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Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-19 · 724 added, 448 removed, 40 unchanged (97% of the section changed)

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

should read the following discussion and analysis of our financial condition and results of operations for the fiscal years ended December

31, 2023 and 2022 together with our consolidated financial statements and related notes and other financial information appearing in

this Annual Report.

The discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions

concerning events and financial trends that may affect our future operating results or financial position.

Actual results and the timing

of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those

described under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing

elsewhere in the Annual Report.

We are an independent oil and

gas company focused on the acquisition and development of crude oil, natural gas and NGLs.

We currently hold attractive acreage in the

DJ Basin that our experienced management team intends to develop, deploying next-generation technology and techniques in an environmentally

efficient manner.

In addition to growing production through our drilling operations, we also seek to grow our business through accretive

acquisitions, focusing on assets with the following criteria:

(i) producing reserves, with opportunities to add accretive, undeveloped

bolt-on acreage;

(ii) ample, high rate-of-return inventory of drilling locations that can be developed with cash flow reinvestment;

strong well-level economics;

following discussion and analysis of our financial condition and results of operations for the year ended December 31, 2024 and 2023

should be read in conjunction with our consolidated financial statements and related notes to those financial statements and other financial

information appearing in this Annual Report.

discussion includes forward–looking statements based upon current expectations that involve risks and uncertainties, such as our

plans, objectives, expectations and intentions.

Actual results and the timing of events could differ materially from those anticipated

in these forward–looking statements as a result of a number of factors, including those described under the headings “Risk

Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in the Annual Report.

Except as otherwise indicated or required by the context, references to the “Company,” “we,” “us,”

“our” or similar terms refer to Prairie Operating Co.

are an independent oil and gas company focused on the acquisition and development of crude oil, natural gas, and NGLs.

and operations are strategically located in the oil region of rural Weld County, within the DJ Basin.

We believe the DJ Basin to be one

of the premier resource plays in the U.S.

Weld County boasts some of the lowest break-even prices in the U.S., and has a long production

history that has proven and consistent results.

The productivity of this resource is demonstrated by the integral role that Weld County

holds in Colorado’s energy economy, having produced 82% of Colorado’s oil production as of December 2024.

We seek to deliver energy in an environmentally efficient manner by deploying

next-generation technology and techniques.

In addition to growing

production through our drilling operations, we also seek to grow our business through accretive acquisitions, focusing on assets with

the following criteria:

(i) producing reserves, with opportunities to add accretive, undeveloped bolt–on acreage;

(ii) ample, high

rate–of–return inventory of drilling locations that can be developed with cash flow reinvestment;

(iii) strong well–level

(iv) liquids–rich assets;

and (v) accretive valuation.

of December 31, 2023, all of the Company’s E&P assets were acquired in the Exok Transaction (as described herein) and Exok

Option Purchase (as defined herein) and consist of certain oil and gas leasehold interests with no existing oil and gas production or

In February 2024, we acquired the Genesis Bolt-on Assets offsetting our existing assets.

We refer to the assets acquired in

these transactions as our “Genesis Assets.” In all, the total Genesis Assets include 24,351 net mineral acres in, on and

under 37,985 gross acres.

In addition, in January 2024, we entered into a definitive agreement with NRO to acquire producing acreage

and PUDs that are complementary to our existing acreage, which we refer to as the “Central Weld Assets.” We have no current

drilling or completion operations.

As such, our current activities are focused on obtaining requisite permits to begin drilling wells

on our Genesis Assets, as well as funding and closing the NRO Acquisition, which we anticipate in the first half of 2024.

also engaged in cryptocurrency mining operations and these operations accounted for all of our revenues in 2023.

In January 2024, we

divested all of our cryptocurrency mining assets.

See “ Business—Recent Developments ” for more information regarding

the NRO and Genesis Bolt-On Assets acquisitions, as well as the sale of our Cryptocurrency mining operations.

Merger, Exok Transaction and Related Events

May 3, 2023, the Company completed the Merger, pursuant to which, among other things, Merger Sub merged with and into Prairie LLC,

with Prairie LLC surviving and continuing to exist as a Delaware limited liability company and a wholly owned subsidiary of the

Upon consummation of the Merger, the Company changed its name from “Creek Road Miners, Inc.” to “Prairie

Operating Co.” The Merger was accounted for as a reverse asset acquisition;

as a result, our cryptocurrency mining operations

are reported as commencing on May 3, 2023, concurrent with the Merger and prior revenues and expenses of Creek Road related to

cryptocurrency mining activities are not presented in this “ Management’s Discussion and Analysis of Financial

Condition and Results of Operations ” or the accompanying financial statements.

connection with the Merger, we acquired oil and gas leases covering approximately 3,158 net mineral acres in, on and under 4,494 gross

acres from Exok for $3.0 million.

To fund the Exok Transaction, the Company sold an aggregate of approximately $17.4 million of Series

D Preferred Stock with a stated value of $1,000 per share and convertible into shares of common stock at a price of $5.00 per share,

Series A warrants to purchase 3,475,250 shares of common stock at an exercise price of $6.00 per share (“Series D A Warrants”)

and Series B warrants to purchase 3,475,250 shares of common stock at an exercise price of $6.00 per share (“Series D B Warrants”)

in a private placement (the “Series D PIPE”) pursuant to securities purchase agreements, dated May 3, 2023, by and between

the Company and each of the investors thereto (the “Series D PIPE Investors”).

August 15, 2023, the Company exercised its option under the Exok Transaction to purchase approximately 20,328 net mineral acres in, on

and under approximately 32,695 additional gross acres from Exok (the “Exok Option Assets”).

The Company acquired this acreage

for $25.3 million consisting of (i) $18.0 million in cash (the “Cash Consideration”) to Exok, (ii) issuance of 670,499 shares

of the Company’s common stock and warrants to purchase 670,499 shares of common stock (“Exok Warrants”) to affiliates

of Exok, and (iii) direct transaction costs.

The Cash Consideration was funded from the Series E preferred issuance (see below).

Company received an aggregate of $20.0 million in proceeds from the Series E private placement (the “Series E PIPE”) in exchange

for 20,000 shares of Series E preferred stock, par value $0.01 per share (“Series E Preferred Stock”) along with 39,614 shares

of the Company’s common stock, and Series A warrants to purchase 4,000,000 shares of the Company’s common stock (the “Series

E A Warrants”) and Series B warrants to purchase 4,000,000 shares of common stock (the “Series E B Warrants” and together

with the Series E A Warrants, the “Series E PIPE Warrants”).

“ Business—Background ” for more information regarding the Merger, the Exok Transaction and related events in

October 16, 2023, the Company effected the Reverse Stock Split at an exchange ratio of 1:28.5714286.

Unless otherwise noted, all per

share and share amounts presented herein have been retroactively adjusted for the effect of the Reverse Stock Split.

Cryptocurrency

Mining Operations and Sale

the year ended December 31, 2023, we generated all of our revenue through our cryptocurrency mining activities.

During 2023, our cryptocurrency

mining activities consisted of engaging Atlas Power Hosting, LLC (“Atlas”) to operate our cryptocurrency mining assets, some

of which were owned by Creek Road prior to the Merger and others that we acquired following the Merger.

Pursuant to the Atlas MSA, we

did not own, control or take custody of Bitcoin during 2023;

rather, Atlas retained all Bitcoin rewards and remitted net revenue from

cryptocurrency mining to us in the form of US dollars pursuant to the Atlas MSA.

Since the Merger was accounted for as a reverse asset

acquisition, our cryptocurrency mining operations are reported as commencing on May 3, 2023, concurrent with the Merger and prior revenues

and expenses of Creek Road related to cryptocurrency mining activities are not presented in this “ Management’s Discussion

and Analysis of Financial Condition and Results of Operations ” or the accompanying financial statements.

January 23, 2024, we completed the Crypto Sale, pursuant to which we sold all of our cryptocurrency assets and assigned our interests

under the Atlas MSA to the Crypto Purchaser.

Accordingly, we do not expect to engage in cryptocurrency mining activities in 2024 or thereafter.

This disposition did not meet the requirements of held for sale classification at December 31, 2023, but will require presentation as

discontinued operations in prospective financial statements.

We expect to recognize a loss of $1.1 million in conjunction with this disposition.

See “ Business—Sale of Crypto Assets ” for more information about the sale of our cryptocurrency assets and assignment

of the Atlas MSA.

January 11, 2024, we entered into the NRO Agreement, to acquire the Central Weld Assets for total consideration of $94.5 million, subject

to certain closing price adjustments and other customary closing conditions.

The Purchase Price consists of $83.0 million in cash and

$11.5 million in deferred cash payments.

The Company deposited $9 million of the Purchase Price into an escrow account on January 11,

2024, which will be released to Seller upon the earlier of the closing date and August 15, 2024 (the “Outside Date”).

of the Deposit are subject to earlier release under certain circumstances if the closing has not occurred on or prior to June 17, 2024.

See “ Business—Recent Developments—NRO Acquisition ” for a description of the NRO Agreement.

fund the transaction through a combination of public and/or private issuance of common stock, cash on hand, and proceeds from existing

warrant exercises.

While we expect to close the NRO Acquisition in the first half of 2024, such acquisition is subject to a number of

closing conditions.

Satisfaction of some of these conditions is beyond our control.

If these conditions are not satisfied or waived,

the NRO Acquisition will not be completed.

See “ Risk Factors—Risks Related to the NRO Acquisition.

Company had a net loss of $79.1 million for the year ended December 31, 2023 and working capital (defined as current assets less current

liabilities) of $8.1 million at December 31, 2023.

Cash and cash equivalents totaled $13.0 million at December 31, 2023.

working capital decreased upon the $9.9 million deposit payment associated with the NRO Agreement and acquisition of the Genesis Bolt-on

Assets and is expected to further decrease in the future due to expenses incurred in connection with our business and until revenue is

recognized from our E&P business and/or we raise additional capital through the exercise of existing warrants or through the public

and/or private markets.

We cannot predict if we will be profitable in the near future, or ever.

We may continue to incur losses for an

indeterminate period of time and may be unable to achieve profitability.

An extended period of losses and negative cash flow may prevent

us from successfully operating and expanding our business.

See “— Liquidity

and Capital Resources , ” “ Risk Factors—We will require significant additional

capital to fund our growing operations;

we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations ,”

“ Risk Factors—We have historically incurred significant losses, and may be unable to generate profitability.

to successfully operate and expand our business is dependent on the consummation of the NRO Acquisition or our ability to raise additional

capital to support our drilling program on our existing assets,” and “ Risk Factors—We will require significant

additional capital to fund our growing operations;

we may not be able to obtain sufficient capital and may be forced to limit the scope

of our operations ” for more information.

of December 31, 2024, our E&P assets consist of our Central Weld Assets, Genesis and Genesis Bolt–on Assets, and the Exok

Option Purchase assets.

Our Central Weld Assets were acquired from NRO in October 2024 and included 26 revenue producing oil and

natural gas wells.

Our total Genesis Assets include approximately 18,100 net leasehold acres in, on and under approximately 31,000 gross

acres and our Central Weld Assets include approximately 5,640 net leasehold acres, on and under approximately 6,000 gross

We commenced drilling wells on our Genesis Bolt-on Assets in the third quarter of 2024 and all eight wells began producing in

February 2025.

Bayswater Acquisition

February 6, 2025, we and certain of our subsidiaries entered into the Bayswater PSA with Bayswater, pursuant to which we agreed to acquire

the Bayswater Assets from Bayswater for a purchase price of $602.8 million, subject to certain closing price adjustments.

The Bayswater Acquisition has an outside closing date of March 15, 2025,

subject to customary closing conditions, with an economic effective date of December 1, 2024.

However, there can be no assurance that a closing will occur.

The Bayswater PSA contains customary representations, warranties and covenants of us and Bayswater for a transaction of this nature.

Program Launch

the third quarter of 2024, we commenced our initial drilling program, starting with an 8-well pad on Shelduck South, part of the

Genesis Bolt–on Assets acquired in February 2024.

The Shelduck South development consists of eight two-mile lateral wells

across 1,115 gross leasehold acres, targeting the Niobrara B and C formations.

We spud our first well on September 5, 2024 and all

eight wells began producing in February 2025.

January 11, 2024, we entered into the NRO Agreement to acquire the Central Weld Assets, located in the DJ Basin in Weld County, Colorado

for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions.

Price consisted of $83.0 million in cash and $11.5 million in deferred cash payments.

Pursuant to the NRO Agreement, we deposited $9.0

million of the Purchase Price into an escrow account on January 11, 2024.

August 15, 2024, we and NRO agreed to amend certain terms of the NRO Agreement, pursuant to which, total consideration of the NRO

Acquisition was reduced to $84.5 million in cash, subject to certain closing price adjustments and other customary closing

conditions, and the parties agreed to remove the deferred cash payments.

Additionally on August 15, 2024, $6.0 million of the

Deposit was released to NRO and the remaining $3.0 million was returned to us.

On October 1, 2024, we closed the NRO Acquisition and paid $49.6 million

to the sellers in cash, using cash on hand, the proceeds from the issuance of Common Stock, and a portion of the proceeds from the issuance

of the Senior Convertible Note.

We completed the final settlement with NRO in December 2024, which resulted in a final purchase price

of $55.5 million.

On December 16, 2024, we, as borrower, entered into a reserve-based credit

agreement with Citibank, N.A.

(“Citi”), as administrative agent and the financial institutions party thereto (the “Credit

Facility Agreement”), which has a maximum credit commitment of $1.0 billion and is set to mature on December 16, 2026 (collectively,

the “Credit Facility”).

The Credit Facility is guaranteed by all of our restricted subsidiaries and is secured by a first-priority

security interest on substantially all of our oil and natural gas properties and substantially all of our personal property assets, subject

to customary exceptions.

As of December 31, 2024, the Credit Facility had a borrowing base and an aggregate elected commitment of $44.0

million and a $5.0 million sublimit for the issuance of letters of credit.

The borrowing base is subject to semi-annual redeterminations

based upon the value of our oil and gas properties as determined in a reserve report dated as of January and July of each year, subject

to certain interim redeterminations.

of December 31, 2024, we had $28.0 million of revolving borrowings and no letters of credit outstanding under the Credit Facility,

resulting in $7.2 million of availability for future borrowings and letters of credit.

Refer to Liquidity and Capital Resources -

Significant Sources of Liquidity below for a further discussion of the Credit Facility.

On February 3, 2025, we entered into the

First Amendment to the Credit Facility Agreement (the “First Amendment”), which among other things, increased the

borrowing base and the aggregate elected commitments to $60.0 million.

Equity Purchase Agreement

September 30, 2024, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD., a Cayman

Islands exempt limited company (“Yorkville”), whereby, subject to certain conditions, we have the right, not the

obligation, to sell to Yorkville up to $40.0 million shares of Common Stock, at any time and in the amount as specified in the

Company’s request (“Advance Notice”), during the commitment period commencing on September 30, 2024 (the

“SEPA Effective Date”) and terminating on September 30, 2026.

Each issuance and sale of shares by us to Yorkville

pursuant to the SEPA (“Advance”) is subject to a maximum limit equal to 100% of the aggregate volume traded of our

Common Stock on the Nasdaq Stock Market during the five trading days immediately prior to the date of the Advance Notice.

will be issued and sold to Yorkville at a per share price equal to 97% of the lowest daily volume weighted average price of Common

Stock for three consecutive trading days commencing on the trading day immediately following Yorkville’s receipt of an Advance

On September 30, 2024, pursuant to the SEPA, we paid Yorkville a structuring fee of $25,000 and a Commitment Fee by issuing

Yorkville 100,000 shares of Common Stock.

Our right to sell shares to Yorkville under the SEPA was contingent upon us having an

effective registration statement, which was declared effective by the SEC on December 20, 2024.

Refer to Liquidity and Capital

Resources - Significant Sources of Liquidity below for a further discussion of the SEPA.

Convertible Note

September 30, 2024, Yorkville advanced an initial $15.0 million (the “Pre-Paid Advance”) to us and we issued a

convertible promissory note (the “Senior Convertible Note”), with an interest rate of 8.00% and a maturity date of

September 30, 2025.

Our obligations with respect to the Pre-Paid Advance and under the Senior Convertible Note are guaranteed by

Prairie LLC, a subsidiary of the Company, and Prairie Holdco, a subsidiary of the Company, pursuant to a global guaranty agreement

entered into by Prairie LLC and Prairie Holdco in favor of Yorkville on September 30, 2024.

Yorkville may convert the Pre-Paid

Advance into shares of Common Stock at any time at the Conversion Price.

We may, at any time, redeem all or a portion of the amounts

outstanding under the Senior Convertible Note at 105% of the principal amount thereof, plus accrued and unpaid interest.

In December 2024, and in conjunction with the

Credit Facility Agreement, we made a $3.7 million payment on the Senior Convertible Note, resulting in a principal balance of $11.3

million as of December 31, 2024.

Additionally, in January and February 2025, Yorkville converted the remaining $11.3 million of the Senior

Convertible Note in exchange for 2.1 million shares of Common Stock.

Refer to Liquidity and Capital Resources - Significant

Sources of Liquidity below for a further discussion of the Senior Convertible Note.

Promissory Note and Subordinated Note Warrants

On September 30, 2024, we entered into a subordinated promissory note (the

“Subordinated Note”) with First Idea Ventures LLC and The Hideaway Entertainment LLC (together, the “Noteholders”),

in a principal amount of $5.0 million, with a maturity of December 31, 2025.

The Subordinated Note has an interest rate of 10.00% and

the Noteholders are entitled to a minimum return on capital of up to 2.0x upon the repayment, prepayment or acceleration of the obligations,

or the occurrence of certain other triggering events under the Subordinated Note.

Pursuant to the terms of the Subordinated Note, we issued

to the Noteholders warrants (the “Subordinated Note Warrants”) to purchase up to 1,141,552 shares of Common Stock, vesting

in tranches based on the date of repayment of the Subordinated Note.

December 2024, and in conjunction with the Credit Facility Agreement, we made a $1.8 million payment on the Subordinated Note,

resulting in a principal balance of $3.2 million as of December 31, 2024.

Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below

for a further discussion of the Subordinated Note and Subordinated Note Warrants.

Affecting the Comparability of Financial Results

discussed above, on January 11, 2024, we entered into the NRO Agreement to acquire the Central Weld Assets, located in the DJ Basin in

Weld County, Colorado for total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing

Pursuant to the NRO Agreement, we deposited $9.0 million of the Purchase Price into an escrow account on January 11, 2024.

August 15, 2024, we and NRO agreed to amend certain terms of the NRO Agreement, pursuant to which, total consideration of the NRO

Acquisition was reduced to $84.5 million in cash, subject to certain closing price adjustments and other customary closing

Additionally on August 15, 2024, $6.0 million of the Deposit was released to NRO and the remaining $3.0 million was

returned to us.

October 1, 2024, we closed the NRO Acquisition and paid $49.6 million to the sellers in cash, using cash on hand, the proceeds from the

issuance of Common Stock, and a portion of the proceeds from the issuance of the Senior Convertible Note.

We completed the final settlement

with NRO in December 2024, which resulted in a final purchase price of $55.5 million.

As previously discussed, we acquired our cryptocurrency mining operations

in May 2023, concurrent with the Merger.

On January 23, 2024, we sold all of our Mining Equipment for consideration consisting of (i)

$1.0 million in cash and (ii) $1.0 million in deferred cash payments, to be paid out of (a) 20% of the monthly net revenues received by

the buyer associated with or otherwise attributable to the Mining Equipment until the aggregate amount of such payments equals $250,000

and (b) thereafter, 50% of the monthly net revenues received by the buyer associated with or otherwise attributable to the Mining Equipment

until the aggregate amount of such payments equals the Deferred Purchase Price, plus accrued interest.

As of December 31, 2024, we have

received $0.3 million of the Deferred Purchase Price.

oil, natural gas, and NGL prices are the most significant factors impacting our results of operations, continued price variations can

have a material impact on our financial results and capital expenditures.

In an effort to reduce the impact of price volatility, and

in compliance with requirements under our Credit Facility Agreement, we enter into derivative contracts to economically hedge a portion

of our estimated production from our proved, developed, producing oil and natural gas properties against adverse fluctuations in commodity

By doing so, we believe we can mitigate, but not eliminate, the potential negative effects of decreases in oil and natural gas

prices on our cash flows from operations.

However, our hedging activity could reduce our ability to benefit from increases in oil and

natural gas prices.

Further, we could sustain losses to the extent our oil and natural gas derivative contract prices are lower than

market prices and, conversely, we could recognize gains to the extent our oil and natural gas derivative contract prices are higher than

market prices.

Refer to Results of Operations - Other income and expenses below for a discussion of our recognized gains or losses

on derivative contracts.

of December 31, 2024, we had the following outstanding crude oil and natural gas derivative contracts in place, which settle monthly

and are indexed to NYMEX West Texas Intermediate and NYMEX Henry Hub, respectively:

January 1, 2025

December 31, 2025

January 1, 2026

December 31, 2026

January 1, 2027

December 31, 2027

January 1, 2028

December 31, 2028

Crude Oil Swaps:

Notional volume (Bbls)

Weighted average price ($/Bbl)

Natural Gas Swaps:

Notional volume (MMBtus)

Weighted average price ($/MMBtu)

of Operations

of inception)

Operating costs and

(35,137,222 )

from operations

$ (33,591,430 )

from operations

from operations increased $33.2 million for the year ended December 31, 2023, compared to the period from June 7, 2022 (date of inception)

through December 31, 2022.

The $1.5 million increase in cryptocurrency mining revenues resulting from the commencement of such operations

upon the Merger was more than offset by a $34.7 million increase in operating costs and expenses, as discussed below.

Costs and Expenses

of inception)

Cryptocurrency

Depreciation, depletion

and amortization

General and administrative

Impairment of cryptocurrency

mining equipment

Production, and Average Realized Price

following table presents the components of our revenue, production, and average realized sales price for the periods indicated:

Year Ended December 31,

Revenues (in thousands)

Natural gas revenue

Total revenues

Natural gas (MMcf)

Total production (MBoe)

Average sales price (excluding effects of derivatives):

Oil (per MBbls)

Natural gas (per MMcf)

NGL (per MBbls)

Average price (per MBoe)

revenue and production .

For the year ended December 31, 2024, our oil production was 96.1 MBbls resulting in oil revenue of $6.6

million and an average realized price of $68.60 per barrel.

All of our oil revenue for the year ended December 31, 2024 was derived from

the assets acquired in the NRO Acquisition, which closed on October 1, 2024.

We did not have any oil revenue prior to the NRO Acquisition.

gas revenue and production .

For the year ended December 31, 2024, our natural gas production was 245.1 MMcf resulting in natural

gas revenue of $0.6 million and an average realized price of $2.25 per MMcf.

All of our natural gas revenue for the year ended December

31, 2024 was derived from the assets acquired in the NRO Acquisition, which closed on October 1, 2024.

We did not have any natural gas

revenue prior to the NRO Acquisition.

revenue and production .

For the year ended December 31, 2024, our NGL production was 33.0 MBbls resulting in NGL revenue of $0.8

million and an average realized price of $24.03 per MBbl.

All of our NGL revenue for the year ended December 31, 2024 was derived from

the assets acquired in the NRO Acquisition, which closed on October 1, 2024.

We did not have any NGL revenue prior to the NRO Acquisition.

The following table presents the components of our operating expenses for

the periods indicated:

Year Ended December 31,

(In thousands, except per Boe amounts)

Lease operating expenses

Gathering, transportation, and processing

Ad valorem and production taxes

Depreciation, depletion, and amortization

Accretion of asset retirement obligation

Exploration expenses

General and administrative expenses

Total operating expenses

Operating expenses per Boe:

Lease operating expenses

Gathering, transportation, and processing

Ad valorem and production taxes

Depreciation, depletion, and amortization

Accretion of asset retirement obligation

Exploration expenses

General and administrative expenses

Total operating expenses

A per Boe calculation is not meaningful due

to a zero-value denominator.

operating expenses .

costs and expenses increased $34.7 million for the year ended December 31, 2023 compared to the period from June 7, 2022 (date of inception)

to December 31, 2022.

Cryptocurrency

The increase in cryptocurrency mining costs of $0.5 million for the year ended December 31, 2023 over the period from June

7, 2022 (date of inception) to December 31, 2022, respectively, is due to the commencement of cryptocurrency operations upon the Merger.

For the year ended December 31, 2024, lease operating expenses (“LOE”)

increased $1.3 million compared to the year ended December 31, 2023, fully driven by LOE recognized for the properties acquired in the

NRO Acquisition, which closed on October 1, 2024.

Gathering, transportation, and processing expenses .

For the year ended December 31, 2024, gathering, transportation, and processing expenses increased $0.9 million compared to the year ended

December 31, 2023, fully driven by the gathering, transportation, and processing expenses recognized for the properties acquired in the

NRO Acquisition, which closed on October 1, 2024.

valorem and production taxes.

For the year ended December 31, 2024, ad valorem and production taxes increased $0.6 million compared

to the year ended December 31, 2023, fully driven by the ad valorem and production taxes recognized for the properties acquired in the

NRO Acquisition, which closed on October 1, 2024.

Depreciation,

depletion, and amortization .

The increase of $1.0 million in depreciation, depletion and amortization (“DD&A”) for

the year ended December 31, 2023 over the period from June 7, 2022 (date of inception) to December 31, 2022 is due to the commencement

of cryptocurrency operations upon the Merger.

There was no DD&A associated with E&P for any of the respective periods.

and administrative .

General and administrative expenses for the year ended December 31, 2023 increased $15.8 million over the period

from June 7, 2022 (date of inception) to December 31, 2022.

This was primarily due to employment and benefit costs of $4.5 million, stock-based

compensation of $3.0 million, investor relations costs of $2.8 million, legal and accounting costs of $1.8 million, Board fees and expenses

$1.0 million, professional services of $0.6 million, insurance of $0.4 million and other costs of $1.7 million.

of cryptocurrency mining equipment .

The impairment of $17.1 million for the year ended December 31, 2023 is due to the $16.6 million

adjustment required to write-off the excess of the allocated purchase price of the Merger over the fair value of the acquired net assets,

the subsequent write-off of $0.2 million shipping and customs fees incurred on cryptocurrency miners after the Merger and $0.3 million

for impairment of the remaining mobile data centers and deposits on mobile data centers at December 31, 2023.

Exploration .

The increase in exploration expenses of $0.3 million for the year ended December 31, 2023 over the period from June 7, 2022 (date of

inception) to December 31, 2022 is due to delay rentals incurred on oil and gas leases.

There were no such costs in 2022.

income and expenses

of inception)

Interest income

For the year ended December 31, 2024, depreciation, depletion, and amortization (“DD&A”) expenses were $0.4 million, the majority of which related

to DD&A for the NRO Acquisition wells.

For the year ended December 31, 2024, exploration expenses increased $0.5 million compared to the year ended December 31,

These increases were driven by delay rental costs incurred on oil and gas leases during the year ended December 31, 2024, which

were not incurred during the same periods of 2023.

and administrative expenses.

For the year ended December 31, 2024, general and administrative expenses increased $14.3 million compared

to the year ended December 31, 2023.

This increase aligns with the growth of our E&P business during the year ended December

31, 2024 and was primarily driven by incremental stock–based compensation of $5.7 million,

employee and benefit expenses of $4.0 million, legal and accounting costs of $2.4 million, financing commitment fees of $0.6 million,

investor relations costs of $0.4 million, and insurance and rent costs of $0.4 million.

Other expenses

The following table presents the components of our other expenses for the periods indicated:

Year Ended December 31,

(In thousands)

Interest expense

Loss on adjustment to fair value – warrant

(39,797,994 )

Loss on adjustment to fair value - AR Debentures

Loss on adjustment to fair value - Obligation

Loss on derivatives, net

Loss on adjustment to fair value – debt and warrants

Loss on issuance of debt

Interest income and other

Liquidated damages

other income (expense)

$ (45,487,430 )

Interest income for the year ended December 31, 2023 increased $0.2 million compared to the period from June 7, 2022 (date

of inception) to December 31, 2022.

This increase was entirely due to interest earned on our cash balance in the current period and not

in the prior year period.

Interest expense for the year ended December 31, 2023 increased $0.1 million compared to the period from June 7, 2022 (date

of inception) to December 31, 2022.

This increase was entirely due to interest on the AR Debentures and SBA loan resulting from the Merger

and certain financing costs incurred in 2023.

on adjustment to fair value – warrant liabilities .

The loss for the year ended December 31, 2023 increased $39.8 million compared

to the period from June 7, 2022 (date of inception) to December 31, 2022.

This increase was entirely due to the change in fair value

of warrant liabilities that were reclassified from and to permanent equity during the period.

The change in fair value was due to the

increase in the share price of the Company’s common stock.

on adjustment to fair value - AR Debentures .

The loss for the year ended December 31, 2023 increased $3.8 million compared to the

period from June 7, 2022 (date of inception) to December 31, 2022.

These increases were entirely due to the change in fair value of the

AR Debentures from the Merger through the date of their conversion in October 2023.

The change in fair value was primarily due to the

increase in the share price of the Company’s common stock.

on adjustment to fair value - Obligation Shares .

The loss for the year ended December 31, 2023 increased $1.5 million compared to

the period from June 7, 2022 (date of inception) to December 31, 2022, respectively.

This increase was entirely due to the change in

fair value of the Obligation Shares (as defined herein) liability from the Merger through issuance of the Obligation Shares in September

The change in fair value was due to the increase in the share price of the Company’s common stock.

Liquidated damages of $0.5 million were recorded for the year ended December 31, 2023 as a result of the registration statement

registering the resale of certain shares of the Company’s common stock and shares of common stock underlying the Series D Preferred

Stock and Series D PIPE Warrants having not been declared effective within the timeframe required under the related registration rights

There were no such costs in 2022.

Other expenses

For the year ended December 31, 2024, interest expense increased $1.0 million

compared to the year ended December 31, 2023, primarily driven by the interest and premium paid for the partial

redemption of the Senior Convertible Note and the interest and premium paid for the partial redemption of the

Subordinated Note.

Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further discussion of

the Senior Convertible Note and the Subordinated Note.

on derivatives, net.

For the year ended December 31, 2024, we recognized a $4.4 million unrealized

loss, net on derivatives related to the change in fair value of our derivative contracts, which we entered into in December 2024 pursuant

to our Credit Facility Agreement.

We did not have any outstanding derivative contracts during the year ended December 31, 2023, therefore,

we did not recognize a loss on derivatives for the period.

Refer to Factors Affecting the Comparability of Financial Results –

Commodity Prices above for a further discussion of our derivative contracts.

on adjustment to fair value – debt and warrants .

We have multiple financial instruments that are valued at fair value on a recurring basis;

therefore, we recognize

the changes in fair value at each remeasurement period as a loss on adjustment to fair value – debt and warrants on our consolidated

statement of operations for the period.

For the year ended December 31, 2024, the loss on adjustment to fair value – debt and warrants

reflects the fair value adjustments of $0.8 million for the SEPA, $2.1 million for the Senior Convertible Note, $1.1 million for the Subordinated

Note, and $1.4 million for the Subordinated Note Warrants recognized during the period.

Refer to Liquidity and Capital Resources -

Significant Sources of Liquidity below for a further discussion of the SEPA, the Senior Convertible Note and the Subordinated Note.

For the year ended December 31, 2023, the loss

on adjustment to fair value – debt and warrants reflects the fair value adjustments of $39.8 million for the portion of the Series

D A Warrants, $3.8 million for the senior secured convertible debentures, which were converted into Common Stock in October 2023, and $1.5 million for the shares of Common Stock which we were obligated to issue as a result of

the Merger and related transactions, which were fully issued in September 2023.

on debt issuance.

For the year ended December 31, 2024, the loss on debt issuance of $3.0 million reflects the loss recognized for

the issuance of the Subordinated Note and the Subordinated Note Warrants.

As discussed above, we have elected the fair value option to

account for both the Subordinated Note and the Subordinated Note Warrants and engaged a third-party to determine the fair value of both

instruments at issuance.

As of December 31, 2024, the total fair value of the Subordinated Note and the Subordinated Note Warrants exceeded

the proceeds of $5.0 million, as a result, we have recognized a loss on debt issuance of $3.0 million on our consolidated statements

of operations for the year ended December 31, 2024.

Interest income and other.

For the year ended

December 31, 2024, interest income and other increased $0.3 million compared to the year ended December 31, 2023, primarily driven by

higher average cash balances in the current period.

For the year ended December 31, 2023, we recognized liquidated damages expense of $0.5 million due to the registration statement

registering the resale of certain shares of our Common Stock and the shares of Common Stock underlying the Series D Preferred Stock and

Series D PIPE Warrants not being declared effective within the timeframe required under the related registration rights agreement.

did not recognize any liquidated damage expense during the year ended December 31, 2024.

The following table presents the components of our net loss from discontinued

operations for the periods indicated:

Year Ended December 31,

(In thousands)

Cryptocurrency mining revenue

Cryptocurrency mining costs

Depreciation and amortization

Impairment of cryptocurrency mining equipment

Loss from sale of cryptocurrency mining equipment

Loss from discontinued operations before income taxes

Provision for income taxes

Net loss from discontinued operations

the year ended December 31, 2024, the net loss from discontinued operations decreased $16.0 million compared to the year ended

December 31, 2023.

As discussed above, we completed the Crypto Sale in January 2024;

therefore, we did not have any cryptocurrency

mining revenue or related expenses during the majority of the year ended December 31, 2024.

However, we did recognize a $1.1 million

loss on the sale of cryptocurrency mining equipment.

Additionally, during the year ended December 31, 2023, we recognized $17.1

million of impairment of cryptocurrency mining equipment to write off the excess of the allocated purchase price to the

cryptocurrency assets which were over the fair value of the acquired net assets and to subsequently write off shipping and customs

fees incurred on miners after the Merger.

Refer to Factors Affecting the Comparability of Financial Results – Crypto Sale above for a further

discussion of the Crypto Sale.

Financial Measures

EBITDA and PV-10 are financial measures not calculated or presented in accordance with generally accepted accounting principles (“GAAP”).

These supplemental non-GAAP financial measures are used by management and external users of our financial statements, such as investors,

lenders, and rating agencies and may not be comparable to similarly-titled measures reported by other companies.

Adjusted EBITDA is used by management to evaluate the performance of our

business, make operational decisions, and assess our ability to generate cashflows.

Management believes Adjusted EBITDA provides investors

with helpful information to better understand the underlying performance trends of our business, facilitate period-to-period comparisons,

and assess the company’s operating results.

Adjusted EBITDA is derived from net loss from

continuing operations and is adjusted for income tax expense, depreciation, depletion, and amortization, accretion of asset

retirement obligations, non-cash stock-based compensation, interest expense (income), net, non-cash loss on issuance of debt,

non-cash loss on adjustment to fair value – debt and warrants, and loss on unrealized derivatives, all as applicable.

adjust net loss from continuing operations for the items listed above to arrive at Adjusted EBITDA because these amounts can vary

substantially between periods and companies within our industry depending upon accounting methods, book values of assets, capital

structures, and the method by which assets were acquired.

Adjusted EBITDA has limitations as an analytical tool, including that it

excludes certain items that affect our reported financial results.

Adjusted EBITDA should not be considered as an alternative to, or

more meaningful than, net income calculated in accordance with GAAP or as an indicator of our operating performance or liquidity.

Additionally, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.

following table presents the reconciliation of Net loss from continuing operations to Adjusted EBITDA for the periods

Year Ended December 31,

(In thousands)

Net loss from continuing operations reconciliation to Adjusted EBITDA:

Net loss from continuing operations

Depreciation, depletion, and amortization

Accretion of asset retirement obligations

Non-cash stock-based compensation

Interest expense (income), net

Non-cash loss on adjustment to fair value – debt and warrants (1)

Non- cash loss on issuance of debt (2)

Loss on unrealized derivatives, net

Income tax expense

Adjusted EBITDA

the changes in the fair values of the financial instruments which we’ve elected to value at fair value on a recurring basis.

Refer to Liquidity and Capital Resources - Significant Sources of Liquidity below for a further discussion.

the loss recognized for the issuance of the Subordinated Note and the Subordinated Note Warrants.

PV-10 is a financial measure not presented in accordance

PV-10 is derived from the Standardized Measure, which is the most directly comparable GAAP financial measure for proved

PV-10 is a computation of the Standardized Measure on a pre-tax basis and is equal to the Standardized Measure at the applicable

date, before deducting future income taxes discounted at 10%.

Neither PV-10 nor Standardized Measure represents an estimate of the fair

market value of the applicable crude oil, natural gas, and NGLs properties.

We believe that the presentation of PV-10 is

relevant and useful to our investors as a supplemental disclosure to the Standardized Measure, or after-tax amount, because it

presents the discounted future net cash flows attributable to our reserves before considering future corporate income taxes and our

current tax structure.

While the standardized measure is dependent on the unique tax situation of each company, PV-10 is based on

prices and discount factors that are consistent for all companies.

following table presents the reconciliation of the Standardized Measure to the PV-10 of our estimated proved reserves for the periods

Ended December 31,

value of future income taxes discounted at 10%

and Capital Resources

1 unchanged sentence

In 2023, our primary sources of liquidity

were the Series D PIPE and the Series E PIPE, which funded the purchase of the Initial Genesis Assets and working capital, as well

as proceeds from the exercise of warrants, which funded, among other things, working capital and the deposit for the NRO Acquisition

Since we sold our only revenue-generating assets in January 2024 and do not yet have any operating E&P assets, we will

require additional capital to fund our development program and operations.

Our primary uses of cash have been for the acquisition

and development of oil and natural gas properties and payments of general, administrative and operating costs.

addition, in order to close the NRO Acquisition, we will need to raise $74 million in cash, subject to customary closing adjustments.

We do not currently have sufficient cash or committed capital to close the NRO Acquisition.

While we are seeking to raise the necessary

capital through an offering of common stock, there is no assurance that we will be successful in raising sufficient funds from the proposed

offering or through other sources.

If we are unable to raise sufficient funds to close the NRO Acquisition, or if we are unable to close

the acquisition for other reasons, we will need to seek other sources of capital to fund our development activity and operations until

our other E&P assets are generating revenues.

Under certain circumstances, if we are unable to close the NRO Acquisition, we would

lose the deposit.

See “ Risk Factors – We do not

currently have sufficient funds or committed financing necessary to consummate the NRO Acquisition and the NRO Agreement does not include

a financing condition .”

do not currently have significant capital commitments outside of the NRO Acquisition.

However, even if we are able to close the NRO Acquisition,

we expect that we will need to access additional capital through public and/or private markets in order to fund our E&P development

and strategy.

The availability of such additional capital is subject to numerous factors including prices of oil and natural gas and

the overall health of the U.S.

and global economic environment and are largely outside of the control of the Company.

There can be no

assurance that the Company can obtain such additional capital.

The amount and allocation of future capital expenditures will depend upon

a number of factors, including the amount and timing of cash flows from operations, investing and financing activities, and timing and

cost of additional capital sources.

we are the operator of all of our acreage, the timing and level of our capital spending is largely discretionary and within our control.

We could choose to defer a portion of planned capital expenditures depending on a variety of factors, including, but not limited to,

the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs, the level of

participation by other working interest owners, the success of our drilling activities, prevailing and anticipated prices for oil, natural

gas and NGLs, the availability of necessary equipment, infrastructure and capital.

expect to continue funding our business and strategic plans with cash on hand and proceeds from exercises of warrants, if any.

we have no debt outstanding.

We expect to enter into a revolving credit facility primarily to support our hedging program, but we do

not intend to utilize such facility to fund our drilling program.

We believe our approach to leverage will permit us to grow production

while mitigating adverse impacts of commodity price volatility.

We expect that limiting our use of leverage will provide flexibility

to slow our development pace when commodity prices are not supportive and to accelerate when prices rise.

In the near term, we intend

to primarily deploy our cash flow towards development.

were the proceeds from the Series D PIPE and the Series E PIPE, which funded the purchase of the initial Genesis Assets and working

capital, as well as proceeds from the exercise of warrants, which funded, among other things, working capital and the deposit for

the NRO Acquisition in 2024.

We commenced drilling wells on our Genesis Bolt-on Assets in the third quarter of 2024 and those wells

began producing in February 2025.

Additionally,

during the third quarter of 2024, we raised approximately $35.0 million in cash by issuing Common Stock, the Senior Convertible

Note, and the Subordinated Note.

On October 1, 2024, we used cash on hand, the proceeds from the issuance of Common Stock, and a

portion of the proceeds from the issuance of the Senior Convertible Note to fund the closing of the NRO Acquisition.

On December 16,

2024, we entered into a reserve-based Credit Facility with Citi and borrowed $28.0 million to help fund our working capital needs.

Management expects that our cash balance, expected revenues from the producing NRO wells and newly producing Shelduck wells, and

liquidity available under the SEPA and Credit Facility and potential offerings under the effective Form S-3 registration statement

will be sufficient to fund our development program and operations.

development program is dependent upon our cash flow from operations generated from our assets and

our ability to obtain additional financing through our SEPA and Credit Facility.

Additionally, we could obtain additional financing through public and private capital markets;

the availability of additional capital would be subject to numerous factors

outside of our control including prices of oil and natural gas and the overall health of the U.S.

and global economic environments.

There can be no assurance that we will be able to obtain such additional capital.

The amount and allocation of future capital

expenditures will depend upon a number of factors, including the amount and timing of cash flows from operations, investing and

financing activities, and the timing and cost of additional capital sources.

currently plan to be the operator on substantially all of our acreage.

As a result, we anticipate that the timing and level of our capital spending

will largely be discretionary and within our control.

We could choose to defer a portion of our planned capital expenditures depending

on a variety of factors, including, but not limited to, the receipt and timing of required regulatory permits and approvals, seasonal

conditions, drilling and acquisition costs, the level of participation by other working interest owners, the success of our drilling

activities, prevailing and anticipated prices for oil, natural gas, and NGLs, the availability of necessary equipment, infrastructure

define working capital as current assets less current liabilities.

At December 31, 2023 we had working capital of $8.1 million and at

December 31, 2022 we had a working capital deficit of $2.1 million.

Our current working capital decreased upon the deposit payment associated

with the NRO Agreement and is expected to further decrease in the future due to expenses incurred in connection with our business and

until revenue is recognized from our E&P business and/or we raise additional capital through the exercise of existing warrants or

through the public and/or private markets.

Cash and cash equivalents totaled $13.0 million and $0.1 million at December 31, 2023 and

December 31, 2022, respectively.

As of December 31, 2024, we had a working capital deficit of

$44.7 million and cash and cash equivalents of $5.2 million and as of December 31, 2023, we had working capital of $8.1 million and cash

and cash equivalents of $13.0 million.

Flows from Operating, Investing, and Financing Activities

following table summarizes our cash flows for the periods indicated:

December 31, 2023

(date of inception)

December 31, 2022

following table summarizes our cash flows for the years indicated:

Year Ended December 31,

(In thousands)

Net cash used in operating activities

1 unchanged sentence

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

of Cash Flow Changes for the Year Ended December 31, 2023 and Period from June 7, 2022 (date of inception) through December 31, 2022

cash used in operating activities was $11.9 million for the year ended December 31, 2023, compared to $0.0 million in the prior year

The increase resulted primarily from a net loss of $79.1 million, which was partially offset by the add back for non-cash

expenses for the impairment of cryptocurrency mining equipment of $17.1 million, losses on adjustment to fair value of certain

financial instruments of $45.1 million, stock based compensation expense of $2.9 million, change in working capital of $1.1 million

and depreciation and amortization expense of $1.0 million.

cash used in operating activities for the period from June 7, 2022 (date of inception) to December 31, 2022 was related to bank charges

and is reflective of the Company’s limited activity initially after its formation.

Net cash used in investing activities

was $23.7 million for the year ended December 31, 2023 and primarily resulted from the $21.2 million acquisition of unproved oil and gas

properties, cash paid in the reverse asset acquisition, net of cash received of $2.0

million and capital investments of $0.4 million.

There was no cash used in or

provided by investing activities for the period from June 7, 2022 (date of inception) to December 31, 2022 reflective of the Company’s

limited activity initially after formation.

Financing Activities

Net cash provided by financing

activities was $48.6 million for the year ended December 31, 2023, compared to $0.1 million for the period from June 7, 2022 (date of

inception) to December 31, 2022, and primarily resulted from $17.4 million of proceeds from the Series D PIPE, $20.0 million from the

Series E PIPE, and $12.5 million from the exercise of warrants, partially offset by financing costs of $1.1 million and $0.2 million from

the payoff of the SBA loan.

Concern Analysis

Company had a net loss of $79.1 million for the year ended December 31, 2023.

We cannot predict if we will be profitable in the near

future, or ever.

We may continue to incur losses for an indeterminate period of time and may be unable to achieve profitability.

period of losses and negative cash flow may prevent us from successfully operating and expanding our business.

We may be unable to achieve

or sustain profitability on a quarterly or annual basis.

At December 31, 2023, we had cash and cash equivalents of $13.0 million, working

capital of $8.1 million, and an accumulated deficit of $78.9 million.

Subsequent to December 31, 2023,

our cash and cash equivalents were reduced by $9.9 million due to the Deposit and Genesis Bolt-on Assets.

We expect that our cash balance

will decline until we are able to obtain financing through public or private capital markets and/or upon the exercise of common stock

As of December 31, 2023, the Company had common stock warrants with exercise prices of $6.00 per share of common stock and expiring

through August 2024 (see Note 15) that, if all were exercised, would represent cash proceeds to the Company of approximately $32.4 million.

Based on recent and current prices of the Company’s common stock, the Company expects such warrants to be exercised.

received $1.2 million of cash proceeds from such warrant exercises in the period from January 1, 2024 through March 15, 2024.

there is no assurance that the remainder of such common stock warrants will ultimately be exercised.

assessment of liquidity and going concern requires the Company to make estimates of future activity and judgments about whether the Company

can meet its obligations and has adequate liquidity to operate.

Significant assumptions used in the Company’s forecasted model

of liquidity in the next 12 months include our current cash position and our ability to manage spending.

Based on an assessment of these

factors, management believes that the Company will have adequate liquidity for its operations for at least the 12 months from the date

the Company’s financial statements are issued.

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

The consolidated

financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of

assets, or the amounts and classification of liabilities that may result from the matters discussed herein.

Sheet Arrangements

do not have any off-balance sheet arrangements.

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of the year

Cash and cash equivalents, end of the year

Net cash used in operating activities totaled $9.3 million and $11.9 million during the years ended December 31, 2024

and 2023, respectively.

The $2.6 million change in our net cash used in operating activities was largely due to an increase in revenue

recognized during the current period, partially offset by increased operating costs during the current period.

Net cash used in investing activities totaled $83.4 million and $23.7

million during the years ended December 31, 2024 and 2023, respectively.

The $59.7 million increase in our net cash used in investing

activities was largely driven by the NRO Acquisition, with a final purchase price of $55.5 million, and a $28.3 million increase in capital investments in oil and natural

gas properties during the year ended December 31, 2024.

These increases were partially offset by the $21.2 million invested in connection

with the Exok Option Purchase during the year ended December 31, 2023.

Net cash provided by financing activities totaled $84.9 million for the year ended December 31, 2024, driven by proceeds

of $33.5 million from the exercise of Series D B and Series E B Warrants, $28.0 million from borrowings under the Credit Facility, net

of related issuance costs of $0.3 million, $15.0 million of proceeds from the issuance of Common Stock, net of related issuance costs

of $5.0 million, $14.3 million of proceeds from the issuance of the Senior Convertible Note, partially offset by a repayment of $3.8 million,

and $5.0 million of proceeds from the issuance of the Subordinated Note, partially offset by a repayment of $1.8 million.

Net cash provided

by financing activities totaled $48.6 million for the year ended December 31, 2023, which was comprised of proceeds from the issuance

of the Series D PIPE of $17.4 million, net of related financing costs of $0.9 million, the issuance of the Series E PIPE of $20.0 million,

net of related financing costs of $0.2 million, and proceeds of $12.5 million from the exercise of Series D B Warrants.

Sources of Liquidity

On December 16, 2024, we, as borrower, entered into the Credit Facility Agreement with Citi, as administrative agent

and the financial institution party, which has a maximum credit commitment of $1.0 billion and is set to mature on December 16,

The Credit Facility is guaranteed by all of our restricted subsidiaries and is secured by a first-priority security interest

on substantially all of our oil and natural gas properties and substantially all of our personal property assets, subject to

customary exceptions.

The borrowing base is subject to semi-annual redeterminations based upon

the value of our oil and gas properties as determined in a reserve report dated as of January and July of each year, subject to certain

interim redeterminations.

We are subject to certain financial covenants

and customary restrictive covenants under the Credit Facility.

The financial covenants require us to maintain, for each fiscal

quarter commencing with the fiscal quarter ending March 31, 2025, a Net Leverage Ratio (as defined in the Credit Facility Agreement)

of no greater than 2.50 to 1.00 and a Current Ratio (as defined in the Credit Facility Agreement) of at least 1.00 to 1.00.

As of December 31, 2024, the Credit Facility had a borrowing base and an

aggregate elected commitment of $44.0 million and a $5.0 million sublimit for the issuance of letters of credit.

As of December 31, 2024,

we had $28.0 million of revolving borrowings and no letters of credit outstanding under the Credit Facility, resulting in $7.2 million

of availability for future borrowings and letters of credit.

On February 3, 2025, we entered into the First Amendment to the Credit Facility Agreement, which, among other things, increased the borrowing base and the aggregate elected commitments to $60.0 million.

Equity Purchase Agreement.

On September 30, 2024, we entered into the SEPA with Yorkville, whereby, subject to certain conditions,

we have the right, not the obligation, to sell to Yorkville up to $40.0 million shares of Common Stock, at any time and in an amount

as specified in the applicable Advance Notice, during the commitment period commencing on the SEPA Effective Date and terminating on

September 30, 2026.

Each Advance by us under the SEPA is subject to a maximum limit equal to 100% of the aggregate volume traded of our

Common Stock on the Nasdaq Stock Market during the five trading days immediately prior to the date of the Advance Notice.

will be issued and sold to Yorkville at a per share price equal to 97% of the lowest daily volume weighted average price of Common Stock

for three consecutive trading days commencing on the trading day immediately following the Yorkville’s receipt of an Advance Notice.

On September 30, 2024, pursuant to the SEPA, we paid Yorkville a structuring fee of $25,000 and a Commitment Fee by issuing Yorkville

100,000 shares of Common Stock.

Our right to sell shares to Yorkville under the SEPA was contingent upon

us having an effective registration statement, which was declared effective by the SEC on December 20, 2024.

to the SEPA, we may issue up to a total of 4,198,343 shares of Common Stock within the cap of 19.99% of our issued and outstanding Common Stock as of the SEPA

Effective Date through Advances under the SEPA,

upon conversion of the Senior Convertible Note or through any other issuances of Common Stock thereunder.

However, per the SEPA, we do not have access to issue an Advance Notice until the Pre-Paid Advance of $15.0 million

(the Senior Convertible Note) is fully repaid.

In December 2024, and in conjunction with the Credit Facility Agreement,

we made a $3.7 million payment on the Senior Convertible Note, resulting in a principal balance of $11.3 million as of December 31, 2024.

Additionally, in January and February 2025, Yorkville converted the remaining $11.3 million of the Senior Convertible Note in exchange

for 2.1 million shares of Common Stock.

have determined that the SEPA represents a derivative instrument pursuant to ASC 815, which should be recorded at fair value at

inception and remeasured at fair value each reporting period with changes in the fair value recognized in earnings.

Additionally,

the Commitment Fees and any issuance costs associated with the SEPA have been expensed to general and administrative expenses.

such, we have recorded the SEPA at its fair value of $0.8 million as of December 31, 2024 and recorded the corresponding $0.8

million loss on adjustment to fair value – debt and warrants for the year ended December 31, 2024.

Convertible Note.

On September 30, 2024, Yorkville advanced the Pre-Paid Advance of $15.0

million to us and we issued the Senior Convertible Note, with an interest rate of 8.00% and a maturity date of September 30, 2025.

may convert the Pre-Paid Advance into shares of Common Stock at any time at the Conversion Price.

We may, at any time, redeem all or a

portion of the amounts outstanding under the Senior Convertible Note at 105% of the principal amount thereof, plus accrued and unpaid

Additionally, we may also convert the Pre-Paid Advance into shares of Common Stock at any time at the Conversion Price, however,

a conversion requested by us would not result in us receiving cash but instead would be applied towards reducing the outstanding balance

of the Senior Convertible Note.

In December 2024, and in conjunction with the Credit Facility Agreement,

we made a $3.7 million payment on the Senior Convertible Note, resulting in a principal balance of $11.3 million as of December 31, 2024.

Additionally, in January and February 2025, Yorkville converted the remaining $11.3 million of the Senior Convertible Note in exchange

for 2.1 million shares of Common Stock.

We have determined that certain features of the Senior Convertible Note

require bifurcation and separate accounting as embedded derivatives and have elected the fair value option to account for the Senior Convertible

therefore, in accordance with ASC 815, we have recorded the Senior Convertible Note at fair value.

As of December 31, 2024, the

fair value of the Senior Convertible Note was $12.6 million, which resulted in a loss on adjustment to fair value – debt and warrants

of $2.1 million for the year ended December 31, 2024.

Promissory Note and Subordinated Note Warrants.

On September 30, 2024, we entered into the Subordinated Note with the Noteholders,

First Idea Ventures LLC and The Hideaway Entertainment LLC, in a principal amount of $5.0 million, with a maturity of December 31, 2025.

The Noteholders are entities controlled by Jonathan H.

Gray, who is a director of the Company, therefore the Subordinated Note and Subordinated

Note Warrants are presented as related-party on our consolidated balance sheet as of December 31, 2024.

The Subordinated Note has an interest

rate of 10.00% and the Noteholders are entitled to a minimum return on capital of up to 2.0x upon the repayment, prepayment or acceleration

of the obligations, or the occurrence of certain other triggering events under the Subordinated Note.

In December 2024, and in conjunction with the Credit Facility Agreement,

we made a $1.8 million payment on the Subordinated Note, resulting in a principal balance of $3.2 million as of December 31, 2024.

Pursuant to the terms of the Subordinated Note,

we issued the Subordinated Note Warrants to purchase up to 1,141,552 shares of Common Stock to the Noteholders, vesting in tranches based

on the date of repayment of the Subordinated Note.

As of December 31, 2024, Subordinated Note Warrants providing the right to purchase

570,778 shares of Common Stock had vested and were outstanding.

We have determined that certain features of the Subordinated Note require

bifurcation and separate accounting as embedded derivatives and have elected the fair value option to account for the Subordinated Note;

therefore, in accordance with ASC 815, we have recorded the Subordinated Note at fair value and will remeasure the fair value each reporting

period with changes in fair value recognized in earnings.

As of December 31, 2024, the fair value of the Subordinated Note is $4.6 million,

which resulted in a loss on adjustment to fair value – debt and warrants of $1.1 million for the year ended December 31, 2024.

the year ended December 31, 2024, we had a net loss of $40.9 million.

We cannot predict if or when we will be profitable, and we may continue to incur losses for an indeterminate

period of time.

Additionally, we may be unable to achieve or sustain profitability on a quarterly or annual basis and extended periods

of losses and negative cash flow may prevent us from successfully operating and expanding our business.

As of December 31, 2024, we had

cash and cash equivalents of $5.2 million, a working capital deficit of $44.7 million, and an accumulated deficit of $119.8 million.

assessment of liquidity requires management to make estimates of future activity and judgments about whether we can meet our

obligations, have adequate liquidity to operate, and maintain compliance with the applicable financial covenants of our Credit

Facility Agreement, as discussed above.

Significant assumptions used in our forecasted model of liquidity in the next 12 months

include our current cash position and our ability to manage spending.

Based on an assessment of these factors, management expects

that our cash balance, expected revenues from our existing producing wells and newly producing Shelduck wells, and liquidity

available under the SEPA and Credit Facility and potential offerings under the effective Form S-3 registration statement will be

sufficient to meet our obligations over the next 12 months and fulfil the financial covenant requirements under our Credit Facility

Agreement, as discussed above.

entering into the SEPA in September 2024 and the Credit Facility Agreement in December 2024 and with the Form S-3 registration

statement becoming effective in December 2024, we have the ability to access funds to meet our working capital needs.

ability to request an Advance under the SEPA does not require action on the part of management, other than requesting the Advance,

and the maximum Advance amount is less or equal to our liquidity needs, substantial doubt about our ability to continue as a going

concern does not exist.

Accounting Policies and Estimates

preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States

(“GAAP”), requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue

and expenses, and related disclosure of contingent assets and liabilities.

When making these estimates and assumptions, we consider our

historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under

the circumstances.

Actual results may differ under different estimates and assumptions.

The accounting estimates and assumptions discussed

in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently

involve significant judgments and uncertainties.

and equipment

We follow the successful efforts method of accounting for our oil and natural gas properties.

discussion and analysis of our financial condition and results of operations is based upon the accompanying consolidated financial

These financial statements have been prepared in conformity with GAAP, which requires management to make estimates and

assumptions that affect the amounts reports for assets, liabilities, revenues, and expenses and the disclosure of contingent assets

and liabilities.

Management believes its estimates and assumptions to be reasonable under these circumstances.

Certain estimates and

assumptions are inherently unpredictable and actual results could differ from those estimates.

Described below are the most

significant policies and the related estimates and assumptions used by management in the preparation of our financial statements.

Refer to Item 8.

Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies for

a further discussion of our accounting policies.

Natural Gas, and NGL Reserves and the Standardized Measure of Discounted Net Future Cash Flows

proved oil, natural gas, and NGL reserve estimates as of December 31, 2024 and associated future net cash flows included in this Annual

Report have been prepared by CG&A, independent third-party reserve engineers, in accordance with the rules and regulations of the

SEC in Regulation S-X, Rule 4-10.

engineering is a subjective process of estimating volumes of economically recoverable oil and natural gas that cannot be measured in

an exact manner.

The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological

interpretation.

To achieve reasonable certainty, our internal reserve engineers and CG&A employed technologies that have been demonstrated

to yield results with consistency and repeatability.

The technologies and economic data used in the estimation of our proved reserves

include, but are not limited to, technical and economic data including well logs, geologic maps, seismic data, well test data, production

data, historical price and cost information, and property ownership interests.

Estimates of economically recoverable oil and natural

gas and of future net revenues are based on a number of variables and assumptions, all of which may vary from actual results, including

geologic interpretation, prices and future production rates and costs.

Periodic revisions to the estimated reserves and future cash flows

may be necessary as a result of a number of factors, including reservoir performance, new drilling, oil, natural gas, and NGL prices,

changes in costs, technological advances, new geological or geophysical data, or other economic factors.

Accordingly, reserve estimates

may differ significantly from the quantities of oil and natural gas ultimately recovered.

Standardized Measure is the present value, discounted at 10%, of estimated future net cash flows to be generated from the production

of proved reserves calculated by using the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month

in the period January through December (with consideration of price changes only to the extent provided by contractual arrangements).

The estimated future net cash flows are reduced by projected future development, production (excluding DD&A and any impairments of

oil and natural gas properties), plug and abandon (“P&A”) costs, and estimated future income tax expenses.

The Standardized Measure is calculated per

ASC Topic 932, Extractive Activities - Oil and Gas and in accordance with SEC pricing guidelines.

our estimates of total proved reserves, development costs, and production rates were based on the best available information, the development

and production of the oil and natural gas reserves may not occur in the periods assumed.

Actual prices realized, costs incurred and production

quantities may vary significantly from our estimates.

Therefore, the Standardized Measure should not be considered to represent our estimate

of expected revenues or the fair value of our proved oil, natural gas, and NGL reserves.

discussed further below, our estimates of proved reserves materially impact calculated depletion expense each period;

therefore, if our

estimates of total proved reserves decrease, the rate at which we record depletion expense will increase, reducing earnings.

and Natural Gas Properties

follow the successful efforts method of accounting for our oil and natural gas properties.

Under this method, exploration costs such

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acquisition costs and development costs are capitalized when incurred.

drilling costs are initially capitalized, or suspended, pending the determination of proved reserves.

If proved reserves are found, drilling

costs remain capitalized and are classified as proved properties.

Costs of unsuccessful wells are charged to exploration expense.

exploratory wells that find reserves that cannot be classified as proved when drilling is completed, costs continue to be capitalized

as suspended exploratory drilling costs if there have been sufficient reserves found to justify completion as a producing well and sufficient

progress is being made in assessing the reserves and the economic and operational viability of the project.

If we determine that future

appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.

instances, this determination may take longer than one year.

successful efforts accounting, exploratory drilling costs are initially capitalized, or suspended, pending the determination of proved

If proved reserves are found, drilling costs remain capitalized and are classified as proved properties.

If proved reserves

are not found, the costs related to unsuccessful wells are charged to exploration expense.

For exploratory wells that find reserves that

cannot be classified as proved when drilling is completed, costs continue to be capitalized as suspended exploratory drilling costs if

there have been sufficient reserves found to justify completion as a producing well and sufficient progress is being made in assessing

the reserves and the economic and operational viability of the project.

If we determine that future appraisal drilling or development

activities are unlikely to occur, associated suspended exploratory well costs are expensed.

In some instances, this determination may

take longer than one year.

We review the status of all suspended exploratory drilling costs quarterly.

Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of natural

gas and oil are capitalized.

of drilling and equipping successful wells, costs to construct or acquire facilities, and associated asset retirement costs are depreciated

using the unit-of-production (“UOP”) method based on total estimated proved developed oil and natural gas reserves.

Costs to develop proved reserves,

including the costs of all development wells and related equipment used in the production of natural gas and oil, are capitalized.

costs of drilling and equipping successful wells, costs to construct or acquire facilities, and associated asset retirement costs are

depreciated using the UOP method based on total estimated proved developed oil and natural gas reserves.

Costs for wells in the process

of being drilled, significant nonproducing properties, and in-process development projects are excluded from depletion until the related

project is completed and proved producing reserves are established or, if unsuccessful, abandonments expense is recognized.

of acquiring proved properties, including leasehold acquisition costs transferred from unproved properties, are depleted using the UOP

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Fair value is generally estimated

using the income approach described in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic

(“ASC”) 820, Fair Value Measurements.

If applicable, we utilize prices and other relevant information generated by market

transactions involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining

The expected future cash flows used for impairment reviews and related fair value measurements are typically based on judgmental

assessments of commodity prices, pricing adjustments for differentials, operating costs, capital investment plans, future production

volumes, and estimated proved reserves, considering all available information at the date of review.

These assumptions are applied to

develop future cash flow projections that are then discounted to estimated fair value, using a market-based weighted average cost of

Cryptocurrency

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful

lives of 2 to 5 years.

Leasehold improvements are amortized over the shorter of the useful lives of the related assets, or the lease

Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized.

Gains and losses on disposals are included in the consolidated statements of operations.

assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may

not be recoverable.

If there is indication of impairment, management prepares an estimate of future cash flows expected to result from

the use of the asset and its eventual disposition.

If these cash flows are less than the carrying amount of the asset, an impairment

loss is recognized to write down the asset to its estimated fair value.

Cryptocurrency

mining assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset

may not be recoverable.

An estimate of undiscounted future cash flows produced by the asset, or the appropriate grouping of assets, is

compared to the carrying value to determine whether an impairment exists, pursuant to the provisions of ASC 360-10 “Accounting

for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” If an asset is determined to be impaired,

the loss is measured based on quoted market prices in active markets, if available.

If quoted market prices are not available, the estimate

of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows and fundamental analysis.

Company evaluates all of its financial instruments, including issued private placement stock purchase warrants, to determine if such

instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to GAAP.

The Company accounts for warrants

as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable

Management’s assessment considers whether the warrants are freestanding financial instruments, whether they meet the definition

of a liability, and whether the warrants meet all of the requirements for equity classification.

warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the

time of issuance.

For warrants that are precluded from equity classification, they are recorded as a liability at their fair value on

the date of such classification and subject to remeasurement on each balance sheet date with changes in the estimated fair value of the

warrants to be recognized statements of operations.

of December 31, 2023, the Company had no liability-classified warrants.

value of financial instruments

820, Fair Value Measurements and Disclosures, defines fair value, establishes a consistent framework for measuring fair value, and expands

disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis.

is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants.

As such, fair value is a market-based measurement that should be determined based on assumptions

that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, ASC 820 establishes

a fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

1 valuations – Consist of observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active

markets as of the reporting date.

2 valuations – Consist of observable market-based inputs or unobservable inputs that are corroborated by market data.

are inputs other than quoted prices in active markets included in Level 1 that are either directly or indirectly observable as of the

reporting date.

3 valuations – Consist of unobservable inputs that are not corroborated by market data and may be used with internally developed

methodologies that result in management’s best estimate of fair value.

using the income approach described in ASC 820.

If applicable, we utilize prices and other relevant information generated by market transactions

involving assets and liabilities that are identical or comparable to the item being measured as the basis for determining fair value.

The expected future cash flows used for impairment reviews and related fair value measurements are typically based on judgmental assessments

of commodity prices, pricing adjustments for differentials, operating costs, capital investment plans, future production volumes, and

estimated proved reserves, considering all available information at the date of review.

These assumptions are applied to develop future

cash flow projections that are then discounted to estimated fair value, using a market-based weighted average cost of capital.

utilize commodity derivative instruments to reduce our exposure to crude oil and natural gas price volatility for a portion of our estimated

production from its proved, developed, producing oil and natural gas properties.

The fair values of our derivative instruments are measured

on a recurring basis using a third-party industry-standard pricing model.

have not designated any of its derivative instruments as hedges for accounting purposes;

therefore, the aggregate net gains and losses

resulting from changes in the fair values of its outstanding derivatives, the settlement of derivative instruments, and any net proceeds

or payments related to the early termination of derivative contracts during the period are recognized as net gain or loss on derivatives,

as applicable, in the consolidated statements of operations.

Retirement Obligations

oil and natural gas properties include estimates of future expenditures to P&A wells, pipelines, platforms, and other related facilities

after the reserves have been depleted.

We recognize the present value of the asset retirement obligation costs as a liability when it

is incurred or assumed (acquired) and an increase to its capitalized oil and natural gas properties.

The capitalized asset retirement

obligation costs are depleted over the productive lives of the oil and natural gas properties while the asset retirement obligation liability

is accreted to the expected settlement value over the productive lives of the oil and natural gas properties.

Upon settlement, the difference

between the recorded liability amount and the amount of costs incurred will be recognized as an adjustment to the capitalized cost of

oil and natural gas properties.

determination of future asset retirement obligations requires estimates of the future costs of removal and restoration, productive lives

of the oil and natural gas properties based on reserve estimates, and future inflation rates.

Estimated costs consider historical experience,

third-party estimates, and government regulatory requirements but do not consider salvage values.

These costs could be subject to revisions

in subsequent years due to changes in regulatory requirements, the estimated P&A cost, and the estimated timing of the oil and natural

gas property retirement.

In subsequent periods, if the estimate of the asset retirement obligation liability changes, we record an adjustment

to both the asset retirement obligation liability and the oil and natural gas property carrying value.

Additionally, we estimate the

credit-risk adjusted discount rate, which is applied to the future inflated P&A costs to determine the discounted present value which

is recognized as the initial liability.

The determined credit-risk adjusted discount rate is also subsequently applied to accrete the

and Contingencies

Company is subject to various litigation, claims and proceedings, that arise in the ordinary course of business.

The Company recognizes

a liability for such loss contingencies when it believes it is probable a liability has been incurred, and the amount can be reasonably

recognize a liability for loss contingencies when we believe it is probable a liability has been incurred, and the amount can be reasonably

If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range,

the Company accrues that amount.

When no amount within the range is a better estimate than any other amount the Company accrues the minimum

amount in the range.

The outcomes of any such currently pending matters are not expected to have a material adverse effect on the Company’s

financial position or results of operations.

Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers.

The underlying principle of ASC 606 is

to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.

are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration

that we expect to receive in exchange for those goods or services.

The Company applies the following five steps in order to determine

the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:

the contract with a customer;

the performance obligations in the contract;

the transaction price;

the transaction price to performance obligations in the contract;

revenue as the performance obligation is satisfied.

Company’s cryptocurrency mining assets that were in service in 2023 were operated under the Atlas MSA, whereby Atlas hosted, operated,

and managed the Company’s assets.

The Company received payment in U.S.

dollars for the net mining revenue representing the dollar

value of the cryptocurrency award generated less power and other costs.

The Company did not receive or own cryptocurrencies under this

Cryptocurrency

Company’s cryptocurrency mining costs consisted primarily of direct costs under the Atlas MSA, but exclude depreciation and amortization,

which are separately stated in the Company’s consolidated statements of operations.

account for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences,

and deferred tax liabilities are recognized for taxable temporary differences.

Temporary differences are the differences between the

reported amounts of assets and liabilities and their tax bases.

Deferred tax assets are reduced by a valuation allowance when, in the

opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.

assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

At December 31, 2023,

the Company had a full valuation allowance to offset its net deferred tax assets.

we accrue that amount.

When no amount within the range is a better estimate than any other amount we accrue the minimum amount in the

at Fair Value

On September 30, 2024, we entered into the SEPA and issued the Senior Convertible

Note, the Subordinated Note, and the Subordinated Note Warrants.

All three of these agreements contain features which must be evaluated

for embedded derivatives and bifurcation pursuant to ASC 815.

As such, we have elected to account for the SEPA, the Senior Convertible

Note, the Subordinated Note, and the Subordinated Note Warrants using the fair value option.

stock–based compensation awards are classified as either equity or liability awards in accordance with GAAP.

The fair value of

an equity–classified award is determined at the grant date and is amortized to general and administrative expense on a graded attribution

basis over the vesting period of the award.

The fair value of a liability–classified award is determined on a quarterly basis beginning

at the grant date until final vesting.

Changes in the fair value of liability–classified awards are recorded to general and administrative

expense over the vesting period of the award.

Additionally,

we grant PSUs, which vest and become earned upon the achievement of certain performance goals based on our relative total shareholder

return as compared to the performance peer group during the performance period, which represents a market condition per ASC Topic

718, Compensation—Stock Compensation .

As such, the fair value of the PSUs awards is determined by a third party using a Monte

Carlo simulation model as of the grant date.

Per the PSU agreements, these awards can be settled in either stock or cash, as determined

by the Committee;

however, unless the Committee determines otherwise, these PSUs will be settled in stock;

therefore, we classified the

PSUs as equity awards.

recognize compensation expense related to equity–classified and liability–classified awards using the straight-line method

over the requisite service period during which the employee, board member, director, or advisor is required to provide services in exchange

for the award in accordance with ASC Topic 718, Compensation - Stock Compensation .

We have elected to not estimate the forfeiture

rate of its RSUs and PSUs in its initial calculation of compensation expense, but instead we will adjust compensation expense for forfeitures

as they occur.

account for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary

differences, and deferred tax liabilities are recognized for taxable temporary differences.

Temporary differences are the

differences between the reported amounts of assets and liabilities and their respective tax basis.

Deferred tax assets are reduced

by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax

assets will be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the

date of enactment.

As of December 31, 2024, we had a full valuation allowance to offset its net deferred tax

Sheet Arrangements

do not have any off–balance sheet arrangements.

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