What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-06 compared with 2024-03-19 · 2142 added, 1491 removed, 207 unchanged (95% of the section changed)

Financial Statements and Supplementary Data

TO FINANCIAL STATEMENTS

OPERATING CO.

of Independent Registered Public Accounting Firm (PCAOB ID:

Financial Statements:

Balance Sheets

Statements of Operations

Statements of Members’ Deficit/Stockholders’ Equity

Statements of Cash Flows

to the Consolidated Financial Statements:

Organization, Description of Business and Basis of Presentation

Summary of Significant Accounting Policies

Purchase Price Allocation

Property and Equipment

Deposits on Cryptocurrency Mining Equipment

Accounts Payable and Accrued Expenses

Related Party Transactions

Fair Value Measurement

Commitments and Contingencies

Preferred Stock

Common Stock Options and Warrants

Long-Term Incentive Compensation

Segment Information

Subsequent Events

Supplemental Oil and Gas Disclosures (Unaudited)

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023

Consolidated Statement of Stockholders’ Equity/Members’ Deficit for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

Notes to Consolidated Financial Statements

Note 1 – Organization, Description of Business, and Basis of Presentation

Note 2 – Summary of Significant Accounting Policies

Note 3 – Discontinued Operations

Note 4 – Acquisitions and Merger

Note 5 – Derivative Instruments

Note 6 – Fair Value Measurements

Note 7 – Property and Equipment, net

Note 8 – Asset Retirement Obligation

Note 9 – Accounts Payable and Accrued Expenses

Note 10– Debt

Note 11 – Leases

Note 12 – Commitments and Contingencies

Note 13 – Preferred Stock

Note 14 – Common Stock

Note 15 – Common Stock Options and Warrants

Note 16 – Long–Term Incentive Compensation

Note 17 – Income Taxes

Note 18 – Related Party Transactions

Note 19 – Subsequent Events

Note 20 – Supplemental Oil and Gas Disclosures (Unaudited)

of Independent Registered Public Accounting Firm

the Stockholders and the Board of Directors of Prairie Operating, Co.

on the Financial Statements

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Prairie Operating, Co.

(formerly known as Prairie Operating Co., LLC) and

its subsidiaries (the Company), as of December 31, 2023 and 2022, the related consolidated statements of operations, members’ deficit/stockholders’

equity and cash flows for year ended December 31, 2023, and for the period from June 7, 2022 (date of inception) to December 31, 2022

and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the

results of its operations and its cash flows for the year ended December 31, 2023, and for the period from June 7, 2022 (date of inception)

to December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

and its subsidiaries (the “Company”)

as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity/members’ deficit

and cash flows for each of the two years in the period ended December 31, 2024, and the related notes to the consolidated financial statements

(collectively, the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each

of the two years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States

financial statements are the responsibility of the Company’s management.

29 unchanged sentences

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

the Merger as an Asset Acquisition and Evaluate the Acquired Assets Value – Asset Acquisition of Creek Road Miners, Inc.

Refer to Note 1 and Note 3 to the financial statements

Value – Financial Instruments (Standby Equity Purchase Agreement, Senior Convertible Note and Subordinated Note Warrants) - Refer

to Note 1, Note 2, Note 4, Note 6 and Note 10 to the financial statements.

Audit Matter Description

Company’s merger with Creek Road Miners, Inc.

was determined to be a reverse asset acquisition and resulted in Prairie Operating

Co., LLC being the accounting acquirer.

The Company used the cost accumulation method to determine the cost of the acquisition as well

as determining the cost of the acquisition to be recorded as the acquired asset value.

the Company’s determination of the transaction as a reverse asset acquisition and evaluating the acquired assets value required

auditor judgment in assessing and concluding the appropriateness of management determinations that the transaction is not a business

combination but rather a reverse asset acquisition as well as determining the cost of the acquisition to be recorded as the acquired

the Critical Audit Matter Was Addressed in the Audit

audit procedures related to the determination that the Creek Road Miners, Inc.

merger transaction is a reverse asset acquisition and

evaluating the acquired assets value included the following, among others:

read the Amended and Restated Agreement and Plan of Merger to identify and assess the relevant terms and conditions to evaluate the

appropriateness of management’s accounting treatment.

evaluated the appropriateness of management’s determination that the transaction is a reverse asset acquisition by assessing

the reasonableness of the qualitative and quantitative considerations utilized in determining that the assets acquired and liabilities

assumed do not constitute a business (does not have inputs, processes and outputs) and that Prairie Operating Co., LLC is considered

the accounting acquirer.

evaluated management’s determination of the acquired assets value by assessing the appropriateness of the cost accumulation

method used by management and by evaluating the appropriateness of management’s conclusion that the fair value of the consideration

paid will be based on the fair value of the common stock retained by Creek Road Miners, Inc.

stockholders, Series D Preferred Stock

issued and transaction costs.

Value – Financial Instruments (AR Debentures and Series D Preferred Stock) - Refer to Note 2, Note 3, Note 8 and

Note 10 to the financial statements

described in Note 1, Note 2, Note 4, Note 6 and Note 10 to the financial statements, the Company entered into a Standby Equity Purchase

Agreement to fund working capital needs.

The Company determined that the Standby Equity Purchase Agreement represents a derivative instrument.

The Company utilized unobservable market data to determine the fair value of the Standby Equity Purchase Agreement.

As described in Note

1, Note 2, Note 4, Note 6 and Note 10 to the financial statements, the Company issued a $15.0 million Senior Convertible Note to provide

a portion of the proceeds for the NRO Acquisition.

The Company determined that the Senior Convertible Note contained certain features

that required bifurcation and separate accounting as embedded derivatives and elected to account for the note at fair value.

utilized unobservable market data to determine the fair value of the Senior Convertible Note.

As described in Note 2, Note 6 and Note

10 to the financial statements, the Company issued Subordinated Note Warrants to purchase up to 1,141,552 shares of common stock.

Company determined that the Subordinated Note Warrants should be accounted for as a liability at fair value.

The Company utilized unobservable

market data to determine the fair value of the Subordinated Note Warrants.

principal consideration for our determination that the valuation of the Standby Equity Purchase Agreement, Senior Convertible Note and

Subordinated Note Warrants is a critical audit matter are the significant judgment by management necessary in the selection of valuation

techniques and assumptions with significant unobservable market data to estimate the fair value.

This required a high degree of auditor

judgment and extensive audit effort, including the need to involve fair value specialists who possess significant quantitative and modeling

expertise, to audit and evaluate the appropriateness of these models and inputs.

We Addressed the Matter in Our Audit

audit procedures related to the valuation of the Standby Equity Purchase Agreement, Senior Convertible Note and Subordinated Note Warrants

included the following, among others:

obtained an understanding of the design of the Company’s controls over the valuation of the Standby Equity Purchase Agreement,

Senior Convertible Note and Subordinated Note Warrants, including controls over management’s review of the valuation model

and the significant assumptions used in determining their fair values.

the assistance of a third-party valuation specialist, we audited the fair value of the equity volatility and asset volatility, valuation

methodology, and key assumptions used in determining the fair value of the Standby Equity Purchase Agreement, Senior Convertible

Note and Subordinated Note Warrants by:

Evaluating the appropriateness of the valuation model and techniques used in determining fair value;

that the significant valuation assumption inputs of implied volatility and yield are consistent with those that would be used by market

participants through the testing of source information, checking the mathematical accuracy of the calculation, and developing independent

estimates and comparing to those selected by management, where applicable;

Recalculation

of the fair value determined by management to verify its reasonableness.

audited the completeness and accuracy of the underlying data supporting the significant valuation assumption inputs.

Value – Share-Based Compensation (Performance Share Awards (PSU)) - Refer to Note 2 and Note 16 to the financial statements

Audit Matter Description

described in Note 3 to the financial statements, the Company issued 4,432 shares of Series D Preferred Stock as consideration in the

merger transaction with Creek Road Miners, Inc.

The Company utilized a complex valuation technique with unobservable inputs to determine

the fair value of the Series D Preferred Stock.

As described in Note 3, Note 8 and Note 10 to the financial statements, in connection

with the merger transaction with Creek Road Miners, Inc., the Company assumed AR Debentures in an aggregate principal amount of $2.0

The Company determined that the AR Debentures contained certain features that required bifurcation and separate accounting as

embedded derivatives.

The Company elected to measure the AR Debentures in their entirety at fair value.

principal consideration for our determination that the valuation of the AR Debentures and Series D Preferred Stock is a critical audit

matter are the significant judgments by management necessary in the selection of valuation techniques and assumptions with significant

unobservable inputs to estimate the fair value.

This required a high degree of auditor judgment and extensive audit effort, including

the need to involve fair value specialists who possess significant quantitative and modeling expertise, to audit and evaluate the appropriateness

of these models and inputs.

described in Note 2 and Note 16 to the financial statements, the Company granted PSUs to certain of its employees.

The Company utilized

unobservable market data to determine the grant date fair value of PSUs.

principal consideration for our determination that the valuation of the PSU grant date fair value is a critical audit matter are the

significant judgment by management necessary in the selection of valuation techniques and assumptions with significant unobservable market

data to estimate the fair value.

This required a high degree of auditor judgment and extensive audit effort, including the need to involve

fair value specialists who possess significant quantitative and modeling expertise, to audit and evaluate the appropriateness of these

models and inputs.

We Addressed the Matter in Our Audit

audit procedures related to the valuation of the AR Debentures and Series D Preferred Stock included the following, among others:

obtained an understanding of the design of the Company’s controls over the valuation

of the AR Debentures and Series D Preferred Stock, including controls over management’s

review of the valuation model and the significant assumptions used in determining their fair

the assistance of a third-party valuation specialist, we audited the fair value of the embedded

conversion option and warrant liability, valuation methodology, and key assumptions used

in determining the fair value of the AR Debentures and Series D Preferred Stock by:

the appropriateness of the valuation model and techniques used in determining fair value;

that the significant valuation assumption inputs of implied volatility and yield are consistent

with those that would be used by market participants through the testing of source information,

checking the mathematical accuracy of the calculation, and developing independent estimates

and comparing to those selected by management, where applicable;

audit procedures related to the PSU grant date fair value included the following, among others:

obtained an understanding of the design of the Company’s controls over the valuation of the PSU grant date fair value, including

controls over management’s review of the valuation model and the significant assumptions used in determining their fair values.

the assistance of a third-party valuation specialist, we audited the fair value of the equity volatility, valuation methodology,

and key assumptions used in determining the fair value of the PSU grant date fair value by:

Evaluating the appropriateness of the valuation model and techniques used in determining fair value;

that the significant valuation assumption inputs of implied volatility and yield are consistent with those that would be used by market

participants through the testing of source information, checking the mathematical accuracy of the calculation, and developing independent

estimates and comparing to those selected by management, where applicable;

Recalculation

of the fair value determined by management to verify its reasonableness.

audited the completeness and accuracy of the underlying data supporting the significant valuation

assumption inputs.

audited the completeness and accuracy of the underlying data supporting the significant valuation assumption inputs.

Ham, Langston, and Brezina, L.L.P .

3 unchanged sentences

Balance Sheets

thousands, except share amounts)

December 31, 2024

December 31, 2023

Current assets:

Cash and cash

Accounts and other receivable

Cash and cash equivalents

Accounts receivable:

Oil, natural gas, and NGL revenue

Joint interest and other

Note receivable

Prepaid expenses and other current assets

Current assets – discontinued operations

Total current assets

Property and equipment:

Oil and natural gas properties,

successful efforts method of accounting ($ 28,705,404

excluded from amortization at December 31, 2023)

Cryptocurrency mining equipment

Oil and natural gas properties, successful efforts method of accounting including $ 70,462 and $ 28,705 excluded from amortization as of December 31, 2024 and 2023, respectively

Accumulated depreciation, depletion, and amortization

( 1,111,115 )

Total property and equipment,

Total property and equipment, net

Deposits on oil and natural gas property purchases

Operating lease assets

transaction costs

Liabilities and Members’

Deficit/Stockholders’ Equity

Note receivable – non–current

Deferred transaction costs

Other non–current assets

Non–current assets – discontinued operations

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued

Accrued interest and expenses

– related parties

lease liabilities, current

Accounts payable and accrued expenses

Ad valorem and production taxes payable

Oil, natural gas, and NGL revenue payable

Senior convertible note, at fair value

Derivative liabilities

Operating lease liabilities

Total current liabilities

Long–term liabilities:

lease liabilities, long-term

long-term liabilities

Commitments and contingencies

Credit facility

Subordinated note, at fair value – related party

Subordinated note warrants, at fair value – related party

SEPA, at fair value

Derivative liabilities

Asset retirement obligation

Operating lease liabilities

Total long–term liabilities

Total liabilities

Commitments and contingencies (Note 12)

Stockholders’ equity:

Series D convertible preferred

shares authorized and 20,627

shares issued and outstanding at December 31, 2023;

shares authorized, issued and outstanding at December 31,

Series E convertible preferred

shares authorized and 20,000

shares issued and outstanding at December 31, 2023;

shares authorized, issued and outstanding at December 31,

Series D convertible preferred stock;

$ 0.01 par value;

50,000 shares authorized, and 14,457 and 20,627 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Series E convertible preferred stock;

$ 0.01 par value;

50,000 shares authorized, and zero and 20,000 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Preferred stock value

Common stock;

shares authorized and 9,826,719

shares issued and outstanding at December 31, 2023;

shares authorized, issued and outstanding at December 31,

$ 0.01 par value;

500,000,000 shares authorized, and 23,045,209 and 9,826,719 shares issued and outstanding as of December 31, 2024 and 2023, respectively

Additional paid–in capital

( 78,853,677 )

stockholders’ equity

liabilities and members’ deficit/stockholders’ equity

notes to consolidated financial statements

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes are an integral part of these consolidated financial statements.

Operating Co.

1 unchanged sentence

Statements of Operations

Ended December 31,

7, 2022 (date of inception) through December 31,

Cryptocurrency

Operating costs and expenses:

Cryptocurrency mining costs

Depreciation and amortization

General and administrative

Impairment of cryptocurrency

mining equipment

thousands, except share and per share amounts)

Years Ended December 31,

Oil, natural gas, and NGL revenue

Total revenues

Operating expenses:

Lease operating expenses

Gathering, transportation, and processing expenses

Ad valorem and production taxes

Depreciation, depletion, and amortization

Accretion of asset retirement obligation

Exploration expenses

General and administrative expenses

Total operating expenses

Loss from operations

( 33,591,430 )

Other income (expense):

Interest income

Other (expenses) income:

Interest expense

Loss on adjustment to fair

value – warrant liabilities

( 39,797,994 )

Loss on adjustment to fair

value – AR Debentures

( 3,790,428 )

Loss on adjustment to fair

value – Obligation Shares

( 1,477,103 )

Total other income (expense)

( 45,487,430 )

Loss from operations before

Loss on derivatives, net

Loss on adjustment to fair value – debt and warrants

Loss on issuance of debt

Interest income and other

Liquidated damages

Total other expenses

Loss from operations before provision for income taxes

Provision for income taxes

( 79,078,860 )

for income taxes

$ ( 79,078,860 )

$ ( 461,520 )

Loss per common share:

Weighted average common shares outstanding:

notes to consolidated financial statements

Net loss from continuing operations

Discontinued operations

Loss from discontinued operations, net of taxes

Net loss from discontinued operations

Earnings (loss) per common share:

Loss per share – continuing operations, basic and diluted

Loss per share – discontinued operations, basic and diluted

Loss per share, basic and diluted

Weighted average common shares outstanding, basic and diluted

accompanying notes are an integral part of these consolidated financial statements.

Operating Co.

and Subsidiaries

Statements of Members’ Deficit/Stockholders’ Equity

Shareholders’

Statement of Stockholders’ Equity/Members’ Deficit

(In thousands, except

share amounts)

Stockholders’

D Preferred Stock

7 unchanged sentences

Stockholders’

June 7, 2022 (date of inception)

contributions

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

December 31, 2022

loss from January 1, 2023 through May 3, 2023

of membership interests

of common stock to former stockholders of Creek Road Miners upon Merger

of Series D to PIPE investors, net of issuance costs

to holders of Convertible Debentures for settlement of Creek Road Miners liabilities

of common stock and warrants in conjunction with purchase of Exok Option assets

of Series E preferred stock, warrants and common stock net of issuance cost

Reclassification

( 67,681,928 )

1, 2023 balance

Net loss from January 1, 2023

through May 3, 2023

$ ( 381,520 )

of Obligation Shares

of AR Debentures

Conversion of membership interests

Issuance of Common Stock to former stockholders of

Creek Road Miners upon Merger

Series D Preferred Stock to PIPE investors, net of issuance costs

Series D Preferred Stock to holders of Convertible Debentures for settlement of Creek Road Miners liabilities

Issuance of Common Stock and warrants in conjunction

with purchase of Exok Option assets

Issuance of Series E Preferred Stock and warrants and

Common Stock, net of issuance cost

Reclassification (Refer to Note 14 – Common Stock )

Issuance of Obligation Shares

Conversion of

AR Debentures, inclusive of interest

Reclassification

( 21,799,032 )

( 19,999,980 )

of Series D preferred stock

of common stock upon warrant exercise

based compensation

loss from May 3, 2023 through December 31, 2023

( 78,853,677 )

(Refer to Note 14 – Common Stock)

Conversion of Series D Preferred Stock

Issuance of Common Stock upon warrant exercise

Stock based compensation

Net loss from May 3, 2023 through

December 31, 2023

$ 118,927,814

$ ( 78,853,677 )

Conversion of Series D Preferred Stock

Conversion of Series E Preferred Stock

Issuance of Common Stock upon warrant exercise

Issuance of Common Stock to fund NRO Acquisition, net

of issuance costs

Issuance of Common Stock for SEPA commitment fee

Issuance of Common Stock as part of credit facility

issuance costs

Issuance of Common Stock related to stock based compensation

Stock based compensation

31, 2024 balance

$ ( 119,766 )

notes to consolidated financial statements

accompanying notes are an integral part of these consolidated financial statements.

Operating Co.

1 unchanged sentence

Statements of Cash Flows

(date of inception)

Cash flow from operating

$ ( 79,078,860 )

$ ( 461,520 )

Adjustment to reconcile

net loss to net cash used in operating activities:

Depreciation and amortization

Impairment of cryptocurrency

mining equipment

Year Ended December 31,

Cash flows from operating activities:

Net loss from continuing operations

Adjustment to reconcile net loss to net cash used in operating activities:

Stock based compensation

Loss on adjustment to fair

value – warrant liabilities

Loss on adjustment to fair

value – AR Debentures

Loss on adjustment to fair

value – Obligation Shares

Changes in operating assets

and liabilities:

Accounts and other receivable

Prepaid expenses

Accounts payable and accrued

Accrued interest and expenses

– related parties

cash used in operating activities

( 11,940,855 )

Cash flow from investing

Acquisition of unproved

oil and gas properties

( 21,225,466 )

Cash paid in reverse asset

acquisition, net of cash received

( 1,990,336 )

Capital investments –

to mining equipment

transaction costs related to Nickel Road Asset Purchase

cash used in investing activities

( 23,684,302 )

Cash flow from financing

Proceeds from the issuance

of Series D preferred stock and warrants

Financing costs associated

with issuance of Series D preferred stock and warrants

Proceeds from the issuance

of Series E preferred stock, warrants and common stock

Proceeds from the exercise

of Series D B warrants

Financing costs associated

with issuance of Series E preferred stock, warrants and common stock

Depreciation, depletion, and amortization

Loss on derivatives, net

Loss on adjustment to fair value – debt and warrants

Loss on issuance of debt

Non-cash SEPA commitment fee

Amortization and expensing of deferred financing costs

Accretion of asset retirement obligation

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Ad valorem and production taxes payable

Oil, natural gas, and NGL revenue payable

Accrued interest and expenses – related parties

Other assets and liabilities

Net cash used in continuing operating activities

Net cash provided by discontinued operations

Net cash used in operating activities

Cash flows from investing activities:

Cash paid for Nickel Road asset purchase, net of cash received

Transaction expenses paid related to Nickel Road asset purchase

Deposit on other oil and natural gas properties purchase

Investments in oil and natural gas properties

Purchases of other property and equipment

Acquisition of unproved oil and natural gas properties

Cash received from sale of cryptocurrency miners

Cash received from payment on note receivable related to sale of cryptocurrency miners

Cash paid in reverse asset acquisition, net of cash received

Net cash used in continuing investing activities

Net cash used in discontinued investing activities

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from the issuance of Common Stock

Financing costs associated with issuance of Common Stock

Proceeds from the issuance of the Senior Convertible Note

Payments of the Senior Convertible Note

Proceeds from the issuance of the Subordinated Note – related party

Payments of the Subordinated Note – related party

Borrowings on the Credit Facility

Debt issuance costs associated with the Credit Facility

Proceeds from the exercise of Series D and E Preferred Stock warrants

Proceeds from the issuance of Series D Preferred Stock and warrants

Financing costs associated with the issuance of Series D Preferred Stock

Proceeds from the issuance of Series E Preferred Stock and warrants

Financing costs associated with the issuance of Series E Preferred Stock

Payments on long-term debt

from the sale of options

cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents,

beginning of period

and cash equivalents, end of period

Supplemental disclosures

of cash flow information:

paid for income taxes

paid for interest

Supplemental disclosures

of noncash investing and financing activity:

transaction costs associated with the Merger and Exok Transaction

transaction costs associated with the Series D PIPE

Cryptocurrency

mining equipment and deposits acquired in the Merger

convertible debentures assumed in the Merger

loan payable acquired assumed in the Merger

interests converted into shares of common stock

$ ( 606,705 )

stock issued at Merger

D Preferred stock issued at Merger

stock and warrants issued in Exok option acquisition

stock issued in satisfaction of share issuance obligation

stock issued in conversion of AR Debentures

Reclassification of increase in value of warrant liabilities to equity

notes to consolidated financial statements

Net cash provided by continuing financing activities

Net cash provided by discontinued financing activities

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of the year

Cash and cash equivalents, end of the year

accompanying notes are an integral part of these consolidated financial statements.

to Note 2 – Summary of Significant Accounting Policies for supplemental cash flow disclosures.

Operating Co.

2 unchanged sentences

1 – Organization, Description of Business, and Basis of Presentation

May 3, 2023, we changed our name from Creek Road Miners, Inc.

to Prairie Operating Co.

(the “Company,”

“we,” “us” or “our” ) in connection with the Merger (as defined below).

The Company was incorporated

in Delaware on May 2, 2001.

The Company is an independent energy company engaged in oil, natural gas and NGLs development, exploration

and production (“E&P”).

The Company is also a crypto company focused on cryptocurrency mining.

The Company operates in

two segments:

E&P and cryptocurrency mining.

Merger Agreement and Related Transactions

May 3, 2023, Prairie Operating Co., a Delaware corporation formerly named Creek Road Miners, Inc., completed its previously

announced merger with Prairie Operating Co., LLC, a Delaware limited liability company (“Prairie LLC”), pursuant to the

terms of the Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2023 (the “Merger Agreement,” and the

closing thereunder, the “Closing”), by and among the Company, Merger Sub and Prairie LLC, 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 Company (the “Merger”).

Upon consummation of the Merger, the

Company changed its name from “Creek Road Miners, Inc.” to “Prairie Operating Co.” The Company traded under

its former name and ticker symbol “CRKR” until October 16, 2023 and under “CRKRD,” a transitionary ticker

symbol, until November 10, 2023.

Our common stock (as defined below) began trading on the OTCQB under the symbol “PROP”

on November 13, 2023.

In December 2023, the Company received approval to list its shares of

common stock on the Nasdaq Capital Market stock exchange (“Nasdaq”) and trading of the Company’s shares of common

stock commenced on the Nasdaq on December 28, 2023.

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 for

all periods presented .

the Merger, membership interests in Prairie LLC were converted into the right to receive each member’s pro rata share of 2,297,668

shares of common stock of the Company.

addition, the Company consummated the previously announced purchase of oil and gas leases, including all of Exok, Inc.’s, an Oklahoma

corporation (“Exok”), right, title and interest in, to and under certain undeveloped oil and gas leases located in Weld County,

Colorado, together with certain other associated assets, data and records, from Exok for $ 3.0

million pursuant to the Amended and Restated

Purchase and Sale Agreement, dated as of May 3, 2023, by and among the Company, Prairie LLC and Exok.

fund the Exok Transaction, the Company received an aggregate of $ 17.4

million in proceeds from a number of investors

(the “Series D PIPE Investors”), and the Series D PIPE Investors were issued Series D preferred stock, par value $ 0.01

per share (“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, and 100 %

warrant coverage for each of Series A warrants to purchase shares of common stock (the “Series D A Warrants”) and Series

B warrants to purchase shares of common stock (the “Series D B Warrants” and together with the Series D A Warrants, the “Series

D PIPE Warrants”), in a private placement pursuant (the “Series D PIPE”) to securities purchase agreements entered

into with each Series D PIPE Investor.

Merger has been accounted for as a reverse asset acquisition under existing GAAP (as defined below).

For accounting purposes, Prairie

LLC was treated as acquiring Merger Sub in the Merger.

See Note 3 for further discussion.

and Description of Business

Operating Co.

(individually or together with its subsidiaries, the “Company”) is an independent energy company focused on the acquisition and development of

crude oil, natural gas and natural gas liquids (“NGLs”).

The Company assets and operations are strategically located in the oil region of rural Weld County, within the Denver–Julesburg Basin (the “DJ Basin”) of Colorado.

In addition to growing production through its drilling operations, the Company also seeks to grow its business through accretive acquisitions,

such as the acquisition of the Genesis Bolt–on Assets (as defined herein) in February 2024 and the NRO Acquisition (as defined

herein), which closed in October 2024.

Refer to Note 4 – Acquisitions and Merger for a full discussion of the acquisitions.

As of December 31, 2024, the Company’s

exploration and production (“E&P”) assets consist of its Central Weld Assets (as defined herein), Genesis and

Genesis Bolt–on Assets (as defined herein), and the Exok Option Purchase assets (as defined herein).

The Company’s

Central Weld Assets were acquired from Nickel Road Development LLC and Nickel Road Operating LLC (collectively, “NRO”)

in October 2024 and include 26 revenue producing oil and natural gas wells.

As of December 31, 2024, the Company’s total

Genesis Assets include approximately 18,100

net leasehold acres in, on and under approximately 31,000

gross acres and total Central Weld Assets include approximately 5,640

net leasehold acres, on and under approximately 6,000

The Company commenced drilling wells on its Genesis Bolt-on Assets in the third quarter of 2024 and all eight wells

began producing in February 2025.

the Company focused on cryptocurrency mining until the sale of its cryptocurrency miners in January 2024.

The Company’s cryptocurrency

mining operations commenced on May 3, 2023 concurrent with the Merger (as defined herein).

Prior to January 2024, all of the Company’s

revenue was generated through its cryptocurrency mining activities from assets that were acquired in the Merger.

Upon the closing of

the Crypto Sale (as defined herein), the Company exited the cryptocurrency mining business.

All results and activities from these assets

and operations have been classified as discontinued operations in the Company’s consolidated financial statements.

Refer to Note

3 – Discontinued Operations for a full discussion of the discontinued operations.

Agreement and Related Transactions

May 3, 2023, the Company completed its merger with Prairie Operating Co., LLC, a Delaware limited liability company (“Prairie LLC”),

pursuant to the terms of the Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2023 (the “Merger Agreement”), by and among the Company, Creek Road Merger Sub, LLC (“Merger Sub”),

and Prairie LLC, 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 Company (the “Merger”).

Upon consummation

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

the Merger, membership interests in Prairie LLC were converted into the right to receive each member’s pro rata share of 2,297,668 shares

of Common Stock.

The Merger was accounted for as a reverse asset acquisition under existing accounting principles generally

accepted in the United States (“GAAP”).

For accounting purposes, Prairie LLC was treated as acquiring Merger Sub in the

Refer to Note 4 – Acquisitions and Merger for a further discussion.

October 16, 2023, the Company effected a 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 for all periods presented.

for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Prairie LLC

3 unchanged sentences

assets recorded.

Option Purchase and Related Transactions

August 14, 2023, Prairie LLC exercised its option in connection with the Exok Transaction and purchased oil and gas leases, including

all of Exok’s right, title and interest in, to and under certain undeveloped oil and gas leases located in Weld County, Colorado,

together with certain other associated assets, data and records, consisting of approximately 20,328

net mineral acres in, on and under approximately

gross acres from Exok (the “Exok Option

The Company paid $ 18.0

million in cash to Exok and issued equity consideration

to certain affiliates of Exok, consisting of (i) 670,499

shares of common stock and (ii) warrants providing

the right to purchase 670,499

shares of common stock at $ 7.43

per share (the “Exok Warrants”).

fund the Exok Option Purchase, the Company entered into a securities purchase agreement with Narrogal Nominees Pty Ltd ATF Gregory K

O’Neill Family Trust (the “Series E PIPE Investor”) on August 15, 2023, pursuant to which the Series E PIPE Investor

agreed to purchase, and the Company agreed to sell to the Series E PIPE Investor, for an aggregate of $ 20.0

million, securities consisting of (i) 39,614

shares of common stock, (ii) 20,000

shares of Series E preferred stock, par value

per share, with a stated value of $ 1,000

per share, convertible into shares of common

stock at a price of $ 5.00

per share (“Series E Preferred Stock”),

and (iii) Series E A Warrants to purchase 4,000,000

shares of common stock and Series E B Warrants

to purchase 4,000,000

shares of common stock, each at a price of $ 6.00

per share (collectively, the “Series E

PIPE Warrants”), in a private placement (the “Series E PIPE”).

The Exok Option

Purchase and the Series E PIPE closed on August 15, 2023.

Stock Split and Amendment to Certificate of Incorporation

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

Company also changed its name from Creek Road Miners, Inc.

to Prairie Operating Co.

(the “Corporate Name Change”) and changed

its ticker symbol from “CRKR” to “PROP” (the “Symbol Change”) on the OTCQB marketplace of OTC Markets.

The Reverse Stock Split and the Corporate Name Change became effective on the OTCQB marketplace of OTC Markets on October 16, 2023.

connection with the Reverse Stock Split, Corporate Name Change and Symbol Change, the CUSIP number for the Company’s common stock

changed to 739650109.

Our common stock began trading on the OTCQB under the symbol “PROP” on November 13, 2023.

Certificate of Amendment filed by the Company with the Delaware Secretary of State took effect on October 16, 2023 and, among other things,

(i) effected the Reverse Stock Split;

and (ii) changed the total number of shares of all classes of stock which the Company shall have

authority to issue 155,000,000 shares,

consisting of (a) 150,000,000

shares of common stock

and (b) 5,000,000

shares of preferred

stock, par value $ 0.01

after the filing of the Certificate of Amendment, the Company filed the Second Amended and Restated Certificate of Incorporation (the

“Amended and Restated Charter”) with the Delaware Secretary of State, with the Amended and Restated Charter and took effect

October 16, 2023, that, among other things, (i) eliminated certain provisions related to shares of preferred stock as a result of the

elimination of certain series of preferred stock;

(ii) removed provisions providing for action by written consent of stockholders;

included a waiver of the corporate opportunity doctrine;

(iv) made certain modifications to the election and removal of directors of

(v) adopted Delaware as the exclusive forum for certain shareholder litigation;

and (vi) increased the total number of shares

of all classes of stock which the Company shall have authority to issue 550,000,000

shares, consisting of

(a) 500,000,000

shares of common stock

and (b) 50,000,000

shares of preferred

December 2023, the Company received approval to list its shares of common stock on the Nasdaq Capital Market stock exchange (“Nasdaq”)

and trading of the Company’s shares of common stock commenced on the Nasdaq on December 28, 2023.

Unless otherwise noted, all

per share and common stock amounts have been retroactively adjusted for the effect of this Reverse Stock

Split for all periods presented.

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

currently hold acreage in the DJ Basin of Colorado that we intend to develop.

In addition to growing production through our drilling operations, we

also seek to grow our business through accretive acquisitions , including the acquisition of the

Genesis Bolt-On Assets in February 2024 and the NRO Acquisition, which was signed in January 2024 (see Note 18).

Cryptocurrency

mining operations commenced on May 3, 2023 concurrent with the Merger.

In the year ended December 31, 2023, we generated all of our revenue

through our cryptocurrency mining activities from assets we acquired in the Merger.

On January 23, 2024, we closed the Crypto Sale in

which we sold all of our Mining Equipment and our rights and obligations under the Atlas MSA.

Accordingly, we currently do not expect

to receive rewards in the form of cryptocurrency in the future.

We do not own, control or take custody of Bitcoin.

Atlas, our service

provider, retained all Bitcoin rewards, deducted a hosting service fee from the monthly total mined currency produced by our miners and

remitted the net mined currency to us in cash.

exited cryptocurrency mining upon the January 2024 disposition of our cryptocurrency mining equipment (see Note 18).

of Presentation

consolidated financial statements included in this Annual Report present the Company’s financial position, results of operations

and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States (“GAAP”).

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the

amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements,

and the amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

The Company evaluates

subsequent events through the date the financial statements are issued.

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.

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.

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.

to December 31, 2023, our cash and cash equivalents were reduced by $ 9.9 million

due to the payment of the Deposit in connection with the NRO Acquisition and the purchase of the Genesis Bolt-on assets (see Note

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 warrants.

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.

The Company has 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 12 months from the date the

Company’s financial statements are issued.

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

The condensed 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.

of Presentation and Consolidation

accompanying consolidated financial statements included in this Annual Report present the Company’s financial position, results

of operations, and cash flows for the periods presented in accordance with GAAP and the accounts of the Company and its wholly-owned

subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

The Company owns 100 % of Prairie LLC,

which is considered a variable interest entity for which the Company is the primary beneficiary, as the Company is the sole managing

member of Prairie LLC and has the power to direct the activities most significant to Prairie LLC’s economic performance, as well

as the obligation to absorb losses and receive benefits that are potentially significant.

the year ended December 31, 2024, the Company had a net loss of $ 40.9

The Company cannot predict if or when it will be profitable and may continue to incur losses for an indeterminate period of

Additionally, the Company 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 it from successfully operating and expanding its business.

As of December 31,

2024, the Company had cash and cash equivalents of $ 5.2

million, a working capital deficit of $ 44.7

million, and an accumulated deficit of $ 119.8

September 30, 2024, the Company entered into the SEPA (as defined herein), a Subordinated Note (as defined herein), and a Senior

Convertible Note (as defined herein).

The Company closed the NRO Acquisition (as defined herein) on October 1, 2024, 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

The Company used the remainder of the Senior Convertible Note proceeds and the Subordinated Note proceeds to fund its drilling

On December 16, 2024, the Company entered into a reserve-based Credit Facility (as defined herein) with Citibank, N.A.

(“Citi”) and borrowed $ 28.0

million to help fund its working capital needs.

Refer to Note 10 – Debt for a discussion of the Credit Facility, Senior

Convertible Note, and Subordinated Note issuances and to Note 14 – Common Stock for a discussion of the issuance of

Common Stock.

The assessment of liquidity requires management

to make estimates of future activity and judgments about whether the Company can meet its obligations, have adequate liquidity to

operate, and maintain compliance with the applicable financial covenants of its Credit Facility Agreement, as discussed in Note

Significant assumptions used in the Company’s forecasted model of liquidity in the next 12 months include

its current cash position and ability to manage spending.

Based on an assessment of these factors, management expects that the

Company’s cash balance, expected revenues from its 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 its obligations over the next 12 months and fulfil the financial covenant requirements under its Credit Facility

Agreement, as discussed in Note 10 – Debt .

Since 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,

the Company has the ability to access funds to meet its working capital needs.

Since the Company’s 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 the Company’s liquidity needs, substantial doubt about the Company’s ability to continue as a

going concern does not exist.

Segment Information

Company operates in one business segment, the acquisition, development, and production of crude oil, natural gas, and NGLs (the “Operating

Segment,”), primarily in the U.S.

This is consistent with the internal reporting provided to the Company’s executive

team, which is the chief operating decision maker (“CODM”) and includes the Chief Operating Officer, President, Chief Financial

Officer, and Executive Vice President of Operations.

Company’s Operating Segment produces and sells crude oil, natural gas, and NGL volumes, which is reported as oil, natural gas,

and NGL revenue on its consolidated statements of operations for the years ended December 31, 2024 and 2023.

The Company’s revenue

recognition policy and other accounting policies for its Operating Segment are the same as its companywide accounting policies discussed

below in Note 2 – Summary of Significant Accounting Policies .

The Operating Segment’s major customers during the year

ended December 31, 2024 are also discussed below in Note 2 – Summary of Significant Accounting Policies.

Additionally, the

Company did not have any intra-entity sales or transfers during the years ended December 31, 2024 or 2023 and the Operating Segment significant

expenses are the same as those reported on the consolidated statements of operations for the years ended December 31, 2024 and 2023.

CODM assesses the performance of the Operating Segment and decides how to allocate resources based on the Company’s net income

(loss), as reported on the consolidated statements of operations.

Additionally, net income (loss) on the consolidated statements of operations

is used to monitor budget versus actual results of the Operating Segment and to benchmark against the Company’s competitors.

CODM’s measure of the Operating Segment assets is reported as total assets on the consolidated balance sheets.

2 – Summary of Significant Accounting Policies

of Consolidation

accompanying financial statements are consolidated and include the accounts of the Company and its wholly owned subsidiaries.

Intercompany balances and transactions have been eliminated in consolidation.

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

2 unchanged sentences

Actual results could differ from these estimates.

estimates and assumptions include estimates for reserves of uncollectible accounts, accruals for potential liabilities, estimates and

assumptions made in valuing assets and debt instruments issued in the Merger, and realization of deferred tax assets.

Concentration

of Credit Risk

instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents.

places its cash with high quality financial institutions and at times may exceed the FDIC $ 250,000

insurance limit.

of the Company’s revenue for the year ended December 31, 2023 was generated from its cryptocurrency mining business under a contract

with Atlas (described below).

We were wholly reliant on Atlas to operate our miners on a daily basis.

Company does not anticipate incurring any losses related to these credit risks.

estimates and assumptions include estimates for reserves of credit losses, accruals for potential liabilities, estimates and assumptions

made in valuing assets and debt instruments issued in the Merger, the valuation of the SEPA, Senior Convertible Note, the Subordinated

Note, and warrants issued in the third quarter of 2024, discussed further in Note 10 – Debt , the fair value of its derivative

instruments, and the realization of deferred tax assets.

and Cash Equivalents

and cash equivalents are defined by the Company as short-term, highly liquid investments that have an original maturity of three months

or less and deposits in money market mutual funds that are readily convertible into cash.

Management considers cash and cash equivalents

to have minimal credit and market risk.

The Company had $ 13.0

and cash equivalents are defined by the Company as short-term, highly liquid investments which have an original maturity of three

months or less and deposits in money market mutual funds that are readily convertible into cash.

The carrying value of cash and cash

equivalents approximate the fair value due to the short-term nature of these instruments.

The Company may have cash balances which

exceed the federal deposit insurance limits of $ 250,000 , creating a potential credit risk.

To mitigate this risk, the Company

maintains its cash and cash equivalents with high quality financial institutions;

therefore, it does not anticipate incurring any

losses related to these credit risks.

December 31, 2024 and 2023, the Company had cash and cash equivalents of $ 5.2

million and $ 13.0

in cash and cash equivalents

as of December 31, 2023 and December 31, 2022, respectively.

receivable represents revenue recognized, but for which payment has not yet been received.

All of the Company’s accounts receivable

at December 31, 2023 is from Atlas.

No allowance for doubtful accounts was recorded as of December 31, 2023 and December 31, 2022.

and equipment

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

Under this method, exploration costs such

as exploratory geological and geophysical costs, expiration of unproved leasehold, delay rentals and exploration overhead are expensed

million, respectively.

natural gas, and NGL revenue receivable consists of uncollateralized accrued oil, natural gas, and NGL revenue due under normal

trade terms, generally requiring payment within 30 days of production.

Joint interest and other receivables consist of

uncollateralized joint interest owner obligations due within 30 days of the invoice date and, at times, receivables from the

counterparties to the Company’s derivative contracts.

In the Company’s capacity as operator, it incurs development,

exploration, operating, and plug and abandon (“P&A”) costs that are billed to its partners based on their respective

working interests.

For receivables from joint interest owners, the Company typically has the ability to withhold revenue

distributions to recover any unpaid joint operations billings that are past due.

The Company did not have any producing wells prior to the NRO Acquisition

(as defined herein), which closed on October 1, 2024.

Following the NRO Acquisition, during the fourth quarter of 2024, two of the Company’s

largest customers accounted for approximately 80 % and 15 % of its oil, natural gas, and NGL revenues.

Those same two customers accounted

for approximately 78 % and 20 % of the Company’s accrued oil, natural gas, and NGL revenues.

The Company is exposed to credit risk

in the event of nonpayment by the purchasers of its production, all of which are concentrated in energy-related industries and may be

similarly affected by changes in economic and financial conditions, commodity prices, or other conditions.

However, the Company does

not believe the loss of any single purchaser would materially impact its operating results, as crude oil, natural gas, and NGL are fungible

products with well-established markets and numerous purchasers.

and Natural Gas Properties

Company follows the successful efforts method of accounting for its oil and natural gas properties.

Under this method, exploration costs

such as exploratory geological and geophysical costs, expiration of unproved leasehold, delay rentals, and exploration overhead are expensed

All costs related to production, general corporate overhead, and similar activities are also expensed as incurred.

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.

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.

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

method based on total estimated proved developed and undeveloped reserves.

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 the Company determines 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.

The Company reviews 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.

costs 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 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.

The costs of acquiring proved properties, including leasehold acquisition costs transferred from unproved properties,

are depleted using the UOP method based on total estimated proved developed and undeveloped reserves.

following table presents the costs of unproved properties excluded from the Company’s UOP depreciation calculation as of

December 31, 2024 and the periods such costs were incurred:

of Unproved Properties

(In thousands)

Acquisition costs

Development costs (1)

Total costs incurred

of December 31, 2024, $ 38.0

million of development costs relate to wells which were in the process of being completed.

These wells began producing in February

2025 and will be reflected in proved properties and the Company’s UOP depreciation calculation in the first quarter of

from the sales of individual oil and natural gas properties and the capitalized costs of individual properties sold or abandoned are

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impact the depletion rate of the remaining properties in the amortization base.

circumstances indicate that the carrying value of proved oil and natural gas properties may not be recoverable, we compare unamortized

capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which

identifiable cash flows are independent of cash flows of other assets.

If the expected undiscounted pre-tax future cash flows, based

on our estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant

data, are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value.

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 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.

Cryptocurrency

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

Leasehold improvements are amortized over

the shorter of the useful lives of the related assets, or the lease term.

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.

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.

If there is an indication of impairment, 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 determines if a contract contains a lease at its inception or as a result of an acquisition.

A lease is defined as a contract,

or part of a contract, that conveys the right to control the use of identified property, plant or equipment (an identified asset) for

a period of time in exchange for consideration.

A right-of-use asset and corresponding lease liability are recognized on the balance

sheet at commencement at an amount based on the present value of the remaining lease payments over the lease term as determined using

the implicit rate of the lease.

Operating right-of-use assets and operating lease liabilities are presented separately on the consolidated

balance sheet.

The Company does not have any finance leases as of December 31, 2023.

Leases with an initial term of twelve months or

less are not recorded on the balance sheet.

The Company recognizes lease expense for these leases on a straight-line basis, and variable

lease payments are recognized in the period as incurred.

leases contain both lease and non-lease components.

The Company has chosen to account for the lease and non-lease components separately.

Company leases office space and vehicles under non-cancelable operating leases expiring through 2027.

Certain lease agreements include

options to renew the lease, early terminate the lease or purchase the underlying asset(s).

The Company determines the lease term at the

lease commencement date as the non-cancelable period of the lease, including options to extend or terminate the lease when such an option

is reasonably certain to be exercised.

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 in the statements of operations.

of December 31, 2023 and 2022, the Company had no

liability-classified warrants.

See Note 14 for

additional information.

circumstances indicate that the carrying value of proved oil and natural gas properties may not be recoverable, the Company compares

unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest

level for which identifiable cash flows are independent of cash flows of other assets.

If the expected undiscounted pre-tax future cash

flows, based on the Company’s estimate of future crude oil and natural gas prices, operating costs, anticipated production from

proved reserves and other relevant data, are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair

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, the Company utilizes 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.

Property and Equipment

property and equipment primarily consists of office furniture and fixtures which are depreciated using the straight line method over

their estimated useful lives of 5 years.

Company utilizes commodity derivative instruments to reduce its exposure to crude oil and natural gas price volatility for a portion

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

The fair values of the Company’s

derivative instruments are measured on a recurring basis using a third-party industry-standard pricing model.

Refer to Note 6 - Fair

Value Measurements for a further discussion of the fair value of the Company’s derivative instruments.

Company has 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.

Refer to Note 4 - Derivative Instruments for a discussion

of the Company’s outstanding derivative instruments.

Expenses and Other Current Assets

Company’s prepaid expenses and other current assets primarily consists of premiums paid for its various insurance packages, including

commercial packages, general liability, and Director and Officer policies, and performance bonds which are amortized into G&A over

the life of the policy.

Deferred Financing Costs

Deferred financing costs include origination, legal, and other fees incurred

to issue debt or amend existing credit facilities.

Deferred financing costs related to the Company’s Credit Facility (as defined

herein) are capitalized to other non–current assets on the accompanying balance sheets and amortized to interest expense on the

accompanying statements of operations on a straight-line basis over the life of the Credit Facility.

Refer to Note 10 - Debt for

a discussion of the Company’s Credit Facility.

discussed further below in Note 3 – Discontinued Operations, the Company sold all of its cryptocurrency miners (the “Mining

Equipment”) in January 2024.

The consideration included $ 1.0 million in deferred cash payments (the “Deferred Purchase Price”),

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, the Company presents the Deferred Purchase Price payment as a note receivable

on its consolidated balance sheet, $ 0.5 million of which is classified as current and $ 0.2 million of which is classified as non–current,

based on when the payments are expected.

The Company did not have a note receivable balance on its consolidated balance sheet as of December

Company capitalizes its operating leases as right-of-use (“ROU”) assets and lease liabilities on the accompanying consolidated

balance sheets and recognizes the fixed minimum lease costs for its operating leases on a straight-line basis over the lease term in

accordance with ASC Topic 842, Leases (“ASC 842”).

The Company does not recognize leases with initial lease terms less than

or equal to 12 months on the balance sheet and only includes those short-term leases as part of its lease-related disclosures.

Additionally,

the Company does not include any of its variable lease costs in the calculation of its ROU assets and lease liabilities, instead variable

costs are expensed as incurred

Company makes certain assumptions and judgments when determining its ROU assets and lease liabilities.

When determining whether a contract

contains a lease, the Company considers whether there is an identified asset that is physically distinct, whether the supplier has substantive

substitution rights, whether the Company has the right to obtain substantially all of the economic benefits from the use of the asset,

and whether it has the right to control the asset.

Certain of the Company’s leases include one or more options to renew the lease,

with renewal terms that can extend the lease term for additional years.

When determining if renewals should be included in the lease

term to be recognized, the Company utilizes the reasonably certain threshold, therefore, certain of the leases included in the calculation

of its ROU assets and lease liabilities could include optional renewal periods for which it is not contractually obligated.

Additionally,

the Company must estimate its incremental borrowing rate when the implicit rate is not stated in the lease agreement and cannot be readily

As of December 31, 2024, none of the Company’s active leases contain purchase or termination options that are reasonably

certain to be exercised.

Company has several operating leases for office space and vehicles used in its daily operations, for which it records the related lease

costs as G&A expenses on the accompanying consolidated statements of operations.

Retirement Obligations

Company’s 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.

The Company recognizes 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, the Company records

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

Additionally, the

Company estimates 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 liability.

Refer to Note 8 - Asset Retirement Obligations for further information related to the Company’s

asset retirement obligations.

and Contingencies

5 unchanged sentences

the minimum amount in the range.

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 are in service are operating under a contract with Atlas Power Hosting, LLC (“Atlas”)

whereby Atlas hosts, operates, and manages the Company’s assets.

The Company receives payment in U.S.

dollars for the daily net

mining revenue representing the dollar value of the cryptocurrency award generated less power and other costs.

The Company does not currently

receive or own cryptocurrencies under this contract.

Cryptocurrency

Company’s cryptocurrency mining costs consist primarily of direct costs under the Atlas contract described above, 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 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.

tax 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.

Prairie LLC was a flow-through entity not subject to

income taxes as of December 31, 2022 and for the period from June 7, 2022 (date of inception) through December 31, 2022.

at Fair Value

discussed in Note 10 – Debt and Note 14 – Common Stock , on September 30, 2024, the Company 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 Topic 815, Derivatives and Hedging

As such, the Company has elected to account for the SEPA, the Senior Convertible Note, the Subordinated Note,

and the Subordinated Note Warrants using the fair value option.

Refer to Note 6 – Fair Value Measurements for a full discussion

of the fair values of the SEPA, the Senior Convertible Note, the Subordinated Note, and the Subordinated Note Warrants.

Company recognizes revenue from the sales of oil, natural gas, and NGLs at the point that control of the produced oil, natural gas, and NGL volumes are transferred to

the customer.

The following table presents the Company’s oil,

natural gas, and NGL revenue disaggregated by revenue stream:

Schedule of Disaggregated by Revenue

Year Ended December 31,

(In thousands)

Natural gas revenue

Total revenues

Company considers the transfer of control to have occurred when the production is delivered to the purchaser because at that time,

the purchaser has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the oil, natural

gas, or NGL production.

Transfer of control dictates the presentation of the Company’s gathering, transportation, and

processing expenses within its consolidated statements of operations.

Gathering, transportation, and processing expenses incurred

prior to the transfer of control are recorded gross within gathering, transportation, and processing in the accompanying statements

of operations.

Additionally, the Company has made an accounting election to exclude certain qualifying taxes collected from

customers and remitted to governmental authorities from its reported revenues and is presenting those amounts as a component of

operating expense in the accompanying consolidated statements of operations.

The amounts due from purchasers are accrued in oil,

natural gas, and NGL revenue accounts receivable on the accompanying consolidated balance sheets.

The Company records the

differences between its estimates and the actual amounts received for product sales in the month that payment is received from the

Additionally, the Company has determined that product returns or refunds are very rare and will account for them as they

occur, and it generally provides no warranty other than the implicit promise that goods delivered are free of liens and encumbrances

and meet the agreed upon specification.

revenue contracts.

The majority of the Company’s oil revenue contracts are structured so that the Company delivers

production at the wellhead or other contractually agreed-upon delivery point, at which time the purchaser takes custody, title, and

risk of loss of the product, and the Company receives a specified index price from the purchaser with no deduction.

Therefore, the

Company recognizes revenue when control transfers to the purchaser at the delivery point based on the price received from the

purchaser and records the third-party transportation costs as a component of operating expense in the accompanying

consolidated statements of operations.

Natural gas and NGLs revenue contracts .

the Company’s natural gas processing contracts, the Company delivers natural gas to a processing entity at the wellhead or the inlet

of the processing entity’s system.

In these contracts, the Company may elect to take residue gas and/or NGLs in-kind at the tailgate

of the processing plant and subsequently market the product.

Through the marketing process, the Company delivers the product to the purchaser

at a contractually agreed-upon delivery point and receives a specified index price from the purchaser.

This purchaser can be the natural

gas processor or the processor can market the product on the Company’s behalf to a third-party purchaser.

In both scenarios, the

Company is the principal in the transaction as control of the product remains with the Company throughout the process and any fees paid

to the processor are considered to be for a distinct service with an identifiable benefit that is sufficiently separable.

Therefore, the

Company recognizes revenue when control transfers to the ultimate purchaser at the delivery point based on the index price received from

the purchaser and records the gathering, processing, and compression fees attributable to the gas processing contract, as well as any

transportation fees incurred to deliver the product to the purchaser, are presented as a component of operating expense in the accompanying

consolidated statements of operations.

and Administrative Expenses

and administrative (“G&A”) expenses consist of overhead, including salaries, incentive compensation, benefits for the

Company’s corporate staff, costs of maintaining its headquarters, and costs of managing its production and development operations.

The Company records a certain portion of its salaries, wages, and benefits as LOE when they are directly attributable to maintaining

the production of its operated oil and natural gas properties.

For oil and natural gas properties for which the Company is the operator,

it reduces G&A expenses for reimbursements received from other working interest owners for the portion of costs and allowable overhead

incurred during the drilling and production phases of the property.

G&A expenses also include software fees and audit, legal, and

other professional service fees.

Additionally, the Company could be subject to legal actions and claims arising in the ordinary course

of business, which, if considered probable and reasonably estimable, would require a contingent liability to be recorded as G&A expense.

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

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,

the Company grants performance stock awards (“PSUs”), which vest and become earned upon the achievement of certain performance

goals based on the Company’s 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 Compensation Committee of the Board (the “Committee”);

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

therefore, the Company classified the PSUs as

equity awards.

Company recognizes 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 .

has elected to not estimate the forfeiture rate of its RSUs and PSUs in its initial calculation of compensation expense, but instead

will adjust compensation expense for forfeitures as they occur.

Refer to Note 16 - Long-Term Incentive Compensation for a

further discussion of the Company’s RSUs and PSUs.

Company accounts 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

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

(Loss) Per Common Share

two-class method of computing earnings per share is required for entities that have participating securities.

The two-class method is

an earnings allocation formula that determines earnings per share for participating securities according to dividends declared (or accumulated)

and participation rights in undistributed earnings.

Our Series D Preferred Stock and Series E Preferred Stock are participating securities.

The two–class method of computing earnings per share is required

for entities that have participating securities.

The two–class method is an earnings allocation formula that determines earnings

per share for participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings.

The Company’s Series D Preferred Stock (as defined herein) is a participating security and the Company’s Series E Preferred

Stock (as defined herein) was considered a participating security when the shares were outstanding during the year ended December 31,

These participating securities do not have a contractual obligation to share in the Company’s losses.

Therefore, in periods of

net loss, no portion of such losses are allocated to participating securities.

earnings (loss) per common share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders

by the weighted average number of shares of common stock outstanding each period.

Dilutive EPS is calculated by dividing adjusted net

income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding each period, which

includes the effect of potentially dilutive securities.

Potentially dilutive securities for the diluted EPS calculation consists of (i)

Series D Preferred Stock, (ii) Series E Preferred Stock (iii) warrants for common stock and (iv) exercisable common stock options.

EPS reflects the dilutive effect of the participating securities using the two-class method or the treasury stock method, whichever is

more dilutive.

and diluted earnings (loss) attributable to common stockholders is the same for the year ended December 31, 2023 because the Company

has only incurred losses and all potentially dilutive securities are anti-dilutive.

Potentially dilutive securities that were not included

in the computation of diluted earnings (loss) attributable to common stockholders at December 31, 2023 because their inclusion would

be anti-dilutive are as follows:

Therefore, in periods

of net loss, no portion of such losses are allocated to participating securities.

Basic earnings (loss) per common share (“EPS”)

is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of Common Stock

outstanding each period.

Dilutive EPS is calculated by dividing adjusted net income (loss) attributable

to common stockholders by the weighted average number of shares of Common Stock outstanding each period, which includes the effect of

potentially dilutive securities.

Potentially dilutive securities for the diluted EPS calculation consists of (i) Series D Preferred Stock,

(ii) Series E Preferred Stock, when the shares were outstanding during the year ended December 31, 2023, (iii) warrants to purchase Common

Stock, and (iv) exercisable Common Stock options.

Diluted EPS reflects the dilutive effect of the participating securities using the two–class

method or the treasury stock method, whichever is more dilutive.

and diluted earnings (loss) attributable to common stockholders is the same for the year ended December 31, 2024 and 2023 because the

Company has only incurred losses and all potentially dilutive securities are anti–dilutive.

following table presents the potentially dilutive securities which were not included in the computation of diluted earnings (loss) attributable

to common stockholders for the year ended December 31, 2024 because their inclusion would be anti–dilutive:

of Anti-dilutive Securities Excluded from Earnings Per Share

Dilutive Security

Value Per Share

Value or Stated Value

Merger Options

and restricted stock units (1)

Potentially Dilutive Security

Stated Value Per Share

Total Value or Stated Value

Assumed Conversion Price

Resulting Common Shares

Merger Options, restricted stock units, and performance stock units (1)

Common stock warrants

Series D Preferred Stock

Senior Convertible Note (2)

exercisable or vested as of December 31, 2024.

Refer to Note 15 – Common Stock Options and Warrants for a discussion

of the Merger Options (as defined herein) and Note 16 – Long–Term Incentive Compensation for a discussion of the

restricted stock units and performance stock units.

the conversion option of the Senior Convertible Note, pursuant to the SEPA.

Refer to Note 10 – Debt for a discussion

of the Senior Convertible Note and Note 14 – Common Stock for a discussion of the SEPA.

following table presents the potentially dilutive securities which were not included in the computation of diluted earnings (loss) attributable

to common stockholders for the year ended December 31, 2023 because their inclusion would be anti–dilutive:

Potentially Dilutive Security

Stated Value Per Share

Total Value or Stated Value

Assumed Conversion Price

Resulting Common Shares

Common stock options and restricted stock units (1)

Common stock warrants

Series D Preferred Stock

Series E Preferred Stock

exercisable or vested as of December 31, 2023 (see Notes 15 and 16).

the period ended December 31, 2022, there were no

potentially dilutive units exercisable and outstanding.

the year ended December 31, 2023 and without consideration of the Reverse Stock Split, there were insufficient authorized and unissued

shares of common stock for the Company to satisfy all of its commitments to deliver shares.

The Company adopted a sequencing policy to

determine how to allocate authorized and unissued shares among commitments to deliver shares pursuant to ASC 815-40.

The sequence is

based upon reclassifying securities with the latest maturity date first.

The sequencing order during the year ended December 31, 2023

and its effects are further described in Note 14.

Company follows ASC 850-10, Related Parties, for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20, the related parties include:

(a) affiliates of the Company (“affiliate” means, with respect

to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by

or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act of 1933,

as amended (the “Securities Act”));

(b) entities for which investments in their equity securities would be required, absent

the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity

method by the investing entity;

or under the trusteeship of management;

(d) principal owners of the Company;

(e) management of the Company;

(f) other parties with which

the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent

that one of the transacting parties might be prevented from fully pursuing its own separate interests;

and (g) other parties that can

significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of

the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented

from fully pursuing its own separate interests.

exercisable or vested as of December 31, 2023.

Refer to Note 15 – Common Stock Options and Warrants for a discussion

of the Merger Options and Note 16 – Long–Term Incentive Compensation for a discussion of the restricted stock

Disclosures of Cash Flow Information

following table presents non–cash investing and financing activities and supplemental cash flow disclosures relating to the cash

paid for interest and income taxes for the periods presented:

of Non-cash Investing And Financing Activities And Supplemental Cash Flow Disclosures

Year Ended December 31,

(In thousands)

Non–cash investing and financing activities:

Common Stock issued upon conversion of Series D Preferred Stock

Common Stock issued upon conversion of Series E Preferred Stock

Capital expenditures included in accrued liabilities

Common Stock issued for SEPA commitment fee (1)

Credit facility issuance costs paid by the issuance of Common Stock (2)

Credit facility issuance costs included in accrued liabilities

Cryptocurrency mining equipment and deposits acquired in the Merger

Secured convertible debentures assumed in the Merger

SBA loan payable acquired assumed in the Merger

Membership interests converted into shares of Common Stock

Common Stock issued at Merger

Series D Preferred Stock issued at Merger

Common Stock and warrants issued in Exok option acquisition

Common Stock issued in satisfaction of share issuance obligation

Common Stock issued in conversion of AR Debentures

Reclassification of increase in value of warrant liabilities in equity

Supplemental disclosure:

Cash paid for interest (3)

Cash paid for income taxes

to the SEPA, the Company issued 100,000 shares to Yorkville as a commitment fee.

Refer to Note 14 – Common Stock for

a discussion of the SEPA.

to entering into the Credit Facility (as defined below) agreement in December 2024, the Company issued 120,048

shares to Yorkville as a consent fee.

Refer to Note 10 – Debt for a discussion of the credit facility.

For the year ended December 31, 2024, includes amounts paid for redemption

premium and minimum return premium.

Refer to Note 10 – Debt for a further discussion.

Issued Accounting Pronouncements

accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants,

and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s

present or future consolidated financial statements.

Purchase Price Allocation

the terms of the Merger, the Company issued 2,297,668

shares of common stock to the members of Prairie

LLC in exchange for all of the membership interests of Prairie LLC.

Additionally and as a condition of the Merger, 4,423

shares of Series D Preferred Stock were issued

to holders of the AR Debentures.

purchase price is calculated based on the fair value of the common stock that the Company’s stockholders immediately prior to the

Merger own after the Merger and the fair value of the Series D Preferred Stock issued to the holders of the AR Debentures.

With no active

trading market for membership interests of Prairie LLC, the fair value of the common stock represents a more reliable measure of the

fair value of consideration transferred in the Merger and because it is based upon a quoted price in an active market it is a Level 1

fair value calculation.

The fair value of the 4,423

shares of Series D Preferred Stock was determined

using a valuation model with unobservable inputs and is a Level 3 fair value calculation.

total purchase price and allocated purchase price is summarized as follows:

In December 2023, the FASB issued Accounting Standards Update (“ASU”)

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”) to expand the disclosure requirements

for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for annual periods beginning

January 1, 2025, with early adoption permitted.

The Company is currently evaluating the potential effect that the updated standard will

have on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting

Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2023-03”),

which requires the disclosure of specific information about certain costs and expenses.

ASU 2024-03 is effective for annual periods beginning

January 1, 2027, with early adoption permitted.

The Company is currently evaluating the potential effect that the updated standard will

have on its financial statement disclosures.

3 – Discontinued Operations

January 23, 2024, the Company sold all of its cryptocurrency miners (the “Mining Equipment”) for consideration consisting

of (i) $ 1.0 million in cash and (ii) $ 1.0 million in deferred cash payments (the “Deferred Purchase Price”), 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, (collectively, the “Crypto Sale”) .

As of December 31, 2024, the Company presents the Deferred Purchase

Price payment as a note receivable on its consolidated balance sheet, $ 0.5 million of which is classified as current and $ 0.2 million

of which is classified as non–current, based on when the payments are expected.

The Company did not have a note receivable balance

on its consolidated balance sheet as of December 31, 2023.

The Company recognized a loss of $ 1.1 million related to this disposition

on its consolidated statement of operations and statement of cash flows for the year ended December 31, 2024.

Company has presented the related assets and liabilities associated with discontinued operations separately as discontinued operations

on its consolidated balance sheets as of December 31, 2024 and 2023.

The following table presents the major classes of assets included

as part of discontinued operations in the Company’s consolidated balance sheets for the periods indicated:

of Assets and Liabilities Associated Discontinued Operations in Financial Statements

December 31, 2024

December 31, 2023

(In thousands)

Accounts receivable

Property and equipment, net

Total assets – discontinued operations

Additionally,

the Company has presented the financial results associated with discontinued operations separately as discontinued operations on its

consolidated statements of operations for the year ended December 31, 2024 and 2023 and its consolidated statements of cash flows for

the year ended December 31, 2024 and 2023.

The following table presents the major classes of line items constituting the loss from discontinued

operations on the Company’s consolidated statements of operations and consolidated statements of cash flows for the periods presented:

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

4 – Acquisitions and Merger

January 11, 2024, the Company entered into an asset purchase agreement (the “NRO Agreement”) with Nickel Road Development

LLC, Nickel Road Operating, LLC, (“NRO”) and Prairie LLC to acquire certain assets owned by NRO (the “Central Weld

Assets”) for total consideration of $ 94.5 million (the “Purchase Price”), subject to certain closing price adjustments

and other customary closing conditions (the “NRO Acquisition”).

The Purchase Price consisted of $ 83.0 million in cash and

$ 11.5 million in deferred cash payments.

The Company deposited $ 9.0 million of the Purchase Price into an escrow account on January 11,

2024 (the “Deposit”).

August 15, 2024, the Company and NRO agreed to amend certain terms of the NRO Agreement, pursuant to which the 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 the Company.

October 1, 2024, the Company 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.

Refer to Note 10 – Debt for a discussion of the Senior Convertible

Note and to Note 14 – Common Stock for a discussion of the issuance of Common Stock.

The Company completed the final

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

NRO Acquisition was accounted for as an asset acquisition in accordance with ASC Topic 805 - Accounting for Business Combinations.

estimated fair value of the consideration paid by the Company and the allocation of that amount to the underlying assets acquired, on

a relative fair value basis, were recorded on the Company’s books as of October 1, 2024, the closing date of the NRO Acquisition.

Additionally, costs directly related to the NRO Acquisition were capitalized as a component of the Purchase Price.

following table presents the allocation of the purchase price, adjusted for the final settlement, to the net assets acquired on October

1, 2024, the closing date of the NRO Acquisition:

of Purchase Price Allocation

Price Allocation:

Consideration:

consideration (1)

on oil and natural gas properties (2)

transaction costs (3)

consideration

and natural gas properties (4)

expenses, third-party JIB receivable, and other

Assets acquired

payable and accrued expenses (5)

retirement obligation, long-term

Liabilities acquired

the final settlement statement payment of $ 0.3

million from NRO to the Company.

the Deposit paid by the Company to NRO.

transaction costs associated with the NRO Acquisition which have been capitalized in accordance with ASC 805-50.

Includes the asset retirement obligation asset associated with the proved

oil and natural gas properties.

the amounts associated with the assets acquired in the NRO Acquisition unpaid at the closing date and primarily relates to ad valorem

tax liabilities of $ 6.6 million and suspended revenues of $ 1.2 million.

Bolt–on Acquisition

February 5, 2024, the Company acquired 1,280 gross leasehold acres on drillable spacing unit and eight proved undeveloped drilling

locations in the DJ Basin (the “Genesis Bolt–on Assets”) from a private seller for $ 0.9

These assets offset the other oil and gas assets held by the Company in northern Weld County, Colorado.

Genesis Asset Acquisitions

closing of the Merger, the Company consummated the purchase of oil and gas leases from Exok, Inc.

(“Exok”), including all

of Exok’s right, title, and interest in, to and under certain undeveloped oil and gas leases located in Weld County, Colorado,

together with certain other associated assets, data, and records, for $ 3.0 million (the “Exok Transaction”).

August 15, 2023, Prairie LLC exercised the option it acquired in the Exok Transaction and purchased additional oil and gas leases from

Exok, consisting of approximately 25,240 net leasehold acres in, on and under approximately 32,580 gross acres (the “Exok Option

Purchase”) for total consideration of $ 25.3 million.

The total consideration consisted of $ 18.0 million in cash to Exok, which

was funded with the Series E PIPE (as defined herein), and equity consideration to certain affiliates of Exok consisting of (i) 670,499

shares of Common Stock, and (ii) warrants providing the right to purchase 670,499 shares of Common Stock at $ 7.43 per share (the “Exok

Refer to Note 15 – Common Stock Options and Warrants for a discussion of the Exok Warrants.

with Creek Road Miners, Inc.

the terms of the Merger, the Company issued 2,297,668 shares of Common Stock to the members of Prairie LLC in exchange for all of the

membership interests of Prairie LLC.

Additionally, and as a condition of the Merger, 4,423 shares of Series D Preferred Stock (as defined

herein) were issued to holders of the 12 % amended and restated senior secured convertible debentures (collectively, the “AR Debentures”).

Refer to Note 10 – Debt for a discussion of the AR Debentures.

purchase price was calculated based on the fair value of Common Stock that the Company’s stockholders, immediately prior to the

Merger, owned after the Merger, and the fair value of the Series D Preferred Stock issued to the holders of the AR Debentures.

there was no active trading market for the membership interests of Prairie LLC, the fair value of the Company’s Common Stock represented

a more reliable measure of the fair value of consideration transferred in the Merger.

The Company’s Common Stock was based upon

a quoted price in an active market, which is considered a Level 1 fair value input.

The fair value of the 4,423 shares of Series D Preferred

Stock was determined using a valuation model with unobservable inputs, which are considered Level 3 inputs on the fair value hierarchy.

following table presents the total purchase price on May 3, 2023, the closing date of the Merger:

of Total Purchase Price

Number of shares of common stock

of the combined company owned by the Company’s stockholders immediately prior to the merger (1)

Multiplied by the fair

value per share of common stock (2)

Fair value of the Company’s pre-Merger

Number of shares of Series D Preferred Stock

issued to effectuate the Merger

(In thousands, except share amounts)

Number of shares of Common Stock of the combined company owned by the Company’s stockholders immediately prior to the merger (1)

Multiplied by the fair value per share of Common Stock (2)

Fair value of the Company’s pre–Merger Common Stock

Number of shares of Series D Preferred Stock issued to effectuate the Merger

Multiplied by the fair value per share (3)

Fair value of Series D Preferred Stock issued

as consideration

Prairie LLC Transaction

Fair value of Series D Preferred Stock issued as consideration

Prairie LLC transaction costs (4)

Purchase price

the historical shares of the common stock outstanding immediately prior to the Closing of the Merger on May 3, 2023.

on the last reported sale price of the common stock on OTC Capital Markets on May 3, 2023, the closing date of the Merger (the “Closing

the historical shares of Common Stock outstanding immediately prior to the closing of the Merger on May 3, 2023.

on the last reported sale price of Common Stock on OTC Capital Markets on May 3, 2023, the closing date of the Merger.

value calculated as described above on May 3, 2023.

2 unchanged sentences

increase in the purchase price.

purchase price for the Merger was allocated to the net assets acquired on the basis of relative fair values.

The fair values of the current

assets acquired and current liabilities (excluding the convertible debentures) assumed in the Merger were determined to approximate carrying

value due to their short-term nature.

The fair values of the mining equipment were determined using estimated replacement values of the

same or similar equipment and, as such, are Level 3 fair value calculations.

The fair value of the secured convertible debentures was

calculated as described above.

The fair value of the share issuance liability was calculated based on the quoted price of the Company’s

common stock and, as such, is a Level 1 measurement on the fair value hierarchy.

The following summarizes the allocation of the purchase

price to the net assets acquired.

purchase price for the Merger was allocated to the net assets acquired on the basis of their relative fair values.

The fair values of

the current assets acquired and current liabilities (excluding the convertible debentures) assumed in the Merger were determined to approximate

carrying value due to their short–term nature.

The fair value of the mining equipment was determined using estimated replacement

values of the same or similar equipment and, as such, are considered Level 3 inputs in the fair value hierarchy.

The fair value of the

secured convertible debentures was calculated as described above.

The fair value of the share issuance liability was calculated based

on the quoted price of the Company’s Common Stock and, as such, is considered a Level 1 measurement on the fair value hierarchy.

following table presents the allocation of the purchase price to the net assets acquired on May 3, 2023, the closing date of the Merger:

of Allocation of Purchase Price to Net Assets Acquired

Price Allocation:

Cash and cash

Accounts receivable

Prepaid expenses

Mining equipment (1)

Deposits on mining equipment

Accounts payable and accrued

( 3,352,389 )

Secured convertible debentures

( 1,981,000 )

SBA loan payable

Share issuance liability

and cash equivalents

equipment (1)

on mining equipment

payable and accrued expenses

convertible debentures

issuance liability

assets acquired

1 unchanged sentence

was ascribed to the property and equipment acquired.

See Note 4 for additional discussion of the subsequent impairment recognized.

Property and Equipment

and equipment consisted of the following:

of Property and Equipment

Proved properties

Total capitalized costs

Accumulated depreciation, depletion and amortization

capitalized costs

Cryptocurrency Mining

Cryptocurrency

Accumulated depreciation

( 1,111,115 )

property and equipment

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

additional gross acres from Exok (the “Exok

Option Assets”).

The acquisition cost of this acreage was $ 25.3

million consisting of (i) $ 18.0

million in cash (the “Cash Consideration”),

(ii) issuance of 670,499

shares of the Company’s common stock and

Exok Warrants to purchase 670,499

shares of common stock for an aggregate value

million, and (iii) direct transaction costs.

The Cash Consideration was funded from the Series E PIPE (see Note 13).

conjunction with the Merger, the Company recorded the cryptocurrency mining equipment assumed in the Merger.

In accordance with GAAP

for asset acquisitions, the excess purchase price over the fair value of the acquired assets and liabilities was ascribed to the property

and equipment acquired.

Due to the significant excess purchase price being allocated over the fair value of the acquired property and

equipment, the Company determined that an indicator of impairment was present.

The Company therefore recognized an impairment of $ 16.6

million to bring the carrying amount of the acquired

property and equipment down to its estimated fair value of $ 1.5

Additionally and upon the receipt of

cryptocurrency mining equipment and transfer from deposits to property and equipment (See Note 5), the Company recognized an additional

impairment of $ 0.2

million related to shipping and customs fees on this equipment

incurred subsequent to the Merger.

Deposits on Cryptocurrency Mining Equipment

on cryptocurrency mining equipment, consisted of the following:

of Cryptocurrency Mining Equipment

Cryptocurrency

5 – Derivative Instruments

Company utilizes commodity derivative instruments to reduce its exposure to crude oil and natural gas price volatility for a portion

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

Currently, the Company only has commodity

swap contracts outstanding, which guarantee a fixed price on contracted volumes over specified time periods.

However, in the future,

the Company could utilize other types of derivative instruments including call and purchased options, put spreads, collars, and three-way

As of December 31, 2024, the Company’s derivative counterparty is Citi, which is the administrative

agent and lender of its reserve-based credit agreement (the “Credit Facility”).

of December 31, 2024, the Company 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:

of Outstanding Crude Oil and Natural Gas Derivative Contracts in Place

January 1, 2025

December 31, 2025

Beginning balance

Deposits acquired upon Merger

Deposits on equipment during

delivered and transferred to mining equipment

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)

Company recognizes all of its derivative instruments at fair value as assets or liabilities on the accompanying consolidated balance

The Company has 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 and the settlement of derivative

instruments during the period are recognized as part of the loss on derivatives, net on the accompanying consolidated statements of

Additionally, all of the Company’s hedge positions are currently in a liability position, therefore, there is no

offsetting in the presentation of its derivative instruments.

following table presents the net fair values of the Company’s derivative instruments, recorded on the consolidated balance

sheet for the period presented:

of Derivative Instruments Consolidated Balance Sheets

December 31, 2024

(In thousands)

Current liabilities

Long-term liabilities

Total derivatives liabilities

following table presents the components of loss on derivatives, net reflected on the accompanying consolidated statement of

operations and cash flows for the period presented:

of Derivative Instruments

December 31, 2024

(In thousands)

Change in fair value of derivatives, net

Loss on derivatives, net

The Company did not have any outstanding derivatives contracts or any derivative

settlements during the year ended December 31, 2023.

6 – Fair Value Measurements

of the Company’s assets and liabilities are carried at fair value and measured on either a recurring or nonrecurring basis.

ASC Topic 820, Fair Value Measurements and Disclosures , fair value 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.

GAAP fair value valuation hierarchy categorizes assets and liabilities measured at fair value into one of three levels depending on the

observability of the inputs used in determining fair value.

The three levels of the fair value hierarchy are 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.

These 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.

classification of an asset or liability within the fair value hierarchy is based on the lowest level input that is significant to the

fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement of an

asset or liability requires judgment and may affect the valuation of the fair value asset or liability and its placement within the fair

value hierarchy.

There have been no transfers between fair value hierarchy levels.

Value of Financial Instruments

carrying values of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and other current liabilities

on the consolidated balance sheets approximate fair value because of their short–term nature.

Measured at Fair Value on a Recurring Basis

following table summarizes the Company’s liabilities which were measured at fair value on a recurring basis as of December 31,

2024 and their classification within the fair value hierarchy:

of Balance of Liabilities Measured at Fair Value on a Recurring Basis

Fair Value Measurement as of December 31, 2024

(In thousands)

Commodity derivative contracts

Senior convertible note

Subordinated note – related party

Subordinated note warrants – related party

Commodity derivative contracts.

The fair values

of the Company’s derivative instruments are measured on a recurring basis using a third-party industry-standard pricing model that

considers various inputs such as quoted forward commodity prices, discount rates, volatility factors, and current market and contractual

prices for the underlying instruments, as well as other relevant data.

These significant inputs are observable in the current market

or can be corroborated by observable active market data and are therefore considered Level 2 inputs within the fair value hierarchy.

As of December 31, 2024, the fair value of the Company’s commodity derivative contracts is a liability of $ 4.4 million, $ 2.4 million

of which is considered a current liability.

Company has elected the fair value option for the financial instruments listed below, as such, it reflects these financial instrument

liabilities at their fair value on its consolidated balance sheet and reflects the changes in the fair values of the liabilities as loss

on adjustment to fair value – debt and warrants on its consolidated statements of operations and consolidated statement of cash

The following table presents the changes in the Company’s financial

instruments presented at fair value for the periods presented:

of Financial Instrument Presented at Fair Value

December 31, 2024

December 31, 2023

(In thousands)

SEPA, at the beginning of the period

Loss on adjustment to fair value

SEPA, at the end of the period

Senior convertible note, at the beginning of the period

Loss on adjustment to fair value

Senior convertible note, at the end of the period

Subordinated note – related party, at the beginning of the period

Loss on issuance of debt

Loss on adjustment to fair value

Subordinated note – related party, at the end of the period

Subordinated note warrants – related party, at the beginning of the period

Loss on issuance of debt

Loss on adjustment to fair value

Subordinated note warrants – related party, at the end of the period

AR debentures, at the beginning of the period

Conversion to Common Stock

Loss on adjustment to fair value

AR debentures, at the end of the period

Obligation shares, at the beginning of the period

Obligation, at merger

Issuance of Common Stock

Loss on adjustment to fair value

Obligation shares, at the end of the period

Reclassified warrant liabilities, at the beginning of the period

Reclassification from equity to liabilities

Reclassification from liabilities back to equity

Loss on adjustment to fair value

Reclassified warrant liabilities, at the end of the period

The following table presents the face value and fair value of each financial

instrument presented at fair value on the Company’s consolidated balance sheet as of December 31, 2024:

of Fair Value On Financial Instrument Balance Sheets

December 31, 2024

(In thousands)

Senior convertible note

Subordinated note – related party

Subordinated note warrants – related party

Equity Purchase Agreement.

On September 30, 2024, the Company 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, the Company has the right, not the obligation, to sell to Yorkville shares 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

The Company’s right to sell shares to Yorkville under the SEPA was contingent upon the Company having an effective

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

The Company has 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.

of December 31, 2024, the fair value of the SEPA was determined by a third-party using a Monte Carlo simulation model and the significant

inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

of Fair Value Instruments Unobservable Market

SEPA – Monte Carlo Simulation Model

Time to termination (years)

Stock price – as of December 31, 2024

Risk-free rate

Equity volatility rate

of December 31, 2024, the fair value of the SEPA is $ 0.8 million, which resulted in corresponding loss on adjustment to fair value –

debt and warrants of $ 0.8 million on the Company’s consolidated statement of operations and consolidated statement of cash flows

for the year ended December 31, 2024.

Refer to Note 10 – Debt for a further discussion of the SEPA.

Convertible Note.

Additionally, on September 30, 2024, Yorkville advanced an initial $ 15.0

million (the “Pre-Paid Advance”)

to the Company and the Company issued a convertible promissory note (the “Senior Convertible Note”), with an interest rate

and a maturity date of September

The Company has determined that

certain features of the Senior Convertible Note require bifurcation and separate accounting as embedded derivatives.

As such, the Company

has elected the fair value option to account for the Senior Convertible Note;

therefore, in accordance with ASC 815, the Company recorded

the Senior Convertible Note at fair value and will remeasure the fair value each reporting period with changes in fair value recognized

As of December 31, 2024, the fair value

of the Senior Convertible Note was determined by a third-party using a Monte Carlo simulation model and the significant inputs listed

below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

of Fair Value Instruments Unobservable Market

Convertible Note – Monte Carlo Simulation Model

Stock price – as of December 31, 2024

Risk-free rate

Equity volatility rate

Market yield – as of December 31, 2024

of December 31, 2024, the fair value of the Senior Convertible Note is $ 12.6

million, which resulted in a loss on adjustment

to fair value – debt and warrants of $ 2.1

million on the Company’s consolidated statement

of operations and consolidated statement of cash flows for the year ended December 31, 2024.

Refer to Note 10 – Debt for

a further discussion of the Senior Convertible Note.

Promissory Note.

On September 30, 2024, the Company 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.

The Company has determined that certain features

of the Subordinated Note require bifurcation and separate accounting as embedded derivatives.

As such, the Company has elected the fair

value option to account for the Subordinated Note;

therefore, in accordance with ASC 815, the Company recorded the Subordinated Note

at fair value and will remeasure the fair value each reporting period with changes in fair value recognized in earnings.

of December 31, 2024, the fair value of the Subordinated Note was determined by a third-party using a credit default valuation model

using the significant inputs listed below, which are considered unobservable inputs which are corroborated by market data and

are therefore considered Level 2 inputs within the fair value hierarchy.

of Fair Value Instruments Unobservable Market

Subordinated Note – Credit Default Valuation

Quarterly default rate

Moody’s Investor debt recovery rate – Senior convertible note

Moody’s Investor debt recovery rate – Subordinated note

Risk-free rate

4.18 % - 4.79 %

Discount factor

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 on the Company’s consolidated statement of operations and

consolidated statement of cash flows for the year ended December 31, 2024.

Refer to Note 10 – Debt for a further discussion

of the Subordinated Note.

Note Warrants.

As discussed in Note 10 – Debt below, pursuant to the terms of the Subordinated Note, the Company 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.

The Company has determined that the Subordinated Note Warrants should be accounted

for as a liability pursuant to ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”).

In accordance with

ASC 815, the Company recorded the Subordinated Note Warrants at fair value and will remeasure the fair value each reporting period with

changes in fair value recognized in earnings.

The fair value of the Subordinated Note

Warrants was determined by a third-party using a Monte Carlo simulation model using

the significant inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the

fair value hierarchy.

of Fair Value Instruments Unobservable Market

Subordinated Note Warrants – Monte Carlo Simulation Model

Time to termination (years)

Stock price – as of December 31, 2024

Exercise price

Risk-free rate

Equity volatility rate

Market yield – as of December 31, 2024

As of December 31, 2024, the fair value of the Subordinated Note Warrants was $ 4.2

million compared to $ 2.8

million as of September 30, 2024, the date of the Subordinated Note Warrants issuance.

The Company recognized the $ 1.4

million change in fair value as loss on adjustment to fair value – debt and warrants on its consolidated statement of operations

and consolidated statement of cash flows for the year ended December 31, 2024.

Refer to Note 15 – Common Stock Options and Warrants

for a further discussion of the Subordinated Note Warrants.

Through September 2023, the fair value of the Company’s AR Debentures was based on a widely accepted valuation

methodology that utilizes (i) the Company’s Common Stock price, (ii) value of the debt component, and (iii) the value of the equity

key unobservable inputs in the valuation model listed below could change significantly and result in significantly higher or lower fair

values at different measurement dates;

therefore, they are considered Level 3 inputs within the fair value hierarchy.

of Fair Value Measurement On Valuation Model

AR Debentures – Valuation Model

Equity volatility rate

Market yield – as of May 3, 2023, the date of the Merger

AR Debentures were converted in October 2023;

therefore, the Company stopped remeasuring the change in fair value at that time.

value at conversion was determined using the Company’s Common Stock price.

On October 11, 2023, the date that the AR Debentures

were fully converted, the fair value of the AR Debentures was $ 5.8 million, compared to $ 2.0 million at the date of the Merger.

recognized the $ 3.8 million change in fair value as loss on adjustment to fair value – debt and warrants on its consolidated statement

of operations and consolidated statement of cash flows for the year ended December 31, 2023.

to Note 10 – Debt for a further discussion of the AR Debentures.

Stock Obligation Shares.

As discussed in Note 14 – Common Stock, as a result of the Merger and related transactions,

the Company had the obligation to issue 205,970 shares of Common Stock (the “Obligation Shares”).

The fair value of the Obligation

Shares was based on the quoted price of the Company’s Common Stock and, as such, was considered a Level 1 input within the fair

value hierarchy.

The underlying shares were fully issued on September 7, 2023, therefore, the Company stopped remeasuring the change

in the fair value of the obligation at that time.

September 7, 2023, the date that the underlying shares were fully issued, the fair value of the Obligation Shares was $ 1.5 million.

Company recognized the $ 1.5 million change in fair value as loss on adjustment to fair value – debt and warrants on its consolidated

statement of operations and consolidated statement of cash flows for the year ended December 31,

Refer to Note 14 – Common Stock for a further discussion of the Obligation Shares.

Warrant Liabilities.

In September 2023, pursuant to ASC 815, the Company adopted a sequencing policy to determine how to

allocate authorized and unissued shares among commitments to deliver shares.

The sequence was based upon reclassifying securities

with the latest maturity date first.

Refer to Note 14 – Common Stock for a discussion of the share sequencing.

sequencing and the lack of sufficient authorized shares required the Company to reclassify a portion of the Series D A Warrants and

all of the Series E A Warrants to liabilities at various dates throughout the year ended December 31, 2023 (collectively, the

“Reclassified Warrant Liabilities”).

fair values of the Reclassified Warrant Liabilities at their respective reclassification dates throughout the year ended December 31,

2023 were determined by a third-party using Black-Scholes option-pricing models and the key inputs listed below, which are based on unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

of Fair Value Instruments Unobservable Market

Reclassified Warrant Liabilities – Black-Scholes Option Pricing Model

Stock price range

$ 6.71 - $ 14.71

Option exercise price

Expected term range (years)

Equity volatility rate

Discount rate range

4.27 % - 4.58 %

the time of the reclassification, the total fair value of the Reclassified Warrant Liabilities reclassified to liabilities was $ 25.9

The total fair value of the Reclassified Warrant Liabilities at the time they were transferred back to equity was $ 65.9 million.

The Company recognized the $ 39.8 million change in fair value as loss on adjustment to fair value – debt and warrants on its consolidated

statement of operations and consolidated statement of cash flows for the year ended December 31,

Refer to Note 14 – Common Stock for a further discussion of the Reclassified Warrant Liabilities.

and Liabilities Measured at Fair Value on a Non–Recurring Basis

and merger–related assets and liabilities .

The fair values of assets acquired and liabilities assumed in an acquisition or

merger are measured on a non–recurring basis on the acquisition or merger date.

If the assets acquired and liabilities assumed

are current and short–term in nature, the Company uses their approximate carrying values as their fair values, which is considered

a Level 1 input in the fair value hierarchy.

If the assets acquired are not short–term in nature, then the fair value is determined

using the estimated replacement values of the same or similar assets and, as such, are considered Level 3 inputs in the fair value hierarchy.

Refer to Note 2 – Acquisitions and Merger for a further discussion of the Company’s acquisitions and merger.

7 – Property and Equipment, net

Company’s property and equipment, net consisted of the following for the periods presented:

of Property and Equipment, net

December 31, 2024

Ending balance

deposits resulted from the Merger and there were no such deposits as of December 31, 2022.

December 31, 2023

(In thousands)

Oil and natural gas properties:

Proved properties

Unproved properties

Total oil and natural gas properties

Accumulated depreciation, depletion, and amortization

Oil and natural gas properties, net

Other property and equipment

Accumulated depreciation, depletion, and amortization

Other property and equipment, net

Total property and equipment, net

of December 31, 2024, the unproved properties balance includes $ 38.0 million of development costs for wells which were in the process of

being completed.

These wells began producing in February 2025 and will be reflected in proved properties in the first quarter of 2025.

8 – Asset Retirement Obligation

following table presents the changes in the Company’s asset retirement obligations for the periods presented:

of Asset Retirement Obligation

December 31, 2024

December 31, 2023

(In thousands)

Asset retirement obligation, at the beginning of the period

Liabilities incurred in acquisitions

Accretion of asset retirement obligation

Asset retirement obligation, at the end of the period

Company did not have any producing assets until the NRO Acquisition was closed on October 1, 2024, therefore it did not have any asset

retirement obligations prior to that date.

Refer to Note 4 – Acquisitions and Merger for a further discussion of

the NRO Acquisition.

9 – Accounts Payable and Accrued Expenses

following table provides detail of the Company’s accounts payable and accrued expenses for the periods presented:

Company’s accounts payable and accrued expenses consist of the following for the periods presented:

of Accounts Payable and Accrued Expenses

December 31, 2024

December 31, 2023

(In thousands)

Accounts payable

Accrued legal and accounting fees

Incentive compensation

Accounts payable and

accrued expenses

Related Party Transactions

Consideration

the effective time of the Merger (the “Effective Time”), Edward Kovalik (Chief Executive Officer and Chairman) and Gary C.

Hanna (President and Director) were each issued 1,148,834

shares of common stock as merger consideration

pursuant to the Merger Agreement.

Investment Fund, Ltd.

(“Bristol Investment Fund”), an entity affiliated with Paul L.

Kessler, a director of the Company,

purchased $ 1,250,000

of Series D Preferred Stock and Series D PIPE

Warrants in the Series D PIPE.

First Idea Ventures LLC, an entity affiliated with Jonathan H.

Gray, a director of the Company, purchased

of Series D Preferred Stock and Series D PIPE

Warrants in the Series D PIPE Transaction.

First Idea International Ltd.

(included with First Idea Ventures LLC, “the First Idea

Entities”), an entity affiliated with Jonathan H.

Gray, purchased $ 254,875

of Series D Preferred Stock and Series D PIPE

Warrants from another holder.

damages of $ 548,144

were paid under the registration rights agreement associated

with the Series D PIPE for the year ended December 31, 2023.

Of this total, $ 46,229

was paid to Bristol Investment Fund and $ 31,767

was paid to the First Idea Entities.

to the Effective Time, the Company, Bristol Capital Advisors, LLC (“Bristol Capital Advisors”), Paul L.

Kessler, Gary C.

Hanna and Edward Kovalik entered into a Stockholders Agreement (the “Stockholders Agreement”) pursuant to which the

parties agreed to use reasonable best efforts, including taking certain necessary actions, to cause the board of directors of the

Company (the “Board”) to cause certain nominees to be elected to serve as a director on the Board under the following

one nominee designated by Bristol Capital Advisors and Paul L.

Kessler, collectively, so long as Bristol Capital Advisors, Paul L.

Kessler and their respective affiliates collectively beneficially own at least 50% of the number of shares of common stock

collectively beneficially owned by such parties on the Closing Date and (ii) (A) four nominees designated by Gary C.

Edward Kovalik (the “Prairie Members”) so long as the Prairie Members and their affiliates collectively beneficially own

at least 50% of the number of shares of common stock collectively beneficially owned by such parties on the Closing Date;

three nominees designated by the Prairie Members so long as the Prairie Members and their affiliates collectively beneficially own

at least 40% (but less than 50%) of the number of shares of common stock collectively beneficially owned by such parties on the

Closing Date;

beneficially own at least 30% (but less than 40%) of the number of shares of common stock collectively beneficially owned by such

parties on the Closing Date;

or (D) one nominee designated by the Prairie Members so long as the Prairie Members and their

affiliates collectively beneficially own at least 20% (but less than 30%) of the number of shares of common stock collectively

beneficially owned by such parties on the Closing Date .

connection with the Closing, the Company entered into lock-up agreements with the Prairie Members, Paul Kessler, John D.

Maatta, Michael

Breen (former director), Alan Urban (former Chief Financial Officer) and Scott Sheikh (former Chief Operating Officer and General Counsel),

that impose limitations on any sale of shares of common stock until 180 days after the Closing, subject to certain exceptions.

agreements expired in November 2023.

addition, the Company entered into a lock-up agreement with Bristol Investment Fund that impose limitations on any sale of an aggregate

of 50% of its shares of common stock until 120 days after the Closing, subject to certain exceptions, and Bristol Investment Fund agreed,

subject to such lock-up, to effect only open market sales and not to sell an aggregate daily amount of shares of common stock exceeding

1%, for every $ 100,000

invested in the Series D PIPE, of the average

daily volume of the trading day on which the open market sales of the shares of common stock occurs.

This agreement expired in September

and Restated Senior Secured Convertible Debenture and Amended and Restated Security Agreement

connection with the Closing, the Company entered into the AR Debentures as further described in Note 8.

and Restated Non-Compensatory Option Agreement

consummation of the Merger, the Company assumed and converted options to purchase membership interests of Prairie LLC outstanding and

unexercised as of immediately prior to the Merger into non-compensatory options to acquire an aggregate of 8,000,000

shares of common stock for $ 7.14

per share, which are only exercisable if specific

production hurdles are achieved, and the Company entered into option agreements with each of Gary C.

Hanna, Edward Kovalik, Paul Kessler

and BOKA Energy LP, a third-party investor (the “Option Agreements”) as further described in Note 15.

August 30, 2023, the Company, Gary C.

Hanna, Edward Kovalik, Bristol Capital and Georgina Asset Management entered into a non-compensatory

option purchase agreement, pursuant to which Georgina Asset Management agreed to purchase, and each of the Sellers agreed to sell to

Georgina Asset Management, Non-Compensatory Options to acquire an aggregate of 200,000

shares of common stock for the Option Purchase.

The Option Purchase closed on August 30, 2023.

In connection with the Option Purchase, the Company entered into an amendment to the Option

Agreements with each of the Sellers (or an assignee thereof) to reflect that each Seller owns a lesser number of Non-Compensatory Options

after the Option Purchase.

Reimbursements

the Merger, on May 5, 2023, the Board approved a one-time payment of $ 250,000

for each of Edward Kovalik and Gary Hanna as

former members of Prairie LLC and Paul Kessler, former Chairman of the Company, and all of whom are current members of the Board of Directors.

These payments were made in light of the significant unpaid time and resources expended by each of these parties to finalize the Merger,

including extensive travel, due diligence, negotiation, structuring, legal management and investment banking disciplines.

fund the Exok Option Purchase, the Company entered into a securities purchase agreement with the Series E PIPE Investor on August 15,

2023, pursuant to which the Series E PIPE Investor agreed to purchase, and the Company agreed to sell to the Series E PIPE Investor,

for an aggregate of $ 20.0

million, securities consisting of (i) 39,614

shares of common stock, (ii) 20,000

shares of Series E Preferred Stock, and (iii)

Series E PIPE Warrants to purchase 8,000,000

shares of common stock, each at a price of $ 6.00

per share, in a private placement.

connection with the Series E PIPE and the Exok Option Purchase, the Company entered into the Series E Registration Rights Agreement with

the Series E PIPE Investor and Exok affiliates pursuant to which the Company agreed to submit to or file with the SEC a registration statement registering the resale of the shares of common stock issued to

Exok (the “Exok Shares”), shares of common stock underlying the Series E Preferred Stock and Series E PIPE Warrants, Exok

Shares and shares of common stock underlying the Exok Warrants.

Such registration statement was declared effective by the SEC on December

of Series D B Warrants

November 13, 2023, Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust (“O’Neill Trust”) delivered notice

to the Company of the exercise of Series D B Warrants to purchase 2,000,000 shares

of common stock at an exercise price of $ 6.00

per share for total proceeds to the Company of

million (the “Warrant Exercise”).

These warrants were originally issued on May 3, 2023, in connection with the Series D PIPE

Accrued legal and accounting fees

Accrued interest

Accounts payable and accrued expenses

Company’s debt balances consisted of the following for the periods indicated:

of Debt Balances

December 31, 2024

December 31, 2023

(In thousands)

Credit facility

Fair value adjustment

SEPA, at fair value

Senior convertible note

Fair value adjustment

Senior convertible note, at fair value

Subordinated note – related party

Fair value adjustment

Subordinated note – related party, at fair value

following table presents the components of interest expense reflected in the Company’s consolidated statements of operations for

the periods indicated:

of Components of Interest Expense

Year Ended December 31,

(In thousands)

Interest expense – Credit facility

Amortization of deferred financing costs – Credit facility

Interest expense – Senior convertible note

Premium paid for redemption – Senior convertible note

Interest expense – Subordinated note – related party

Minimum return premium – Subordinated note – related party

SBA loan and other interest

Interest expense

Total interest expense

December 16, 2024, the Company, as borrower, entered into a reserve-based credit agreement with Citi, as administrative agent and the

financial institution party thereto (the “Credit Facility Agreement”), which has a maximum credit commitment of $ 1.0

billion and is set to mature on December

The Credit Facility is guaranteed by

all of the Company’s restricted subsidiaries and is secured by a first-priority security interest on substantially all of the Company’s

oil and natural gas properties and substantially all of the Company’s 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

The borrowing base is subject to semi-annual redeterminations based upon the value of the Company’s oil and gas properties

as determined in a reserve report dated as of January and July of each year, subject to certain interim redeterminations.

3, 2025, the Company 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.

of December 31, 2024, the Company 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

Borrowing under the Credit Facility bear interest, at the Company’s election, based upon the Term SOFR or Alternate Base

Rate (each as defined in the Credit Facility Agreement), as applicable, plus an additional margin which is based on the percentage of

the borrowing base being utilized, ranging from 3.00 % to 4.00 % per annum for Term SOFR loans (plus a 0.10 % per annum adjustment) and

2.00 % to 3.00 % for Alternate Base Rate loans.

There is also a commitment fee of 0.50 % on the undrawn commitments.

Company is subject to certain financial covenants under the Credit Facility, which require the Company to maintain, for each fiscal quarter

commencing with the fiscal quarter ending March 31, 2025, a Net Leverage Ratio (as defined in the Credit Agreement) of no greater than

2.50 to 1.00 and a Current Ratio (as defined in the Credit Agreement) of at least 1.00 to 1.00.

The Credit Facility Agreement also includes

conditional equity cure rights that will enable the Company to cure certain breaches of these financial maintenance covenants.

beginning March 1, 2025, the Credit Facility Agreement requires the Company and its restricted subsidiaries to always hedge not less

than 80% of projected production from their proved developed producing reserves and certain wells through December 31, 2028.

Additionally,

the Credit Facility Agreement contains various restrictive covenants that, among other things, limit the Company’s ability and

the ability of its restricted subsidiaries to, subject to certain exceptions:

(i) incur indebtedness;

(ii) incur liens;

(iii) declare

or pay dividends, distributions or make other restricted payments;

(iv) repay or redeem other indebtedness;

(v) make investments;

change their respective lines of business or acquire or make any expenditures in oil and gas properties outside the U.S.;

or discount receivables;

(viii) acquire or merge with any other company;

(ix) sell assets or equity interests of the Company’s

subsidiaries;

(x) enter into or terminate certain hedge agreements;

(xi) enter into transactions with affiliates;

(xii) own any subsidiary

that is not organized in the U.S.;

(xiii) enter into certain contracts or agreements that prohibit or restrict liens on property in favor

of the administrative agent or restrict any restricted subsidiary from paying dividends or making distributions;

(xiv) allow gas imbalances,

take-or-pay or other prepayments with respect to the Company’s proved oil and gas properties;

(xv) engage in certain marketing

(xvi) enter into sale and leasebacks;

and (xvii) make or incur any capital expenditure or leasing or acquisition expenditure

in oil and gas properties that are not borrowing base properties.

As of December 31, 2024, the Company has $ 1.7 million of unamortized deferred

financing costs associated with its Credit Facility, which is presented in other non-current assets on the consolidated balance sheet.

These costs will be amortized to interest expense on the accompanying statements of operations on a straight-line basis over the life

of the Credit Facility.

Equity Purchase Agreement

September 30, 2024, the Company entered into the SEPA with Yorkville, whereby, subject to certain conditions, the Company has the right,

not the obligation, to sell to Yorkville up to $ 40.0 million shares of Common Stock, at any time and in an the 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 issuance and sale by the Company under the SEPA (an “Advance”) is subject to a maximum limit equal to 100% of the aggregate

volume traded of the Company’s Common Stock on the Nasdaq Stock Market during the five trading days immediately prior to the date

of the Advance Notice.

The shares 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, the Company paid Yorkville a structuring fee of $ 25,000 and

a commitment fee of 100,000 shares of Common Stock (the “Commitment Fee”).

purchases under an Advance will be subject to certain limitations, including that Yorkville cannot acquire (i) any shares that would

result in the Yorkville, including its affiliates, beneficially owning more than 4.99% of the Company’s outstanding Common Stock

at the time of an Advance or (ii) more than 19.99% of the Company’s issued and outstanding Common Stock as of the SEPA Effective

Date (the “Exchange Cap”), subject to limited exceptions.

to the SEPA, the Company may issue up to a total of 4,198,343 shares

of Common Stock within the Exchange Cap 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, the Company does not have access to issue an Advance

Notice until the Pre-Paid Advance of $ 15.0 million

(the Senior Convertible Note) is fully repaid.

connection with the SEPA, the Company entered into a registration rights agreement (the “SEPA Registration Rights Agreement”)

with Yorkville pursuant to which the Company agreed to file a registration statement registering the resale of the Common Stock shares

underlying the SEPA, the Pre- Paid Advance, and the Commitment Fee.

The Company’s right to sell shares to Yorkville under the SEPA

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

Company has 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, the Company has 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 on its consolidated statement of operations and consolidated statement of

cash flows for the year ended December 31, 2024.

The fair value of the SEPA was determined by a third-party using a Monte Carlo

simulation model, refer to Note 6 – Fair Value Measurements for a further discussion of the fair value of the SEPA.

Convertible Note

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

million to the Company and the Company issued the Senior Convertible Note, with an interest rate of 8.00 %

and a maturity date of September

The Company’s 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 Operating Holding Co., LLC (“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 (as defined in the SEPA).

The Company 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.

Additionally, the Company 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 the Company 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, the Company 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.

Company has determined that certain features of the Senior Convertible Note require bifurcation and separate accounting as embedded derivatives.

As such, the Company has elected the fair value option to account for the Senior Convertible Note;

therefore, in accordance with ASC

815, the Company recorded the Senior Convertible 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 Senior Convertible Note is $ 12.6 million, which

resulted in a loss on adjustment to fair value – debt and warrants of $ 1.3 million on the Company’s consolidated statement

of operations and consolidated statement of cash flows for the year ended December 31, 2024.

to Note 6 – Fair Value Measurements for a further discussion of the fair value of the Senior Convertible Note.

Promissory Note

September 30, 2024 (the “Subordinated Note Effective Date”), the Company entered into the Subordinated Note with the

Noteholders, as defined above, in a principal amount of $ 5.0

million, with a maturity of December

Refer to Note 18 – Related Party Transactions for a further discussion about the Subordinated Note and

the Noteholders.

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.

The Subordinated Note is guaranteed

by Prairie LLC pursuant to a global guaranty agreement entered into by Prairie LLC in favor of the Noteholders on the Subordinated

Note Effective Date.

The Subordinated Note is subordinated to the prior payment in full in cash to the Senior Convertible Note and

any future senior secured revolving credit facility of the Company entered into after the Subordinated Note Effective Date.

December 16, 2024, the Company and the Noteholders agreed to amend the Subordinated Note (the “Amended and Restated

Subordinated Note Agreement”), to, among other things, extend the maturity date of the Subordinated Note to March 17, 2027.

Additionally, the Amended and Restated Subordinated Note Agreement modified certain provisions to better align with the Credit

Facility Agreement.

In December 2024, and in conjunction with the Credit Facility Agreement, the Company made an $ 1.8 million

payment on the Subordinated Note, resulting in a principal balance of $ 3.2

million as of December 31, 2024.

to the terms of the Subordinated Note, the Company 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.

Refer to Note 15 – Common

Stock Options and Warrants below for a further discussion of the Subordinated Note Warrants.

to the Subordinated Note, the Company entered into a registration rights agreement (the “SPA Registration Rights Agreement”)

with the Noteholders pursuant to which the Company agreed to file a registration statement registering the resale of the Common Stock

underlying the Subordinated Note Warrants.

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

Company has determined that certain features of the Subordinated Note and the Subordinated Note Warrants require bifurcation and

separate accounting as embedded derivatives.

As such, the Company has elected the fair value option to account for the Subordinated

Note and the Subordinated Note Warrants;

therefore, in accordance with ASC 815, the Company has recorded the Subordinated Note and

the Subordinated Note Warrants at fair value and will remeasure the fair values each reporting period with changes in fair value

recognized in earnings.

On September 30, 2024, the issuance date of the Subordinated Note and the Subordinated Note Warrants, the total fair value of the Subordinated Note and the Subordinated Note Warrants

exceeded the proceeds of $5.0 million, as a result, the Company recognized a loss on debt issuance of $3.0 million on its consolidated

statement of operations and consolidated statement of cash flows for the year ended December 31, 2024.

Refer to Note 15 – Common

Stock Options and Warrants below for a further discussion of the Subordinated Note Warrants.

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 on the Company’s consolidated statement

of operations and consolidated statement of cash flows for the year ended December 31, 2024.

Refer to Note 6 – Fair Value

Measurements for a further discussion of the fair value of the Subordinated Note and the Subordinated Note Warrants.

and Restated Senior Secured Convertible Debentures

connection with the Merger, the Company entered into debentures due December 31, 2023 with each of Bristol Investment Fund, Ltd.

and Barlock 2019 Fund, LP (“Barlock”), in the principal amount of $ 1,000,000

(“AR Debentures”).

Bristol is controlled

Kessler who was the Executive Chairman of the Company at the time of the Merger and is a current member of our Board of Directors.

Barlock is controlled by Scott D.

Kaufman who is a former President, Chief Executive Officer, and Director of the Company.

The AR Debentures

will accrue interest on the aggregate unconverted and then outstanding principal amount of the debentures at the rate of 12 %

Interest is payable quarterly on (i) January 1, April 1, July 1 and October 1, beginning on May 3, 2023, (ii) each date the

AR Debentures are converted into common stock (as to that principal amount then being converted), (iii) the day that is at least five

trading days following the Company’s notice to redeem some or all of the then outstanding principal of the AR Debentures (only

as to that principal amount then being redeemed), which may be provided at any time after the Company’s common stock is listed

or quoted for trading on the NYSE American (or any successor thereto) or any other national securities exchange, and (iv) the maturity

October 2023, conversion notices were received from holders of the AR Debentures and the Company issued 400,666

shares of common stock to affect the conversion.

This represented the full conversion of the AR Debentures, together with accrued interest due to one of the holders.

Company determined that the AR Debentures contain certain features that require bifurcation and separate accounting as embedded derivatives.

connection with the Merger, the Company entered into 12 % amended and restated senior secured convertible debentures due December 31,

2023 with each of Bristol Investment Fund, Ltd.

(“Bristol Investment”) and Barlock 2019 Fund, LP (“Barlock”),

in the principal amount of $ 1.0 million each.

Refer to Note 18 – Related Party Transactions for a further discussion about

Bristol Investment and Barlock.

Company determined that the AR Debentures contained certain features which required bifurcation and separate accounting as embedded derivatives.

As such, the Company elected to initially and subsequently measure the AR Debentures in their entirety at fair value with changes in

fair value recognized in earnings in accordance with ASC 815.

The fair value of the AR Debentures increased to $ 5.8

million at the date of their conversion representing

an increase of $ 3.8

million from the date of the Merger and recognized

in the consolidated statements of operations for the year ended December 31, 2023.

the Merger, the Company assumed a loan agreement with the SBA.

The loan accrued interest at a rate of 3.75 %

and was scheduled to mature in June 2050.

The Company elected to fully repay the SBA loan and accrued interest in September 2023.

Company had no debt outstanding at December 31, 2023 or December 31, 2022.

Company’s right-of-use assets and lease liabilities are recognized on the accompanying balance sheets based on the present value

of the expected lease payments over the lease term.

As of December 31, 2023 and 2022, the Company did not have any finance leases.

following table summarizes the Company’s operating leases:

On October 11, 2023, the date that the AR Debentures were fully converted,

the fair value of the AR Debentures was $ 5.8 million, compared to $ 2.0 million at the date of the Merger.

The Company recognized the $ 3.8

million change in fair value as loss on adjustment to fair value – debt and warrants on its consolidated statement of operations

and consolidated statement of cash flows for the year ended December 31, 2023.

Refer to Note

6 – Fair Value Measurements for a further discussion of the fair value of the AR Debentures.

Business Administration Loan

the Merger, the Company assumed a loan agreement with the Small Business Administration (“SBA”).

The loan accrued interest

at a rate of 3.75 % and was scheduled to mature in September 2050.

The Company elected to fully repay the SBA loan and the accrued interest

in September 2023, which is presented as part of financing cash outflows on the consolidated statement of cash flows for the year ended

December 31, 2023.

Company determines if a contract contains a lease at its inception or as a result of an acquisition and makes certain assumptions and

judgments when determining its right–of–use assets and lease liabilities.

When determining whether a contract contains a

lease, the Company considers whether there is an identified asset that is physically distinct, whether the supplier has substantive substitution

rights, whether the Company has the right to obtain substantially all of the economic benefits from the use of the asset, and whether

it has the right to control the asset.

Certain lease agreements could include options to renew the lease, terminate the lease early,

or purchase the underlying asset(s).

The Company determines the lease term at the lease commencement date as the non–cancellable

period of the lease, including any options to extend or terminate the lease when such an option is reasonably certain to be exercised.

The Company recognizes variable lease payments in the period they are incurred.

Certain leases contain both lease and non–lease

components, which the Company has chosen to account for separately.

As of December 31, 2024 and 2023, all of the Company’s leases

are operating leases.

Company capitalizes its operating right–of–use assets and corresponding lease liabilities separately on its consolidated

balance sheets, using the present value of the remaining lease payments over the determined lease term applying the implicit rate of

following table presents the components of the Company’s operating leases on its consolidated balance sheets for the periods presented:

of Operating Leases Right of Use Asset

of December 31,

Operating Leases

Total right-of-use asset

Total lease liability

following table summarizes the components of the Company’s lease costs incurred for the periods below:

of Components of Lease Costs

December 31, 2024

(date of inception)

December 31, 2023

Operating lease cost

Short-term lease cost

Total lease cost

Company recognizes operating lease cost on a straight-line basis.

Short-term lease costs are recognized as incurred and represent payments

for office leases with a lease term of one year or less.

(In thousands)

Total right–of–use asset

Total lease liability

Company’s weighted–average remaining lease terms and discount rates as of December 31, 2024 are as follows:

of Weighted-average Remaining Lease Terms and Discount Rates

Operating Leases

Weighted–average lease term (years)

Weighted–average discount rate

commitments by year for the Company’s leases with a lease term of one year or more as of December 31, 2023 are presented in the

Such commitments are reflected at undiscounted values and are reconciled to the discounted present value recognized on the

accompanying balance sheets as follows:

Company has several operating leases for office spaces and vehicles used in its daily operations, under non–cancellable operating

leases expiring through 2030.

The Company recognizes lease expense for these leases on a straight–line basis.

following table presents the components of the Company’s lease costs during the periods presented:

of Lease costs

Year Ended December 31,

(In thousands)

Operating lease cost

Short–term lease cost (1)

Variable lease cost (2)

Total lease cost

of the Company’s office space operating leases, which expired in September 2024, had an initial lease term of less than 12

months and was considered a short-term lease.

The Company does not capitalize short–term leases, instead the costs are expensed

as they are incurred.

lease costs include operating costs, such as parking and property taxes, associated with the Company’s office leases.

expenses variable lease costs as they are incurred.

of December 31, 2024, the Company’s future lease commitments by year consisted of the following:

of Future Commitments of Operating Lease Liabilities

(In thousands)

January 1, 2025 through December 31, 2025

January 1, 2026 through December 31, 2026

January 1, 2027 through December 31, 2027

January 1, 2028 through December 31, 2028

January 1, 2029 through December 31, 2029

Total lease payments

imputed interest

lease liability

cash flow disclosures related to leases are presented below:

Total lease liability

Company’s supplemental cash flow disclosures related to operating leases are presented below for the periods indicated:

of Supplemental Cash Flow Related to Leases

December 31, 2023

(date of inception)

December 31, 2022

Cash paid for amounts included

in the measurement of lease liabilities - operating cash flows from operating leases

Right-of-use assets obtained in exchange for

operating liabilities

Fair Value Measurements

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.

Fair value 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 o bservable 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.

These 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.

carrying values of cash and cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities

on the consolidated balance sheets approximate fair value because of their short-term nature.

For debt and warrant liabilities, the following

methods and assumptions were used to estimate fair value:

Through September 2023, the fair value of the Company’s AR Debentures (as defined below) was based on a widely accepted valuation

methodology that utilizes (i) the Company’s common stock price, (ii) value of the debt component, and (iii) the value of the equity

The key unobservable inputs in the valuation model are the volatility that is appropriate to use in the Company stock price

and the yield that is appropriate for the Company.

These inputs could change significantly and result in significantly higher or lower

fair values at different measurement dates.

The Company considers the fair value of its debt to be a Level 3 measurement on the fair

value hierarchy.

At conversion on October 11, 2023, the fair value was determined using the Company’s common stock price.

The fair value of the Company’s warrant liabilities is estimated using a Black-Scholes option pricing model.

model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying

common stock, expected warrant life, and expected volatility in the market value of the underlying common stock.

were no assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and December 31, 2022.

convertible debentures

significant unobservable inputs used in the Level 3 fair value measurement of the senior convertible debentures as of May 3, 2023 (date

of the Merger) and their values are as follows:

of Senior Convertible Debentures

Fair value measurements

of senior convertible debentures

was estimated using stock price volatility of the Company and a set of peer companies over a lookback period equal to the time to maturity.

Yields were estimated using a range of 15.00 %

at May 3, 2023.

table below provides a summary of changes in the fair value of the Company’s Level 3 senior convertible debentures for the year

ended December 31, 2023.

The debentures were converted on October 11, 2023 and fair value at such date was estimated using the Company’s

common stock price, which is a Level 1 valuation.

There were no Level 3 liabilities in the period from June 7, 2022 (date of inception)

through December 31, 2022.

of Fair Value For Level 3 Liabilities

Balance at beginning of year

Senior convertible debentures assumed

in the Merger

Losses reported in earnings

Conversion to common

( 5,771,428 )

Balance at December 31, 2023

estimated fair value of the warrant liabilities at various dates during the year ended December 31, 2023 through when they were reclassified

into equity (see Note 14) was determined using Level 3 inputs.

Inherent in a Black-Scholes option-pricing model are assumptions used

in calculating the estimated fair values which represent the Company’s best estimate.

However, inherent uncertainties are involved.

If factors or assumptions change, the estimated fair values could be materially different.

following table summarizes the Company’s assumptions used in the valuation of warrant liabilities for the year ended December 31,

There were no warrant liabilities at December 31, 2023 or 2022.

of Valuation of Warrant Liabilities

Option exercise price

Expected term (years)

Discount rate

following table sets forth a summary of the changes in the fair value of the Level 3 warrant liabilities for the year ended December

There were no Level 3 liabilities in the period from June 7, 2022 (date of inception) through December 31, 2022.

of Changes in Fair Value in Warrant Liabilities

December 31, 2023

Balance at beginning of period

Reclassification to warrant liabilities

Change in estimate fair value

Reclassification to

( 65,681,089 )

Balance at December 31, 2023

Year Ended December 31,

(In thousands)

Cash paid for amounts included in the measurement of lease liabilities – operating cash flows from operating leases

Right–of–use assets obtained in exchange for operating liabilities

12 – Commitments and Contingencies

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

Company is subject to various litigation, claims and proceedings, which 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

a liability for such loss contingencies when it believes it is probable that 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,

4 unchanged sentences

financial position or results of operations.

provision (benefit) for income taxes for the year ended December 31, 2023 consisted of the following components.

13 – Preferred Stock

D Preferred Stock

Company has authorized 50,000 shares of Series D preferred stock with a par value of $ 0.01 and a stated value of $ 1,000 per share, which

are convertible into shares of Common Stock at a price of $ 5.00 per share (“Series D Preferred Stock”).

No dividends are

to be paid other than in those in the same form as dividends actually paid on Common Stock other than any adjustments related to stock

dividends or stock splits.

share of Series D Preferred Stock is convertible at any time at the option of the holder into the number of shares of Common Stock

determined by dividing the stated value of such share of $ 1,000

subject to adjustment by certain events as defined in the Certificate of Designation of Preferences, Rights and Limitations of

Series D Preferred Stock (the “Series D Certificate”).

If the average price of the Company’s Common Stock, as

defined and calculated, for any 22 trading days during a 30 consecutive trading day period exceeds $ 8.50 ,

subject to adjustment, the Company can require conversion of the Series D Preferred Stock into Common Stock subject to certain

conditions including stock trading volumes and existence of an effective registration statement for such converted

Company received an aggregate of $ 17.4 million in proceeds from a number of investors (the “Series D PIPE Investors”) who

were issued 17,376 shares of Series D Preferred Stock along with Series A warrants (“Series D A Warrants”) to purchase 3,475,250

shares of the Company’s Common Stock and Series B warrants (“Series D B Warrants” and together with the Series D A

Warrants, the “Series D PIPE Warrants”) to purchase 3,475,250 shares of Common Stock (collectively, the “Series D PIPE”).

Refer to Note 15 – Common Stock Options and Warrants for a further description of the Series D PIPE Warrants.

Additionally,

upon the closing of the Merger, holders of the AR Debentures were issued 4,423 shares of Series D Preferred Stock.

No warrants were issued

with or are associated with these shares.

the years ended December 31, 2024 and 2023, there were conversions of 6,170 and

1,172 shares of Series D Preferred Stock, respectively, into 1,234,090

and 234,424 shares of Common Stock,

respectively.

As of December 31, 2024 and 2023, there were 14,457 and 20,627 shares,

respectively, of Series D Preferred Stock outstanding.

E Preferred Stock

Company has authorized 50,000 shares of Series E preferred stock with a par value of $ 0.01 and a stated value of $ 1,000 per share, which

are convertible into shares of Common Stock at a price of $ 5.00 per share (“Series E Preferred Stock”).

No dividends are

to be paid other than in those in the same form as dividends actually paid on Common Stock other than any adjustments related to stock

dividends or stock splits.

share of Series E Preferred Stock is convertible at any time at the option of the holder into the number of shares of Common Stock determined

by dividing the stated value of such share of $ 1,000 by $ 5.00 , subject to adjustment by certain events as defined in the Certificate

of Designation of Preferences, Rights and Limitations of Series E Preferred Stock (the “Series E Certificate”).

If the average

price of the Company’s Common Stock, as defined and calculated, for any 22 trading days during a 30 consecutive trading day period

exceeds $ 8.50 , subject to adjustment, the Company can require conversion of the Series E Preferred Stock into Common Stock subject to

certain conditions including stock trading volumes and existence of an effective registration statement for the resale of such converted

Company received an aggregate of $ 20.0 million in proceeds from Narrogal Nominees Pty Ltd ATF Gregory K O’Neill Family Trust (the

“O’Neill Trust” or the “Series E PIPE Investor”).

The Series E PIPE Investor was issued 20,000 shares of

Series E Preferred Stock along with 39,615 shares of the Company’s Common Stock, and Series A warrants (“Series E A Warrants”)

to purchase 4,000,000 shares of the Company’s Common Stock and Series B warrants (“Series E B Warrants” and together

with the Series E A Warrants, the “Series E PIPE Warrants”) to purchase 4,000,000 shares of Common Stock (collectively, the

“Series E PIPE”).

Refer to Note 15 – Common Stock Options and Warrants for a further description of the Series

E PIPE Warrants.

Company’s obligations under the Series E Preferred Stock and the Series E PIPE Warrants were secured by a lien on the assets acquired

in the Exok Option Purchase as described under the Deed of Trust, Mortgage, Assignment of As–Extracted Collateral, Security Agreement,

Fixture Filing and Financing Statement, dated August 15, 2023 (“Deed of Trust”).

On August 15, 2024, the lien on the assets

acquired in the Exok Option Purchase under the Deed of Trust was released in accordance with the terms and procedures set forth therein

pursuant to the Consent and Agreement (as defined herein).

Refer to Note 18 – Related Party Transactions for a further discussion

of the Consent and Agreement with the O’Neill Trust.

the year ended December 31, 2024, in connection with the Consent and Agreement, all of the Series E Preferred Stock shares outstanding

were converted, into 4,000,000 shares of Common Stock.

As of December 31, 2024 and 2023, there were zero and 20,000 shares, respectively,

of Series E Preferred Stock outstanding.

14 – Common Stock

Company has 500,000,000 authorized shares of Common Stock with a par value of $ 0.01 per share.

The holders of the Company’s Common

Stock are entitled to one vote per share and the Company’s Second Amended and Restated Certificate of Incorporation does not provide

for cumulative voting.

The Company’s common stockholders are entitled to receive ratably such dividends, if any, as may be declared

by the Company’s Board of Directors (the “Board”) out of legally available funds.

However, the current policy of the

Board is to retain earnings, if any, for the Company’s operations and expansion.

Upon liquidation, dissolution or winding–up,

the holders of the Company’s Common Stock are entitled to share ratably in all of its assets which are legally available for distribution,

after payment of or provision for all liabilities.

The Company’s common stockholders have no pre-emptive, subscription, redemption,

or conversion rights.

The rights, preferences and privileges of the Company’s common stockholders are subject to and may be adversely

affected by the rights of the holders of shares of any series of preferred stock that the Company may designate and issue.

conjunction with the closing of the Merger, the Company issued (i) 2,297,669 shares of Common Stock to the former members of Prairie

LLC in exchange for their membership interests in Prairie LLC and (ii) 3,860,898 shares of Common Stock were deemed issued to former

stockholders of Creek Road Miners, Inc.

As a result of the Merger and related transactions, the Company had the obligation to issue 205,970

shares of Common Stock.

On September 7, 2023, the date that the underlying shares were fully issued,

the fair value of the Obligation Shares was $ 1.5 million.

The Company recognized the $ 1.5 million change in fair value as loss on adjustment

to fair value – debt and warrants on its consolidated statement of operations and consolidated statement of cash flows for the year

ended December 31, 2023.

The Company stopped recording the change in the fair value of the obligation

when the underlying shares were fully issued on September 7, 2023.

Refer to Note 6 – Fair Value Measurements for a further

discussion of the fair value of the Obligation Shares.

September 30, 2024, the Company entered into a securities purchase agreement to sell 1,827,040 shares of Common Stock (the “Acquired

Shares”) to an investor for $ 8.21 per share.

Concurrent with the issuance of the Common Stock, the Company entered into the SPA

Registration Rights Agreement with the investor pursuant to which the Company agreed to file a registration statement registering the

resale of the Acquired Shares.

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

Share Sequencing and Reclassifications

of September 30, 2023, the Company had 500,000,000 common shares authorized and 7,074,742 common shares issued and outstanding as adjusted

for the reverse stock split, as discussed in Note 1 – Organization, Description of Business, and Basis of Presentation .

On September 30, 2023, and without consideration of the reverse stock split, there were insufficient authorized and unissued shares for

the Company to satisfy all of its commitments to deliver shares.

The Company adopted a sequencing policy to determine how to allocate

authorized and unissued shares among commitments to deliver shares pursuant to ASC 815-40.

The sequence is based upon reclassifying securities

with the latest maturity date first.

Company’s sequencing policy resulted in the allocation of authorized and unissued shares in the following order at September 30,

2023 (i) AR Debentures, (ii) Legacy Warrants (as defined herein) (March 2024 expiration), (iii) Series D B Warrants, (iv) restricted

stock units issued to directors and an advisor (refer to Note 16 – Long–Term Incentive Compensation ), (v) Series E

B Warrants, (vi) restricted stock units issued to employees (refer to Note 16 – Long–Term Incentive Compensation )

and Legacy Warrants (September 2024 – January 2027 expiration), (vii) Series D A Warrants, (viii) Series E A Warrants, (ix) Exok

Warrants, (x) Series D Preferred Stock, (xi) Series E Preferred Stock and (xii) Merger Options.

This sequencing and the lack of sufficient

authorized shares required the Company to reclassify Reclassified Warrant Liabilities to liabilities at fair value during the three months

ended September 30, 2023.

At the time of the reclassification, the total fair value of the Reclassified Warrant Liabilities reclassified

to liabilities was $ 25.9 million.

The total fair value of the Reclassified Warrant Liabilities at the time they were transferred back

to equity was $ 65.9 million.

The Company recognized the $ 39.8 million change in fair value as loss on adjustment to fair value –

debt and warrants on its consolidated statement of operations and consolidated statement of cash

flows for the year ended December 31, 2023.

Refer to Note 6 – Fair Value Measurements for a discussion of the Reclassified

Warrant Liabilities fair value.

Additionally,

and due to the lack of sufficient authorized shares, the Company’s Series D Preferred Stock and Series E Preferred Stock were reclassified

to mezzanine equity at their maximum redemption value during the three months ended September 30, 2023.

Upon the effectiveness of the

reverse stock split in October 2023 (refer to Note 1 – Organization, Description of Business, and Basis of Presentation ),

the Company had sufficient authorized shares of Common Stock issuable upon the conversion or exercise of all of its issued and outstanding

securities and therefore, reclassified the warrant liabilities and mezzanine equity into permanent equity effective in October 2023.

15 – Common Stock Options and Warrants

August 31, 2022, Prairie LLC entered into agreements with its members whereby each member was provided non–compensatory options

to purchase a 40 % membership interest in the Company for an aggregate exercise price of $ 1,000,000 per member.

The non–compensatory

options were sold to the members for $ 80,000 per option holder.

The non–compensatory options only become exercisable in 25 % increments

upon the achievement of the following production milestones in barrels of oil equivalent per day (“Boe/d”):

5,000 Boe/d, 7,500 Boe/d, and 10,000 Boe/d.

May 3, 2023, prior to the closing of the Merger, Prairie LLC entered into a non–compensatory option purchase agreement with its

members, Bristol Capital, LLC (“Bristol Capital”), which manages Bristol Investment described above, and BOKA Energy LP (“BOKA”),

a third–party investor, pursuant to which Bristol Capital and BOKA purchased non–compensatory options for $ 24,000 and $ 8,000 ,

respectively, from Prairie LLC’s members.

the Merger, the Company converted the non–compensatory options to purchase the outstanding and unexercised membership interests

of Prairie LLC, as of immediately prior to the Merger, into options to acquire an aggregate of 8,000,000 shares of Common Stock for an

exercise price of $ 0.25 per share (the “Merger Options”), which are only exercisable if the production hurdles noted above

are achieved.

Company then entered into amended and restated non–compensatory option agreements (the “Option Agreements”) with each

Hanna, Edward Kovalik, Bristol Capital, and BOKA.

An aggregate of 2,000,000 Merger Options are subject to be transferred to

the Series D PIPE Investors, based on their then percentage ownership of the Series D Preferred Stock to the aggregate Series D Preferred

Stock outstanding and held by all Series D PIPE Investors as of the May 3, 2023, if the Company does not meet certain performance metrics

by May 3, 2026.

August 30, 2023, the Company, Gary C.

Hanna, Edward Kovalik, Bristol Capital, and Georgina Asset Management entered into a non–compensatory

option purchase agreement, pursuant to which Georgina Asset Management agreed to purchase, and each of the sellers agreed to sell to

Georgina Asset Management, the Merger Options to acquire an aggregate of 200,000 shares of Common Stock, for an exercise price of $ 0.25

per share for an aggregate purchase price of $ 2,000 .

September 30, 2024, the Company, BOKA, Rose Hill Holdings Limited (“Rose Hill”), Anchorman Holdings Inc.

(“Anchorman”),

and Blackstem Forest, LLC (“Blackstem” and, together with Rose Hill and Anchorman, the “Option Purchasers”) entered

into a non-compensatory option purchase agreement, pursuant to which each of the Option Purchasers agreed to purchase, and BOKA agreed

to sell to the Option Purchasers, Merger Options to acquire an aggregate of 800,000 shares of Common Stock, for an exercise price of

$ 0.25 per share.

The Company did not receive any proceeds from the transfer of the Merger Options and the terms of the Option Agreements

were not amended, modified, or changed in any way in connection with the transfers.

of the Merger Options were exercisable as of December 31, 2024 or December 31, 2023.

the Merger, the Company assumed warrants to purchase 53,938 shares of the Company’s Common Stock with a weighted average exercise

price of $ 49.71 per share (the “Legacy Warrants”).

As of December 31, 2024 and 2023, Legacy Warrants providing the right

to purchase 43,438 and 53,938 shares of Common Stock, respectively, were outstanding with a weighted average remaining contractual life

of 0.6 and 2.2 years, respectively.

D PIPE Warrants

Series D PIPE Warrants, upon issuance, provided the warrant holders with the right to purchase an aggregate of 6,950,500 shares of Common

Stock at an exercise price of $ 6.00 per share.

The Series D A Warrants expire on May 3, 2028 and the Series D B Warrants expired on May

All such warrants must be exercised for cash.

April 8, 2024, the Company entered into an Amendment and Waiver of Exercise Limitations Letter Agreement (the “Letter

Agreement”) with Bristol Investment to amend certain terms of the Series D A Warrants and Series D B Warrants held by Bristol

Each of the Series D PIPE Warrants held by Bristol Investment is subject to a limitation on exercise if as a result of

such exercise or conversion, the

holder would own more than 4.99% of the outstanding shares of the Company’s Common Stock (the “Beneficial Ownership Limitation”), which may be increased by the

holder upon written notice to the Company, to any specified percentage not in excess of 9.99% (the “Beneficial Ownership

Limitation Ceiling”).

The Letter Agreement increases the Beneficial Ownership Limitation Ceiling from 9.99% to 19.99%.

Pursuant to the Letter Agreement, Bristol Investment further notified the Company of its intent to immediately increase the

Beneficial Ownership Limitation Ceiling to 19.99% and the parties agreed to waive the waiting period with respect to such

the year ended December 31, 2024, Series D A Warrants to purchase 189,489 shares

of Common Stock were exercised for total proceeds to the Company of $ 1.1 million.

Additionally, during the year ended December 31, 2023, Series D A Warrants to purchase Common Stock were exercised on a cashless

basis resulting in a net issuance of 41,980 shares of Common Stock.

During the years ended December 31, 2024 and 2023, Series D B

Warrants to purchase 1,400,250 and 2,075,000 shares,

respectively, of Common Stock were exercised for total proceeds to the Company of $ 8.4 million

and $ 12.5 million,

respectively.

of December 31, 2024 and 2023, Series D A Warrants providing the right to purchase 3,215,761 and 3,405,250 shares of Common Stock, respectively,

were outstanding with a remaining contractual life of 3.3 and 4.3 years, respectively.

As of December 31, 2024, all of the Series D B

Warrants have been exercised and as of December 31, 2023, Series D B Warrants providing the right to purchase 1,400,250 shares of Common

Stock were outstanding with a remaining contractual life of 0.3 years.

E PIPE Warrants

Series E PIPE Warrants provide the warrant holders with the right to purchase 8,000,000 shares of Common Stock at an exercise price of

$ 6.00 per share.

The Series E A Warrants expire on August 15, 2028 and the Series E B Warrants expired on August 15, 2024 .

All such warrants

must be exercised for cash.

the year ended December 31, 2024, all of the Series E B Warrants were exercised, resulting in the issuance of 4,000,000 shares of Common

Stock, for total proceeds to the Company of $ 24.0 million.

As of December 31, 2024 and 2023, Series E A Warrants providing the right

to purchase 4,000,000 shares of Common Stock with a remaining contractual life of 3.6 and 4.6 years, respectively, were outstanding.

As of December 31, 2024, all of the Series E B Warrants have been exercised and as of December 31, 2023, Series E B Warrants providing

the right to purchase 4,000,000 shares of Common Stock with a remaining contractual life of 0.6 years were outstanding.

discussed in Note 4 – Acquisitions and Merger , the Company issued warrants in connection with the Exok Transaction completed

in August 2023.

The Exok Warrants provide the warrant holders with the right to purchase 670,499 shares of Common Stock at an exercise

price of $ 7.43 per share.

The Exok Warrants expire on August 15, 2028 and may be exercised in a cashless manner under certain circumstances.

On December 31, 2024 and 2023, Exok Warrants providing the right to purchase 670,499 shares of Common Stock with a remaining contractual

life of 3.6 and 4.6 years, respectively, were outstanding.

Note Warrants

discussed in Note 10 – Debt above, pursuant to the terms of the Subordinated Note, the Company issued the Subordinated Note

Warrants to purchase up to 1,141,552 shares of Common Stock to the Noteholders.

The Subordinated Note Warrants vest in equal tranches,

beginning on September 30, 2024, every 3 months until the Subordinated Note is repaid.

Upon vesting, the Subordinated Note Warrants will

be exercisable at any time until September 30, 2029, at an exercise price of $ 8.89 , subject to adjustments as provided under the terms

of the Subordinated Note Warrants.

Company has determined that the Subordinated Note Warrants should be accounted for as a liability pursuant to ASC 480.

In accordance

with ASC 815, the Company recorded the Subordinated Note Warrants 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 Warrants is $ 4.2

Refer to Note 6 – Fair Value Measurements for a further discussion of the fair value of the Subordinated Note Warrants.

September 30, 2024, in connection with the Subordinated Note, the Company entered into the SPA Registration Rights Agreement with the

Noteholders pursuant to which the Company agreed to file a registration statement registering the resale of the Common Stock underlying

the Subordinated Note Warrants.

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

of December 31, 2024, Subordinated Note Warrants providing the right to purchase 570,778 shares of Common Stock with a remaining contractual

life of 4.8 years had vested and were outstanding.

16 – Long–Term Incentive Compensation

Company’s long–term incentive plan for employees, directors, consultants, and other service providers (as amended and restated

effective as of September 5, 2024, and as may be further amended from time to time, the “LTIP”) provides for the grant of

all or any of the following types of equity–based awards:

(i) incentive stock options qualified as such under U.S.

federal income

(ii) stock options that do not qualify as incentive stock options;

(iii) stock appreciation rights;

(iv) restricted stock awards;

(v) restricted stock units (“RSUs”), which may also include performance stock awards (“PSUs”);

(vi) stock awards;

(viii) dividend equivalents;

(ix) other stock–based awards;

(x) cash awards;

and (xi) substitute awards.

Subject to adjustment

in accordance with the terms of the LTIP, 7,500,000 shares of the Company’s Common Stock are reserved for issuance pursuant to

awards under the LTIP.

As of December 31, 2024, there are 5,501,356 shares available for grant under the LTIP.

Company’s stock–based compensation awards are classified as either equity awards 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 Company accounts for forfeitures of stock–based compensation

awards as they occur.

There were no forfeitures during the years ended December 31, 2024 and 2023.

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.

and PSUs granted under the LTIP can immediately vest (A) upon a termination due to (i) death, (ii) disability, or (iii) retirement, in

the case of employee awards, or (B) in connection with a change in control;

provided that for employee RSU or PSU awards, such accelerated

vesting upon a change in control only applies to the extent no provision is made in connection with a change in control for the assumption

of awards previously granted or there is no substitution of such awards for new awards.

To the extent an employee’s RSU or PSU

award is assumed or substituted in connection with the change in control, if a participant is terminated by the Company without “cause”

or the employee terminates for “good reason” (each as defined in the applicable award agreement), then each RSU or PSU award

will become fully vested.

Equity–Classified

Restricted Stock Units

Company has granted RSUs to employees which primarily vest ratably over a three-year period, subject to the employees continued service

through each applicable vesting date.

The Company has also granted RSUs to directors and advisors which primarily vest one year following

the grant date, subject to the director’s or advisor’s continued service through the vesting date.

The fair values of these

RSU awards are based on the price of the Company’s Common Stock as of each relevant grant date.

following table presents the Company’s equity–classified RSU activity for the periods indicated:

Schedule of Restricted Stock Units

Number of RSUs

Unvested units as of January 1, 2023

Unvested units as of December 31, 2023

Unvested units as of December 31, 2024

the years ended December 31, 2024 and 2023, the Company recognized stock–based compensation costs of $ 6.8 million and $ 2.9 million,

respectively, related to its equity–classified RSUs.

of December 31, 2024, there was $ 6.9 million of total unrecognized compensation cost related to the Company’s unvested equity–classified

RSUs, which is expected to be recognized over a weighted–average period of 1.2 years.

Equity–Classified

Performance Stock Units

September 2024, the Company granted PSUs to certain of its employees.

The PSUs vest and become earned upon the achievement of certain

performance goals based on the Company’s relative total shareholder return as compared to the performance peer group during the

performance period, in each case, at the end of a three-year performance period, and generally subject to the employees continued service

throughout the performance period.

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

Compensation Committee of the Board (the “Committee”);

however, unless the Committee determines otherwise, these PSUs will

be settled in stock;

therefore, the Company classified these PSUs as equity awards.

The number of shares of Common Stock that a holder

of the PSUs earns at the end of the performance period may range from 0% to 200% of the target number of PSUs granted, as determined

by the Company’s total shareholder return relative to a group of peers over the performance period, which represents a market condition

per ASC Topic 718, Compensation—Stock Compensation .

The fair value of the PSUs granted in September 2024 was determined by

a third-party using a Monte Carlo simulation model as of the grant date, using the significant inputs listed below, which are based on

unobservable market data and are therefore considered Level 3 inputs within the fair value hierarchy.

Schedule of Performance Stock Units-

Monte Carlo Simulation Model

Performance Stock Units – Monte Carlo Simulation Model

Stock price – on grant date

Risk-free rate

Equity volatility rate

Equity volatility rate adjustment factor

Adjusted equity volatility rate

following table presents the Company’s equity–classified PSU activity for the periods indicated:

Schedule of Restricted Stock Units

Number of PSUs

Unvested units as of January 1, 2024

Unvested units as of December 31, 2024

the year ended December 31, 2024, the Company recognized stock–based compensation costs of $ 1.6 million related to its equity–classified

The Company did not recognize any stock–based compensation costs for its equity–classified PSUs during the year ended

December 31, 2023 because there were no PSUs granted until June 2024.

of December 31, 2024, there was $ 5.7 million of total unrecognized compensation cost related to the Company’s unvested equity–classified

PSUs, which is expected to be recognized over a weighted–average period of 2.0 years.

Liability–Classified

Restricted Stock Units

Company has also granted RSUs to certain of its directors and advisors, which primarily vest one year following the grant date, subject

to the director’s or advisor’s continued service through the applicable vesting date.

Such RSUs are payable 60% in Common

Stock and 40% in either cash or Common Stock (or a combination thereof), as determined by the Committee.

The Company has accounted for

the portion of the awards that can be settled in cash as liability–classified awards and accordingly records the changes in the

market value of the instruments to general and administrative expense over the vesting period of the award.

following table presents the Company’s liability–classified RSU activity for the periods indicated:

Schedule of Restricted Stock Units

Number of RSUs

Unvested units as of January 1, 2023

Unvested units as of December 31, 2023

Unvested units as of December 31, 2024

the years ended December 31, 2024 and 2023, the Company recognized stock–based compensation costs of $ 0.3 million and $ 0.1 million,

respectively, related to its liability–classified RSUs.

of December 31, 2024, there was less than $ 0.1 million of total unrecognized compensation cost related to liability–classified

RSUs, which is expected to be recognized over a weighted–average period of 0.4 years.

The amount of unrecognized compensation cost

for liability–classified awards will fluctuate over time as they are marked to market.

17 - Income Taxes

following table presents the Company’s provision (benefit) for income taxes for continuing operations for the periods

of Provision (Benefit) for Income Taxes

Year Ended December 31,

(In thousands)

Total current

1 unchanged sentence

Total provision (benefit) for income taxes

income tax (benefit) provision for the year ended December 31, 2022 is not presented as Prairie LLC was a flow-through entity not subject

to income taxes for the year ended December 31, 2022.

following reconciles the provision (benefit) for income taxes included in the consolidated statement of operations with the provision

(benefit) which would result from the application of the statutory federal income tax rate:

following table presents the reconciliation between the provision (benefit) for income taxes included in the Company’s

consolidated statement of operations with the provision (benefit) which would result from the application of a blended statutory

federal and state income tax rate of 24.4 %

for the periods presented:

of Reconciliation of Provision (Benefit) for Income Taxes

Income tax expense

(benefit) at federal statutory rate

$ ( 16,606,561 )

State tax expense (benefit),

( 3,111,717 )

Loss on adjustment to fair

Ended December 31,

tax benefit at federal statutory rate

Loss on adjustment to fair value

Other nondeductible expenses

Federal prior year adjustments

Officer compensation disallowance

Change in valuation allowance

Total provision (benefit)

for income taxes

provision (benefit) for income taxes

income taxes are provided to reflect the future tax consequences of temporary differences between the tax basis of assets and liabilities

6 unchanged sentences

net deferred tax asset has been reduced by a full valuation allowance as of December 31, 2024.

differences and carryforwards which give rise to deferred tax assets and liabilities consisted of the following at December 31, 2023:

following table presents the temporary differences and carryforwards which give rise to deferred tax assets and liabilities for the periods

Schedule of Deferred Tax Assets and Liabilities

December 31, 2023

Year Ended December 31,

(In thousands)

Deferred tax assets

Property and equipment

Stock-based compensation

Commodity derivative contracts

Transaction costs

Lease liabilities, net

Federal NOL carryforward

State NOL carryforward

( 13,926,989 )

deferred tax assets

Deferred tax liabilities

Lease asset (net)

in partnership

Valuation allowance

Total deferred tax assets

Deferred tax liabilities

$ ( 103,929 )

deferred tax liability

Company has U.S.

federal income tax net operating loss carryforwards (“NOLs”) of approximately $ 33.3 million available to

reduce future U.S.

Property and equipment

Right-of-use asset, net

Investment in partnership

Total deferred tax liabilities

Net deferred tax liability

As of December 31, 2024 and 2023,

the Company has U.S.

federal income tax net operating loss carryforwards (“NOLs”) of approximately $ 56.3 million

and $ 35.7 million,

respectively, available to reduce future U.S.

taxable income.

Of the $ 33.3 million of federal NOLs, $ 8.9 million expire during the years 2030 through 2037, while

$ 24.4 million do not have an expiration date.

In addition, the Company has approximately $ 42.6 million of state NOLs of which $ 21.5 million

expire during the years 2040 through 2043, while $ 21.1 million do not have an expiration date.

As of December 31, 2024, $ 8.9 million of the $ 56.3 million

federal NOLs expire during the years 2030 through 2037, while $ 47.4 million do not have expiration dates.

Additionally, as of

December 31, 2024 and 2023, the Company has state NOLs of approximately $ 65.5 million

and $ 44.9 million,

respectively, available to reduce future U.S.

taxable income.

As of December 31, 2024, $ 42.4 million

of the $ 65.5 million

state NOLs expire during the years 2040 through 2043, while $ 21.1 million

do not have expiration dates.

Company believes that it is likely that an ownership change as defined in Section 382 of the Code has occurred.

1 unchanged sentence

such an ownership change, utilization of the NOLs would be subject to an annual limitation, which is determined by first multiplying

the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to

the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to

additional adjustments, as required.

Any such limitation may result in the expiration of a portion of the NOL before utilization.

Any such limitation may result in the expiration of a portion of the NOLs before utilization.

carryforwards that expire prior to utilization as a result of the limitation will be removed from deferred tax assets with a corresponding

2 unchanged sentences

and various state jurisdictions and is subject to examination in the various jurisdictions

in which the Company files.

in which it files.

The Company’s tax years 2021 to present remain open for federal examination.

3 unchanged sentences

state tax audits varies, depending on the state, but is generally from three to five years .

Company did no t have any unrecognized tax benefits at December 31, 2023.

Preferred Stock

Company has authorized 50,000

shares of Series D Preferred Stock with a par

value of $ 0.01

and a stated value of $ 1,000 .

No dividends are to be paid other than in those in the same form as dividends actually paid on common stock other than any adjustments

related to stock dividends or stock splits.

Series D Preferred Stock has no voting rights.

However, as long as any such shares are outstanding, the Company must seek approval from

holders of Series D Preferred Stock of at least 66% of the then outstanding shares in order to (a) alter or change the powers, preferences

or rights given to the Series D Preferred Stock in a materially adverse manner, (b) authorize or create any class of stock ranking as

to dividends, redemption or distribution of assets upon a liquidation senior to, or otherwise pari passu with, the Series D Preferred

Stock, (c) amend its certificate of incorporation or other charter documents in any manner that materially adversely affects any rights

of the holders, (d) increase the number of authorized shares of Series D Preferred Stock, or (e) enter into any agreement with respect

to any of the foregoing.

share of Series D Preferred Stock is convertible at any time at the option of the holder into the number of shares of common stock determined

by dividing the stated value of such share of $ 1,000

subject to adjustment by certain events as defined in the certificate of designation.

If the average price of the Company’s common

stock, as defined and calculated, for any 22 trading days during a 30 consecutive trading day period exceeds $ 8.50 ,

subject to adjustment, the Company can require conversion of the Series D Preferred Stock into common stock subject to certain conditions

including stock trading volumes and existence of an effective registration statement for such converted shares.

any time on or after May 3, 2025, the Company may also redeem some or all outstanding Series D Preferred Stock for $ 1,050

per share plus any accrued and unpaid dividends

and any other amounts due in respect of the Series D Preferred Stock.

Such redemption is subject to certain conditions including stock

trading volumes and existence of an effective registration statement.

Company received an aggregate of $ 17.4

million in proceeds from the Series D PIPE Investors

who were issued 17,376

shares of Series D Preferred Stock along with

Series D A Warrants to purchase 3,475,250

shares of the Company’s common stock and

Series D B warrants to purchase 3,475,250

shares of common stock.

See Note 15 for a further

description of the Series D PIPE Warrants.

Company entered into registration rights agreements with each Series D PIPE Investor whereby the Company is required to pay liquidated

damages if the resale of the underlying shares of common stock is not registered by the Securities and Exchange Commission by August

The Company paid a total of $ 548,144

of such damages for the year ended December 31,

2023 before the resale registration statement with respect to such shares was declared effective in December 2023.

and upon the Merger, holders of the AR Debentures were issued 4,423

shares of Series D Preferred Stock.

were issued with or are associated with these shares.

the year ended December 31, 2023, there were conversions of 1,172

shares of Series D Preferred Stock into 234,424

shares of common stock.

There were 20,627

shares of Series D Preferred Stock outstanding

at December 31, 2023.

Company has authorized 50,000

shares of Series E Preferred Stock with a par

value of $ 0.01

and a stated value of $ 1,000 .

No dividends are to be paid other than in those in the same form as dividends actually paid on common stock other than any adjustments

related to stock dividends or stock splits.

Series E Preferred Stock has no voting rights.

However, as long as any such shares are outstanding, the Company must seek approval from

holders of Series E Preferred Stock of at least 66% of the then outstanding shares in order to (a) alter or change the powers, preferences

or rights given to the Series E Preferred Stock in a materially adverse manner, (b) authorize or create any class of stock ranking as

to dividends, redemption or distribution of assets upon a liquidation senior to, or otherwise pari passu with, the Series E Preferred

Stock, (c) amend its certificate of incorporation or other charter documents in any manner that materially adversely affects any rights

of the holders, (d) increase the number of authorized shares of Series E Preferred Stock, or (e) enter into any agreement with respect

to any of the foregoing.

share of Series E Preferred Stock is convertible at any time at the option of the holder into the number of shares of common stock determined

by dividing the stated value of such share of $ 1,000

subject to adjustment by certain events as defined in the certificate of designation.

the average price of the Company’s common stock, as defined and calculated, for any 22 trading days during a 30 consecutive trading

day period exceeds $8.50, subject to adjustment, the Company can require conversion of the Series E Preferred Stock into common stock

subject to certain conditions including stock trading volumes and existence of an effective registration statement for the resale of

such converted shares .

any time on or after August 15, 2025, the Company may also redeem some or all outstanding Series E Preferred Stock for $ 1,050

per share plus any accrued and unpaid dividends

and any other amounts due in respect of the Series E Preferred Stock.

Such redemption is subject to certain conditions including stock

trading volumes and existence of an effective registration statement.

Company received an aggregate of $ 20.0

million in proceeds from the Series E PIPE Investor

who was issued 20,000

shares of Series E Preferred Stock along with

shares of the Company’s common stock, and

Series E A warrants to purchase 4,000,000

shares of the Company’s common stock and

Series E B Warrants to purchase 4,000,000

shares of common stock.

See Note 15 for a further

description of the Series E PIPE Warrants.

Company’s obligations under the Series E Preferred Stock and the Series E PIPE Warrants are secured by a lien on the Exok Option

Assets as described under the Deed of Trust, Mortgage, Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing and

Financing Statement, dated August 15, 2023 (“Deed of Trust”).

Upon commencement of a voluntary bankruptcy proceeding by Prairie

LLC or involuntary bankruptcy proceeding against Prairie LLC, the Series E PIPE Investor will have the right and option to proceed with

foreclosure and to sell all or any portion of the Exok Option Assets.

In the event that no shares of Series E Preferred Stock remain

outstanding (whether by conversion, redemption or otherwise) or are no longer beneficially owned or otherwise held by the Series E PIPE

Investor (or any of its affiliates), the lien on the Exok Option Assets under the Deed of Trust will be released in accordance with the

terms and procedures set forth therein.

have been no conversions of Series E Preferred Stock and there were 20,000

shares of Series E Preferred Stock outstanding

at December 31, 2023.

of our common stock are entitled to one vote per share.

Our Amended and Restated Charter (as defined below) does not provide for cumulative

Holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by our Board out of legally

available funds.

However, the current policy of our Board is to retain earnings, if any, for our operations and expansion.

Upon liquidation,

dissolution or winding-up, the holders of our common stock are entitled to share ratably in all of our assets which are legally available

for distribution, after payment of or provision for all liabilities.

The holders of our common stock have no preemptive, subscription,

redemption or conversion rights.

The rights, preferences and privileges of holders of our common stock are subject to and may be adversely

affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue.

conjunction with the Closing of the Merger (i) 2,297,669

shares of common stock were issued to the former

members of Prairie LLC in exchange for their membership interests in Prairie LLC and (ii) 3,860,898

shares of common stock were deemed issued to

former stockholders of Creek Road Miners, Inc.

As a result of the Merger and related transactions, the Company has the obligation to

issue 205,970

shares of common stock (“Obligation Shares”).

The fair value of this obligation increased $ 1,477,103

from the Merger to September 7, 2023 when the

underlying shares were fully issued.

This change was recognized in Loss on adjustment to fair value – Obligation Shares in the

consolidated statements of operations for the year ended December 31, 2023.

Company’s sequencing policy (through October 13, 2023 as described in Note 2) resulted in the allocation of authorized and unissued

shares in the following order at September 30, 2023 (i) AR Debentures, (ii) Legacy Warrants (March 2024 expiration), (iii) Series D B

Warrants, (iv) restricted stock units issued to directors and advisors (see Note 16), (v) Series E B Warrants, (vi) restricted stock

units issued to employees (see Note 16) and Legacy Warrants (September 2024 – January 2027 expiration) (vii) Series D A Warrants,

(viii) Series E A Warrants, (ix) Exok Warrants, (x) Series D Preferred Stock, (xi) Series E Preferred Stock and (xii) Merger Options

(defined below).

This sequencing and the lack of sufficient authorized shares required the Company to reclassify a portion of the Series

D A Warrants and all the Series E A Warrants and Exok Warrants to liabilities at fair value during August and September 2023.

These liabilities

were remeasured to fair value until their reclassification back into equity upon the Reverse Stock Split in October 2023 with the change

in fair value reflected in the statement of operations.

Additionally and due to the lack of sufficient authorized shares, the Company’s

Series D Preferred Stock and Series E Preferred Stock were reclassified to mezzanine equity at their maximum redemption value during

Upon the effectiveness of the Reverse Stock Split in October 2023, the Company has sufficient authorized shares for all

its securities and reclassified the warrant liabilities and mezzanine equity into permanent equity effective in October 2023.

Common Stock Options and Warrants

the Merger, the Company assumed 7,087

options to purchase shares of the Company’s

common stock (the “Legacy Options”) with a weighted average exercise price of $ 28.57

The Legacy Options expired on August

August 31, 2022, Prairie LLC entered into agreements with its members whereby each member was provided non-compensatory options to purchase

membership interest in the Company for an aggregate purchase price of $ 1,000,000

The non-compensatory options were

sold for $ 80,000 .

The non-compensatory options only become exercisable in 25 %

increments upon the achievement of the following production milestones in barrels of oil equivalent per day (“BOE/D”):

BOE/D, and 10,000

May 3, 2023, prior to the Closing of the Merger, Prairie LLC entered into a non-compensatory option purchase agreement with its members,

Bristol Capital, LLC and BOKA Energy LP, a third-party investor pursuant to which Bristol Capital, LLC and BOKA Energy LP purchased non-compensatory

options for $ 24,000

and $ 8,000 ,

respectively, from Prairie LLC’s members.

Upon the Merger, the Company converted the non-compensatory options to purchase membership

interests of Prairie LLC outstanding and unexercised as of immediately prior to the Merger into options to acquire an aggregate of 8,000,000

shares of common stock for an exercise price

of $ 7.14 per

share (“Merger Options”), which are only exercisable if the production hurdles noted above are achieved, and the Company

entered into the Option Agreements with each of Gary C.

Hanna, Edward Kovalik, Bristol Capital LLC and BOKA Energy LP.

Erik Thoresen,

a director of the Company, is affiliated with BOKA Energy LP.

An aggregate of 2,000,000

Merger Options are subject to be transferred

to the Series D PIPE Investors, based on their then percentage ownership of the Series D Preferred Stock to the aggregate Series D Preferred

Stock outstanding and held by all Series D PIPE Investors as of the Closing Date, if the Company does not meet certain performance metrics

by May 3, 2026.

Company did no t

have any unrecognized tax benefits as of December 31, 2024 or 2023.

18 – Related Party Transactions

As described in Note 10 – Debt, in connection with the closing of the Merger, the Company entered into

the AR Debentures with Bristol Investment, which is managed by Paul L.

Kessler who is a former Director of the Company, and Barlock,

which is controlled by Scott D.

Kaufman who is a former President, Chief Executive Officer, and Director of the Company.

2023, conversion notices were received from holders of the AR Debentures and the Company issued 400,666

shares of Common Stock to affect the conversion.

This represented the full conversion of the AR Debentures, together with the

accrued interest due to one of the holders.

Stock Options .

As described in Note 15 – Common Stock Options and Warrants , upon consummation of the Merger, the

Company entered into Option Agreements with each of Gary C.

Hanna, Edward Kovalik, Paul L.

Kessler, who is a former Director of the

Company, and BOKA.

Erik Thoresen, a director of the Company, is affiliated with BOKA.

August 30, 2023, the Company, Gary C.

Hanna, Edward Kovalik, Bristol Capital LLC and Georgina Asset Management entered into a non-compensatory

Hanna, Edward Kovalik, Bristol Capital, and Georgina Asset Management entered into a non–compensatory

option purchase agreement, pursuant to which Georgina Asset Management agreed to purchase, and each of the sellers agreed to sell to

Georgina Asset Management for an aggregate purchase price of $ 2,000 ,

Merger Options to acquire an aggregate of 200,000

shares of common stock for an exercise price

of the Merger Options were exercisable at December 31, 2023.

the Merger, the Company assumed warrants to purchase 53,938

shares of the Company’s common stock with

a weighted average exercise price of $ 49.71

per share (the “Legacy Warrants”).

Legacy Warrants providing the right to purchase 53,938

shares of common stock were outstanding at December

31, 2023 with a weighted average remaining contractual life of 2.2

D PIPE Warrants

Series D PIPE Warrants provide the warrant holders with the right to purchase an aggregate of 6,950,500

shares of common stock at an exercise price of

The Series D A Warrants expire on

May 3, 2028 and could be exercised in a cashless manner under certain circumstances until December 2023 and as of December 31, 2023 and

in the future must all be exercised for cash.

The Series D B Warrants expire on May 3, 2024 and must be exercised for cash.

December 2023, Series D A Warrants to purchase common stock were exercised on cashless basis resulting in the net issuance of 41,980

shares of common stock.

Additionally, in November

and December 2023, Series D B Warrants to purchase 2,075,000

shares of common stock were exercised for total

proceeds to the Company of $ 12.5

D A Warrants providing the right to purchase 3,405,250

shares of common stock and Series D B Warrants

providing the right to purchase 1,400,250

shares of common stock were outstanding at December

E PIPE Warrants

Series E PIPE Warrants provide the warrant holders with the right to purchase 8,000,000

shares of common stock at an exercise price of

The Series E A Warrants expire on

August 15, 2028 and may be exercised in a cashless manner under certain circumstances.

The Series E B Warrants expire on August 15, 2024

and must be exercised for cash.

The Series E A Warrants providing the right to purchase 4,000,000

shares of common stock and Series E B Warrants

providing the right to purchase 4,000,000

shares of common stock were outstanding at December

Exok Warrants provide the warrant holders with the right to purchase 670,499

shares of common stock at an exercise price of

The Exok Warrants expire on August

15, 2028 and may be exercised in a cashless manner

under certain circumstances.

Exok Warrants providing the right to purchase 670,499

shares of common stock were outstanding at December

Long-Term Incentive Compensation

Company’s long-term incentive plan for employees, directors, consultants, and other service providers (as amended from time to

time, the “LTIP”) provides for the grant of all or any of the following types of equity-based awards:

(i) incentive

stock options qualified as such under United States federal income tax laws;

(ii) stock options that do not qualify as incentive

stock options;

(iii) stock appreciation rights;

(iv) restricted stock awards;

(v) restricted stock units (“RSUs”);

stock awards;

(vii) performance awards;

(viii) dividend equivalents;

(ix) other stock-based awards;

(x) cash awards;

substitute awards.

to adjustment in accordance with the terms of the LTIP, 35,000,000

shares of the Company’s common stock were

reserved for issuance pursuant to awards under the LTIP, as such LTIP was in effect as of December 31, 2023 and without consideration

of the Reverse Stock Split.

This number was subsequently adjusted to 1,225,000

shares, effective as of October 16, 2023, to

reflect the Reverse Stock Split.

After giving effect to the Reverse Stock Split and the awards that have been granted and forfeited under

the LTIP as of December 31, 2023 there were 677,426

shares remaining available for grant under the

Company’s stock-based compensation is classified as either equity awards or liability awards in accordance with GAAP.

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 Company accounts for forfeitures of stock-based compensation awards as they

The fair value of a liability-classified award is determined on a quarterly basis beginning at the grant date until final

Changes in the fair value of liability-classified awards are recorded to general and administrative expense over the vesting

period of the award.

The Company issued RSUs to employees,

directors and advisors that (i) cliff-vest on May 3, 2024 (the one-year anniversary of the Merger) (ii) vest one year after the effective

date of the applicable consulting agreement, or (iii) vest ratably over three years, on each anniversary date of the Merger beginning

with May 3, 2024, as applicable.

RSUs granted under the LTIP can immediately vest (A) upon a termination due to (i) death, (ii) disability,

or (iii) retirement, or (B) in connection with a change in control;

provided that for employee RSU awards, such accelerated vesting upon

a change in control only applies to the extent no provision is made in connection with a change in control for the assumption of awards

previously granted or there is no substitution of such awards for new awards.

To the extent an employee’s RSU award is assumed or

substituted in connection with the change in control, if a participant is terminated by the Company without “cause” or the

employee terminates for “good reason” (each as defined in the applicable award agreement), then each RSU award will become

fully vested.

The fair value of RSU awards is based on the stock price of the Company’s common stock as of each relevant date.

to the terms of the award agreements covering the RSUs granted to employees in August 2023, no adjustment to the number of shares subject

to such RSUs was made in connection with the Reverse Stock Split.

Company recognized the following amounts in total related to long-term incentive compensation costs for the year ended December 31, 2023

and the period from June 7, 2022 (date of inception) through December 31, 2022:

of Long Term Incentive Compensation Costs

the year ended

December 31, 2023

(date of inception)

December 31, 2022

Long-term incentive compensation

Equity-Classified

Company recognized $ 2.9

million in equity-classified stock-based compensation

costs for the year ended December 31, 2023.

There were no

equity-classified stock-based compensation costs

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

Equity-Classified

Restricted Stock Units

of December 31, 2023, there was $ 4.8

million of total unrecognized compensation cost

related to the Company’s unvested equity-classified RSUs.

This cost is expected to be recognized over a weighted-average

period of 0.9

The following table summarizes equity-classified

restricted stock units for the year ended December 31, 2023 and provides information for unvested units as of December 31, 2023.

of Restricted Stock Units

Unvested units at December 31, 2022

Unvested units at December 31, 2023

Liability-Classified

Company recognized $ 78,955

in liability-classified stock-based compensation

costs for the year ended December 31, 2023.

There were no

liability-classified stock-based compensation

costs for the period from June 7, 2022 (date of inception) through December 31, 2022.

Liability-Classified

Restricted Stock Units

August 2023, the Company granted RSUs to directors and an advisor that vest in May 2024 and August 2024, respectively, which are

payable 60% in common stock and 40% in either cash or common stock (or a combination thereof), as determined by the Compensation

Committee of the Board .

The Company has accounted

for the portion of the awards that can be settled in cash as liability-classified awards and accordingly changes in the market value

of the instruments will be recorded to general and administrative expense over the vesting period of the award.

As of December 31,

2023, there was $ 0.1

million of total unrecognized compensation cost related to liability-classified RSUs that is expected to be recognized over a weighted-average period of 0.3 years.

The amount of unrecognized compensation cost for liability-classified awards will fluctuate over time as they are marked to

following table summarizes activity related to liability-classified RSUs for the year ended December 31, 2023:

of Restricted Stock Units

Unvested units at December 31, 2022

Unvested units at December 31, 2023

Segment Information

Company’s reportable business segments have been identified based on the differences in products or services provided.

The Company’s

E&P segment is comprised of oil and gas properties which are currently related to its assets in Colorado.

The cryptocurrency mining

segment generates revenue through cryptocurrency mining activities from assets that we acquired through the Merger.

All such activities

currently operate under a contract with Atlas as described above and occur in the United States.

The Company exited cryptocurrency mining

upon the January 2024 disposition of its cryptocurrency mining equipment (see Note 18).

financial information for the Company’s reportable segments is shown in the following table.

The accounting policies of the segments

are the same as those described for the Company.

Management evaluates the performance of its segments based on operating income, defined

as operating revenues less operating costs.

Income before income taxes, for the purpose of reconciling the operating income amount shown

below to consolidated income before income taxes, is the sum of operating income, interest expense.

General and administrative expense,

interest income, interest expense, liquidated damages and losses on adjustment to fair value (warrant liabilities and obligation shares)

are incurred at the corporate level and allocated to the segments.

of Reportable Segments

Cryptocurrency

Year ended December 31, 2023

Depreciation, depletion and amortization expense

Impairment of cryptocurrency mining equipment

Loss from operations

( 13,305,589 )

( 20,285,841 )

( 33,591,430 )

Interest income (1)

Interest expense

Liquidated damages

Loss on adjustment

to fair value – warrant liabilities (1)

( 35,822,179 )

( 3,975,815 )

( 39,797,994 )

Loss on adjustment to fair value – AR

( 3,790,428 )

Loss on adjustment

to fair value – Obligation Shares (1)

( 1,477,103 )

Loss on adjustment

to fair value – Obligation Shares (1)

( 1,477,103 )

Other expense -

Other income -

Capital investments

June 7, 2022 (date of inception) through December

Depreciation, depletion and amortization expense -

Operating income -

Interest expense -

Interest income -

Other expense -

Other income -

Amounts are allocated

to each segment as they are incurred at the corporate level.

following table presents the breakout of other assets, which represent corporate assets not allocated to segments at December 31, 2023

of Corporate Assets Not Allocated to Segments

of December 31,

Cash and cash equivalents

Prepaid expenses

Georgina Asset Management, non–compensatory options to acquire an aggregate of 200,000 shares of Common Stock for the option purchase.

September 30, 2024, the Company, BOKA, Rose Hill, Anchorman, and Blackstem entered into a non-compensatory option purchase agreement,

pursuant to which each of the Option Purchasers agreed to purchase, and BOKA agreed to sell to the Option Purchasers, Merger Options

to acquire an aggregate of 800,000 shares of Common Stock, for an exercise price of $ 0.25 per share.

The Company did not receive any

proceeds from the transfer of the Merger Options and the terms of the Option Agreements were not amended or modified in any way in connection

with the transfers.

to Note 15 – Common Stock Options and Warrants for a full discussion of these options.

As described in Note 13 – Preferred Stock, Bristol Investment, an entity affiliated with Paul L.

who is a former Director of the Company, purchased $ 1,250,000

of Series D Preferred Stock and Series D PIPE Warrants in the Series D PIPE.

First Idea Ventures LLC, an entity affiliated with

Gray, a director of the Company, purchased $ 750,000

of Series D Preferred Stock and Series D PIPE Warrants in the Series D PIPE.

First Idea International Ltd.

(included with First Idea

Ventures LLC), an entity affiliated with Jonathan H.

Gray, purchased $ 254,875

of Series D Preferred Stock and Series D PIPE Warrants from another holder.

Additionally, the O’Neill Trust, which is the sole

Series E PIPE Investor, was also an investor in the Series D PIPE.

Refer to Note 13 – Preferred Stock and Note 15

– Common Stock Options and Warrants and for a full discussion of the Series D PIPE.

Company entered into registration rights agreements with each of the Series D PIPE Investors whereby the Company is required to pay liquidated

damages if the resale of the underlying shares of Common Stock is not registered by the Securities and Exchange Commission by August

The resale registration statement with respect to such shares was declared effective in December 2023, as such, the Company

recognized an expense of $ 0.5 million for the liquidated damages during the year ended December 31, 2023.

There were no such damages incurred

or paid in the year ended December 31, 2024.

As described in Note 13 – Preferred Stock , to fund the Exok Option Purchase, the Company entered into a securities

purchase agreement with the Series E PIPE Investor, the O’Neill Trust, on August 15, 2023, pursuant to which the Series E PIPE

Investor agreed to purchase, and the Company agreed to sell to the Series E PIPE Investor, for an aggregate of $ 20.0 million, securities

consisting of (i) 39,614 shares of Common Stock, (ii) 20,000 shares of Series E Preferred Stock, and (iii) Series E PIPE Warrants to

purchase 8,000,000 shares of Common Stock, each at a price of $ 6.00 per share, in a private placement.

Refer to Note 13 – Preferred

Stock and Note 15 – Common Stock Options and Warrants for a full discussion of the Series E PIPE.

and Agreement .

On August 15, 2024, the Company entered into a Consent and Agreement (the “Consent and Agreement”) with

the O’Neill Trust, pursuant to which the O’Neill Trust (a) consented to, and waived any and all negative covenants with respect

to, any and all transactions the Company may consummate in connection with the funding of the NRO Acquisition and its ongoing operations;

(b) released its mortgage on certain property of the Company, which was established in favor of the O’Neill Trust securing the

Company’s obligations under the Series E Certificate;

and (c) agreed to (i) amend Section 6(d) of the Series E Certificate to increase

the Beneficial Ownership Limitation Ceiling from 9.99% to 49.9%, (ii) subject to consent from the requisite holders of the Series D Preferred

Stock, amend Section 6(d) of the Series D Certificate to increase the Beneficial Ownership Limitation from 9.99% to 49.9% and (iii) amend Section 2(e) of each of the O’Neill Trust’s Series D A Warrant and Series E A Warrant and Section 2(d) of

the O’Neill Trust’s Series E B Warrant to increase the Beneficial Ownership Limitation Ceiling from 25% to 49.9%.

connection with the increase to the Beneficial Ownership Limitation Ceiling, the O’Neill Trust agreed pursuant to the Consent and

Agreement that (i) until its remaining Series D Preferred Stock, Series D PIPE Warrants, and Series E PIPE Warrants are exercised or

converted, as applicable, it will not acquire any other shares of Common Stock of the Company, and (ii) for a period of ten years following

the date of the Consent and Agreement, it will not, directly or indirectly, acquire by means of public equity trading markets, any Common

Stock or other securities with underlying Common Stock, to the extent the O’Neill Trust would beneficially own the voting, investment

or economic control over 49.9 % of the Common Stock of the Company.

O’Neill Trust further agreed that if at any time it beneficially owns, or exercises control over, shares of Common Stock with voting

rights that exceed 29.9 % of the Common Stock of the Company (the “Voting Threshold”), the Company shall exercise the voting

rights with respect to such shares of Common Stock beneficially owned in excess of the Voting Threshold in the same proportion as the

outstanding Common Stock (excluding Common Stock beneficially owned, directly or indirectly, by the O’Neill Trust or any Affiliate

(as defined in the Consent and Agreement) of the O’Neill Trust, but including any securities of the Company eligible to vote with

the Common Stock on an as-converted basis) voted on all matters submitted to a vote of the holders of Common Stock of the Company.

Promissory Note and Subordinated Note Warrants .

As described in Note 10 – Debt , on September 30, 2024, the Company issued

the Subordinated Note in a principal amount of $ 5.0 million, with a maturity of December 31, 2025 to the Noteholders, First Idea Ventures

LLC and The Hideaway Entertainment LLC.

Pursuant to the terms of the Subordinated Note, the Company also issued the Subordinated Note

Warrants to the Noteholders, which provide the Noteholders the ability to purchase up to 1,141,552 shares of Common Stock, vesting in

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

The Noteholders are entities controlled by Jonathan H.

Gray, a director

of the Company.

Refer to Note 10 – Debt and Note 15 – Common Stock Options and Warrants for a further discussion

of the Subordinated Note and the Subordinated Note Warrants.

19 – Subsequent Events

January 11, 2024, the Company entered into an asset purchase agreement (the “Purchase Agreement”), by and among the Company,

Nickel Road Development LLC, NRO and Prairie Operating Co., LLC, to acquire the NRO assets for the Purchase Price, subject to certain

closing price adjustments and other customary closing conditions (the “NRO Acquisition”).

The Purchase Price consists of

million in cash and $ 11.5

million in deferred cash payments.

deposited $ 9

million of the Purchase Price into an escrow

account on January 11, 2024 (the “Deposit”), which will be released to Seller upon the earlier of the closing date and August

15, 2024 (the “Outside Date”).

Portions of the Deposit are subject to earlier release under certain circumstances if the

closing has not occurred on or prior to June 17, 2024.

Purchase Agreement provides that the closing of the NRO Acquisition is subject to customary conditions precedent, including (i) the accuracy

of the representations and warranties of each party (subject to specified materiality standards), (ii) compliance by each party in all

material respects with their respective covenants, (iii) that no event of Force Majeure or Material Adverse Effect (in each case as defined

in the Purchase Agreement) shall have occurred, in each case the result of which is that the Company is unable to secure satisfactory

financing with respect to the Transaction (as defined in the Purchase Agreement), and (iv) the Registration Statement (as defined in

the Purchase Agreement) has been declared effective with the SEC on or before the Outside Date.

The Purchase Agreement contains customary

title and environmental defect mechanisms with respect to the NRO Assets, including purchase price adjustments and termination rights.

The Purchase Agreement may be terminated under circumstances as described in the Purchase Agreement, including (i) with the mutual written

consent of the Company and NRO, (ii) by the Company, upon the occurrence of an event of Force Majeure or Material Adverse Effect, in

each case the result of which is that the Company determines, in its reasonable discretion, that it is, or will be, unable to secure

satisfactory financing with respect to the Transaction, or (iii) in the event that the NRO Acquisition has not been consummated on or

before the Outside Date.

parties have made customary representations and warranties in the Purchase Agreement.

The Purchase Agreement also contains customary

covenants and agreements, including covenants and agreements relating to (a) the conduct of NRO’s business during the period between

the execution of the Purchase Agreement and closing of the NRO Acquisition and (b) the efforts of the parties to cause the NRO Acquisition

to be completed, including actions which may be necessary to facilitate a satisfactory financing transaction by the Company.

have agreed to indemnify each other for certain liabilities following the closing on the NRO Acquisition (as further set forth in the

Purchase Agreement), subject to the limitations set forth in the Purchase Agreement.

Assets and the operations of NRO include Oil and Gas Leases, Mineral Fee Interests, producing and disposal Wells, and Units, in each

case as defined in the Purchase Agreement and located in the DJ Basin in Weld County, Colorado, as well as appurtenant records and equipment

and other properties.

Company expects the NRO Acquisition to close on or before the Outside Date, subject to customary closing conditions, with an economic

effective date of February 1, 2024.

The Company expects to fund the transaction through a combination of public and/or private issuance

of common stock, cash on hand, and proceeds from existing warrant exercises.

of Cryptocurrency Assets

January 23, 2024, the Company sold all of its cryptocurrency miners (the “Mining Equipment”) for consideration consisting

million in cash and (ii) $ 1.0

million in deferred cash payments (the “Deferred

Purchase Price”), to be paid out of (i)

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 (ii) thereafter, 50% of the monthly net revenues received by 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 .

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.

Bolt-on Acquisition

February 5, 2024, the Company acquired a 1,280-acre drillable spacing unit and eight proved undeveloped drilling locations in the DJ

Basin from a private seller for $ 900,000 .

These offset the other oil and gas assets held by the Company in northern Weld County, Colorado.

February 6, 2025, the Company and certain of its subsidiaries into a Purchase and Sale Agreement (the “Bayswater PSA”)

with Bayswater Resources, LLC, Bayswater Fund III-A, LLC, Bayswater Fund III-B, LLC, Bayswater Fund IV-A, LP, Bayswater Fund IV-B,

LP, Bayswater Fund IV-Annex, LP, and Bayswater Exploration & Production, LLC (collectively, “Bayswater”), pursuant

to which it agreed to acquire certain oil and gas assets from Bayswater for a purchase price of $ 602.8 million,

subject to certain closing price adjustments (collectively, the “Bayswater Acquisition”).

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.

Bayswater PSA contains customary representations, warranties and covenants of the Company and Bayswater for a transaction of this

D Preferred Stock Conversion

January 2025, the O’Neill Trust converted 8,000 shares of Series D Preferred Stock into 1,600,000 shares of Common Stock.

result, they no longer hold any Series D Preferred Stock.

20 – Supplemental Oil and Gas Disclosures (Unaudited)

Company’s oil and natural gas activities are located entirely within the United States.

incurred in the acquisition, development, and exploration of oil and natural gas properties and are entirely related to unproved properties:

Incurred in Oil and Natural Gas Property Acquisition, Exploration, and Development Activities

following table presents the costs incurred in oil and natural gas acquisition, exploration, and development activities for the periods

of Costs Incurred in Acquisition of Unproved Properties

December 31, 2023

(date of inception)

December 31, 2022

Unproved property acquisition costs

Development costs

Year Ended December 31,

(In thousands)

Acquisition costs:

Proved properties

Unproved properties

Total acquisition costs

Exploration costs

of Operations

Company has no existing oil and gas production or revenue.

Our current activities are focused on obtaining requisite permits to begin

drilling wells and, as such, we have no results of operations.

Company did not incur any exploratory well costs during the year ended December 31, 2023 and the period from June 7, 2022 (date of inception)

through December 31, 2022.

Company had no proved reserves at December 31, 2023 or December 31, 2022.

Development costs

Total costs incurred

the year ended December 31, 2024, the Company’s proved property acquisition costs incurred include $ 63.6 million of proved property

acquired in the NRO Acquisition, $ 0.2 million of which relates to the asset retirement obligations costs assumed in the acquisition.

Refer to Note 4 – Acquisitions and Merger for a further discussion.

For the year ended December 31,

2024, the development costs incurred includes $ 38.0

million of development costs for wells which were in the process of being completed and began producing in February 2025.

reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable

certainty to be economically producible, from a given date forward, from known reservoirs, and under existing economic conditions, operating

methods, and government regulations, prior to the time at which contracts providing the right to operate expire, unless evidence indicates

that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.

numerous uncertainties inherent in estimating the quantities of proved oil and natural gas reserves and periodic revisions to estimated

reserves and future cash flows may be necessary as a result of numerous 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 or reserve quantities

reported by other entities.

Company’s reserve estimates as of December 31, 2024, are based on reserve reports prepared by CG&A in accordance with the rules

and regulations of the SEC in Regulation S-X, Rule 4-10.

All of the Company’s proved reserves presented below are located in the

The Company’s estimated proved reserves and the related net revenues and Standardized Measure were determined using the

12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the period January through December (“SEC

The SEC Prices are adjusted for treating costs and/or crude quality and

gravity corrections.

For the year ended December 31, 2024, SEC Prices, inclusive of adjustments, used in the calculations were $74.63

per Bbl of oil, $1.60 per Mcf of natural gas, and $21.63 per Bbl of NGLs.

following table presents the quantities of the Company’s estimated proved, proved developed, and proved undeveloped oil, natural

gas, and NGL reserves and the changes in the quantities of estimated proved oil, natural gas, and NGL reserves for the periods indicated:

of Proved Reserves

Proved reserves as of January 1, 2024

Acquisitions of reserves

Revisions to previous estimates

Proved reserves as of December 31, 2024

Proved developed reserves

Proved undeveloped reserves

the year ended December 31, 2024, the Company’s estimated proved reserves were 26.1 MMBoe, primarily comprised of acquisitions throughout the year.

Acquisition, which closed on October 1, 2024, resulted in 23.3 MMBoe of estimated proved reserves and the acquisition of the Shelduck assets in February 2024 resulted in 2.8 MMBoe

of estimated proved reserves.

Measure of Discounted Future Net Cash Flows

Company did not have proved reserves at December 31, 2023 or 2022 and, as such, did not calculate a standardized measure of discounted

future net cash flows relating to proved oil and natural gas reserves.

Standardized Measure is the present value, discounted at 10%, of future net cash flows from estimated proved reserves calculated 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, P&A, and production (excluding DD&A and any impairments of oil and natural gas properties)

costs and estimated future income tax expenses.

the Company’s 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 those used.

Therefore, the Standardized Measure should not be considered

to represent the Company’s estimate of the expected revenues or the fair value of its proved oil, natural gas, and NGL reserves.

following table presents the Standardized Measure relating to the Company’s estimated proved oil and natural gas reserves for the

periods indicated:

of Estimated Proved Oil and Natural Gas Reserves for the

Periods Indicated

Year Ended December 31,

(In thousands)

Future cash inflows

Future production costs

Future development and abandonment costs

Future income taxes

Future net cash flows

10% annual discount for estimated timing of cash flows

Standardized Measure

following table presents the changes in the Standardized Measure relating to the Company’s estimated proved oil and natural gas

reserves for the periods indicated:

of Standardized Measure Relating to the Company’s Estimated Proved Oil and Natural Gas

Reserves for the Periods Indicated

Year Ended December 31,

(In thousands)

Standardized Measure at the beginning of the period

Net change in sales prices and production costs related to future production

Sales and transfers of oil and natural gas produced, net of production costs

Purchases of reserves

Revisions of previous quantity estimates

Development and abandonment costs incurred during the period

Accretion of discount

Net change in income taxes

Changes in production rates, timing, and other

Changes in estimated future development and abandonment costs —

Extensions, discoveries, and other additions, net of future production

and development costs —

Net increase in Standardized Measure

Standardized Measure at the end of the period

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data