OKMIN RESOURCES INC

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months Ended December 31, 2023 and 2022

See accompanying notes to the unaudited consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

1. ORGANIZATION AND NATURE OF OPERATIONS

Business description

Okmin Resources, Inc. (collectively with its subsidiaries, “Okmin” or the “Company”) was incorporated in Nevada in December 2020 to engage in the business of the acquisition, exploration and development of oil and gas properties, mineral rights, and other natural resource assets.

As a development-stage company, Okmin has been focused on the acquisition and development of domestic oil and gas fields, and 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, organized on May 25, 2021 in the State of Kansas, and Okmin Energy LLC, organized 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.

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.

The Company’s fiscal year end is June 30.

Basis of Presentation

The accompanying interim condensed consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

The Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Accounting principles followed and the methods of applying those principles, which materially affect the determination of financial position, results of operations and cash flows are summarized below.

The financial statements are presented on a consolidated basis and include all of the accounts of Okmin and its subsidiaries. All significant intercompany balances and transactions have been eliminated. The results for the interim period are not necessarily indicative of the results to be expected for the year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023, filed with the Securities and Exchange Commission on September 28, 2023.

Going concern

The Company currently has limited operations. These unaudited consolidated 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 unaudited condensed financial statements, the Company had a net loss of $203,687 for the six months ended December 31, 2023 and an accumulated deficit of $1,038,991 as of December 31, 2023. These factors, among others, raise doubt about the Company’s ability to continue as a going concern.

The Company had a working capital deficit of $77,719 as of December 31, 2023 and management believes that the Company will require additional working capital. For the remainder of the 2024 fiscal year ended June 30, 2024, the Company anticipates cash needs of approximately $230,000, of which approximately $130,000 is for general corporate overhead and $100,000 for continued work on oil and gas properties. The Company anticipates receiving limited revenue from oil and gas sales and intends to obtain the remaining 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.

The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and certain assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

Cash and cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2023 and June 30, 2023, the Company cash equivalents totaled $112,636 and $214,316 respectively.

Revenue recognition

The Company recognizes oil and gas revenues when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.

Oil and gas properties

The Company uses the full cost method of accounting for exploration and development activities as defined by the SEC. Under this method of accounting, the costs of unsuccessful, as well as successful, exploration and development activities are capitalized as properties and equipment. This includes any internal costs that are directly related to property acquisition, exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities. Gain or loss on the sale or other disposition of oil and gas properties is not recognized unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.

Oil and gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs excluded represent investments in unevaluated properties and include non-producing leasehold, geological, and geophysical costs associated with leasehold or drilling interests and exploration drilling costs. The Company allocates a portion of its acquisition costs to unevaluated properties based on relative value. Costs are transferred to the full cost pool as the properties are evaluated over the life of the reservoir. Unevaluated properties are reviewed for impairment annually and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions.

Gains and losses on the sale of oil and gas properties are not generally reflected in income unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves. Sales of less than 100% of the Company’s interest in the oil and gas property are treated as a reduction of the capital cost of the field, with no gain or loss recognized, as long as doing so does not significantly affect the unit-of-production depletion rate. Costs of retired equipment, net of salvage value, are usually charged to accumulated depreciation.

Depreciation, depletion, and amortization

The depreciable base for oil and natural gas properties includes the sum of all capitalized costs net of accumulated depreciation, depletion, and amortization (“DD&A”), estimated future development costs and asset retirement costs not included in oil and natural gas properties, less costs excluded from amortization. The depreciable base of oil and natural gas properties is amortized on a unit-of-production method.

Asset retirement obligations

The fair value of a liability for an asset’s retirement obligation (“ARO”) is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, with the corresponding charge capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its then-present value each subsequent period, and the capitalized cost is depleted over the useful life of the related asset. Abandonment costs incurred are recorded as a reduction of the ARO liability.

Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.

3. OIL AND GAS PROPERTIES

Blackrock Joint Venture - Oklahoma

In February 2021, Okmin entered into a Joint Venture Agreement and Operating Agreement with Blackrock Energy, LLC (“Blackrock”), committing $100,000 in the initial phase to acquire working interests and commence rehabilitation work on a package of ten oil and gas leases located in Okmulgee and Muskogee Counties in Oklahoma. Under the Operating Agreement, Blackrock is the operator of the project. Pursuant to a further agreement entered into on June 10, 2022, Okmin added an additional five oil and gas leases across 739 acres to the Joint Venture with Blackrock, thereby expanding the overall project to fifteen leases covering over 1500 acres. In the six months ended December 31, 2023, lease operating expenses recorded across the extended Joint Venture totaled $24,500. Our share of revenues attributable to the Joint Venture totaled $32,931.

Pursuant to the foregoing Joint Venture Agreements, the Company has acquired working interests in the following leases:

50% Working Interest

25% Working Interest

There are no proven reserves of any classification in the Blackrock Joint Venture leases.

Vitt Project – Kansas

In July 2021, the Company through its wholly owned Kansas subsidiary, Okmin Operations, LLC, entered into an agreement 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 expenditures, initially of at least $50,000 to rework the wells on the lease. The lease covers 160 acres and includes eleven existing oil and gas wells, of which two sit idle requiring equipment and four water injection wells. As of our last fiscal year end on June 30, 2023, additional expenditures beyond the purchase totaled approximately $101,000. During the six months ended December 31, 2023, the Company’s expenditures at the Vitt Lease totaled $5,700. For the six months ended December 31, 2023, the Company received $1,972 in revenues from the project compared to revenues for the six months ending December 31, 2022 of $2,317.

West Sheppard Pool Field in North East Oklahoma

In August 2021, the Company entered into an option 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. In November 2021, the Company exercised its option and entered into a definitive joint venture and operating agreement with Blackrock at a cost of $150,000 in cash.

During the six months ended December 31, 2023, gas sales continued to be suspended on the property due the failure of equipment owned by the gas pipeline company at its compressor station. In order to replace the failed equipment, the gas pipeline company is requiring additional gas throughput to justify the investment. As a result of this, in the six months ended December 31, 2023 the Company recordedno revenues from the project compared to revenues for the six months ended December 31, 2022 of $1,948.

In the six months ended December 31, 2023, our partner and operator, Blackrock Energy, LLC agreed to a farmout agreement of its working interests in West Sheppard Pool (with the exception of a 2% overriding royalty interest maintained by Blackrock). Blackrock’s interests were transferred to Sheppard Pool Operating, LLC (hereinafter referred to as “SPO”), the owner of the adjacent East Sheppard Pool leases. SPO also became the Operator of record on the project. This does not change the Company’s working interests in the project. The Company and SPO had already previously entered into a gas gathering agreement in June 2023 in an effort to restore and ultimately improve gas flows into the gas transit pipeline system.

SPO has been utilizing its knowledge and expertise of the greater area to conduct further improvements on the West Sheppard Pool leases, though to date gas sales have not resumed. In the six months ended December 31, 2023, the Company’s expenditures at West Sheppard Pool were $7,094.

The 26 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. Prior to the suspension of activities following a compressor outage, only 6 of the 26 wells on the property were selling into the pipeline. Subsequently an additional 4 wells were connected in late 2022, so in total there are now 10 of the 26 wells at West Sheppard Pool connected, which will be ready to sell gas once there is a resolution to the pipeline issue.

Pushmataha in South East Oklahoma

In December 2021, the Company exercised its option and entered into definitive agreements with Blackrock to acquire a 50% joint venture interest in the Pushmataha Gas Field, comprising 6 leases covering an area of 3,840 acres located in Pushmataha County, Oklahoma. In connection with the acquisition, the Company expended $252,526.

In the six months ended December 31, 2023, the Company’s lease operating expenditures on the project were $11,191 with additional gas fees, transportation and taxes aggregating $4,761. For the six months ended December 31, 2023 the Company recorded $10,562 in revenues from the project compared to revenues for the six months ending December 31, 2022 of $41,188.

For the six months ended December 31, 2023, the Company had production revenues of $45,465. Our cost of revenue, consisting of lease operating expenses and production and excise taxes was $55,649 plus depreciation expense of $2,476, reflecting the fact that production costs continue to be higher during the reworking phases of the projects as these are older leases that require rehabilitation and ongoing reworks to re-establish production activity.

The Company’s work program will require further additional lease operating expenditures that are likely to exceed production revenues for the foreseeable future, as it seeks to improve infrastructure on the leases and optimize the production potential of the existing oil and gas wells on site.

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.

There are no proven reserves of any classification in any of the projects listed above.

4. STOCKHOLDERS’ EQUITY

Preferred stock

The Company is authorized to issue 50,000,000 shares of preferred stock with a par value of $0.0001 per share. As of December 31, 2023, the Company had a total of 5,000,000 shares of Series A preferred stock issued and outstanding. Each share of Series A Preferred Stock has voting rights of ten votes per share, though is not entitled to receive dividends. Additionally, each share of Series A preferred shares may be converted at $0.01 per preferred share into ten shares of common stock for each share of Series A Preferred Stock. The Series A Preferred Stock upon liquidation, winding-up or dissolution of the Corporation, ranks on a parity, in all respects, with all the Common Stock.

Common stock

The Company is authorized to issue 750,000,000 shares of common stock with a par value of $0.0001 per share. As of December 31, 2023, the Company had 114,103,180 shares of its common stock issued and outstanding.

During the six month period ended December 31, 2023, the Company issued the following shares of common stock in lieu of cash for services:

As of August 1, 2023, the Company issued 460,000 shares pursuant to a consulting agreement which vest quarterly, at a deemed price of $0.22 per share. During the six months ended December 31, 2023 we expensed $50,600 in connection with this agreement.

As of August 28, 2023, the Company issued 59,375 shares at a deemed price of $0.12 per share for previous services valued at $7,125 rendered by its consulting geologist.

On November 27, 2023, the Company issued 151,305 shares at a deemed price of $0.10 per share for services valued of $15,131 pursuant to an ongoing services agreement with Sierra Land Resources, LLC, in connection with Land and Resource Development work.

On October 1, 2023, the Company established an Advisory Board to include seasoned professionals and industry experts to assist in the development of the Company. On October 1, 2023, the Company entered into an Advisory Board Member Agreement with Dr. John N. O’Brien pursuant to which Dr. O’Brien was appointed by the Company as Senior Advisory Board Member to its Board of Advisors. In consideration of Dr. O’Brien’s appointment to the Company’s Board of Advisors, the Company agreed to issue Dr. O’Brien an aggregate of 200,000 restricted shares of its common stock (the “Shares”), subject to a vesting schedule. No Shares have been issued to Dr. O’Brien as of December 31, 2023.

5. NET INCOME PER COMMON SHARE

A reconciliation of the components of basic and diluted net income per common share for the three months and six months ended December 31, 2023 is presented below:

The numerator for basic earnings per share is net income attributable to common stockholders. The numerator for diluted earnings per share is net income available to common stockholders.

6. INCOME TAXES

Net operating loss carry forwards of approximately $1,038,991 at December 31, 2023 are available to offset future taxable income. Assuming an effective tax rate of 21%, this calculates to a potential net deferred tax asset of approximately $218,188 at December 31, 2023.

7. CONVERTIBLE LOAN

In November 2021, the Company entered into a convertible loan agreement with an accredited investor (the “Investor”) pursuant to which the Company raised $231,000 in financing. The note has a 10% annual interest rate, with repayments of a minimum of $3,500 per month commencing as of May 2022 and any open balance is convertible at the Investor’s discretion into shares of the Company’s common stock at $0.03 per share with warrant coverage at the same price on the basis of one warrant per every three shares issued under the loan. As of December 31, 2023, the Company had an outstanding balance of $167,135 and accrued interest of $41,364 payable on the convertible loan. The principal amount of the loan is secured by a lien on the Vitt Lease. In the related security agreement, the Company has agreed to remit the first $125,000 in net revenue received from its interest in the Pushmataha Gas Field toward the payment and performance of the note.

On January 3, 2023, the convertible loan agreement was amended to limit the Investor’s ability to convert the loan to only that portion of the outstanding loan amount that would result in the Investor being the beneficial owner of not more than 9.99% of the Company’s class of common stock. Since November 2023, in view of currently low production revenues, the Company, in agreement with the Investor, has set monthly repayments at $2,000 until further notice and the loan continues to accrue interest during this period.

8. SUBSEQUENT EVENTS

The Company evaluates events that occur after the period’s end date through the date the financial statements are available to be issued. No other matters were identified affecting the accompanying financial statements and related disclosures.