What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-31 compared with 2024-03-18 · 287 added, 129 removed, 531 unchanged (44% of the section changed)

16 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America

Restatement of 2023 and 2022 Financial Statements

As discussed in Note 4 to the consolidated financial statements, the consolidated financial statements as of December 31, 2023 and 2022 and for the years ended December 31 2023 and 2022 have been restated to correct misstatements.

Basis for Opinion

27 unchanged sentences

As a basis for using this work, the specialists’ qualifications were understood and the Company’s relationship with the specialists was assessed.

The procedures performed also included evaluating the methods and assumptions used by the specialists, tests of the completeness and accuracy of the data used by the specialists, testing the completeness and accuracy of the data used by the specialists, and evaluating the specialists’ findings.

The procedures performed also included evaluating the methods and assumptions used by the specialists, testing the completeness and accuracy of the data used by the specialists, and evaluating the specialists’ findings.

/s/ Marcum llp

17 unchanged sentences

Operating lease – right-of-use asset

Deferred income taxes

Liabilities and Shareholders’ Equity

28 unchanged sentences

Total operating expenses

Loss on sale of oil and gas properties

Operating income (loss)

Other income:

Loss on sale of oil and gas properties, net

Operating income

Other income (Expense):

Interest income

Gain on sale of fixed asset

Other (expense) income

Total other income

Loss per common share:

Income before income taxes

Income tax benefit

Earnings per common share:

Weighted average number of common shares outstanding:

7 unchanged sentences

Share-based compensation expense

Loss on sale of oil and gas properties

Loss on sale of oil and gas properties, net

Gain on disposal of fixed asset

Uncollected account expense

Amortization of right-of-use asset

Deferred income tax benefit

Changes in operating assets and liabilities:

10 unchanged sentences

Proceeds from the sale of oil and gas property

Cash received for sale of vehicle

Cash paid for issuance of note receivable

Cash received (paid) for security deposit

Cash received for security deposit

Net cash used in investing activities

Cash Flows From Financing Activities:

Proceeds from the issuance of common stock, net

Net cash provided by financing activities

Net (decrease) increase in cash and restricted cash

Net decrease in cash and restricted cash

Cash and restricted cash at beginning of year

11 unchanged sentences

(amounts in thousands, except share amounts)

Paid-in Capital

(As Restated)

Balances at December 31, 2022

1 unchanged sentence

Issuance of restricted common stock

Issuance of common stock to non-affiliate

Stock-based compensation

1 unchanged sentence

Issuance of restricted common stock

Rescinded restricted common stock

Stock-based compensation

14 unchanged sentences

The Company holds its Permian Basin acres located in Chaves and Roosevelt Counties, New Mexico, through its wholly-owned operating subsidiary, Pacific Energy Development Corp.

(“PEDCO”), which asset the Company refers to as its “Permian Basin Asset,” and it holds its D-J Basin acres located in Weld and Morgan Counties, Colorado, and Laramie County, Wyoming, through its wholly-owned subsidiary, PRH Holdings LLC, and which asset the Company refers to as its “D-J Basin Asset.” During the current year, the Company assigned all of its oil and gas assets held in its wholly-owned subsidiary Red Hawk Petroleum LLC, to PRH Holdings LLC.

(“PEDCO”), which asset the Company refers to as its “Permian Basin Asset,” and it holds its D-J Basin acres located in Weld and Morgan Counties, Colorado, and Laramie County, Wyoming, through its wholly-owned subsidiary, PRH Holdings LLC, and which asset the Company refers to as its “D-J Basin Asset.” In 2023, the Company assigned all of its oil and gas assets held in its wholly-owned subsidiary Red Hawk Petroleum LLC to PRH Holdings LLC.

The Company believes that horizontal development and exploitation of conventional assets in the Permian Basin and development of the Wattenberg and Wattenberg Extension in the D-J Basin represent among the most economic oil and natural gas plays in the United States (“U.S.”).

4 unchanged sentences

The consolidated financial statements herein have been prepared in accordance with GAAP and include the accounts of the Company and those of its wholly and partially-owned subsidiaries as follows:

(i) Blast AFJ, Inc., a Delaware corporation (dissolved on October 19, 2022);

(ii) PEDCO, a Nevada corporation;

(iii) Red Hawk Petroleum LLC, a Nevada limited liability company;

(iv) Ridgeway Arizona Oil Corp., an Arizona corporation (“RAZO”);

(v) EOR Operating Company, a Texas corporation (“EOR”) (sold on November 9, 2023);

(vi) SRPT Acquisition, LLC, a Texas limited liability company, and (vii) PRH Holdings LLC, a Nevada limited liability company.

(i) PEDCO, a Nevada corporation;

(ii) Red Hawk Petroleum LLC, a Nevada limited liability company;

(iii) Ridgeway Arizona Oil Corp., an Arizona corporation (“RAZO”);

(iv) SRPT Acquisition, LLC, a Texas limited liability company, and (v) PRH Holdings LLC, a Nevada limited liability company.

All significant intercompany accounts and transactions have been eliminated.

10 unchanged sentences

The Company periodically assesses the financial condition of its financial institutions and considers any possible credit risk to be minimal.

Sales to three customers comprised 42 %, 35 % and 18 %, respectively, of the Company’s total oil and gas revenues for the year ended December 31, 2023 compared to sales to two customers comprising 63% and 20%, respectively, of the Company's total oil and gas revenues for the year ended December 31, 2022.

Sales to three customers comprised 38 %, 36 % and 12 %, respectively, of the Company’s total oil and gas revenues for the year ended December 31, 2024, compared to sales to three customers comprising 42 %, 35 % and 18 %, respectively, of the Company’s total oils and gas revenues for the year ended December 31, 2023.

The Company believes that, in the event that its primary customers are unable or unwilling to continue to purchase the Company’s production, there are a substantial number of alternative buyers for its production at comparable prices.

81 unchanged sentences

Recently Adopted Accounting Pronouncements.

On January 1, 2023, we adopted Accounting Standards Update (ASU) No.

2016-13, Measurement of Credit Losses on Financial Instruments , as issued by the FASB.

This standard established the current expected credit loss model, a new impairment model for certain financial instruments, based on expected rather than incurred losses.

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

The amendments in this update expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements.

This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Adoption of this standard is on a modified retrospective basis and had no impact on the Company’s financial position, results of operations, cash flows or net income per share.

Recently Issued Accounting Pronouncements .

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

Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity's effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures.

This ASU will be effective for the annual period ending December 31, 2025.

The Company is currently evaluating the timing and impacts of adoption of this ASU

Subsequent Events.

The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

NOTE 4 – CASH AND CASH EQUIVALENTS

NOTE 4 – RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

In connection with the preparation of the Company's Consolidated Financial Statements as of and for the fiscal year ended December 31, 2024, the Company discovered that in prior years it had not appropriately accounted for the depletion expense related to its oil and gas properties.

The error resulted in an overstatement of depreciation, depletion, amortization and accretion expense and accumulated DD&A of approximately $ 1,435,000 and $ 1,251,000 for the fiscal years ended December 31, 2023 and 2022, respectively.

The error did not impact total revenue, cash flow and cash balances for the fiscal years ended December 31, 2023 and 2022, respectively.

In conjunction with the restatement of DD&A, we also restated certain balances in the net deferred tax asset / deferred tax liability schedule to correct an additional error.

The misstatements were material to the previously issued financial statements of the Company and as a result, the Company has restated its Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Cash Flows, Consolidated Statements of Changes in Shareholder's Equity and for Note 7 – Oil and Gas Properties, Note 13 – Earnings Per Common Share and Note 14 – Income Taxes, and as of and for the fiscal years ended December 31, 2023 and 2022, respectively, presented herein.

The restatement includes adjustments to oil and gas properties, subject to amortization, net;

depreciation, depletion, amortization and accretion;

accumulated deficit;

and earnings per share.

The impact of the correction of the misstatements is summarized below:

As of December 31, 2023

CORRECTED CONSOLIDATED BALANCE SHEETS

As previously reported

Impact of Adjustment

Oil and gas properties, subject to amortization, net

Total oil and gas properties, net

Accumulated deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

As of December 31, 2023

CORRECTED CONSOLIDATED STATEMENTS OF OPERATIONS

As previously reported

Impact of Adjustment

Depreciation, depletion, amortization and accretion

Total operating expenses

Operating (loss) income

Earnings per common share:

As of December 31, 2023

CORRECTED CONSOLIDATED STATEMENTS OF CASH FLOWS

As previously reported

Impact of Adjustment

Cash Flows From Operating Activities:

Depreciation, depletion and amortization

Net cash used in operating activities

As of December 31, 2022

CORRECTED CONSOLIDATED BALANCE SHEETS

As previously reported

Impact of Adjustment

Oil and gas properties, subject to amortization, net

Total oil and gas properties, net

Accumulated deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

As of December 31, 2022

CORRECTED CONSOLIDATED STATEMENTS OF OPERATIONS

As previously reported

Impact of Adjustment

Depreciation, depletion, amortization and accretion

Total operating expenses

Operating (loss) income

Earnings per common share:

As of December 31, 2022

CORRECTED CONSOLIDATED STATEMENTS OF CASH FLOWS

As previously reported

Impact of Adjustment

Cash Flows From Operating Activities:

Depreciation, depletion and amortization

(Accumulated Deficit)

CORRECTED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

As previously reported

Impact of Adjustment

Balances at December 31, 2022

$ ( 126,741 )

$ ( 125,490 )

Balances at December 31, 2023

As of December 31, 2023

CORRECTED CONSOLIDATED BALANCE SHEETS

As previously reported

Impact of Adjustment

Oil and gas properties, subject to amortization, net

Total oil and gas properties, net

Accumulated deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

As of December 31, 2023

CORRECTED CONSOLIDATED STATEMENTS OF OPERATIONS

As previously reported

Impact of Adjustment

Depreciation, depletion, amortization and accretion

Total operating expenses

Operating (loss) income

Earnings per common share:

As of December 31, 2023

CORRECTED CONSOLIDATED STATEMENTS OF CASH FLOWS

As previously reported

Impact of Adjustment

Cash Flows From Operating Activities:

Depreciation, depletion and amortization

Net cash used in operating activities

As of December 31, 2022

CORRECTED CONSOLIDATED BALANCE SHEETS

As previously reported

Impact of Adjustment

Oil and gas properties, subject to amortization, net

Total oil and gas properties, net

Accumulated deficit

Total shareholders’ equity

Total liabilities and shareholders’ equity

As of December 31, 2022

CORRECTED CONSOLIDATED STATEMENTS OF OPERATIONS

As previously reported

Impact of Adjustment

Depreciation, depletion, amortization and accretion

Total operating expenses

Operating (loss) income

Earnings per common share:

As of December 31, 2022

CORRECTED CONSOLIDATED STATEMENTS OF CASH FLOWS

As previously reported

Impact of Adjustment

Cash Flows From Operating Activities:

Depreciation, depletion and amortization

(Accumulated Deficit)

CORRECTED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

As previously reported

Impact of Adjustment

Balances at December 31, 2022

Balances at December 31, 2023

NOTE 5 – CASH

The following table provides a reconciliation of cash and restricted cash reported within the balance sheets on December 31, 2024 and 2023, which sum to the total of such amounts shown in the accompanying consolidated statements of cash flows (in thousands):

Restricted cash included in other assets*

Total cash and restricted cash as shown in the consolidated statements of cash flows

Total restricted cash decreased $ 1,347,000 during the current period due to the transfer of collateralized deposits related to plugging and abandonment bonds with the State of New Mexico to Tilloo Exploration and Production LLC (“Tilloo”) in connection with the sale of our wholly-owned subsidiary EOR and related assets to Tilloo in November 2023.

See Note 6 below.

Total cash and restricted cash

* Increase in restricted cash is primarily related to additional collateral for surety bonds for the Company’s New Mexico operations, due to an updated assessment from the New Mexico Bureau of Land Management.

NOTE 6 – REVENUE FROM CONTRACTS WITH CUSTOMERS

7 unchanged sentences

The following tables summarize the Company’s oil and gas activities by classification for the years ended December 31, 2024 and 2023, respectively (in thousands):

Balance at December 31,

Oil and gas properties, subject to amortization

3 unchanged sentences

Total oil and gas assets

Balance at December 31,

Oil and gas properties, subject to amortization

1 unchanged sentence

Asset retirement costs

Accumulated depreciation, depletion and impairment

Total oil and gas assets

Accumulated depreciation, depletion and impairment (As Restated)

Total oil and gas assets (as Restated)

For the year ended December 31, 2024, the Company incurred $ 20.5 million of capital costs primarily related to non-operated drilling and completion costs related to the Company’s participation in 24 new non-operated wells in the D-J Basin in which the Company participated and the Company’s completion operations with respect to three operated wells with a third-party in the Permian Basin, together with costs related to certain workovers for lift conversions, cleanouts and permitting in the Company’s D-J Basin Asset.

As of December 31, 2024, the Company also acquired approximately 267 net mineral acres and 4,960 net lease acres in and around its existing footprint in the D-J Basin through multiple transactions at total acquisition and due diligence costs of $ 725,000 and $ 862,000 , respectively.

On August 21, 2024, the Company, through its wholly-owned subsidiary, PRH Holdings, LLC (“PRH”), entered into a five-year Participation Agreement with a large private equity-backed D-J Basin exploration and production company with extensive operational experience (“Joint Development Party”), whereby the Joint Development Party assigned to PRH a 30% interest in approximately 7,607 net acres of existing oil and gas leases and PRH assigned to the Joint Development Party a 70% interest in approximately 3,166 net acres of oil and gas leases, all located within the SW Pony Prospect in the D-J Basin in Weld County, Colorado.

Additionally, to facilitate joint development of the SW Pony Prospect, the parties agreed to an approximately 16,900 gross acre Area of Mutual Interest wherein the Joint Development Party will transfer 30% of future interests acquired by the Joint Development Party in leaseholds to PRH, and PRH will transfer 70% of future interests acquired by PRH in leaseholds to the Joint Development Party, in each case at an acquisition cost proportionate to their respective interests.

The assigned interests will be subject to an overriding royalty, such that the assigning party shall deliver to the other party leasehold interests with an 80% net revenue interest, and the parties agreed that the Joint Development Party will be the operator of the combined leaseholds.

The Participation Agreement specifically addresses the Harlequin Wells, which are existing wells within the SW Pony Prospect, whereby PRH acquired a 30% undivided interest in six Harlequin Wells as part of the leasehold assignment .

The Company correspondingly paid $ 8.6 million in capital costs (included in the $20.5 million number above) related to these wells.

Additionally, on September 23, 2024, PRH sold 320 net acres to a third-party in the Company’s D-J Basin Asset for $ 750,000 , and, as a result, the Company recognized a $ 735,000 gain from the sale of oil and gas properties.

Also, the Company sold 30 gross 5.1 net non-operated legacy well-bores in our D-J Basin Asset for net cash proceeds of $ 90,000 .

As a result of the sale, the Company recognized a loss on sale of oil and gas properties of $ 865,000 for these non-core assets.

However, the Company still retained the corresponding acreage related to the sale for any potential future development.

In a separate transaction, the Company also sold an additional legacy well-bore assignment for net cash proceeds of $ 25,000 and recognized a gain on sale of oil and gas properties of $ 29,000 .

Taken together, the three sales transactions represented a net loss on the sale of oil and gas properties of $ 76,000 on its Consolidated Statement of Operations as of December 31, 2024.

For the year ended December 31, 2023, the Company incurred $ 21,573,000 of capital costs primarily related to non-operated drilling and completion costs related to the Company’s participation in 13 new non-operated wells in the D-J Basin Asset in which the Company participated and the Company’s drilling of three operated wells with Evolution Petroleum Corporation (“Evolution”), noted below, together with costs related to certain workovers for lift conversions and cleanouts in the Company’s Permian Basin Asset.

3 unchanged sentences

Evolution acquired a 50% working interest share in existing leases, covering the initial two Development Blocks (which equals Evolution’s share of the acreage portion for nine drilling locations therein), and upon completion of the wells in each Development Block, Evolution will have the right, but not the obligation, to acquire a 50% working interest share in the next Development Block in exchange for the payment of $450 per net acre of existing leases held by the Company in such block, and participate on a 50% working interest share basis in the drilling and completion of up to nine horizontal San Andres wells in such Development Block.

On November 9, 2023, the Company entered into a Purchase and Sale Agreement and a Stock Purchase Agreement with Tilloo, pursuant to which we sold our wholly-owned subsidiary EOR and approximately 8,035 gross leasehold acres, current operated production, and all of PEDCO’s and EOR’s leases and related rights, oil and gas and other wells, equipment, easements, contract rights, and production located in the Milnesand and Sawyer Fields of the San Andres play in the Permian Basin situated in eastern New Mexico, which assets included approximately 80 legacy vertical oil and gas wells (53 producers and 27 injectors).

Pursuant to the Participation Agreement, in June 2024, Evolution acquired a 50% working interest share in Existing Leases covering approximately 811 net acres located in the third, fourth and fifth Development Blocks in exchange for the payment of $365,000 in total proceeds to the Company .

On November 9, 2023, the Company entered into a Purchase and Sale Agreement and a Stock Purchase Agreement with Tilloo, pursuant to which we sold our wholly-owned subsidiary EOR Operating Company (“EOR”) and approximately 8,035 gross leasehold acres, current operated production, and all of PEDCO’s and EOR’s leases and related rights, oil and gas and other wells, equipment, easements, contract rights, and production located in the Milnesand and Sawyer Fields of the San Andres play in the Permian Basin situated in eastern New Mexico, which assets included approximately 80 legacy vertical oil and gas wells (53 producers and 27 injectors).

Aggregate consideration received by the Company for the sale, which was effective August 1, 2023, was $1,122,436, subject to customary adjustments, which is to be paid by Tilloo through entry into a five-year secured promissory note (see Note 7 below).

As a result of the transaction, the Company has sold all of its operated oil and gas interests in the non-core Milnesand and Sawyer Fields, including the 52 inactive legacy wells that the Company would otherwise be required to plug and abandon, thereby successfully reducing its asset retirement obligations with respect to these assets and reducing its estimated aggregate plugging and abandoning liabilities by over $3.2 million.

As a result of the transaction, the Company sold all of its operated oil and gas interests in the non-core Milnesand and Sawyer Fields, including 52 inactive legacy wells that the Company would otherwise be required to plug and abandon, thereby successfully reducing its asset retirement obligations with respect to these assets and reducing its estimated aggregate plugging and abandoning liabilities by over $3.2 million.

The Company recognized a receivable of $56,000 due from Tilloo in post-closing adjustments, and as a result of the transaction, the Company recognized a $4.3 million loss on sale of oil and gas properties as reflected in the Statement of Operations for the year ended December 31, 2023 .

For the year ended December 31, 2022, the Company incurred $ 23,131,000 of capital costs primarily related to drilling operations, completion and facility construction for the two new wells started at the end of 2021 and production enhancement cleanouts in our Permian Basin Asset for approximately $ 8.4 million and the acquisition and development of assets in the D-J Basin, which also includes our participation in the drilling and completion of six wells by a third-party operator for approximately $ 12.5 million in the latter part of the period.

Additionally, the Company consummated the acquisition of certain additional assets located in the D-J Basin from a third-party effective July 1, 2021, for approximately $ 500,000 in cash consideration.

These assets include approximately 46.6 net leasehold acres and interests in 14 horizontal wells currently producing from the acreage.

The Company incurred $ 1.2 million (included in the $23.1 million total above) in net capital costs for its working interest in these 14 new well interests during the year ended December 31, 2022.

As of December 31, 2022, the Company also acquired approximately 480 net mineral acres and 787 net lease acres in and around its existing footprint in the D-J Basin through multiple transactions at total acquisition and due diligence costs of $ 607,000 and $ 688,000 , respectively.

The depletion recorded for production on proved properties for the year ended December 31, 2024 and 2023, amounted to $ 14,911,000 and $ 8,830,000 , respectively.

NOTE 8 – NOTE RECEIVABLE

On November 9, 2023, in accordance with the sale of our wholly-owned subsidiary EOR to Tilloo (see Note 6 above), the Company entered into a five-year secured promissory note (the “Note”) with Tilloo, bearing interest at 10 % per annum, with no payments due during the first twelve months, and fully-amortized payments due monthly over the remaining four years of the term thereafter until maturity.

On November 9, 2023, in accordance with the sale of our wholly-owned subsidiary EOR to Tilloo (see Note 6 above), the Company entered into a five-year secured promissory note (the “Note”) with Tilloo, bearing interest at 10 % per annum, with no payments due until January 8, 2025, and fully-amortized payments due monthly over the remaining four years of the term thereafter until maturity.

The Note contains customary events of default and is secured by a lien over all the assets and capital shares of EOR created under a Security Agreement, a Security Agreement (Pledge of Corporate Securities), and a Mortgage entered into by and between the Company and Tilloo.

As of December 31, 2024, the Company recognized $ 293,000 of the Note in Current Assets, with the remaining balance of $ 933,000 (including $ 104,000 of accrued interest) in Other Assets on the Company’s balance sheet.

Tilloo failed to make the initial installment payment due under the Tilloo Note on January 8, 2025.

The Company issued a notice of default under the Note to Tilloo in mid-January 2025, and the Company intends to pursue all available avenues and remedies, including potential foreclosure under the security agreement and mortgages securing the secured obligation, to resolve these matters.

Tilloo may not timely pay the Note when due, if at all.

However, as the Tilloo Note is fully-secured, the Company believes that should it pursue foreclosure under the security agreement and mortgages, that it would ultimately be made whole, so no reserve allowance is required as of December 31, 2024.

NOTE 9 – ASSET RETIREMENT OBLIGATION

8 unchanged sentences

Includes $ 663,000 of current asset retirement obligations at December 31, 2024.

In New Mexico, the Company, through its New Mexico operating subsidiary RAZO, has entered into a Stipulated Final Order (“ SFO ”) with the OCD pursuant to which, among other things, RAZO agreed to reimburse the OCD for actual costs incurred by the OCD for plugging and abandoning approximately 299 inactive legacy wells in the Permian Basin Asset at a rate of $ 2.00 per gross barrel of oil sold by RAZO during any production reporting period, subject to a minimum payment of $ 30,000 per month by RAZO.

RAZO has been timely paying each reimbursement invoice received from the OCD in accordance with the SFO and is in full compliance with the SFO.

The SFO superseded all previous Agreed Compliance Orders, as amended, entered into by and between RAZO and the OCD.

During fiscal year 2024, the Company reimbursed the OCD $ 248,000 in plugging and abandoning costs related to the SFO.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Lease Agreements

Currently, the Company has one operating sublease for office space that requires ASC Topic 842 treatment, discussed below.

Currently, the Company has one operating sublease for office space that requires Accounting Standards Codification (“ASC”) Topic 842 treatment, discussed below.

The Company’s leases typically do not provide an implicit rate.

22 unchanged sentences

The Company’s oil and gas leasehold acreage is subject to expiration of leases if the Company does not drill and hold such acreage by production or otherwise exercises options to extend such leases, if available, in exchange for payment of additional cash consideration.

In the D-J Basin Asset, no net acres expire during 2024 (net to our direct ownership interest only), with 1,721 and 4,108 net acres set to expire for the years ending December 31, 2025 and 2026 respectively, and 1,578 net acres thereafter, if we fail to meet drilling commitments or obtain term assignment extensions (net to our direct ownership interest only).

In the Permian Basin Asset, 40, 0 and 0 net acres are set to expire for the years ending December 31, 2024, 2025, 2026, respectively, and 798 net acres thereafter , if we fail to meet drilling commitments or obtain term assignment extensions (net to our direct ownership interest only).

In the D-J Basin Asset, 808.91 net acres are set to expire during 2025 (net to our direct ownership interest only), with 3,662 and 1,657 net acres set to expire for the years ending December 31, 2026 and 2027 respectively, and 508.53 net acres thereafter, if we fail to meet drilling commitments or obtain term assignment extensions (net to our direct ownership interest only).

In the Permian Basin Asset only 200 net acres is set to expire for the year ending December 31, 2026 , (net to our direct ownership interest only), all of the remaining acreage is currently held by production.

The Company plans to hold significantly all of this acreage through a program of drilling and completing producing wells.

5 unchanged sentences

Although the Company provides no assurance about the outcome of these or any other pending legal and administrative proceedings and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on the Company’s financial condition or results of operations.

Milnesand Sale Dispute and Tilloo Note Default

On November 4, 2024 the Company received correspondence from legal counsel to Tilloo Exploration & Production, LLC (“ Tilloo ”) seeking to recover damages which Tilloo is alleging were caused by alleged intentional misrepresentations made by principals of the Company to principals of Tilloo in connection with Tilloo’s acquisition of the Milnesand and Sawyer fields in New Mexico from the Company for aggregate consideration of $ 1,122,436 effective August 1, 2023 (the “ Milnesand Sale ”), which consideration was paid to the Company by Tilloo via a five-year secured promissory note with 10 % annual interest and no payments due until January 8, 2025 (the “ Tilloo Note ”).

The Company does not believe any misrepresentations were made by the Company or its principals in the Milnesand Sale and that the claims are baseless, without merit, and fail as a matter of law.

The Company has not received any correspondence from Tilloo subsequent to receipt of the November 4, 2024 correspondence from Tilloo, and Tilloo failed to make the initial installment payment due under the Tilloo Note on January 8, 2025.

The Company issued a notice of default under the Tilloo Note to Tilloo in mid-January 2025, and the Company intends to pursue all available avenues and remedies, including potential foreclosure under the security agreement and mortgages securing the secured obligation, to resolve these matters.

NOTE 11 – SHAREHOLDERS’ EQUITY

1 unchanged sentence

During the year ended December 31, 2023, the Company granted an aggregate of 1,460,000 restricted stock awards to various employees and board members of the Company (see Note 12 below).

On June 10, 2022, the Company sold 87,121 shares of common stock at a sales price of $ 1.66 per share via an ongoing “at the market offering” (the “ATM Offering”) for net proceeds of $ 141,000 , which includes $ 4,000 in commission fees.

The Company also incurred $ 106,000 in initial and subsequent legal and audit fees for registration and placement of the ATM Offering.

The ATM Offering was made pursuant to the terms of that certain November 17, 2021, Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth Capital”, or the “Agent”).

Pursuant to the Sales Agreement the Company agreed to pay the sales agent a commission of 3.0 % of the gross sales price of any shares sold under the Sales Agreement, less reimbursement of the first $ 40,000 of such gross proceeds.

The Company also provided the Agent with customary indemnification rights and has agreed to reimburse the sales agent for certain specified expenses up to $ 25,000 .

Sales under the Sales Agreement were to be made under the Company’s Form S-3 shelf registration statement, which has now expired, and as such, the Company is not currently eligible to sell any additional securities under the Sales Agreement and, accordingly, was terminated by the Company effective March 15, 2024.

NOTE 12 – SHARE-BASED COMPENSATION

2021 Incentive Plan

On September 1, 2021, the shareholders of the Company approved the 2021 Equity Incentive Plan (the “2021 Incentive Plan”), which was previously approved by the Board of Directors on July 11, 2021 and authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, performance shares and other securities as described in greater detail in the 2021 Incentive Plan, to the Company’s employees, officers, directors and consultants.

A total of a maximum of 8,000,000 shares of common stock are eligible to be issued under the 2021 Incentive Plan.

On September 1, 2021, the shareholders of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”), which was previously approved by the Board of Directors on July 11, 2021 and authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, performance shares and other securities as described in greater detail in the 2021 Incentive Plan, to the Company’s employees, officers, directors and consultants.

The 2021 Incentive Plan was amended on August 29, 2024 to increase the number of shares reserved for issuance under the 2021 Incentive Plan by 5,000,000 to 13,000,000 shares of common stock.

As of December 31, 2024, 5,145,000 shares have been issued as restricted stock, and 1,310,000 shares are subject to issuance upon exercise of issued and outstanding options.

4 unchanged sentences

The Company is not eligible to grant any additional awards under the 2012 Incentive Plan.

PEDCO 2012 Equity Incentive Plan

As a result of the July 27, 2012 merger by and between the Company, Blast Acquisition Corp., a wholly-owned Nevada subsidiary of the Company (“MergerCo”), and Pacific Energy Development Corp., a privately-held Nevada corporation pursuant to which MergerCo was merged with and into PEDCO, with PEDCO continuing as the surviving entity and becoming a wholly-owned subsidiary of the Company, in a transaction structured to qualify as a tax-free reorganization (the “Merger”), the Company assumed the PEDCO 2012 Equity Incentive Plan (the “PEDCO Incentive Plan”), which was adopted by PEDCO on February 9, 2012.

The PEDCO Incentive Plan authorized PEDCO to issue an aggregate of 100,000 shares of common stock in the form of restricted shares, incentive stock options, non-qualified stock options, share appreciation rights, performance shares, and performance units under the PEDCO Incentive Plan.

As of December 31, 2023, there were no outstanding options, and 55,168 shares of the Company’s restricted common stock have been granted under this plan (all of which were granted by PEDCO prior to the closing of the merger with the Company, with such grants being assumed by the Company and remaining subject to the PEDCO Incentive Plan following the consummation of the merger).

The Company is not eligible to grant any additional awards under the PEDCO Incentive Plan.

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award over the vesting period.

On January 23, 2023, an aggregate of 1,250,000 shares of restricted common stock were granted to officers of the Company under the Company’s 2021 Equity Incentive Plan.

The grant of the 1,250,000 shares of restricted common stock vest as follows:

On January 26, 2024, restricted stock awards were granted to officers and employees of the Company for an aggregate of 2,105,000 shares of the Company’s restricted common stock, under the Company’s 2021 Plan.

The grant for the 2,105,000 shares of restricted common stock vest as follows:

33.3% vest each subsequent year from the date of grant contingent upon the recipient’s continued service with the Company.

These shares had a total fair value of $ 1,363,000 based on the market price on the issuance date.

On August 31, 2023, an aggregate of 210,000 restricted stock awards were granted to two board members under the Company’s 2021 Equity Incentive Plan.

These shares have a total fair value of $ 1,426,000 based on the market price on the grant date.

On August 29, 2024, an aggregate of 210,000 restricted stock awards were granted to two board members under the Company’s 2021 Plan.

The grant of the 210,000 shares of restricted common stock vest as follows:

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These shares have a total fair value of $ 184,000 , based on the market price on the grant date.

On January 25, 2022, an aggregate of 1,200,000 shares of restricted common stock were granted to officers of the Company, under the Company’s 2021 Equity Incentive Plan.

On May 24, 2024, 70,000 shares of restricted common stock were forfeited due to an employee termination.

As a result, these shares were canceled, and the shares once again became eligible for future awards under the Company’s 2021 Plan.

On January 23, 2023, an aggregate of 1,250,000 shares of restricted common stock were granted to officers of the Company under the Company’s 2021 Plan.

The grant of the 1,250,000 shares of restricted common stock vest as follows:

33.3% vest each subsequent year from the date of grant, contingent upon the recipient’s continued service with the Company (of which the first tranche has fully vested).

These shares have a total fair value of $ 1,404,000 based on the market price on the issuance date.

On August 25, 2022, restricted stock awards were granted to three board members for an aggregate of 240,000 shares of the Company’s restricted common stock, under the Company’s 2021 Equity Incentive Plan.

33.3% vest each subsequent year from the date of grant, contingent upon the recipient’s continued service with the Company.

These shares had a total fair value of $ 1,363,000 based on the market price on the issuance date.

On August 31, 2023, an aggregate of 210,000 restricted stock awards were granted to two board members under the Company’s 2021 Plan.

The grant of the 210,000 shares of restricted common stock vest as follows:

100% of 170,000 shares and 100% of 70,000 shares vesting on July 12, 2023 and September 27, 2023, respectively , contingent upon each recipient’s continued service with the Company (all of which have vested).

100% of 125,000 shares and 100% of 85,000 shares vesting on July 12, 2024 and September 27, 2024, respectively , contingent upon each recipient’s continued service with the Company.

These shares have a total fair value of $ 200,000 based on the market price on the grant date.

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The remaining amount of unamortized stock-based compensation expense related to restricted stock at December 31, 2024 and 2023 was $ 807,000 and $ 819,000 , respectively.

On January 23, 2023, the Company granted options to purchase an aggregate of 540,000 shares of common stock to various Company employees at an exercise price of $ 1.09 per share under the Company’s 2021 Equity Incentive Plan.

On January 26, 2024, the Company granted options to purchase an aggregate of 460,000 shares of common stock to various Company employees at an exercise price of $ 0.6775 per share under the Company’s 2021 Plan.

The options have a term of five years and fully vest in January 2027, with 33.3% vesting each subsequent year from the date of grant, contingent upon the recipient’s continued service with the Company .

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(1) a discount rate of 4.04 % based on the applicable US Treasury bill rate, (2) expected term of 3.5 years, (3) expected volatility of 104 % based on the trading history of the Company, and (4) zero expected dividends.

During the period ended December 31, 2023, 315,333 options expired unexercised.

On January 25, 2022, the Company granted options to purchase an aggregate of 520,000 shares of common stock to various Company employees at an exercise price of $ 1.17 per share.

The options have a term of five years and fully vest on January 2025, with 33.3% vesting each subsequent year from the date of grant, contingent upon the recipient’s continued service with the Company .

During the period ended December 31, 2024, 256,667 options were rescinded due to an employee termination.

As a result, these options once again became eligible for future awards under the Company’s Amended and Restated 2012 and 2021 Plans.

The options have a term of five years and fully vest in January 2026, with 33.3% vesting each subsequent year from the date of grant, contingent upon the recipient’s continued service with the Company .

The aggregate fair value of the options on the date of grant, using the Black-Scholes model, was $ 429,000 .

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(1) a discount rate of 3.61 % based on the applicable US Treasury bill rate, (2) expected term of 3.5 years, (3) expected volatility of 113 % based on the trading history of the Company, and (4) zero expected dividends.

During the period ended December 31, 2022, 190,000 options were rescinded due to an employee termination.

As a result, these options once again became eligible for future awards under the Company’s Amended and Restated 2012 and 2021 Equity Incentive Plans.

An additional 45,768 options expired unexercised.

During the period ended December 31, 2023, 315,333 options expired unexercised.

During the year ended December 31, 2024 and 2023, the Company recognized stock option-based compensation expense related to options of $ 278,000 and $ 422,000 , respectively.

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The calculation of earnings per share for the years ended December 31, 2024 and December 31, 2023 were as follows (amounts in thousands, except share and per share data):

(As Restated)

Weighted average common shares – basic

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Earnings per share – basic

Earnings (loss) per share – diluted

Earnings per share – diluted

For the years ended December 31, 2024 and 2023, share equivalents related to options to purchase 1,375,667 and 1,632,334 shares of common stock, respectively, were excluded from the computation of diluted net income per share as the inclusion of such shares would be anti-dilutive.

NOTE 14 – INCOME TAXES

Due to the Company’s net losses, there were no provisions for income taxes for the years ended December 31, 2023, and 2022.

In conjunction with the restatement for DD&A, we also restated certain balances in the net deferred tax asset / deferred tax liability schedule to correct an additional error.

The components of the income tax expense (benefit) for the years ended December 31, 2024, and 2023, respectively, are as follows:

(As Restated)

Total current expense/(benefit)

Total deferred tax expense/(benefit)

Income tax expense (benefit)

The income tax expense (benefit) reported in our consolidated statement of operations is different from the federal income tax expense (benefit) computed using the federal statutory rate.

The following table reconciles the U.S.

federal statutory income tax rate in effect for the years ended December 31, 2023, and 2022, and the Company’s effective tax rate:

federal statutory income tax

State and local income tax, net of benefits

Amortization of debt discount

Meals & Entertainment

Other Income – PPP Loan

Officer life insurance and D&O insurance

Stock-based compensation

Tax rate changes and other

Valuation allowance for deferred income tax assets

Effective income tax rate

Deferred income tax assets as of December 31, 2023, and 2022 are as follows (in thousands):

Deferred Tax Assets

Difference in depreciation, depletion, and capitalization methods – oil and natural gas properties

Interest Expense - PPP Loan

Lease Liability

Gain/Loss from sale of FA and/or O&G properties

Stock options - NQ

Stock-Based Compensation

Net operating loss – federal taxes

Net operating loss – state taxes

Total deferred tax asset

Less valuation allowance

Total deferred tax assets

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all deferred assets will not be realized.

federal statutory income tax rate in effect for the years ended December 31, 2024, and December 31, 2023 (in thousands):

(As Restated)

Statutory expense/(benefit)

State tax, net

Permanent differences

Other adjustments

Change in valuation allowance

Income tax expense (benefit)

In 2024, the Company recorded a $ 12.8 million tax benefit primarily due to the release of the full valuation allowance recorded against deferred taxes in 2023.

Deferred income taxes are provided to reflect temporary differences in the tax basis of assets and liabilities and their reported amounts in the financial statements.

The tax-effected temporary differences and net operating loss (“NOL”) carryforwards that comprise our deferred income as of December 31, 2024, and 2023 taxes are as follows (in thousands):

(As Restated)

Deferred tax asset:

Net operating losses

Asset retirement obligations

Stock compensation

Right of use liability

Deferred tax asset

Valuation allowance

Deferred tax asset after valuation allowance

Deferred tax liabilities:

Oil and gas properties

Right of use asset

Deferred tax liability

Net deferred tax asset / deferred tax liability

As of December 31, 2024, and 2023, the Company had deferred tax assets of $ 12.8 million and $ 26.4 million, respectively, upon which the Company had a valuation allowance of $ 0 and $ 26.4 million, respectively.

The net change in the valuation allowance of $ 26.4 million is due to the release of the valuation allowance.

As of December 31, 2024, the Company has federal net operating loss carryforwards of approximately $ 88.4 million, which if not utilized, approximately $ 10.6 million will begin expiring in 2025 and ending 2037, respectively.

The remaining net operating losses can be carried forward indefinitely and are subject to an 80 % taxable income limitation.

In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all deferred assets will not be realized.

The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Utilization of NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code (the “Code”), as amended, as well as similar state provisions.

In general, an “ownership change” as defined by the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding return stock of a company by certain shareholders or public groups.

Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be fully realizable.

Accordingly, management has applied a full valuation allowance against its net deferred tax assets on December 31, 2023, and 2022.

The net change in the total valuation allowance from December 31, 2023, to December 31, 2022, was a decrease of $ 305,000 .

In general, an “ownership change” as defined by the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain shareholders or public groups.

Based on the available objective evidence, the Company believes it is more likely than not that the net deferred tax assets will be fully realizable based on the Company's ability to generate income in future periods.

Accordingly, the Company has recorded no valuation allowance against its net deferred tax assets on December 31, 2024.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

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The Company did not have associated accrued interest or penalties, nor was any interest expense or penalties recognized for the years ended December 31, 2023, and 2022.

Prior to the TCJA amendment, Section 174 allowed taxpayers to either immediately deduct R&E expenditures in the year paid or incurred or elect to capitalize and amortize R&E expenditures over a period of at least 60 months.

Starting after December 31, 2021, TCJA’s amendment to Section 174 requires U.S.-based and non-U.

S-based research and experimental (R&E) expenditures to be capitalized and amortized over a period of five or 15 years, respectively, for amounts paid in tax years.

Additionally, software development costs are specifically included as R&E expenditures under Section 174(c)(3) and, therefore, will be subject to the same mandatory amortization period of five or 15 years.

Currently, there are no R&E expenditure that will apply to this regulation.

As of December 31, 2023, the Company has federal net operating loss carryforwards of approximately $ 128,000,000 , which if not utilized, approximately $ 93,000,000 of which will begin expiring in 2024 and ending 2038, respectively, and $ 35,000,000 under CARES Act can be carried back up to five years but also, can be carried forward indefinitely, limited to 80 % of a given years taxable income.

The Company currently has tax returns open for examination by the Internal Revenue Service for all years, since 2019.

NOTE 15 — SEGMENT INFORMATION

Operating segments are defined as components of an enterprise for which separate financial information is available and regularly evaluated by the Chief Operating Decision Maker (“CODM”) for the purpose of making key operating decisions, allocating resources, and assessing operating performance.

The Company operates in one reportable operating segment, oil and natural gas development, exploration and production.

The Company’s oil and gas properties are managed as a whole rather than through discrete operating segments.

Financial and operational information is tracked by geographic area;

however, financial performance is assessed as a single enterprise and not on a geographic basis.

Allocation of resources is made on a project basis across the Company’s entire portfolio without regard to geographic area, and considers among other things, return on investment, current market conditions, including commodity prices and market supply, availability of services and human resources, and contractual commitments.

The Company’s Chief Executive Officer is its CODM.

The Company’s profitability measure is consolidated net income which is used to assess budgeted versus actual results and drives the Company’s operating cash flow.

The CODM reviews significant consolidated forecasts and results of operations, including return on capital, operating expenses, and cash flow when making decisions such as the allocation of capital.

The financial position, results of operations and cash flows of the Company’s reportable operating segment are consistent with the Company’s consolidated financial statements included herein.

NOTE 16 – SUBSEQUENT EVENTS

On January 26, 2024, the Company granted options to purchase an aggregate of 460,000 shares of common stock to various Company employees at an exercise price of $ 0.6675 per share under the Company’s 2021 Equity Incentive Plan.

The options have a term of five years and fully vest in January 2027, with 33.3 % vesting each subsequent year from the date of grant, contingent upon the recipient’s continued service with the Company.

On January 23, 2025, the Company granted options to purchase an aggregate of 464,000 shares of common stock to various Company employees at an exercise price of $ 0.85 per share under the Company’s 2021 Plan.

The options have a term of five years and fully vest in November 2027, with 33.3% vesting on the 10-month anniversary of the vesting commencement date, 33.3% vesting on the 22-month anniversary date of the vesting commencement and 33.4% vesting on the 34-month anniversary date of the vesting , contingent upon the recipient’s continued service with the Company.

The aggregate fair value of the options on the date of grant, using the Black-Scholes model, was $ 195,000 .

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(1) a discount rate of 4.45 % based on the applicable US Treasury bill rate, (2) expected term of 3.5 years, (3) expected volatility of 64.5 % based on the trading history of the Company, and (4) zero expected dividends.

Additionally, on January 26, 2024, restricted stock awards were granted to officers and employees of the Company for an aggregate of 2,105,000 shares of the Company’s restricted common stock, under the Company’s 2021 Equity Incentive Plan.

Additionally, on January 23, 2025, restricted stock awards were granted to officers and employees of the Company for an aggregate of 1,844,118 shares of the Company’s restricted common stock, under the Company’s 2021 Plan.

The grant for the 1,844,118 shares of restricted common stock vest as follows:

33.3 % vest each subsequent year from the date of grant contingent upon the recipient’s continued service with the Company.

33.3% vesting on the 10-month anniversary of the vesting commencement date, 33.3% vesting on the 22-month anniversary date of the vesting commencement and 33.4% vesting on the 34-month anniversary date of the vesting , contingent upon the recipient’s continued service with the Company.

These shares have a total fair value of $ 1,568,000 based on the market price on the grant date.

In addition, on January 26, 2024, after recommendation by the Compensation Committee of the Company’s Board of Directors, the Board of Directors of the Company, in connection with the Company’s annual compensation review, approved:

(A) a 5% increase of the annual base salaries for (i) Mr.

Paul Pinkston, the Company’s Chief Accounting Officer, from $160,000 to $168,000, (ii) Mr.

Douglas Schick, the President of the Company, from $290,000 to $304,500, and (iii) Mr.

Moore, the Executive Vice President, General Counsel and Secretary of the Company, from $280,000 to $294,000, all effective February 1, 2024 (none of the increases in salary were documented by written agreements or amendments);

and (B) cash bonuses for (i) Mr.

In addition, on January 23, 2025, after recommendation by the Compensation Committee of the Company’s Board of Directors, the Board of Directors of the Company, in connection with the Company’s annual compensation review, approved cash bonuses for (i) Mr.

Paul Pinkston, the Company’s Chief Accounting Officer, in the amount of $50,000, (ii) Mr.

Douglas Schick, the President of the Company, in the amount of $120,000, and (iii) Mr.

Douglas Schick, the President and newly appointed Chief Executive Officer of the Company, in the amount of $130,000, (iii) Mr.

Jody Crook, the newly appointed Chief Commercial Officer of the Company, in the amount of $100,000, and (iv) Mr.

Moore, the Executive Vice President, General Counsel and Secretary of the Company, in the amount of $120,000 .

The Company also acquired approximately 319 net lease acres in and around its existing footprint in the D-J Basin through multiple transactions in the first quarter 2024, at total acquisition costs of $ 138,000 .

In February 2025, the Company entered into a joint development agreement (“Agreement”) with a large, Denver, Colorado-based private equity-backed D-J Basin E&P Company with extensive operational experience (“Operator”), pursuant to which the parties agreed to jointly participate in the expansion and development of the Company’s Roth and Amber DSUs located in Weld County, Colorado, with the Operator paying to the Company $ 1.7 million, the Company agreeing to amend the Company’s existing Roth and Amber DSUs to increase each to 1,600 acres and transferring operatorship of the DSUs to the Operator, and the parties agreeing to jointly participate in the development of the Roth and Amber DSUs.

SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES

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During the year ended December 31, 2024, the Company’s reserves increased by 1.1 MMBoe of proved reserves.

Included in the increase, the Company had a 0.43 MMBoe increase in proved undeveloped reserves (noted below) resulting from the addition of volumes in the D-J Basin due to increased activity.

The Company also had an increase of 0.98 MMBoe in proved developed non-producing reserves resulting from wells moving from proved undeveloped to proved developed in the D-J Basin Asset and Permian Basin offset by a 0.35 MMBoe decrease in proved developed reserves related to natural decline in existing production base.

Included in the increase, the Company had a 0.95 MMBoe increase in proved undeveloped reserves (noted below) resulting primarily from the addition of volumes in the D-J Basin due to increased activity.

The Company also had an increase of 1.2 MMBoe in proved developed producing reserves related to acquisition of properties in the D-J Basin and reclassification of wells from proved developed non-producing at the end of 2023 to proved developed producing for 2024, which offset the natural decline in existing production base in the D-J Basin Asset and Permian Basin.

The following table sets forth the Company’s proved developed and undeveloped reserves at December 31, 2024 and 2023, respectively:

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For the year ended December 31, 2023, total proved undeveloped reserves (PUDs) increased by 430 MBoe to 13,372 MBoe, primarily related to the following:

Transfer of 887 MBoe from PUD to proved developed reserves in D-J Basin Asset based on total capital expenditures during 2022;

Additions related to the development of operated (3,341 MBoe) and non-operated (278 MBoe) sections in the D-J Basin;

Revisions related to expected performance increase of 1,192 MBoe in the D-J Basin Asset based on offset well results and removal of PUD locations in D-J Basin Asset based on revised development activity of 334 MBoe, and removal of PUD locations in Chaveroo and Milnesand fields of our Permian Basin Asset outside of the five-year development plan of 3,134 MBoe.

For the year ended December 31, 2023, total proved undeveloped reserves (PUDs) increased by 430 MBoe to 13,372 MBoe, primarily related to the following:

Transfer of 809 MBoe from PUD to proved developed reserves in D-J Basin (561 MBoe) and Permian Basin Asset (248 MBoe) based on total capital expenditures during 2023;

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Revisions related to increase in leasehold and minerals and expected performance increase of 1,447 MBoe in the D-J Basin Asset based on offset well results, and decrease of 3,311 MBoe related to removal of PUD locations in Chaveroo of our Permian Basin Asset outside of the five-year development plan and decrease of 489 Mboe primarily related to reduced working interest in a recently developed unit.

For the year ended December 31, 2024, total proved undeveloped reserves (PUDs) increased by 955 MBoe to 14,327 MBoe, primarily related to the following:

Additions of 3,796 MBoe related to the development of operated and non-operated sections in the D-J Basin (3,256 MBoe) and operated sections in Permian Basin (540 MBoe);

Revisions of 2,841 Mboe related to increase in leasehold and minerals and expected performance increase of 586 MBoe in the D-J Basin Asset based on offset well results, and decrease of 3,427 MBoe related to removal of PUD locations in D-J Basin (1970 Mboe) and Chaveroo of our Permian Basin Asset (1457 MBoe) outside of the five-year development plan.

There was no transfer of proved undeveloped to proved developed reserves in 2024 since projects scheduled to be completed in 2024 were delayed to future periods and replaced with participation in wells through acquired leasehold properties in the D-J Basin.

We expect to spend an aggregate of $170–$200 million developing proved undeveloped reserves through December 31, 2028.

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We expect to fund these development costs with cash from operations and cash on hand, supplemented as needed by proceeds from asset sales, private and public offerings, credit availability and equity infusions or loans (which may be convertible) made available from Dr.

Kukes, the Company’s Chief Executive Officer, and director, or entities which he controls, which funding Dr.

Kukes, the Company’s former Chief Executive Officer and newly appointed Executive Chairman of the Company's Board of Directors, or entities which he controls, which funding Dr.

Kukes is under no obligation to provide.

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The following table sets forth the capitalized costs relating to the Company’s crude oil and natural gas producing activities at December 31, 2024 and 2023 (in thousands):

(As Restated)

Proved oil and gas properties

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The following table sets forth the results of operations for oil and natural gas producing activities for the years ended December 31, 2024 and 2023 (in thousands):

(As Restated)

Crude oil and natural gas revenues

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Discount to present value at 10% annual rate

Standardized measure of discounted future net

cash flows relating to proved oil and gas

Standardized measure of discounted future net cash flows relating to proved oil and gas reserves

Changes in Standardized Measure of Discounted Future Net Cash Flows.

15 unchanged sentences

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 8. Financial Statements and Supplementary Data