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Item 7. Management’s Discussion and Analysis

2026-03-12 compared with 2025-03-31 · 643 added, 378 removed, 60 unchanged (94% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below.

The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Report.

The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management.

Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, particularly in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “ECD,” “we”, “us”, “our”, and the “Company” are intended to refer to (i) following the Business Combination (as defined below), the business and operations of New Era Helium, Inc.

and its consolidated subsidiaries, and (ii) prior to the Business Combination, New Era Helium, Inc.

(the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiary.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations.

The following discussion and analysis summarizes

the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented

The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto

included elsewhere in this Report.

The discussion contains forward-looking statements that are based on the beliefs of management, as

well as assumptions made by, and information currently available to, management.

Actual results could differ materially from those discussed

in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report,

particularly in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Unless the context otherwise requires, references

in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”,

“us”, “our”, and the “Company” are intended to refer to (i) following the Business Combination (as

defined below), the business and operations of New Era Energy & Digital, Inc.

and its consolidated subsidiaries, and (ii) prior to

the Business Combination, New Era Helium, Inc.

(the predecessor entity in existence prior to the consummation of the Business Combination)

and its consolidated subsidiaries.

Business Overview and Strategy

NEH is a corporation formed in Nevada on February 2, 2023.

It is an exploration and production company whose primary operations include the exploration, development, and production of helium, natural gas, oil, and natural gas liquids The Company sources helium produced in association with natural gas reserves located in Chaves County, New Mexico.

To date, we have not generated any revenue from the production of helium.

Although hydrocarbons are currently the Company’s primary source of revenues, our business model is moving from a hydrocarbon focus to a helium focused model and centers on providing helium to various parties in the supply chain, namely helium refiners, non- refiners, Tier 1 multinational distributors, and smaller Tier 2 gas companies.

We currently own and operate 137,000 acres in Southeast New Mexico and have 85,498 MMcfe of prove hydrocarbon reserves and 166,430 MMcfe of probable hydrocarbon reserves.

In addition, the Company has approximately 422 MMcf of net proved undeveloped helium reserves and 788 MMcf of net probable undeveloped helium reserves.

On February 6, 2023, the Company entered into the Agreement with Solis Partners.

Immediately prior to February 6, 2023, the Company was authorized to issue 190 million shares of common stock with par value of $0.001 per share and 10 million shares of preferred stock with par value of $0.001 per share.

Subject to the terms of the Agreement, all issued and outstanding member interests in Solis Partners was automatically converted and exchanged for 5 million shares of the Company’s common stock.

Presently, we operate through two subsidiaries, (i) Solis Partners, LLC, a Texas limited liability company (“ Solis Partners ”), wholly owned by the Company and engaged in the oil and gas producing business, and (ii) NEH Midstream LLC, a Texas limited liability company (“ NEH Midstream ”) wholly owned by the Company which will own and operate the Pecos Slope Plant and gathering system located in Chaves County, New Mexico.

New Era Energy & Digital, Inc.

was initially

incorporated in the State of Delaware on November 5, 2020 under the name Roth CH Acquisition V Co., which was formed for the purpose of

entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business

combination with one or more target businesses.

Roth CH Acquisition V Co.

consummated an initial public offering, after which its securities

began trading on the Nasdaq on December 1, 2021.

In December 2024, Roth CH Acquisition V Co.

merged with and into Roth CH V Holdings,

Inc., a Nevada corporation and a wholly owned subsidiary of Roth CH Acquisition V Co., formed on June 24, 2024, for the sole purpose of

reincorporating Roth CH Acquisition V Co.

into the State of Nevada, with Roth CH V Holdings, Inc.

surviving such merger.

Immediately following the reincorporation, the

Company completed its business combination (the “Business Combination”) with New Era Helium Corp., a Nevada corporation, pursuant

to that certain Business Combination Agreement and Plan of Reorganization, dated as of January 3, 2024 (as amended on June 5, 2024, August

8, 2024, September 11, 2024, and September 30, 2024, the “BCA”), by and among New Era Helium Corp., Roth CH Acquisition V

Co., Roth CH V Holdings, Inc., and Roth CH V Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Roth CH Acquisition

The Company subsequently changed its name to “New Era Helium, Inc.” and later to “New Era Energy & Digital,

We are a vertically-integrated developer and operator

of next-generation digital infrastructure and integrated power assets accelerating speed-to-power for advanced AI hyperscalers.

second half of 2025, we executed a strategic pivot from our legacy natural gas operations to focus exclusively on developing data center

campuses where power, land, and connectivity can be assembled and delivered on accelerated timelines.

Our mission is to deliver speed-to-power

by converging behind-the-meter power flexibility with data center development capabilities.

Our primary strategy is to aggregate and entitle

“Powered Land” and to develop “Powered Shells” and build-to-suit assets in power-advantaged markets, beginning

with the Permian Basin, which benefits from energy abundance, regulatory clarity, and fiber connectivity.

We are initially focused on our flagship project,

TCDC, a 438-acre campus in Ector County, Texas, designed to support over 1 GW of potential compute capacity through phased development,

with projected power delivery beginning as early as the end of 2027.

We believe our proximity to major natural gas pipelines, fiber networks

and CO 2 pipelines will provide us with the ability to serve our customers lower transmission costs and best-in-class uptime

for purposes of reliably generating AI compute to capitalize on the AI revolution.

We intend to execute through partnering across engineering,

construction, procurement, power generation and sustainability with a world-class developer partner to provide our hyperscaler tenants

with certainty of execution and speed-to-power.

Our principal executive offices are located at

Loraine Street, Suite 1324, Midland, TX 79701, and our phone number is (432) 695-6997.

Our website is www.newerainfra.ai .

Information found on or accessible through our website is not incorporated by reference into this prospectus and should not be considered

part of this prospectus.

Recent Developments

Merger with Roth CH Acquisition V Co.

On December 6, 2024, the Company completed the business combination (the “Business Combination) contemplated by the Business Combination and Plan of Organization dated January 3, 2024 (the “Business Combination Agreement”) (as amended on June 5, 2024, August 8, 2024, September 11, 2024 and September 30, 2024, the “BCA”), by and among Roth CH Acquisition V Co.

(“ROCL”), Roth CH V Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCL (“Merger Sub”), and NEH.

At the Closing, pursuant to the Business Combination Agreement and after giving effect to the redemption of shares of ROCL common stock:

The total consideration paid at the Closing (the “ Merger Consideration ” ) by ROCL to New Era Helium Corp.

security holders was 8,916,625 shares of common stock of Holdings.

Each share of Merger Sub common stock, par value $0.0001 per share ( “ Merger Sub Common Stock ” ), issued and outstanding immediately prior to the Effective Time (as defined in the Business Combination Agreement) was converted into one newly issued share of the Company’s common stock.

Following the filing of the Articles of Merger with the Secretary of State of the State of Nevada, ROCL merged with and into Holdings, with Holdings as the surviving company of the Initial Merger.

Following the filing of the Articles of Merger with the Secretary of State of the State of Nevada, Merger Sub merged with and into with New Era Helium Corp.

as the surviving corporation of the Business Combination, effective December 6, 2024.

Thus, New Era Helium Corp.

became a wholly owned subsidiary of ROCL.

In connection with the Business Combination, Holdings changed its name to “New Era Helium Inc.”

Other Recent Developments

During 2024, NEH conducted several bridge financing rounds, pursuant to which it issued 10% Secured Convertible Debentures (the “Bridge Financing Debentures”) to certain investors.

As a result of the Business Combination, the Bridge Financing Debentures were converted into shares of common stock of the combined company.

In July 2024, NEH agreed to convert a $27,500 loan it owed to our shareholder Mr.

Adrian Beeston into the Bridge Financing Debentures and issued a 10% Secured Convertible Debenture (the “ Beeston Debentures ”) to Mr.

As a result of the Business Combination, the Beeston Debentures were converted into shares of common stock of the combined company.

On July 31, 2024 (and effective as of July 1, 2024), NEH entered into a Retention and Consulting/Services Agreement with Tall City Well Service Co., LP, a Texas limited partnership owned by NEH’s Chairman, Joel G.

Solis (“Tall City”), pursuant to which Tall City shall deliver or otherwise make available workover rigs to NEH and shall act as a consultant for work associated with such workover rigs, providing maintenance and repair services for the workover rigs.

NEH agreed to pay Tall City $720,000 as a retainer fee (the “Retainer Fee”) and shall pay for the services performed in accordance with Tall City’s standard invoicing practices and prices.

The Retainer Fee shall be paid to Tall City with a 10% Secured Convertible Debenture due March 1, 2025 pursuant to Section 2.6 of a certain Securities Purchase Agreement dated as of February 23, 2024, which debenture was amended on July 31, 2024 (such amended debenture, the (“Amended Solis Debenture”).

As a result of the Business Combination the Amended Solis Debenture was repaid.

In anticipation of securing future revenue and establishing a more robust market position in the helium industry following the establishment of the Pecos Slope Plant, through our operating subsidiary NEH Midstream, we recently entered into certain sales agreements with various purchasers for the helium anticipated to be generated by the Pecos Slope Plant.

We agreed to sell fifty percent (50%) of the helium generated from the Pecos Slope Plant each month to Air Life Gases USA, Inc., in the form of liquefied helium, pursuant to that certain Liquid Helium Agreement.

We also agreed to sell fifty percent (50%) of the gaseous helium generated monthly at the Pecos Slope Plant to an international gas supplier, pursuant to that certain Gaseous Helium Agreement.

On October 1, 2023, the Company, through NEH Midstream, LLC, entered into the Amendment to Liquid Helium Agreement with AirLife Gases USA Inc.

The Amendment to Liquid Helium Agreement incorporated the sale by NEH Midstream, LLC of additional quantities of liquid helium by the Company to AirLife that were not originally included in the between NEH Midstream and AirLife dated August 25, 2023.

Following entry into the Amendment to Liquid Helium Agreement, the Company would provide to AirLife Gases USA, Inc., in sum:

(i) fifty percent (50%) of the helium generated from the Pecos Slope Plant each month, in the form of liquefied helium (from all sources other than from the crude helium purchased from Badger (as described in the following paragraph), less two percent (2%) tolling losses, and (ii) all of the helium produced from the crude helium the Company purchases from Badger each month, minus two percent (2%) tolling losses.

On August 25, 2023, the Company, through its wholly owned subsidiary NEH Midstream LLC, entered into the Crude Helium Agreement with Badger.

Pursuant to the Crude Helium Agreement, the Company will purchase crude helium from Badger, starting on January 1, 2024 and continuing through an initial term through June 30, 2027.

Badger agreed to supply all of the crude helium it could secure processing rights, purchasing rights, and clear title to during the term of the Purchase and Sale Agreement.

We entered into that certain Tolling Agreement with KHC dated September 1, 2023, pursuant to which we would receive tolling services with respect to our crude helium and such crude helium would be purified and liquified by KHC into liquid helium and filled into containers.

KHC agreed to provide tolling services to us on a firm basis, for a volume equivalent to the quantities sold by Badger

to us pursuant to the Crude Helium Agreement with Badger.

Tolling services provided by KHC to NEH Midstream LLC under the Helium Tolling Agreement will be at volumes now sold to AirLife Gases USA Inc.

by operation of the Assignment Agreement.

On April 19, 2024, NEH Midstream LLC, AirLife Gases USA Inc., and Badger entered into the Assignment Agreement, pursuant to which NEH Midstream LLC assigned all of its rights, title, interest and obligations in the Crude Helium Agreement to AirLife Gases USA Inc.

Loan and Equity Purchase Facility Agreement

On the Closing Date, following the closing of the Business Combination, the Company and an institutional investor (the “EPFA Investor”) entered into an Equity Purchase Facility Agreement (the “EPFA”).

Pursuant to the EPFA, the Company has the right to issue and sell to the EPFA Investor, from time to time as provided therein, and the EPFA Investor must purchase from the Company, up to an aggregate of $75 million (the “Commitment Amount”) in newly issued shares (the “Advance Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), subject to the satisfaction or waiver of certain conditions.

The Company may issue up to 866,873 Advance Shares assuming a purchase price of $8.075 per Advance Share.

The EFPA also provides for the issuance of two pre-paid advances in the aggregate amount of $10 million, the first pre-paid advance in the amount of $7 million and the second pre-paid advance in the amount of $3 million, each of which to be evidenced by a senior secured convertible promissory note (each, a “Convertible Note”), which is convertible into shares of Common Stock.

On December 6, 2024, the EPFA Investor advanced to the Company the aggregate principal amount of $7 million following the Closing (the “First Pre-Paid Advance Note”).

The second pre-paid advance of the aggregate principal amount of $3 million (the “Second Pre-Paid Advance Note”) will be advanced by the EPFA Investor to the Company no later than three (3) trading days following the date on which the initial Registration Statement (as defined in the EPFA) is declared effective by the U.S.

Securities and Exchange Commission, subject to the satisfaction or waiver of certain conditions.

The Notes are secured by all assets of the Company as described below.

Based on the terms of the Note, the Company received proceeds under the First Pre-Paid Advance Note in an amount of approximately $6.5 million, after giving effect to a 7% original issue discount.

These proceeds will be used by the Company first to pay the monthly payments of the First Pre-Paid Advance Note in accordance with its terms and then the remainder in the manner as will be set forth in the prospectus included in the Registration Statement.

Currently, the Note for the First Pre-Paid Advance is initially convertible into 770,000 shares of Common Stock, assuming a conversion price of $10 and no accrued and unpaid interest.

The Second Pre-Paid Advance Note will be initially convertible into 330,000 shares of Common Stock, assuming a conversion price of $10 and no accrued and unpaid interest.

The proceeds from the Second Pre-Paid Advance Note and sale of Advance Shares are expected to be used by the Company first to pay the then monthly payment on any outstanding Notes and then the remainder in the manner for working capital and as otherwise set forth in the prospectus included in the Registration Statement.

Pursuant to the terms of the EPFA, the Company is required to hold a special meeting of stockholders no later than ninety (90) calendar days following December 6, 2024 to seek approval of (i) the issuance of all of the shares of Common Stock that may be issuable pursuant to the Notes and the EPFA in compliance with the rules and regulations of Nasdaq and (ii) an amendment to the Company’s articles of incorporation to increase the number of authorized shares of capital stock of the Company to 250,000,000.

Upon the terms and subject to the conditions of the EPFA, at any time until the EPFA is terminated, the Company, in its sole discretion, has the right, but not the obligation, to issue and sell to the EPFA Investor, and the EPFA Investor must subscribe for and purchase from the Company, Advance Shares by the delivery to the EPFA Investor of Advance Notices (as defined below), on the following terms:

(i) The Company must, in its sole discretion, select the number of Advance Shares, not to exceed the Maximum Advance Amount (as defined below), it desires to issue and sell to the EPFA Investor in each Advance Notice and the time it desires to deliver each written notice to the EPFA Investor setting forth the number of Advance Shares that the Company desires to issue and sell to the EPFA Investor (the “Advance Notice”).

(ii) There is no mandatory minimum Advances and there is no non-usages fee for not utilizing the Commitment Amount or any part thereof.

(iii) For so long as any amount remains outstanding under the Notes, without the prior written consent of the EPFA Investor, the Company may only submit an Advance Notice if the aggregate purchase price owed to the Company from such Advances (“Advance Proceeds”) may be paid by the EPFA Investor by offsetting the amount of the Advance Proceeds against an equal amount outstanding under the subject Notes (first towards accrued and unpaid interest, and then towards outstanding principal), subject to the Advance Proceeds being used by the Company first to pay the monthly payments of the Notes in accordance with the terms of the Notes and then the remainder in the manner as will be set forth in the prospectus included in any registration statement filed pursuant to the EPFA (and any post-effective amendment thereto) and any prospectus supplement thereto filed pursuant to the EPFA, including for working capital purposes for the Company and its subsidiaries.

(iv) If there is any default under the Notes, the Company may only submit an Advance Notice if the Company obtains the prior written consent of the EPFA Investor and the Company must use the proceeds from the sale of the Advance Shares under the EPFA to first pay the Company’s senior Indebtedness, including amounts outstanding under any Notes as provided in Section 7.15 of the EPFA, subject to certain exceptions.

“Maximum Advance Amount” means:

● “Accelerated Purchase Maximum Advance Amount” in respect of each Advance Notice with an accelerated purchase pricing period, 400% of the average daily trading volume over the five trading days before the notice date, but not exceed the ownership and registration limitations in the EPFA;

● “Regular Purchase Maximum Advance Amount” in respect of each Advance Notice with a regular purchase pricing period, 100% of the average daily trading volume over the five trading days before the notice date, also subject to the ownership and registration imitations in the EPFA.

The price per Advance Share will be determined by multiplying the market price by 95% in respect of an Advance Notice, which shall be reduced by one-third (1/3rd) for each Excluded Day Purchase Price (as defined in the EPFA), which is not known at the time an Advance Notice is delivered but shall be determined on each closing based on the daily prices of the Advance Shares that are the inputs to the determination of the purchase price.

While the Convertible Notes are outstanding, the Company cannot issue, sell, grant, or otherwise dispose of any securities, or enter into any agreement or arrangement to do so, at a price per security less than 120% of $2.00 per share of Common Stock (the “EPFA Floor Price”) on such date, or otherwise provide rights to acquire securities at an effective price per security below 120% of the EPFA Floor Price unless the Company uses the proceeds of such transaction to fully redeem such outstanding Notes.

Until the termination of the EPFA, the Company must maintain a minimum cash balance of $500,000.

As an inducement to entering into the EPFA, a designee of the EPFA Investor received 550,000 shares of ROCL and such shares were converted into 550,000 shares of Common Stock in connection with Business Combination.

Senior Secured Convertible Promissory Note

Each Convertible Note provides for a 7% original issue discount and is for a term of 15 months.

Commencing on the ninetieth (90th) day following the applicable Issuance Date, and continuing on the same day of each successive calendar month until the entire outstanding principal amount has been repaid, the Company is required to make monthly payments to the holder of the Note (the “Holder”).

Each monthly payment will be in an amount equal to the sum of (i) one twelfth (1/12) of the initial aggregate principal of the Note and all other notes issued pursuant to the EPFA, plus (ii) accrued and unpaid under the Note as of each payment date.

Interest accrues on the outstanding principal balance hereof at an initial annual rate equal to 10% (“Interest Rate”), which Interest Rate will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Note).

On December 6, 2024, the Company drew the first prepaid advance of $7,000,000, net of an original issue discount of $490,000 and debt issuance costs of $4,558,574.

As of December 31, 2024, the Company recorded $53,632 of amortization of the debt discount in the consolidated statement of operations.

The unamortized debt discount is expected to be amortized over the next 14 and a half months.

As of December 31,2024, and 2023 the accrued interest on the Convertible Note in the consolidated balance sheets was $49,863 and $0.

Conversion Rights

Each Note is convertible into shares of Common Stock at the option of the Investor at an initial conversion price of $10.00 per share (the “Conversion Price”).

Subject to certain exceptions outlined in the Note, including, but not limited to, equity issuances in connection with its equity incentive plan and certain strategic acquisitions, if the Company sells, enters into an agreement to sell, or grants any option to purchase, or sells, enters into an agreement to sell, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, Common Stock, at an effective price per share less than the Conversion Price of the Note then in effect, the Conversion Price will be reduced to equal the effective price per share in such dilutive issuance.

The Conversion Price is also subject to a downward adjustment if an Event of Default occurs.

The Conversion Price is subject to an initial floor price of $2.00 per share of Common Stock, however beginning on the effective date of the initial Registration Statement, and on the same day of every six (6) months thereafter (each, a “Floor Price Reset Date”), the

floor price will be reduced to 20% of the average volume weighted average price of the Common Stock for such trading day on the primary market of the Common Stock during regular trading hours as reported by Bloomberg L.P.

(the “VWAP”) during the five (5) trading days immediately prior to such Floor Price Reset Date.

Additionally, the Company may reduce the floor price to any amount set forth in a written notice to the Holder, provided that any such reduction will be irrevocable and will not be subject to increase thereafter.

The Company may prepay the Note at its option, upon thirty (30) business days written notice, by paying a 10% redemption premium.

Event of Default Conversion

From and after the occurrence of an Event of Default, the Holder may elect to convert the Note into shares of the Common Stock at the “Event of Default Conversion Price”, which is equal to the lower of:

The Conversion Price then in effect;

and 90% of the lowest VWAP of the Common Stock during the ten (10) consecutive trading days immediately prior to the date on which we received written notice of such conversion from such holder, subject to the Floor Price.

Limitations on Conversion

A Holder shall not have the right to convert any portion of the Note to the extent that, after giving effect to such conversion, the Holder (together with its related parties) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of shares of our Common Stock outstanding immediately after giving effect to such conversion.

The Maximum Percentage may be raised or lowered to any other percentage not in excess of 9.99%, at the option of the Holder, except that any increase will only be effective upon 61 days’ prior written notice to us.

Redemption Rights

At any time, the Company may redeem in cash all, or any portion, of the Note, in an amount equal to the outstanding principal balance being redeemed, plus a 10% premium in respect of such principal amount, plus all accrued and unpaid interest, if any, on such principal amount.

Security Agreement

Also, on December 6, 2024, the Company, each of its subsidiaries (each, a “Grantor”), and the Investor, for itself and as the collateral agent (the “Collateral Agent”) for the benefit of the Secured Parties (as defined in the Security Agreement), entered into a Security Agreement (the “Security Agreement”) with respect to the Notes.

Pursuant to the Security Agreement, each Grantor granted to the Collateral Agent, for the benefit of the Secured Parties, a security interest in such Grantor’s right, title and interest in and to each type of property described in the Security Agreement, or in which or to which such Grantor has any rights, whether now owned or hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising (collectively, the “Collateral”), including, but not limited to the Company’s Equipment, Inventory, Receivables, Related Contracts, Pledged Debt, Investment Property, Pledged Stock and Account Collateral (each as defined therein).

The Collateral secures and will secure all debts, obligations, liabilities, covenants and duties of every kind now or hereafter existing, absolute or contingent owed at any time to the Secured Parties by the Grantors under the Purchase Agreement, the Notes, the Guarantee and/or each other Transaction Document, or otherwise (whether or not evidenced by any note, indenture, guaranty or other agreement), whether principal, interest (including interest upon the occurrence of an Event of Default), fees, costs, expenses, including without limitation attorneys’ fees and expenses.

Subsidiary Guarantee

Also, on December 6, 2024, each of the Company’s subsidiaries (the “Guarantors”) executed a guarantee agreement (the “Subsidiary Guarantee”), whereby each such Guarantor guaranteed to the EPFA Investor the prompt and full payment and performance of the Guaranteed Obligations of the Company under and pursuant to the Security Agreement.

Key Factors Affecting Results of Operations

We have set out below a discussion of the key factors that have affected our financial performance and that are expected to impact our performance going forward.

These factors present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Report titled “Risk Factors”.

SharonAI Purchase Agreement

On January 21, 2025, we entered into a Limited

Liability Company Agreement (the “LLC Agreement”) with SharonAI for the creation of TCDC as a joint venture of the Company

and SharonAI (the “Joint Venture”).

Pursuant to the terms of the LLC Agreement, the purpose of the Joint Venture was to engage

in (i) the purchase, building, and development of a site in Texas with an initial 250 MW gas-fired power plant and corresponding data

center, (ii) the operation of this site, and (iii) any and all lawful activities necessary or incidental thereto.

The Company made a $75,000 contribution to the Joint Venture on April

On July 16, 2025, the Company made an additional contribution of $750,000.

On September 26, 2025, the Company made an additional

contribution of $25,000.

On November 21, 2025, the Company made an additional contribution of $12,500.

For the year ended December 31,

2025, the Company recognized an equity loss of $119,236, representing its 50% share of the joint venture’s net loss of $238,473.

The carrying amount of the investment as of December 31, 2025, was $3,631,005.

On January 16, 2026, we acquired the remaining 50% member interest

in TCDC, from SharonAI, pursuant to the Membership Interest Purchase Agreement (the “SharonAI Purchase Agreement”), dated

as of January 16, 2026, by and between the Company and SharonAI, for an aggregate purchase price of $70 million, of which (a) $10 million

is payable in cash, (b) $10 million is payable in equity securities to be issued in connection with the Company’s next equity financing

transaction, and (c) $50 million is payable in the form of a senior secured convertible promissory note (the “Convertible Note”).

The entirety of the acquisition consideration is subject to a 19.99% ownership cap.

The Convertible Note matures on June 30, 2026

and has an interest rate of 10% per annum payable on the maturity date in cash.

The Convertible Note is secured by the Company’s

ownership in TCDC and the assets of TCDC.

SharonAI may convert 20% of the Convertible Note into shares of the Company’s Common Stock

at a conversion price equal to the 30-day volume-weighted average price of the Common Stock prior to the conversion date.

The conversion

price for the Convertible Note has a floor of 20% of the market price on the closing date of the Purchase Agreement.

Based on the closing

share price of $4.33 on January 16, 2026, the maximum number of shares of Common Stock issuable pursuant to the Convertible Note, assuming

a floor price of $0.87, is approximately 11.5 million shares.

The Convertible Note contains customary affirmative and negative covenants

of the Company.

Investor Waiver

On February 1, 2026, the Company entered into

an Amended and Restated Consent and Waiver (the “Amended Waiver”) with ATW AI Infrastructure LLC (the “Investor”)

pursuant to which the Investor agreed to partially waive the anti-dilution provisions of the First Tranche Warrant and Second Tranche

Warrant (the “Investor Warrants”) such that the exercise prices of the First Tranche Warrant and Second Tranche Warrant were

each adjusted down solely to $2.00.

As a result of the anti-dilution adjustments in the Investor Warrants, as modified by the Amended

Waiver, the number of shares of Common Stock of the Company issuable pursuant to the First Tranche Warrant total 5.5 million shares and

the number of shares of Common Stock issuable pursuant to the Second Tranche Warrant total 10.7 million shares.

The Investor also waived certain provisions of

that certain Securities Purchase Agreement, dated December 6, 2024, between the Company and the Investor (the “Securities Purchase

Agreement”), relating to restrictions on Variable Rate Transactions (as defined in the Securities Purchase Agreement), additional

issuances of equity securities, redemption or payment of cash dividends, and stock splits.

The parties agreed to certain administrative

updates to the Securities Purchase Agreement including cashless exercise after 75 days from the effective date of the Amended Waiver (solely

to the extent a resale registration statement is not effective), registration rights obligations, the provision of a transfer agent instruction

letter, and a forced exercise provision granting the Company the right to force exercise of the Investor Warrants assuming certain conditions

Option for Land Acquisition

On February 12, 2026, TCDC entered into a non-binding

letter of intent (the “LOI”) with Jones Bros.

Dirt & Paving Contractors, Inc.

to acquire approximately 54 acres of vacant

land located in Odessa, Ector County, Texas for an estimated total purchase price of $3,510,000.

As part of the purchase price, TCDC deposited

$100,000 as non-refundable earnest money following execution of the LOI.

The exclusivity period runs for a period of 90 days following

execution of the LOI.

If the parties do not execute a mutually acceptable purchase and sale agreement within 30 days of the execution

of the LOI, the LOI shall be terminated.

Trends and Other Key Factors Affecting Results

of Operations

Power Demand and Supply Dynamics

The rapid expansion of AI, HPC, and cloud infrastructure,

coupled with rising demand from data centers, broad-based electrification, and other emerging electrical needs, has driven record levels

of power consumption while domestic electricity providers face significant supply constraints stemming from insufficient new generation

capacity and aging infrastructure.

We believe we are well positioned to help fill this need by providing consistent baseload generation,

in part behind-the-meter to our customers.

Powered land is becoming increasingly difficult for hyperscalers to access, and we believe

our projects provide “speed-to-power” in a manner differentiated from our peers.

However, there can be no assurance that U.S.

power demand will continue to grow at current rates, or that advances in technology and efficiency applicable to new or existing power

sources will not materially diminish the current trajectory of rising electricity demand.

Artificial Intelligence and Data Center Infrastructure

Our partnerships with hyperscalers will depend,

in part, on our ability to identify and secure sites capable of supporting the co-location of power assets and data centers.

or slowdown in the deployment of AI infrastructure, a reduction in the power requirements associated with AI workloads, or broader market

saturation in the AI sector could adversely affect demand for our solutions and materially impact our business prospects.

Tenant Acquisition and Retention

Our revenue model is heavily dependent on securing

multi-GW scale anchor tenants and maintaining long-term power delivery and leasing agreements.

Our ability to attract high-credit-quality tenants—particularly

large AI developers, hyperscalers, and sovereign compute platforms—is critical to achieving scale and recurring revenues.

in customer requirements, economic conditions, or competitive offerings could hinder tenant growth or increase churn risk.

Delays in tenant

onboarding or renegotiation of terms due to construction timelines may also impact financial performance.

Environmental Stewardship and Community Relations

Although we believe that public support for AI

infrastructure remains at acceptable levels, public perception and environmental stewardship remain critical to the long-term viability

of our business.

Any material shift in local sentiment, changes in federal or state law, organized stakeholder opposition, or heightened

perceptions of environmental risk could result in reputational harm or disruptions to our operations.

Geopolitical Environment and Policy Considerations

Energy infrastructure and computing capacity are

increasingly viewed through the lens of national security and economic competitiveness.

Changes in U.S.

energy policy, particularly with

respect to land use regulation, artificial intelligence governance, foreign investment review, or export controls, may materially affect

our operations.

Our ability to navigate this evolving policy landscape, especially as it pertains to the regulatory treatment of nuclear

energy, grid resilience, and the designation of critical infrastructure, will be an important factor in our long-term scalability and

strategic positioning.

Principal Components of Results of Operations

We operate our business within a single reportable segment, which is consistent with how our management reviews our business, makes investment and resource allocation decisions, and assesses operating performance.

We operate our business within a single reportable

segment, which is consistent with how our management reviews our business, makes investment and resource allocation decisions, and assesses

operating performance.

Management primarily reviews total assets and income (loss) from operations of the single reportable segment.

Revenues, net

The Company sells its oil to a single purchaser on a monthly basis, pursuant to a purchase agreement (the “Oil Purchase Agreement”), at a price based on an index price from the purchaser.

The Oil Purchase Agreement with continue on a month-to-month basis thereafter unless and until terminated by the Company or the purchaser with a 30-day advance notice.

Oil that is produced from the Company’s wells is stored in tank batteries located on the Company’s lease.

When the purchaser’s truck connects to the storage tank and oil enters the truck, control of the oil is transferred to the purchaser, the Company’s obligations are satisfied, and revenue is recognized.

We currently sell our natural gas and natural gas liquids to IACX, a processor, pursuant to that certain Marketing Agreement, at a price based on an index price from the purchaser, which expired on May 31, 2024.

This agreement currently continues on a month-to-month basis unless and until terminated by the Company or the purchaser with a 30-day advance notice.

IACX processes our gas for natural gas liquids and other usable components in its facilities.

We receive value for our natural gas and any associated natural gas liquids as further defined as hydrocarbons pursuant to the Marketing Agreement.

Although the company produces helium alongside its natural gas, IACX will not compensate us for our helium produced under our existing contract.

To date, we have not generated any revenue from the production of helium.

The Marketing Agreement is filed as Exhibit 10.41 to this Report.

Under our natural gas and natural gas liquid contracts with processors, when the unprocessed natural gas is delivered at the sales meter, control of the gas is transferred to the purchaser, the Company’s obligations are satisfied, and revenue is recognized.

In the cases where the Company sells to a processor, management has determined that the processors are customers.

The Company recognizes the revenue in these contracts based on the net proceeds received from the processor.

The Company will sell its helium to two purchasers, each purchasing 50% of the helium production under a 10-year contracts.

One of the contracts will commence upon delivery of gaseous helium production at the tailgate of the processing plant.

The other contract will commence upon delivery of liquid helium from the Keyes Helium Company liquefaction plant located in Keys, OK.

When the gaseous helium is loaded into the gaseous helium trailer, control of the helium is transferred to the purchaser, the Company’s transport the gaseous helium to the Key Helium liquefaction plant.

Once the helium has been liquified and loaded into the liquid helium trailer, control of the helium is transferred to the purchaser, the Company’s obligations are satisfied, and revenue is recognized.

The Company has no unsatisfied performance obligations at the end of each reporting period.

Pursuant to the Company’s ongoing oil and

gas and helium obligations that existed prior to its strategic pivot, the Company previously sold its oil to a single purchaser on a monthly

basis, pursuant to a purchase agreement (the “Oil Purchase Agreement”), at a price based on an index price from the purchaser.

The Oil Purchase Agreement with continue on a month-to-month basis thereafter unless and until terminated by the Company or the purchaser

with a 30-day advance notice.

Oil that is produced from the Company’s wells is stored in tank batteries located on the Company’s

When the purchaser’s truck connects to the storage tank and oil enters the truck, control of the oil is transferred to the

purchaser, the Company’s obligations are satisfied, and revenue is recognized.

During 2025, the Company did not have any oil sales as it disposed of its oil properties in 2024.

We currently sell our natural gas and natural

gas liquids to Cimmaron Midstream, formerly known as IACX, (“Cimmaron”) a processor, pursuant to that certain Marketing Agreement,

at a price based on an index price from the purchaser, which expired on May 31, 2024.

This agreement currently continues on a month-to-month

basis unless and until terminated by the Company or the purchaser with a 30-day advance notice.

IACX processes our gas for natural gas

liquids and other usable components in its facilities.

We receive value for our natural gas and any associated natural gas liquids as

further defined as hydrocarbons pursuant to the Marketing Agreement.

Although the Company produces helium alongside its natural gas, IACX

will not compensate us for our helium produced under our existing contract.

To date, we have not generated any revenue from the production

Under our natural gas and natural gas liquid contracts

with processors, when the unprocessed natural gas is delivered at the sales meter, control of the gas is transferred to the purchaser,

the Company’s obligations are satisfied, and revenue is recognized.

In the cases where the Company sells to a processor, management

has determined that the processors are customers.

The Company recognizes the revenue in these contracts based on the net proceeds received

from the processor.

The Company has no unsatisfied performance obligations

at the end of each reporting period.

Lease operating expenses

Lease operating expenses represent costs incurred in operations of producing properties and workover costs.

The majority of these costs are comprised of labor costs, production taxes, compression, workover, and repair costs.

Depletion, depreciation, amortization, and accretion

The Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized.

Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells, administrative costs directly attributable to those activities and asset retirement costs.

The Company records depletion expense for oil and natural gas properties on a units of production basis over the life of the full cost pool’s reserves.

The Company records depreciation expense for computer equipment and furniture and fixtures over a useful life of five years.

Lease operating expenses represent costs incurred

in operations of producing properties and workover costs.

The majority of these costs are comprised of labor costs, production taxes,

compression, workover, and repair costs.

Depletion, depreciation, amortization, and

The Company follows the full cost accounting method

to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves

are capitalized.

Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling,

completing and equipping of oil and gas wells, administrative costs directly attributable to those activities and asset retirement costs.

The Company records depletion expense for oil and natural gas properties on a units of production basis over the life of the full cost

pool’s reserves.

The Company records depreciation expense for computer equipment and furniture and fixtures over a useful life of

The Company records depreciation expense for leasehold improvement over a useful life of five to fifteen years.

The Company will record depreciation expense for the processing plant over its estimated useful life.

Depreciation on the processing plant will commence once the procession plant is put into service.

General and administrative costs

General and administrative costs primarily include costs incurred for overhead, consisting of payroll and benefits for the Company’s corporate staff, contractor and consulting costs, stock compensation expenses, accounting and legal costs, and office rent.

General and administrative costs primarily include

costs incurred for overhead, consisting of payroll and benefits for the Company’s corporate staff, contractor and consulting costs,

stock compensation expenses, accounting and legal costs, and office rent.

Gain on sale of assets

Gain on sale of assets consists of gains recorded on significant sales of oil and natural gas properties.

As a full cost company, disposition of oil and natural gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to operations.

Gain on sale of assets consists of gains recorded

on significant sales of oil and natural gas properties.

As a full cost company, disposition of oil and natural gas properties are accounted

for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship

between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to operations.

Other income and expense

Other income and expenses primarily include income and expenses associated with interest, gains or losses recorded on certain transactions, and fees charged by the Company to operate properties on behalf of a third party on a short term.

Our interest income relates to interest earned on certificate of deposit associated with operating bonds.

Our interest expenses are primarily associated with interest due on notes outstanding.

Our other income and expense primarily consists of gains and losses recorded on certain transactions as well as operating fees charged by the Company.

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes.

Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts for income tax purposes and net operating loss and tax credit carryforwards.

The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.

The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences.

A valuation allowance is provided when it is more likely than not (likelihood of greater than 50 percent) that some portion or all the deferred tax assets will not be realized.

The Company recorded a valuation allowance as of $2,487,466 and $0 for the years ended December 31, 2024 and 2023, respectively.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon the technical merits of the position.

If all or a portion of the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company’s deferred tax liability and will affect the Company’s effective tax rate in the period it is recognized.

The Company records any tax-related interest charges as interest expense and any tax-related penalties as other expense in the consolidated statements of operations of which there have been none to date.

Other income (expenses) primarily consists of interest income and expense,

changes in the fair value of derivative instruments, losses associated with the extinguishment of debt, losses from the Company’s

investment in a joint venture, and other miscellaneous gains and losses recorded on certain transactions.

Interest income relates primarily

to interest earned on certificates of deposit associated with operating bonds.

Interest expense is primarily associated with interest

on outstanding notes.

Changes in the fair value of derivative instruments reflect periodic mark-to-market adjustments on derivative assets

and liabilities.

The loss on debt extinguishment relates to the settlement of certain outstanding obligations during the period.

on investment in joint venture represents the Company’s share of results from its joint venture investment.

Other income (expense),

net consists of miscellaneous gains and losses recorded during the period.

The provision for income taxes is determined using

the asset and liability approach of accounting for income taxes.

Under this approach, deferred income taxes reflect the net tax effects

of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts

for income tax purposes and net operating loss and tax credit carryforwards.

The amount of deferred taxes on these temporary differences

is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as

applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.

The Company reviews its deferred tax assets for recoverability

and establishes a valuation allowance based on projected future taxable income, applicable tax strategies and the expected timing of the

reversals of existing temporary differences.

A valuation allowance is provided when it is more likely than not (likelihood of greater

than 50 percent) that some portion or all the deferred tax assets will not be realized.

The balance of the Company’s valuation allowance

as of $10,003,463 and $2,487,466 for the years ended December 31, 2025 and 2024, respectively.

The Company recognizes the tax benefit from an

uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities,

based upon the technical merits of the position.

If all or a portion of the unrecognized tax benefit is sustained upon examination by

the taxing authorities, the tax benefit will be recognized as a reduction to the Company’s deferred tax liability and will affect

the Company’s effective tax rate in the period it is recognized.

The Company records any tax-related interest charges

as interest expense and any tax-related penalties as other expense in the consolidated statements of operations of which there have been

none to date.

The Company is also subject to Texas Margin Tax.

The Company realized no Texas Margin Tax in the accompanying consolidated financial statements as we do not anticipate owing any Texas Margin Tax for the periods presented.

The Company realized no Texas Margin Tax in the accompanying consolidated

financial statements as we do not anticipate owing any Texas Margin Tax for the periods presented.

Stock-based compensation

The Company accounts for its stock-based compensation awards in accordance with Accounting Standards Codification (“ASC”) Topic 718, Compensation-Stock Compensation (“ASC 718”).

ASC 718 requires all stock-based payments to employees and non-employees including grants of stock options, to be recognized as expense in the statements of operations based on their grant date fair values.

The Company periodically issues common stock and common stock options to consultants for various services.

Costs of these transactions are measured at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable.

The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.

The Company accounts for its stock-based compensation

awards in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“ASC 718”).

requires all stock-based payments to employees and non-employees including grants of stock options, to be recognized as expense in the

statements of operations based on their grant date fair values.

The Company periodically issues common stock and common stock options

to consultants and directors for various services.

Costs of these transactions are measured at the fair value of the service received

or the fair value of the equity instruments issued, whichever is more reliably measurable.

The value of the common stock is measured at

the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or

(ii) the date at which the counterparty’s performance is complete.

Results of Operations

To provide readers with meaningful comparisons, the following analysis provides comparisons of the financial results for the year ended December 31, 2024 and 2023.

We analyze and explain the differences between years in the specific line items of the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

The following table sets forth our results of operations for the years presented:

For the year ended

Revenue, net:

To provide readers with meaningful comparisons,

the following analysis provides comparisons of the financial results for the years ended December 31, 2025 and 2024.

We analyze and explain

the differences between years in the specific line items of the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Year Ended December 31, 2025 Compared to

the Year Ended December 31, 2024

The following table sets forth our results of

operations for the years presented:

For the Years Ended

Revenues, Net

Oil, natural gas, and product sales, net

Total Revenues, Net

Costs & Expenses:

Costs and expenses

Lease operating expenses

Impairment expenses

Depletion, depreciation, amortization, and accretion

General & Administrative Expenses

Total Costs & Expenses

Gain on sale of assets

General and administrative expenses

Total costs and expenses

Loss from operations

Other income (expense):

(24,503,264 )

(12,732,730 )

(11,770,534 )

Other income (expenses)

Interest income

Interest expense

Total other loss

Change in fair value of derivative asset

Change in fair value of derivative liability

Loss on debt extinguishment

Loss on investment in Joint Venture

Total Other Income (Expenses)

Loss before income taxes

Benefit (provision) for income taxes

(29,585,804 )

(13,173,884 )

(16,411,920 )

Provision for income taxes

(29,585,804 )

(13,782,384 )

(15,803,420 )

Net Revenue by Product Category

The following table summarizes the Company’s net audited consolidated revenues disaggregated by product category:

The following table summarizes the Company’s

net audited consolidated revenues disaggregated by product category:

Less gathering and processing

Natural gas, net

Total revenues, net

Natural Gas represented 47.3% of the revenue for the year ended December 31, 2024, compared to 49.6% for the year ended December 31, 2023, and decreased $51,532 for the year ended December 31, 2024, as compared to year ended December 31, 2023.

The primary drivers of the revenue decrease for the year ended December 31, 2024 compared to the year ended December 31, 2023 was a $79,000 decrease related to a $0.09 per mcf decrease in gas prices net of processing and transportation, partially offset by a $27,000 increase related to a 74 MMcf increase in gas volumes.

NGLs represented 47.7% of the revenue for the year ended December 31, 2024, compared to 24.1% for the year ended December 31, 2023, and increased $106,295 for the year ended December 31, 2024, as compared to year ended December 31, 2023.

The primary driver of the revenue increase for the year ended December 31, 2024 compared to the year ended December 31, 2023 was a $136,000 increase related to a 2 MBbl increase in NGL volumes, partially offset by a $29,000 decrease related to a $6.67 per bbl decrease in NGL prices.

Oil represented 5.0% of the revenue for the year ended December 31, 2024, compared to 26.3% for the year ended December 31, 2023, and decreased $134,174 for the year ended December 31, 2024, as compared to year ended December 31, 2023.

The primary driver of the revenue decrease for the year ended December 31, 2024 compared to the year ended December 31, 2023 was the sale of the Company’s oil properties effective on February 1, 2024.

Total revenue, net

Natural gas, net represented 72.9% of the revenue

for the year ended December 31, 2025, compared to 47.3% for the year ended December 31, 2024, and increased $393,666 for the year ended

December 31, 2025, as compared to the year ended December 31, 2024.

The increase in revenue was primarily due to a $384,000 increase related

to a $0.41 per Mcf increase in gas prices net of processing and transportation, and a $10,000 increase related to a 36 MMcf increase in

gas sales volumes.

Natural gas liquids (“NGLs”) represented

27.1% of the revenue for the year ended December 31, 2025, compared to 47.7% for the year ended December 31, 2024, and decreased $14,250

for the year ended December 31, 2025 compared to the year ended December 31, 2024.

The decrease in revenue was primarily due to a $34,000

decrease related to a $7.24 per Bbl decrease in NGL prices, partially offset by a $20,000 increase related to a 343 Bbl increase in NGL

sales volumes.

No revenue was generated from oil sales for the

year ended December 31, 2025, compared to 5% for the year ended December 31, 2024, and decreased $26,796 for the year ended December 31,

2025, as compared to the year ended December 31, 2024.

This decrease was due to the sale of the Company’s oil properties during

Operating Expenses

For the Years Ended

Costs and expenses

Lease operating expenses

Impairment expenses

Depletion, depreciation, amortization, and accretion

1 unchanged sentence

Total costs and expenses

The Company experienced an overall increase in operating expenses of $6,527,319 for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

For the year ended December 31, 2024, lease operating expenses decreased 152,819, as compared to the year December 31, 2023.

This increase was primarily attributable to a $235,000 decrease related to the sale of certain properties located in Chaves County, New Mexico which occurred in July 2023, a $164,000 decrease related to the assignment of the Pathfinder lease which was effective February 2024, partially offset by a $120,000 increase related to amortization during 2024 of a standby retainer, consulting, and services agreement, and an increase in workover and repair costs.

General and administrative expenses increased $6,675,599 during the year ended December 31, 2024, as compared to the year ended December 31, 2023.

The primary drivers for the increase was a $4,395,000 increase in stock-based compensation expense recognized primarily as a result of the Business Combination and associated financing, a $685,000 increase in public relations and marketing cost, a $662,000 increase in employee and consulting costs, a $644,000 in legal, accounting, and audit and review costs, a $166,000 increase related to the assignment of certain properties as compensation and $97,000 increase related to a decrease in overhead recovery primarily related to properties sold in July 2023.

For the year ended December 31, 2024, depletion, depreciation, amortization and accretion expense increased $4,540, as compared to the year ended December 31, 2023.

This increase was primarily due to a $71,000 increase in accretion expense associated with Asset Retirement Obligations, a $68,000 increase in depletion expense related to higher sales volumes, partially offset by a $119,000 decrease in related to a decrease in depletion rates.

The Company experienced an overall increase in operating expenses

of $12,123,154 for the year ended December 31, 2025, as compared to the year ended December 31, 2024.

Lease operating expenses increased $48,854 for

the year ended December 31, 2025, compared to the year ended December 31, 2024.

The increase was primarily due to a $130,000 increase

related to road and location repair work, $120,000 increase related to the amortization of a standby retainer, consulting, and services

agreement, a $98,000 increase in severance tax expense related to an audit of severance tax report in 2020 - 2022 and associated adjustments

related to the findings, partially offset by a $272,000 decrease in workover costs.

Impairment expenses increased $12,062,639 for

the year ended December 31, 2025, as compared to the year ended December 31, 2024.

The increase was primarily due to a $6,732,000 impairment

of oil and gas properties as a result of a ceiling test failure, a $5,330,000 impairment of the gas processing plant.

Depletion, depreciation, amortization and accretion

increased $20,207 for the year ended December 31, 2025, as compared to the year ended December 31, 2024.

a $57,000 increase in accretion

expense associated with asset retirement obligations, a $28,000 increase in depletion expense due to a 36 MMcfe increase in sales volumes,

and a $18,000 increase in depreciation expense associated with the purchase of equipment during 2025, partially offset by an $82,000 decrease

in depletion expense related to a decrease in the depletion rate.

General and administrative costs decreased $8,546

for the year ended December 31, 2025, as compared to the year ended December 31, 2024.

The decrease was primarily due to a $5,918,000

decrease in equity compensation, a $166,000 decrease for to non-employee compensation related to disposition of Company oil and gas properties,

partially offset by a $1,656,000 increase in public relations and market costs, a $1,193,000 increase in legal fees, a $765,000 increase

in director and officer insurance, a $684,000 increase in employee compensation and benefits, a $586,000 increase in professional fees

primarily association with exchange and filing related costs, $479,000 increase in consulting costs, a $463,000 increase in bad debt expense,

and a $249,000 increase in board member compensation.

Other (Expense) Income

For the Years Ended

Other income (expenses)

Interest income

Interest expense

Other income (expense), net

Total other income (loss)

For the year ended December 31, 2024, interest expense increased $587,157, as compared to the year ended December 31, 2023, primarily due to $301,000 increase related to amortization of the debt discount and debt issuance costs, a $215,000 increase related to interest expense associated with the Bridge Financing Debentures, and a $112,000 increase related to interest expense associated with the AirLife note, partially offset by a $31,000 decrease in expense related to the Office of Natural Resources Revenue and the State of New Mexico, and an $8,000 decrease in interest expense related to the Beaufort Acquisitions note.

For the year ended December 31, 2024, other income (expense) increased $448,138 as compared to the year ended December 31, 2023, primarily due to a $299,000 loss on the exchange of a notes receivable due to the Company for an overriding royalty interest in certain properties located in Howard County, TX recorded in 2023, and a $134,000 increase in fees to operate properties charged to the purchaser of certain properties, previously owned by the Company, located in Chaves County, NM that were sold effective July 2023.

Change in fair value of derivative asset

Change in fair value of derivative liability

Loss on Debt Extinguishment

Loss on investment in Joint Venture

Total Other Income (Expenses)

Interest income increased $84,790 for the year

ended December 31, 2025, as compared to the year ended December 31, 2024.

Aventus Properties is controlled by Joel Solis, a former director

of the Company.

This increase was primarily due to interest earned on a note issued by the Company to Aventus Properties on October 23,

This note was repaid on December 8, 2025.

Interest expense increased $4,024,076 for the

year ended December 31, 2025, as compared to the year ended December 31, 2024.

this increase was primarily due to a $4,120,000 increase

related to the convertible note interest, deferral fees and amortization of debt discount and debt issuance cost, and a $160,000 increase

related to interest expense associated with excise and withholding taxes, partially offset by a $165,000 decrease related to interest

expense associated with the 10% convertible debentures issued to certain investors as part of several bridge financing rounds in 2024

(the “Bridge Financing Debentures”), and a $64,000 decrease related to the promissory note held by Beaufort Acquisitions,

(the “Beaufort Acquisitions Note”).

Both the Bridge Financing Debentures and the Beaufort Acquisitions Note were paid

off in December 2024.

The remaining other expense, net increased $702,100 for the year

ended December 31, 2025, as compared to the year ended December 31, 2024.

This increase was primarily due to a $577,000 loss on the extinguishment

of the convertible note, a $294,000 increase related to penalties and interest on late payment of withholding and excise taxes, a $267,000

decrease in fees to operate properties charged to the purchaser of certain properties, previously owned by the Company, located in Chaves

County, New Mexico that were sold effective July 2023, a $119,000 loss related to the Company’s ownership in a joint venture, partially

offset by a $555,000 decrease related to changes in fair value of derivative assets and liabilities.

Liquidity and Capital Resources

Going Concern

Our cash and cash equivalents are not sufficient

to fund our planned operations for a period of at least one year from the date these financial statements are issued.

Until we can generate

substantial revenue and achieve profitability, we will need to raise additional capital to fund our ongoing operations and capital needs.

There is no assurance, however, that additional financing will be available when needed or that we will be able to obtain financing on

terms acceptable to us.

These conditions raise substantial doubt about our ability to continue as a going concern.

Sources of Liquidity

We are currently focused in the near-term on using

our available liquidity for the development of our flagship data center project, TCDC.

We expect our liquidity to be supported by a diversified

mix of debt and equity capital, including project financing for the buildout of our flagship project as well as tenant prepayments and

advances, strategic equity investments and government grants.

Although we plan to fund near-term development activity through a combination

of these methods, there can be no assurance that such capital will be available in the amounts required or on favorable terms.

to financing may be constrained by changes in macroeconomic conditions, increases in interest rates, customer-specific credit risks, regulatory

shifts, or other market factors beyond our control.

On January 23, 2026, we filed a shelf registration

statement on Form S-3 (File No.

333-292892) with the SEC, which was declared effective on January 30, 2026 (the “Registration Statement”).

The Registration Statement, which includes a base prospectus, allows us at any time to offer any combination of securities described in

the prospectus in one or more offerings in an aggregate amount of up to $350 million.

The Registration Statement is intended to provide

us flexibility to conduct registered sales of our securities, subject to market conditions and our future capital needs.

any future offering under the Registration Statement will be established at the time of such offering and will be described in a prospectus

supplement filed with the SEC prior to the completion of any such offering.

In February and March 2026, we issued 3,284,600

shares of Common Stock underlying the First Tranche Warrant to the Investor at an exercise price of $2.00 per share for total proceeds

of $6,569,200.

We may also experience delays in construction

that extend beyond our estimated development timeline.

Prolonged development periods could increase project costs beyond budgeted amounts

and reduce the availability of construction loans from project partners or third party financing sources during interim periods.

timing misalignments could necessitate additional bridge capital or contingency financing, which may not be available on acceptable terms,

Furthermore, unanticipated events—such as permitting delays, failure to secure required regulatory approvals, or force

majeure events—could result in liquidity shortfalls or force us to amend our capital plan.

Market conditions may also affect our ability

to raise capital.

For example, credit providers or their regulators may shift policy away from funding projects involving nuclear generation

assets, or may reduce exposure to long-duration infrastructure development with extended pre-revenue periods.

Even if financing is available,

we may be required to accept unfavorable terms, including higher cost of capital, restrictive covenants, or equity dilution, all of which

could impair our ability to execute our business plan.

If we are unable to raise capital in the amounts, timing, or terms we expect, we

may be forced to delay capital expenditures, amend or terminate our purchase commitments for long-lead materials or surrender assets pledged

as collateral under our financing agreements in order to preserve liquidity, which could materially extend our development timeline and

delay one or more phases of our projects, preventing us from achieving planned operational and financial milestones within the anticipated

Additionally, if we do not obtain stockholder

approval to issue Common Stock in connection with the SharonAI Purchase Agreement, we would not be able to pay the portion of the acquisition

consideration that is due and payable in shares of Common Stock to the extent such issuances would equal or exceed the 20% share ownership

limitation imposed by Nasdaq (the “Share Cap”).

In such event, the SharonAI Purchase Agreement requires us to satisfy the

remaining payment in cash in an amount equal to the difference between (i) the fair market value of the securities that SharonAI would

have been issued but for the Share Cap, minus (ii) the fair market value of all of the securities that actually were issued to SharonAI.

It is possible that we would need to raise additional funding if we are required to make such payments in cash.

Such additional funding

may not be available to us on acceptable terms, or at all, and we may be subject to certain contractual restrictions on raising capital.

In the event we are unable to raise the cash required to make such payments, we could default on the Convertible Note and all amounts

owed thereunder may become due and payable.

Planned Use of Capital

The capital expenditures we expect to incur as

we complete the development of our flagship project will be significant.

We currently estimate that the total capital expenditures we

will incur to complete the development of our flagship project could exceed $15 billion, excluding amounts expected to be financed by

our tenants of which approximately $50 million to $300 million is expected to be incurred in the next twelve months across all phases.

These near-term expenditures are expected to be funded through a combination of tenant prepayments, project-level debt financing, and

strategic equity capital.

Required capital expenditures are difficult to estimate with precision and will depend on final tenant composition,

generation mix, supply chain dynamics, and site optimization decisions.

Uses and Availability of Funds

We measure our liquidity in a number of ways, including cash balances on hand, working capital, and operating cash flows.

We had a cash balance of $ 1,053,744 as of December 31, 2024.

We also had a working capital deficit of $2,300,604 as of December 31, 2024.

Since our inception, the Company’s primary sources of liquidity have been cash flow from operations, contributions from members, and borrowings.

The Company is in the process of securing a project financing arrangement to fund construction of a processing plant, the construction or acquisition of a gather system, and a production enhancement program that will consist of workovers, recompletions, new drilling, or acquisition of properties.

The Company estimates the capital requirements during 2025 and 2026 to be approximately $40 million to $45 million.

The Company anticipates that cash flows from operations during 2025 and 2026 will increase as a result of this capital spending.

In connection with the closing of the Business Combination on December 6, 2024, the Company and an institutional investor (the EPFA Investor”) entered into an Equity Purchase Agreement (the “EPFA”).

Pursuant to the EPFA, the Company has the right to issue and sell to the EPFA Investor, and the EPFA Investor must purchase from the Company, up to an aggregate of $75 million (the “Commitment Amount”) in newly issued shares (the “Advance Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), subject to the satisfaction or waiver of certain conditions.

The EFPA also provides for the issuance of two pre-paid advances in the aggregate amount of $10 million, the first pre-paid advance in the amount of $7 million, which was drawn by the Company on December 6, 2024, and the second pre-paid advance in the amount of $3 million, which was drawn by the Company on January 16, 2025, each of which is evidenced by a senior secured convertible promissory note (each, a “Convertible Note”), which is convertible into shares of common stock.

As a result of the above, in connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, Management has determined that funding available to the Company through the EPFA will enable it to sustain operations for a period of at least one-year from the issuance date of these financial statements.

Our primary operations include the exploration, development, and production of helium, natural gas, oil, and natural gas liquids (“NGLs”).

The Company’s producing oil and gas assets and non-producing acreage are primarily located in Chaves County, New Mexico.

The Company also owns overriding royalty interests located in Howard County, Texas.

Cash flows for the years ended December 31, 2024 and 2023

The following table summarizes our cash flow activity for the periods presented:

We recorded a net loss of $29,585,804 for the

year ended December 31, 2025, and net loss of $13,782,384 for the year ended December 31, 2024.

As of December 31, 2025, we had a working

capital of $2,545,098 and a cash balance of $1,202,728.

Historically, our primary sources of liquidity have been cash

received from oil, natural gas, and product sales, contributions from members, and borrowings.

Management’s assessment of the entity’s

ability to continue as a going concern involves making a judgement, at a particular point in time, about inherently uncertain future outcomes

of events or conditions.

Any judgment about the future is based on information

available at the time at which the judgment is made.

Subsequent events

may result in outcomes that are inconsistent with judgments that were reasonable at the time they were made.

Management has taken into

account the following:

Our financial position;

The risks facing

us that could impact liquidity and capital adequacy.

future capital requirements will depend on many factors, including the our revenue growth rate and the timing and extent of spending

to support further sales and marketing efforts.

We currently expect to require approximately $73.9 million over the next twelve months,

including $9.85 million payable by March 31, 2026 and up to an additional $50.0 million payable by June 30, 2026 related to outstanding

financing arrangements.

We also expect to incur approximately $10.0 million in general and administrative expenses and approximately

$3.9 million of other costs.

Upon executing binding term sheets or definitive agreements wi th data center users, these costs may

increase materially.

We cannot provide any assurance that additional

financing will be available to it on commercially acceptable terms, if at all.

If we are unable to raise additional capital, our business,

results of operations and financial condition could be materially and adversely affected.

As a result, in connection with the our assessment of going concern

considerations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)

2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management has determined that

our liquidity condition raises substantial doubt about our ability to continue as a going concern through the twelve months following

the issuance date of the December 31, 2025 consolidated financial statements.

These consolidated financial statements do not include

any adjustments relating to the recovery of recorded assets or the classification of liabilities that might result should we be unable

to continue as a going concern.

Cash flows for the years ended December 31,

2025 and 2024

The following table summarizes our cash flow activity

for the periods presented:

For the Years Ended

Cash Provided by (Used in)

Operating Activities

(11,699,112 )

Investing Activities

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Net cash used in operating activities

Operating activities used cash of $5,349,948 for the year ended December 31, 2024, primarily due to an increase in prepaid and other assets, deferred tax asset, accounts receivable offset by a decrease in asset retirement obligations, a decrease in accrued expenses and an increase in accounts payable and other payable

Operating activities used cash of $2,682,921 for the year ended December 31, 2023, primarily due to a gain on sale of assets offset by stock-based compensation.

Operating activities used cash of $11,699,112

for the year ended December 31, 2025, primarily due to an increase in our net loss for the year offset by changes in non-cash adjustments

including impairment expense and amortization of debt discount and debt issuance costs.

Operating activities used cash of $5,349,948 for

the year ended December 31, 2024, primarily due to a gain on sale of assets offset by stock-based compensation.

Net cash used in investing activities

Investing activities used cash of $533,054 for the year ended December 31, 2024, related to the purchase of property, plant and equipment and the purchase of interest in oil and natural gas properties.

Investing activities used cash of $1,283,200 for the year ended December 31, 2023, related to the purchasing of property, plant and equipment offset by proceeds from the sale of interest in oil and natural gas properties and proceeds from the sale of restricted investments.

Net cash provided by financing activities

Financing activities provided cash of $6,816,736 for the year ended December 31, 2024, primarily related to proceeds from bridge financing, proceeds from the convertible note, and issuance of common stock offset by repayment to related party.

Financing activities provided cash of $4,805,726 for the year ended December 31, 2023, primarily related to the issuance of common stock and proceeds from note payable.

As of December 31, 2024, the Company had $9,000,000 in outstanding loans and financing, excluding accounts payable and accrued interest.

The following is a description of our material indebtedness.

These descriptions are only summaries and do not purport to describe all of the terms of the financing arrangements that may be important.

The table below reflects the Company indebtedness as of December 31, 2024:

Principal Amount

Maturity Date

Interest Rate

Airlife Gases

ATW AI Infrastructure LLC

March 6, 2026

(1) The earlier of May 30, 2027 or 18 months after commencement date as defined the Purchase and Sale Agreement between NEH Midstream and AirLife dated August 25, 2024.

As of December 31, 2024, the Company has accrued $217,823 of interest on this note.

Tabular Disclosure of Contractual Obligations

The following is a summary of our contractual obligations as of December 31, 2024:

Less than 1 Year

Note Payable – Air Life (1)

Convertible note - ATW

(1) Assumes monthly payments will begin in July 2025 and last payment made December 2026.

This note carries an annual interest rate of 8%.

As of December 31, 2024, the Company has accrued $217,823 of interest on this note.

We typically do not experience seasonality in our operations.

Related Party Transactions

The Company has related party transactions consisting of notes payable and accounts payable as of 12/31/2023.

All of these balances were paid by 12/31/2024 except for a small payable for reimbursement of business related travel expenses.

Investing activities provided cash of $5,363,624

for the year ended December 31, 2025, related to the investment in the Joint Venture and purchase of property, plant and equipment and

the purchase of interest in oil and natural gas properties.

Investing activities used cash of $533,054 for

the year ended December 31, 2024, related to the purchasing of property, plant and equipment offset by proceeds from the sale of interest

in oil and natural gas properties and proceeds from the sale of restricted investments.

Net cash provided by financing

Financing activities used cash of $17,211,720

for the year ended December 31, 2025, primarily related to proceeds from proceeds from the convertible note and issuance of common stock

offset by repayment of notes payable and repayment of the convertible note.

Financing activities provided cash of $6,816,736 for the year

ended December 31, 2024, primarily related to proceeds from bridge financing, proceeds from the convertible note, and issuance of

common stock offset by repayment to related party.

We typically do not experience seasonality in

our operations.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures.

The amendments address more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The ASU also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments in the ASU are effective for public business entities for annual periods beginning after December 31, 2024 on a prospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of this guidance.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” This ASU updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense and information used to assess segment performance.

In December 2023, the FASB issued ASU 2023-09,

“Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness

of income tax disclosures.

The amendments address more transparency about income tax information through improvements to income tax disclosures

primarily related to the rate reconciliation and income taxes paid information.

The ASU also includes certain other amendments to improve

the effectiveness of income tax disclosures.

The amendments in the ASU are effective for public business entities for annual periods beginning

after December 31, 2024 on a prospective basis.

The Company adopted this guidance during the current fiscal year and the adoption did

not have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03,

“Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40):

Disaggregation

of Income Statement Expenses.

This ASU requires public business entities to disclose, in interim and annual reporting periods, additional

information about certain expenses in the notes to the financial statements.

The amendments in the ASU are effective for public entities

for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

This ASU requires public business entities to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements.

The amendments in the ASU are effective for public entities for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early

adoption permitted.

The Company is still evaluating the effect of the adoption of this guidance.

Critical Accounting Estimates

The Company prepares its consolidated financial statements for inclusion in this Report in accordance with GAAP.

The Company prepares its consolidated financial

statements for inclusion in this Report in accordance with generally accepted accounting principles in the United States (“GAAP”).

See Note 2 of Notes to Consolidated Financial Statements.

The following is a discussion of the Company’s most critical accounting estimates, judgments and uncertainties that are inherent in the Company’s application of GAAP.

The Company’s proved reserve information as of December 31, 2024 and 2023 was prepared by the Company’s independent petroleum engineers.

Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, proved reserve estimates will be different from the quantities of oil and natural gas that are ultimately recovered.

In addition, results of drilling, testing and production after the date of an estimate may justify material revisions, positively or negatively, to the estimate of proved reserves.

The Company’s estimates of proved reserves materially impact DD&A expense.

If the estimates of proved reserves decline, the rate at which the Company records DD&A expense will increase, reducing future net income.

Such a decline may result from lower commodity prices, which may make it uneconomical to drill for and produce higher cost fields.

In addition, a decline in proved reserve estimates may impact the outcome of the Company’s ceiling test calculations of its proved properties for impairment.

The following is a discussion of the Company’s most critical accounting

estimates, judgments and uncertainties that are inherent in the Company’s application of GAAP.

The Company’s proved reserve information

as of December 31, 2025 and 2024 was prepared by MKM Engineering, independent reservoir engineers.

Because these estimates depend on many

assumptions, all of which may substantially differ from future actual results, proved reserve estimates will be different from the quantities

of oil and natural gas that are ultimately recovered.

In addition, results of drilling, testing and production after the date of an estimate

may justify material revisions, positively or negatively, to the estimate of proved reserves.

The Company’s estimates of proved

reserves materially impact depreciation, depletion and amortization (“DD&A”) expense.

If the estimates of proved reserves

decline, the rate at which the Company records DD&A expense will increase, reducing future net income.

Such a decline may result from

lower commodity prices, which may make it uneconomical to drill for and produce higher cost fields.

Under the full cost method of accounting,

the Company performs a quarterly ceiling test in accordance with SEC Regulation S-X Rule 4-10.

The ceiling test limits the net capitalized

costs of oil and gas properties to the present value (PV-10) of estimated future net revenues from proved reserves, based on SEC-prescribed

commodity prices, adjusted for discounted asset retirement obligations and income taxes.

The calculation requires significant estimates

and assumptions, including reserve quantities, future production timing, future operating and development costs and commodity prices.

Declines in proved reserve estimates, reductions in projected future net revenues or other adverse changes in the underlying assumptions

may reduce the calculated ceiling limitation and result in non-cash impairment charges.

Asset Retirement Obligations.

The Company has significant obligations to remove tangible equipment and facilities and to restore the land at the end of oil and natural gas production operations.

The Company’s removal and restoration obligations are primarily associated with plugging and abandoning wells.

Estimating the future restoration and removal costs is difficult and requires management to make estimates and judgments because most of the removal obligations are many years in the future and in some cases have vague descriptions of what constitutes removal.

Asset removal technologies and costs are constantly changing, as are regulatory, political, environmental, safety and public relations considerations.

Inherent in the present value calculation are numerous assumptions and judgments including the ultimate settlement amounts, 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 present value of the existing asset retirement obligations, a corresponding adjustment is generally made to the crude oil and natural gas property balance.

The Company has significant obligations to remove

tangible equipment and facilities and to restore the land at the end of oil and natural gas production operations.

The Company’s

removal and restoration obligations are primarily associated with plugging and abandoning wells.

Estimating the future restoration and

removal costs is difficult and requires management to make estimates and judgments because most of the removal obligations are many years

in the future and in some cases have vague descriptions of what constitutes removal.

Asset removal technologies and costs are constantly

changing, as are regulatory, political, environmental, safety and public relations considerations.

Inherent in the present value calculation

are numerous assumptions and judgments including the ultimate settlement amounts, 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 present value of the existing asset retirement obligations, a corresponding adjustment is generally made to the crude oil and natural

gas property balance.

Deferred Tax Asset Valuation Allowance.

The Company continually assesses both positive and negative evidence for recoverability of its deferred tax assets and based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences, the Company has established a valuation allowance of $2,487,466 for the year ended December 31, 2024.

There can be no assurance that facts and circumstances will not materially change and require the Company to revise this valuation allowance in a future period.

The Company continually assesses both positive and negative evidence

for recoverability of its deferred tax assets and based on projected future taxable income, applicable tax strategies and the expected

timing of the reversals of existing temporary differences, the Company maintained a valuation allowance of $10,003,463 for the year ended

December 31, 2025.

There can be no assurance that facts and circumstances will not materially change and require the Company to revise

this valuation allowance in a future period.

Stock-based Compensation.

The Company calculates the fair value of stock-based compensation using various valuation methods.

The Company determination on the appropriate valuation method requires the use of estimates to derive the inputs necessary to determine fair value.

Costs of these transactions are measured at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable.

The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with

Characteristics of both Liabilities and Equity (“ASC 480”), then in accordance with ASC 815-40 (“ASC 815”), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.

Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares.

If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature.

If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its Common Stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP.

The Company calculates the fair value of stock-based

compensation using various valuation methods.

The Company determination on the appropriate valuation method requires the use of estimates

to derive the inputs necessary to determine fair value.

Costs of these transactions are measured at the fair value of the service received

or the fair value of the equity instruments issued, whichever is more reliably measurable.

The Company determines the accounting classification

of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in

accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC

480”), then in accordance with ASC 815-40 (“ASC 815”), Accounting for Derivative Financial Instruments Indexed to, and

Potentially Settled in, a Company’s Own Stock.

Under ASC 480, warrants are considered liability classified if the warrants are mandatorily

redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must

or may require settlement by issuing variable number of shares.

If warrants do not meet liability classification under ASC 480, the Company

assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for

cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement

If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company

also assesses whether the warrants are indexed to its Common Stock and whether the warrants are classified as equity under ASC 815 or

other applicable GAAP.

After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity.

Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations.

Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.

Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value

after the issuance date recorded in the statements of operations.

Equity classified warrants only require fair value accounting at issuance

with no changes recognized subsequent to the issuance date.

Related parties

Management approves all material related-party transactions.

Management considers the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction, and the benefits to the Company and the relevant related party.

In determining whether to approve a related party transaction, the following factors are considered:

(1) if the terms are fair to the Company, (2) if there are business reasons to enter into the transaction, or (3) if the transaction would present an improper conflict of interest for any officer.

Management approves all material related-party

transactions.

Management considers the details of each new, existing or proposed related party transaction, including the terms of the

transaction, the business purpose of the transaction, and the benefits to the Company and the relevant related party.

In determining whether

to approve a related party transaction, the following factors are considered:

(1) if the terms are fair to the Company, (2) if there are

business reasons to enter into the transaction, or (3) if the transaction would present an improper conflict of interest for any officer.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

Fair value is defined as the price that would

be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market

participants at the measurement date.

The hierarchy is broken down into three levels based on the observability of inputs as follows:

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Environmental Matters

The Company, as a lessee of oil and gas properties, is subject to various federal, provincial, state and local laws and regulations relating to discharge of materials into, and protection of, the environment.

These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages.

In some instances, the Company may be directed to suspend or cease operations in the affected area.

There can be no assurance, however, that current regulatory requirements will not change, or past noncompliance with environmental laws will not be discovered on the Company’s properties.

Irrevocable Standby Letter of Credit and Promissory Note

On September 24, 2020, the Company entered into an irrevocable standby letter of credit (“LOC”) and a promissory note with West Texas National Bank in the amount of $25,000 with variable interest initially of 4.25% per annum and maturing on December 24, 2021.

No amount was drawn down under this LOC up to the date it was amended on October 29, 2021.

On October 29, 2021, the Company entered into an amendment of the LOC a new promissory note, increasing the amount to $425,000 with variable interest initially of 4.25% per annum and maturing on September 29, 2025.

On January 1, 2022, and March 29, 2022, the

LOC was amended, and new promissory notes were executed increasing the amount to $650,000 and $920,000, respectively.

As of December 31, 2024, and December 31, 2023, no amount was drawn down under the LOC.

Subsequent Events

Limited Liability Company Agreement

On January 21, 2025, the Company entered into a Limited Liability Company Agreement (the “LLC Agreement”) with SharonAI for the creation of Texas Critical Data Centers LLC, a Delaware limited liability company and joint venture of the Company and SharonAI (the “Joint Venture”).

Pursuant to the terms of the LLC Agreement, the purpose of the Joint Venture is to engage in (i) the purchase, building, and development of a site in Texas with an initial 250 MW gas-fired power plant and corresponding data center, and (ii) the operation of this site and (iii) any and all lawful activities necessary or incidental thereto.

Each of the Company and SharonAI has contributed $75,000 to the Joint Venture and have a 50% membership interest in the Joint Venture, constituting the initial members of the Joint Venture.

So long as a Member holds a membership interest in the Joint Venture, such Member may not withdraw or resign as a member prior to the dissolution and winding up of the Joint Venture, and any such withdrawal or resignation or attempted withdrawal or resignation will be null and void.

Members are required to make additional capital contributions (each, an “Additional Capital Contribution”) as set forth in the LLC Agreement, and failure to make Additional Capital Contributions in accordance with the terms of the LLC Agreement entitle the non-defaulting Member to institute proceedings against the non-contributing Member (“Non-Contributing Member”), purchase such Non-Contributing Member’s membership interest, or force a sale of such Non-Contributing Member’s membership interest.

No Member may transfer all or any portion of its membership interest without the written consent of the other Member unless such transfer is made pursuant to a Non-Contributing Member’s failure to make Additional Capital Contributions as set forth in the LLC Agreement.

New Members of the Joint Venture may be admitted from time to time pursuant to the terms of the LLC Agreement.

No real or personal property of the Joint Venture will be deemed to be owned by any of its Members individually and will be owned by, and title will be vested solely in, the Joint Venture.

Each fiscal year, net income and net loss will be allocated amongst the Members pro rata in accordance with their membership interests in the Joint Venture.

Distributions of the Joint Venture, following allowance for payment of Joint Venture obligations then due and payable, will be made to the members on at least a quarterly basis (unless the Board and members unanimously agree otherwise), pro rata in accordance with the Members’ percentage interests in the Joint Venture.

Senior Secured Convertible Promissory Note

On January 16, 2025 (the “Issuance Date”), following the effectiveness of the Company’s Registration Statement on Form S-1, as amended, initially filed with the U.S.

Securities and Exchange Commission (the “SEC”) on December 30, 2024, and pursuant to the terms of the EPFA, the Company issued another Senior Secured Convertible Promissory Note (the “Subsequent Note”) to the Investor in an aggregate principal amount of $3.0 million for an aggregate purchase price of $2.79 million after giving effect to a 7% original issue discount.

The Subsequent Note is for a term of 15 months from the Issuance Date.

Commencing on the ninetieth (90th) day following the Issuance Date and continuing on the same day of each successive calendar month until the entire outstanding principal amount has been repaid, the Company is required to make monthly payments to the holder of the Subsequent Note (the “Holder”).

Each monthly payment will be in an amount equal to the sum of (i) one twelfth (1/12) of the initial aggregate principal of the Subsequent Note and all other notes issued pursuant to the EPFA, plus (ii) accrued and unpaid under the Subsequent Note as of each payment date.

Conversion Rights.

Conversion at Option of Holder .

The Subsequent Note is convertible into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at the option of the Investor at an initial conversion price of $10.00 per share (the “Conversion Price”).

Subject to certain exceptions outlined in the Subsequent Note, including, but not limited to, equity issuances in connection with its equity incentive plan and certain strategic acquisitions, if the Company sells, enters into an agreement to sell, or grants any option to purchase, or sells, enters into an agreement to sell, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, Common Stock, at an effective price per share less than the Conversion Price of the Subsequent Note then in effect, the Conversion Price will be reduced to equal the effective price per share in such dilutive issuance.

The Conversion Price is also subject to a downward adjustment if an Event of Default occurs.

The Conversion Price is subject to an initial floor price (the “Floor Price”) of $0.7176 per share of Common Stock;

however, beginning on July 15, 2025 and on the same day of every six (6) months thereafter (each, a “Floor Price Reset Date”), the Floor Price will be reduced to 20% of the average volume weighted average price of the Common Stock for such trading day on the primary market of

the Common Stock during regular trading hours as reported by Bloomberg L.P.

(the “VWAP”) during the five (5) trading days immediately prior to such Floor Price Reset Date.

Additionally, the Company may reduce the Floor Price to any amount set forth in a written notice to the Holder, provided that any such reduction will be irrevocable and will not be subject to increase thereafter.

The Company may prepay the Subsequent Note at its option, upon thirty (30) business days written notice, by paying a 10% redemption premium.

Redemption Rights .

At any time, the Company may redeem in cash all, or any portion, of the Subsequent Note, in an amount equal to the outstanding principal balance being redeemed, plus a 10% premium in respect of such principal amount, plus all accrued and unpaid interest, if any, on such principal amount.

Event of Default Conversion .

From and after the occurrence of an Event of Default, the Holder may elect to convert the Subsequent Note into shares of the Common Stock at the “Event of Default Conversion Price,” which is equal to the lower of:

● The Conversion Price then in effect;

● 90% of the lowest VWAP of the Common Stock during the ten (10) consecutive trading days immediately prior to the date on which we received written notice of such conversion from such holder, subject to the Floor Price.

Limitations on Conversion .

A Holder shall not have the right to convert any portion of the Subsequent Note to the extent that, after giving effect to such conversion, the Holder (together with its related parties) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of shares of our Common Stock outstanding immediately after giving effect to such conversion.

Amended and Restated Equity Purchase Facility Agreement

On February 21, 2025, the Company and the Investor entered into an Amended and Restated Equity Purchase Facility Agreement (the “ A&R EPFA ”), which amends and restates the Existing EPFA in its entirety.

Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the A&R EPFA.

The A&R EPFA provides, among other things, that for so long as any amount remains outstanding under the Promissory Notes, if the Company submits an Advance Notice (as defined in the A&R EPFA), then the aggregate purchase price owed to the Company from such Advance Notice (the “ Advance Proceeds ”) shall be paid by the Investor to the Company and used by the Company in accordance with Section 7.15 of the A&R EPFA;

provided, however , that any such Advance Notice that is submitted during any thirty (30) calendar day period preceding the date on which the Company is required to make a monthly payment pursuant to Sections 1(b) and 1(d) of the Promissory Notes (each such payment, a “ Note Payment ”), then without the prior written consent of the Investor, the Company may only submit such Advance Notice, if the Advance Proceeds are paid by the Investor by offsetting the amount of the Advance Proceeds against the full amount of the applicable Note Payment (first towards accrued and unpaid interest, then towards Payment Premiums (as defined in the Promissory Notes) (if applicable), and then towards outstanding principal), with any remaining Advance Proceeds to be paid by the Investor in cash to the Company and used by the Company in accordance with Section 7.15 of the A&R EPFA.

Furthermore, if there is any default under the Promissory Notes, the Company may only submit an Advance Notice with the prior consent of the Investor.

Under the terms of the A&R EPFA, the price per Advance Share (as defined in the A&R EPFA) is set at the product obtained by multiplying the market price by 95%.

In the event of a Regular Purchase Pricing Period (as defined in the A&R EPFA), the Company may elect to set the minimum price per Advance Share (the “ Minimum Acceptable Price ”) for such Advance Notice, however, if no Minimum Acceptable Price is selected, the Minimum Acceptable Price will automatically be set at a price equal to the Floor Price (as defined in the A&R EPFA) then in effect multiplied by 105.3%.

In the event of an Accelerated Purchase Pricing Period (as defined in the A&R EPFA), the Minimum Acceptable Price shall always equal the Floor Price then in effect multiplied by 105.3%.

Each trading day during a Pricing Period (as defined in the A&R EPFA) that is an Excluded Day (as defined in the A&R EPFA), shall result in an automatic reduction to the number of Advance Shares set forth in such Advance Notice by (i) in the event of a Regular Purchase Pricing Period, one-third for each such Excluded Day, (ii) in the event of an Accelerated Purchase Pricing Period, (A) with respect to an Equity Condition Excluded Day (as defined in the A&R EPFA), 100% or (B) with respect to a MAP Excluded Day (as defined in the A&R EPFA), 16% for each MAP Event (as defined in the A&R EPFA) in the applicable Accelerated Purchase Pricing Period.

The A&R EPFA also provides that in no event may the Purchase Price be lower than the Floor Price then in effect and the Company may

not submit an Advance Notice, without the consent of the Investor, if the market price of the Company’s common stock immediately prior to submission is lower than 120% of the Floor Price then in effect.

Pursuant to the terms of the A&R EPFA, the Floor Price is currently set at $0.7176 per Common Share, which is equal to 20% of the average five-day VWAP of the Common Shares on January 15, 2025, which is the date the Company’s resale registration statement on Form S-1 was declared effective.

The A&R EPFA further provides that, beginning on July 15, 2025 and on the same day of every six (6) months thereafter (each, a “ Floor Price Reset Date ”), the Floor Price shall be adjusted (downwards only) to 20% of the average VWAP of the common stock during the five (5) trading days immediately prior to such Floor Price Reset Date.

Notwithstanding the foregoing and subject to the rules and regulations of the Nasdaq Stock Market LLC, the Company may reduce the Floor Price then in effect to any amount set forth in a written notice to the Investor;

provided that such reduction shall be irrevocable and shall not be subject to increase thereafter.

Letter of Intent

On February 27, 2025, the Company issued a press release announcing its intention, along with its joint venture partner, Sharon AI, Inc., to acquire a 200-Acre Site for 250MW Net-Zero AI Data Center in the Permian Basin.

Notice of Delisting

On March 4, 2025, the Company received a letter from Nasdaq (the “Notice”) which notified the Company that, for 30 consecutive business days, the Company’s market value of listed securities (“MVLS”) closed below the $50,000,000 MVLS threshold required for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Rule”).

In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company has 180 calendar days, or until September 2, 2025 (the “MVLS Compliance Period”), to regain compliance with the MVLS Rule.

The Notice notes that, to regain compliance, the Company’s MVLS must close at or above $50,000,000 for a minimum of ten consecutive business days during the MVLS Compliance Period.

The Notice further notes that if the Company is unable to satisfy the MVLS requirement prior to such date, the Company may be eligible to transfer the listing of its securities to The Nasdaq Capital Market (provided that the Company then satisfies the requirements for continued listing on that market).

If the Company does not regain compliance by the end of the MVLS Compliance Period, Nasdaq staff will provide written notice to the Company that its securities are subject to delisting.

At that time, the Company may appeal any such delisting determination to a hearings panel.

Quantitative and Qualitative Disclosures about Market Risk.

As a smaller reporting company we are not required to make disclosures under this Item.

Financial Statements and Supplementary Data.

Our financial statements, together with the report of the independent registered public accounting firm, are appended to this Report and an index of those financial statements can be found beginning on page F-1.

The Company, as a lessee of oil and gas properties,

is subject to various federal, provincial, state and local laws and regulations relating to discharge of materials into, and protection

of, the environment.

These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for

the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages.

In some instances,

the Company may be directed to suspend or cease operations in the affected area.

There can be no assurance, however, that current regulatory

requirements will not change, or past noncompliance with environmental laws will not be discovered on the Company’s properties.

Irrevocable Standby Letter of Credit and

Promissory Note

On September 24, 2020, the Company entered into

an irrevocable standby letter of credit (“LOC”) and a promissory note with West Texas National Bank in the amount of $25,000

with variable interest initially of 4.25% per annum and maturing on December 24, 2021.

No amount was drawn down under this LOC up to the

date it was amended on October 29, 2021.

On October 29, 2021, the Company entered into

an amendment of the LOC a new promissory note, increasing the amount to $425,000 with variable interest initially of 4.25% per annum and

maturing on September 29, 2026.

On January 1, 2022, and March 29, 2022, the LOC was amended, and new promissory notes were executed increasing

the amount to $650,000 and $920,000, respectively.

As of December 31, 2025, and December 31, 2024, no amount was drawn down under the

Quantitative and Qualitative Disclosures

about Market Risk.

As a smaller reporting company we are not required

to make disclosures under this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis