Okmin Resources, Inc 10-Q for FY2024 Q2
Okmin Resources, Inc. (OKMN)
About this 10-Q
Okmin Resources, Inc filed this 10-Q on February 14, 2024, covering the quarter ended December 31, 2023 (FY2024 Q2).
Headline figures
Quarter ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $91.85K
- compared with a net loss of $163.58K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________ |
Commission File Number:
| (Exact Name of Registrant as specified in its charter) |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. ☒
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller Reporting Company | |
| Emerging growth company |
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 pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered |
| None | N/A | N/A |
As of February 5, 2024, there were shares of the registrant’s common stock, $0.0001 par value per share, issued and outstanding.
OKMIN RESOURCES INC.
FORM 10-Q
December 31, 2023
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 |
| Item 3. | Qualitative and Quantitative Disclosures about Market Risk | 16 |
| Item 4. | Controls and Procedures | 16 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 18 |
| Item 1A. | Risk Factors | 18 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 18 |
| Item 3. | Defaults Upon Senior Securities | 18 |
| Item 4. | Mine Safety Disclosures | 18 |
| Item 5. | Other Information | 18 |
| Item 6. | Exhibits | 19 |
| SIGNATURES | 20 |
i
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.
Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q, and information contained in other reports that we file with the Securities and Exchange Commission (“SEC”). You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.
We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Unless otherwise indicated, references in this report to “we,” “us” or the “Company” refer to Okmin Resources, Inc. and its subsidiaries.
ii
PART 1 – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
OKMIN RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| December 31, | June 30 | |||||||
| 2023 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Production revenue receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Oil and gas properties, net | ||||||||
| Black Rock Joint Venture | ||||||||
| Other assets and restricted cash | ||||||||
| Total non current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities: | ||||||||
| Accrued interest payable | ||||||||
| Note payable | ||||||||
| Total long term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred Stock, $ par value, shares authorized, shares issued and outstanding at December 31, 2023 and June 30, 2023 | ||||||||
| Common stock, $ par value, shares authorized, and , respectively, issued and outstanding at December 31, 2023 and June 30, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
| 1 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months | Three Months | Six Months | Six Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Oil and gas sales | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Depreciation, depletion and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| (Loss) income from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income | ||||||||||||||||
| Interest Income | ||||||||||||||||
| (Loss) before taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Total net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net (loss) per share | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of shares outstanding | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
| 2 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three Months Ended December 31, 2023 and 2022
(Unaudited)
| Additional | Stockholders’ | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-In | Accumulated | Equity/ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance June 30, 2022 | ( | ) | ||||||||||||||||||||||||||
| Shares issued for cash | — | |||||||||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Shares issued for cash | — | — | ||||||||||||||||||||||||||
| Shares issued for services | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | ||||||||||||||||||||||||||
| Balance June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to the unaudited consolidated financial statements
| 3 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash from operations: | ||||||||
| Production revenue receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ||||||
| Other assets and restricted cash | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ||||||||
| Accrued interest payable | ||||||||
| Net cash from operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Investment in oil and gas properties | ( | ) | ||||||
| Net cash from (used in) investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Issuance of common stock | ||||||||
| (Repayment of) note payable | ( | ) | ( | ) | ||||
| Net cash from financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | |||||||
See accompanying notes to the unaudited consolidated financial statements.
| 4 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023
1. ORGANIZATION AND NATURE OF OPERATIONS
Business description
Okmin Resources, Inc. (collectively with its subsidiaries, “Okmin” or the “Company”) was incorporated in Nevada in December 2020 to engage in the business of the acquisition, exploration and development of oil and gas properties, mineral rights, and other natural resource assets.
As a development-stage company, Okmin has been focused on the acquisition and development of domestic oil and gas fields, and investing in lower profile rework and recompletion opportunities with lower entry costs. The Company's initial projects are located in Oklahoma and Kansas.
The Company has two wholly owned subsidiaries that conduct oil and gas activities: Okmin Operations, LLC, organized on May 25, 2021 in the State of Kansas, and Okmin Energy LLC, organized on November 21, 2021 in the State of Oklahoma.
The Company has an interest in four separate projects:
| 1) | The Blackrock Joint Venture encompassing 15 oil and gas leases in Oklahoma; | |
| 2) | A 72.5% Net Revenue Interest in the Vitt oil lease located in Neosho County, Kansas; | |
| 3) | A 50% Joint Venture interest in West Sheppard Pool, a natural gas project in North East Oklahoma; and | |
| 4) | A 50% Joint Venture interest in Pushmataha, a natural gas project in Southeast Oklahoma. |
The Company has not conducted any reserve evaluations or calculations, and there are currently no proven reserves on any of the Company’s properties.
The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to advance the Company’s current plan to rework and possibly develop its existing projects and to identify and acquire new projects.
The Company’s fiscal year end is June 30.
Basis of Presentation
The accompanying interim condensed consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.
The Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Accounting principles followed and the methods of applying those principles, which materially affect the determination of financial position, results of operations and cash flows are summarized below.
The financial statements are presented on a consolidated basis and include all of the accounts of Okmin and its subsidiaries. All significant intercompany balances and transactions have been eliminated. The results for the interim period are not necessarily indicative of the results to be expected for the year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023, filed with the Securities and Exchange Commission on September 28, 2023.
Going concern
The Company currently has limited operations. These unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying unaudited condensed
financial statements, the Company had a net loss of $
The Company had a working capital deficit of
$
| 5 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023
The Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtaining additional financing. If such additional financing is not available on terms acceptable to us or at all, then we may need to curtail our operations and/or take additional measures to conserve and manage our liquidity and capital resources, any of which would have a material adverse effect on our financial position, results of operations, and our ability to continue as a going concern. The condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and certain assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from these estimates.
Cash and cash Equivalents
The Company considers all highly liquid
temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2023
and June 30, 2023, the Company cash equivalents totaled $
Revenue recognition
The Company recognizes oil and gas revenues when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.
Oil and gas properties
The Company uses the full cost method of accounting for exploration and development activities as defined by the SEC. Under this method of accounting, the costs of unsuccessful, as well as successful, exploration and development activities are capitalized as properties and equipment. This includes any internal costs that are directly related to property acquisition, exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities. Gain or loss on the sale or other disposition of oil and gas properties is not recognized unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.
Oil and gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs excluded represent investments in unevaluated properties and include non-producing leasehold, geological, and geophysical costs associated with leasehold or drilling interests and exploration drilling costs. The Company allocates a portion of its acquisition costs to unevaluated properties based on relative value. Costs are transferred to the full cost pool as the properties are evaluated over the life of the reservoir. Unevaluated properties are reviewed for impairment annually and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions.
Gains and losses on the sale of oil and gas properties are not generally reflected in income unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves. Sales of less than 100% of the Company’s interest in the oil and gas property are treated as a reduction of the capital cost of the field, with no gain or loss recognized, as long as doing so does not significantly affect the unit-of-production depletion rate. Costs of retired equipment, net of salvage value, are usually charged to accumulated depreciation.
Depreciation, depletion, and amortization
The depreciable base for oil and natural gas properties includes the sum of all capitalized costs net of accumulated depreciation, depletion, and amortization (“DD&A”), estimated future development costs and asset retirement costs not included in oil and natural gas properties, less costs excluded from amortization. The depreciable base of oil and natural gas properties is amortized on a unit-of-production method.
| 6 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023
Asset retirement obligations
The fair value of a liability for an asset’s retirement obligation (“ARO”) is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, with the corresponding charge capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its then-present value each subsequent period, and the capitalized cost is depleted over the useful life of the related asset. Abandonment costs incurred are recorded as a reduction of the ARO liability.
Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
3. OIL AND GAS PROPERTIES
Blackrock Joint Venture - Oklahoma
In February 2021, Okmin entered into a Joint Venture
Agreement and Operating Agreement with Blackrock Energy, LLC (“Blackrock”), committing $
Pursuant to the foregoing Joint Venture Agreements, the Company has acquired working interests in the following leases:
50% Working Interest
| · | Chain Lease – 160 Acres in Okmulgee County | |
| · | Burke Lease – 40 Acres in Okmulgee County | |
| · | Preston Lease – 80 Acres in Okmulgee County | |
| · | Goldner Lease – 160 Acres in Okmulgee County | |
| · | Peavler Lease – 80 Acres in Okmulgee County | |
| · | Anthony Lease – 70 Acres in Muskogee County | |
| · | Calley Lease – 40 Acres in Okmulgee County | |
| · | Abbey Lease – 40 Acres in Okmulgee County | |
| · | Duffy Lease – 40 Acres in Okmulgee County | |
| · | Shanks Lease – 160 Acres in Okmulgee County | |
| · | Waldrip Lease – 80 Acres in Okmulgee County | |
| · | Circle V Lease – 236 Acres in Okmulgee County | |
| · | Hessom Lease – 183 Acres in Okmulgee County | |
| · | Chastain Lease – 80 Acres in Okmulgee County |
25% Working Interest
| · | Hollingsworth Lease – 80 Acres in Okmulgee County |
There are no proven reserves of any classification in the Blackrock Joint Venture leases.
| 7 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023
Vitt Project – Kansas
In July 2021, the Company through its wholly owned
Kansas subsidiary, Okmin Operations, LLC, entered into an agreement to acquire a
West Sheppard Pool Field in North East Oklahoma
In August 2021,
the Company entered into an option agreement with Blackrock to acquire a
During the six
months ended December 31, 2023, gas sales continued to be suspended on the property due the failure of equipment owned by the gas
pipeline company at its compressor station. In order to replace the failed equipment, the gas pipeline company is requiring additional
gas throughput to justify the investment. As a result of this, in the six months ended December 31, 2023 the Company recorded
In the six months ended December 31, 2023, our partner and operator, Blackrock Energy, LLC agreed to a farmout agreement of its working interests in West Sheppard Pool (with the exception of a 2% overriding royalty interest maintained by Blackrock). Blackrock’s interests were transferred to Sheppard Pool Operating, LLC (hereinafter referred to as “SPO”), the owner of the adjacent East Sheppard Pool leases. SPO also became the Operator of record on the project. This does not change the Company’s working interests in the project. The Company and SPO had already previously entered into a gas gathering agreement in June 2023 in an effort to restore and ultimately improve gas flows into the gas transit pipeline system.
SPO has been utilizing its
knowledge and expertise of the greater area to conduct further improvements on the West Sheppard Pool leases, though to date gas sales
have not resumed. In the six months ended December 31, 2023, the Company’s expenditures at West Sheppard Pool were $
The 26 existing wells on the leases range from 850 feet to 1,950 feet in depth with gas production from several zones as their main objective. Prior to the suspension of activities following a compressor outage, only 6 of the 26 wells on the property were selling into the pipeline. Subsequently an additional 4 wells were connected in late 2022, so in total there are now 10 of the 26 wells at West Sheppard Pool connected, which will be ready to sell gas once there is a resolution to the pipeline issue.
Pushmataha in South East Oklahoma
In December 2021,
the Company exercised its option and entered into definitive agreements with Blackrock to acquire a
In the six months ended December 31, 2023, the Company’s
lease operating expenditures on the project were $
| 8 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023
For the six months ended December 31, 2023, the Company
had production revenues of $
The Company’s work program will require further additional lease operating expenditures that are likely to exceed production revenues for the foreseeable future, as it seeks to improve infrastructure on the leases and optimize the production potential of the existing oil and gas wells on site.
| Schedule of oil and gas properties | ||||||||||||||||||||||||||||
| Oil | Natural Gas | |||||||||||||||||||||||||||
| Production | Avg. Cost | Avg. Sales Price | Production | Avg. Cost | Avg. Sales Price | Total Revenue | ||||||||||||||||||||||
| Project | (BBLS) | ($) | ($) | (MCF) | ($) | ($) | ($) | |||||||||||||||||||||
| Black Rock JV | ||||||||||||||||||||||||||||
| Pushmataha | ||||||||||||||||||||||||||||
| West Sheppard | ||||||||||||||||||||||||||||
| Vitt Lease | ||||||||||||||||||||||||||||
Subject to the Company being able to secure adequate additional financing, Okmin may also acquire the rights to and participate in drilling and/or other mining operations. The Company will evaluate exploration and mining opportunities and other strategic corporate opportunities as they become available from time to time.
There are no proven reserves of any classification in any of the projects listed above.
4. STOCKHOLDERS’ EQUITY
Preferred stock
The Company is authorized to issue shares
of preferred stock with a par value of $ per share. As of December 31, 2023, the Company had a total of shares of Series
A preferred stock issued and outstanding.
Common stock
The Company is authorized to issue shares of common stock with a par value of $ per share. As of December 31, 2023, the Company had shares of its common stock issued and outstanding.
During the six month period ended December 31, 2023, the Company issued the following shares of common stock in lieu of cash for services:
As of August 1, 2023, the Company issued shares
pursuant to a consulting agreement which vest quarterly, at a deemed price of $ per share. During the six months ended December 31,
2023 we expensed $
As of August 28, 2023, the Company issued shares
at a deemed price of $ per share for previous services valued at $
On November 27, 2023, the Company issued shares
at a deemed price of $ per share for services valued of $
On October 1, 2023, the Company established an Advisory Board to include seasoned professionals and industry experts to assist in the development of the Company. On October 1, 2023, the Company entered into an Advisory Board Member Agreement with Dr. John N. O’Brien pursuant to which Dr. O’Brien was appointed by the Company as Senior Advisory Board Member to its Board of Advisors. In consideration of Dr. O’Brien’s appointment to the Company’s Board of Advisors, the Company agreed to issue Dr. O’Brien an aggregate of restricted shares of its common stock (the “Shares”), subject to a vesting schedule. No Shares have been issued to Dr. O’Brien as of December 31, 2023.
| 9 |
OKMIN RESOURCES INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2023
A reconciliation of the components of basic and diluted net income per common share for the three months and six months ended December 31, 2023 is presented below:
| Schedule of basic and diluted net income per common share | ||||||||||||
| Three Months Ended December 31, 2023 | ||||||||||||
| Net Loss | Weighted Average Shares | Per Share | ||||||||||
| Basic Earnings per Share: | ||||||||||||
| Net loss attributable to common stock basic | $ | ( | ) | $ | ( | ) | ||||||
| Net loss attributable to common stock fully diluted | $ | ( | ) | $ | ( | ) | ||||||
| Six Months Ended December 31, 2023 | ||||||||||||
| Net Loss | Weighted Average Shares | Per Share | ||||||||||
| Basic Earnings per Share: | ||||||||||||
| Net loss attributable to common stock basic | $ | ( | ) | $ | ( | ) | ||||||
| Net loss attributable to common stock fully diluted | $ | ( | ) | $ | ( | ) | ||||||
The numerator for basic earnings per share is net income attributable to common stockholders. The numerator for diluted earnings per share is net income available to common stockholders.
6. INCOME TAXES
Net operating loss carry forwards of approximately
$
7. CONVERTIBLE LOAN
In November 2021, the Company entered into a convertible
loan agreement with an accredited investor (the “Investor”) pursuant to which the Company raised $
On January 3, 2023, the convertible loan agreement
was amended to limit the Investor’s ability to convert the loan to only that portion of the outstanding loan amount that would result
in the Investor being the beneficial owner of not more than
8. SUBSEQUENT EVENTS
The Company evaluates events that occur after the period’s end date through the date the financial statements are available to be issued. No other matters were identified affecting the accompanying financial statements and related disclosures.
| 10 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Special Note Regarding Forward-Looking Information
The following discussion and analysis of the results of operations and financial condition of Okmin Resources, Inc., and its subsidiaries (“Okmin” or the “Company”) as of December 31, 2023 should be read in conjunction with our unaudited financial statements and the notes to those unaudited financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to Okmin. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based.
Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
Unless otherwise indicated, references to the “Company,” “us” or “we” refer to Okmin Resources, Inc. and its subsidiaries.
U.S. Dollars are denoted herein by “USD,” “$” and “dollars”.
Overview
Okmin Resources, Inc. was organized in 2020 to engage in the business of the acquisition, exploration and development of mineral rights and natural resource assets.
As a development stage company, Okmin has been focused on the acquisition and development of domestic oil and gas fields, investing in lower profile rework and recompletion opportunities with lower entry costs. The Company's initial projects are located in Oklahoma and Kansas.
The Company has two wholly owned subsidiaries that conduct oil and gas activities, Okmin Operations, LLC, incorporated on May 25, 2021 in the State of Kansas, and Okmin Energy LLC, incorporated on November 21, 2021 in the State of Oklahoma.
The Company has an interest in four separate projects:
| 1) | The Blackrock Joint Venture encompassing 15 oil and gas leases in Oklahoma | |
| 2) | A 72.5% Net Revenue Interest in the Vitt oil lease located in Neosho County, Kansas | |
| 3) | A 50% joint venture interest in West Sheppard Pool, a natural gas project in North East Oklahoma | |
| 4) | A 50% joint venture interest in Pushmataha, a natural gas project in South East Oklahoma. |
The Company has not conducted any reserve evaluations or calculations, and there are currently no proven reserves on any of the Company’s properties.
Blackrock Joint Venture
Okmin entered into a Joint Venture Agreement and Operating Agreement in February 2021, committing $100,000 in the initial phase to acquire working interests in ten oil and gas leases located in Okmulgee and Muskogee Counties in Oklahoma. Under the Operating Agreement, Okmin has a 50% Working Interest in 710 acres and a 25% interest in 80 acres. The Company’s Joint Venture partner, Blackrock Energy LLC (“Blackrock”), is the operator of the project. Pursuant to a further agreement entered into on June 10, 2022, the Company added an additional five oil and gas leases across 739 acres to its Joint Venture with Blackrock, thereby expanding the overall project to fifteen leases covering over 1,500 acres. In the six months ended December 31, 2023, lease operating expenses including taxes recorded across the extended Joint Venture totaled $26,884 and our share of the Joint Venture recorded revenues of $32,931 from oil and gas sales, predominantly oil, compared with $22,785 in revenues for the corresponding six months ended December 31, 2022.
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Vitt Lease
The Company through its wholly owned Kansas subsidiary, Okmin Operations, LLC entered into an agreement in July 2021 to acquire a 72.5% Net Revenue Interest in the Vitt Lease located in Neosho County, Kansas. Okmin Operations, LLC acquired the lease with a cash payment of $25,000 together with a commitment to make additional capital and operating expenditures to rework the wells on the lease. The lease covers 160 acres and after initial reworking now includes nine oil wells, two idle wells and four water injection wells. At present, five of the nine oil wells are pumping. In September 2023, the operator began a rework program for five of the producing wells on the lease. As of our last fiscal year end on June 30, 2023, additional expenditures beyond the purchase totaled approximately $101,000. During the six months ended December 31, 2023, the Company’s expenditures at the Vitt Lease totaled $5,700. For the six months ended December 31, 2023, the Company received $1,972 in revenues from the project compared to revenues for the six months ending December 31, 2022 of $2,317.
The Vitt Lease has now become a small nominal producing lease, though not on a consistent basis as we continue to encounter various maintenance issues that have to be addressed. The Company continues to explore a number of possibilities for the Vitt Lease, which may include involving a partner in its further development.
West Sheppard Pool
In August 2021, the Company entered into an option agreement with Blackrock to acquire a 50% joint venture interest in the West Sheppard Pool Field, a series of leases totaling 1,930 acres located in Okmulgee County, Oklahoma. In November 2021, the Company exercised its option and entered into a definitive joint venture and operating agreement with Blackrock at a cost of $150,000 in cash.
During the six months ended December 31, 2023, gas sales continued to be suspended on the property due the failure of equipment owned by the gas pipeline company at its compressor station. In order to replace the failed equipment, the gas pipeline company is requiring additional gas throughput to justify the investment. As a result of this, in the six months ended December 31, 2023 the Company recorded no revenues from the project compared to revenues for the six months ended December 31, 2022 of $1,948.
In the six months ended December 31, 2023, our partner and operator, Blackrock Energy, LLC agreed to a farmout agreement of its working interests in West Sheppard Pool (with the exception of a 2% overriding royalty interest maintained by Blackrock). Blackrock’s interests were transferred to Sheppard Pool Operating, LLC (hereinafter referred to as “SPO”), the owner of the adjacent East Sheppard Pool leases. SPO also became the Operator of record on the project. This does not change our working interests in the project. The Company and SPO had already previously entered into a gas gathering agreement in June 2023 in an effort to restore and ultimately improve gas flows into the gas transit pipeline system.
SPO has been utilizing its knowledge and expertise of the greater area to conduct further improvements on the West Sheppard Pool leases, though to date gas sales have not resumed. Recent work has included trenching and replacing gas gathering lines as numerous leaks were discovered in the older lines, which likely contributed to the lack of throughput to the compressor station. In the six months ended December 31, 2023, the Company’s expenditures at West Sheppard Pool were $7,094.
The 26 existing wells on the leases range from 850 feet to 1,950 feet in depth with gas production from several zones as their main objective. Prior to the suspension of activities following a compressor outage, only 6 of the 26 wells on the property were selling into the pipeline. Subsequently an additional 4 wells were connected in late 2022, so in total there are now 10 of the 26 wells at West Sheppard Pool connected, which will be ready to sell gas once there is a resolution to the pipeline issue.
In the six months ended December 31, 2023, the Company recorded expenditures at West Sheppard Pool of $7,094.
As a result of the suspended activities, in the six months ended December 31, 2023, the Company recorded no revenues from the project compared to revenues for the six months ending December 31, 2022 of $1,948.
The operator has identified five wells for reentry to perforate and fracture new zones for both oil and gas, and workover up to 10 other existing wells to increase production. There are also infill drilling prospects for new wells within the property. Any work is dependent upon obtaining additional capital, which could include adding an additional partner to fund this work program.
Pushmataha
In December 2021, the Company exercised its option and entered into a definitive joint venture and operating agreement with Blackrock to acquire 50% of Blackrock’s interest in the Pushmataha Gas Field, comprising 6 leases covering an area of 3,840 acres located in Pushmataha County, Oklahoma. Blackrock had previously entered into a separate option to acquire working interests ranging from 92 -100% in the existing wells and lease acreage from a third party. In connection with the initial acquisition, the Company expended approximately $253,000 in cash. Under the terms of the Joint Venture agreement, after deducting operating costs including a flat sum of $1,000 per month to Blackrock as operator, the Company shall receive all net income from revenues of the project until it has recouped $125,000, thereafter, the parties shall equally split the income.
The Company has a 50% ownership interest in the Joint Venture with Blackrock. The leases owned by the Joint Venture are subject to landowner royalties and other commitments resulting in net revenue interests to the joint venture of between 71% - 76%, with the exception of the Stephenson well, which has a net revenue interest of approximately 68%.
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Pushmataha has seven existing gas wells ranging in depth from 10,000 - 12,300 feet. The wells were inactive since 2019 due to line leaks and lower gas prices, though in April 2021 some wells were put back online and have at various intervals produced between 100 - 300 thousand cubic feet per day (MCFD). Through the fiscal year ended June 30, 2023, we recorded $60,066 in revenues from gas sales at the project. Earlier in the fiscal year ended June 30, 2023, the wells were shut in, as the operator awaited repairs to a gas leak by the pipeline owner to the pipeline gathering system. The operator subsequently resumed production on the leases.
The existing seven wells show additional behind-pipe zones and the joint venture partners assessed recompleting a new zone in one of the wells called the KDC. The operator had a rig out on site at KDC in late January 2023 and commenced some work on the well and were planning to conduct a recompletion, though weather conditions made it too dangerous to proceed. Plans were also underway for the operator to commence repairing or possibly replacing the plunger lift systems of some of the wells, with the goal of dewatering the wells to enable the gas to flow freely. The joint venture partners have temporarily deferred pursuing this active rework activity during the current downturn in natural gas pricing or until additional capital is available.
A hydrocarbon survey was conducted in July 2022 across these leases utilizing a third party patented remote sensing technology. The survey has provided the operator with valuable data in charting the potential for the future development of this project. There is also space to drill new gas wells on the 3,840-acre leasehold, using the hydrocarbon mapping as a tool to locate the optimal drilling locations in these reservoirs.
In the six months ended December 31, 2023, the Company’s lease operating expenditures on the project were $11,191 with additional gas fees, transportation and taxes aggregating $4,761. For the six months ended December 31, 2023 the Company recorded $10,562 in revenues from the project compared to revenues for the six months ending December 31, 2022 of $41,188.
The operator believes with additional capital expenditures for reworking and recompletion efforts it can further optimize the production potential of this field. The application of newer technologies could also have an important impact on the economics for this asset.
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Management is actively evaluating various new strategic investment and acquisition opportunities in the resources sector, including opportunities to potentially broaden our activities beyond the development of conventional oil and gas projects. To assist in this process, the Company has established a Board of Advisors and appointed Dr. John N. O’Brien as its Senior Advisory Board Member.
No agreements to acquire new assets or interests have been reached, and any future agreements would be subject to the Company being able to secure adequate additional financing.
RESULTS OF OPERATIONS
For the Three months ended December 31, 2023, as compared to the Three months ended December 31, 2022
Revenue
We generated $22,789 in revenue from oil and gas sales for the three months ended December 31, 2023, as compared to $26,006 in revenues generated in the three months ended December 31, 2022. The decrease in revenue is predominantly attributable to lower natural gas prices. These lower prices not only reduced the sales price we received for each MCF sold, but also led to the curtailment of operations on certain of our properties until prices improve which resulted in a decrease of our production volumes. We also received $950 in interest income from our cash balances for three months ended December 31, 2023.
General and Administrative Expense
General and administrative expenses decreased to $90,951 for the three months ended December 31, 2023 as compared to $120,570 for the three months ended December 31, 2022. During the current three-month period, amounts paid to consultants and professional fees declined while the prior year’s period also included one-time costs related to the Company’s transition from its start-up phase into greater operations.
Net Loss
The net loss for the three months ended December 31, 2023 was $91,852 compared to a net loss of $163,579 for the three months ended December 31, 2022. The Expenses during the three month period ended December 31, 2023, included $23,402 in lease operating expenses, including taxes and royalties; $60,750 in accrued compensation; $4,191 in interest expense; $17,500 in legal fees; $22,941 in other consulting and professional fees; and other general and administrative expenses necessary for our operations. The Expenses during the comparative three month period ended December 31, 2022 included: $70,265 in lease operating expenses, including taxes and royalties; $40,500 in compensation, $5,066 in interest expense, $60,000 in connection with corporate consultants, $14,627 in professional fees and other general and administrative expenses necessary for our operations. These amounts included $60,000 of non-cash items with stock issued in lieu of services.
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For the Six months ended December 31, 2023, as compared to the Six months ended December 31, 2022
Revenue
We generated $45,465 in revenue from oil and gas sales for the six months ended December 31, 2023, as compared to $68,238 in revenues in the six months ended December 31, 2022. The decrease in revenue is predominantly attributable to lower natural gas prices. These lower prices not only reduced the sales price we received for each MCF sold, but also led to a decrease in our production volumes as operations on certain of our properties have been curtailed until prices improve. Current revenue was also negatively affected by the continued suspension of gas sales at West Sheppard Pool due to the failure of equipment owned by the gas pipeline company at its compressor station. During the current period, we also received $4,851 in interest income from our cash balances compared to interest income of $1,250 for the six months ended December 31, 2022.
General and Administrative Expense
General and administrative expenses decreased to $195,878 for the six months ended December 31, 2023 as compared to $237,237 for the six months ended December 31, 2022. This decrease is attributable lower consulting and professional fees in the current six months. The prior year’s period also included one-time costs as the Company moved from its start-up phase into higher levels of operations.
Net Loss
The net loss for the six months ended December 31, 2023 was $203,687 compared to a net loss of $292,760 for the six months ended December 31, 2022. The Expenses during the six month period ended December 31, 2023, included $55,649 in lease operating expenses, including taxes and royalties; $82,500 in compensation (of which only $21,750 has been paid, with the remainder being accrued as a payable); $8,469 in interest expense; $48,490 in audit, legal and professional fees; $7,980 in listing related fees; and non-cash amounts of $15,130 and $25,288 in connection with personnel and corporate and investor relations consultants. We also incurred other general and administrative expenses necessary for our operations. The Expenses during the comparative six month period ended December 31, 2022, included $125,011 in lease operating expenses, including taxes and royalties; $81,000 in compensation; $10,400 in interest expense; $61,000 in connection with corporate and investor relations consultants; $54,355 in professional fees; $26,912 in listing related fees; and other general and administrative expenses necessary for our operations. These amounts included $72,600 of non-cash items with stock issued in lieu of services.
Net cash used in investing activities
In the six months ended December 31, 2023, net cash from investing activities was $2,476 versus net cash of $15,152 expended on investing activities in the previous corresponding six months ended December 31, 2022.
Net cash from financing
Net cash from financing activities in the six months ended December 31, 2023 totaled $119,456, which was largely attributable to stock issued in lieu of services. Net cash from financing activities in the corresponding six months ended December 31, 2022 totaled $406,975, which was predominantly comprised of private placements of equity securities during the period.
LIQUIDITY AND CAPITAL RESOURCES
Current Financial Condition
As of December 31, 2023, we had total assets of $898,564, comprised primarily of cash and cash equivalents of $112,636, production revenue receivable of $10,299, oil and gas properties $698,813 and other assets of $76,720. As at December 31, 2023, we had total liabilities of $409,249, primarily comprised of convertible debt and related interest payable of $208,499, accounts payable of $5,000, and accrued liabilities of $195,750 which is predominantly deferred compensation expense as the CEO is currently deferring salary in an effort to conserve cash.
Our business plan calls for substantial capital resource requirements and we have incurred significant losses since inception. The Company had a net loss of $203,687 for the six months ended December 31, 2023 and an accumulated deficit of $1,038,991 as of December 31, 2023. The Company had a working capital deficit of $77,719 as at December 31, 2023 and for the remainder of the 2024 fiscal year, the Company anticipates cash needs of approximately $230,000, of which approximately $130,000 is for general corporate overhead and $100,000 for continued work on oil and gas properties. The Company anticipates receiving limited revenue from oil and gas sales and intends to obtain the remaining capital through private sales of securities.
To date, we have funded our operations primarily through the issuance of equity and/or convertible securities for cash. We depend upon debt and/or equity financing and revenues to fund our ongoing operations and to execute our current business plan. In the current 2024 fiscal year, such capital requirements will be in excess of what we have in available cash for planned ongoing activities.
We will be required to obtain alternative or additional financing from financial institutions, investors or otherwise, in order to maintain and expand our existing operations. The failure by us to obtain such financing would have a material adverse effect upon our business, financial condition and results of operations, and adversely affecting our ability to complete ongoing activities.
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Critical Accounting Estimates
This management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are fairly presented in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Recently Issued Accounting Pronouncements
Management does not believe any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s present or future financial statements.
Going Concern Qualification
The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business.
As reflected in the accompanying condensed financial statements, the Company had a net loss of $183,437 for the six months ended December 31, 2023 and an accumulated deficit of $1,018,742 as of December 31, 2023. These factors, among others, raise doubt about the Company’s ability to continue as a going concern.
The Company had a working capital deficit of $57,469 as at December 31, 2023 and management believes that the Company will require additional working capital for the remainder of the 2024 fiscal year. For the remainder of the 2024 fiscal year, the Company anticipates cash needs of approximately $230,000, of which approximately $130,000 is for general corporate overhead and $100,000 for continued work on oil and gas properties. The Company anticipates receiving limited revenue from oil and gas sales and intends to obtain the remaining capital through private sales of securities.
The Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtaining additional financing. If such additional financing is not available on terms acceptable to us or at all, then we may need to curtail our operations and/or take additional measures to conserve and manage our liquidity and capital resources, any of which would have a material adverse effect on our financial position, results of operations, and our ability to continue as a going concern. The condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Inflation
The effect of inflation on our revenue and operating results was not significant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to reasonably ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 15d-15(e) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
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At the end of the period covered by this Quarterly Report, we conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2023, the disclosure controls and procedures of our Company were not effective to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis because of the material weaknesses in internal control over financial reporting described below.
Material Weaknesses and Corrective Actions
In connection with the audits of our financial statements for the fiscal years ended June 30, 2022 and 2023, we identified certain deficiencies relating to our internal control over financial reporting that constitute a material weakness under standards established by the Public Company Accounting Oversight Board (the “PCAOB”). The PCAOB defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.
The following material weaknesses in our internal control over financial reporting continued to exist at December 31, 2023:
| ● | We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); | |
| ● | We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our limited size and early-stage nature of operations, segregation of all conflicting duties may not always be possible and may not be economically feasible; however, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals; | |
| ● | We lack an audit committee of our board of directors; and | |
| ● | We have insufficient monitoring and review of controls over the financial reporting closing process, including the lack of individuals with current knowledge of U.S. GAAP. |
We believe that these material weaknesses primarily relate, in part, to our lack of sufficient staff with appropriate training in U.S. GAAP and SEC rules and regulations with respect to financial reporting functions, and the lack of robust accounting systems, as well as the lack of sufficient resources to hire such staff and implement these accounting systems.
Subject to raising sufficient additional capital, we plan to take a number of actions in the future to correct these material weaknesses including adding experienced accounting and financial personnel and retaining third-party consultants to review our internal controls and recommend improvements. We will need to take additional measures to fully mitigate these issues, and the measures we have taken, and expect to take, to improve our internal controls may not be sufficient to (1) address the issues identified, (2) ensure that our internal controls are effective or (3) ensure that the identified material weakness or other material weaknesses will not result in a material misstatement of our annual or interim financial statements. In addition, other material weaknesses may be identified in the future. If we are unable to correct deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Controls over Financial Reporting
There were no changes (including corrective actions with regard to material weakness) in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be subject to ordinary routine litigation incidental to our normal business operations. We are not currently a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business, operating results, cash flows or financial condition.
ITEM 1A. RISK FACTORS.
Risk factors describing the major risks to our business can be found under Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended June 30, 2023. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the six month period ended December 31, 2023, the Company issued the following shares of common stock in lieu of cash for services:
As of August 1, 2023, the Company issued 460,000 shares pursuant to a consulting agreement which vest quarterly, at a deemed price of $0.22 per share. During the six months ended December 31, 2023 we expensed $50,600 in connection with this agreement.
As of August 28, 2023, the Company issued 59,375 shares at a deemed price of $0.12 per share for previous services valued at $7,125 rendered by its consulting geologist.
On November 27, 2023, the Company issued 151,305 shares at a deemed price of $0.10 per share for services valued of $15,131 pursuant to an ongoing services agreement with Sierra Land Resources, LLC, in connection with Land and Resource Development work.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
On October 1, 2023, the Company established an Advisory Board to include seasoned professionals and industry experts to assist in the development of the Company. On October 1, 2023, the Company entered into an Advisory Board Agreement with Dr. John N. O’Brien pursuant to which Dr. O’Brien was appointed by the Company as Senior Advisory Board Member to its Board of Advisors. In consideration of Dr. O’Brien’s appointment to the Company’s Board of Advisors, the Company agreed to issue Dr. O’Brien an aggregate of 200,000 restricted shares of its common stock (the “Shares”), subject to a vesting schedule. No Shares have been issued to Dr. O’Brien as of December 31, 2023.
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ITEM 6. EXHIBITS
|
Exhibit Number |
Description | |
| 31.1* | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14a or 15d-14(a) under the Securities Exchange Act of 1934, as amended, and adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the six months ended December 31, 2023, is formatted in Inline XBRL. |
* Filed herewith.
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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.
| OKMIN RESOURCES INC. | ||
| Date: February 14, 2024 | /s/ Jonathan Herzog | |
|
Jonathan Herzog, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
|
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EXHIBIT 31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14a or 15d-14(a) under the Securities Exchange Act of 1934, as amended, and adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
I, Jonathan Herzog, certify that:
1. I have reviewed this Form 10-Q of Okmin Resources Inc. for the period ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly for the period in which this quarterly report is being prepared; | |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; | |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | |
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: February 14, 2024
| By: | /s/ Jonathan Herzog | |
| Jonathan Herzog | ||
|
Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |
EXHIBIT 32.1
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
In connection with the Quarterly Report on Form 10-Q of Okmin Resources Inc. (the “Company”) for the quarter ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan Herzog, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| Date: February 14, 2024 | /s/ Jonathan Herzog |
| Jonathan Herzog | |
| Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |