NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017 AND 2016
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1.
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Organization and Summary of Significant Accounting Policies
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Organization and business
West Texas Resources, Inc.
(the “Company”) was incorporated under the laws of Nevada on December 9, 2010 under the name Texas Resources Energy,
Inc. On June 30, 2011, the Company changed its name to West Texas Resources, Inc. The Company intends to engage in the acquisition,
exploration and development of oil and gas properties in North America. From its inception, the Company has devoted its activities
to developing a business plan, raising capital and acquiring operating assets. On August 5, 2016, the Company formed a wholly owned
subsidiary in the State of Texas, WTXR Operating (Texas) Inc., to operate oil and gas wells in Texas. This subsidiary was incorporated
to operate oil and gas wells in which West Texas Resources, Inc. owns interests. The subsidiary began the operation of several
leases in South Texas and a lease in East Texas, with operations beginning in December 2016.
Going concern
The accompanying consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP)
that contemplate continuation of the Company as a going concern. The Company has not earned any significant revenues since inception.
During the nine months ended June 30, 2017 and 2016, the Company incurred a net operating loss of $242,488 and $139,971, respectively.
In addition, the Company had an accumulative deficit of $2,847,208 and $2,604,720, as of June 30, 2017 and September 30, 2016,
respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company will require up
to $1 million of additional capital in order to fund its proposed operations over the next 12 months. Management plans to continue
to seek sources of financing on favorable terms; however, there are no assurances that any such financing can be obtained on favorable
terms, if at all. Management expects to monitor and control the Company’s operating costs until cash is available through
financing or operating activities. There are no assurances that the Company will be successful in achieving these plans. The Company
anticipates that losses will continue until such time, if ever, as the Company is able to generate sufficient revenues to support
its operations.
Unaudited Interim Financial
Information
We have prepared the accompanying
consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the ‘SEC”)
for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments,
consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets, operating
results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of
the results that may be expected for 2017 due to seasonal and other factors. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)
have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part VI, “ Financial
Statements and Supplementary Data,” of our 2016 Annual Report on Form 10-K.
Oil and gas properties
The Company uses the successful
efforts method of accounting for oil and gas producing activities. Costs to acquire mineral interests 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 that do not find proved reserves, geological and geophysical costs, and
costs of carrying and retaining unproved 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. Other unproved properties are amortized based on the Company's experience of successful drilling
and average holding period. Capitalized costs of producing oil and gas properties, after considering estimated residual salvage
values, are depreciated and depleted by the unit-of-production method.
WEST TEXAS RESOURCES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017 AND 2016
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.
Impairment of long-lived assets
The Company accounts for the
impairment and disposition of long-lived assets in accordance with ASC 360-10-35,
Impairment or Disposal of Long-Lived Assets
.
In accordance with ASC 360-10-35, long-lived assets are reviewed for events of changes in circumstances, which indicate that their
carrying value may not be recoverable.
Asset retirement obligations
ASC 410-20,
Asset Retirement
Obligations
, clarifies that a legal obligation to perform an asset retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform
the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. ASC
410-20 requires a liability to be recognized for the fair value of a conditional asset retirement obligation if the fair value
of the liability can be reasonably estimated.
In general, our future asset retirement
obligations relate to future costs associated with plugging and abandoning our oil and natural gas wells, removing equipment
and facilities from leased acreage, and returning land to its original condition. The fair value of a liability for an asset
retirement obligation is recorded in the period in which it is incurred, discounted to its present value using our
credit-adjusted-risk-free interest rate, and a corresponding amount capitalized by increasing the carrying amount of the
related long-lived asset. The liability is accreted each period, and the capitalized cost is depreciated over the useful life
of the related asset. Revisions to estimated retirement obligations will result in an adjustment to the related capitalized
asset and corresponding liability. If the liability for an oil or natural gas well is settled for an amount other
than the recorded amount, the difference is recorded to current period earnings, unless significant.
Cash, cash equivalents, and
other cash flow statement supplemental information
Cash is commonly considered
to consist of currency and demand deposits. The Company considers all liquid investments with an original maturity of three months
or less that are readily convertible into cash to be cash equivalents. The Company places its cash with high credit quality financial
institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The
Company performs ongoing evaluations of these institutions to limit its concentration of risk exposure. Management believes this
risk is not significant due to the financial strength of the financial institutions utilized by the Company.
Use of estimates
The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect certain reported amounts and disclosures. Management believes its estimates and assumptions
are reasonable; however, such estimates and assumptions are subject to a number of risks and uncertainties that may cause actual
results to differ materially from such estimates.
WEST TEXAS RESOURCES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017 AND 2016
Income taxes
The Company reports certain
expenses differently for financial and tax reporting purposes and, accordingly, provides for the related deferred taxes. Income
taxes are accounted for under the liability method in accordance with ASC 740,
Income Taxes.
Management has considered
its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely
than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities from
2013 to the present, generally for three years after they are filed.
The Company has not filed
its income tax return for fiscal year 2016. The Company plans to file this tax return in the third quarter 2017. The Company believes
that it should not have a material impact on the financials because the Company did not have any tax liabilities due to the net
loss incurred in fiscal year 2016.
Basic and diluted net income
(loss) per share
Basic net income (loss)
per share is based upon the weighted average number of common shares outstanding. Diluted net income (loss) per share is based
on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying
the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or
at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price
during the period. For the nine months ended June 30, 2017 and 2016, all common stock equivalents were anti-dilutive.
Stock-based payments
Compensation costs for all share-based awards
are measured based on the grant date fair value and are recognized over the vesting period. Expense related to awards with performance
conditions is recognized when it becomes probable that the performance conditions will be met, at which time the grant date fair
value will be amortized over any requisite service period, net of estimated pre-vesting forfeitures.
Revenue recognition
In accordance with the requirements
ASC topic 605 “Revenue Recognition”, revenues are recognized at such time as (1) persuasive evidence of an arrangement
exists, (2) delivery has occurred or services have been rendered, (3) the seller’s price to the buyer is fixed or determinable
and (4) collectability is reasonably assured.
Fair value of financial instruments
The accounting standards
regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure
of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash and other current
assets and liabilities to approximate their fair values because of the short period of time between the origination of such instruments
and their expected realization.
The Company has also adopted
ASC 820-10 which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and
enhances disclosure requirements for fair value measures. The three levels are defined as follows:
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|
·
|
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
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·
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Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets,
and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the
financial instruments.
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·
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Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
|
As of June 30, 2017 and
September 30, 2016, the Company did not identify any assets or liabilities that are required to be presented on the balance sheet
at fair value in accordance with ASC 820-10.
WEST TEXAS RESOURCES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017 AND 2016
New Accounting Pronouncements
In August 2016, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts
and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other
Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15,
2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted
this ASU in 2016 and the implementation did not have a material impact on our financial position or statement of operations.
In March 2016, the FASB issued ASU No. 2016-09, Compensation
– Stock Compensation (Topic 718) (“ASU 2016-09”), which simplified certain aspects of the accounting for share-based
payment transactions, including income taxes, classification of awards and classification in the statement of cash flows. ASU 2016-09
will be effective for the Company beginning in its first quarter of 2018. We are currently evaluating the impact of adopting the
new stock compensation standard on our consolidated financial statements.
In August 2014, the FASB issued Accounting Standards
Update No. 2014-15, “
Presentation of Financial Statements – Going Concern”
, Subtopic 205-40, “
Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern.”
The amendments in this ASU
apply to all entities and require management to assess an entity’s ability to continue as a going concern by incorporating
and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a
definition of the term
substantial doubt,
(2) require an evaluation every reporting period including interim periods,
(3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when
substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and
other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date
that the financial statements are issued (or available to be issued). The amendments in this update are effective for the annual
period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. We
adopted this ASU in 2016 and the implementation did not have a material impact on our financial position or results of operations.
In May 2014, the FASB issued ASU No. 2014-09 “
Revenue
from Contracts with Customers
” (Topic 606). This ASU was subsequently amended by ASU No. 2016-10 and 2016-12. As amended,
Topic 606 supersedes the revenue recognition requirements in Topic 605,
“Revenue Recognition”
including
most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments
create a new Subtopic 340-40,
“Other Assets and Deferred Costs—Contracts with Customers”.
In
summary, the core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. For a public entity, the amendments in this update are effective for annual reporting periods beginning after December
15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting
periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are currently evaluating
the impact this guidance will have on our financial position and statement of operations.
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2.
|
Oil and Gas Properties
|
Eastland County Field
In September 2011, we acquired
our initial property consisting of a 31.25% working interest in an explanatory oil and gas drilling prospect covering 120 acres
in Eastland County, Texas. After explanatory work was performed, we determined that, as of the three months ended June 30, 2013,
our investment in the Eastland County prospect was impaired due to an unsuccessful fracture stimulation. The value of this property,
subsequent the impairment, was $20,449. The operator has undertaken no further activity on the Eastland County prospect as of the
date of this report.
Sunshine Prospect, Landry
Parish, Louisiana
On August 1, 2014, the Company
entered into an agreement with Restech Resources, LLC to purchase a 15% (14.25% net revenue interest) in an oil and gas prospect
located in Landry Parish, Louisiana. The working interest concerns 248 gross acres and net acres in the Sunshine Prospect. Our
purchase price for the working interest was $76,500.
WEST TEXAS RESOURCES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017 AND 2016
Birnie Field, Motley County,
Texas
On September 17, 2014, the
Company entered into an agreement with Escopeta Oil and Gas Corporation to purchase a 10% working interest (7.5% net revenue interest)
in a natural gas prospect located in the Birnie field in Motley County, Texas. The working interest concerns 5,760 leased acres
in the Palo Duro Basin prospect. Our purchase price for the working interest was $70,000. In 2014, the operator drilled an initial
well on the prospect, however the drilling was unsuccessful and resulted in a dry hole. The operator agreed to provide us, for
no additional consideration, a 1% working interest in the Stansell field prospect described below.
Stansell Field, Floyd County,
Texas
We hold a 1% working interest
in an oil prospect located in Floyd County, Texas. The working interest comprises 15,000 leased acres in the southern section of
the Palo Duro basin. The initial project will be the re-entry of the Stansell #1-A well, an existing wellbore that was drilled
in 2006. The original drilling encountered oil shows in three separate reservoirs and the operator intends to re-enter and recomplete
the Stansell #1-A using current fracture stimulation technology. We have a carried 1% working interest in the Stansell #1-A well
through the tanks. In April 2015, the operator has started the re-entry of the Stansell #1-A well.
Hale County Field, Hale County,
Texas
In June and July 2014, the
Company acquired non-operating leases covering approximately 1,070 gross mineral acre leases in a property located in Hale County,
Texas. The leases were acquired for cash payments of $45,484. The leases have a primary term of five years with the Company option
to extend the term for another five years. The leased properties constitute the surface acreage comprising a natural gas prospect,
for which we hold 50% of the working interest and 40% net revenue interest. The leased properties are subject to a 20% royalty
interest held by the owners and a third party. The Company is currently evaluating the Company options for the exploitation of
the leased properties, including the Company sale of the leases or the Company farm-out of the leases to a natural gas operator.
Leased Properties from Kiowa
Oil Company
On September 30, 2015, the
Company entered into an agreement with Kiowa Oil Company to lease 100% of interests, for a period of five years, of properties
in North Dakota, Florida, Illinois, and Kentucky. The total price for the subject interests under this lease agreement is $5,000
and a 15% royalty interest in all the subject interests leased. The total price was paid in the Company’s common shares at
the per share price of $0.50.
TW Lee Field, Gregg County,
Texas
On March 3, 2016, the Company
entered into an agreement with Two Eagle Resources, a Texas corporation, to purchase 25% working interest (18.75% net revenue interest)
in the properties located in Gregg County, Texas. The property is known as T.W. Lee. The purchase price for the subject interests
under this agreement is $25,000, which will be paid in the Company’s common shares at the per share price of $0.25.
T.A. Greer Lease
On May 10, 2016, the Company
acquired a 25% working interest (19.5% net revenue interest) in an East Texas oil and gas property. The property is known as the
T.A. Greer lease and includes two tracts of land totaling approximately 407 acres in Panola County, Texas. We acquired the property
from an unaffiliated party in consideration of our payment of $10,000 and issuance of 60,000 shares of our common stock at $0.25
per share for a total consideration of $25,000.
WEST TEXAS RESOURCES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017 AND 2016
Origin Acquisition
On November 10, 2016, the
Company acquired from Origin Production Co. Inc. interests in various producing and non-producing leases; primarily in Gonzales,
Caldwell, and Wilson County, Texas. We acquired the property from an unaffiliated party in for the purchase of 500,000 units of
the Company’s securities for a purchase price of $0.30 per unit for a total of $150,000. Each Unit consists of one share
of the Company’s common stock and one common stock warrant that entitles its holder to purchase one share of the Company’s
common stock at an exercise price of $0.50 per share over a three year period ending November 1, 2019.
As of June 30, 2017 and September
30, 2016, total oil and gas properties amounted to $408,893 and $267,433, respectively.
During the nine months ended
June 30, 2017 and 2016, a shareholder made advances to the Company to support its daily operations. These advances were due on
demand and do not bear any interest.
The Company repaid $6,558
during the nine months ended June 30, 2016. In January 2016, the Company issued 450,000 shares of its common stock upon conversion
of the outstanding amount of $45,000. In addition, the shareholder retired 30,000 shares in exchange for $3,000 overpayment made
to him.
During the quarter ended
September 30, 2016, a shareholder paid a total amount of $17,000 for payment of legal fees on behalf of the Company through his
personal credit line.
During the nine months ended
June 30, 2017, a shareholder paid a total amount of $27,655 for payment of legal fees on behalf of the Company through his personal
credit line and the company repaid $4,265 of advances received. The outstanding balance is due on demand and does not bear any
interest. As of June 30, 2017, and September 30, 2016, the total outstanding amount due to the shareholder was $36,832 and $13,442,
respectively.
Common Equity
The Company is authorized
to issue 200,000,000 shares of common stock, par value of $0.001, and 10,000,000 shares of preferred stock, par value of $0.001.
During the nine months ended June 30, 2017, the Company
entered into subscription agreements with various accredited investors to sell 486,000 shares of the Company’s common stock
at $0.30 per share. The total amount of $145,800 was received and all of the shares were issued.
During the nine months ended
June 30, 2017, the Company exchanged 540,000 units of WTXR securities valued at $0.30 per unit, for a total consideration of $164,000,
in exchange for $14,000 of professional services and $150,000 of equipment and various producing and non-producing leases primarily
in Gonzales, Caldwell, and Wilson County, Texas. Each Unit consists of one share of the Company’s common stock and one common
stock warrant that entitles its holder to purchase one share of the Company’s common stock at an exercise price of $0.50
per share over a three year period ending November 1, 2019.
As of
June 30, 2017 and September 30, 2016, the Company had 17,315,908 and 16,289,908 shares of common stock issued and outstanding and
had not issued any of its preferred stock.
WEST TEXAS RESOURCES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017 AND 2016
Share-based Compensation
On September 15, 2011,
the Company adopted the West Texas Resources, Inc. 2011 Stock Incentive Plan (the “Plan”) providing for the grant
of non-qualified stock options and incentive stock options to purchase its common stock and for grant of restricted and unrestricted
grants. The Company has reserved 3,000,000 shares of its common stock under the Plan. All officers, directors, employees and consultants
to the Company are eligible to participate under the Plan. The purpose of the Plan is to provide eligible participants with an
opportunity to acquire an ownership interest in the Company.
On April 16, 2015, the Company
granted options to Mr. Paul Brogan, the Company’s director, to purchase a total of 200,000 shares of the Company’s
common stock. The options have an exercise price of $0.50 per share, expire on April 16, 2020, and 66,667 shares vest immediately
with the rest vesting equally on April 16, 2016 and 2017. The fair value of these options was determined to be $99,712, of which
$18,003 was amortized and included in general and administrative expenses for the nine months ended June 30, 2017. As of June 30,
2017, all compensation expense related to these options has been recognized.
The following assumptions were
used in the fair value method calculation:
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·
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Risk free rate of return: 1.375%
|
On October 19, 2016, the Company granted options
to Mr. William Sawyer, the Company’s new CEO, to purchase a total of 1,500,000 shares of the Company’s common stock.
The options have an exercise price of $0.50 per share, and expire on October 18, 2021. The stock options vest in 375,000 increments
based on the CEO’s ability to raise additional capital ($1M and $10M), get company’s share price to above $2.00 with
10,000 shares daily trading volume for 30 consecutive days, or increase daily production to 500 boepd. The fair value of
the options was determined to be $448,500, but the Company does not consider it probable that the performance conditions will
be met. Therefore no compensation expense has been recognized.
The following assumptions were
used in the fair value method calculation:
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·
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Risk free rate of return: 1.375%
|
The following is a rollforward
of the options outstanding and exercisable for the six months ended June 30, 2017:
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Options
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Weighted Average Exercise Price
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Average Remaining Life
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Outstanding and exercisable – September 30, 2016
|
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563,889
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|
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$
|
0.57
|
|
|
|
2.73
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Vested
|
|
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|
36,111
|
|
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|
|
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Expired
|
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|
–
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|
|
|
|
|
|
|
|
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Outstanding and exercisable – June 30, 2017
|
|
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|
600,000
|
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$
|
0.57
|
|
|
|
2.06
|
|
WEST TEXAS RESOURCES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2017 AND 2016
Based
on the available information and other factors, management believes it is more likely than not that the net deferred tax assets
at June 30, 2017 and September 30, 2016 will not be fully realizable. Accordingly, management has recorded a full valuation allowance
against its net deferred tax assets at June 30, 2017 and September 30, 2016. As of June 30, 2017 and September 30, 2016, the Company
had federal net operating loss carry-forwards of approximately $2,847,488 and $2,605,000, respectively, expiring beginning in 2032.
Deferred tax assets consist of the following components:
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June 30,
2017
|
|
|
September 30,
2016
|
|
|
|
Net loss carryforward
|
|
|
$
|
1,005,638
|
|
|
$
|
920,000
|
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|
Valuation allowance
|
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|
(1,005,638
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)
|
|
|
(920,000
|
)
|
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|
Total deferred tax assets
|
|
|
$
|
–
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$
|
–
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6.
|
New CEO’s employment and stock options agreement
highlights.
|
On October 19, 2016, the Company hired a new CEO and
entered into an employment agreement providing for the following compensation:
Base Salary:
The base salary is $90,000 per
year ($7,500 per month), with $2,000 guaranteed and paid on a monthly basis, and the remaining $5,500 accruing each month until
certain benchmarks are reached. Accrual reduction happens at the one year mark, at which point $4,000 is guaranteed and paid on
a monthly basis, with the remaining $3,500 accruing each month until certain benchmarks are reached. At the two year mark, accrual
ends and any unpaid balance is paid out on a monthly basis at $500, with the final lump sum paid at the three year mark.
Option Compensation:
The CEO was granted 1,500,000
stock options. The stock options vest in 375,000 increments based on the CEO’s ability to raise additional capital ($1M and
$10M), get Company’s share price to above $2.00 with 10,000 shares daily trading volume for 30 consecutive days, or increase
daily production to 500 boepd. All benchmarks must be reached within two years of the October 18, 2016 grant date. If there is
a change in control, then all options vest and become immediately exercisable. As of June 30, 2017, the Company concluded that
the vesting conditions were not probable, and therefore no compensation expense has been recorded related to these options.
Annual Bonus:
The annual bonus is not guaranteed,
however the Company will track the performance criteria throughout the year.
Other Perks:
Among the various perks, the CEO
gets two weeks paid vacation each calendar year.
During the nine
months ended June 30, 2017, the Company’s legal counsel forgave $26,292 in legal fees payable. The Company recognized a gain
as a result of this forgiveness within other income on the Consolidated Statement of Operations.
Events subsequent to June 30, 2017 have been
evaluated through the date these consolidated financial statements were issued to determine whether they should be disclosed to
keep the consolidated financial statements from being misleading.