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Summary of Significant Accounting Policies

9 Months Ended

Sep. 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 nine months ended September 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.

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 September 30, 2024, the Company had a full valuation allowance to offset its net deferred tax assets.

Liabilities at Fair Value

As discussed in Note 8 – Debt and Note 12 – 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 Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”). 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 5 – 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.

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 nine months ended September 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 nine months ended September 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⁾		9,050,909	$	—	$	—	$	—		1,050,909
Common stock warrants		228,004,372		—		—		—		9,064,951
Series D Preferred Stock		14,457		1,000		14,456,680		5.00		2,891,336
Senior Convertible Note ⁽²⁾		—		—		15,750,000		7.79		2,021,823

Total		-		-		-		-		15,029,018

⁽¹⁾	Not exercisable or vested as of September 30, 2024. Refer to Note 13 – Common Stock Options and Warrants for a discussion of the Merger Options (defined herein) and Note 14 – Long–Term Incentive Compensation for a discussion of the restricted stock units and performance stock units.
⁽²⁾	Reflects the conversion option of the $15.0 million Senior Convertible Note at 105% principal amount, pursuant to the SEPA. Refer to Note 8 – Debt for a discussion of the Senior Convertible Note and Note 12 – Common Stock for a discussion of the SEPA.

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 nine months ended September 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 and restricted stock units ⁽¹⁾		8,641,176	$	—	$	—	$	—		641,176
Common stock warrants		447,855,367		—		—		—		15,674,938
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
Series E Preferred Stock		20,000		1,000		20,000,000		5.00		4,000,000

Total		-		-		-		-		25,075,964

⁽¹⁾	Not exercisable or vested as of September 30, 2023. 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.

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:


	Nine Months Ended September 30,
	2024			2023
Non–cash investing and financing activities:
Common Stock issued upon conversion of Series D Preferred Stock	$	6,170,450		$	—
Common Stock issued upon conversion of Series E Preferred Stock	$	20,000,000		$	—
Capital expenditures included in accrued liabilities	$	(4,717,644	)	$	—
Proceeds from Senior Convertible Note issuance not yet received, net of original issuance discount ⁽¹⁾	$	14,250,000		$	—
Proceeds from Subordinated Note issuance not yet received – related party⁽¹⁾	$	2,000,000		$	—
Common Stock issued for SEPA commitment fee ⁽²⁾	$	600,000		$	—
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
Common Stock and warrants issued in Exok option acquisition	$	—		$	7,289,492
Common Stock issued in satisfaction of share issuance obligation	$	—		$	2,006,741
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	$	—		$	57,101

⁽¹⁾	Proceeds from the issuance of the Senior Convertible Note and the Subordinated Note were not received until October 1, 2024. Therefore, the Company recorded the unreceived proceeds as Financing receivable as of September 30, 2024. Refer to Note 8 – Debt for a discussion of the Senior Convertible Note and the Subordinated Note.
⁽²⁾	Pursuant to the SEPA, the Company issued 100,000 shares to Yorkville as a commitment fee. Refer to Note 12 – Common Stock for a discussion of the SEPA.

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.