UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(MARK ONE)

Commission File Number: 000-56381

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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 ☒

As of February 9, 2023 there were 113,182,500 shares of the registrant’s common stock, $0.0001 par value per share, issued and outstanding.

Okmin Resources, Inc.

TABLE OF CONTENTS

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements.

OKMIN RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to the unaudited consolidated financial statements.

OKMIN RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to the unaudited consolidated financial statements.

OKMIN RESOURCES, INC AND SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Six Months Ended December 31, 2022 and 2021

(Unaudited)

See accompanying notes to the unaudited consolidated financial statements 

OKMIN RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes to the unaudited consolidated financial statements.

OKMIN RESOURCES, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022

(Unaudited)

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, 2022 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.

U.S. Dollars are denoted herein by “USD,” “$” and “dollars”.

Note on COVID- 19

The COVID-19 pandemic is a highly fluid situation and it is not currently possible for us to reasonably estimate the impact it may have on our financial and operating results. We will continue to evaluate the impact of the COVID-19 pandemic on our business as we learn more and the impact of COVID-19 on our industry becomes clearer. We are complying with health guidelines regarding safety procedures, including, but are not limited to, social distancing, remote working, and teleconferencing. The extent of the future impact of the COVID-19 pandemic on our business is uncertain and difficult to predict. Adverse global economic and market conditions as a result of COVID-19 could also adversely affect our business. If the pandemic continues to cause significant negative impacts to economic conditions, our results of operations, financial condition and liquidity could be adversely impacted.

Overview

Okmin Resources, Inc. was organized near the end of 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:

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. Recent focus was directed to the Shanks lease, one of the newly acquired leases. Initially the operator was able to activate one of the four wells on the lease and ran a 24 hour gas test on the well. The test results showed 198.5 MCFD potential. Upon being put on production, the (13C) well came on at 140 MCFD through the meter for a short time and then the flow rate dropped due to blockage at the perforations downhole. Blockages and corrosion are typical since the well has been shut in for a number of years. The well was subsequently pulled and the operator attempted to recomplete the well utilizing a stimulation technique, though encountered continued issues with the well and was unable to resume immediate production. The operator is now preparing to perforate at least one and possibly two zones in the 13C. The work program on the 13C well is designed to reopen the existing zone, restoring the gas production and potentially adding an additional gas and oil zone on the same wellbore. Three additional wells on the Shanks lease have been pulled and are potential candidates for stimulations and recompletion into additional behind-pipe zones.

 In the fiscal year ended June 30, 2022, our share of the joint venture recorded revenues of approximately $51,000 from oil and gas sales, predominantly oil. In the six months ended December 31, 2022, our share of the joint venture recorded revenues of $19,147 from oil sales and $3,638 from the sale of natural gas.

Vitt

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 active oil wells, two idle wells and two active water injection wells, plus another two injection wells that require further assessment. In the six months ended December 31, 2022, lease operating expenditures and production and excise taxes and commitments were $9,123 with nominal revenue of $2,317 being derived during this period.

The Vitt lease has now become a small producing lease, though we continue to encounter various maintenance issues that have to be addressed. The Company continues to explore a number of possibilities for the lease, which may include involving a partner in its further development.

West Sheppard Pool

In November 2021, the Company entered into a definitive joint venture and operating 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 with an upfront cost of $150,000 plus some ancillary costs and an anticipated initial rework budgeted at $100,000. As of the last fiscal year end on June 30, 2022, approximately $21,000 of additional expenditures had been made on equipment and field work. The 24 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. Following the acquisition of the leases, the operator began to assess the inventory of wells and equipment on site. Initial work focused on improving the flow lines, water congestion issues and electronic metering. After some minor repairs, there has been minimal gas flow between 25 to 50 MCFD, and additional work is ongoing. The plan is to open up as many connected wells as we can and purge the water in the flow lines. The project also requires further trenching to lay up to 3 miles of flow line with associated valve requirements and work has been underway to complete this over the next several months.

Gas sales have been temporarily suspended at West Sheppard Pool, as the gas pipeline company had an equipment failure at its compressor station three miles away. In order to justify the investment in upgraded equipment, the gas pipeline company is requiring local operators to provide additional production throughput, sending more gas into the system.

Prior to the compressor outage, only 6 of the 24 wells on the property were selling into the pipeline. 4 additional wells have now been connected since the outage and are ready to sell gas. The operator has also negotiated deals with the operator of three adjacent gas wells to gather and sell their gas in exchange for 20% of the gas revenue, which will be divided between the operator and the Company on the basis of the property joint venture interest (50%/50%). With seven additional wells now ready to sell into the system, along with the re-calibration of several chart readers, the operator will soon conduct a 72 hour flow test at the master meter and present the results to the gas pipeline company in an effort to reactivate the operation of the compressor so that gas sales can resume. If gas sales successfully resume, the operator will then proceed to finish the reconnection of the remaining 14 wells at West Sheppard Pool.

Beyond this, in terms of further developing the project, the operator believes that there is room to drill additional wells and additional behind-pipe opportunities within the existing 24 wells. In the six months ended December 31, 2022, we recorded minimal revenues of $1948 prior to the temporary suspension at West Sheppard Pool.

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 land owner 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%. 

Pushmataha has 7 existing gas wells ranging in depth from 10,000-12,300 feet. The wells were temporarily 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 MCFD. Through the fiscal year ended June 30, 2022, we recorded $28,110 in revenues from gas sales at the project. Earlier this year, 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 developed its plan to resume and improve production on the leases and the Company has committed to further expend an unspecified additional amount of capital toward reworking the field as it reasonably determines. At this stage the Company anticipates its next phase of such expenditure to be between $100,000 to $200,000, though there can be no guarantee that such amount will be sufficient or what results it will achieve. The operator believes with additional reworking and recompletion efforts it can further optimize the production potential of this field. Newer modern day technologies could also have an important impact on the economics for this asset. In July 2022, management was present on site as a hydrocarbon survey was conducted across these leases utilizing a third party patented remote sensing technology, which has provided the operator with valuable data in charting the potential for the future development of this project. Plans are 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 existing seven wells show additional behind-pipe zones and the joint venture partners are currently assessing recompleting a new zone in one of the existing wells. In addition, there is room 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. 

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.

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.

Results of Operations

For the Six months ended December 31, 2022, as compared to the Six months ended December 31, 2021

Revenue

We generated $68,238 in revenue from oil and gas sales for the six months ended December 31, 2022, as compared to $21,924 in revenues generated in the six months ended December 31, 2021. The increase in revenue is attributable to ongoing rework operations and improvements over the past twelve months and the fact that some of the properties were only acquired toward the end of the calendar year in 2021, including West Sheppard Pool and Pushmataha. We also received $1,250 in interest income from our cash balances for six months ended December 31, 2022.

General and Administrative Expense

General and administrative expenses increased to $237,237 for the six months ended December 31, 2022 as compared to $80,680 for the six months ended December 31, 2021, part of these expenses included $72,600 in non-cash items, where stock was issued in lieu of cash for services. This increase is attributable to the Company moving from its formative stages into development and operations at its oil and gas properties and greater expenses of the Company as it moved from a start-up phase to a more advanced operating Company and therefore incurring expenses related to compensation, lease operating, interest, consultants and professional fees. Additionally, this incorporates fees and expenses related to the efforts in becoming a publicly traded company.

Net Loss

The net loss for the six months ended December 31, 2022 was $292,760 compared to a net loss of $60,332 for the six months ended December 31, 2021.  The Expenses during the six month period ended December 31, 2022, included: $125,011 in lease operating expenses (including taxes and royalties), $81,000 in compensation (of which only half is being paid out at the present time, with the remainder being accrued as a payable), $10,400 in interest expense, $61,000 in connection with corporate and investor relations consultants and $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. The Expenses during the comparative six month period ended December 31, 2021 were lower as the Company was still in its formative stages, these included: $27,000 in compensation, $31,250 in finance costs, $16,927 in professional fees and other general and administrative expenses necessary for our operations.

For the Three months ended December 31, 2022, as compared to the Three months ended December 31, 2021

Revenue

We generated $26,006 in revenue from oil and gas sales for the three months ended December 31, 2022, as compared to $8,791 in revenues generated in the three months ended December 31, 2021. The increase in revenue is attributable to ongoing rework operations and improvements over the past twelve months and the fact that some of the properties were only acquired toward the end of the calendar year in 2021, including West Sheppard Pool and Pushmataha. We also received $1,250 in interest income from our cash balances for three months ended December 31, 2022.

General and Administrative Expense

General and administrative expenses increased to $120,570 for the three months ended December 31, 2022 as compared to $73,076 for the three months ended December 31, 2021, part of these expenses included $60,000 in non-cash items, where stock was issued in lieu of cash for services. This increase is attributable to the Company moving from its formative stages into development and operations at its oil and gas properties and greater expenses of the Company as it moved from a start-up phase to a more advanced operating Company and therefore incurring expenses related to compensation, lease operating, interest, consultants and professional fees.

Net Loss

The net loss for the three months ended December 31, 2022 was $163,579 compared to a net loss of $64,918 for the three months ended December 31, 2021. The Expenses during the three month period ended December 31, 2022, included: $70,265 in lease operating expenses (including taxes and royalties), $40,500 in compensation (of which only half is being paid out at the present time, with the remainder being accrued as a payable), $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. The Expenses during the comparative three month period ended December 31, 2021 were lower as the Company was still in its formative stages, these included: $27,000 in compensation, $31,250 in finance costs, $10,318 in professional fees and other general and administrative expenses necessary for our operations.

Net cash used in investing activities

In the six months ended December 31, 2022, net cash expended on investing activities was $15,152 versus $503,219 in the previous corresponding six months ended December 31, 2021. The difference is attributable to the fact that a significant amount was invested into acquiring three of our oil and gas projects during the six months ended December 31, 2021.

Net cash from financing 

Net cash from financing activities in the six months ended December 31, 2022 totaled $406,975, which was predominantly comprised of private placements of equity securities during the period. Net cash from financing activities in the corresponding six months ended December 31, 2021 totaled $557,750, which was attributable to an earlier private placement of equity securities and some debt financing via a convertible note during that period.

LIQUIDITY AND CAPITAL RESOURCES

Current Financial Condition

As of December 31, 2022, we had total assets of $1,096,007, comprised primarily of cash and cash equivalents of $343,509, production revenue receivable of $77,170, oil and gas properties $671,229 and other assets of $4003. As at December 31, 2022, we had total liabilities of $342,707, primarily comprised of convertible debt and related interest payable of $215,919, accounts payable of $2,288 and accrued liabilities of $94,500 in deferred compensation expense.

We have substantial capital resource requirements and have incurred significant losses since inception. The Company had a net loss of $292,760 for the six months ended December 31, 2022 and an accumulated deficit of $599,050 as of December 31, 2022. The Company had working capital of $293,987 as at December 31, 2022 and for the 2023 fiscal year, the Company anticipates cash needs of at least a minimum of $550,000, of which approximately $250,000 is for general corporate overhead and $300,000 for continued work on existing properties. A portion of the required cash will be obtained from oil and gas sales. The Company plans to obtain the remainder of the required 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 2023 fiscal year, such capital requirements will be in excess of what we have in available cash for planned ongoing activities. On October 4, 2022, the Company filed a Form D in connection with a private placement of securities in the Company, total gross proceeds of the private placement are an aggregate of $361,500 as of December 31, 2022. Subsequent to the end of the fiscal six month period, the Company received additional gross proceeds of a further $40,000. These securities were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”) and Regulation D promulgated thereunder. Proceeds from the placement will be used for general corporate purposes. 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.

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 $292,760 for the six months ended December 31, 2022 and an accumulated deficit of $599,050 as of December 31, 2022. These factors, among others, raise doubt about the Company’s ability to continue as a going concern.

The Company had working capital of $293,987 as at December 31, 2022 and for the 2023 fiscal year, the Company anticipates cash needs of at least a minimum of $550,000, of which approximately $250,000 is for general corporate overhead and $300,000 for continued work on existing properties. A portion of the required cash will be obtained from oil and gas sales. The Company plans to obtain the remainder of the required 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

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.

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, 2022, 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, 2021 and 2022, 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, 2022:

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 in our internal controls over financial reporting that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.

Item 1A. Risk Factors.

We are not required to provide this information as we are a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 29, 2022, the Company completed the placement of 6,375,000 equity units in a private placement. In October and November 2022, the Company placed an additional 2,662,500 equity units in the private placement. Each unit consists of 1 common share and 0.5 of a warrant. The units were priced at $0.04 per unit and each full warrant will be exercisable to buy one share of the Company’s common stock at a price of $0.05 until December 31, 2024. Pursuant to the terms of the placement the Company issued an aggregate of 9,037,500 common shares and 4,518,750 warrants for gross proceeds of $361,500.

On September 30, 2022, the Company issued an aggregate of 65,000 shares of common stock in lieu of cash in connection with accounting, secretarial and public relations related services.

Additionally on September 30, 2022, the Company issued 250,000 shares of common stock in lieu of cash in connection with a compliance consulting services agreement.

On December 29, 2022, the Company issued 2,400,000 shares of common stock in lieu of cash in connection with ongoing services of a corporate consultant covering a twelve month period. 

Subsequent to the end of the fiscal period ended December 31, 2022, the Company received additional gross proceeds of $40,000 in a private placement, bringing total gross proceeds of its private placement to an aggregate of $401,500 as of this date.

Except as otherwise noted, the securities in the transactions described above were sold in reliance on the exemption from registration provided in Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D for transactions not involving any public offering. All certificates evidencing the shares sold bore a restrictive legend. No underwriter participated in the offer and sale of these securities, and no commission or other remuneration was paid or given directly or indirectly in connection therewith. The cash proceeds from these sales will be used for general corporate purposes.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

There is no other information required to be disclosed under this item which has not been previously disclosed.

Item 6. Exhibits

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.