10-Q: CoJax Oil & Gas Faces Going Concern Doubt Amid Q3 Loss

CoJax Oil and Gas Corporation reported an increased net loss for Q3 2025 and acknowledged substantial doubt about its ability to continue as a going concern.

Summary

• CoJax Oil and Gas Corporation reported a net loss of $157,705 for the three months ended September 30, 2025, an increase from $149,758 in the same period of 2024.
• For the nine months ended September 30, 2025, the net loss decreased to $506,572 from $527,682 in the prior year period.
• Revenues for the three months ended September 30, 2025, decreased by 15.1% to $212,868, primarily due to a lower average crude oil sale price.
• Nine-month revenues increased by 4.5% to $784,714, driven by production from the Liberty and Pine Grove Assets acquired in May and August 2024.
• Lease operating expenses rose significantly by 30.3% for the three months and 34.2% for the nine months, mainly due to the acquired assets.
• General and administrative expenses decreased by 33.9% for the three months and 15.8% for the nine months, primarily due to reduced payroll expenses.
• The company's management concluded that its disclosure controls and procedures were not effective as of September 30, 2025.
• Substantial doubt exists about the company's ability to continue as a going concern due to accumulated losses and dependence on future financing.
• Cash on hand increased to $71,119 at September 30, 2025, from $46,738 at December 31, 2024, but net cash provided by operating activities decreased for the nine-month period.

Sentiment

Score: 3

Explanation: The company faces significant challenges, including an increased quarterly net loss, declining Q3 revenue due to lower oil prices, substantially higher operating expenses, and a formal 'going concern' disclosure. The ineffective disclosure controls further compound the negative sentiment, indicating fundamental operational and financial instability despite some improvements in nine-month net loss and G&A expenses.

Positives

• Net loss for the nine months ended September 30, 2025, decreased by 4.0% compared to the same period in 2024.
• Revenues for the nine months ended September 30, 2025, increased by 4.5% to $784,714, primarily due to production from recently acquired assets.
• General and administrative expenses saw a significant reduction of 15.8% for the nine-month period, driven by decreased payroll expenses.
• Cash on hand increased to $71,119 at September 30, 2025, from $46,738 at December 31, 2024.

Negatives

• Net loss for the three months ended September 30, 2025, increased by 5.3% to $157,705.
• Revenues for the three months ended September 30, 2025, decreased by 15.1% due to a decline in the average crude oil sale price.
• Lease operating expenses increased substantially by 30.3% for the three months and 34.2% for the nine months, impacting profitability.
• The average oil sales price declined significantly to $62.97 per Bbl for the three months and $67.17 per Bbl for the nine months ended September 30, 2025, compared to prior year periods.
• The company's accumulated deficit increased to $12,880,459 as of September 30, 2025.
• Management concluded that disclosure controls and procedures were not effective as of September 30, 2025.
• Substantial doubt exists about the company's ability to continue as a going concern.
• Net cash provided by operating activities decreased to $31,938 for the nine months ended September 30, 2025, from $59,219 in the prior year period.

Risks

• Declines or volatility in the prices received for oil and natural gas.
• Ability to raise additional capital to fund future capital expenditures.
• Ability to generate sufficient cash flow from operations, borrowings, or other sources.
• General economic conditions, whether internationally, nationally, or in regional and local market areas.
• Risks associated with drilling, including completion risks, cost overruns, and the drilling of non-economic wells or dry holes.
• Uncertainties associated with estimates of proved oil and natural gas reserves.
• The presence or recoverability of estimated oil and natural gas reserves and actual future production rates and associated costs.
• Risks and liabilities associated with acquired companies and properties, and risks related to their integration.
• Potential defects in title to properties.
• Cost and availability of drilling rigs, equipment, supplies, personnel, and oilfield services.
• Geological concentration of reserves.
• Environmental or other governmental regulations, including legislation of hydraulic fracture stimulation.
• Ability to secure firm transportation for oil and natural gas and to sell at market prices.
• Exploration and development risks.
• Management's ability to execute plans to meet goals and retain key members of the management team.
• The occurrence of cybersecurity incidents, attacks, or other breaches to information technology systems.
• Weather conditions.
• Effectiveness of internal control over financial reporting.
• Actions or inactions of third-party operators of properties.
• Costs and liabilities associated with environmental, health, and safety laws.
• Ability to find and retain highly skilled personnel.
• Operating hazards attendant to the oil and natural gas business.
• Competition in the oil and natural gas industry, including a price disadvantage compared to larger producers.
• Evolving geopolitical and military hostilities in the Middle East and the Russian-Ukrainian conflict.
• Economic and competitive conditions.
• Lack of available insurance.
• Cash flow and anticipated liquidity.
• The company's ability to continue as a going concern.

Future Outlook

Management expects to incur further losses in the development of its business and is dependent upon future issuances of equity or other financings to fund ongoing operations. The company's ability to continue as a going concern relies on generating future profitable operations and/or obtaining necessary financing. Business costs are anticipated to fluctuate with commodity prices for oil and natural gas and associated demand for services.

Management Comments

• "Management has developed a capital investment proposal plan and is currently pursuing funding opportunities; however, there is no assurance of additional funding being available or on acceptable terms, if at all."
• "Our goal is to increase stockholder value by investing in oil and natural gas projects with attractive rates of return on capital employed. We plan to achieve this goal by exploiting and developing our existing oil and natural gas properties and pursuing strategic acquisitions of additional properties, while remaining cash flow positive, maintaining low operating costs, and striving to show a gain in annual production while reducing the Company's debt."
• "Based on management's evaluation, Messrs. Downs and Guzy concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective..."

Industry Context

CoJax operates in a highly cyclical and competitive global oil and natural gas market, which is significantly influenced by government regulations, geopolitical instability, and fluctuations in commodity demand and prices. As a smaller producer, the company faces a competitive disadvantage against larger entities with greater financial and technical resources, particularly in negotiating favorable prices for larger product quantities. The industry's inherent volatility directly impacts CoJax's revenue, profitability, and access to capital.

Comparison to Industry Standards

• The company acknowledges that many large producers possess and employ financial, technical, and personnel resources substantially greater than its own.
• CoJax views itself as having a price disadvantage compared to larger producers, as more favorable prices can usually be negotiated for larger quantities of oil and/or gas products.

Management Changes

Corporate Governance

Legal Proceedings

• There are no known pending legal proceedings to which the Company is a party or in which any director, officer, or affiliate has a material adverse interest.

Related Party Transactions

• Unsecured promissory notes totaling $113,000 were issued to the CFO, bearing 2% interest and maturing on December 31, 2025.
• On January 10, 2024, 100,000 common shares were issued to William R. Downs at $0.99 per share in connection with his appointment as CEO.
• On January 26, 2024, Series A preferred stock was converted into common shares, resulting in 575,000 common shares for Jeffrey J. Guzy and 475,000 for Wm. Barrett Wellman.
• On April 11, 2025, 170,116 shares of Common Stock were issued to Mr. Wellman at $2.00 per share in lieu of $340,232 in accrued salary liability for services performed as CFO.

Stakeholder Impact

• Shareholders face potential dilution from future equity issuances and risks associated with the company's 'going concern' doubt and volatile commodity prices.
• Creditors, including the CFO as a related party lender, face increased risk due to the company's financial instability and dependence on future financing.
• Employees may be affected by management's efforts to reduce costs, as evidenced by the decrease in general and administrative expenses due to reduced payroll.
• Customers and suppliers are exposed to the volatility of oil and natural gas prices, which can impact demand for products and services.

Next Steps

• Management is pursuing funding opportunities for a capital investment proposal plan.
• The company intends to acquire producing properties and/or developed undrilled properties, focusing on the Gulf States Drill Region.
• Plans to exploit and develop existing oil and natural gas properties and pursue strategic acquisitions.
• Will continue to monitor and evaluate the effectiveness of disclosure controls and internal controls over financial reporting and implement additional enhancements as funds allow.

Key Dates

Recommendation

The company's disclosure of 'substantial doubt about its ability to continue as a going concern,' coupled with an increased net loss for the most recent quarter and a formal declaration of 'not effective' disclosure controls, presents significant red flags. While nine-month revenue increased and net loss slightly improved, these are overshadowed by declining Q3 revenue, rising operating costs, and a reliance on future, uncertain financing. The related party transactions and the competitive disadvantages as a smaller producer further add to the risk profile. These factors indicate severe financial and operational instability, making the stock a high-risk investment with a strong likelihood of further value erosion.

Keywords

Oil and Gas, Exploration and Production, E&P, Energy, Gulf States Drill Region, SEC Filing, 10-Q, Financial Report, Crude Oil, Natural Gas, Net Loss, Going Concern, Disclosure Controls, Capital Raise, Acquisitions, Lease Operating Expenses