OKMIN RESOURCES INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

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.

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’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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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 Resources, Inc and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

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 June 30, 2024, the Company cash equivalents totaled $72,281.

OKMIN RESOURCES INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2024

Oil and gas properties

The Company uses the full cost method of accounting for exploration and development activities as defined by the Securities and Exchange Commission (“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.

Fair Value

The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy in accordance with ASC 820, “Fair Value Measurements and Disclosures”. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available.

ASC 820 requires that assets and liabilities measured at fair value are classified and disclosed in one of the following three categories:

Level 1*—*Quoted market prices for identical assets or liabilities in active markets or observable inputs.

Level 2*—*Significant other observable inputs that observable market data can corroborate; and

Level 3*—*Significant unobservable inputs that observable market data cannot corroborate.

Financial instruments consist principally of cash and cash equivalents, accounts receivable, prepaid expenses, oil and gas properties, accounts payable, accrued liabilities, note payable, and interest payable. The recorded values of all financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

OKMIN RESOURCES INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2024

Revenue recognition

The Company is not the operator of any of its oil and gas properties. Sales of all oil and gas produced are the responsibility of the property operator. The operator recognizes revenue when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred, title has transferred, and collectability is reasonably assured in accordance with ASC 606. The Company only recognizes oil and gas revenues when the operator has provided the Company with confirmation of the completed sale and the amount of the revenue attributable to the Company’s working interest has been determined.

Stock-based compensation

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”). Stock-based compensation is recognized as compensation expense in the financial statements based on the fair value which is measured on the grant date for stock-settled awards. That expense is recognized over the period during which a grantee is required to provide services in exchange for the award. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period, or in the period of grant for awards that vest immediately without any future service condition. For awards that vest over time, previously recognized compensation cost is reversed if the service or performance conditions are not satisfied and the award is forfeited.

Income taxes

Income taxes are accounted for under the asset and liability method in accordance with ASC 740, “Income Taxes”. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, their respective tax bases and operating loss, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities or a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced to estimated amounts to be realized using a valuation allowance. A valuation allowance is applied when in management’s view, it is more likely than not that such deferred tax asset will be unable to be utilized.

The Company currently has limited operations. These 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 consolidated financial statements, the Company had a net loss of $873,214 for the year ended June 30, 2024 (year ended June 30, 2023 - $529,014) and an accumulated deficit of $1,708,518 as of June 30, 2024 (2023 - $835,304). 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 $460,878 as at June 30, 2024 (as of June 30, 2023 – positive working capital of $72,287) and management believes that the Company will require additional working capital for the 2025 fiscal year. For the 2025 fiscal year which started in July, we anticipate cash needs of approximately $300,000 for general corporate overhead and for operations on our existing lease properties. This amount does not include funding for any potential workovers, re-entries, stimulation treatments and recompletions of existing non or low producing wells. Any new work on our properties will require additional capital. The Company anticipates receiving limited revenue from oil and gas sales and intends to obtain the remaining capital through private sales of securities and/or debt financing.

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 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.

4. 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 1,500 acres. In the year ended June 30, 2024, lease operating expenses including taxes across the extended Joint Venture totaled $42,048. Our share of revenues attributable to the Joint Venture totaled $28,285.

OKMIN RESOURCES INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2024

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 June 30, 2024, aggregate additional expenditures beyond the purchase totaled $108,000. During the year ended June 30, 2024, the Company’s expenditures at the Vitt Lease totaled $6,719. For the year ended June 30, 2024, the Company received $1,972 in revenues from the project compared to revenues for the year ended June 30, 2023 of $5,209.

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.

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. During the year ended June 30, 2024, 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 year ended June 30, 2024 the Company recordedno revenues from the project compared to revenues for the year ended June 30. 2023 of $1,948.

During the second half of calendar 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 transaction 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 completed some work to upgrade the West Sheppard Pool leases, though to date gas sales have not resumed. In the year ended June 30, 2024, the Company recorded expenditures at West Sheppard Pool of $14,594.

OKMIN RESOURCES INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2024

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 cash. In the fiscal year ended June 30, 2024, lease operating expenditures at Pushmataha were $22,664 with additional gas fees, transportation and taxes aggregating $6,000. In the fiscal year ended June 30, 2024, the Company achieved production revenues of $12,286 from this project.

5. IMPAIRMENT OF OIL AND GAS PROPERTIES

During the year ended June 30, 2024, the Company reviewed the capitalized value of its oil and gas properties and conducted a test to determine the current fair value and if any impairment of the capitalized values was necessary. As a result of this test, the Company determined that the capitalized value exceeded the current fair value. An impairment charge of $401,858 was recorded as an expense for the year ended June 30, 2024.

6. REVENUES AND COST OF REVENUES

For the year ended June 30, 2024, the Company had production revenue of $42,543 compared to revenue of $114,098 for the year ended June 30, 2023. Refer to the table below of production and revenue through June 30, 2024. For the years ended June 30, 2024 and June 30, 2023 our cost of revenue, consisting of lease operating expenses and production and excise taxes was $92,024 and $260,768 respectively.** **

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.

7. 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 at June 30, 2024, 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. Jonathan Herzog, the Company’s President and Chief Executive Officer owns all of the Series A Preferred Stock. At any shareholders meeting or in connection with the giving of shareholder consents, the holder of each share of Series A Preferred Stock is entitled to voting rights of ten votes per share, though is not entitled to receive dividends. Accordingly, by reason of his ownership of Series A Preferred Stock, Mr. Herzog exercises control of approximately 49% of the aggregate voting power in the Company. 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.

OKMIN RESOURCES INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2024

Common stock

The Company is authorized to issue 750,000,000 shares of common stock with a par value of $0.0001 per share.

At June 30, 2024, the Company had 114,424,921 shares of its common stock issued and outstanding.

The Company has issued the following shares for cash pursuant to private placements:

In October 2021, the Company completed a Private Placement of 20,000,000 shares for aggregate proceeds of $500,000.

On April 26, 2022, the Company issued 4,000,000 common shares to two individuals in a private placement for proceeds of $100,000. These shares were issued pursuant toan exemption from registration under Section 4(2) of the Securities Act of 1933 and Regulation D promulgated thereunder.

During the year ended June 30, 2023, the Company completed the private placement of 10,037,500 equity units at a price of $0.04 per unit. Each unit consists of one common share and 0.5 of a warrant. Each full warrant is exercisable to buy one additional share of common stock at a price of $0.05 until December 2024. A total of 10,037,500 common shares and 5,018,750 were issued in this placement for gross proceeds of $401,500. These equity units were issued pursuant toan exemption from registration under Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”) and Regulation D promulgated thereunder.

In the Company’s efforts to conserve limited liquidity, these shares included shares of common stock issued during the fiscal years ended June 30, 2022, 2023 and 2024 in lieu of services or in connection with financing as follows:

On September 30, 2021, the board of directors approved the issuance of 80,000 shares of common stock in lieu of a cash payment of $2,000 in consideration of accounting services.

On November 22, 2021, the Company issued 1,250,000 shares of common stock to a lender in connection with a convertible note financing of $231,000 and recorded a non-cash expense of $31,250 in connection with such financing.

On March 31, 2022, the Company issued 1,200,000 shares of common stock to a corporate and investor relations consultant in lieu of ongoing services and recorded a non-cash expense of $30,000 and a further 80,000 shares of common stock in lieu of website services, recording a non-cash expense of $2,000.

On September 30, 2022, the board of directors approved the issuance of an aggregate of 65,000 shares of common stock in lieu of cash payments of $2,600 in consideration of: accounting, secretarial and public relations related services.

On September 30, 2022, the board of directors approved the issuance of 250,000 shares of common stock in connection with a consulting services agreement for services in connection with the Company’s filing preparation, compliance matters and business activities.

On December 29, 2022, the board of directors approved the issuance of 2,400,000 shares of common stock in connection with ongoing services of a corporate consultant covering a twelve-month period.

On February 11, 2023, the board of directors approved the issuance of 250,000 shares of common stock in connection with the signing of an ongoing services agreement with Sierra Land Resources, LLC, in connection with Land and Resource Development work.

As of August 1, 2023, the Company issued 460,000 shares pursuant to a consulting agreement, vesting quarterly, at a deemed price of $0.22 per share.

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

On June 30, 2024, the Company issued 321,741 shares at $0.0425 per share, pursuant to an ongoing services agreement with Sierra Land Resources, LLC, in connection with Land and Resource Development work.

OKMIN RESOURCES INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSJune 30, 2024

8. NET INCOME PER COMMON SHARE

A reconciliation of the components of net loss per common share for the years ended June 30, 2024 and 2023 are 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.

9. STOCK BASED COMPENSATION

The Company has not adopted any equity grant program. The Company’s Officers hold no stock options or unvested stock awards, and held none at any time during the year ended June 30, 2024.

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, Dwight Ingram.

During the year ended June 30, 2024, the Company issued a total of 473,046 common shares at a deemed value of $28,805 to Sierra Land Resources, LLC (“Sierra”) in connection with an ongoing services agreement, whereby Mr. Ed Sierra serves as the Company’s Advisor on Land and Resource Development, which was initially entered into on July 2022. Under the agreement, the Company issues shares to Sierra for their work in lieu of cash fees based upon the price of the Company’s common stock at the time services are invoiced.

10. INCOME TAXES

Net operating loss carry forwards of approximately $1,683,087 at June 30, 2024 are available to offset future taxable income. This results in a net deferred tax asset, assuming an effective tax rate of 21% of approximately $353,448 at June 30, 2024.

11. RELATED PARTY TRANSACTIONS

As of November 1, 2021, the Company agreed to compensate its Chief Executive Officer, President, and Chief Financial Officer Jonathan Herzog, at a rate of $13,500 per month, consisting of $6,750 in cash compensation and $6,750 to be accrued and deferred until management determines that the Company is in a position to make such payments. Such accrued amounts may be paid in cash or may be satisfied through the issuance of common stock or preferred stock in lieu of cash payments. The Company and Mr. Herzog have not entered into a formal written employment agreement in relation to Mr. Herzog’s compensation and employment terms. As of June 30, 2024 and June 30, 2023, the Company has accrued $276,750 and $135,000 as accrued liabilities – related party, respectively.

12. 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 set initially at 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 June 30, 2024, the Company had an outstanding balance of $155,135 and accrued interest of $49,542 payable on the convertible loan with repayments revised in accordance with the lender at a minimum of $2,000 monthly. 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. In the quarter ended September 30, 2023, the Company, in agreement with the Investor, temporarily suspended monthly repayments. The loan continued to accrue interest during this period.

The Company has determined that the loan is accounted for as a liability and not equity as repayment is being made in cash pursuant to the repayment schedule, and no conversion of any of the principal or interest into common shares has been made. Management assessed there is no embedded derivative and therefore no need for the bifurcation of proceeds at initial recognition.

As of June 30, 2024, the remaining principal and accrued interest have been classified as a short-term liability, as the due date of the loan is less than 12 months from that date.

13. SUBSEQUENT EVENTS

Effective as of July 31, 2024, Thomas Lapinski retired as a Director and Chairman of the Company to dedicate more time to his family. Mr. Lapinski remains as an advisor and consultant to the Company. On July 24, 2024, the Board appointed Shmuel “Samuel” J. Naparstek to serve on the Board, effective as of July 31, 2024 to fill the vacancy resulting from Mr. Lapinski’s retirement.

Outside of this, the Company has evaluated subsequent events through the filing date of these financial statements and has disclosed that there are no such events that are material to the financial statements to be disclosed.