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T-Rex Oil, Inc. – ‘10-Q’ for 6/30/17

On:  Wednesday, 12/4/19, at 12:47pm ET   ·   For:  6/30/17   ·   Accession #:  1065949-19-187   ·   File #:  0-51425

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

12/04/19  T-Rex Oil, Inc.                   10-Q        6/30/17   59:2.9M                                   Chilcote Candi M/FA

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2017

OR

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________.

Commission file number: 000-51425

T-Rex Oil, Inc.

(Exact name of registrant as specified in its charter)

520 Zang Street, Suite 209

Broomfield, CO 80021

(Address of principal executive offices)

(720) 502-4483

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ ] No [  ]

Indicate by check mark whether the registrant has submitted electronically on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [  ] 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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 14, 2017, T-Rex Oil, Inc. has 17,697,621 shares of $0.001 par value common stock outstanding.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [X] No [  ]

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

T-Rex Oil, Inc. and Subsidiaries

Consolidated Balance Sheets

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

T-Rex Oil, Inc. and Subsidiaries

Consolidated Statements of Operations

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

T-Rex Oil, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

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

T-Rex Oil, Inc. and Subsidiaries

Consolidated Statement of Changes in Stockholders’ Equity

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

T-REX OIL, INC. AND SUBSIDIARIES

Notes to The Consolidated Financial Statements

June 30, 2017

(Unaudited)

Note 1 – Organization and History

T-Rex Oil, Inc. (the “Company”) was incorporated in Colorado on September 2, 2014. Rancher Energy Corp was incorporated in Nevada on February 2, 2004. Effective October 20, 2014, T-Rex Oil, Inc. and Rancher Energy Corp were merged under the laws of the State of Colorado and T-Rex Oil, Inc. became the surviving entity. Effective October 29, 2014, the Company authorized 50,000,000 shares of preferred stock in addition to its common stock and completed a reverse split of its common stock, issued and outstanding, on a one (1) new share for three hundred fifty (350) old shares basis.

The Company has been engaged in the acquisition, exploration, and development of oil and gas prospects in the Rocky Mountain region of Wyoming.

Cole Creek

On January 15, 2016, T-Rex Oil LLC #3 (“LLC #3) entered into a Purchase and Sale Agreement with Blue Tip Energy Wyoming, Inc. and Cole Creek Recompletions LLC and acquired approximately 82% of the working interest in certain leases located in the state of Wyoming known as the Cole Creek properties in exchange for $1,200,000 in cash plus the assumption of liabilities in the amount of $833,382 for a total purchase price of $2,033,382. On April 20, 2016, the LLC #3 entered into a Purchase and Sale Agreement with Black Hills Exploration & Production, Inc. and acquired the remaining approximately 18% working interest in the Cole Creek properties in exchange for $250,000 in cash plus the assumption of liabilities in the amount of $133,311 for a total purchase price of $383,311. These leases are proved developed and undeveloped leaseholds and include producing crude oil wells totaling approximately 13,328 gross acres. See Note 2 – Principles of Consolidation.

Nexfuels Spin Off

On July 11, 2016, Nexfuels, Inc. was incorporated as a wholly-owned subsidiary of the Company in the State of Colorado (“Nexfuels”). Nexfuels was created to develop the Company’s Carbon Dioxide Recovery Project. The Carbon Dioxide Recovery Project (“the Project”) is focused on the development of exhaust stack supplies of carbon dioxide for use in enhanced oil recovery. The project involves the development, build out and operation of a commercial scale carbon capture systems on existing coal fueled electric power plants in the United States, specifically in Wyoming.

The Company’s Board of Directors determined that to focus and better implement these strategies necessary to financing and build the Project, the Board of Directors approved the spin-off of Nexfuels on July 15, 2016.

Shareholders of T-Rex, as of the Record Date of August 19, 2016, received one share of Nexfuels common stock for every two shares (2) of T-Rex common stock owned. The stock dividend was based upon 17,097,622 shares of the Company’s common stock that were issued and outstanding as of the Record Date.

As part of the spin-off of Nexfuels, the Company’s Chief Executive Officer and Chairman, Mr. Donald Walford and a director of the Company Mr. Sears were appointed to the Board of Directors of Nexfuels.

On August 19, 2016, the Company assigned to Nexfuels the following:

An analysis of the properties assigned to Nexfuels by the Company showed that the Company in accordance with its accounting policies had not capitalized any of the direct or indirect costs associated with the MOUs, the feasibility study or any of the other interests in the project. As such, the Company did not recognize a gain or loss in connection with the Nexfuels spin-off.

Note 2 – Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of T-Rex Oil, Inc. and its wholly owned subsidiaries. All intercompany balances have been eliminated during consolidation.

The Company owns a 14.29% interest in T-Rex Oil, LLC #3, a Colorado limited liability company (LLC #3”) and the remaining 85.71% economic interest is held by a former director and shareholder of the Company. The Company has identified LLC #3 as a variable interest entity (VIE). The Company holds current rights that gives it the power to direct the activities of the VIE which most significantly impact the VIE’s economic performance including provisions that give the Company the right to receive potentially significant benefits. As member manager of LLC #3, the Company continuously evaluates whether it has a controlling interest in LLC#3. Therefore, the Company has included LLC #3 as a wholly owned subsidiary eliminating all intercompany balances during consolidation.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates include the fair value of assets and liabilities, oil and natural gas reserves, income taxes and the valuation allowances related to deferred tax assets, asset retirement obligations and contingencies.

Cash and Cash Equivalents

The Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. Cash and cash equivalents include demand deposits and money market funds carried at cost which approximates fair value. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”), although such deposits are in excess of the insurance coverage.

Concentration of Credit Risk

The Company’s producing properties are primarily located in Wyoming and the oil and gas production is sold to various purchasers based on market index prices. The risk of non-payment by these purchasers is considered minimal and the Company does not generally obtain collateral for sales. The Company continually monitors the credit standing of the primary purchasers. During the three months ended June 30, 2017 and 2016, two purchasers accounted for all of the total revenues.

Oil and Gas Producing Activities

The Company uses the successful efforts method of accounting for oil and gas activities. Under this method, the costs of productive exploratory wells, all development wells, related asset retirement obligation assets, and productive leases

are capitalized and amortized, principally by field, on a units-of-production basis over the life of the remaining proved reserves. Exploration costs, including personnel costs, geological and geophysical expenses, and delay rentals for oil and gas leases are charged to expense as incurred. Exploratory drilling costs are initially capitalized, but charged to expense if and when the well is determined not to have found reserves in commercial quantities. The sale of a partial interest in a proved property is accounted for as a cost recovery, and no gain or loss is recognized as long as this treatment does not significantly affect the units-of-production amortization rate. A gain or loss is recognized for all other sales of producing properties. There were capitalized costs of $11,679,817 and $10,281,659 at June 30, 2017 and 2016, respectively.

Unproved oil and gas properties are assessed annually to determine whether they have been impaired by the drilling of dry holes on or near the related acreage or other circumstances, which may indicate a decline in value. When impairment occurs, a loss is recognized. When leases for unproved properties expire, the costs thereof, net of any related allowance for impairment, is removed from the accounts and charged to expense. During the three months ended June 30, 2017 and 2016, there was no impairment to unproved properties. The sale of a partial interest in an unproved property is accounted for as a recovery of cost when substantial uncertainty exists as to the ultimate recovery of the cost applicable to the interest retained. A gain on the sale is recognized to the extent that the sales price exceeds the carrying amount of the unproved property. A gain or loss is recognized for all other sales of unproved properties. There were capitalized costs of $4,758,798 and $4,754,620 at June 30, 2017 and 2016, respectively.

Costs associated with development wells that are unevaluated or are waiting on access to transportation or processing facilities are reclassified into developmental wells-in-progress ("WIP"). These costs are not put into a depletable field basis until the wells are fully evaluated or access is gained to transportation and processing facilities. Costs associated with WIP are included in the cash flows from investing as part of investment in oil and gas properties. At June 30, 2017 and 2016, no capitalized developmental costs were included in WIP.

Depreciation, depletion and amortization of proved oil and gas properties is calculated using the units-of-production method based on proved reserves and estimated salvage values. For the three months ended June 30, 2017 and 2016, the Company recorded depreciation, depletion and amortization expense on oil and gas properties in the amount of $24,938 and $35,123, respectively.

The Company reviews its proved oil and natural gas properties for impairment whenever events and circumstances indicate that a decline in the recoverability of its carrying value may have occurred. It estimates the undiscounted future net cash flows of its oil and natural gas properties and compares such undiscounted future cash flows to the carrying amount of the oil and natural gas properties to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying amount of the oil and natural gas properties to fair value. For the three months ended June 30, 2017 and 2016, there was no impairment to proved properties.

Other Property and Equipment

Other property and equipment, such as computer hardware and software, are recorded at cost. Costs of renewals and improvements that substantially extend the useful lives of the assets are capitalized. Maintenance and repair costs are expensed when incurred. When other property and equipment is sold or retired, the capitalized costs and related accumulated depreciation are removed from their respective accounts. Depreciation expense of other property and equipment for the three months ended June 30, 2017 and 2016 was $4,560 and $10,284, respectively.

Asset Retirement Obligations

The Company records estimated future asset retirement obligations ("ARO") related to its oil and gas properties. The Company records the estimated fair value of a liability for ARO in the period in which it is incurred with a corresponding increase in the carrying amount of the related long-lived asset. The increased carrying value is depleted using the units-of-production method, and the discounted liability is increased through accretion over the remaining life of the respective oil and gas properties.

The estimated liability is based on historical industry experience in abandoning wells, including estimated economic lives, external estimates as to the cost to abandon the wells in the future, and federal and state regulatory requirements.

The Company's liability is discounted using management's best estimate of its credit-adjusted, risk-free rate. Revisions to the liability could occur due to changes in estimated abandonment costs, changes in well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells.

Impairment of Long-Lived Assets

In accordance with authoritative guidance on accounting for the impairment or disposal of long-lived assets, as set forth in Topic 360 of the ASC, the Company assesses the recoverability of the carrying value of its non-oil and gas long-lived assets when events occur that indicate an impairment in value may exist. An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than the carrying amount of the assets. If this occurs, an impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.

Revenue Recognition

The Company recognizes oil revenues when production is sold to the purchaser, delivery occurs and title is transferred and recognizes natural gas revenues when the title and risk of loss pass to the purchaser. The Company records its share of revenues based on its net revenue interest. The Company sells the majority of its products soon after production at various locations, including the wellhead.

Other Comprehensive Loss

The Company has no material components of other comprehensive loss and accordingly, net loss is equal to comprehensive loss for the period.

Income Taxes

The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the accounting bases and the tax bases of the Company’s assets and liabilities. The deferred tax assets and liabilities are computed using enacted tax rates in effect for the year in which the temporary differences are expected to reverse.

The Company's deferred income taxes include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

The Company has adopted ASC guidance regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the consolidated financial statements and applies to all income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the consolidated financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. At March 31, 2017 and 2016, there were no uncertain tax positions that required accrual.

Net Loss per Share

Basic net loss per common share of stock is calculated by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding during each period.

Diluted net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding, including the effect of other dilutive securities. The Company’s potentially dilutive securities consist of in-the-money outstanding options and warrants to purchase the Company’s common stock. Diluted net loss per common share does not give effect to dilutive securities as their effect would be anti-dilutive.

The treasury stock method is used to measure the dilutive impact of stock options and warrants. The following table details the weighted-average dilutive and anti-dilutive securities related to stock options and warrants for the periods presented:

Equity Based Payments

The Company recognizes compensation cost for equity based awards based on estimated fair value of the award and records capitalized cost or compensation expense over the requisite service period. See Note 9 – Equity Based Payments.  

Major Customers

During the three months ended June 30, 2017 and 2016, two purchasers accounted for all of the Company’s revenues.

Beneficial Conversion Feature and Deemed Dividend Related to Series A Shares

Pursuant to ASC 470-20, when the $558,171 of convertible Series A Shares of preferred stock were issued at a discount from the if-converted $682,989 fair value as of the issuance date, the Company recognized this difference between the fair value per share of its common stock and the conversion price, multiplied by the number of shares issuable upon conversion. This total Beneficial Conversion Feature of $124,818 will be recorded as additional paid-in-capital for common shares. The offsetting amount was amortizable over the period from the issue date to the first conversion date or 9 months. Therefore, since the 409,019 Series A Shares of preferred stock are convertible between July and December of 2016, a deemed dividend of $0 and $37,805 to the Series A Shares of preferred stock was recorded during the three months ended June 30, 2017 and 2016, respectively. As the Company is in an accumulated deficit position, the deemed dividends were charged against additional paid-in-capital for common shares as there being no retained earnings from which to declare a dividend.

Off-Balance Sheet Arrangements

As part of its ongoing business, the Company has not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. From its incorporation on February 11, 2014 through June 30, 2017, the Company has not been involved in any unconsolidated SPE transactions.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize all leases, including operating leases, on the balance sheet as a lease asset or lease liability, unless the lease is a short-term lease. ASU 2016-02 also requires additional disclosures regarding leasing arrangements. ASU 2016-02 is

effective for interim periods and fiscal years beginning after December 15, 2018, and early application is permitted. The Company is in the process of determining the method of adoption and the impact this guidance will have on its financial condition, results of operations and cash flows.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for the Company beginning April 1, 2017 and early adoption is permitted. The Company is currently evaluating the effect that the adoption will have on the Company’s Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”). ASU 2016-15 clarifies the classification of certain cash receipts and cash payments within the statement of cash flows to reduce diversity in practice. ASU 2016-15 is effective for the Company beginning January 1, 2018 and early adoption is permitted. The Company is currently evaluating the effect that the adoption will have on the Company’s Consolidated Financial Statements.

There were other accounting standards and interpretations issued during the year ended March 31, 2017, none of which are expected to have a material impact on the Company’s financial position, operations or cash flows.

Subsequent Events

The Company evaluates events and transactions after the balance sheet date but before the financial statements are issued.

Note 3 – Going Concern and Managements’ Plan

The Company’s consolidated financial statements for the three months ended June 30, 2017 and 2016 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported a net loss of $358,446 and $786,161 for the three months ended June 30, 2017 and 2016, respectively, and an accumulated deficit of $31,364,695 as of June 30, 2017. At June 30, 2017, the Company had a working capital deficit of $2,827,416.

The future success of the Company is dependent on its ability to attract additional capital and ultimately, upon its ability to develop future profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. Management believes that actions presently being taken to revise the Company’s operating and financial requirements provide the opportunity for the Company to continue as a going concern.

Note 4 – Fair Value Measurements

The Company applies the authoritative guidance applicable to all financial assets and liabilities required to be measured and reported on a fair value basis, as well as to non-financial assets and liabilities measured at fair value on a non-recurring basis, including impairments of proved oil and gas properties and other long-lived assets and AROs initially measured at fair value. The fair value of an asset or liability is the amount that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from sources independent of the Company. Unobservable input are inputs that reflect the Company’s assumptions of what market participants would use in valuing the asset or liability based on the information available in the circumstances.

Financial and non-financial assets and liabilities are classified within the valuation hierarchy based upon the lowest level of input that is significant to the fair value measurement. The Company’s policy is to recognize transfers in and out of the fair value hierarchy as of the end of the reporting period in which the event or change in circumstances caused the transfer. The Company has consistently applied the valuation techniques discussed below in all periods

presented. The hierarchy is organized into three levels based on the reliability of the inputs as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities; or

Level 2: Quoted prices in active markets for similar assets and liabilities and inputs, quoted prices for identical or similar assets or liabilities in markets that are not active and model-derived valuations whose inputs or significant value drivers are observable; or

Level 3: Unobservable pricing inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

There was no measure at fair value on a non-recurring basis as of June 30, 2017 and 2016 and there was no impairment for the three months then ended.

The following table presents the Company’s non-financial assets and liabilities that were measured at fair value on a non-recurring basis at March 31, 2017 by level within the fair value hierarchy:

Effective March 31, 2017, the Company’s oil and gas properties were tested under ASC 360 as to their recoverability to determine if impairment is required under the accounting guidance. The Company used Level 3 inputs to measure the fair value of the oil and gas properties. As such, there was an impairment of $307,948 to the oil and gas properties during the year ended March 31, 2017.

Effective August 18, 2016, the Company acquired 100% of the outstanding membership interest in T-Rex Oil LLC #1, a Colorado limited liability company (“LLC #1”) as part of a put agreement with the members of LLC #1, and recorded the investment in LLC #1 at $425,000 as per the put agreement. Thus, due to the significance of this event, the investment was tested under ASC 360 as to its recoverability and recorded at fair value if impairment was required under the accounting guidance. The Company used Level 3 inputs and after reviewing the assets of LLC #1, there was no recoverability in the Company’s investment. As such, there was an impairment of $425,000 during the year ended March 31, 2017.

Note 5 – Significant Acquisitions

Effective as of January 1, 2016, the Company acquired 82% of the working interest in certain leases located in the state of Wyoming known as the Cole Creek properties.

The following table presents the allocation of the consideration given to the assets acquired and liabilities assumed, based on their fair values at January 1, 2016:

Effective April 29, 2016, the Company acquired the remaining 18% of the leases known as Cole Creek properties.

The following table presents the allocation of the consideration given to the assets acquired and the liabilities assumed:

Note 6 – Nexfuels Warrant

On October 15, 2016, Nexfuels issued a warrant to the Company exercisable for 1,056,000 shares of Nexfuels shares of common stock in return for the Company performing staff services and office space over a six-month period (“Nexfuels Warrant”). The Nexfuels Warrant has an exercise price of $1.25 per share. The Nexfuels Warrant is both assignable and transferable. The Company valued the warrant at $45,000 or $7,500 per month.

In November 2016, the Company assigned part of the warrant to acquire 50,000 shares of Nexfuels shares of common stock to a third party as part of the issuance of a convertible promissory note in the amount of $300,000. The Nexfules warrant expired on February 15, 2017.

Note 7 – Debt

Promissory Notes

On February 28, 2017, the Company borrowed $55,000 from the former operator of its Cole Creek properties in exchange for a promissory note including interest at the rate of 8% per annum with accrued and unpaid interest due at August 31, 2017. The proceeds from the loan were used to acquire a bond from the State of Wyoming for purposes of the Company to continue to operate the Cole Creek properties. At June 30, 2017, the Company owes $55,000 on the promissory note plus accrued interest of $1,471. On November 1, 2018, the Company paid the note holder $58,000 in complete satisfaction of the debt.

On November 3, 2016, the Company borrowed $300,000 in exchange for a convertible promissory note at the rate of 12% per annum with accrued and unpaid interest and principal due January 31, 2017. The due date of the promissory note was extended to May 1, 2017. The promissory note is convertible into shares of the Company’s common stock at $0.80 per share. In addition, the Company issued the holder of the promissory note 75,000 shares of the Company’s common stock valued at $49,752 and a warrant to acquire 50,000 shares of Nexfuels shares of common stock. At June 30, 2017, the Company owes $300,000 on the promissory note plus accrued interest of $23,573. On November 1, 2018, the Company paid the note holder $275,000 in complete satisfaction of the debt.

On August 11, 2016, the Company borrowed $100,000 from a former director of the Company, who owns a 85.71% interest in LLC#3 in exchange for a promissory note including interest at the rate of 15% per annum with accrued and unpaid interest and principal due on August 11, 2017. During the term of the promissory note the Company agreed to pay the holder 30% of the net revenues received from the sale of oil from the Cole Creek properties, starting August 2016. At June 30, 2017, the Company owes $100,000 on the promissory note plus accrued interest of $11,199. On November 1, 2018, the Company paid the note holder $1,600,000 as complete satisfaction of the debt including repayment of the $1,400,000 that the note holder contributed to LLC #3.

On April 25, 2016, the Company borrowed $50,000 from a director of the Company in exchange for an unsecured promissory note including interest at the rate of 5% per annum with accrued and unpaid interest and principal due at December 31, 2016. On September 15, 2016, the holder of the note agreed to extend the due date of the promissory note to March 31, 2017, with all other terms remaining in effect. At June 30, 2017, the Company owes $50,000 on the promissory note plus accrued interest of $7,068. On November 5, 2018, the Company paid the note holder $68,000 in complete satisfaction of the debt.

During the year ended March 31, 2016, the Company paid $341,405 in principal towards the repayment of promissory notes relative to the repurchase of 18,717 shares of Western Interior common stock owned by dissident shareholders as part of agreements effective March 31, 2015 to repurchase a total of 33,085 shares of Western Interior common stock. At June 30, 2017, the Company owes $488,298 on a promissory note plus accrued interest at the rate of 3.5% per annum of $34,134. The During the year ended March 31, 2019, the Company transferred certain oil and gas properties in complete satisfaction of the debt.

On January 14, 2016, the Company borrowed $50,000 from a director and officer of the Company who resigned from the Company on September 14, 2016 in exchange for a secured promissory note including interest at the rate of 5% per annum with accrued and unpaid interest and principal due at September 30, 2016. The note is currently in default. The default interest rate is 8%. The promissory note is collateralized by certain oil and gas properties located in the State of Wyoming. The Holder may, at any time prior to payment of the promissory notes elect to convert all or any portion of the promissory note, including accrued interest, into common shares of the Company at a price determined by the average ten consecutive day trading closing price less 30%. On October 2016, the holder of the promissory note filed suit against the Company for payment of the promissory. At June 30, 2017, the Company owes $50,000 on the promissory note plus accrued interest of $3,649. In August 2017, the Company settled with the former director and officer of the Company by transferring certain oil and gas properties in complete satisfaction of the debt.

On January 14, 2016, the Company borrowed $50,000 from a then director, in exchange for a secured promissory note including interest at the rate of 5% per annum with accrued and unpaid interest and principal due at September 30, 2016. On September 15, 2016, the holder of the note agreed to extend the due date of the promissory note to December 31, 2016, with all other terms remaining in effect. The note is currently in default. The default interest rate is 8%. The

promissory note is collateralized by certain oil and gas properties located in the State of Wyoming. The Holder may, at any time prior to payment of the promissory notes elect to convert all or any portion of the promissory note, including accrued interest, into common shares of the Company at a price determined by the average ten consecutive day trading closing price less 30%. At June 30, 2017, the Company owes $50,000 on the promissory note plus accrued interest of $3,649. On November 5, 2018, the Company paid the note holder $50,000 in complete satisfaction of the debt.

Line-of-Credit

The Company has a line-of-credit with a bank in the original amount of $350,000 collateralized by certain oil and gas properties of the Company. Annual interest is at prime plus 2.50% with a floor of 7%. At June 30, 2017, the Company owes $111,914 plus accrued interest of $6,795. The line-of-credit matured in November 2016 and is in default.

Note 8 – Stockholders’ Equity

The Company’s capital stock at June 30, 2017 consists of 325,000,000 authorized shares of which 50,000,000 shares are $0.001 par value preferred stock and 275,000,000 shares are $0.001 par value common stock.

Preferred Shares

At June 30, 2017 and 2016, there are a total of 0 and 409,019 shares of preferred stock issued and outstanding, respectively.

On October 28, 2015, the Company filed an Amendment to its Articles of Incorporation to designate a class of preferred stock as the Series A Convertible Preferred Stock. 

The Amendment sets aside 5,000,000 shares of the authorized 50,000,000 shares of the Company's $0.001 par value preferred stock as the Series A Convertible Preferred Stock ("the Series A Shares.")  The Series A Shares are convertible at the option of the Holder into common shares of the Company's stock 9 months after the date of issuance.  Further, the Series A Shares have a conversion price based upon 80% of the 10 day average of the Company's closing market price.

In October 2015, the Company commenced a private placement financing of $7,000,000 in Units, a Unit consisting of one share of its Series A Shares and a Unit Warrant.  The Unit Warrant has an exercise price of $3.00 per share and a term of 3 years.  The Unit Warrant is exercisable 9 months after issuance and is callable by the Company upon the Company's common stock closing at a market price of $5.00 or above for a period of 10 days.

Pursuant to ASC 470-20, when the $558,171 of convertible Series A Shares of preferred stock were issued at a discount from the if-converted $682,989 fair value as of the issuance date, the Company recognized this difference between the fair value per share of its common stock and the conversion price, multiplied by the number of shares issuable upon conversion. This total Beneficial Conversion Feature of $124,818 will be recorded as additional paid-in-capital for common shares. The offsetting amount will be amortizable over the period from the issue date to the first conversion date or 9 months. Therefore, since the 409,019 Series A Shares of preferred stock are convertible between July and December of 2016, a deemed dividend to the Series A Shares of preferred stock has been recorded during the three months ended June 30, 2017 and 2016 in its statement of operations of $0 and $37,805, respectively. As the Company is in an accumulated deficit position, the deemed dividend has been charged accordingly against additional paid-in-capital for common shares as there being no retained earnings from which to declare a dividend.

During the year ended March 31, 2016, the Company received $818,038, including cash of $793,037, in exchange for the issuance of 409,019 shares of its Series A Preferred Stock and Unit Warrants exercisable for shares of common stock. 

We apply the guidance enumerated in ASC 480 "Distinguishing Liabilities from Equity" when determining the classification and measurement of preferred shares. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder

or subject to redemption upon the occurrence of uncertain events not solely within our control, as equity. At all other times, we classified our preferred shares in stockholders' equity.

We have applied the guidance of ASC 470 "Debt" in accounting for the unit warrants and as such have valued the Unit Warrants using the Black-Scholes option pricing model. The option-pricing model requires a number of assumptions, of which the most significant are the stock price at the valuation date that was at a range of $1.10 to $1.50 per share as well as the following assumptions:

Volatility                                            82% - 134%

Expected Option/Warrant Term         3 years

Risk-free interest rate                          ..25%

Expected dividend yield                      0.00%

The expected term of the Unit Warrants granted were estimated to be the contractual term. The expected volatility was based on an average of the volatility disclosed based upon comparable companies who had similar expected option and warrant terms. The risk-free rate was based on the one-year U.S. Treasury bond rate.

On August 18, 2016, the Board of Directors approved a conversion of the Series A Preferred Shares at a conversion price of $1.43, based upon the 5-day average. The 409,019 shares of Series A Preferred Shares were converted for 572,055 shares of the Company’s common stock.

Common Shares

At June 30, 2017 and 2016, there are a total of 17,697,621 and 15,866,099 shares of common stock issued and outstanding, respectively.

During the three months ended June 30, 2017, the Company neither sold or issued any of its shares of common stock.

During the three months ended June 30, 2016, the Company as part of a private placement sold 99,378 shares of its restricted common stock for $74,613 in cash and 235,839 shares for $353,719 in cash.

During the three months ended June 30, 2016, the Company issued 50,000 shares of common stock in connection with the cash exercise of options at an exercise price of $0.10 per share.

Additional Paid-in Capital

During the three months ended June 30, 2017 and 2016, as the Company is in an accumulated deficit position, the deemed dividends in the amount of $0 and $37,805, respectively were charged against additional paid-in-capital as there being no retained earnings from which to declare a dividend.

During the three months ended June 30, 2016, the Company realized additional paid in capital relative to the fair value of equity based payments in the amount of $207,200 of which $11,520 was expensed and $195,680 was capitalized. See Note 9 – Equity Based Payments.

Note 9 – Equity Based Payments

The Company accounts for equity based payment accruals under authoritative guidance as set forth in the Topics of the ASC. The guidance requires all equity based payments to employees and non-employees, including grants of employee and non-employee stock options and warrants, to be recognized in the consolidated financial statements based at their fair values.

The Black-Scholes option-pricing model is used to estimate the option and warrant fair values. The option-pricing model requires a number of assumptions, of which the most significant are the stock price at the valuation date that ranged from $0.01 to $3.50 per share as well as the following assumptions:

The expected term of the options and warrants granted were estimated to be the contractual term. The expected volatility was based on an average of the volatility disclosed based upon comparable companies who had similar expected option and warrant terms. The risk-free rate was based on the one-year U.S. Treasury bond rate.

Warrant

During May 2016, the Company issued a warrant exercisable for 350,000 shares of the Company’s common stock in exchange for business development services pursuant to a consulting agreement. The warrant has a term of 3 years and an exercise price of $2.00 per share.

Using the Black-Scholes option-pricing model, the warrant has a fair value of $207,200. Assumptions used in the pricing were:

2014 Stock Incentive Plan

Effective October 1, 2014, the Company’s 2014 Stock Option and Award Plan (the “2014 Stock Incentive Plan”) was approved by its Board of Directors. Under the 2014 Stock Incentive Plan, the Board of Directors may grant options or purchase rights to purchase common stock to officers, employees, and other persons who provide services to the Company or any related company. The participants to whom awards are granted, the type of awards granted, the number of shares covered for each award, and the purchase price, conditions and other terms of each award are determined by the Board of Directors, except that the term of the options shall not exceed 10 years. A total of 2 million shares of the Company’s common stock are subject to the 2014 Stock Incentive Plan. The shares issued for the 2014 Stock Incentive Plan may be either treasury or authorized and unissued shares.

The following table summarizes the non-qualified stock option and warrant activity at June 30, 2017:

The aggregate intrinsic value of outstanding securities is the amount by which the fair value of underlying (common) shares exceed the amount paid for and the exercise price of the options and warrants issued and outstanding.

Note 10 – Commitments and Contingencies

Operating Lease

The Company currently leases an office space in Colorado on a month to month basis at the rate of $5,451 plus expenses. In addition, the Company leased an office space in Wyoming at the rate of $5,838 per month and the Company terminated from the lease as of March 31, 2017. Total rent expense under these leases was $36,903 and $35,527 for the three months ended June 30, 2017 and 2016, respectively.

The Company has no minimum future rental annual payments.

Employment Agreements

In August 2014, Terex entered into an Employment Agreement for services with its Chief Executive Officer, President and director. The Employment Agreement had a term of 3 years and provided for an annual compensation of $204,000 and a monthly car allowance of $600. It also provided for an annual bonus as determined by the board of directors. As of November 30, 2017, the parties entered into a settlement agreement where the Company issued 750,000 shares of its common stock to Terex’s former CEO, President and director towards effectuating a full compromise, settlement and release of any and all claims between the parties.

In November 2014, Terex entered into an Employment Agreement for services with its Vice President of Operations and director. The Employment Agreement had a term of 3 years and provided for an annual compensation of $150,000. It also provided for an annual bonus as determined by the board of directors. As of November 30, 2017, the parties entered into a settlement agreement where the Company issued 750,000 shares of its common stock to Terex’s former Vice President and director towards effectuating a full compromise, settlement and release of any and all claims between the parties.

In January 2015, T-Rex entered into an Employment Agreement for services with its Vice President of Operations and director. The Employment Agreement had a term of 3 years and provided for an annual compensation of $150,000. It also provided for an annual bonus as determined by the board of directors. In September 2016, the Employment Agreement was terminated.

Consulting Agreement

The Company entered into a three-year agreement effective September 1, 2014 with a consultant to perform services at the base rate of $150,000 per year under certain terms and conditions including an auto allowance of $600 per month. As of August 1, 2016, the parties entered into a revised three-year agreement to perform services at the base rate of $195,000 per year. In addition, the consultant had been granted cashless options to acquire up to 500,000 shares of T-Rex’s common stock at an option price of $0.10 per share for a period of three years from April 1, 2014.

Litigation

BMO Holdings Litigation

On October 31, 2016, BMO Holding, LLC (“BMO Holding”) filed suit against the Company in the Supreme Court of the State of New York, New York County, alleging a breach of alleged contract resulting from certain business negotiations with the Company revolving around the purchase of oil and gas properties in Wyoming by an affiliated entity of BMO Holding. The suit seeks the fulfillment of the alleged contract and unspecified damages to be determined by jury. At the time of this filing, the Company has filed a Motion to Dismiss due to a lack of jurisdiction and failure to state a claim. The suit was dismissed on August 21, 2017. Subsequently, BMO Holding filed suit against the Company in the District Court of the County of Broomfield, Colorado and such suit was dismissed in April 2019.

Note 11 – Related Party Transactions

T-Rex Oil LLC #1

The Company in December 2014 entered into put agreements with the members of T-Rex #1 whereby the Company granted a right to put the purchase of their interest of T-Rex #1 in the amount of $425,000 back to the Company at an exercise price of $2.00 per share or a total of 212,500 shares of the Company’s common stock. In August 2016, the Company issued to the members of LLC #1 a total of 425,000 shares of its restricted common stock at an exercise price of $1 per share valued at $425,000.

T-Rex Oil LLC #3

The Company is the manager of T-Rex Oil LLC #3 that was formed in January 2016 for the purpose of acquiring and developing oil and gas leases known as the Cole Creek properties in Wyoming. T-Rex Oil LLC #3 is included as part of the consolidated financial statements as of and for the three months ended March 31, 2017 and 2016. See Note 2 –

Summary of Significant Accounting Policies – Principles of Consolidation.

Note 12 – Subsequent Events

Cole Creek

Effective September 1, 2018, the Company sold its 100% working interest in the Cole Creek properties for $3,500,000 in cash.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements.

Unless the context requires otherwise, references in this document to “T-Rex Oil”, “we”, “our”, “us” or the “Company” are to T-Rex Oil, Inc. and our subsidiaries.

The independent registered public accounting firm’s report on the Company’s financial statements as of March 31, 2017, and for each of the years in the two-year period then ended, includes a “going concern” explanatory paragraph, that describes substantial doubt about the Company’s ability to continue as a going concern.

PLAN OF OPERATIONS

Due to the significant reduction in oil prices we have suspended all production, rework and exploration operations as of October 2018. We are in a liquidation made from our assets as of June 30, 2017.

We will require substantial additional capital to support any future operations. We have no committed source for any additional funds as of the date hereof. No representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales or royalty income and could fail in business as a result of these uncertainties.

RESULTS OF OPERATIONS

For the Three Months Ended June 30, 2017 and June 30, 2016

Overview. During the three months ended June 30, 2017, the Company recognized a net loss of $358,446 compared to a net loss of $786,161 for the three months ended June 30, 2016. The decrease of $427,715 is primarily the result of a decrease in general and administrative expenses as it relates to a decrease in oil and gas operations. Discussions of individually significant line items follow:

Revenues: During the three months ended June 30, 2017, the Company recognized revenues of $175,268 compared to $320,011 during the three months ended June 30, 2016. Management expects to see continued decreases in its production numbers as it continues to liquidate its assets.

Operating Expenses: During the three months ended June 30, 2017, the Company had a decrease of $556,994 in total operating expenses as a result of the following:

A decrease in costs of $158,288 related to its oil and gas operational activities as a result of a decrease in production and exploration explorations. General and administrative expenses decreased by $403,069 primarily as a result of decreases in staffing and costs associated with reporting requirements. Depletion, depreciation, amortization and accretion increased by $4,363.

LIQUIDITY

We have incurred a net loss of $358,446 for the three months ended June 30, 2017 and have had a limited operating history.

During the three months ended June 30, 2017, the Company sold none of its shares of common stock or issued any debt for cash.

The Company will need substantial additional capital to support its proposed future operations. The Company has no committed source for any funds and as of June 30, 2017, has $69,662 in cash. No representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, we may not be able to carry out our business plan and we may never achieve sales sufficient to support our operations.

Decisions regarding future participation in oil and gas development or geophysical studies or other activities will be made on a case-by-case basis. We may, in any particular case, decide to participate or decline participation. If participating, we may pay our proportionate share of costs to maintain our proportionate interest through cash flow or debt or equity financing. If participation is declined, we may elect to farmout, non-consent, sell or otherwise negotiate a method of cost sharing in order to maintain some continuing interest in the prospect.

The Company used cash flows in operations of $16,470 during the three months ended June 30, 2017 that was adjusted by non-cash items including: depreciation, depletion, amortization and accretion of $49,770 and equity based compensation of $89,032.

The Company used cash flows in investing activities of $18 during the three months ended June 30, 2017 that was primarily comprised of: additions to oil and gas properties of $0 and additions to other assets of $18.

The Company was provided cash flows from financing activities of $0 during the three months ended June 30, 2017.

Promissory Notes

On February 28, 2017, the Company borrowed $55,000 from the former operator of its Cole Creek properties in exchange for a promissory note including interest at the rate of 8% per annum with accrued and unpaid interest due at August 31, 2017. The proceeds from the loan were used to acquire a bond from the State of Wyoming for purposes of the Company to continue to operate the Cole Creek properties. At June 30, 2017, the Company owes $55,000 on the promissory note plus accrued interest of $1,471. On November 1, 2018, the Company paid the note holder $58,000 in complete satisfaction of the debt.

On November 3, 2016, the Company borrowed $300,000 in exchange for a convertible promissory note at the rate of 12% per annum with accrued and unpaid interest and principal due January 31, 2017. The due date of the promissory note was extended to May 1, 2017. The promissory note is convertible into shares of the Company’s common stock at $0.80 per share. In addition, the Company issued the holder of the promissory note 75,000 shares of the Company’s common stock valued at $49,752 and a warrant to acquire 50,000 shares of Nexfuels shares of common stock. At June 30, 2017, the Company owes $300,000 on the promissory note plus accrued interest of $23,573. On November 1, 2018, the Company paid the note holder $275,000 in complete satisfaction of the debt.

On August 11, 2016, the Company borrowed $100,000 from a former director of the Company, who owns a 85.71% interest in LLC#3 in exchange for a promissory note including interest at the rate of 15% per annum with accrued and unpaid interest and principal due on August 11, 2017. During the term of the promissory note the Company agreed to pay the holder 30% of the net revenues received from the sale of oil from the Cole Creek properties, starting August 2016. At June 30, 2017, the Company owes $100,000 on the promissory note plus accrued interest of $11,199. On November 1, 2018, the Company paid the note holder $1,600,000 as complete satisfaction of the debt including repayment of the $1,400,000 that the note holder contributed to LLC #3.

On April 25, 2016, the Company borrowed $50,000 from a director of the Company in exchange for an unsecured promissory note including interest at the rate of 5% per annum with accrued and unpaid interest and principal due at December 31, 2016. On September 15, 2016, the holder of the note agreed to extend the due date of the promissory note to March 31, 2017, with all other terms remaining in effect. At June 30, 2017, the Company owes $50,000 on the promissory note plus accrued interest of $7,068. On November 5, 2018, the Company paid the note holder $68,000 in complete satisfaction of the debt.

During the year ended March 31, 2016, the Company paid $341,405 in principal towards the repayment of promissory notes relative to the repurchase of 18,717 shares of Western Interior common stock owned by dissident shareholders as part of agreements effective March 31, 2015 to repurchase a total of 33,085 shares of Western Interior common stock. At June 30, 2017, the Company owes $488,298 on a promissory note plus accrued interest at the rate of 3.5% per annum of $34,134. The During the year ended March 31, 2019, the Company transferred certain oil and gas properties in complete satisfaction of the debt.

On January 14, 2016, the Company borrowed $50,000 from a director and officer of the Company who resigned from the Company on September 14, 2016 in exchange for a secured promissory note including interest at the rate of 5% per annum with accrued and unpaid interest and principal due at September 30, 2016. The note is currently in default. The default interest rate is 8%. The promissory note is collateralized by certain oil and gas properties located in the State of Wyoming. The Holder may, at any time prior to payment of the promissory notes elect to convert all or any portion of the promissory note, including accrued interest, into common shares of the Company at a price determined by the average ten consecutive day trading closing price less 30%. On October 2016, the holder of the promissory note filed suit against the Company for payment of the promissory. At June 30, 2017, the Company owes $50,000 on the promissory note plus accrued interest of $3,649. In August 2017, the Company settled with the former director and officer of the Company by transferring certain oil and gas properties in complete satisfaction of the debt.

On January 14, 2016, the Company borrowed $50,000 from a then director, in exchange for a secured promissory note including interest at the rate of 5% per annum with accrued and unpaid interest and principal due at September 30, 2016. On September 15, 2016, the holder of the note agreed to extend the due date of the promissory note to December 31, 2016, with all other terms remaining in effect. The note is currently in default. The default interest rate is 8%. The promissory note is collateralized by certain oil and gas properties located in the State of Wyoming. The Holder may, at any time prior to payment of the promissory notes elect to convert all or any portion of the promissory note, including accrued interest, into common shares of the Company at a price determined by the average ten consecutive day trading closing price less 30%. At June 30, 2017, the Company owes $50,000 on the promissory note plus accrued interest of $3,649. On November 5, 2018, the Company paid the note holder $50,000 in complete satisfaction of the debt.

Line-of-Credit

The Company has a line-of-credit with a bank in the original amount of $350,000 collateralized by certain oil and gas properties of the Company. Annual interest is at prime plus 2.50% with a floor of 7%. At June 30, 2017, the Company owes $111,914 plus accrued interest of $6,795. The line-of-credit matured in November 2016 and is in default.

Short Term

On a short-term basis, we have not generated revenues sufficient to cover operations. Based on prior history, we will continue to have insufficient revenue to satisfy current and recurring liabilities.

Capital Resources

The Company has only equity as its capital resource.

We have no material commitments for capital expenditures within the next year.

Need for Additional Financing

We do not have capital sufficient to meet our cash needs. The Company will have to seek loans or equity placements to cover such cash needs.

No commitments to provide additional funds have been made by the Company’s management or other shareholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow us to cover the Company’s expenses as they may be incurred.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements nor do we have any unconsolidated subsidiaries.

Critical Accounting Policies

Critical accounting policies and estimates are provided in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8 – Financial Statements and Supplementary Data. Additional disclosures are provided in Notes to Consolidated Financial Statements (unaudited) which are included in Item 1 – Consolidated Financial Statements to this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

Item 4. Controls and Procedures

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Acting Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. We identified multiple material weaknesses in our internal control over financial reporting and, as a result of this material weakness, we concluded as of June 30, 2017, that our disclosure controls and procedures were not effective.

Internal Control-Integrated Framework

A material weakness is a control deficiency, or combination of control deficiencies, that result in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. As of June 30, 2017, and as determined in the fiscal year ended March 31, 2017, the Company identified the following material weakness:

The Company did not adequately segregate the duties of different personnel within our accounting department due to an insufficient complement of staff and inadequate management oversight.

We have limited accounting personnel with sufficient expertise in generally accepted accounting principles to enable effective segregation of duties with respect to recording journal entries and to allow for appropriate monitoring of financial reporting matters and internal control over financial reporting. Specifically, the Acting Chief Accounting

Officer has involvement in the creation and review of journal entries and note disclosures without adequate independent review and authorization. This control deficiency is pervasive in nature and impacts all significant accounts. This control deficiency also affects the financial reporting process including financial statement preparation and the related note disclosures. Other significant control deficiencies at this time are lack of independent review and approval of journal entries before they are entered into the general ledger, not effectively implementing comprehensive entity-level controls, and the Company has not implemented procedures for timely review and approval of bank reconciliations.

As a result of the aforementioned material weakness, management concluded that the Company’s internal control over financial reporting as of June 30, 2017 was not effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There is no ongoing litigation to which the Company is subject.

ITEM 1A. RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. However, our current risk factors are set forth in our Annual Report on Form 10-K for the year ended March 31, 2017, which risk factors are incorporated herein by this reference.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

NONE. 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

NONE.

ITEM 4. MINE AND SAFETY DISCLOSURE

NOT APPLICABLE.

ITEM 5. OTHER INFORMATION

NONE.

ITEM 6. EXHIBITS

The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

* Filed herewith.

SIGNATURES

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

---

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing		Date		Other Filings
Filed on:		12/4/19		10-K
		3/31/19
		12/15/18
		11/5/18
		11/1/18
		9/1/18
		1/1/18
		11/30/17
		8/31/17
		8/21/17
		8/14/17
		8/11/17
For Period end:		6/30/17		NT 10-K
		5/1/17
		4/1/17
		3/31/17		10-K,  NT 10-K
		2/28/17
		2/15/17
		1/31/17
		12/31/16		10-Q,  10-Q/A
		11/3/16
		10/31/16
		10/15/16
		9/30/16		10-Q,  NT 10-Q
		9/15/16
		9/14/16		8-K
		8/19/16
		8/18/16
		8/11/16		10-K
		8/1/16
		7/15/16		4
		7/11/16
		6/30/16		10-Q,  NT 10-Q
		4/29/16		8-K
		4/25/16
		4/20/16
		3/31/16		10-K,  5,  EFFECT,  NT 10-K
		1/15/16
		1/14/16		4
		1/1/16
		10/28/15		8-K
		3/31/15		10-K,  10-K/A,  NT 10-K
		10/29/14		8-K,  8-K/A
		10/20/14
		10/1/14
		9/2/14
		9/1/14
		4/1/14
		2/11/14
		2/2/04
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Filing Submission 0001065949-19-000187   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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