Annual Report for Fiscal Year Ending 12-31, 2024 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 that may cause our or our industry's actual results, levels of activity, or 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 the United States of America ("GAAP"). The following discussion and analysis of financial condition and results of operations of the Company is based upon and should be read in conjunction with the audited consolidated financial statements and related notes elsewhere in this Annual Report on Form 10-K.

Overview

We were incorporated on November 13, 2017, under the laws of the Commonwealth of Virginia, to acquire, fund, and operate oil exploration and production from assets in the Gulf States Drill Region. 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 and natural gas in the Gulf States Drill Region.

Since our inception, we have incurred operating losses. Prior to the Barrister Acquisition, we had not generated positive cash flows from operations, and while after the Barrister 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 Acquisitions do 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 Jeffrey J. Guzy, our Chief Financial Officer, and $53,000 raised in the initial public offering in 2020.

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.

Risks and Uncertainties

Oil and natural gas prices have and may continue to be volatile. Recessionary concerns have placed some downward pressure on commodity prices, causing oil and gas prices to decline in the first quarter of 2023 from their earlier highs in 2022. Although supply has increased throughout the last three years, there is still an element of volatility and uncertainty that we expect to continue at least for the near-term and possibly longer, in part by the impact of the Russian-Ukrainian military conflict on global commodity and financial markets, and the associated effect of trade sanctions on imports of oil and natural gas from Russia. This volatility could negatively impact future prices for oil, natural gas, petroleum products and industrial products.

Results of Operations

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

		For the Year Ended December 31,
										Change				Change
		2024				2023				Amount				%
Revenues		$	971,686			$	927,983			$	43,703				4.7%
Lease operating expenses			355,644				248,642				107,002				43.0%
General & administrative expenses			919,994				1,038,473				(118,479)				(11.4%	)
Depletion and accretion on discounted liabilities			382,061				393,430				(11,369)				(2.9%	)
Impairment expense			922,932				875,400				47,532				5.4%
Loss from operations			(1,608,945	)			(1,627,962	)			19,017				(1.2%	)
Other expense, net			(901	)			(1,940	)			1,039				(53.6%	)
Net loss		$	(1,609,846	)		$	(1,629,902	)		$	20,056				(1.2%	)

Revenues

Revenues were $971,686 for the year ended December 31, 2024, and $927,983 for the year ended December 31, 2023. The Company is an early-stage company and began producing significant revenue in 2023. The increase in revenue of $43,703 is attributable to the acquisition of additional mineral and oil and gas interests during 2024.

General and Administrative Expenses

General and administrative expenses consisted primarily of accounting and audit fees, legal and professional services fees, and payroll-related expenses. General and administrative expenses were $919,994 for the year ended December 31, 2024, compared to $1,038,473 in the same period in 2023, representing a decrease of 11.4% or $118,479. The decrease was primarily driven by a decrease in management fees.

Lease Operating Expenses

Lease operating expenses were $355,644 for the year ended December 31, 2024, compared to $248,642 in the same period in 2023. The increase in lease operating expenses of 43.0% or $107,002 was primarily driven by the 2024 acquisition of additional mineral and oil and gas interests and the operation of those interests.

Loss from Operations

Total operating loss was $1,608,945 for the year ended December 31, 2024, and $1,627,962 for the year ended December 31, 2023. The change in loss was primarily driven by the decrease in general and administrative expenses, offset by the increase in lease operating expenses.

Other Expense, Net

Other expense, net was ($901) for the year ended December 31, 2024, compared to ($1,940) for the same period in 2023. The change in other expense, net, was attributable to an increase in interest income.

Net Loss

As a result of the above factors, there was a net loss of $1,609,846 for the year ended December 31, 2024, compared to a net loss of $1,629,902 in the same period of 2023.

Liquidity and Capital Resources

Sources of Liquidity

The Company had cash and cash equivalents of $46,738 at December 31, 2024. The Company has incurred net operating losses and operating cash flow deficits since inception, continuing through the years ended December 31, 2024, and December 31, 2023. Since inception, the primary sources of financing have been a combination of loans or contributions of Jeffrey J. Guzy, an officer and director of the Company, and $53,000 raised in the public offering. This limited funding has been inadequate as of the date of this Annual Report to fund our business strategy. The Company has not attained profitable operations and its ability to pursue any future plan of operation is dependent upon our ability to obtain additional financing.

Funding Requirements

The Company believes that its working capital on hand, as of the date of this report, will not be sufficient to fund its plan of operations over the next 12 months. Until such time, if ever, as the Company can generate substantial revenues, it expects to continue relying on a combination of equity offerings and debt financings to fund ongoing operations. To the extent that the Company raises additional capital through the sale of equity or debt securities, the ownership interest of the Company may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect the rights of the Company's existing stockholders. There is no assurance that the Company will be able to complete any additional sales of equity securities or that it will be able to arrange for other financing to fund its planned business activities.

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. 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 the Company Oil Rights will likely decrease, and such decreased revenues may increase our requirements for capital. The Company 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. The Company 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 Company is unable to raise additional funds through equity or debt financings or other arrangements sufficient to satisfy its long-term capital requirements, together with its revenues from any acquired operations, it may be required to reduce operating costs, which are already minimal and delay, reduce or eliminate its acquisition and development activities. That reduction could jeopardize the Company's future strategic initiatives and business plans. The Company may be required to sell some or all of its 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 U.S. Bankruptcy Code). Any of these actions could result in investors in the common stock losing their investment or failing to realize any appreciation in the common stock from the purchase price.

Working Capital (Deficit)

The following table summarizes our total current assets, total current liabilities, and working capital (deficit) as of December 31, 2024, and December 31, 2023:

		As of				As of
		December 31, 2024				December 31, 2023
Current assets		$	215,030			$	281,214
Current liabilities			1,326,177				1,176,419
Working capital deficit		$	(1,111,147	)		$	(895,205	)

Cash Flows

Changes in the net cash provided by and (used in) operating, investing, and financing activities for the years ended December 31, 2024, and December 31, 2023, are set forth in the following table:

		Year Ended				Year Ended
		December 31, 2024				December 31, 2023
Net cash provided by/(used in) operating activities		$	(19,187)			$	48,046
Net cash provided by investing activities			-				-
Net cash used in financing activities			(9,983)				(9,888	)
Cash at beginning of period			75,908				37,750
Net increase (decrease) in cash		$	(29,170)			$	38,158

Net cash from operating activities is derived from net loss from operations adjusted for non-cash items, changes in accounts receivables balances, prepaid expenses, accounts payables, and accrued expenses. For the period ended December 31, 2024, net cash used in operating activities was $19,187 compared to net cash provided by operating activities of $48,046 for the period ended December 31, 2023. The net decrease was primarily attributable to a net $317,004 decrease in the non-cash adjustment for common stock issued for services and salaries. This change was offset by the net increase in accounts receivable during the period ended December 31, 2024.

Net cash used in investing activities was $0 for both the periods ended December 31, 2024, and December 31, 2023.

Total net cash used in financing activities was $9,983 for the period ended December 31, 2024. Net cash used in financing activities was $9,888 for the periods ended December 31, 2023. The net decrease was due to the decrease in payments made of the SBA PPP loan.

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 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.

Revenue Recognition. In January 2018, the Company adopted Financial Accounting Standards Board ("FASB") Codification Revenues from Contracts with Customers (Topic 606). The timing of recognizing revenue from the sale of produced crude oil and natural gas was not changed as a result of adopting ASC 606. The Company predominantly derives its revenue from the sale of produced crude oil and natural gas. The contractual performance obligation is satisfied when the product is delivered to the purchaser. Revenue is recorded in the month the product is delivered to the purchaser. The Company receives payment within one month after pickup. The transaction price includes variable consideration as product pricing is based on published market prices and reduced for contract-specified differentials. The new guidance regarding ASC 606 does not require that the transaction price be fixed or stated in the contract. Estimating the variable consideration does not require significant judgment. 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 2 of our financial statements for additional information.

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.

Impairment of Oil and Natural Gas Properties. We evaluate the impairment of our proved oil and natural gas properties generally on a field-by-field basis or at the lowest level for which cash flows are identifiable, whenever events or changes in circumstance indicate that the carrying value may not be recoverable. We reduce the carrying values of proved properties to fair value when the expected undiscounted future cash flows are less than the net book value. We measure the fair values of proved properties using valuation techniques consistent with the income approach, converting future cash flows to a single discounted amount. Significant inputs used to determine the fair values of proved properties include estimates of (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a risk-adjusted discount rate. These inputs require significant judgments and estimates by our management at the time of the valuation. The most significant financial statement effect from a change in our oil and gas reserves or impairment of its proved properties would be the DD&A rate.

An impairment 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 December 31, 2024, and 2023 were prepared using an average price equal to the unweighted arithmetic average of the first day of the month price for each month within the 12-month periods ended December 31, 2024, and 2023, respectively, in accordance with SEC guidelines. As of December 31, 2024, our reserves are based on an SEC average price of $73.68 per Bbl of WTI oil posted and $2.013 per MCF natural gas. As of December 31, 2023, our reserves are based on an SEC average price of $75.81 per Bbl of WTI oil posted and $0 per MCF natural gas. Prices are adjusted by local field and lease level differentials and are held constant for the life of reserves in accordance with SEC guidelines.

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.

Recent Issued Accounting Pronouncements

See Note 4 in the notes to our consolidated financial statements for further discussion regarding recently issued accounting standards.