$ 0

Premium

96,310

96,310

96,310

$ 39,103

Interest Expense

$ 1,089

1,408

Promissory Note Disclosure

The NOTE 2 may not be prepaid in whole or in part. No amount of principal or interest on NOTE 2 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the NOTE 2 is fully paid and shall be computed n the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this NOTE 2 and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this NOTE 2 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this NOTE 2 in excess of that portion of the NOTE 2 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this NOTE 2 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date.

Note 3

Promissory Note, Draw

45,000

Promissory Note, Legal Fees

7,000

Promissory Note, Principal Sum

$ 53,500

$ 53,500

$ 53,500

Promissory Note, Interest Rate

6.00%

6.00%

6.00%

Premium

$ 7,000

$ 7,000

$ 7,000

Initial Embedded Conversion Feature

73,963

Interest Expense

$ 1,477

Promissory Note Disclosure

The Note 3 may be prepaid pursuant to the following schedule: 1) Payment on Day 1-90 will result in 125% of the face value being owed 2) Payment on Day 91-180 will result in 145% of the face value being owed. Interest after the date of issuance shall be computed on the basis of a 365-day year and the actual number of days elapsed. The Holder shall have the right on or after 180 days from the date of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of common stock, as such common stock exists on the issue date, or any shares of capital stock or other securities of the Borrower into which such common stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided, however, that in no event shall the holder be entitled to convert any portion of this Note 3 in excess of that portion of this Note 3 upon conversion of which the sum of (1) the number of shares of common stock beneficially owned by the holder and its affiliates (other than shares of common stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Note 3 or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 3 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the outstanding shares of common stock. The shares to be issued pursuant to conversions are subject to the legal opinion letter, customary and satisfactory to parties hereto as provided by the holder.) The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the lowest Trading Price for the common stock during the fifteen trading day period ending on the latest complete trading day prior to the Conversion Date.

The net carrying value of Note 3 at September 30, 2015 was $53,500. The Company recorded a premium of $38,741 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015.

Note 4

Promissory Note, Draw

$ 25,000

Promissory Note, Legal Fees

2,000

Promissory Note, Principal Sum

$ 27,000

$ 27,000

$ 27,000

Promissory Note, Interest Rate

8.00%

8.00%

8.00%

Premium

$ 2,000

$ 2,000

$ 2,000

Initial Embedded Conversion Feature

59,671

Interest Expense

$ 121

Promissory Note Disclosure

The Note 4 may be prepaid with the following penalties: (i) < 30 days – 118% of principal plus accrued interest, (ii) 31-60 days – 124% of principal plus accrued interest, (iii) 61-90 days – 130% of principal plus accrued interest, (iv) 91-120 days – 136% of principal plus accrued interest, (v) 121-150 days – 142% of principal plus accrued interest, (vi) 151-180 days – 148% of principal plus accrued interest. Interest shall be paid by the Company in common stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for interest shares based on an agreed formula. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice. The Note 4 may not be prepaid after the 180^th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void. The holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock at a price (“Conversion Price”) for each share of common stock equal to 58% of the lowest trading of the common stock as reported on the National Quotation Bureau OTCQB exchange for the 15 prior trading days including the day upon which a notice of conversion is received by the Company. To the extent the Conversion Price of the Company’s common stock closed below the par value per share, the Company will take steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In no event shall the holder be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the holder and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company.

The net carrying value of Note 4 at September 30, 2015 was $27,000. The Company recorded a premium of $19,552 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. For the three months ended September 30, 2015, the Company has recognized interest expense of (1) $121 related to the amortization of the OID, and (2) $130 on the principal balance as it related to this Note 4.

Note 5

Promissory Note, Draw

$ 50,000

Promissory Note, Legal Fees

25,000

Promissory Note, Principal Sum

225,000

225,000

225,000

Premium

5,000

$ 5,000

$ 5,000

Initial Embedded Conversion Feature

112,082

Interest Expense

$ 144

Promissory Note Disclosure

The Company may repay Note 5 at any time on or before 90 days from the Effective Date, after which the Company may not make further payments on this Note 5 prior to the Maturity Date without written approval from the Investor. If the Company repays a payment of consideration on or before 90 days from the Effective Date of that payment, the interest rate on that payment of consideration shall be 0%. If the Company does not repay a payment of consideration on or before 90 days from the Effective Date, a one-time interest charge of 12% shall be applied to the principal sum. Any interest payable is in addition to the OID, and that OID remains payable regardless of time and manner of payment by the Company. The investor has the right, at any time after the Effective Date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of fully paid and non-assessable shares of common stock of the Company as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. All conversions shall be cashless and not require further payment from the investor. If no objection is delivered from the Company to the investor regarding any variable or calculation of the conversion notice within 24 hours of delivery of the conversion notice, the Company shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Company shall deliver the shares from any conversion to the investor within three (3) business days of conversion notice delivery.

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4. OIL AND GAS PROPERTIES

9 Months Ended

Sep. 30, 2015

Extractive Industries [Abstract]

4. OIL AND GAS PROPERTIES

NOTE 4: OIL AND GAS PROPERTIES

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

Name of the Property	Type		September 30, 2015 (Unaudited)			December 31, 2014
Rogers County, OK - Glass Lease		Oil	$	-		$	221,000
Rogers County, OK - Phillips Lease		Oil		-			130,000
Rogers County, OK (9) Leases		Oil		-			378,600
Chautauqua County, KS - B&W Ranch Lease		Oil & Gas		75,000			75,000
Chautauqua County, KS - Charles & Nancy Smith Lease		Oil & Gas		24,750			24,750
Chautauqua County, KS - Lloyd & Patricia Fields Lease		Oil & Gas		14,400			14,400
Chautauqua County, KS - Rinck Lease		Oil & Gas		24,750			24,750
Osage County, OK – Branson Leases		Oil & Gas		40,000			-
Osage County, OK – (3) Renco Leases		Oil & Gas		185,000			-
Wilson County, KS – Farwell, Puckett & Farwell/Eagle Lease		Oil & Gas		251,208			251,208
Doug & Wendy Strauch – Brown Lease, Montana		Oil & Gas		5,040			-
Nowata County, OK (4) Leases		Gas		-			35,000
Shackelford County, TX – Terry Heirs		Oil		9,722			9,722
				629,870			1,164,430
Asset Retirement Obligation				4,563			4,000
Impairment allowance				(160,867	)		(919,603	)
Total			$	473,566		$	248,827

There were no exploration well costs capitalized for more than one year following the completion of drilling.

The following oil and gas leases were acquired and sold during the nine months ended September 30, 2015.

Acquisition of Oil and Gas Leases in Montana

In February 2015, the Company entered into a Lease Purchase Agreement with a third party to acquire oil and gas lease properties, wells and equipment located in Counties of Yellowstone, Golden Valley, Treasure, Musselshell and surrounding Counties of the Crooked Creek Field within South Central Montana. The Company has paid a purchase consideration of $4,000 to the third party for such acquisition of leases. On May 26, 2015, the Company extended the terms of the Lease Purchase Agreement and paid an additional consideration of $1,040 to the third party as additional acquisition cost. The Company has not started any exploration and production as of September 30, 2015.

Assignment of Rogers County and Nowata County, Oklahoma Leases

Glass Lease, and (9) Leases- Jackson Lease, Anna Lease, Kerrigan Lease, Everett Lease, Jameson Lease, Thomas Lease, Winchester Lease, Winchester II Lease, Roberts Lease, Roebuck Lease, Taylor Lease and Walker Lease (“Leases”)

On January 22, 2015, the Company entered into an agreement with a third party to assigns all of its rights and ownership interests in these Leases for $100,000. The transaction closed on March 1, 2015 and the Company has received $90,000 of the sale price on March 3, 2015. The remaining balance of $10,000 will be received subject to completion of takeover of the Leases. As a result of assignment of these Leases, the Company has recorded a loss of $33,886 on assignment for the nine months ended September 30, 2015.

Acquisition of Branson Leases in Osage County, Oklahoma

On August 1, 2015, the Company entered into a Purchase of Leases Agreement (the “Agreement”) to purchase from PEMCO, LLC, an Oklahoma Limited Liability Company, the owner and operator of 17 Quarter Sections of oil and gas leases in Osage County, Oklahoma, (the “Branson Leases”) together with equipment, machinery, pipes and tools, subject to completion of due diligence period and certain agreed terms. PEMCO granted the Company the right to perform due diligence prior to the purchase of the Assets. The Company agreed to pay PEMCO a consideration of $40,000 as Initial Payment upon execution of the Agreement, and for the extension period, if applicable, $10,000 as Extension Payment within 10 days prior to the end of the initial period. The initial due diligence commenced on August 1, 2015 and shall continue for a period of 60 days, and may be extended by the Company for an additional 30 days consecutive after the expiration of the initial due diligence period. On July 31, 2015, the Company paid to PEMCO $40,000 as Initial payment for the purchase of leases. The Company has completed its due diligence as of September 30, 2015 and closed the purchase. The Company has not started any exploration and production as of September 30, 2015.

Acquisition of Renco Leases in Osage County, Oklahoma

On August 31, 2015, the Company entered into a Lease Purchase Agreement with Renco Energy, Inc., an Oklahoma corporation, to purchase three (3) 160 acre oil and gas leases located in Osage County, Oklahoma, together with equipment, machinery, pipes and tools located thereon for a purchase consideration of $185,000. The agreement required the purchase price to be paid $15,000 in cash, assumption of estimated $55,000 in debt owed by Renco Energy to third parties, and the balance of $115,000 in the form of a promissory Note bearing 5% per annum interest. The principal sum of the promissory Note and interest shall be payable in ten installments of $11,500 each plus accrued interest, commencing on with the first installment on October 15, 2015 and on the 15^th day of each month thereafter until paid in full. The transaction closed on September 1, 2015. Upon closing, the Company made a cash payment of $15,000, executed a promissory Note of $115,000 and is currently in negotiations to settle the third parties debt of $55,000. The Company has not started any exploration and productions as of September 30, 2015.

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3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES - Noncontrolling Interest in Consolidated Subsidiaries (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2013
Beginning Balance	$ 263,895
Contribution by noncontrolling interest member			$ 650,000
Ending Balance	$ 492,797
2013 NWE Drilling Program 1 LP
Beginning Balance		$ 511,942
Contribution by noncontrolling interest member
Net loss applicable to noncontrolling interest		$ (211,170)
Ending Balance	$ 147,797	$ 300,772	$ 511,942
NWE Oil and Gas Program 1 LP
Beginning Balance
Contribution by noncontrolling interest member	$ 345,000
Ending Balance	$ 345,000

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	Sep. 30, 2015 USD ($) shares
Accounting Policies [Abstract]
Warrants Outstanding, Common Shares	18,860,920
Stock Options Outstanding	3,000,000
Reduction of Assets and Liabilities, Recent Accounting Pronouncements | $	$ (12,000)

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3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARY (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2013	Dec. 31, 2014	Mar. 18, 2013
Cash Funding received					$ 650,000
Contribution to partnership					6,500
Fixed fee revenue per month					$ 250
Noncontrolling Interest of Limited Partner	$ 491,536		$ 491,536			$ 263,895
Limited Partnership Interests for Sale	20		20
Limited Partnership Interest Purchasable			2.45%
Limited Partnership Purchase Price	$ 115,000		$ 115,000
Limited Partnership Units Sold			3
Limited Partnership Interest Sold			7.35%
2013 NWE Drilling Program 1 LP
Ownership							51.00%
Cash Funding received
Loss on partnership	$ (62,504)	$ (83,114)	$ (236,935)	$ (430,960)
Allocation of Limited Partnership's Loss	30,627	$ 40,725	116,098	$ 211,170
Noncontrolling Interest of Limited Partner	$ 147,797		147,797
NWE Oil and Gas Program 1 LP
Cash Funding received			$ 345,000
Limited Partnership Interests for Sale	20		20
Limited Partnership Interest Purchasable			2.45%
Limited Partnership Purchase Price	$ 115,000		$ 115,000
Limited Partnership Units Sold			3
Limited Partnership Interest Sold			7.35%

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4. OIL AND GAS PROPERTIES - Oil and Gas Properties (Details) - USD ($)	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Unproved Properties	$ 629,870	$ 1,164,430
Asset Retirement Obligation	4,563	4,000
Impairment allowance	160,867	919,603
Unproved Properties, Net	$ 473,566	244,827
Rogers County - Glass Lease
Type	Oil
Unproved Properties		221,000
Rogers County - Phillips Lease
Type	Oil
Unproved Properties		130,000
Rogers County - Nine Leases
Type	Oil
Unproved Properties		378,600
Chautauqua County BW Ranch Lease
Type	Oil & Gas
Unproved Properties	$ 75,000	75,000
Chautauqua County Charles and Nancy Smith Lease
Type	Oil & Gas
Unproved Properties	$ 24,750	24,750
Chautauqua County Lloyd and Patricia Fields Lease
Type	Oil & Gas
Unproved Properties	$ 14,400	14,400
Chautauqua County Rinck Lease
Type	Oil & Gas
Unproved Properties	$ 24,750	24,750
Wilson County Farwell Puckett and Farwell Eagle Lease
Type	Oil & Gas
Unproved Properties	$ 251,208	$ 251,208
Doug and Wendy Strauch Montana Lease
Type	Oil
Unproved Properties	$ 5,040
Nowata County Four Leases
Type	Gas
Unproved Properties		$ 35,000
Shackelford County Terry Heirs Lease
Type	Oil
Unproved Properties	$ 9,722	$ 9,722
Osage County Branson Leases
Type	Oil & Gas
Unproved Properties	$ 40,000
Osage County 3 Renco Leases
Type	Oil & Gas
Unproved Properties	$ 185,000

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3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES

9 Months Ended

Sep. 30, 2015

Noncontrolling Interest [Abstract]

3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES

NOTE 3: NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES

2013 NWE Drilling Program 1 LP

On March 18, 2013, the Company formed a new entity 2013 NWE Drilling Program 1 LP (the “Limited Partnership”). The Limited Partnership was specifically formed to drill three oil wells on the Company’s B&W Ranch lease in the Chautauqua County, Kansas. The Company became the General Partner and owns 51% of the Limited Partnership. The Limited Partnership closed upon receiving a cash contribution of $650,000 from one non-affiliate shareholder of the Company as the Limited Partner. The Company’s contribution as the General Partner was $6,500 in cash and giving the rights and commitment to the Limited Partnership to drill three oil wells on the Company’s B&W Ranch lease. Pursuant to the terms of the partnership agreement, the Limited Partner will be entitled to receive 70% of the net income and cash available for distributions until such time an amount equal to the Limited Partner’s initial investment plus a 50% return on such initial investment is received by the Limited Partner. Thereafter, net income and cash available for distributions shall be allocated 20% to the Limited Partner and 80% to the General Partner. The Limited Partnership entered into turnkey drilling agreement with the managing General Partner, to drill and complete the partnership wells. The turnkey price included all ordinary costs of drilling, testing and completing the wells. When the wells begin producing, the General Partner, as operator of the wells, will be reimbursed at actual cost for all direct expenses incurred on behalf of the Limited Partnership, and shall receive a fixed fee of $250 per well per month for supervising, operating and maintaining the wells during production operations.

The Limited Partnership recorded a loss of $58,309 and $236,935 for the three months and nine months periods ended September 30, 2015 as compared to a loss of $166,678 and $430,960 for the same comparable periods in 2014. The Company allocated $28,571 and $116,098 of the limited partnership’s loss for the three months and nine months periods ended September 30, 2015, and $81,672 and $211,170 of the limited partnership’s loss for the three months and nine months periods ended September 30, 2014 to its noncontrolling member in its consolidated financial statements as of September 30, 2015 and 2014, respectively. As a result, the noncontrolling interest of the limited partner was reduced to $147,797 at September 30, 2015.

The following provides a summary of activity in the noncontrolling interest (“NCI”) in Limited Partnership, a consolidated subsidiary account for the nine months ended September 30, 2015 and 2014:

Balance NCI at December 31, 2013	$	511,942
Contribution by noncontrolling interest		—
Net loss applicable to noncontrolling interest for nine months ended September 30, 2014 – 49%		(211,170	)
Balance NCI at September 30, 2014	$	300,772
Balance NCI at December 31, 2014	$	263,895
Contribution by noncontrolling interest		—
Net loss applicable to noncontrolling interest for nine months ended September 30, 2015 – 49%		(116,098	)
Balance NCI at September 30, 2015	$	147,797

NWE Oil & Gas Program #1 LP

On April 9, 2015, the Company formed an entity NWE Oil & Gas Program #1 LP, a California limited partnership (the “California Limited Partnership”), for the sole purpose of (a) acquiring and drilling, managing, owning, re-working and operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) new oil and gas wells. The Company became the General Partner and shall own 21 Units which shall represent 51% ownership of the California Limited Partnership. The Limited Partners shall own no more than 20 Units which shall represent 49% of the California Limited Partnership. As of June 30, 2015, the Company received cash contributions of $345,000 from three non-affiliated limited partners from the sale of three (3) Units of $115,000 each. The Company is obligated to contribute as General Partner $23,000 in cash for its ownership interest and the Company has not made its cash contribution as of September 30, 2015. The partnership commenced on April 9, 2015 and will continue for a term of 25 years unless sooner terminated in accordance with the terms of the agreement. Pursuant to the terms of the partnership agreement, the net income and distributions of the partnership shall be allocated 70% to the Limited Partners and 30% to the General Partner, until the Limited Partners has received in cash distributions an amount equal to their initial capital plus a 30% return on their original invested capital. Thereafter, net income and distributions shall be allocated 30% to the Limited Partners and 70% to the General Partner. Any net proceeds from the sale of any of the leases owned by the partnership shall be distributed 49% to the Limited Partners in accordance with each Limited Partner’s capital account and 51% to the General Partner.

The following provides a summary of activity in the noncontrolling interest (“NCI”) in California Limited Partnership, a consolidated subsidiary account for the nine months ended September 30, 2015:

Balance NCI at December 31, 2014	$	—
Contributions by NCI		345,000
Balance NCI at September 30, 2015	$	345,000

Total noncontrolling interest in consolidated subsidiaries amounted to $492,797 and $263,895 as of September 30, 2015 and December 31, 2014, respectively.

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4. OIL AND GAS PROPERTIES (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended
	Mar. 31, 2015	Sep. 30, 2015
Doug and Wendy Strauch Montana Lease
Payment to Acquire Oil and Gas Property	$ 4,000	$ 1,040
Rogers County - Nine Leases
Proceeds from Sale of Oil and Gas Property		100,000
Gain on Sale of Oil and Gas Property		(33,886)
Osage County Branson Leases
Payment to Acquire Oil and Gas Property		40,000
Osage County 3 Renco Leases
Payment to Acquire Oil and Gas Property		$ 185,000

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10. STOCKHOLDERS EQUITY (Details Narrative) - USD ($)

9 Months Ended

Sep. 30, 2015

Sep. 30, 2014

Mar. 31, 2015

Dec. 31, 2014

Dec. 31, 2013

Preferred Stock Par Value

$ 0.0001

$ 0.0001

$ 0.0001

$ 0.0001

$ 0.0001

Preferred Stock Shares Authorized

5,000,000

5,000,000

5,000,000

5,000,000

5,000,000

Preferred Stock Shares Issued

351,500

254,000

351,500

294,100

0

Preferred Stock Shares Outstanding

351,500

254,000

351,500

294,100

0

Common Stock Par Value

$ 0.0001

$ 0.0001

$ 0.0001

$ 0.0001

$ 0.0001

Common Stock Shares Authorized

250,000,000

250,000,000

250,000,000

250,000,000

250,000,000

Common Stock Shares Issued

77,357,086

74,806,448

75,742,086

76,242,086

72,185,866

Common Stock Shares Outstanding

77,357,086

74,806,448

75,742,086

76,242,086

72,185,866

Units Offered in Private Placement

1,500,000

Goal of Private placement

$ 7,500,000

Minimum Investment, Units

5,000

Minimum Investment, Value

$ 25,000

Private Placement, Unit Description

Each Unit consists of two (2) shares of Series A 7% Convertible Preferred Stock, par value $0.0001 per share and one (1) redeemable Class F Warrant of the Company to purchase ten (10) shares of common stock. Each share of Series A Preferred Stock pays a 7% annual dividend for the first year ending March 31, 2015 and thereafter, a 10% dividend payable, at the option the Company, in cash or in the Company’s common stock.

Exercise Price

$ 0.30

Redemption Price

$ 0.05

Shares Sold in Private Placement

127,000

Consideration Received during Private Placement

$ 635,000

Stock Options Outstanding, Shares

3,000,000

3,000,000

Limited Partnership Interests for Sale

20

Limited Partnership Interest Purchasable

2.45%

Limited Partnership Purchase Price

$ 115,000

Limited Partnership Units Sold

3

Limited Partnership Interest Sold

7.35%

Class E Warrants [Member]

Stock Options Outstanding, Shares

7,500,000

Class F Warrants [Member]

Stock Options Outstanding, Shares

8,923,420

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Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Current assets
Cash and cash equivalents	$ 60,900	$ 11,000
Accounts receivable	10,350	25,389
Inventory	20,000	23,464
Notes receivable, net	26,664	65,000
Prepaid expenses and other assets	10,580	86,025
Total current assets	128,494	210,878
Property and equipment, net	42,543	210,752
Oil and gas properties, net	473,566	248,827
Other assets	21,930	1,930
Total Assets	666,533	672,387
Current liabilities
Accounts payable	65,781	71,298
Accrued expenses	279,564	139,651
Accrued interest payable	15,842	143,397
Note payable, current portion, net of discount of $0 at September 30, 2015 and $536,841 at December 31, 2014	280,000	$ 1,146,909
Convertible notes payable, current portion, net of premium and discount of $7,403 at September 30, 2015	360,700
Embedded conversion option liability	123,281
Warrant liability	176,555	$ 291,003
Payable to related party	100	100
Total current liabilities	1,301,823	$ 1,792,358
Long Term Liabilities
Convertible notes payable, net of discount of $53,274 at September 30, 2015	1,726
Accrued assets retirement obligation	6,750	$ 4,000
Total long term liabilities	5,476	4,000
Total Liabilities	1,310,299	1,796,358
New Western Energy Corporation and Subsidiaries Stockholders' Deficit
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, 351,500 shares and 294,100 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	35	29
Common stock, $0.0001 par value, 250,000,000 shares authorized, 77,357,086 shares and 76,242,086 shares issued and to be issued and outstanding at September 30, 2015 and December 31, 2014, respectively	7,736	7,625
Additional paid in capital	9,780,642	7,130,199
Accumulated deficit	(10,924,976)	(8,525,719)
Total New Western Energy Corporation and Subsidiaries Stockholders' Deficit	(1,136,563)	(1,387,866)
Noncontrolling interest in consolidated subsidiaries	492,797	263,895
Total Stockholders' Deficit	(643,766)	(1,123,971)
Total Liabilities and Stockholders' Deficit	$ 666,533	$ 672,387

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1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN

9 Months Ended

Sep. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN

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

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

On December 1, 2010, the Company formed New Western Texas Oil and Gas Corporation, incorporated in the State of Nevada, as its wholly-owned subsidiary. New Western Texas Oil and Gas Corporation started its operations in January 2011. On May 3, 2013, New Western Texas Oil and Gas Corporation amended its Articles of Incorporation and changed its name to New Western Gas Corporation. On March 9, 2015, New Western Gas Corporation changed its name to New Western Mineral Extraction Inc.

On January 2, 2012, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. (“RTE”) and RTE became a wholly-owned subsidiary of the Company. RTE conducts its business as a separate operating company.

On March 18, 2013, the Company formed 2013 NWE Drilling Program 1 LP (the “Limited Partnership”). The Company became the General Partner and owns 51% of the Limited Partnership. The Limited Partnership was specifically formed to drill three oil wells on the Company’s B&W Ranch lease in Chautauqua County, Kansas (See Note 3).

On May 15, 2014, the Company formed New Western Operating LLC, as its wholly-owned subsidiary that will take over all operations for its leases, oil and gas exploration, drilling and production in the state of Kansas.

On June 30, 2014, the Company formed NWDP Energy, LLC, as its wholly-owned subsidiary, registered in the state of Nevada, to explore, drill and produce oil and gas in Montana. On January 8, 2015, NWDP Energy, LLC changed its name to NWE/Forward Energy, LLC and registered in the state of Montana.

On December 22, 2014, the Company formed New Western Montana Oil & Gas Corporation (the “New Western Montana”) as its wholly owned subsidiary, to enter into an operating agreement with Forward Energy, LLC, a Montana limited liability company. New Western Montana is the managing member of NWE/Forward Energy LLC owning a 51% interest and Forward Energy owning a 49% interest in the LLC.

On April 9, 2015, the Company formed NWE Oil & Gas Program #1 LP, a California limited partnership, for the sole purpose of (a) acquiring and drilling, managing, owning, re-working and operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) acquisition of new oil and gas wells. The Company is the General Partner and shall own not less than a 51% ownership interests and the Limited Partners shall own up to 49% ownership interest in the California limited Partnership. The Company plans to sell up to 20 limited partner interests and each limited partner can purchase 2.45% interest in the limited partnership for $115,000. The Company has currently sold three units or 7.35% of the allocated limited partners’ interest.

On May 1, 2015, the Company formed New Osage Energy Corporation, a wholly-owned subsidiary, registered in the state of Oklahoma, to operate and manage the Company’s oil and gas properties in Oklahoma.

Basis of presentation

The accompanying interim consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at September 30, 2015, and the results of operations and cash flows for the three months and nine months periods ended September 30, 2015. The balance sheet as of December 31, 2014 is derived from the Company’s audited consolidated financial statements.

Certain information and footnote disclosures normally included in consolidated financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these interim consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the consolidated financial statements and the Notes thereto contained in the Company’s 2014 Annual Report filed with the Securities and Exchange Commission on Form 10-K on April 15, 2015.

Going Concern

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing, and the attainment of profitable operations.

At September 30, 2015, the Company had working capital deficit of $1,173,329, incurred a net loss applicable to New Western Energy Corporation common stockholders of $2,399,257 for the nine months ended September 30, 2015 and used cash in operating activities of $872,131. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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6. NOTES PAYABLE (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Payables and Accruals [Abstract]
Interest Expense	$ 36,063	$ 38,888	$ 116,467	$ 115,716

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4. OIL AND GAS PROPERTIES (Tables)

9 Months Ended

Sep. 30, 2015

Extractive Industries [Abstract]

Oil and Gas Properties

Name of the Property	Type		September 30, 2015 (Unaudited)			December 31, 2014
Rogers County, OK - Glass Lease		Oil	$	-		$	221,000
Rogers County, OK - Phillips Lease		Oil		-			130,000
Rogers County, OK (9) Leases		Oil		-			378,600
Chautauqua County, KS - B&W Ranch Lease		Oil & Gas		75,000			75,000
Chautauqua County, KS - Charles & Nancy Smith Lease		Oil & Gas		24,750			24,750
Chautauqua County, KS - Lloyd & Patricia Fields Lease		Oil & Gas		14,400			14,400
Chautauqua County, KS - Rinck Lease		Oil & Gas		24,750			24,750
Osage County, OK – Branson Leases		Oil & Gas		40,000			-
Osage County, OK – (3) Renco Leases		Oil & Gas		185,000			-
Wilson County, KS – Farwell, Puckett & Farwell/Eagle Lease		Oil & Gas		251,208			251,208
Doug & Wendy Strauch – Brown Lease, Montana		Oil & Gas		5,040			-
Nowata County, OK (4) Leases		Gas		-			35,000
Shackelford County, TX – Terry Heirs		Oil		9,722			9,722
				629,870			1,164,430
Asset Retirement Obligation				4,563			4,000
Impairment allowance				(160,867	)		(919,603	)
Total			$	473,566		$	248,827

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7. CONVERTIBLE NOTES PAYABLE - Convertible Debt (Details) - USD ($)	Sep. 30, 2015	May. 29, 2015	Mar. 26, 2015	Dec. 31, 2014
Convertible notes payable - current	$ 360,700
Debt Discount				$ (536,841)
Note 1
Convertible notes payable - current	$ 79,000
Premium on convertible notes payable	96,310		$ 57,207
Note 2
Convertible notes payable - current	54,000
Premium on convertible notes payable	96,310	$ 39,103
Note 3
Convertible notes payable - current	53,500
Premium on convertible notes payable	7,000
Note 4
Convertible notes payable - current	27,000
Premium on convertible notes payable	2,000
Note 5
Convertible notes payable - current	55,000
Premium on convertible notes payable	5,000
Convertible Debt [Member]
Convertible notes payable - current	213,500
Premium on convertible notes payable	154,603
Debt Discount	53,274
Notes payable, net of premium	$ 1,726

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7. CONVERTIBLE NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Convertible Debt

	September 30, 2015			December 31, 2014
	(Unaudited)
Note payable to a third party, secured, bearing interest at 8% per annum, due December 30, 2015 (Note 1)	$	79,000		$	—
Note payable to a third party, secured, bearing interest at 8% per annum, due March 3, 2016 (Note 2)		54,000			—
Note payable to a third party, secured, bearing interest at 6% per annum, due July 1, 2016 (Note 3)		53,500			—
Note payable to a third party, secured, bearing interest at 8% per annum, due September 8, 2016 (Note 4)		27,000			—
Note payable to a third party, bearing interest at 12% per annum, due September 9, 2017 (Note 5)		55,000			—
Total		268,500			—
Convertible Note payable – current portion		213,500			—
Premium on Note 1, Note 2, Note 3 and Note 4 payable		154,603			—
Less: Debt discount		(7,403	)
Convertible Notes payable, current portion, net of premium and discount		360,700			—
Convertible Note payable – long term portion		55,000			—
Less: Debt discount		(53,274	)		—
Convertible Notes payable, long term, net of debt discount	$	1,726		$	—

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries New Western Mineral Extraction Corporation, Royal Texan Energy Co., New Western Operating LLC, New Western Montana Oil & Gas Corporation, New Osage Energy Corporation, the Company’s 51% majority owned subsidiary 2013 NWE Drilling Program 1 LP and NWE Oil & Gas Program #1 LP. All intercompany balances and transactions are eliminated in consolidation.  

Noncontrolling Interest

The Company accounts for its less than 100% interest in consolidated subsidiaries in accordance with Financial Accounting Standards Board - Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”, and accordingly, the Company presents noncontrolling interests as a component of equity on its consolidated balance sheets and presents noncontrolling interest net income or loss under the heading “Net loss applicable to noncontrolling interest in consolidated subsidiaries” in the unaudited consolidated statements of operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of accounts, Notes and other receivables, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of long-lived assets, oil, gas and mineral properties, stock-based compensation and deferred tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Accounting for Derivatives

The Company evaluates its convertible debt instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense).  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. The Company does not have any derivative instruments for which it has applied hedge accounting treatment.

Fair value of Financial Instruments and Fair Value Measurements

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

Level 1

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

Level 2

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

Level 3

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

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

Assets and liabilities measured at fair value on a recurring and non-recurring basis consist of the following at September 30, 2015: 

			Fair Value Measurements at September 30, 2015
	Carrying Value at September 30, 2015 (Unaudited)		(Level 1) (Unaudited)		(Level 2) (Unaudited)		(Level 3) (Unaudited)
Warrant Liabilities	$	176,555	$	—	$	—	$	176,555
Embedded Conversion Option Liability	$	123,281	$	—	$	—	$	123,281

The following is a summary of activity of Level 3 assets and liabilities for the period ended September 30, 2015:

Warrant Liabilities
Balance - December 31, 2014	$	291,003
Additions		—
Change in fair value		(114,448	)
Balance – September 30, 2015	$	176,555
Embedded Conversion Option Liability
Balance - December 31, 2014	$	—
Additions		50,000
Initial value of Embedded Conversion Option		62,082
Change in fair value		11,199
Balance – September 30, 2015	$	123,281

Changes in fair value of the embedded conversion liability are included in other income (expense) in the accompanying unaudited consolidated statements of operations.

Revenue Recognition

The Company sells crude oil and minerals under short-term agreements at prevailing market prices. Revenue, which is the Company's net revenue interest in the leased property, is recognized at the point of sale, when the crude oil and minerals are extracted from our storage units by the customer. This is at the point where the customer has taken title and has assumed the risks and rewards of ownership, the sales price is fixed or determinable and collectability is reasonably assured.

For sale of gas, the Company records revenue based on an estimate of the volumes delivered at the agreed-upon price and then adjusts revenue in subsequent periods based upon the data received from the purchaser that reflects actual volumes received. Generally, proceeds from gas production are received from one to three months after the actual delivery has occurred. Thus, it is usually necessary to estimate gas revenue based on prior months’ production volumes and current lease operating data, such as meter readings, in order to prepare financial statements on a timely basis.

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire interest in oil and gas properties, to drill and equip exploratory wells that find proved reserves, to drill and equip development wells and related asset retirement costs are capitalized. Costs to drill exploratory wells, including equipment and facilities are capitalized as part of “Uncompleted Wells, Equipment and Facilities” pending determination of whether the well has found proved reserves. Costs to drill exploratory wells that find proved reserves are reclassified to proved oil and gas properties while costs that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining undeveloped properties are expensed.

Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Management may also determine to initiate straight line amortization of a property over the remaining useful life of the lease if management is uncertain as to its ability to recover the asset value but immediate impairment is not indicated. Capitalized costs of producing oil and gas properties (proved or unproved), after considering estimated residual salvage values, are depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives.

On the sale or retirement of a complete unit of a proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale of a partial unit of proved property, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in income.

On the sale of an entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into consideration the amount of any recorded impairment if the property had been assessed individually. If a partial interest in an unproved property is sold, the amount received is treated as a reduction of the cost of the interest retained.

Asset Retirement Obligations

The Company follows the provisions of ASC 410, “Asset Retirement and Environmental Obligations”, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. We record a liability for asset retirement obligations at fair value in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The associated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset. Subsequently, the asset retirement cost is allocated to expense using a systematic and rational method over the asset’s useful life. Our recognized asset retirement obligation exclusively relates to the plugging and abandonment of oil and natural gas wells and decommissioning of our Fredonia gas wells in Kansas. Management periodically reviews the estimates of the timing of well abandonments as well as the estimated plugging and abandonment costs, which are discounted at the credit adjusted risk free rate. These retirement costs are recorded as a long-term liability on the consolidated balance sheets with an offsetting increase in oil and natural gas properties. An ongoing accretion expense is recognized for changes in the value of the liability as a result of the passage of time, which we record in lease operating expenses in the statements of operations.

The Company’s asset retirement obligations represent the present value of estimated future costs associated with the plugging and abandonment of oil and gas wells, in accordance with applicable local, state and federal laws.  The Company follows FASB ASC Topic 410, “Asset Retirement and Environmental Obligations”, to determine its asset retirement obligation amounts by calculating the present value of the estimated future cash outflows associated with its plug and abandonment obligations.  Revisions to the liability typically occur due to changes in estimated abandonment costs or well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells.

Net Earnings (Loss) Per Share

The Company computes net earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible Notes and preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At September 30, 2015, there were Class E, F and G Warrants outstanding for 18,860,920 common shares that if exercised, may dilute future earnings per share, 3,000,000 stock options outstanding awarded to employees and consultants and stock options issued to a stockholder convertible into 50,000,000 shares of common stock.

Reclassification of Prior Period Amounts

Certain amounts in comparative periods have been reclassified in the Company’s consolidated financial statements and related footnotes to conform to the current presentation.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which changes the presentation of debt issuance costs in financial statements. Under this guidance such costs would be presented as a direct deduction from the related debt liability rather than as an asset. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. Retrospective application is required. The Company has evaluated the impact this guidance on its Consolidated Balance Sheet as of September 30, 2015 which resulted in the reduction of assets and liabilities by approximately $12,000.

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

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

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Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Preferred Stock Par Value	$ 0.0001	$ 0.0001
Preferred Stock Shares Authorized	5,000,000	5,000,000
Preferred Stock Shares Issued	351,500	294,100
Preferred Stock Shares Outstanding	351,500	294,100
Common Stock Par Value	$ 0.0001	$ 0.0001
Common Stock Shares Authorized	250,000,000	250,000,000
Common Stock Shares Issued	77,357,086	76,242,086
Common Stock Shares Outstanding	77,357,086	76,242,086
Note Payable, Discount Current	$ 0	$ 536,841
Convertible Notes Payable, Discount and Premium, Current	7,403
Convertible Notes Payable, Discount, Noncurrent	53,274
Conversion Option Liability, Discount	$ 121,004

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12. SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

12. SUBSEQUENT EVENTS

NOTE 12: SUBSEQUENT EVENTS

On October 21, 2015, the Company converted $12,000 of the debt by issuance of 736,196 shares of its common stock valued at $0.0163 per share. The Conversion Price is 58% of the lowest trade price of $0.028 in the 10 trading days previous to the conversion date.

On October 21, 2015, the Company issued 345,000 shares of its common stock to three investors valued at $10,695 at their fair value on the date of issuance. During May 2015 and June 2015, these investors purchased three Units for $345,000 in NWE Oil & Gas Program #1 LP, a limited partnership (“Partnership”), of which the Company is the General Partner and owns 51% of the total Partnership’s interest. The Company recorded $10,695 as additional expense for investing in the Partnership.

On October 21, 2015, the Company issued 1,000,000 shares of its common stock valued at $31,000 at their fair value on the date of issuance, to a non-executive director as compensation for negotiating settlement of its debt with a shareholder. 

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 12, 2015
Document And Entity Information
Entity Registrant Name	New Western Energy Corp
Entity Central Index Key	0001479488
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		77,357,086
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2015

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1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING CONCERN (Policies)

9 Months Ended

Sep. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation

Basis of presentation

The accompanying interim consolidated financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at September 30, 2015, and the results of operations and cash flows for the three months and nine months periods ended September 30, 2015. The balance sheet as of December 31, 2014 is derived from the Company’s audited consolidated financial statements.

Certain information and footnote disclosures normally included in consolidated financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these interim consolidated financial statements are adequate to make the information presented therein not misleading. For further information, refer to the consolidated financial statements and the Notes thereto contained in the Company’s 2014 Annual Report filed with the Securities and Exchange Commission on Form 10-K on April 15, 2015.

Going Concern

Going Concern

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing, and the attainment of profitable operations.

At September 30, 2015, the Company had working capital deficit of $1,206,500, incurred a net loss applicable to New Western Energy Corporation common stockholders of $2,431,025 for the nine months ended September 30, 2015 and used cash in operating activities of $872,131. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenues
Oil and gas sales	$ 18,452	$ 131,660	$ 77,801	$ 313,782
Operating expenses
Depreciation, depletion and amortization	3,932	18,904	12,271	76,785
General and administrative	236,411	$ 505,932	1,051,271	$ 1,587,743
Impairment expense	$ 9,952		29,856
Loss on sale of oil leases			33,886
Oil and gas production	$ 26,703	$ 144,631	96,146	$ 512,062
Total operating expenses	276,998	669,467	1,223,430	2,176,590
Loss from operations	(258,546)	(537,807)	(1,145,629)	(1,862,808)
Other income (expenses)
Interest expense	(167,725)	(91,140)	(496,349)	(1,288,617)
Gain (loss) on settlement of debt	(888,916)	(128,168)	(860,226)	(128,168)
Change in fair value of embedded conversion option and warrant liability income (expense)	$ (102,184)	$ 304,802	41,167	$ 1,131,241
Other income			10,000
Total other income (expenses)	$ (1,158,825)	$ (267,774)	(1,305,408)	$ (285,544)
Loss from operations before income tax	(1,417,371)	$ (270,033)	(2,451,051)	$ (2,148,352)
Provision for income tax	1,925		1,925
Net loss	(1,419,296)	$ (270,033)	(2,452,962)	$ (2,148,352)
Preferred stock dividend	(24,433)	(11,204)	(62,393)	(13,582)
Net loss applicable to common stock before allocation to noncontrolling interest	(1,443,729)	(281,237)	(2,515,355)	(2,161,934)
Net loss applicable to noncontrolling interest in consolidated subsidiaries	(28,571)	(81,672)	116,098	(211,170)
Net loss applicable to New Western Energy Corporation common stock	$ (1,415,158)	$ (199,565)	$ (2,399,257)	$ (1,950,764)
Basic and diluted net loss per share applicable to New Western Energy Corporation's common stock	$ (0.02)	$ (0.00)	$ (0.03)	$ (0.03)
Weighted average number of shares outstanding - Basic and Diluted	76,846,325	74,265,144	76,246,903	73,460,791

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7. CONVERTIBLE NOTES PAYABLE

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

7. CONVERTIBLE NOTES PAYABLE

NOTE 7: CONVERTIBLE NOTES PAYABLE

Convertible Notes payable consist of:

	September 30, 2015			December 31, 2014
	(Unaudited)
Note payable to a third party, secured, bearing interest at 8% per annum, due December 30, 2015 (Note 1)	$	79,000		$	—
Note payable to a third party, secured, bearing interest at 8% per annum, due March 3, 2016 (Note 2)		54,000			—
Note payable to a third party, secured, bearing interest at 6% per annum, due July 1, 2016 (Note 3)		53,500			—
Note payable to a third party, secured, bearing interest at 8% per annum, due September 8, 2016 (Note 4)		27,000			—
Note payable to a third party, bearing interest at 12% per annum, due September 9, 2017 (Note 5)		55,000			—
Total		268,500			—
Convertible Note payable – current portion		213,500			—
Premium on Note 1, Note 2, Note 3 and Note 4 payable		154,603
Less: Debt discount		(7,403	)
Convertible Notes payable, current portion, net of premium and discount		360,700			—
Convertible Note payable – long term portion		55,000			—
Less: Debt discount		(53,274	)		—
Convertible Notes payable, long term, net of debt discount	$	1,726		$	—

Convertible Promissory Note 1 (“Note 1”)

On March 26, 2015, the Company executed a Convertible Promissory Note (the “Note 1”) and received $75,000 (the “Draw”) net of $4,000 in legal fees, on April 20, 2015. The principal sum of $79,000 together with any interest on the unpaid balance at the rate of 8% per annum will become due on December 30, 2015. The Note 1 may not be prepaid in whole or in part. No amount of principal or interest on NOTE 1 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the NOTE 1 is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this Note 1and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this Note 1 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this Note 1 in excess of that portion of the Note 1 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 1 with respect to which the determination of this provision is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date.

The net carrying value of Note 1 at September 30, 2015 and December 31, 2014 was $79,000 and $0, respectively. The Company recorded a premium of $57,207 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. In addition, the Company recorded an interest expense of $1,593 and $2,822 for the three months and nine months periods ended September 30, 2015.

Convertible Promissory Note 2 (“Note 2”)

On May 29, 2015, the Company executed a Convertible Promissory Note (the “Note 2”) of $54,000 and received cash proceeds of $43,500 (the “Draw”) net of disbursing $4,000 in legal fees and $6,500 in accounting fees on June 3, 2015. The principal sum of $54,000 together with any interest on the unpaid balance at the rate of 8% per annum will become due on December 30, 2015. The Note 2 may not be prepaid in whole or in part. No amount of principal or interest on Note 2 which is not paid when due shall bear interest at the rate of 22% per annum from the due date until the same is paid. Interest shall commence accruing on the date that the Note 2 is fully paid and shall be computed n the basis of a 365-day year and the actual number of days elapsed. The holder shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of this Note 2 and ending on the later of: (i) the maturity date and (ii) the date of payment of the default amount, each in respect of the remaining outstanding principal amount of this Note 2 into fully paid and non-assessable shares of common stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price determined as provided herein; provided, however, that in no event shall the holder be entitled to convert any portion of this Note 2 in excess of that portion of the Note 2 upon conversion of which the sum of 1) the number of shares of common stock beneficially owned by the holder and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 2 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder of more than 9.99% of the outstanding shares of common stock. The conversion price shall equal the Variable Conversion Price subject to equitable adjustments. The Variable Conversion Price shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). Market price means the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest trading day prior to the conversion date.

The net carrying value of Note 2 at September 30, 2015 and December 31, 2014 was $54,000 and $0, respectively. The Company recorded a premium of $39,103 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. In addition, the Company recorded an interest expense of $1,089 and $1,408 for the three months and nine months periods ended September 30, 2015.

Convertible Promissory Note 3 (“Note 3”)

On July 1, 2015, the Company executed a Convertible Promissory Note (the “Note 3”) of $53,500 and received cash proceeds of $45,000 on July 14, 2015 (the “Draw”) net of fees of $7,000. The principal sum of $53,500 together with any interest on the unpaid balance at the rate of 6% per annum will become due and payable on July 1, 2016. The Note 3 may be prepaid pursuant to the following schedule: 1) Payment on Day 1-90 will result in 125% of the face value being owed 2) Payment on Day 91-180 will result in 145% of the face value being owed. Interest after the date of issuance shall be computed on the basis of a 365-day year and the actual number of days elapsed. The Holder shall have the right on or after 180 days from the date of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of common stock, as such common stock exists on the issue date, or any shares of capital stock or other securities of the Borrower into which such common stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided, however, that in no event shall the holder be entitled to convert any portion of this Note 3 in excess of that portion of this Note 3 upon conversion of which the sum of (1) the number of shares of common stock beneficially owned by the holder and its affiliates (other than shares of common stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Note 3 or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of common stock issuable upon the conversion of the portion of this Note 3 with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the outstanding shares of common stock. The shares to be issued pursuant to conversions are subject to the legal opinion letter, customary and satisfactory to parties hereto as provided by the holder.) The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the lowest Trading Price for the common stock during the fifteen trading day period ending on the latest complete trading day prior to the Conversion Date.

The net carrying value of Note 3 at September 30, 2015 was $53,500. The Company recorded a premium of $38,741 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015.

For the three months ended September 30, 2015, the Company has recognized interest expense of (1) $1,477 related to the amortization of the OID, (2) $677 on the principal balance as it related to this Note 3.

Convertible Promissory Note 4 (“Note 4”)

On September 8, 2015, the Company executed a Convertible Redeemable Note (the “Note 4”) of a principal amount of $27,000, bearing an interest rate of 8% per annum, both the principal and interest due on September 8, 2016. The Company received cash proceeds of $25,000 upon execution of Note 4. The Note 4 may be prepaid with the following penalties: (i) < 30 days – 118% of principal plus accrued interest, (ii) 31-60 days – 124% of principal plus accrued interest, (iii) 61-90 days – 130% of principal plus accrued interest, (iv) 91-120 days – 136% of principal plus accrued interest, (v) 121-150 days – 142% of principal plus accrued interest, (vi) 151-180 days – 148% of principal plus accrued interest. Interest shall be paid by the Company in common stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for interest shares based on an agreed formula. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice. The Note 4 may not be prepaid after the 180^th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void. The holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock at a price (“Conversion Price”) for each share of common stock equal to 58% of the lowest trading of the common stock as reported on the National Quotation Bureau OTCQB exchange for the 15 prior trading days including the day upon which a notice of conversion is received by the Company. To the extent the Conversion Price of the Company’s common stock closed below the par value per share, the Company will take steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In no event shall the holder be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by the holder and its affiliates would exceed 9.9% of the outstanding shares of the common stock of the Company.

The net carrying value of Note 4 at September 30, 2015 was $27,000. The Company recorded a premium of $19,552 on the issuance date as the Note is considered stock settled debt which is charged to interest expense for the three months and nine months periods ended September 30, 2015. For the three months ended September 30, 2015, the Company has recognized interest expense of (1) $121 related to the amortization of the OID, and (2) $130 on the principal balance as it related to this Note 4.

Convertible Promissory Note 5 (“Note 5”)

On September 3, 2015, the Company received $50,000 (the “Draw”) from a third party against a $250,000 Convertible Promissory Note (the “Note 5”) executed on September 8, 2015 (“the Effective Date”). The total consideration receivable against the Note 5 is $225,000, with the Note bearing $25,000 original issue discount (OID). The Company received a cash consideration of $50,000 from the investor upon closing of this Note. The principal sum due to the investor on Note 5 shall be $55,000 which included an OID of $5,000. The Maturity Date of Note 5 is two years from the date of receipt of cash consideration. The Conversion Price is the lesser of $0.05 or 60% of the lowest trade price in the 25 trading days previous to the conversion. Unless otherwise agreed in writing by both parties, at no time will the investor convert any amount of the Note 5 into common stock that would result in the Investor owning more than 4.99% of the common stock outstanding.

The Company may repay Note 5 at any time on or before 90 days from the Effective Date, after which the Company may not make further payments on this Note 5 prior to the Maturity Date without written approval from the Investor. If the Company repays a payment of consideration on or before 90 days from the Effective Date of that payment, the interest rate on that payment of consideration shall be 0%. If the Company does not repay a payment of consideration on or before 90 days from the Effective Date, a one-time interest charge of 12% shall be applied to the principal sum. Any interest payable is in addition to the OID, and that OID remains payable regardless of time and manner of payment by the Company. The investor has the right, at any time after the Effective Date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of fully paid and non-assessable shares of common stock of the Company as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. All conversions shall be cashless and not require further payment from the investor. If no objection is delivered from the Company to the investor regarding any variable or calculation of the conversion notice within 24 hours of delivery of the conversion notice, the Company shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Company shall deliver the shares from any conversion to the investor within three (3) business days of conversion notice delivery.

In connection with the issuance of the Note 5, the Company recorded a loan discount related to the OID in the amount of $5,000 which will be amortized to interest expense over the term of the Draw. In accordance with ASC 815, the Company recognized a debt discount related to the bifurcated embedded conversion option derivative liability in the amount of $50,000 which will be amortized to interest expense over the term of the Draw and an initial change in fair value of $62,082 for a total initial embedded conversion option liability of $112,082. For the three months ended September 30, 2015, the Company has recognized interest expense of (i) $144 related to the amortization of the OID, (ii) $1,582 related to the amortization of the embedded conversion option liability discount, and (iii) $380 on the principal balance as it related to this NOTE 5.

As a result of above issuance of Note 1, Note 2, Note 3, Note 4 and Note 5, the Company recorded a premium of $154,603 on the convertible Notes payable as the Notes are considered stock settled debt which was charged to interest expense as of September 30, 2015. For the three months and nine months periods ended September 30, 2015, the Company recorded interest expense of (i) $1,741 and $1,741 related to the amortization of OID, (ii) $1,582 and $1,582 related to the amortization of the embedded conversion option liability discount, and (iii) $3,869 and $5,418 on the principal balance as it related to the above Notes.

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6. NOTES PAYABLE

9 Months Ended

Sep. 30, 2015

Payables and Accruals [Abstract]

6. NOTES PAYABLE

NOTE 6: NOTES PAYABLE

Notes payable consist of:

	September 30,		December 31,
	2015		2014
	(Unaudited)
Note payable to a third party, unsecured, bearing interest at 5% per annum, due on May  30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan	$	—	$	73,750
Stockholder Note payable, secured, bearing interest at 10% per annum, due on October 31, 2015, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans		—		1,500,000
Note payable to an entity owned by a director, secured, bearing interest at 5% per annum, due on August 31, 2015		110,000		110,000
Note payable to a third party, unsecured, bearing interest at 5% per annum, due on August 30, 2016, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan		55,000		—
Note payable to a third party, secured, bearing interest at 5% per annum, due on July 3, 2016		115,000		—
		280,000		1,683,750
Notes payable - current portion		280,000		1,683,750
Notes payable – long term portion		—		—
Less: Unamortized debt discount and debt issuance costs		—		(536,841	)
Notes payable – current portion, net of debt discounts	$	280,000	$	1,146,909

The Company is in default of a note payable of $110,000 due to an entity owned by a director of the Company. The note holder has not made a demand for the past due note balance as of the date of this report.

The Company recorded interest expense on these Notes of $36,063 and $116,467 for the three months and nine months ended September 30, 2015 and $38,888 and $115,716 for the same comparable periods in 2014.  

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6. NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2015

Payables and Accruals [Abstract]

Notes Payable

	September 30,		December 31,
	2015		2014
	(Unaudited)
Note payable to a third party, unsecured, bearing interest at 5% per annum, due on May  30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan	$	—	$	73,750
Stockholder Note payable, secured, bearing interest at 10% per annum, due on October 31, 2015, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans		—		1,500,000
Note payable to an entity owned by a director, secured, bearing interest at 5% per annum, due on August 31, 2015		110,000		110,000
Note payable to a third party, unsecured, bearing interest at 5% per annum, due on August 30, 2016, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan		55,000		—
Note payable to a third party, secured, bearing interest at 5% per annum, due on July 3, 2016		115,000		—
		280,000		1,683,750
Notes payable - current portion		280,000		1,683,750
Notes payable – long term portion		—		—
Less: Unamortized debt discount and debt issuance costs		—		(536,841	)
Notes payable – current portion, net of debt discounts	$	280,000	$	1,146,909

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries New Western Mineral Extraction Corporation, Royal Texan Energy Co., New Western Operating LLC, New Western Montana Oil & Gas Corporation, New Osage Energy Corporation, the Company’s 51% majority owned subsidiary 2013 NWE Drilling Program 1 LP and NWE Oil & Gas Program #1 LP. All intercompany balances and transactions are eliminated in consolidation.  

Noncontrolling Interest

Noncontrolling Interest

The Company accounts for its less than 100% interest in consolidated subsidiaries in accordance with Financial Accounting Standards Board - Accounting Standards Codification (“ASC”) Topic 810, “Consolidation”, and accordingly, the Company presents noncontrolling interests as a component of equity on its consolidated balance sheets and presents noncontrolling interest net income or loss under the heading “Net loss applicable to noncontrolling interest in consolidated subsidiaries” in the unaudited consolidated statements of operations.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the valuation of accounts, Notes and other receivables, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of long-lived assets, oil, gas and mineral properties, stock-based compensation and deferred tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Accounting for Derivatives

Accounting for Derivatives

The Company evaluates its convertible debt instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense).  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. The Company does not have any derivative instruments for which it has applied hedge accounting treatment.

Fair Value of Financial Instruments and Fair Value Measurements

Fair value of Financial Instruments and Fair Value Measurements

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

Level 1

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

Level 2

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

Level 3

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

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

Assets and liabilities measured at fair value on a recurring and non-recurring basis consist of the following at September 30, 2015: 

			Fair Value Measurements at September 30, 2015
	Carrying Value at September 30, 2015 (Unaudited)		(Level 1) (Unaudited)		(Level 2) (Unaudited)		(Level 3) (Unaudited)
Warrant Liabilities	$	176,555	$	—	$	—	$	176,555
Embedded Conversion Option Liability	$	123,281	$	—	$	—	$	123,281

The following is a summary of activity of Level 3 assets and liabilities for the period ended September 30, 2015:

Warrant Liabilities
Balance - December 31, 2014	$	291,003
Additions		—
Change in fair value		(114,448	)
Balance – September 30, 2015	$	176,555
Embedded Conversion Option Liability
Balance - December 31, 2014	$	—
Additions		50,000
Initial value of Embedded Conversion Option		62,082
Change in fair value		11,199
Balance – September 30, 2015	$	123,281

Changes in fair value of the embedded conversion liability are included in other income (expense) in the accompanying unaudited consolidated statements of operations.

Revenue Recognition

Revenue Recognition

The Company sells crude oil and minerals under short-term agreements at prevailing market prices. Revenue, which is the Company's net revenue interest in the leased property, is recognized at the point of sale, when the crude oil and minerals are extracted from our storage units by the customer. This is at the point where the customer has taken title and has assumed the risks and rewards of ownership, the sales price is fixed or determinable and collectability is reasonably assured.

For sale of gas, the Company records revenue based on an estimate of the volumes delivered at the agreed-upon price and then adjusts revenue in subsequent periods based upon the data received from the purchaser that reflects actual volumes received. Generally, proceeds from gas production are received from one to three months after the actual delivery has occurred. Thus, it is usually necessary to estimate gas revenue based on prior months’ production volumes and current lease operating data, such as meter readings, in order to prepare financial statements on a timely basis.

Oil and Gas Properties

Oil and Gas Properties

The Company uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire interest in oil and gas properties, to drill and equip exploratory wells that find proved reserves, to drill and equip development wells and related asset retirement costs are capitalized. Costs to drill exploratory wells, including equipment and facilities are capitalized as part of “Uncompleted Wells, Equipment and Facilities” pending determination of whether the well has found proved reserves. Costs to drill exploratory wells that find proved reserves are reclassified to proved oil and gas properties while costs that do not find proved reserves, geological and geophysical costs, and costs of carrying and retaining undeveloped properties are expensed.

Unproved oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance. Management may also determine to initiate straight line amortization of a property over the remaining useful life of the lease if management is uncertain as to its ability to recover the asset value but immediate impairment is not indicated. Capitalized costs of producing oil and gas properties (proved or unproved), after considering estimated residual salvage values, are depleted by the unit-of-production method. Support equipment and other property and equipment are depreciated over their estimated useful lives.

On the sale or retirement of a complete unit of a proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale of a partial unit of proved property, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in income.

On the sale of an entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into consideration the amount of any recorded impairment if the property had been assessed individually. If a partial interest in an unproved property is sold, the amount received is treated as a reduction of the cost of the interest retained.

Asset Retirement Obligations

Asset Retirement Obligations

The Company follows the provisions of ASC 410, “Asset Retirement and Environmental Obligations”, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets. We record a liability for asset retirement obligations at fair value in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The associated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset. Subsequently, the asset retirement cost is allocated to expense using a systematic and rational method over the asset’s useful life. Our recognized asset retirement obligation exclusively relates to the plugging and abandonment of oil and natural gas wells and decommissioning of our Fredonia gas wells in Kansas. Management periodically reviews the estimates of the timing of well abandonments as well as the estimated plugging and abandonment costs, which are discounted at the credit adjusted risk free rate. These retirement costs are recorded as a long-term liability on the consolidated balance sheets with an offsetting increase in oil and natural gas properties. An ongoing accretion expense is recognized for changes in the value of the liability as a result of the passage of time, which we record in lease operating expenses in the statements of operations.

The Company’s asset retirement obligations represent the present value of estimated future costs associated with the plugging and abandonment of oil and gas wells, in accordance with applicable local, state and federal laws.  The Company follows FASB ASC Topic 410, “Asset Retirement and Environmental Obligations”, to determine its asset retirement obligation amounts by calculating the present value of the estimated future cash outflows associated with its plug and abandonment obligations.  Revisions to the liability typically occur due to changes in estimated abandonment costs or well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells.

Net Earnings (Loss) Per Share

Net Earnings (Loss) Per Share

The Company computes net earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted net earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible Notes and preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. At September 30, 2015, there were Class E, F and G Warrants outstanding for 18,860,920 common shares that if exercised, may dilute future earnings per share, 3,000,000 stock options outstanding awarded to employees and consultants and stock options issued to a stockholder convertible into 50,000,000 shares of common stock.

Reclassification of Prior Period Amounts

Reclassification of Prior Period Amounts

Certain amounts in comparative periods have been reclassified in the Company’s consolidated financial statements and related footnotes to conform to the current presentation.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which changes the presentation of debt issuance costs in financial statements. Under this guidance such costs would be presented as a direct deduction from the related debt liability rather than as an asset. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. Retrospective application is required. The Company has evaluated the impact this guidance on its Consolidated Balance Sheet as of September 30, 2015 which resulted in the reduction of assets and liabilities by approximately $12,000.

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

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

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10. STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

10. STOCKHOLDERS' EQUITY

NOTE 10: STOCKHOLDERS' EQUITY

The Company’s authorized common shares and preferred shares at September 30, 2015 were 250,000,000 and 5,000,000 shares respectively, both with a par value of $0.0001 per share.

Common Stock

Pursuant to the settlement of litigation with Brent and Brook Hatchett on February 10, 2015, the Company cancelled 600,000 shares of previously issued but not distributed shares of its common stock and returning it to authorized but unissued status, thus reducing the Company’s current number of shares outstanding by 600,000 shares (See Note 9). The Company has not issued and distributed to Hatchetts the remaining 100,000 shares of common stock as of the date of this report.

The Company agreed to issue to investors 115,000 shares of its common stock, as an inducement to purchase one Unit for $115,000 in NWE Oil & Gas Program #1 LP, a limited partnership ( the “Partnership”) of which the Company is the General Partner and owns 51% of the total Partnership’s interest. During the nine months ended September 30, 2015, the Company issued 345,000 shares of its common stock and valued the shares at the closing price of common stock on the date the investor purchased a Unit in the Partnership. For the three months and nine months periods ended September 30, 2015, the Company recorded the fair value of 345,000 shares of common stock as investment expense of $27,600 and $27,600, respectively, as compared to $0 and $0, respectively, for the same comparable periods ended September 30, 2014.

On August 6, 2015, the Company issued 1,270,000 shares of common stock valued at $47,847 in settlement of preferred stock dividend payable to Series A Preferred Stockholders as of June 30, 2015.

Preferred stock

On April 1, 2014, the Company offered to sell pursuant to a private placement, under a Regulation S offering to non-US investors only, 1,500,000 Units to raise $7,500,000. The minimum investment in this offering is for 5,000 Units for $25,000. Each Unit consists of two (2) shares of Series A 7% Convertible Preferred Stock, par value $0.0001 per share and one (1) redeemable Class F Warrant of the Company to purchase ten (10) shares of common stock. Each share of Series A Preferred Stock pays a 7% annual dividend for the first year ending March 31, 2015 and thereafter, a 10% dividend payable, at the option of the Company, in cash or in the Company’s common stock. Each Class F Warrant entitles the holder thereof to purchase, at any time until the expiration date of March 31, 2017, ten (10) shares of Common Stock at an exercise price of $0.30 per share, subject to adjustment. The Class F Warrants are redeemable by the Company, at a redemption price of $0.05 per Warrant, upon at least 30 days’ prior written notice, commencing six months after the date of this private placement, if the average of the closing bid price of the Common Stock, as reported on the Over-The-Counter or other exchange, shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive business days prior to the notice of redemption. The Units are being offered on a “best effort basis” by the Company through its officers and directors and selected finders and broker/dealers.

The Company has sold 127,000 Units and raised $635,000 as of September 30, 2015. The Company has issued 254,000 Series A 7% convertible Preferred Shares, par value $0.0001 per share, and warrants to purchase 2,540,000 shares of common shares at an exercise price of $0.30 per share as of September 30, 2015. The Company has recorded preferred stock dividend expense of $15,832 and $38,893 for Series A Preferred Stockholders for the three months and nine months ended September 30, 2015, and $11,204 and $13,582 for the same comparable periods ended September 30, 2014. On August 6, 2015, Series A Preferred Stockholders agreed to receive 1,270,000 common shares to settle $47,848 of preferred stock dividend payable to them as of June 30, 2015. The Company issued 1,270,000 shares of common stock valued at their fair value of $60,960 to settle the preferred stock dividend payable to Series A Preferred shareholders and recorded a loss of $13,112 upon settlement of preferred stock dividend to Series A Preferred Stockholders for the three months ended September 30, 2015. Series A Preferred Stock dividend payable at September 30, 2015 and December 31, 2014 was $15,832 and $24,786, respectively.

On September 25, 2014, the Company offered to sell pursuant to a private placement, under a Regulation S offering to non-US investors only, 400,000 Units to raise $2,000,000. The minimum investment in this offering is for 5,000 Units for $25,000. Each Unit consists of one (1) share of Series B 7% Convertible Preferred Stock, par value $0.0001 per share and one (1) redeemable Class G Warrant of the Company to purchase twenty-five (25) shares of common stock. Each share of Series B Preferred Stock pays a 7% annual dividend for the first year ending September 30, 2015 and thereafter, a 10% dividend payable, at the option of the Company, in cash or in the Company’s common stock. Each Class G Warrant entitles the holder thereof to purchase, at any time until the expiration date of September 30, 2017, twenty-five (25) shares of Common Stock at an exercise price of $0.20 per share, subject to adjustment. The Class G Warrants are redeemable by the Company, at a redemption price of $0.05 per Warrant, upon at least 30 days’ prior written notice, commencing six months after the date of this private placement, if the average of the closing bid price of the Common Stock, as reported on the Over-The-Counter or other exchange, shall equal or exceed $1.00 per share (subject to adjustment) for ten (10) consecutive business days prior to the notice of redemption. The Units are being offered on a “best effort basis” by the Company through its officers and directors and selected finders and broker/dealers.

The Company has sold 97,500 Units and raised $487,500 as of September 30, 2015. The Company has issued 97,500 Series B 7% convertible Preferred Shares, par value $0.0001 per share, and warrants to purchase 2,437,500 shares of common shares at an exercise price of $0.20 per share as of September 30, 2015. The Company has recorded preferred stock dividend expense of $8,601 and $23,500 for Series B Preferred Stockholders for the three months and nine months ended September 30, 2015, and $0 for the same comparable periods ended September 30, 2014. Series B preferred stock dividend payable at September 30, 2015 and December 31, 2014 was $26,213 and $2,713, respectively.

As a result of all stocks, options and warrant issuances as of September 30, 2015, the Company had 77,357,086 shares of common stock issued and outstanding, 351,500 shares of preferred stock issued and outstanding, 3,000,000 stock options convertible into common stock, 7,500,000 Class E Warrants, 8,923,420 Class F Warrants, 2,437,000 Class G Warrants for conversion into common stock.

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8. RELATED PARTY TRANSACTIONS AND BALANCES

9 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

8. RELATED PARTY TRANSACTIONS AND BALANCES

NOTE 8: RELATED PARTY TRANSACTIONS AND BALANCES

At September 30, 2015 and December 31, 2014, advances, net of repayments, made to the Company by the Chief Executive Officer (“Officer”) for its working capital requirements amounted to $100 and $100, respectively. Amounts due to the Officer are unsecured, non-interest bearing and due on demand without specific repayment terms.

On June 1, 2013, the Company entered into a business consulting and marketing agreement with its non-executive director for a twelve month period at the rate of $2,500 per month. The agreement terminated on May 31, 2014 and the non-executive director continued to provide services to the Company for adhoc fees. The Company recorded an expense of $22,000 and $77,000 as consulting fees for the three and nine months ended September 30, 2015 as compared to $15,000 and $35,000 for the same periods ended September 30, 2014.

On July 1, 2014, the Company entered into a business advisory and consulting agreement for a twelve months term, with a management company related to the Chief Executive Officer. The Company agreed to pay $5,000 monthly cash payment and issued 400,000 shares of its common stock valued at $56,000. The common shares issued are valued at the closing price of stock on the effective date of the consulting agreement and the value is recorded as a prepaid expense to be amortized over the service period. The Company recorded an expense of $0 and $58,000 as consulting expense for the three and nine months ended September 30, 2015 as compared to $29,000 and $29,000 for the same periods in 2014.

The Company engages an entity owned by a director of the Company to be the operator on its oil and gas lease properties in Wilson County, Kansas. The Company has recorded an expense of $24,240 and $82,350 for lease operating expenses and administration for these oil and gas leases for the three and nine months ended September 30, 2015. The Company paid the operator $493,582 and $737,156 for lease operating expenses and administration for these oil and gas leases for the same periods ended on September 30, 2014. Amount payable to the entity owned by the director was $16,609 and $26,635 at September 30, 2015 and December 31, 2014, respectively.

On August 31, 2014, the Company acquired the remaining 12.5% working interest in Volunteer and Lander Leases in Wilson County, Kansas (“Leases”), from an entity owned by a director for $125,000 and obtained the 100% working interest in the Leases. The Company paid $15,000 in cash and executed a promissory Note for $110,000 (See NOTE 6). The Company recorded an interest expense of $1,375 and $4,125 for the three and nine months ended September 30, 2015. Interest payable to the director amounted to $5,958 as of September 30, 2015 and $1,833 as of December 31, 2014.

The Company recorded director fee expense of $12,000 and $36,000 for the three and nine months ended September 30, 2015 and $12,000 and $36,000 for the three and nine months ended September 30, 2014. Director fees of $69,000 and $44,000 remain payable as of September 30, 2015 and December 31, 2014, respectively.

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9. COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2015

Commitments and contingencies (Note 9)

9. COMMITMENTS AND CONTINGENCIES

NOTE 9: COMMITMENTS AND CONTINGENCIES

Employment Agreement

On January 1, 2014, the Company entered into an employment agreement with its Chief executive Officer to retain his services through the year ended December 31, 2018. As an inducement to enter into the employment agreement, the Company paid a signing bonus of cash payment of $50,000 on January 6, 2014. Pursuant to the terms of the employment agreements, total minimum compensation commitments for years ended December 31, 2014 through 2018 are $240,000, $252,000, $264,600, $277,830 and $291,722, respectively. The Company recorded a compensation expense of $63,000 and $189,000 for the three and nine months ended September 30, 2015 and $60,000 and $180,000 for the same periods ended September 30, 2014. 

Contingencies

On November 12, 2013, a complaint was filed in the District Court of Taylor County, Texas, captioned Brent and Brook Hatchett v. New Western Energy Corporation, Case No. 25,863-B. The complaint asserts breach of contract on the part of the Company relating to a Plan and Agreement of Reorganization (the “Contract”) wherein the Company acquired all of the issued and outstanding capital stock of Royal Texan Energy Co. from the Hatchetts. The Hatchetts are seeking the remaining consideration of 600,000 common shares of New Western Energy Corporation payable to them for the acquisition by New Western Energy Corporation of Royal Texan Energy Co. in addition to general damages.

On February 10, 2015, the Company entered into a Settlement Agreement and Mutual Release of Claims (the “Agreement”) with Brent and Brook Hatchett in full settlement of all legal actions and disputes between the parties, including the dismissal with prejudice of the pending lawsuit in Texas. In accordance with the settlement, on March 4, 2015, the Company (a) agreed to cancel 600,000 shares of previously issued but not distributed shares and returning it to authorized but unissued status, thus reducing the Company’s current number of shares outstanding by 600,000 shares (See Note 10), (b) agreed to pay 30% of the proceeds from sale of Royal Texan Energy oil and gas properties in Texas, and (c) agreed to get the $50,000 bond at the railroad commission reduced to $25,000 and thereafter post a bond of $25,000 to release the current bond of Bill Windhem and Brent Hatchett. The Company has not issued and distributed to Hatchetts the remaining 100,000 shares of common stock as of the date of this report. The Company has not posted a bond of $25,000 to release the current bond of Mr. Windhem and Mr. Brent Hatchett.

On March 10, 2015, the Company entered into a Securities Purchase Agreement (the “SPA”) with Fodere Titanium Limited for the assignment of a license to a patent for a new process for the extraction of minerals from tailings in the United Sates (the “License) in exchange for the issuance of 5,000,000 shares of the Company’s common stock (the “Shares”). The transaction was never consummated. The License was never assigned and the Shares were never issued. On May 11, 2015, the parties entered into a Cancellation of Agreement and Mutual Releases agreement (the “Agreement”). The Agreement formally cancelled and terminated the SPA and each party to the SPA released the other party from any liabilities relating to entering into the SPA.

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

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11. CONCENTRATIONS

9 Months Ended

Sep. 30, 2015

Risks and Uncertainties [Abstract]

11. CONCENTRATIONS

NOTE 11: CONCENTRATIONS

Concentration of Operators

As of September 30, 2015, the Company used two operators for the leased properties for which the Company has current activities. The Company also has one mineral lease with another lessor. There has been no activity on the mineral lease other than initial lease acquisition costs relating to the mineral lease as of September 30, 2015.

Concentration of Customer

The Company sells its oil product to two separate customers and gas products to two separate customers.

Concentration of Credit Risk

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2015. The Company’s bank balances did not exceed FDIC insured amounts as of September 30, 2015.

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6. NOTES PAYABLE - Notes Payable (Details) - USD ($)		Sep. 30, 2015	Dec. 31, 2014
Notes Payable, Gross		$ 280,000	$ 1,683,750
Notes payable - Current Portion		$ 280,000	$ 1,683,750
Notes payable - Long term Portion
Less: Unamortized discount and debt issuance costs			$ (536,841)
Notes Payable, Net		$ 280,000	1,146,909
Third Party Unsecured 1
Notes Payable, Gross	[1]		73,750
Stockholder Note
Notes Payable, Gross	[2]		1,500,000
Entity Owned by Director
Notes Payable, Gross	[3]	$ 110,000	$ 110,000
Third Party Unsecured 2
Notes Payable, Gross	[4]	55,000
Secured Note
Notes Payable, Gross	[5]	$ 115,000

[1] Note payable to a third party, unsecured, bearing interest at 5% per annum, due on May 30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan

[2] Stockholder note payable, secured, bearing interest at 10% per annum, due on October 31, 2015, is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans

[3] Note payable to an entity owned by a director, secured, bearing interest at 5% per annum, due on August 31, 2015

[4] Note payable to a third party, unsecured, bearing interest at 5% per annum, due on September 30, 2015, is subordinated in right of payment to the prior payment in full of all bank rediscount line of credit or loan

[5] Note payable to a third party, secured, bearing interest at 5% per annum, due on July 3, 2016

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3. NONCONTROLLING INTEREST IN CONSOLIDATED SUBSIDIARIES (Tables)

9 Months Ended

Sep. 30, 2015

Noncontrolling Interest [Abstract]

Noncontrolling Interest in Consolidated Subsidiaries

Balance NCI at December 31, 2013	$	511,942
Contribution by noncontrolling interest		—
Net loss applicable to noncontrolling interest for nine months ended September 30, 2014 – 49%		(211,170	)
Balance NCI at September 30, 2014	$	300,772
Balance NCI at December 31, 2014	$	263,895
Contribution by noncontrolling interest		—
Net loss applicable to noncontrolling interest for nine months ended September 30, 2015 – 49%		(116,098	)
Balance NCI at September 30, 2015	$	147,797

NWE Oil & Gas Program #1 LP

On April 9, 2015, the Company formed an entity NWE Oil & Gas Program #1 LP, a California limited partnership (the “California Limited Partnership”), for the sole purpose of (a) acquiring and drilling, managing, owning, re-working and operating oil and gas wells located on the leased property in Osage County, Oklahoma, and (b) new oil and gas wells. The Company became the General Partner and shall own 21 Units which shall represent 51% ownership of the California Limited Partnership. The Limited Partners shall own no more than 20 Units which shall represent 49% of the California Limited Partnership. As of June 30, 2015, the Company received cash contributions of $345,000 from three non-affiliated limited partners from the sale of three (3) Units of $115,000 each. The Company is obligated to contribute as General Partner $23,000 in cash for its ownership interest and the Company has not made its cash contribution as of September 30, 2015. The partnership commenced on April 9, 2015 and will continue for a term of 25 years unless sooner terminated in accordance with the terms of the agreement. Pursuant to the terms of the partnership agreement, the net income and distributions of the partnership shall be allocated 70% to the Limited Partners and 30% to the General Partner, until the Limited Partners has received in cash distributions an amount equal to their initial capital plus a 30% return on their original invested capital. Thereafter, net income and distributions shall be allocated 30% to the Limited Partners and 70% to the General Partner. Any net proceeds from the sale of any of the leases owned by the partnership shall be distributed 49% to the Limited Partners in accordance with each Limited Partner’s capital account and 51% to the General Partner.

The following provides a summary of activity in the noncontrolling interest (“NCI”) in California Limited Partnership, a consolidated subsidiary account for the nine months ended September 30, 2015:

Balance NCI at December 31, 2014	$	—
Contributions by NCI		345,000
Balance NCI at September 30, 2015	$	345,000

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Assets and Liabilities Measured at Fair Value on Recurring and NonRecurring Basis (Details)	Sep. 30, 2015 USD ($)
Warrant Liabilities	$ 176,555
Embedded Conversion Option Liability	$ 123,281
Level 1
Warrant Liabilities
Embedded Conversion Option Liability
Level 2
Warrant Liabilities
Embedded Conversion Option Liability
Level 3
Warrant Liabilities	$ 176,555
Embedded Conversion Option Liability	$ 123,281

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12. SUBSEQUENT EVENTS (Details Narrative)	3 Months Ended
	Nov. 13, 2015 USD ($) shares
Debt Converted, Value	$ 12,000
Debt Converted, Shares | shares	736,196
Debt Converted, Info	The Conversion price is 58% of the lowest trade price of $0.028 in the 10 trading days previous to the conversion date.
Investors
Stock Issued, Shares | shares	345,000
Stock Issued, Face Value	$ 10,695
Units Sold, Value	345,000
Additional Expense from Investment	$ 10,695
Non Executive Director
Stock Issued, Shares | shares	1,000,000
Stock Issued, Face Value	$ 31,000

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Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Reconciliation of net loss to net cash used in operating activities:
Net loss applicable to New Western Energy Corporation common stock	$ (2,399,257)	$ (1,950,764)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization	12,271	$ 38,642
Impairment expense	29,856
Amortization of debt discount	$ 181,647	$ 966,951
Amortization of mineral property		$ 38,143
Amortization and accretion of asset retirement obligations	$ 1,750
Amortization of deferred debt issuance cost	21,994	$ 137,887
Amortization of embedded conversion option liability	1,582
Loss applicable to noncontrolling interest	116,098	$ (211,170)
Loss on sale of oil and gas property and related equipment	33,886
(Gain) loss on settlement of convertible note payable	(28,690)	$ 128,168
Loss on conversion of preferred stock dividend to equity	13,112
Loss on conversion of promisory note to equity	875,804
Change in fair value of embedded conversion option liability	73,281	$ (654,692)
Change in fair value of warrant liability	(114,448)	$ (471,201)
Costs incurred in conjunction with issuance of convertible notes	183,103
Stock based investment expense	27,600
Changes in operating assets and liabilities:
Accounts receivable	25,039	$ (10,700)
Inventory	3,464	(9,833)
Prepaid expenses and other current assets	77,207	171,434
Accounts payable	(5,517)	1,073
Accrued expenses	107,761	89,746
Accrued interest payable	122,522	55,684
Net cash used in operating activities	(872,131)	(1,680,632)
Cash Flows From Investing Activities:
Cash paid for purchase of property and equipment	(1,502)	$ (43,564)
Cash proceeds from sale of oil and gas property and related equipment	90,000
Cash paid for security deposits	$ (20,262)
Cash advanced towards a note receviable		$ (75,000)
Cash received from a note receivable	$ 38,336	10,000
Cash paid for purchase and capitalized cost of oil and gas properties, net	(60,041)	(50,000)
Net cash provided by (used in) investing activities	46,531	(158,564)
Cash Flows From Financing Activities:
Cash received from sale of preferred stock	287,000	$ 635,000
Cash received from a note payable	55,000
Cash received from convertible promissory notes	238,500	$ 20,000
Cash repayment of a note payable	(50,000)	$ (308,000)
Cash received from sale of ownership interest in limited partnership	$ 345,000
Repayments of related party advances		$ (1,922)
Net cash provided by financing activities	$ 875,500	345,078
Net increase (decrease) in cash and cash equivalents	49,900	(1,494,118)
Cash and cash equivalents, beginning of the period	11,000	1,523,181
Cash and cash equivalents, end of the period	60,900	$ 29,063
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$ 1,925
Cash paid for interest		$ 90,462
Supplemental disclosures of non-cash investing and financing activities:
Debt discount	$ 48,418	73,591
Promissory notes issued for lease purchases	$ 115,000	110,000
Exchange of oil and gas properties for settlement of convertible notes payable		595,000
Settlement of convertible note payable in exchange for oil lease properties		924,000
Settlement of debt by issuance of options to purchase common shares/issuance of common shares	$ 2,300,000	91,161
Common shares issued to consultant as prepaid for services		$ 259,000
Settlement of preferred stock dividend by issuance of common shares	$ 47,847

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5. NOTE RECEIVABLE

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

5. NOTE RECEIVABLE

NOTE 5: NOTE RECEIVABLE

On April 1, 2014, the Company made a short-term advance of $75,000 to Legend, an entity with whom the Company had previously entered into a merger agreement on January 23, 2014. The advance is non-interest bearing, unsecured and is to be returned to the Company by Legend by February 28, 2015 or within 60 days, if the merger between the Company and Legend is terminated, whichever first occurs. On April 30, 2014, the Company terminated the merger agreement with Legend. The Company received one payment of $10,000 from Legend during 2014 and the outstanding balance of short-term advance at December 31, 2014 amounted to $65,000. On January 7, 2015, the Company and Legend entered into a settlement agreement and mutual release of claims due to the disputes arising between the two parties. Pursuant to the terms of settlement, Legend agreed to pay the settlement amount of $65,000 of which amount $10,000 was paid on January 7, 2015 and agreed to make six (6) equal payments of $9,167 each month starting February 7, 2015 in satisfaction of full payment of short-term advance. The Company has received payments of $38,336 against the settlement amount as of September 30, 2015. Legend is in default of making its settlement payments of $26,664 as of September 30, 2015. The Company is evaluating its options to enforce a stipulated judgment against Legend. The Company has not provided an allowance for uncollected balances as of September 30, 2015.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Level 3 Assets and Liabilities (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Initial value of Embedded Conversion Option	$ (102,184)	$ 304,802	$ 41,167	$ 1,131,241
Balance, Ending	(1,173,329)		(1,173,329)
Warrant [Member]
Balance, Beginning			$ 291,003
Additions
Change in fair value			$ (114,448)
Balance, Ending	176,555		$ 176,555
Options Held [Member]
Balance, Beginning
Additions			$ 50,000
Initial value of Embedded Conversion Option			62,082
Change in fair value			11,199
Balance, Ending	$ 123,281		$ 123,281

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8. RELATED PARTY TRANSACTIONS AND BALANCES (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Related Party Transactions [Abstract]
Advances to the Company, Working Capital			$ 100		$ 100
Professional Fees	$ 0	$ 29,000	58,000	$ 29,000
Lease Operating Expenses	24,240	493,582	82,350	737,156
Consulting Monthly Compensation					$ 5,000
Consulting, Compensation, Shares					400,000
Consulting Compensation, Value of Shares Issued					$ 56,000
Consulting Compensation, Payable					10,000
Property Acquired from Entity Owned by Director, Cash					15,000
Property Acquired from Entity Owned by Director, Note					110,000
Director, Compensation	16,609				26,635
Director Fee Expense	12,000	$ 12,000	36,000	$ 36,000
Director Fee Expense Payable	$ 69,000		69,000		$ 35,000
Periodic Payment			$ 2,500

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Assets and Liabilities Measured at Fair Value on Recurring and NonRecurring Basis

			Fair Value Measurements at September 30, 2015
	Carrying Value at September 30, 2015 (Unaudited)		(Level 1) (Unaudited)		(Level 2) (Unaudited)		(Level 3) (Unaudited)
Warrant Liabilities	$	176,555	$	—	$	—	$	176,555
Embedded Conversion Option Liability	$	123,281	$	—	$	—	$	123,281

Level 3 Assets and Liabilities

Warrant Liabilities
Balance - December 31, 2014	$	291,003
Additions		—
Change in fair value		(114,448	)
Balance – September 30, 2015	$	176,555
Embedded Conversion Option Liability
Balance - December 31, 2014	$	—
Additions		50,000
Initial value of Embedded Conversion Option		62,082
Change in fair value		11,199
Balance – September 30, 2015	$	123,281