CoJax Oil & Gas Corp 10-K

ITEM 1. BUSINESS Corporate History The Company was incorporated in the Commonwealth of Virginia on November 13, 2017. It is an early-stage company seeking to become an independent energy company focused on the acquisition and subsequent exploitation and development of crude oil in the Gulf States Drill Region. We intend to acquire assignments of hydrocarbon revenues and underlying oil and gas exploration and production rights. We believe that we can establish a profitable niche in crude oil production due to the quality of the light sweet crude oil produced from the Gulf States Region, which is cheaper to refine than crude oil from other regions of the U.S. and Canada. On November 17, 2020, the Company acquired (the “Acquisition”) all outstanding capital in Barrister pursuant to an acquisition agreement, dated June 16, 2020, with Barrister and all members of Barrister (the “Acquisition Agreement”). As a result of the Acquisition, the Company acquired the assets of Barrister, including Barrister Oil Rights, in consideration of the issuance of 3,650,000 shares of the Company’s common stock, (the “Common Stock”) to the members of Barrister and the assumption of Barrister’s debt obligations to C.O.P in principal amount of $2,700,000 (the “Assumed Debt” or the “Total Debt”) under the Purchase and Sale Agreement and the related secured promissory note (the “Note”), each dated as of June 1, 2019. While the Note was non-interest bearing; however, the Total Debt under the Note was required to be paid in a lump sum balloon by June 1, 2021, the original maturity date. This original maturity date was initially extended to October 1, 2021, pursuant to the First Amended and Restated Note dated May 29, 2021, and subsequently was extended to April 30, 2022, pursuant to the Second Amended and Restated Note dated September 30, 2021. On November 16, 2021, the Company and C.O.P entered into a debt exchange agreement (the “Debt Exchange Agreement”), pursuant to which, COP fully discharged the Company from the obligation to repay the Total Debt in exchange for the issuance of 1,350,000 shares based upon the conversion price of $2.00 per share (the “Exchange Shares”) of the Company’s Common Stock share (the “Common Stock”). On May 9, 2022, the Board of directors of the Company, after discussion with management and its auditors, determined that the Company’s previously issued financial statements included in the Annual report on Form 10-K (the “Original Form 10-K) and the subsequent Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021, June 30, 2021, and September 30, 2021 (the “Quarterly Reports”) should not be relied upon because the Company incorrectly accounted that the Acquisition was a business combination and reported the properties acquired at the fair value of purchase consideration, including the common shares issued and debt assumed. After further analysis and discussions, the Company concluded that (i) the Acquisition is deemed an asset acquisition ; (ii) the carrying value of the Company’s oil and gas properties shall be reduced from $10,000,000 to $2,700,000, the historical cost to Barrister; and (iii) the Company will use the successful efforts accounting method for its oil and gas producing activities. In addition, that Amendment also reconciled certain dates in the financial statements, using November 17, 2020, as the date of the completion of the Acquisition and June 16, 2020, the date of the entering into the definitive acquisition agreement with Barrister, as the date when the Company obtained interim operational control over the Barrister’s properties. On May 31, 2022, the Company filed an amendment to the Original Form 10-K; and on June 1, 2022, the Company filed amendments to the Quarterly Report (collectively, the “Amendments”) which restated and modified certain statements related to the Acquisition, the Management Discussion and Analysis of 8 Financial Condition and Results of Operation, and the Financial Statements contained in the Original Form 10-K and the Quarterly Report. We have explored third party debt and equity funding for acquiring and expanding oil exploration and production, but as of the date of this Annual Report have no firm commitments for funding. Our experience is that private funding for new drilling on oil leases and rights with limited production or operating history has been difficult to obtain on affordable terms in the past. Our goal is to raise sufficient funds pursuant to the registration statement described below to expand drilling from Barrister Oil Rights and establish a more robust cash flow and production history from Barrister Oil Rights in order to attract future funding, either from lenders or through offering of our securities to investors, to fund further drilling on Barrister Oil Rights and possibly, subject to adequate funds, acquire new oil leases and rights in Gulf State Drilling Region. We focus on Gulf State Drilling Region because of the quality of the oil and the ability to typically access oil without fracking and its history of drilling resulting oil production without an inordinate percentage of dry wells or failed drilling. As an early stage development company and with limited oil production history of Barrister oil rights, the Company does not believe that it can raise funding for exploratory drilling rigs and deep drilling oil rigs. Business Overview We operate through Barrister since November 17, 2020, however, we are producing very limited crude oil production from limited oil drilling operations. This production is not sufficient to cover our operating expenses or to fund establishing new oil drilling rigs or increased drilling. Establishing new oil drilling rigs to exploit the crude oil reserves commercially is essential to establishing a viable business. Even with one or more deep drilling wells for Barrister Oil Rights, those wells may fail to produce any oil or sufficient oil to allow the Company to become profitable. Our long-term objective is to create shareholder value by identifying and assembling a portfolio of low-risk crude oil production assets with attractive economic profiles, and our short-term objective is to leverage the technical and managerial expertise of our proposed contractor operations team to deliver consistently profitable results from the existing oil wells. Our geographical focus is the Gulf States Region due to its light grade oil which is cheaper to process than other forms of crude oil and due to the ability to tap oil reserves without fracking. The acquisition of Barrister is the first and only acquisition of oil and gas exploration and production leases and rights as of the date of this Annual Report. We are focused on establishing profitable oil exploration and production operations by acquiring the right, by lease or assignment, to drill, extract, and sell oil. We may extract and sell gas from time to time, but any gas production would be secondary and not significant business line. Our long-term goal is to create shareholder value by identifying and assembling a portfolio of low-risk assets with attractive economic profiles, and our short-term goal is to identify and complete an equity acquisition of producing oil and gas assets in the Gulf States Drilling Region and then raise sufficient working capital to establish deep drilling rigs to fully exploit oil reserves. The acquisition of Barrister described below is our initial acquisition in the Gulf States Drilling Region. Our ability to implement our business plan is subject in part on our ability to timely raise adequate and affordable funding from investors or lenders for establishing deep drilling rigs in acquired oil and gas leases and rights. If we cannot acquire oil leases and rights for our securities, we will have to fund the cost of acquisition from investors or lenders. The funding may be equity or debt. Our first acquisition, Barrister, lacks existing cash flow from production to fund establishing deep drilling rigs. The lack of existing cash flow from existing oil production may also be true for any future oil leases and rights due our focus being on what we deem to be underexploited oil leases and rights – like Barrister. 9 We may be unable, due to lack of required funding and any enhanced oil production from acquired oil leases and rights, to acquire additional oil leases and rights. We were not successful in our efforts to raise funds in a public registered offering. While we filed a registration statement on a Form S-1, which was declared effective by the Commission on October 9, 2020, to offer and sell up to 6,000,000 shares of our common stock at a price of $2.00 per share, we have raised only $53,000 in that public offering. This public offering closed on May 31, 2021. Competitive Strengths Use of Contractors The Company utilizes experienced contractors, including former members of Barrister, with significant prior experience in oil and gas production in the Gulf States Drilling Region in the initial phases of implementing the business plan. The Company believes that the use of these contractors is the most efficient and cost-effective means of operations for a small independent oil and gas production company and is designed to allow the Company to use experienced oil drilling and production personnel without the high overhead costs of hiring personnel as employees of the Company. Currently, we engage COP as our contractor to operate the limited oil and gas production drilling and storage operations for the Barrister Oil Rights and to manage the Company’s drilling operations. We also engage Jeffrey Delancey, our former Chief Executive Officer, who currently is taking the lead on a part-time management basis. Mr. Delancey has over twenty-nine years of direct oilfield operating experience. He also has extensive experience with operations and administration in an independent oil and gas production company and relies on contract operators to provide experienced personnel to handle all essential crude oil production on a day-to-day basis for the Company. With adequate funding, the Company intends to employ this teaming model strategy to help attract and retain experienced oil industry engineering and production personnel to identify drill sites and then efficiently operate those wells to produce oil at an above-average industry rate of efficiency in the Gulf States region. Focus on Underexploited Oil Leases and Rights . The Company will target oil leases and rights similar to Barrister as possible future acquisitions. The Company is seeking underexploited oil leases and rights in the Gulf States Drilling Region with reserve reports and one or more drilling rigs, even if exploratory or not deep drilling rigs, which taken together indicate that the oil leases and rights have potential, substantial oil production capability – substantial for a small independent oil production company. Generally, the oil fields in the southern part of the Gulf States Drilling Region are less expensive to drill due to the nature of rock strata and the depth of the oil reserves. The Company will seek acquisitions that can be obtained for stock or other securities or under an earn-out arrangement and prefers acquiring companies that hold oil leases and rights rather than acquiring individual oil leases and rights, preferable the targets with several oil leases and rights as opposed to acquiring individual oil leases and rights. The acquisition of a company has the perceived advantages of acquiring several oil leases and rights and existing drilling operations with in-place management in a single transaction along with possibly reduced due diligence costs and more expeditious closing of the transaction. Our Growth Strategy Our teaming approach is also designed to facilitate rapid growth by bringing necessary expertise into operations from available contractors. Our ability to realize profitability from oil production depends on the success of deep drill wells, engaging necessary operations expertise, and market price for crude oil 10 remaining at attractive per-barrel levels, which we believe is $60 or more per barrel. If we have adequate funding and/or sufficient cash flow, then we may seek to drill for oil in other assignee or leasehold interests or, alternatively, in oil and gas assignee or leasehold interests or properties owned by our potential affiliates or teaming partners. Through established networks of contacts, the Company markets its crude oil production, whether current or future, on a month-to-month basis. If the production of oil increases from the Barrister Oil Rights, the Company will have to expand the marketing efforts by engaging a person or firm to seek out new customers for the oil production in case the current customer base is unable or unwilling to purchase increased oil production. The cost means and extent of any enhanced future marketing effort will depend on the amount of increased oil production, the then-current market for oil, and, the potential customer base for the oil production. If the existing customer base will not purchase increased oil production, then the engagement of a dedicated marketing person who engages in direct marketing, by telephone and internet, of potential customers for oil production may be required for the sale of any future increase of oil production. Competition The Company is undercapitalized to properly exploit the existing oil properties or acquire new oil and gas properties for exploitation. These oil properties were acquired by Barrister in June 2019, and since that time, the Company has not expanded the production, acquired new oil properties, or improved operations. The Company has insufficient cash flow or funding to grow its core business operations. As such, the Company is not an active competitor or commercial presence even among local, small independent oil producers. There are many large, medium, and small-sized competitors in the Gulf States Drilling Region (including off-shore drilling in the Gulf of Mexico) and adjacent areas which have extensive operational histories, experienced oil and gas industry management, established market share, profitable operations, and extensive potential oil and gas fields or leases to exploit and the cash or funding resources to explore new oil and gas fields as well as fully exploit existing oil fields. There is also an established oil and gas production industry in northern Alaska and in North Dakota and western Canada (where fracking has made available significant oil and gas reserves in shale formations). Barrister cannot match the resources, whether financial, technical, manpower, size of proven crude oil reserves, and distribution channels, of its competition in the Gulf States Drilling Region or elsewhere. Barrister’s current oil production is not sufficient to concern or attract the attention of competitors, which allows Barrister to operate as a small provider of oil without competitive pressures. If we significantly increase oil production, we will face increasing competition from other small independent oil producers selling limited amounts of oil. Any increase in competitive pressures will require investment in a full-time marketing effort by the Company. Barrister Oil Rights Description of Barrister Oil Properties and Oil Production Operations . The Company currently leases a land package of approximately 700 acres in Southwest Alabama, in one contiguous land package. It also has two producing wells, one saltwater disposal well, a three-mile gas transmission line along with gathering systems, and storage tanks for approximately 1,500 barrels. As shown in the tables below, production has virtually stopped, and the existing operations are at a maintenance level. The Company will not be able to increase production until sufficient financial resources are obtained. Additionally, the Company may need to write down the Barrister oil rights if production cannot be resumed. 11 Energy Production in Alabama . The State of Alabama is located in the Southeastern United States alongside the Gulf of Mexico and has been producing petroleum since the 1940s. The peak of oil production in Alabama was in the 1980s, according to the U.S. Department of Energy’s Energy Information Administration. As of 2021, Alabama was ranked 20th among the states in the production of oil and natural gas combined and is producing oil at an annual rate of 3.2 million barrels of oil (based on 9,000 barrels a day as of June 2021). Alabama's major oil and gas-producing regions are in the western and southwestern parts of the state. The Smackover Trend . The Smackover trend is a belt of carbonate, evaporite, and clastic rocks of the Late Jurassic age that rims the Gulf Coast of the United States from Texas, up to Arkansas, throughout Louisiana, Mississippi, Southwest Alabama, and all the way to the Florida panhandle. Stratigraphic and geochemical data indicate that the oil and gas were generated from algae-rich lime mudstones. It was named after the Smackover oil field, which was discovered in Union County, Arkansas, in 1937. Current Drilling on Barrister Energy Drill Region . There are three wells in the Barrister Energy Drill Region, which have produced oil and gas since 1996. Currently, two of these three wells are in production, and one well is used as a saltwater disposal well. Since November 17, 2020, the date of the Acquisition, we own approximately 95% working interest with a 79% net revenue interest. The two producers are Nall 16-3 #1 and the Nettles 9-12 #1. The historical 8/8 th production (gross production) of these oil wells for the fiscal years 1996 – 2015, 2016, 2017, 2018, 2019, 2020, and 2021 are summarized in the table below. Barrister DRILL REGION PRODUCTION Nall 16-3 #1 and Nettle 9-12 #1 Year 8/8 th Total Oil Produced (bbl) Total Gas Produced (mcf) 1996 – 2015 * 225,300 53,175 2016 * 1,335 - 2017 * 4,371 - 2018 * 2,919 - 2019 * 1,397 - 2020 ** 183 - 2021 127 - Total 235,632 53,175 * Historical production prior to the acquisition of rights by CoJax. ** Current production and historical production prior to the acquisition of rights by CoJax and post-acquisition. Oil and Gas Production, Production Prices and Production Costs Oil and Gas Production The table below summarizes production by final product sold and by geographic area for the last four years. 2021 2020 2019 2018 (8/8 th barrels of oil produced at year-end) 12 Crude oil and natural gas liquids production Crude Oil NGL Crude Oil NGL Crude Oil NGL Crude Oil NGL Consolidated Subsidiaries United States 127 - 183 - 1,397 - 2,919 - Total Consolidated Subsidiaries 127 - 183 - 1,397 - 2,919 - Total crude oil & natural gas liquids production Bitumen production Consolidated Subsidiaries United States - - - - - - - - Synthetic oil production Consolidated Subsidiaries United States - - - - - - - - Total liquids production - - - - - - - - (8/8 th barrels of oil produced at year-end) Natural gas production available for sale Consolidated Subsidiaries United States - - - - - - - - Total Consolidated Subsidiaries - - - - - - - - Total natural gas production available for sale - - - - - - - - (thousands of oil-equivalent barrels at year-end) Oil-equivalent production - - - - - - - - Production Prices and Production Costs. The table below summarizes average production prices and average production costs by geographic area and by product type for the last three years. United States Total During 2021 Consolidated Subsidiaries Average production prices Crude oil, per barrel 64.25 64..25 NGL, per barrel - - Natural gas, per thousand cubic feet - - Bitumen, per barrel - - Synthetic oil, per barrel - - Average production costs, per oil-equivalent barrel – total 251.32 251.32 Average production costs, per barrel – bitumen - - Average production costs, per barrel - synthetic oil - - During 2020 Consolidated Subsidiaries Average production prices Crude oil, per barrel 58.88 58.88 13 NGL, per barrel - - Natural gas, per thousand cubic feet - - Bitumen, per barrel - - Synthetic oil, per barrel - - Average production costs, per oil-equivalent barrel – total 32.13 32.13 Average production costs, per barrel – bitumen - - Average production costs, per barrel - synthetic oil - - During 2019 Consolidated Subsidiaries Average production prices Crude oil, per barrel 66.06 66.06 NGL, per barrel - - Natural gas, per thousand cubic feet - - Bitumen, per barrel - - Synthetic oil, per barrel - - Average production costs, per oil-equivalent barrel – total 33.45 33.45 Average production costs, per barrel – bitumen - - Average production costs, per barrel - synthetic oil - - Average production prices have been calculated by using sales quantities from Barrister’s production as the divisor. Average production costs have been computed by using net production quantities for the divisor. The volumes of crude oil and natural gas liquids (“NGL”) production used for this computation are shown in the oil and gas production table. The volumes of natural gas used in the calculation are the production volumes of natural gas available for sale and are also shown. Gas is converted to an oil-equivalent basis at six million cubic feet per one thousand barrels . Oil and Gas Properties, Wells, Operations, and Acreage Gross and Net Productive Wells Year-End 2021 Year-End 2020 Year-End 2019 Oil Gas Oil Gas Oil Gas Gross Net Gross Net Gross Net Gross Net Gross Net Gross Net Gross and Net Productive Wells Consolidated Subsidiaries United States 3.0 1.8 - - 3.0 1.8 - - 3.0 1.8 - - Total Consolidated Subsidiaries 3.0 1.8 - - 3.0 1.8 - - 3.0 1.8 - - Total gross and net productive wells 3.0 1.8 - - 3.0 1.8 - - 3.0 1.8 - - There were 3 gross, and 1.8 net operated wells at December 31, 2021, December 31, 2020, and December 31, 2019. Gross and Net Developed Acreage Year-End 2021 Year-End 2020 Year-End 2019 Gross Net Gross Net Gross Net (acres) 14 Gross and Net Developed Acreage Consolidated Subsidiaries United States 370 352 370 352 370 352 Total Consolidated Subsidiaries 370 352 370 352 370 352 Total gross and net developed acreage 370 352 370 352 370 352 Separate acreage data for oil and gas are not maintained because, in many instances, both are produced from the same acreage. Gross and Net Undeveloped Acreage Year-End 2021 Year-End 2020 Year-End 2019 Gross Net Gross Net Gross Net (acres) Gross and Net Undeveloped Acreage Consolidated Subsidiaries United States 700 700 2,992 2,244 2,992 2,244 Total Consolidated Subsidiaries 700 700 2.992 2,244 2,992 2,244 Total gross and net undeveloped acreage 700 700 2,992 2,244 2,992 2,244 Separate acreage data for oil and gas are not maintained because, in many instances, both are produced from the same acreage. Our investment in developed and undeveloped acreage is comprised of numerous leases. The List of Leases is included as Exhibit 99.2 to this Annual Report. The terms and conditions under which the Company maintains exploration and production rights to the acreage are property-specific, contractually defined, and vary significantly from property to property. Work programs are designed to ensure that the exploration potential of any property is thoroughly evaluated before expiration. In some instances, we may elect to relinquish acreage in advance of the contractual expiration date if the evaluation process is complete, and there is not a business basis for the extension. In cases where additional time may be required to evaluate acreage fully, the Company has generally been successful in obtaining extensions. The scheduled expiration of leases and concessions for undeveloped acreage over the next three years is not expected to have a material adverse effect on the Company. Government Regulation Oil and natural gas operations such as ours are subject to various types of legislation, regulation, and other legal requirements enacted by governmental authorities. This legislation and regulation affecting the oil and natural gas industry are under constant review for amendment or expansion. Some of these requirements carry substantial penalties for failure to comply. The regulatory burden on the oil and natural gas industry increases our cost of doing business and, consequently, can affect our profitability. Regulation of Drilling and Production The production of oil and natural gas is subject to regulation under a wide range of local, state, and federal statutes, rules, orders, and regulations. Federal, state, and local statutes and regulations require permits for drilling operations, drilling bonds, and reports concerning operations. The trend in oil and natural gas 15 regulation has been to increase regulatory restrictions and limitations on such activities. Any changes in, or more stringent enforcement of, these laws and regulations may result in delays or restrictions in permitting or development of projects or more stringent or costly construction, drilling, water management or completion activities or waste handling, storage, transport, remediation, or disposal emission or discharge requirements which could have a material adverse effect on the Company. For example, on January 20, 2021, the Biden Administration placed a 60-day moratorium on new oil and gas leasing and drilling permits on federal land, and on January 27, 2021, the Department of Interior acting pursuant to a Presidential Executive Order suspended the federal oil and gas leasing program indefinitely. President Biden also announced that his administration would continue to pause all offshore and onshore leasing pending a full review of the federal leasing and permitting program. In response to a challenge filed by Louisiana and other states, a federal court in the Western District of Louisiana issued a preliminary injunction blocking the Biden administration’s leasing moratorium. The Biden administration appealed this decision but has continued to hold lease sales pending appeal. While we do not have a significant federal lands acreage position at 240 net acres, these actions could have a material adverse effect on the Company and our industry. Currently, all our properties and operations are in Alabama, which has regulations governing conservation matters, such as the unitization or pooling of oil and natural gas properties, the establishment of maximum allowable rates of production from oil and natural gas wells, the regulation of well spacing, and plugging and abandonment of wells. The effect of these regulations is to limit the amount of oil and natural gas that we can produce from our wells and to limit the number of wells or the locations at which we can drill, although we can apply for exceptions to such regulations or to have reductions in well spacing. Moreover, Alabama imposes a production or severance tax with respect to the production and sale of oil, natural gas, and natural gas liquids within their jurisdictions. The failure to comply with these rules and regulations can result in substantial penalties. Our competitors in the oil and natural gas industry are subject to the same regulatory requirements and restrictions that affect our operations. Regulation of Transportation of Oil Sales of crude oil, condensate, and natural gas liquids are not currently regulated and are made at negotiated prices, however, Congress could reenact price controls in the future. Our sales of crude oil are affected by the availability, terms, and cost of transportation. The transportation of oil in common carrier pipelines is also subject to rate regulation. The Federal Energy Regulatory Commission, or the FERC, regulates interstate oil pipeline transportation rates under the Interstate Commerce Act. Intrastate oil pipeline transportation rates are subject to regulation by state regulatory commissions. The basis for intrastate oil pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate oil pipeline rates, varies from state to state. Insofar as effective interstate and intrastate rates are equally applicable to all comparable shippers, we believe that the regulation of oil transportation rates will not affect our operations in any way that is of material difference from those of our competitors. Further, interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to all shippers requesting service on the same terms and under the same rates. When oil pipelines operate at full capacity, access is governed by pro-rationing provisions set forth in the pipelines’ published tariffs. Accordingly, we believe that access to oil pipeline transportation services generally will be available to us to the same extent as to our competitors. 16 Regulation of Transportation and Sale of Natural Gas Historically, the transportation and sale for resale of natural gas in interstate commerce have been regulated pursuant to the Natural Gas Act of 1938, the Natural Gas Policy Act of 1978, and regulations issued under those Acts by the FERC. In the past, the federal government has regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at uncontrolled market prices, Congress could reenact price controls in the future. Since 1985, the FERC has endeavored to make natural gas transportation more accessible to natural gas buyers and sellers on an open and non-discriminatory basis. The FERC has stated that open access policies are necessary to improve the competitive structure of the interstate natural gas pipeline industry and to create a regulatory framework that will put natural gas sellers into more direct contractual relations with natural gas buyers by, among other things, unbundling the sale of natural gas from the sale of transportation and storage services. Although the FERC’s orders do not directly regulate natural gas producers, they are intended to foster increased competition within all phases of the natural gas industry. We cannot accurately predict whether the FERC’s actions will achieve the goal of increasing competition in markets in which our natural gas is sold. Therefore, we cannot provide any assurance that the less stringent regulatory approach established by the FERC will continue. However, we do not believe that any action taken will affect us in a way that materially differs from the way it affects other natural gas producers. Intrastate natural gas transportation is subject to regulation by state regulatory agencies. The basis for intrastate regulation of natural gas transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to state. Insofar as such regulation within a particular state will generally affect all intrastate natural gas shippers within the state on a comparable basis, we believe that the regulation of similarly situated intrastate natural gas transportation in any states in which we operate and ship natural gas on an intrastate basis will not affect our operations in any way that is of material difference from those of our competitors. Market Opportunity We believe that we can establish a profitable niche in crude oil production due to the quality of the light sweet crude oil produced from the Gulf States Region, which is cheaper to refine than crude oil from other regions of the U.S. and Canada, especially the “dirty” crude oil extracted from North Dakota and Western Canada oil fields using shale fracking. This optimism is due in part to the increasing percentage of worldwide crude oil production from the U.S. According to a 2017 study by Louisiana State University: “During this past decade, not only did the U.S. experience historical increases in oil and gas production, but it was one of the only countries in the world experiencing large increases in production. This is because these horizontal drilling and hydraulic fracturing techniques used to extract resources from shale geological formations were discovered and perfected in the Gulf Coast region of the U.S. Our Key Competitive Strengths The day-to-day operations of the oil drilling and production from our lease assets in the Gulf States Drill Region will be handled by independent contract operators with experience in conducting oil drilling and operations in the Region. These contractors will handle all operational aspects of oil drilling, storage and production. The Company’s officers will provide executive oversight of its operation as well as handling corporate governance, legal compliance, financial affairs and funding efforts of our company. 17 The use of operating independent contractors in oil and gas exploration and production is not an uncommon industry practice for smaller, independent oil and gas production companies. The Company will use an operating company contractor as it is deemed the most efficient and cost-effective means of operations for a small independent oil and gas production company like us. We do not currently have the financial resources to engage and retain qualified industry personnel as full-time employees for operation of our oil and gas exploration and production business. The use of contractors is designed to allow the Company to use experienced oil drilling and production personnel without the high overhead costs of hiring personnel as employees of the Company. With adequate funding, the Company intends to employ this teaming model strategy to help attract and retain experienced oil industry engineering and production personnel to identify drill sites and then efficiently operate those wells to produce oil at an above average industry rate of efficiency in the Gulf States region. Principal Executive Offices Our principal executive office is located at 3033 Wilson Boulevard, Suite E-605, Arlington, Virginia 22201, in Arlington County outside of Washington, D.C., and our telephone number is (703) 479-8538. We rent our principal executive offices under a month-to-month lease and for a monthly rental of $50. The Company website is www.cojaxoilandgas.com. Employees We have two full-time employees: Jeffrey J. Guzy, our Chief Executive Officer, and a director, and Wm. Barrett Wellman, our Chief Financial Officer. The officers devote the number of hours necessary to perform their duties, which each officer in his sole discretion determines the extent of the time commitment. 18