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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2024

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

The Company has provided a full discussion of its significant accounting policies, estimates, and judgments in Note 2 – Summary of Significant Accounting Policies in its Annual Report on Form 10–K/A for the fiscal year ended December 31, 2023. The Company has not changed any of its significant accounting policies during the six months ended June 30, 2024, however, it did apply the discontinued operations guidance to account for the sale of its cryptocurrency miners in January 2024. Refer to Note 3 – Discontinued Operations for a full discussion of the discontinued operations and the subsequent accounting.

Concentration of Credit Risk

The Company’s financial instruments, which consist of cash and cash equivalents, are potentially subject to concentrations of credit risk. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $250,000 insurance limit. The Company does not anticipate incurring any losses related to these credit risks.

Deferred Financing Costs

The Company’s deferred financing costs represent legal costs associated with negotiating the terms of a new revolving credit facility and the proposed issuance of equity securities to finance the consummation of the NRO Acquisition (as defined herein) and its ongoing operations. Upon the successful completion of each financing, the Company will reclassify these costs as components of debt and equity, respectively. If either or both financings are unsuccessful, such costs will be expensed. As of June 30, 2024 and December 31, 2023, deferred financing costs were $1.6 million and $10,000, respectively.

Income Taxes

The 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 realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. As of June 30, 2024, the Company had a full valuation allowance to offset its net deferred tax assets.

Earnings (Loss) Per Common Share

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 and Series E Preferred Stock (each as defined herein) are participating securities. 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.

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, (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.

Basic and diluted earnings (loss) attributable to common stockholders is the same for the three and six months ended June 30, 2024 and 2023 because the Company has only incurred losses and all potentially dilutive securities are anti–dilutive.

The following table presents the potentially dilutive securities which were not included in the computation of diluted earnings (loss) attributable to common stockholders for the three and six months ended June 30, 2024 because their inclusion would be anti–dilutive:

Potentially Dilutive Security	Quantity		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⁾		9,057,771	$	—	$	—	$	—		1,057,771
Common stock warrants		341,084,219		—		—		—		11,939,698
Series D Preferred Stock		16,507		1,000		16,506,680		5.00		3,301,336
Series E Preferred Stock		20,000		1,000		20,000,000		5.00		4,000,000

Total		-		-		-		-		20,298,805

⁽¹⁾	Not exercisable or vested as of June 30, 2024. Refer to Note 13 – Common Stock Options and Warrants for a discussion of the Merger Options and Note 14 – Long–Term Incentive Compensation for a discussion of the restricted stock units and performance stock units.

The following table presents the potentially dilutive securities which were not included in the computation of diluted earnings (loss) attributable to common stockholders for the three and six months ended June 30, 2023 because their inclusion would be anti–dilutive:

Potentially Dilutive Security	Quantity		Stated Value Per Share		Total Value or Stated Value		Assumed Conversion Price		Resulting Common Shares
Common stock options ⁽¹⁾		8,007,087	$	—	$	—	$	—		7,087
Common stock warrants		200,126,815		—		—		—		7,004,439
Obligation Shares		205,971		—		—		—		205,971
AR Debentures		—		—		2,000,000		5.00		400,000
Series D Preferred Stock		21,799		1,000		21,799,000		5.00		4,359,850

Total		-		-		-		-		11,977,347

⁽¹⁾	Includes 7,087 options which expired in August 2023 and the Merger Options, which were not exercisable as of June 30, 2023. Refer to Note 13 – Common Stock Options and Warrants for a discussion of the Merger Options.

Supplemental Disclosures of Cash Flow Information

The 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:

	2024			2023
	Six Months Ended June 30,
	2024			2023
Non–cash investing and financing activities:
Common stock issued upon conversion of Series D Preferred Stock	$	4,120,450		$	—
Capital expenditures included in accrued liabilities	$	(1,120,098	)	$	—
Cryptocurrency mining equipment and deposits acquired in the Merger	$	—		$	20,760,560
Secured convertible debentures assumed in the Merger	$	—		$	1,981,000
SBA loan payable acquired assumed in the Merger	$	—		$	150,000
Membership interests converted into shares of common stock	$	—		$	(606,705	)
Common stock issued at Merger	$	—		$	9,928,262
Series D Preferred Stock issued at Merger	$	—		$	3,209,196
Deferred transaction costs capitalized to oil and natural gas properties	$	—		$	189,031
Deferred transaction costs associated with financing	$	—		$	519,533
Supplemental disclosure:
Cash paid for income taxes	$	—		$	—
Cash paid for interest	$	—		$	9,503

Recently Issued Accounting Pronouncements

Recent accounting pronouncements issued by the Financial Accounting Standards Board, 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.