Exhibit 99.1
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended June 30, 2024
(EXPRESSED IN UNITED STATES DOLLARS)
(UNAUDITED)
MANAGEMENT’S RESPONSIBILITY FOR INTERIM FINANCIAL REPORT
The accompanying unaudited condensed consolidated interim financial report of Permex Petroleum Corporation (the “Company”) has been prepared by and is the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of this financial report.
PERMEX PETROLEUM CORPORATION
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| | | June 30, 2024 | | | September 30, 2023 | |
| | | | | | | |
| ASSETS | | | | | | | | |
| Current assets | | | | | | | | |
| Cash and cash equivalents | | $ | 428,385 | | | $ | 82,736 | |
| Trade and other receivables (net of allowance: June 30, 2024 - $nil; September 30, 2023 - $nil) | | | 20,126 | | | | 78,441 | |
| Prepaid expenses and deposits | | | 101,389 | | | | 127,239 | |
| Total current assets | | | 549,900 | | | | 288,416 | |
| | | | | | | | | |
| Non-current assets | | | | | | | | |
| Reclamation deposits | | | 75,000 | | | | 145,000 | |
| Property and equipment, net of accumulated depreciation and depletion | | | 10,306,590 | | | | 10,361,419 | |
| Right of use asset, net | | | 96,058 | | | | 146,912 | |
| | | | | | | | | |
| Total assets | | $ | 11,027,548 | | | $ | 10,941,747 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| Current liabilities | | | | | | | | |
| Trade and other payables | | $ | 3,774,392 | | | $ | 3,228,327 | |
| Loans payable | | | 160,936 | | | | 125,936 | |
| Convertible debentures | | | 1,365,000 | | | | - | |
| Lease liability – current portion | | | 78,791 | | | | 77,069 | |
| Total current liabilities | | | 5,379,119 | | | | 3,431,332 | |
| | | | | | | | | |
| Non-current liabilities | | | | | | | | |
| Asset retirement obligations | | | 287,761 | | | | 260,167 | |
| Lease liability, less current portion | | | 30,538 | | | | 81,456 | |
| | | | | | | | | |
| Total liabilities | | | 5,697,418 | | | | 3,772,955 | |
| | | | | | | | | |
| Stockholders’ Equity | | | | | | | | |
| Common stock, no par value per share; unlimited shares authorized, 551,503 shares* issued and outstanding as of June 30, 2024 and September 30, 2023. | | | 14,947,150 | | | | 14,947,150 | |
| Additional paid-in capital | | | 5,227,962 | | | | 4,549,431 | |
| Accumulated other comprehensive loss | | | (127,413 | ) | | | (127,413 | ) |
| Accumulated deficit | | | (14,717,569 | ) | | | (12,200,376 | ) |
| | | | | | | | | |
| Total stockholders’ equity | | | 5,330,130 | | | | 7,168,792 | |
| | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 11,027,548 | | | $ | 10,941,747 | |
| * | The number of shares has been restated to reflect the 4:1 reverse stock split effective on October 23, 2023 (Note 1). All historical share and per share amounts reflected in this report have been adjusted to reflect the reverse stock split. |
Approved by the board of directors on August 29, 2024 and signed on its behalf by:
| “Bradley Taillon” | Director | “Kevin Nanke” | Director |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
PERMEX PETROLEUM CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| | | Three Months Ended
June 30, 2024 | | | Three Months Ended
June 30, 2023 | | | Nine Months Ended
June 30, 2024 | | | Nine Months Ended
June 30, 2023 | |
| | | | | | | | | | | | | |
| Revenues | | | | | | | | | | | | | | | | |
| Oil and gas sales | | $ | - | | | $ | 156,716 | | | $ | 75,466 | | | $ | 541,459 | |
| Royalty income | | | 2,671 | | | | 303 | | | | 11,190 | | | | 18,140 | |
| Total revenues | | | 2,671 | | | | 157,019 | | | | 86,656 | | | | 559,599 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | | | | | |
| Lease operating expense | | | 10,421 | | | | 235,511 | | | | 165,305 | | | | 762,668 | |
| General and administrative | | | 629,836 | | | | 788,659 | | | | 1,674,738 | | | | 3,014,307 | |
| Depletion and depreciation | | | 14,875 | | | | 37,286 | | | | 54,829 | | | | 120,459 | |
| Accretion on asset retirement obligations | | | 9,198 | | | | 7,994 | | | | 27,594 | | | | 23,982 | |
| Total operating expenses | | | (664,330 | ) | | | (1,069,450 | ) | | | (1,922,466 | ) | | | (3,921,416 | ) |
| | | | | | | | | | | | | | | | | |
| Loss from operations | | | (661,659 | ) | | | (912,431 | ) | | | (1,835,810 | ) | | | (3,361,817 | ) |
| | | | | | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | | | | | |
| Interest income | | | - | | | | 108 | | | | - | | | | 108 | |
| Other income | | | - | | | | 6,000 | | | | 8,000 | | | | 18,000 | |
| Foreign exchange gain (loss) | | | 5,146 | | | | (3,310 | ) | | | 5,087 | | | | (7,690 | ) |
| Interest and debt expense | | | (693,444 | ) | | | (1,026 | ) | | | (694,470 | ) | | | (2,208 | ) |
| Gain on settlement of warrant liability | | | - | | | | 930 | | | | - | | | | 930 | |
| Change in fair value of warrant liability | | | - | | | | 136 | | | | - | | | | 22,570 | |
| Total other income (expense) | | | (688,298 | ) | | | 2,838 | | | | (681,383 | ) | | | 31,710 | |
| | | | | | | | | | | | | | | | | |
| Net loss and comprehensive loss | | $ | (1,349,957 | ) | | $ | (909,593 | ) | | $ | (2,517,193 | ) | | $ | (3,330,107 | ) |
| Deemed dividend arising from warrant modification | | | - | | | | (543,234 | ) | | | - | | | | (543,234 | ) |
| Net loss attributable to common stockholders | | $ | (1,349,957 | ) | | $ | (1,452,827 | ) | | $ | (2,517,193 | ) | | $ | (3,873,341 | ) |
| | | | | | | | | | | | | | | | | |
| Basic and diluted loss per common share | | $ | (2.45 | ) | | $ | (2.96 | ) | | $ | (4.56 | ) | | $ | (7.97 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average number of common shares outstanding* | | | 551,503 | | | | 491,036 | | | | 551,503 | | | | 485,779 | |
| * | The number of shares has been restated to reflect the 4:1 reverse stock split effective on October 23, 2023 (Note 1). All historical share and per share amounts reflected in this report have been adjusted to reflect the reverse stock split (Note 1). |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
PERMEX PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three months ended June 30
| | | Number of Shares* | | | Share capital | | | Additional paid-in capital | | | Accumulated other comprehensive loss | | | Deficit | | | Total equity | |
| | | | | | | | | | | | | | | | | | | |
| Balance, March 31, 2024 | | | 551,503 | | | $ | 14,947,150 | | | $ | 4,549,431 | | | $ | (127,413 | ) | | $ | (13,367,612 | ) | | $ | 6,001,556 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Warrants issued in private placement | | | - | | | | - | | | | 678,531 | | | | - | | | | - | | | | 678,531 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (1,349,957 | ) | | | (1,349,957 | ) |
| Balance, June 30, 2024 | | | 551,503 | | | $ | 14,947,150 | | | $ | 5,227,962 | | | $ | (127,413 | ) | | $ | (14,717,569 | ) | | $ | 5,330,130 | |
| | | Number of Shares* | | | Share capital | | | Additional paid-in capital | | | Accumulated other comprehensive loss | | | Deficit | | | Total equity | |
| | | | | | | | | | | | | | | | | | | |
| Balance, March 31, 2023 | | | 483,150 | | | $ | 14,337,739 | | | $ | 4,513,512 | | | $ | (127,413 | ) | | $ | (10,680,929 | ) | | $ | 8,042,909 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Exercise of warrants | | | 68,353 | | | | 781,953 | | | | - | | | | - | | | | - | | | | 781,953 | |
| Share issuance costs | | | - | | | | (129,780 | ) | | | 35,919 | | | | - | | | | - | | | | (93,861 | ) |
| Deemed dividend arising from warrant modification | | | - | | | | - | | | | 543,234 | | | | - | | | | - | | | | 543,234 | |
| Warrant modification | | | - | | | | - | | | | (543,234 | ) | | | - | | | | - | | | | (543,234 | ) |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (909,593 | ) | | | (909,593 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, June 30, 2023 | | | 551,503 | | | $ | 14,989,912 | | | $ | 4,549,431 | | | $ | (127,413 | ) | | $ | (11,590,522 | ) | | $ | 7,821,408 | |
PERMEX PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (cont’d…)
(UNAUDITED)
Nine months ended June 30
| | | Number of Shares* | | | Share capital | | | Additional paid-in capital | | | Accumulated other comprehensive loss | | | Deficit | | | Total equity | |
| | | | | | | | | | | | | | | | | | | |
| Balance, September 30, 2023 | | | 551,503 | | | $ | 14,947,150 | | | $ | 4,549,431 | | | $ | (127,413 | ) | | $ | (12,200,376 | ) | | $ | 7,168,792 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Warrants issued in private placement | | | - | | | | - | | | | 678,531 | | | | - | | | | - | | | | 678,531 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (2,517,193 | ) | | | (2,517,193 | ) |
| Balance, June 30, 2024 | | | 551,503 | | | $ | 14,947,150 | | | $ | 5,227,962 | | | $ | (127,413 | ) | | $ | (14,717,569 | ) | | $ | 5,330,130 | |
| | | Number of Shares* | | | Share capital | | | Additional paid-in capital | | | Accumulated other comprehensive loss | | | Deficit | | | Total equity | |
| | | | | | | | | | | | | | | | | | | |
| Balance, September 30, 2022 | | | 483,150 | | | $ | 14,337,739 | | | $ | 4,513,194 | | | $ | (127,413 | ) | | $ | (8,260,415 | ) | | $ | 10,463,105 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Exercise of warrants | | | 68,353 | | | | 781,953 | | | | - | | | | - | | | | - | | | | 781,953 | |
| Share issuance costs | | | - | | | | (129,780 | ) | | | 35,919 | | | | - | | | | - | | | | (93,861 | ) |
| Deemed dividend arising from warrant modification | | | - | | | | - | | | | 543,234 | | | | - | | | | - | | | | 543,234 | |
| Warrant modification | | | - | | | | - | | | | (543,234 | ) | | | - | | | | - | | | | (543,234 | ) |
| Share-based payments | | | - | | | | - | | | | 318 | | | | - | | | | - | | | | 318 | |
| Net loss | | | - | | | | - | | | | - | | | | - | | | | (3,330,107 | ) | | | (3,330,107 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, June 30, 2023 | | | 551,503 | | | $ | 14,989,912 | | | $ | 4,549,431 | | | $ | (127,413 | ) | | $ | (11,590,522 | ) | | $ | 7,821,408 | |
| * | The number of shares has been restated to reflect the 4:1 reverse stock split effective on October 23, 2023 (Note 1). All historical share and per share amounts reflected in this report have been adjusted to reflect the reverse stock split (Note 1). |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
PERMEX PETROLEUM CORPORATION
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30
(UNAUDITED)
| | | 2024 | | | 2023 | |
| | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | |
| Net loss | | $ | (2,517,193 | ) | | $ | (3,330,107 | ) |
| Adjustments to reconcile net loss to net cash from operating activities: | | | | | | | | |
| Accretion on asset retirement obligations | | | 27,594 | | | | 23,982 | |
| Depletion and depreciation | | | 54,829 | | | | 120,459 | |
| Foreign exchange loss (gain) | | | (5,087 | ) | | | - | |
| Finance expense | | | 14,913 | | | | - | |
| Debt expense | | | 678,531 | | | | - | |
| Gain on settlement of warrant liability | | | - | | | | (930 | ) |
| Change in fair value of warrant liability | | | - | | | | (22,570 | ) |
| Share-based payments | | | - | | | | 318 | |
| | | | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Trade and other receivables | | | 58,315 | | | | 40,599 | |
| Prepaid expenses and deposits | | | 25,850 | | | | 180,877 | |
| Trade and other payables | | | 536,239 | | | | 1,045,347 | |
| Right of use asset and lease liability | | | 1,658 | | | | 5,819 | |
| Net cash used in operating activities | | | (1,124,351 | ) | | | (1,936,206 | ) |
| | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
| Capital expenditures on property and equipment | | | - | | | | (1,249,704 | ) |
| Reclamation deposit redemption | | | 70,000 | | | | - | |
| Net cash provided by (used in) investing activities | | | 70,000 | | | | (1,249,704 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from debenture financing | | | 1,365,000 | | | | - | |
| Proceeds from exercise of warrants | | | - | | | | 781,953 | |
| Share issuance costs | | | - | | | | (93,861 | ) |
| Loan payable proceeds | | | 45,000 | | | | - | |
| Loan payable repayment | | | (10,000 | ) | | | - | |
| Debenture repayment | | | - | | | | (38,291 | ) |
| Net cash provided by (used in) financing activities | | | 1,400,000 | | | | 649,801 | |
| | | | | | | | | |
| Change in cash and cash equivalents during the period | | | 345,649 | | | | (2,536,109 | ) |
| | | | | | | | | |
| Cash and cash equivalents, beginning of the period | | | 82,736 | | | | 3,300,495 | |
| | | | | | | | | |
| Cash and cash equivalents, end of the period | | $ | 428,385 | | | $ | 764,386 | |
| | | | | | | | | |
| Supplemental cash flow disclosures: | | | | | | | | |
| Interest paid | | $ | 1,026 | | | $ | 1,182 | |
| Taxes paid | | $ | - | | | $ | - | |
| | | | | | | | | |
| Supplemental disclosures of non-cash investing and financing activities: | | | | | |
| Share purchase warrants issued in connection with exercise of warrants | | $ | | | | $ | 579,153 | |
| Trade and other payables related to property and equipment | | $ | - | | | $ | 1,459,667 | |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
Permex Petroleum Corporation (the “Company”) was incorporated on April 24, 2017 under the laws of British Columbia, Canada and maintains its head office at 1700 Post Oak Boulevard, 2 Blvd Place Suite 600, Houston Texas, 77056. Its registered office is located at 10th floor, 595 Howe Street, Vancouver, British Columbia, Canada, V6C 2T5. The Company is primarily engaged in the acquisition, development and production of oil and gas properties in the United States. The Company’s oil and gas interests are located in Texas and New Mexico, USA. The Company is listed on the Canadian Securities Exchange (the “CSE”) under the symbol “OIL”. On April 16, 2024, the Company received a cease trade order issued by the British Columbia Securities Commission (the “BCSC”) due to its failure to file the annual financial statements for fiscal 2023 and quarterly reports for fiscal 2024 (“FFCTO”). The trading was halted on the CSE effective April 17, 2024. The Company has brought all required filings up to date and is currently working on the revocation of the FFCTO.
On September 12, 2023, the Company’s board of directors approved a reverse stock split of the Company’s issued and outstanding common stock at a 1 for 4 ratio, which was effective October 23, 2023. All issued and outstanding common stock, options, and warrants to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect the reverse stock splits for all periods presented.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Basis of presentation
The unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2023 or for any other interim period or for any other future fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes for the fiscal year ended September 30, 2023.
Principles of Consolidation
The accompanying consolidated financial statements include the assets, liabilities, revenue and expenses of the Company’s wholly-owned subsidiary, Permex Petroleum US Corporation. All intercompany balances and transactions have been eliminated.
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
| 2. | Significant Accounting Policies (cont’d…) |
Going concern of operations
These consolidated financial statements have been prepared on a going concern basis which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company has incurred losses since inception in the amount of $14,717,569, has a working capital deficiency of $4,829,219 as of June 30, 2024 and has not yet achieved profitable operations. The Company requires equity financings to fund its operation, which it has been unable to secure in sufficient amounts to date, and there can be no assurances that it will be able to do so in the future. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
The Company expects to raise additional funds through equity and debt financings. There are no written agreements in place for such funding or issuance of securities and there can be no assurance that such will be available in the future. During the quarter ended June 30, 2024, the Company raised $1,365,000 through the issuance of convertible debentures. Management believes that this plan provides an opportunity for the Company to continue as a going concern subject to its continued ability to raise funds to maintain its operations and manage its working capital deficiency.
In view of these matters, continuation as a going concern is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to, meet its financial requirements, raise additional capital, and the success of its future operations. The financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company not continue as a going concern.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Management evaluates these estimates and judgments on an ongoing basis and bases its estimates on experience, current and expected future conditions, third-party evaluations and various other assumptions that management believes are reasonable under the circumstances.
Significant estimates have been used by management in conjunction with the following: (i) the fair value of assets when determining the existence of impairment factors and the amount of impairment, if any; (ii) the costs of site restoration when determining decommissioning liabilities; (iii) the useful lives of assets for the purposes of depletion and depreciation; (iv) petroleum and natural gas reserves; and (v) share-based payments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
New accounting standards
In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic740) Improvements to Income Tax Disclosures, which becomes effective for fiscal years beginning after December 15, 2024. The standard requires companies to disclose specific categories in the income tax rate reconciliation table and the amount of income taxes paid per major jurisdiction. The Company does not expect the standard to have a material effect on its consolidated financial statements and has begun evaluating disclosure presentation alternatives.
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
Revenue from contracts with customers is presented in “Oil and gas sales” on the Consolidated Statements of Operations.
As of June 30, 2024 and September 30, 2023, receivable from contracts with customers, included in trade and other receivables, were $2,983 and $48,165, respectively.
The following table present our revenue from contracts with customers disaggregated by product type and geographic areas.
| Three months ended June 30, 2024 | | Texas | | | New Mexico | | | Total | |
| | | | | | | | | | | | | |
| Crude oil | | $ | - | | | $ | - | | | $ | - | |
| Natural gas | | | - | | | | - | | | | - | |
| Revenue | | $ | - | | | $ | - | | | $ | - | |
| Three months ended June 30, 2023 | | Texas | | | New Mexico | | | Total | |
| | | | | | | | | | |
| Crude oil | | $ | 113,471 | | | $ | 42,230 | | | $ | 155,701 | |
| Natural gas | | | 1,015 | | | | - | | | | 1,015 | |
| Revenue | | $ | 114,486 | | | $ | 42,230 | | | $ | 156,716 | |
| Nine months ended June 30, 2024 | | Texas | | | New Mexico | | | Total | |
| | | | | | | | | | |
| Crude oil | | $ | 39,857 | | | $ | 35,609 | | | $ | 75,466 | |
| Natural gas | | | - | | | | - | | | | - | |
| Revenue | | $ | 39,857 | | | $ | 35,609 | | | $ | 75,466 | |
| Nine months ended June 30, 2023 | | Texas | | | New Mexico | | | Total | |
| | | | | | | | | | |
| Crude oil | | $ | 417,050 | | | $ | 116,285 | | | $ | 533,335 | |
| Natural gas | | | 8,124 | | | | - | | | | 8,124 | |
| Revenue | | $ | 425,174 | | | $ | 116,285 | | | $ | 541,459 | |
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
| 4. | CONCENTRATION OF CREDIT RISK |
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of its cash equivalents and trade receivables. The Company’s cash balances sometimes exceed the United States’ Federal Deposit Insurance Corporation insurance limits. The Company mitigates this risk by placing its cash and cash equivalents with high credit quality financial institutions and attempts to limit the amount of credit exposure with any one institution. To date, the Company has not recognized any losses caused by uninsured balances.
The majority of the Company’s receivable balance is concentrated in trade receivables, with a balance of $6,164 as of June 30, 2024 (September 30, 2023 - $73,021). For the nine months ended June 30, 2024 and 2023, we had two significant customers that accounted for approximately 100% and 92%, respectively, of our total oil, and natural gas revenues. For the three months ended June 30, 2024 and 2023, we had two significant customers that accounted for approximately nil% and 93%, respectively, of our total oil, and natural gas revenues. Two customers represented $nil (nil%) of the trade receivable balance. The Company routinely assesses the financial strength of its customers. The non-trade receivable balance consists of goods and services tax (“GST”) recoverable of $13,962. GST recoverable is due from the Canadian Government. It is in management’s opinion that the Company is not exposed to significant credit risk. During the nine months ended June 30, 2024, the Company recognized $9,587 (2023 - $nil) in credit losses on its receivables. During the three months ended June 30, 2024, the Company recognized $nil (2023 - $nil) in credit losses on its receivables.
Property and equipment consisted of the following:
| | | June 30, 2024 | | | September 30, 2023 | |
| | | | | | | |
| Oil and natural gas properties, at cost | | $ | 10,501,244 | | | $ | 10,501,244 | |
| Less: accumulated depletion | | | (305,706 | ) | | | (289,456 | ) |
| Oil and natural gas properties, net | | | 10,195,538 | | | | 10,211,788 | |
| Other property and equipment, at cost | | | 205,315 | | | | 205,315 | |
| Less: accumulated depreciation | | | (94,263 | ) | | | (55,684 | ) |
| Other property and equipment, net | | | 111,052 | | | | 149,631 | |
| Property and equipment, net | | $ | 10,306,590 | | | $ | 10,361,419 | |
Depletion and depreciation expense was $54,829 and $120,459 for the nine month periods ended June 30, 2024 and 2023, respectively. Depletion and depreciation expense was $14,875 and $37,286 for the three month periods ended June 30, 2024 and 2023, respectively.
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
All of the Company’s right-of-use assets are operating leases related to its office premises. Details of the Company’s right-of-use assets and lease liabilities are as follows:
| | | June 30, 2024 | | | September 30, 2023 | |
| | | | | | | |
| Right-of-use assets | | $ | 96,058 | | | $ | 146,912 | |
| | | | | | | | | |
| Lease liabilities | | | | | | | | |
| Balance, beginning of the year | | $ | 158,525 | | | $ | 244,906 | |
| Addition | | | - | | | | - | |
| Liability accretion | | | 12,346 | | | | 24,221 | |
| Lease payments | | | (61,542 | ) | | | (110,602 | ) |
| Balance, end of the year | | $ | 109,329 | | | $ | 158,525 | |
| Current lease liabilities | | $ | 78,791 | | | $ | 77,069 | |
| Long-term lease liabilities | | $ | 30,538 | | | $ | 81,456 | |
| Weighted-average remaining lease term (in years) | | | 1.42 | | | | 2.17 | |
| Weighted-average discount rate | | | 12 | % | | | 12 | % |
The following table presents the Company’s total lease cost.
| | | Three Months Ended
June 30, 2024 | | | Three Months Ended
June 30, 2023 | | | Nine Months Ended
June 30, 2024 | | | Nine Months Ended
June 30, 2023 | |
| | | | | | | | | | | | | |
| Operating lease cost | | $ | 20,573 | | | $ | 27,704 | | | $ | 63,200 | | | $ | 92,947 | |
| Variable lease expense | | | 15,469 | | | | 22,516 | | | | 45,905 | | | | 48,513 | |
| Sublease income | | | - | | | | (12,367 | ) | | | - | | | | (32,762 | ) |
| Net lease cost | | $ | 36,042 | | | $ | 37,853 | | | $ | 109,105 | | | $ | 108,698 | |
As of June 30, 2024, the Company has one office lease agreement for its office premises for terms ending in November 2025. The maturities of the Company’s operating lease liabilities are as follows:
| Year | | | |
| 2024 | | $ | 20,648 | |
| 2025 | | | 84,664 | |
| 2026 | | | 14,180 | |
| Total lease payments | | | 119,492 | |
| Less: imputed interest | | | (10,163 | ) |
| Total lease liabilities | | $ | 109,329 | |
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
| 7. | ASSET RETIREMENT OBLIGATIONS |
Asset retirement obligations reflects the estimated present value of the amount of dismantlement, removal, site reclamation, and similar activities associated with the Company’s oil and gas properties. Changes to the asset retirement obligations are as follows:
| | | June 30, 2024 | | | September 30, 2023 | |
| | | | | | | |
| Asset retirement obligations, beginning of the year | | $ | 260,167 | | | $ | 236,412 | |
| Obligations derecognized | | | - | | | | (287 | ) |
| Revisions of estimates | | | - | | | | (7,934 | ) |
| Accretion expense | | | 27,594 | | | | 31,976 | |
| | | $ | 287,761 | | | $ | 260,167 | |
During the year ended September 30, 2023, the Company had revision of estimates totaling $7,934 primarily due to changes in future cost estimates and retirement dates for its oil and gas assets. During the year ended September 30, 2023, the Company incurred plugging and abandonment costs of $66,354 and recognized a loss of $66,067 on the settlement.
Reclamation deposits
As of June 30, 2024, the Company held reclamation deposits of $75,000 (September 30, 2023 - $145,000), which are expected to be released after all reclamation work has been completed with regard to its oil and natural gas interests. During the nine months ended June 30, 2024, the Company redeemed $70,000 in reclamation deposits.
Convertible debentures
During the three months ended June 30, 2024, the Company completed private placement financings of 1,365 convertible debenture units (each a “Unit”) for gross proceeds of $1,365,000. Each Unit is comprised of one secured convertible debenture in the principal amount of $1,000 and 294 common share purchase warrants. Each warrant is exercisable for a period of five years from the date of issuance for one common share of the Company at an exercise price of $4.08. As a result, the Company issued convertible debentures with an aggregate principal amount of $1,365,000 and 401,310 Warrants.
The Company allocated the proceeds received from the issuance of the convertible debentures and warrants between the debt and equity components based on their relative fair values at the issuance date. Due to the lack of an active market for the Company’s privately placed debt instruments and the absence of relevant observable inputs, the Company determined that a reliable estimate of the fair value of the convertible debentures could not be obtained. Accordingly, the face value of the debentures is considered to be a reasonable approximation of their fair value at the issuance date. The fair value of the warrants issued was determined using the Black-Scholes option pricing model (assuming a risk-free interest rate of 3.41%, an expected life of 5 years, annualized volatility of 128.69% and a dividend rate of 0%). The portion allocated to the warrants was recorded as additional paid-in capital. The resulting debt discount of $678,531 was recognized as debt expense in the statement of operations and comprehensive loss.
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
The Convertible Debentures will mature on the earlier of: (i) one-year from the date of issuance or (ii) three-months from the date of issuance if the Company does not enter into a securities exchange, unit purchase or merger agreement with a third party to the reasonable satisfaction of a majority of the holders of Debentures. The Convertible Debentures are secured by the Company’s assets, bear simple interest at a rate of 10% per annum, payable on the maturity date or the date on which all or any portion of the Convertible Debenture is repaid, and are convertible into common shares of the Company at a conversion price of $3.40 per share. Interest will be paid in cash or shares based on a conversion price of $3.40.
As June 30, 2024, the following Convertible Debentures were outstanding:
| Principal Amount | | | Interest rate | | | Maturity Date |
| | 500,000 | | | | 10 | % | | September 12, 2024 |
| | 865,000 | | | | 10 | % | | September 12, 2024 |
| | 1,365,000 | | | | | | | |
Loans payable
During the nine months ended June 30, 2024, the Company received a $45,000 loan from a former director of the Company. The loan is unsecured, non-interest bearing, and has no specific repayment terms.
On April 28, 2023, the Company issued a promissory note with a principal amount of $209,497 to a supplier to settle an outstanding trade payable. The promissory note is unsecured and bears interest at 6% per annum, payable on September 30. 2023. At June 30, 2024, the Company has an outstanding unpaid principal amount of $115,936 (September 30, 2023 - $125,936).
Convertible debenture – Related party
As of September 30, 2022, the Company had a debenture loan of $73,000 (CAD$100,000) from the former CEO of the Company outstanding. During the year ended September 30, 2022, the Company repaid $34,709 of the loan (CAD$47,546). During the year ended September 30, 2023, the Company repaid the remaining principal loan amount of $38,291 (CAD$52,454). During the years ended September 30, 2023, the Company recorded interest of $1,182.
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
| 9. | RELATED PARTY TRANSACTIONS |
| | i) | The Company entered into an employment agreement with Bradley Taillon, the Company’s CEO, on April 29, 2024, for an annual base salary of base salary of $250,000, which shall be reviewed by the Company annually. Subject to the discretion of the board of directors, Mr. Taillon is also eligible on an annual basis for a cash bonus of up to 100% of annual salary and additional performance bonuses ranging from $50,000 to $750,000 upon the closing of a qualified financing with proceeds to the Company of $1 million or greater. Further, the terms of this employment agreement provide that if Mr. Taillon’s employment with the Company is terminated without “cause” (as defined in the agreement) than Mr. Taillon is entitled to a severance payment equal to two years of base salary and a bonus equal to 50% of his annual base salary. During the three and nine month ended June 30, 2024, the Company incurred management salary of $59,812 and a one-time sign-on bonus of $50,000 for Mr. Taillon. |
| | | |
| | ii) | The Company has an employment agreement with Mehran Ehsan, the former CEO of the Company, for an annual base salary of $250,000, with no specified term. Mr. Ehsan is also eligible on an annual basis for a cash bonus of up to 100% of annual salary, subject to the discretion of the board of directors. During the nine month ended June 30, 2024, the Company incurred management salary of $187,500 (2023 - $187,500), for Mr. Ehsan, with no bonuses incurred in either period. During the three month ended June 30, 2024, the Company incurred management salary of $62,500 (2023 - $62,500), for Mr. Ehsan. Further, the terms of this employment agreement provide that if Mr. Ehsan’s employment with the Company is terminated without “cause” (as defined in the agreement) than Mr. Ehsan is entitled to a severance payment equal to three years of base salary and a bonus equal to 20% of his annual base salary. Mr. Ehsan resigned as President and CEO of the Company on April 29, 2024. On May 15, 2024, the Company amended the employment agreement to change his role to Vice President of Business Development. All other terms and conditions of the employment agreement remain the same. The Company considers this a related party transaction, as it relates to key management personnel and entities over which it has control or significant influence. |
| | | |
| | iii) | On May 1, 2022, the Company entered into an employment agreement with the CFO of the Company for an annual base salary of $50,000, with no specified term. The CFO is also eligible on an annual basis for a cash bonus of up to 100% of annual salary, subject to the discretion of the board of directors. The employment agreement may be terminated with a termination payment equal to two months of base salary. During the nine months ended June 30, 2024, the Company incurred management salary of $37,500 (2023 - $37,500), to the CFO of the Company, with no bonuses incurred in either period. During the three months ended June 30, 2024, the Company incurred management salary of $12,500 (2023 - $12,500). The Company considers this a related party transaction, as it relates to key management personnel and entities over which it has control or significant influence. |
| | iv) | The convertible debenture loan from the former CEO of the Company mentioned in Note 8 was paid off during the nine months ended June 30, 2023. |
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
The calculation of basic and diluted loss per share for the three and nine month periods ended June 30, 2024 and 2023 was based on the net losses attributable to common shareholders. The following table sets forth the computation of basic and diluted loss per share:
| | | Three Months Ended
June 30, 2024 | | | Three Months Ended
June 30, 2023 | | | Nine Months Ended
June 30, 2024 | | | Nine Months Ended
June 30, 2023 | |
| | | | | | | | | | | | | |
| Net loss | | $ | (1,349,957 | ) | | $ | (1,452,827 | ) | | $ | (2,517,193 | ) | | $ | (3,873,341 | ) |
| Weighted average common shares outstanding | | | 551,503 | | | | 491,036 | | | | 551,503 | | | | 485,779 | |
| Basic and diluted loss per share | | $ | (2.45 | ) | | $ | (2.96 | ) | | $ | (4.56 | ) | | $ | (7.97 | ) |
For the three and nine months ended June 30, 2024, 16,980 stock options and 676,663 warrants were excluded from the diluted weighted average number of common shares calculation as their effect would have been anti-dilutive. For the three and nine months ended June 30, 2023, 20,313 stock options and 279,746 warrants were excluded from the diluted weighted average number of common shares calculation as their effect would have been anti-dilutive.
Common stock
The Company has authorized an unlimited number of common shares with no par value. At June 30, 2024 and September 30, 2023, the Company had 551,503 common shares issued and outstanding after giving effect to the 4:1 reverse stock split effective October 23, 2023. All issued and outstanding common stock, options, and warrants to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect the reverse stock split.
There were no share issuance transactions during the three and nine months ended June 30, 2024.
During the year ended September 30, 2023, the Company announced a warrant exercise incentive program (the “Program”) whereby the Company amended the exercise prices of 253,966 warrants (the “Eligible Warrants”) from $50.40 per share to $11.44 per share if the holders of the Eligible Warrants exercised the Eligible Warrants before June 30, 2023 (the “Program Period”). In addition to the repricing, the Company offered, to each warrant holder who exercised the Eligible Warrants during the Program Period, the issuance of one additional common share purchase warrant for each warrant exercised during the Program Period (each, an “Incentive Warrant”). Each Incentive Warrant entitles the warrant holder to purchase one common share of the Company for a period of 5 years from the date of issuance, at a price of $18.00 per Share.
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
On June 30, 2023, the Company issued 68,353 common shares at a price of $11.44 per share from the exercise of the Eligible Warrants pursuant to the Program for gross proceeds of $781,953 (net proceeds of $645,330). In connection with the Program, the Company issued 68,353 Incentive Warrants. The Company also incurred $62,556 and issued 5,470 warrants as a finders’ fee to its investment bank. The finder’s warrants are on the same terms as the Incentive Warrants. The Incentive Warrants and finder’s warrants were valued at $449,005 and $35,919, respectively, using the Black-Scholes option pricing model (assuming a risk-free interest rate of 3.68%, an expected life of 5 years, annualized volatility of 128.81% and a dividend rate of 0%). The repricing of the Eligible Warrants is accounted for as a modification under ASC 815-40-35-14 through 18. The effect of the modification is $544,164, measured as the excess of the fair value of the repriced warrants over the fair value of the original warrants immediately before it was modified and the fair value of the incentive warrants issued as an additional inducement to exercise the warrants. The fair values were measured using the Black-Scholes option pricing model (assuming a risk-free interest rate of 4.21%, an expected life of 3.75 years, annualized volatility of 137.62% and a dividend rate of 0%). The Company recognized a deemed dividend of $543,234 for the fair value of the Incentive Warrants and the portion of inducement related to the equity-classified warrants. The effect of the repricing of the liability-classified warrants was $930 and was recorded in the statement of operations and comprehensive loss. The Company also incurred legal and other expenses of $74,066 in connection with the Program.
Share-based payments
Stock options
The Company has a stock option plan (the “Plan”) in place under which it is authorized to grant options to executive officers and directors, employees and consultants. Pursuant to the Plan, the Company may issue aggregate stock options totaling up to 10% of the issued and outstanding common stock of the Company. Further, the Plan calls for the exercise price of each option to be equal to the market price of the Company’s stock as calculated on the date of grant. The options can be granted for a maximum term of 10 years and vest at the discretion of the Board of Directors at the time of grant.
Stock option transactions are summarized as follows:
| | | Number
of options | | | Weighted Average
Exercise Price | |
| | | | | | | |
| Balance, September 30, 2022 | | | 21,146 | | | $ | 53.04 | |
| Cancelled | | | (833 | ) | | | 42.62 | |
| | | | | | | | | |
| Balance, September 30, 2023 | | | 20,313 | | | $ | 54.23 | |
| Cancelled | | | (3,333 | ) | | | 59.94 | |
| Balance, June 30, 2024 | | | 16,980 | | | $ | 53.11 | |
| | | | | | | | | |
| Exercisable at June 30, 2024 | | | 16,980 | | | $ | 53.11 | |
The aggregate intrinsic value of options outstanding and exercisable as at June 30, 2024 was $nil (September 30, 2023 - $nil).
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
The options outstanding as of June 30, 2024 have exercise prices in the range of $8.88 to $88.80 and a weighted average remaining contractual life of 5.93 years.
During the three and nine months ended June 30, 2024, the Company recognized $nil share-based payment expense. During the three and nine months ended June 30, 2023, the Company recognized share-based payment expense of $nil and $318, respectively, for the portion of stock options that vested during the period.
As June 30, 2024, the following stock options were outstanding:
Number
of Options | | | Exercise Price | | | Issuance Date | | Expiry Date |
| | 4,480 | | | $ | 88.88 | | | December 4, 2017 | | December 4, 2027 |
| | 1,250 | | | $ | 53.28 | | | November 1, 2018 | | November 1, 2028 |
| | 1,250 | | | $ | 8.88 | | | March 16, 2020 | | March 16, 2030 |
| | 10,000 | | | $ | 42.62 | | | October 6, 2021 | | October 6, 2031 |
| | 16,980 | | | | | | | | | |
Warrants
Warrant transactions are summarized as follows:
| | | Number of Warrants | | | Weighted Average Exercise Price | |
| | | | | | | |
| Balance, September 30, 2022 | | | 274,276 | | | $ | 48.48 | |
| Exercised | | | (68,353 | ) | | | 11.44 | |
| Granted | | | 73,823 | | | | 18.00 | |
| | | | | | | | | |
| Balance, September 30, 2023 | | | 279,746 | | | $ | 39.79 | |
| Granted | | | 401,310 | | | | 4.08 | |
| Expired | | | (4,393 | ) | | | 95.90 | |
| | | | | | | | | |
| Balance, June 30, 2024 | | | 676,663 | | | $ | 18.25 | |
PERMEX PETROLEUM CORPORATION
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 2024
(UNAUDITED)
As June 30, 2024, the following warrants were outstanding:
| Number of Warrants | | | Exercise Price | | | Issuance Date | | Expiry Date |
| | | | | | | | | |
| | 149,447 | | | $ | 50.40 | | | March 29, 2022 | | March 29, 2027 |
| | 73,823 | | | $ | 18.00 | | | June 30, 2023 | | June 30, 2028 |
| | 147,000 | | | $ | 4.08 | | | April 16, 2024 | | April 16, 2029 |
| | 254,310 | | | $ | 4.08 | | | June 12, 2024 | | June 12, 2029 |
| | 52,083 | | | $ | 35.52 | | | September 30, 2021 | | September 30, 2031 |
| | 676,663 | | | | | | | | | |
22,059 warrants issued with private placement units during fiscal 2022 have an exercise price denominated in CAD. These warrants were initially valued at $202,009 using the Black-Scholes option pricing model (assuming a risk-free interest rate of 0.98%, an expected life of 2 years, annualized volatility of 153.02% and a dividend rate of 0%) and recorded as a warrant liability. These warrants were subsequently revaluated and a gain on fair value adjustment of $178,509 was recorded during the year ended September 30, 2022. During the year ended September 30, 2023, a gain on fair value of $23,500 was recorded. These warrants expired on November 4, 2023. The following weighted average assumptions were used for the Black-Scholes valuation of warrants as at September 30, 2023:
| | | September 30, 2023 | |
| | | | |
| Risk-free interest rate | | | 4.87 | % |
| Expected life of options | | | 0.17 Year | |
| Expected annualized volatility | | | 39.02 | % |
| Dividend rate | | | Nil | |
| Weighted average fair value of options granted | | $ | 0.00 | |
Operating segments
The Company operates in a single reportable segment – the acquisition, development and production of oil and gas properties in the United States.
The Company from time to time may be involved with disputes, claims and litigation related to the conduct of its business. The Company currently has $455,447 in claims from certain trade vendors for non-payment, of which $446,783 have been accrued as of June 30, 2024. The Company plans to continue engaging with these claimants faithfully and is working on potentially settlements for all outstanding claims.
