COJAX OIL AND GAS CORPORATION Forward-Looking Statements
The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto. The management's discussion and analysis contain forward-looking statements, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under "Risk Factors," which appear in elsewhere in this Annual Report, that could cause
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actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report.
Overview
We were incorporated on
We have no revenue-generating operations as of the date of this prospectus.
We are an early stage corporation seeking to become an independent energy
company focused on the acquisition and subsequent exploitation and development
of crude oil in the
We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production, gathering, and sale of oil. While any oil and gas exploration and production leases and rights that we may acquire may produce gas, we do not currently regard gas as a significant revenue source from possible future oil production operations. The exploitation of gas may change if our oil drilling produces sufficient quantities of gas to warrant its exploitation and sale as a primary business line. These risks include but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, availability of affordable funding, availability of qualified personnel, environmental risks, problems or delays in drilling, other operating risks and regulatory changes, the uncertainty inherent in estimating oil reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, and the other risks described under "Risk Factors" in this prospectus. COVID-19 pandemic also imposes a significant risk factor affecting demand for oil, economic conditions, availability of personnel, the ability of workers to work under possible social distancing and mask requirements and demand from consumers and industries that use oil and oil-based products. Until there is an effective vaccine, there is no certainty as to the duration, scope, and extent of COVID-19 pandemic's impact on the oil industry and our company.
Since our inception, we have incurred operating losses. We have not generated positive cash flows from operations, and there are no assurances that we will be successful in obtaining an adequate level of financing for the development and commercialization of our proposed oil exploration and production business. These factors raise substantial doubt about our ability to continue as a going concern. We expect to incur expenses and operating losses for the foreseeable future as we seek to implement our business plan. Due to its limited revenues, the acquisition of Barrister does not remedy substantial doubts about our ability as a going concern. Acquisition of the Barrister Oil Rights does not enhance our asset base for debt financing because the Barrister Oil Rights are secured by a first senior lien held by COP under the COP Agreements. If we do not raise additional working capital, we will not be unable to continue operations, which could result in the rescission of the acquisition of Barrister if that failure occurs prior to the Rescission Deadline and constitutes a trigger event for a rescission of the Exchange. Loss of Barrister would leave CoJax without any operating assets or revenues. In any liquidation of CoJax, there would not
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be sufficient assets for distribution of assets or money to CoJax shareholders.
CoJax has been unable to raise additional capital as of the date of this
prospectus, other than personal loans by
Reserve engineering is a process of estimating underground accumulations of oil that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing, and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil that are ultimately recovered. When we acquire oil exploration and production leases and rights, we will use oil reserve reports as one factor in deciding whether to drill in the property of a specific oil lease or right. Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of oil from a drilling site.
Effects of COVID-19
In
Our business and operations have been adversely affected by, and may continue to be adversely affected by, the COVID-19 pandemic and the public health response thereto. As a result of the COVID-19 outbreak and the adverse public health developments, including voluntary and mandatory quarantines, travel restrictions and other restrictions, our operations, and those of our subcontractors, customers and suppliers, have experienced, and may to continue to experience, delays or disruptions.
In addition, our financial condition and results of operations have been, and
may continue to be, adversely affected by the ongoing coronavirus outbreak. The
timeline and potential magnitude of the COVID-19 outbreak and its consequences
are currently unknown. The prolongation or exacerbation of this pandemic could
more extensively affect
The Company has experienced the effects of a negatively impacted domestic and international demand for crude oil and natural gas, which has contributed to price volatility and impacted the price we received for our production, and moreover materially and adversely affected the demand for and marketability of our production. For the Company, this means that production was shut in for some of our wells, and that we held some of our production as inventory to be sold at a later date because we refused to accept the unprecedented and exceptionally low price for our production. Our 2020 results were negatively impacted by the pandemic response. At this time, we expect that our financial results for the first quarter of 2021 may be adversely impacted by our response to, the existence of and the global response to the COVID-19 pandemic.
Also, in
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production, which events together contributed to a sharp drop in global oil
prices. While
The imbalance between the supply of and demand for oil, as well as the uncertainty around the extent and timing of an economic recovery, caused significant market volatility and a substantial adverse effect on commodity prices during the last two quarters of 2020. The Company expects ongoing oil and gas price volatility over the short-term. The full impact of the coronavirus on oil and natural gas prices continues to evolve as of the date of this report. As such, the full magnitude of such events on the Company remains uncertain. Management is actively monitoring the global situation and its impact on the Company's future operations, financial position and liquidity in fiscal year 2020.
As a producer of oil and natural gas, we are recognized as an essential business under various federal, state and local regulations related to the COVID-19 pandemic. We have continued to operate as permitted under these regulations while taking steps to protect the health and safety of our workers. We have implemented protocols to reduce the risk of an outbreak within our field operations, and these protocols have not reduced production or efficiency in a significant manner. A substantial portion of our non-field level employees have transitioned temporarily to remote work-from-home arrangements. With these arrangements in place, we have been able to maintain a consistent level of effectiveness, including maintaining our day-to-day operations, our financial reporting systems and our internal control over financial reporting.
Although such restraints have relaxed significantly, we may become subject to such constraints if we are not able to sell our production, or certain components of our production. The lack of a market or available storage for natural gas product or oil could result in us having to shut in production.
Results of Operations
Twelve-month period ended
Revenues
Revenues were
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General and Administrative Expenses
General and administrative (G&A) expenses were
Research and Development Expenses
The Company had no Research and Development (R&D) expenses for the years ended
Operating Income
Total operating income was
Net Income
As a result of the above factors, we had a net loss of
LIQUIDITY AND CAPITAL RESOURCES
We have incurred net operating losses and operating cash flow deficits since
inception, continuing through the years ended
We had cash and cash equivalents at
We believe that our working capital on hand, as of the date of this report, will not be sufficient to fund our plan of operations over the next 12 months. We require additional capital within the next 12 months. Our ability to obtain additional financing may be impaired by many factors outside of our control, including the capital markets (both generally and in the crude oil industry in particular), our lack of operating history, the location of our proposed or future crude oil properties and prices of crude oil on the commodities markets (which will impact the amount of asset-based financing available to us) and other factors. Further, if oil prices on the commodities markets decline, our revenues from any exploitation of Barrister Oil Rights will likely decrease, and such decreased revenues may increase our requirements for capital.
Debt or equity financing arrangements may not be available to us or may be available only on unfavorable terms. Based on prior experience on seeking funding for drilling on properties without any significant oil production, funding for drilling is challenging to obtain at all or on affordable terms.
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Additionally, available forms of funding could be highly dilutive to our
existing stockholders and may not provide us with sufficient funds to meet our
long-term capital requirements. We may continue to incur substantial costs in
the future in connection with raising capital to fund our business, including
investment banking fees, legal fees, accounting fees, securities law compliance
fees, printing and distribution expenses, and other costs. We may also be
required to recognize non-cash expenses in connection with certain securities we
may issue, which may adversely affect our financial condition. If the amount of
capital we are able to raise from financing activities, together with our
revenues from any acquired operations, is not sufficient to satisfy our capital
needs, we will be required to reduce operating costs, which are already minimal.
That reduction could jeopardize our future strategic initiatives and business
plans. We may be required to sell some or all of our acquired properties (which
could be on unfavorable terms), seek joint ventures with one or more strategic
partners, strategic acquisitions, and other strategic alternatives, cease our
operations, sell or merge our business, or file a petition for bankruptcy
(either liquidation or reorganization under the
The following table summarizes our total current assets, total current liabilities, and working capital (deficit) as ofDecember 31, 2020 andDecember 31, 2019 : As of As of Dec 31, 2020 Dec 31, 2019 Current assets$44,051 $28,189 Current liabilities 1,430,030 71,219 Working capital surplus (deficit)$(1,385,979) $(43,030)
Changes in the net cash provided by and (used in) our operating, investing, and
financing activities for the years ended
Year Ended Year Ended
December 31, 2020 December 31, 2019 Net cash provided by (used in) operating
51,502
activities
Cash at beginning of period 28,189 3,500 Net increase (decrease) in cash$15,862 $24,689
Cash Flows from Operating Activities: Net cash from operating activities is
derived from net loss from operations adjusted for non-cash items, changes in
the balances of accounts receivables, deposits, and prepaid expenses, accounts
payables, accrued expenses, and other payables. For the periods ended
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Cash Flows from Financing Activities: Total net cash provided by financing
activities was
Going Concern
The accompanying consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. On a consolidated basis, we have incurred significant operating losses since inception. Because we do not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about our ability to continue as a going concern. Therefore, we will need to raise additional funds and are currently exploring sources of financing. Historically, we have raised capital through private offerings of debt and equity and officer loans to finance working capital needs. There can be no assurances that we will be able to continue to raise additional capital through the sale of common stock or other securities or obtain short-term loans.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our discussion of financial condition and results of operations is based upon the information reported in our financial statements. The preparation of these statements requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities at the date of our financial statements. We base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time. Actual results may vary from our estimates due to changes in circumstances, weather, politics, global economics, mechanical problems, general business conditions and other factors. Our significant accounting policies and restatements are detailed in Note 1 to our financial statements included in this Annual Report. We have outlined below certain of these policies as being of particular importance to the portrayal of our financial position and results of operations and which require the application of significant judgment by our management.
Revenue Recognition. In
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contract. Estimating the variable consideration does not require significant judgment and the company engages third party sources to validate the estimates. Revenue is recognized net of royalties due to third parties in an amount that reflects the consideration the Company expects to receive in exchange for those products. See NOTE 14 of our financial statements, including Restatement of Previously issued Financial Statements for additional information.
On
Write-down of Oil and Natural Gas Properties
Income Taxes. Deferred income taxes are provided for the difference between the tax basis of assets and liabilities and the carrying amount in our financial statements. This difference will result in taxable income or deductions in future years when the reported amount of the asset or liability is settled. Since our tax returns are filed after the financial statements are prepared, estimates are required in valuing tax assets and liabilities. We record adjustments to the actual values in the period we file our tax returns.
In
Recent 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.
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