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 statements are only predictions and involve known and unknown risks, uncertainties, and other factors which may cause our or our industry's actual results, levels of activity, or
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performance to be materially different from any future results, levels of activity, or performance expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. You should not place undue reliance on these statements, which speak only as of the date of this Annual Report. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. You should read this Annual Report on Form 10-K with the understanding that our actual future results may be materially different from what we expect. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by applicable law.
Management's discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements which have been
prepared in accordance with accounting principles generally accepted in
Overview
We were incorporated on
Since our inception, we have incurred operating losses. Prior to the
Acquisition, we have not generated positive cash flows from operations, and
while after the Acquisition, we started to generate revenue, 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 does not remedy substantial
doubts about our ability as a going concern. The Company has been unable to
raise additional capital as of the date of this Annual Report, 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 --------------------------------------------------------------------------------
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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 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 affected domestic and international demand for crude oil and natural gas, which has contributed to price volatility and affected 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 affected by the pandemic response. At this time, we expect that our financial results for the first quarter of 2022 may be adversely affected by our response to, the existence of and the global response to the COVID-19 pandemic.
Also, in
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 2021. The Company expects ongoing oil and gas price volatility over the short term. The full effect 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 effect on the Company's future operations, financial position, and liquidity in fiscal year 2021.
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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 products or oil could result in us having to shut in production.
Recent Developments
On
On
Results of Operations
Twelve-month period ended
Revenues
Revenues were
General and Administrative Expenses
General and administrative (G&A) expenses were
Research and Development Expenses
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The Company had no Research and Development (R&D) expenses for the years ended
Operating Loss
Total operating loss 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 influence 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 in seeking funding for drilling on properties without any significant oil production, funding for drilling is challenging to obtain at all or on affordable terms.
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
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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, 2021 , andDecember 31, 2020 : As of As of Dec 31, 2021 Dec 31, 2020 Current assets$103,765 $44,051 Current liabilities 794,378 1,430,030 Working capital surplus (deficit)$(690,613) $(1,385,979)
Changes in the net cash provided by and (used in) our operating, investing, and
financing activities for the years ended
Year Ended Year Ended
December 31, 2021 December 31, 2020 Net cash provided by (used in) operating
133,607
activities
Cash at beginning of period 44,051 28,189 Net increase (decrease) in cash$(31,953) $15,862
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
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 the 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
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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 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.
On
Revenue Recognition. In
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Successful Efforts Method of Accounting. We account for oil and natural gas properties in accordance with the successful efforts method. Under this method, all acquisition costs of proved properties are capitalized and amortized on a unit-of-production basis over the remaining life of the proved reserves. All development costs of proved properties are capitalized and amortized on a unit-of-production basis over the remaining life of the proved developed reserves. Costs of retired, sold, or abandoned properties that constitute a part of an amortization base are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized in the current period. Gains or losses from the disposal of other properties are recognized in the current period. For assets acquired, we base the capitalized cost on the fair value at the acquisition date. We expense expenditures for maintenance and repairs necessary to maintain properties in operating condition, as well as annual lease rentals, as they are incurred. Estimated dismantlement and abandonment costs are capitalized at their estimated net present value and amortized over the remaining lives of the related assets. Interest is capitalized only during the periods in which these assets are brought to their intended use. We only capitalize the interest on borrowed funds related to our share of costs associated with qualifying capital expenditures.
Write-down of
A write-down may not be reversed in future periods even though higher oil and natural gas prices may subsequently increase the ceiling.
Our estimates of reserves and future cash flow as of
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. --------------------------------------------------------------------------------
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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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