FORWARD-LOOKING STATEMENTS
The discussion and analysis below includes certain forward-looking statements
that are subject to risks, uncertainties and other factors, as described in
"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31,
2021, that could cause our actual growth, results of operations, performance,
financial position and business prospects and opportunities for this fiscal year
and periods that follow to differ materially from those expressed in or implied
by those forward-looking statements. Readers are cautioned that forward-looking
statements contained in this Quarterly Report on Form 10-Q should be read in
conjunction with our disclosure under the heading "Disclosure Regarding
Forward-Looking Statements" below.
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General Business Development
The Company was formed on September 26, 2013 in the State of Colorado.
Business Strategy
Our strategy is to acquire producing properties that the Company can operate
which have proven un-drilled locations available for further development. In the
process of identifying drilling prospects, the Company will utilize the
expertise of existing management and employ contract engineering firms available
to further evaluate the properties.
The company is actively pursuing acquisition of additional properties in
Oklahoma, Texas and New Mexico.
Liquidity and Capital Resources
As of March 31, 2022, we had total current assets of $1,102,966 and total
current liabilities of $3,402,714.
The Company used $306,268 of cash in operating activities during the three
months ended March 31, 2022, compared to $118,692 used in operations during the
same period in 2021. Net cash used in operating activities during the three
months ended March 31, 2022 was mainly comprised of our $376,138 net loss during
the period, adjusted by a non-cash charges of $2,758 for loss on change in fair
value of derivative liabilities, stock-based compensation of $63,000,
amortization of debt discounts of $10,826 and changes in operating assets and
liabilities of $6,714. Net cash used in operating activities during the three
months ended March 31, 2021 was mainly comprised of our $229,780 net loss during
the period, adjusted by a non-cash charges of $120,250 gain on settlement of
accounts payable, $13,304 for gain on change in fair value of derivative
liabilities, stock-based compensation of $48,000, amortization of debt discounts
of $2,754, write off of option contract associated with oil and gas properties
of $85,500, default interest added to note payable of $50,000, asset retirement
obligations expense of $19 and changes in operating assets and liabilities of
$58,369.
The Company used cash of $507,814 for investing activities during the three
months ended March 31, 2022 which consisted of $507,814 for the acquisition of
oil and gas property. The Company used cash of $10,000 for investing activities
during the three months ended March 31, 2022 related to deposits for oil and gas
properties.
The Company generated cash of $1,891,831 from financing activities during the
three months ended March 31, 2022 which consisted of $110,235 in proceeds from
advances from related parties, $499,996 from senior secured convertible notes
payable from related party and $1,281,600 in proceeds from unexecuted
subscription agreements. The Company generated cash of $129,000 from financing
activities during the three months ended March 31, 2021 which consisted of
$129,000 advances from related party.
Going Concern
The future of our company is dependent upon its ability to obtain financing and
upon future profitable operations. Management has plans to seek additional
capital through a private placement and public offering of its common stock, if
necessary. See Note 2 to the unaudited consolidated financial statements for
additional information.
Results of Operations
We generated no revenues during the three months ended March 31, 2022 and 2021.
Total operating expenses were $346,018 during the three months ended March 31,
2022 compared to $169,172 during the same period in 2021. The increase in
operating expenses was due to a $136,769 increase in professional fees which
were offset by $80,173 decrease in general and administrative expenses and a
$120,250 gain on settlement of accounts payable in 2021.
Off-Balance sheet arrangements
As of March 31, 2022, we did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes.
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Critical Accounting Policies
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities, the disclosure of contingent assets and liabilities and
the reported amounts of revenue and expenses during the reported periods. Our
accounting policies are described in Note 1 to our audited consolidated
financial statements for 2021 appearing in our Annual Report on Form 10-K for
the year ended December 31, 2021.
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