NUAI 10-Q/A
New ERA Energy & Digital, Inc. (NUAI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark one)
For the quarterly period ended
Or.
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
| State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of May 12, 2026, the registrant had 101,465,286 shares of common
stock issued and
EXPLANATORY NOTE
Background and Effect of the Restatement
During the preparation of the Company’s financial statements for the quarterly period ended June 30, 2026, management identified certain errors that resulted from the misapplication of accounting under ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), for performance stock units (“PSUs”) granted to certain executive officers during the three months ended March 31, 2026. Specifically, the grant-date fair value of the PSU awards was inappropriately calculated and understated. The corrected aggregate grant-date fair value of certain PSU awards is $57,336,238, as compared to $23,538,447 as originally determined. Additionally, the Company attributed compensation cost for the PSUs on a straight-line basis over the four-year vesting period. Because the PSU awards contain performance and market conditions and vest in monthly tranches, ASC 718 requires compensation cost to be recognized separately for each vesting tranche over that tranche’s requisite service period (the “graded-vesting attribution method”). The Company’s straight-line attribution policy for its restricted stock units, which contain only service conditions, is unaffected.
In addition, the Company recorded $1,629,854 of legal and accounting fees as general and administrative expense for the three months ended March 31, 2026 that were direct and incremental costs of specific transactions and should have been capitalized or deferred: transaction costs of an asset acquisition, which are capitalized as part of the cost of the acquired assets; debt issuance costs, which are presented as a direct deduction from the carrying amount of the related debt or, for debt not yet issued, deferred within other current assets; and equity issuance costs, which are charged against the gross proceeds of completed issuances or, for offerings not yet completed, deferred within other current assets. The correction of these errors also increases interest expense by $93,204, reflecting amortization of the reclassified debt issuance costs. The net effect of these errors was an overstatement of general and administrative expenses of $1,629,854 and an overstatement of net loss of $1,536,650 for the three months ended March 31, 2026.
The combined effect of the errors described above, in addition to certain other immaterial errors, was an understatement of net loss of $1,832,087 for the three months ended March 31, 2026; as restated, net loss is $10,823,974 and net loss per share, basic and diluted, is $(0.19), as compared to $8,991,887 and $(0.16), respectively, as previously reported. The errors affected net loss, net loss per share, total assets, total liabilities and total stockholder’s equity as well as the presentation of the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in stockholders’ equity. The stock-based compensation errors have no effect on the Company’s cash position. The correction of the expense classification errors increases total assets by $1,333,709, decreases total liabilities by $114,616, and increases total stockholders’ equity by $1,448,325, with no effect on the Company’s cash position. The Restatement has no income tax effect because the Company maintains a full valuation allowance against its deferred tax assets. On July 24, 2026, the Audit Committee of the Company’s Board of Directors (the “Audit Committee”), after consultation with management and Weaver and Tidwell, L.L.P., the Company’s independent registered public accounting firm, concluded that the Company’s previously issued unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2026 included in the Original Form 10-Q should no longer be relied upon. The Company reported the Audit Committee’s determination in a Current Report on Form 8-K filed with the SEC on July 30, 2026.
Internal Control Considerations
In connection with the Restatement, management identified material weaknesses in the Company’s internal control over financial reporting related to (i) the design and operation of controls over the measurement of grant-date fair value and the attribution of compensation cost for share-based payment awards containing performance and market conditions, including management review of supporting schedules and third-party valuation reports, and (ii) the design and operation of controls over the review and classification of professional fees and transaction costs, including the identification of costs required to be capitalized or deferred. As stated in the Original Form 10-Q, management has concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2026. A discussion of the Company’s plans to remediate this material weakness is set forth in Part I, Item 4 – Controls and Procedures.
Items Amended in this Filing
This Amendment amends and restates the following items of the Original Form 10-Q:
| ● | Part I, Item 1 — Financial Statements; |
| ● | Part I, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations; |
| ● | Part I, Item 4 — Controls and Procedures; |
| ● | Part II, Item 1A – Risk Factors; and |
| ● | Part II, Item 6 — Exhibits. |
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the certifications specified in Rule 13a-14 under the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) from our principal executive officer and principal financial officer, each dated as of the date hereof, are being filed or furnished, as applicable, with this Amendment as Exhibits 31.1, 31.2, 32.1 and 32.2.
This Form 10-Q/A sets forth the information in the Original Form 10-Q in its entirety, as such information is amended and restated where necessary to reflect the Restatement. Except as described above, this Amendment does not amend, update, or change any other items or disclosures in the Original Form 10-Q, and does not reflect events occurring after the filing of the Original Form 10-Q, except as required to reflect the effects of the Restatement and correct various other immaterial errors. Accordingly, this Amendment should be read in conjunction with the Company’s filings with the SEC subsequent to the date on which the Company filed the Original Form 10-Q. The Company does not intend to amend any other reports previously filed or furnished with the SEC and you should not rely on any previously issued or filed reports, press releases, earnings releases, investor presentations or similar communications relating to the quarterly period ended March 31, 2026.
NEW ERA ENERGY & DIGITAL, INC.
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Amendment contains “forward-looking statements.” Forward-looking statements reflect the current view about future events. When used in this prospectus, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements contained in this Amendment relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation:
| ● | our ability to construct, develop, lease and maintain our flagship project; |
| ● | our ability to access adequate project financing, commercial borrowings and debt and equity capital markets to fund our significant anticipated capital expenditures; |
| ● | the impact of supply chain disruptions, labor availability, raw materials and input commodity costs and availability, and manufacturing and transportation; |
| ● | general business and economic conditions; |
| ● | environmental history, remediation, and associated risks; |
| ● | our ability to obtain and renew leases with our tenants on terms favorable to us, and manage our growth, business, financial results and results of operations; |
| ● | our ability to respond to price fluctuations and rapidly changing technology; |
| ● | the impact of tariffs and global trade disruptions on us and our tenants; |
| ● | changes in political conditions, geopolitical turmoil, political instability, civil disturbances, and restrictive governmental actions; |
| ● | the degree and nature of our competition; |
| ● | our failure to generate sufficient cash flows to service indebtedness; |
| ● | our expectations regarding the anticipated timeline of our cash, cash equivalents and short-term investments, future financial performance and our ability to continue as a going concern; |
| ● | material negative changes in the creditworthiness and the ability of our tenants to meet their contractual obligations; |
| ● | increases and volatility in interest rates; |
| ● | increased power, labor, equipment procurement, shipping, refurbishment or construction costs; |
| ● | a failure of our information technology systems, systems conversions and integrations, cybersecurity attacks or a breach of our information security systems, networks or processes; |
| ● | our inability to obtain and/or maintain necessary government or other required consents or permits; |
| ● | changes in, or the failure or inability to comply with, local, state, federal and applicable international laws and regulations, including related to taxation, real estate and zoning laws, and increases in real property tax rates; |
| ● | the impact of any financial, accounting, legal or regulatory issues or litigation that may affect us; |
| ● | our ability to maintain an effective system of disclosure controls and procedures and internal control over financial reporting and operations; and |
| ● | additional factors discussed in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. |
Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
ii
NEW ERA ENERGY & DIGITAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March
31, (As Restated) | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Related party receivable | ||||||||
| Restricted investments | ||||||||
| Total Current Assets | ||||||||
| Oil and natural gas properties, net | ||||||||
| Property and equipment, net | ||||||||
| Land | ||||||||
| Investment in Joint Venture | ||||||||
| Prepaid - non-current | ||||||||
| Total Assets | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Excise taxes payable | ||||||||
| Withholding taxes payable | ||||||||
| Due to related parties | ||||||||
| Note payable | ||||||||
| Convertible note, net of discount – current | ||||||||
| Asset retirement obligation – current | ||||||||
| Embedded derivative liability | ||||||||
| Other liabilities – current | ||||||||
| Total Current Liabilities | ||||||||
| Asset retirement obligation | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 12) | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Treasury stock, | ( | ) | ( | ) | ||||
| Additional Paid-in Capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
NEW ERA ENERGY & DIGITAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
2026 (As Restated) | 2025 | |||||||
| Revenues, net | ||||||||
| Natural gas and product sales, net | $ | $ | ||||||
| Total revenues, net | ||||||||
| Costs and expenses | ||||||||
| Lease operating expenses | ||||||||
| Impairment expense | ||||||||
| Depletion, depreciation, amortization, and accretion | ||||||||
| General and administrative expenses | ||||||||
| Total costs and expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Change in fair value of deferred equity consideration | ||||||||
| Change in fair value of derivative asset | ( | ) | ||||||
| Change in fair value of derivative liability | ||||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax provision | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Net loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
NEW ERA ENERGY & DIGITAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(UNAUDITED)
| Total | ||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-in | Accumulated | Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance - January 1, 2026 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Shares issued for the acquisition of TCDC | - | |||||||||||||||||||||||||||
| Common shares issued for services | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Warrants exercised, net of issuance costs | - | |||||||||||||||||||||||||||
| Options exercised | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2026 (As Restated) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||
| Total | ||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-in | Accumulated | Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance - January 1, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Sale of common stock | - | |||||||||||||||||||||||||||
| Common shares issued for services | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2025 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
NEW ERA ENERGY & DIGITAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depletion, depreciation, amortization, and accretion | ||||||||
| Change in fair value of deferred equity consideration | ( | ) | ||||||
| Change in fair value of derivative asset | ||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||
| Impairment of long-lived assets | ||||||||
| Amortization of debt discount and debt issuance costs | ||||||||
| Accrued interest on note payable and other current liabilities | ||||||||
| Interest income on investments and notes receivable | ( | ) | ( | ) | ||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ||||||||
| Excise tax payable | ||||||||
| Withholding tax payable | ( | ) | ||||||
| Due to related parties | ( | ) | ||||||
| Other liabilities - current | ||||||||
| CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of land | ( | ) | ||||||
| Purchase of member interest, net of cash acquired | ( | ) | ||||||
| Payments related to project assignment rights | ( | ) | ||||||
| Investment in property, plant and equipment, net | ( | ) | ( | ) | ||||
| CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from exercise of warrants, net of issuance costs | ||||||||
| Issuance of common stock | ||||||||
| Proceeds from convertible note, net of transaction costs | ||||||||
| Repayment on convertible note | ( | ) | ||||||
| Debt issuance costs | ( | ) | ( | ) | ||||
| Proceeds from related party receivable | ||||||||
| CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of year | ||||||||
| Cash and cash equivalents, end of year | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | ||||||||
| Cash paid for interest | ||||||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Related party note issued as part of consideration for asset acquisition | ||||||||
| Convertible debt issued as part of consideration for asset acquisition | ||||||||
| Common stock issued as part of consideration for asset acquisition | ||||||||
| Equity method investment in joint venture reclassified upon consolidation | ||||||||
| Acquisition of assets through issuance of note payable | ||||||||
| Value of shares withheld for taxes upon exercise of stock options | ||||||||
| Initial recognition of derivative liability associated with convertible debt | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
NEW ERA ENERGY & DIGITAL, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Organization and Nature of Operations
New Era Energy & Digital, Inc., formerly known as Roth CH Holdings, Inc. (“Roth V”), is a Nevada corporation. The Company was formed on February 6, 2023, through a Reorganization Agreement and Plan Share Exchange (the “Agreement”) with Solis Partners, LLC (“Solis Partners”) as described further in the paragraph below. The Company’s initial operations included the exploration, development, and production of helium, natural gas, oil, and natural gas liquids (“NGLs”). The Company’s producing oil and gas assets and non-producing acreage are primarily located in Chaves County, New Mexico. The Company also owns overriding royalty interests located in Howard County, Texas.
On February 6, 2023, the Company entered into the Agreement with Solis
Partners. Immediately prior to February 6, 2023, the Company was authorized to issue
The Company’s wholly owned subsidiary Solis Partners is a Texas limited liability company. Solis Partners owns and operates the Company’s producing oil and gas assets and non-producing acreage. The Company’s wholly owned subsidiary NEH Midstream LLC (“NEH Midstream”) is a Texas limited liability company, formed August 4, 2023. NEH Midstream previously entered into helium offtake and tolling agreements which expired during 2025. NEH Midstream is also the owner of an in-construction natural gas processing facility.
On December 6, 2024, the Company completed the business combination (the “Business Combination”) contemplated by the Business Combination and Plan of Organization dated January 3, 2024 (the “Business Combination Agreement”) (as amended on June 5, 2024, August 8, 2024, September 11, 2024 and September 30, 2024, the “BCA”), by and among Roth CH Acquisition V Co. (“ROCL”), Roth CH V Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCL (“Merger Sub”), and NUAI.
The Business Combination was accounted for as a reverse recapitalization in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). Under this method of accounting, although ROCL acquired the outstanding equity in NUAI in the Business Combination, ROCL is treated as the “acquired company” and NUAI was treated as the accounting acquirer for financial statement purposes. Accordingly, the Business Combination was treated as the equivalent of NUAI issuing stock for the net assets of ROCL, accompanied by a recapitalization. The net assets of ROCL are stated at historical cost, with no goodwill or other intangible assets recorded.
Furthermore, the historical financial statements of NUAI became the historical financial statements of the Company upon the consummation of the merger. As a result, the financial statements included in this Amendment reflect (i) the historical operating results of NUAI prior to the merger; (ii) the combined results of ROCL and NUAI following the close of the merger; (iii) the assets and liabilities of NUAI at their historical cost and (iv) NUAI’s equity structure for all periods presented, as affected by the recapitalization presentation after completion of the merger.
On August 11, 2025, the Company’s Board of Directors approved an amendment to the Company’s Articles of Incorporation to change the Company’s name from New Era Helium Inc. to New Era Energy & Digital, Inc. effective as of August 13, 2025. In connection with the name change, the Company’s trading symbol was changed from “NEH” to “NUAI” for common stock and “NEHCW” to “NUAIW” for warrants on August 13, 2025. The name change became effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Nevada.
The Company is a vertically-integrated developer and operator of next-generation digital infrastructure and integrated power assets accelerating speed-to-power for advanced artificial intelligence (“AI”) hyperscalers. In the second half of 2025, we executed a strategic pivot from our legacy natural gas operations to focus exclusively on developing data center campuses where power, land, and connectivity can be assembled and delivered on accelerated timelines. Our mission is to deliver speed-to-power by converging behind-the-meter power flexibility with data center development capabilities. Our primary strategy is to aggregate and entitle “Powered Land” and to develop “Powered Shells” and build-to-suit assets in power-advantaged markets, beginning with the Permian Basin, which benefits from energy abundance, regulatory clarity, and fiber connectivity.
We are initially focused on our flagship project, Texas Critical Data Centers LLC (“TCDC”), a 438-acre campus in Ector County, Texas, designed to support over 1 gigawatt (“GW”) of potential compute capacity through phased development, with projected power delivery beginning as early as the end of 2027. We believe our proximity to major natural gas pipelines, fiber networks and CO2 pipelines will provide us with the ability to serve our customers lower transmission costs and best-in-class uptime for purposes of reliably generating AI compute to capitalize on the AI revolution. We intend to execute through partnering across engineering, construction, procurement, power generation and sustainability with a world-class developer partner to provide our hyperscaler tenants with certainty of execution and speed-to-power.
5
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company as of March 31, 2026 and December 31, 2025, have been prepared in accordance with GAAP issued by the Financial Accounting Standards Board (“FASB”). The accompanying condensed consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. References to GAAP issued by the FASB in these accompanying notes to the condensed consolidated financial statements are to the FASB Accounting Standards Codification (“ASC”).
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different applications dates for public or private companies, the Company as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time the Company is no longer considered to be an emerging growth company. At times, the Company may elect to early adopt a new or revised standard.
Risks and Uncertainties
As a producer of helium, natural gas, NGLs and oil, the Company’s revenue, profitability, and future growth are substantially dependent upon the prevailing and future prices for helium, natural gas, NGLs and oil, which are dependent upon numerous factors beyond its control such as economic, political, and regulatory developments and competition from other energy sources. The energy markets have historically been very volatile, and there can be no assurance that the prices for helium, natural gas, NGLs or oil will not be subject to wide fluctuations in the future. A substantial or extended decline in prices for helium, natural gas, NGLs and oil could have a material adverse effect on the Company’s financial position, results of operations, cash flows, the quantities of natural gas, helium, NGL and oil reserves that may be economically produced and the Company’s access to capital.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with the instructions to Form 10-Q. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed financial statements have been prepared on the same basis as the Company’s annual financial statements for the year ended December 31, 2025. Certain information or footnote disclosures normally included in the unaudited condensed financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 12, 2026. The interim results for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the period ended December 31, 2026 or for any future periods.
Segments
ASC Topic 280, Segment Reporting, establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which they may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.
The Company’s CODM has been identified as the Chief Executive Officer, who reviews total assets and income (loss) from operations of the Company on a consolidated basis to make decisions regarding resource allocation and financial performance assessment.
Management evaluated the Company’s segment reporting conclusion following the acquisition of the remaining interests in TCDC. Management considered that TCDC represents a significant strategic initiative of the Company and comprises a substantial portion of the Company’s consolidated asset base following the acquisition. However, although discrete financial information related to TCDC exists for accounting and legal entity reporting purposes, the CODM does not regularly review standalone operating results or discrete measures of financial performance for purposes of assessing performance and allocating resources in the manner contemplated by ASC 280. During the period, TCDC remained in the development stage and had not yet commenced revenue-generating operations.
6
Accordingly, management determined that the Company operates as a single operating and reportable segment. The Company’s management team allocates capital resources and evaluates financial performance on a consolidated basis as a single enterprise.
Functional and reporting currency
The functional and reporting currency of the Company is the United States dollar.
Liquidity and Going Concern (As Restated)
The Company recorded a net loss of $
Historically, the Company’s primary sources of liquidity have been cash received from oil, natural gas, and product sales, contributions from members, and borrowings. Management’s assessment of the entity’s ability to continue as a going concern involves making a judgement, at a particular point in time, about inherently uncertain future outcomes of events or conditions.
Any judgment about the future is based on information available at the time at which the judgment is made. Subsequent events may result in outcomes that are inconsistent with judgments that were reasonable at the time they were made. Management has taken into account the following:
| a. | The Company’s financial position; and |
| b. | The risks facing the Company that could impact liquidity and capital adequacy. |
The Company’s future capital requirements will depend on many
factors, including its rate of revenue growth and the timing and extent of expenditures to support sales, marketing, and infrastructure
development. The Company currently expects to require approximately $
Since inception, the Company’s primary sources of liquidity have included operating cash flows, capital contributions, and borrowings.
Subsequent to March 31, 2026, the Company strengthened its liquidity
position through a combination of debt and equity financings. On April 8, 2026, TCDC, the Company’s wholly owned subsidiary, entered
into a senior secured term loan facility providing for borrowings of up to $
Access to additional amounts under the term loan facility beyond the initial committed tranche is subject to lender approval and the satisfaction of certain conditions.
As a result, in connection with the Company’s assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management has determined that the Company’s liquidity condition raises substantial doubt about the Company’s ability to continue as a going concern through the twelve months following the issuance of the Original Form 10-Q. The condensed consolidated financial statements do not include any adjustments relating to the recovery of recorded assets or the classification of liabilities that might result should we be unable to continue as a going concern.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities, certain disclosures at the date of the consolidated financial statements, as well as the reported amounts of expenses during the reporting period. Significant estimates affecting the condensed consolidated financial statements have been prepared on the basis of the most current and best available information. The estimates and assumptions include but are not limited to inputs used to calculate asset retirement obligations (“AROs”) (Note 8), the estimate of proved natural gas, oil, and natural gas liquids reserves and related present value estimates of future net cash flows therefrom (Note 5), and inputs used to calculate the value of common shares issued for services (Note 15). These estimates and assumptions are based on management’s best estimates and judgements. However, actual results from the resolution of such estimates and assumptions may vary from those used in the preparation of the financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity date of three months or less to be cash equivalents. As of March 31, 2026 and December 31, 2025, the Company did hold any cash equivalents other than cash on deposit.
7
Restricted Investments
Restricted investments related to Certificates of Deposit (“CDs”) held at West Texas National Bank. These CDs are used as collateral for operating and plugging bonds for the New Mexico Oil Conservation Division, New Mexico State Land Office, and the Bureau of Land Management.
Receivables and Allowance for Expected Losses
The Company’s receivables result primarily from the sale of
natural gas and NGLs as well as billings to joint interest owners for properties in which the Company serves as the operator. Receivables
from product sales are generally due within 30 to 60 days after the last day of each production month and do not bear any interest.
March
31, | December 31, 2025 | |||||||
| Natural gas and NGL sales | $ | $ | ||||||
| Joint interest accounts receivable | ||||||||
| Other accounts receivable | ||||||||
| Less allowance for expected losses | ( | ) | ( | ) | ||||
| Total Accounts Receivable, net | $ | $ | ||||||
The beginning accounts receivable balance at January 1, 2025 was $
| Allowance for Credit Losses | ||||
| Beginning balance | $ | |||
| Provision for expected credit losses | ||||
| Write-offs | ||||
| Recoveries | ||||
| Ending balance | $ | |||
Provision for expected credit losses is recorded within general and
administrative expenses in the consolidated statements of operations. During the three months ended March 31, 2026 and 2025, the Company
did not write off any accounts receivables. In addition to the above, $
Prepaid Expenses
The Company includes in prepaid expenses payments made in advance for goods or services for which the Company will receive a future benefit. Prepaid expenses are recorded at cost and are expensed over the period in which the benefit is realized.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation. Betterments, renewals, and extraordinary repairs that materially extend the useful life of the asset are capitalized; other repairs and maintenance charges are expensed as incurred. The Company includes in property, plant and equipment the processing plant under construction, computer equipment, furniture and fixtures, and leasehold improvements.
Depreciation and amortization expense is calculated using the straight-line method over the estimated useful lives of the related assets, which results in depreciation and amortization being incurred evenly over the life of an asset. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service.
8
Management performs ongoing evaluations of the estimated useful lives
of the property and equipment for depreciation purposes. Management periodically reviews long-lived assets, other than oil and gas property,
for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.
The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of
the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its carrying amount.
The Company recorded an impairment charge of $
Oil and Gas Properties
The Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells, administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to operations.
The capitalized costs of oil and gas properties, plus estimated future development costs relating to proved reserves and excluding unevaluated and unproved properties, are amortized as depletion expense using the units-of-production method based on estimated proved recoverable oil and gas reserves.
The costs associated with unevaluated and unproved properties, initially excluded from the amortization base, relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the existence of proved reserves, together with capitalized interest costs for these projects. Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease. Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry wells are transferred to the amortization base immediately upon determination that the well is unsuccessful.
Under full cost accounting rules for each cost center, capitalized
costs of evaluated oil and gas properties, including asset retirement costs, less accumulated amortization and related deferred income
taxes, may not exceed an amount (the “cost ceiling”) equal to the sum of (a) the present value of future net cash flows from
estimated production of proved oil and gas reserves, based on current prices and operating conditions, discounted at ten percent (
Given the volatility of oil and gas prices, it is reasonably possible that the estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term. If oil and gas prices decline in the future, even if only for a short period of time, it is possible that impairments of oil and gas properties could occur. In addition, it is reasonably possible that impairments could occur if costs are incurred in excess of any increases in the present value of future net cash flows from proved oil and gas reserves, or if properties are sold for proceeds less than the discounted present value of the related proved oil and gas reserves. The Company recorded ceiling test impairment for the three months ended March 31, 2026, and March 31, 2025.
Accounts Payable and Accrued Liabilities
The Company’s payables and accrued liabilities result primarily
from the operation of its oil and natural gas properties as well as the administration of the Company. For properties in which the Company
is operator, the Company pays
| March 31, 2026 (As Restated) | December 31, 2025 | |||||||
| Trade payable | $ | $ | ||||||
| Suspense payable | ||||||||
| Total accounts payable | $ | $ | ||||||
| Total accrued liabilities | $ | $ | ||||||
9
Asset retirement obligations
The Company records a liability for AROs associated with its oil and gas wells when the well has been completed. The ARO is recorded at its estimated fair value, measured by the expected future cash outflows required to satisfy the abandonment and restoration discounted at our credit-adjusted risk-free interest rate. The corresponding cost is capitalized as an asset and included in the carrying amount of oil and gas properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value.
Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement. This gain or loss is recorded to the oil and gas property balance.
Financial Instruments and Concentrations of Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivables. The Company maintains its cash in accounts with major financial institutions within the United States. The Company’s cash balances can, at times, exceed amounts insured by the Federal Deposit Insurance Corporation. The Company places its cash with high credit quality financial institutions. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk.
The Company is subject to credit risk resulting from the concentration
of its oil, natural gas and NGL receivables with significant purchasers. For the three months ending March 31, 2026, the Company had
no oil sales. A separate purchaser accounted for all of the Company’s natural gas and NGL revenues for the nine months ending March
31, 2026, and 2025. For the three months ending March 31, 2025,
Revenue recognition
The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) which uses a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which includes (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue as each performance obligation is satisfied.
Revenue from contracts with customers
The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or the processor of the product. Revenue is measured based on the consideration the Company expects to receive in exchange for those products.
10
Performance obligations and significant judgments
The Company sold oil and natural gas products in the United States through a single reportable segment. The Company enters into contracts that generally include oil, natural gas, and associated liquids in variable quantities and priced based on a specific index related to the type of product.
The oil and natural gas were typically sold in an unprocessed state to processors and other third parties for processing and sale to customers. The Company recognized revenue at a point in time when control of the oil or natural gas passes to the customer or processor, as applicable, discussed below.
The Company sells its natural gas and NGLs to a single purchaser, who
is also the processor, under a purchase agreement at a price based on an index price from the purchaser which expired on May 31, 2024.
This agreement currently continues on a month-to-month basis unless and until terminated by the Company or the purchaser with a
The Company has no unsatisfied performance obligations at the end of each reporting period.
Management does not believe that significant judgments are required with respect to the determination of the transaction price, including any variable consideration identified. There is a low level of uncertainty due to the precision of measurement and use of index-based pricing adjusted for transportation and other related deductions, which are based on contractual or historical data. Additionally, any variable consideration identified is not constrained.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The hierarchy is broken down into three levels based on the observability of inputs as follows:
| ● | Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment; |
| ● | Level 2 — Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly; and |
| ● | Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
Convertible Note Payable
When the Company issues convertible debt, it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine (1) whether the instrument should be classified as a liability under ASC 480, Distinguishing Liabilities from Equity, and (2) whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of a convertible debt instrument would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, were it a standalone instrument, meets the definition of a “derivative” in ASC 815, Derivatives and Hedging. When a conversion feature meets the definition of an embedded derivative, it would be separated from the host instrument and classified as a derivative liability carried on the consolidated balance sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations (see Note 6).
Warrants
The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480”), then in accordance with ASC 815-40 (“ASC 815”), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.
11
Related parties
All material related party transactions are approved by members of the Board of Directors not affiliated with the transactions. These Board members consider the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction, and the benefits to the Company and the relevant related party. In determining whether to approve a related party transaction, the following factors are considered: (1) if the terms are fair to the Company, (2) if there are business reasons to enter into the transaction, or (3) if the transaction would present an improper conflict of interest for any officer.
Income taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.
The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not (likelihood of greater than 50 percent) that some portion or all the deferred tax assets will not be realized.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. If all or a portion of the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company’s deferred tax liability and will affect the Company’s effective tax rate in the period it is recognized.
The Company records any tax-related interest charges as interest expense and any tax-related penalties as other expenses in the consolidated statements of operations of which there have been none to date.
The Company is also subject to the Texas Margin Tax. The Company realized no Texas Margin Tax in the accompanying condensed consolidated financial statements as we do not anticipate owing any Texas Margin Tax for the periods presented.
Stock-based compensation
The Company accounts for its stock-based compensation awards in accordance with ASC 718. ASC 718 requires all stock-based payments to employees and non-employees including grants of stock options, to be recognized as expense in the consolidated statements of operations based on their grant date fair values. Our accounting policy for the recognition of compensation expense for awards with only a service condition is to expense the costs on a straight-line basis over the life of the award. For performance and market based awards, our accounting policy is to recognize compensation expense separately for each vesting tranche over that tranche’s requisite service period. Stock-based compensation expense is not adjusted for actual achievement of market conditions.
The Company periodically issues common stock and common stock options to consultants for various services. Costs of these transactions are measured at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.
Loss Per Share
The Company accounts for net loss per share in accordance with ASC subtopic 260 - 10, Earnings Per Share (“ASC 260 - 10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. It excludes the dilutive effects of any potentially issuable common shares. Diluted are as their effect would be anti - dilutive.
12
Business Combination and Asset Acquisitions
The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs, which would meet the requirements of a business. If determined to be a business combination, the Company accounts for the transaction under the acquisition method of accounting in accordance with ASC Topic 805 Business Combinations (“ASC 805”), which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value measurement point.
If the acquired set of assets and activities does not meet the definition of a business, the Company accounts for the transaction as an asset acquisition in accordance with ASC Subtopic 805-50, Acquisition of Assets Rather than a Business. We record asset acquisitions using the cost accumulation model. Under the cost accumulation model of accounting, the cost of the acquisition, including certain transaction costs, are allocated to the assets acquired using relative fair values.
Recent accounting pronouncements
Recent Accounting Pronouncements, not yet adopted:
ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”) requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosure about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2027 with early adoption permitted. The Company is currently evaluating the impact of this ASU on its unaudited financial statements and disclosures.
In May 2025, the FASB issued ASU No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. The standard revises current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity (“VIE”) that meets the definition of a business. The amendments differ from current GAAP because, for certain transactions, they replace the requirement that the primary beneficiary of a VIE is always the acquirer with an assessment that requires an entity to consider the factors to determine which entity is the accounting acquirer. Under the amendments, acquisition transactions in which the legal acquiree is a VIE will, in more instances, result in the same accounting outcomes as economically similar transactions in which the legal acquiree is a voting interest entity. The ASU does not change the accounting for a transaction determined to be a reverse acquisition or a transaction in which the legal acquirer is not a business and is determined to be the accounting acquiree. The new guidance will become effective for interim and annual reporting periods beginning on January 1, 2027, will require a prospective transition method for business combinations that occur after the initial adoption date, and early adoption is permitted. Management is currently evaluating the impact of the new standard on the Company’s unaudited financial statements.
Recently Adopted Accounting Pronouncements:
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU was effective for the annual period ended December 31, 2025. The adoption of this guidance did not have a material impact on the Company’s unaudited financial statements.
13
NOTE 3: RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Subsequent to the issuance of the Company’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2026, management identified errors in the Company’s accounting for PSUs granted during the quarter and in the classification of certain professional fees related to the Company’s acquisition and financing transactions.
With respect to the PSUs, the Company (i) understated the grant-date
fair value of certain PSU awards, and (ii) attributed compensation cost using the straight-line method rather than recognizing cost separately
for each vesting tranche over its requisite service period using the graded-vesting attribution method, as required for awards containing
performance and market conditions. The corrected aggregate grant-date fair value of the awards is $
In addition, the Company recorded $
The Company assessed the materiality of the errors, individually and in the aggregate, and concluded that the errors were material to the previously issued unaudited condensed consolidated financial statements. Accordingly, the accompanying condensed consolidated financial statements as of and for the three months ended March 31, 2026 have been restated to correct the errors. The Restatement has no income tax effect, as the Company maintains a full valuation allowance against its deferred tax assets.
The correction of Adjustment 1 and Adjustment 2, as well as the correction of other immaterial adjustments to the previously issued unaudited condensed consolidated financial statements, and the related line item impacts on the condensed consolidated balance sheet as of March 31, 2026 and the condensed consolidated statement of operations, condensed consolidated statement of changes in stockholders’ equity and condensed consolidated statement of cash flows for the three months ended March 31, 2026 are presented below.
The effects of the Restatement on the Company’s previously issued unaudited condensed consolidated financial statements are presented below.
14
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) — FOR THE THREE MONTHS ENDED MARCH 31, 2026
| As Previously Reported | Adjustment 1 | Adjustment 2 | Other adjustments | As Restated | ||||||||||||||||
| Natural gas and product sales, net | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Total revenues, net | ( | ) | ||||||||||||||||||
| General and administrative expenses | ( | ) | ||||||||||||||||||
| Total costs and expenses | ( | ) | ||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Change in fair value of deferred equity consideration | ||||||||||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | |||||||||
| Net loss per share — basic and diluted | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) — MARCH 31, 2026
| As Previously Reported | Adjustment 1 | Adjustment 2 | Other adjustments | As Restated | ||||||||||||||||
| Accounts receivable, net | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||||||||
| Total current assets | ( | ) | ||||||||||||||||||
| Land | ||||||||||||||||||||
| Total assets | ||||||||||||||||||||
| Accrued liabilities | ||||||||||||||||||||
| Convertible note, net of discount - current | ( | ) | ||||||||||||||||||
| Current liabilities | ( | ) | ||||||||||||||||||
| Total liabilities | ( | ) | ||||||||||||||||||
| Additional paid-in capital | ( | ) | ||||||||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total stockholders’ equity | ||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | $ | $ | $ | |||||||||||||||
15
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED) — FOR THE THREE MONTHS ENDED MARCH 31, 2026
| Total | ||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-in | Accumulated | Stockholders’ Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| As Previously Reported | ||||||||||||||||||||||||||||
| Common shares issued for services | $ | – | $ | $ | $ | $ | ||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Warrants exercised, net of issuance costs | – | |||||||||||||||||||||||||||
| Balance — March 31, 2026 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Adjustment 1 | ||||||||||||||||||||||||||||
| Common shares issued for services | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | – | – | ||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance — March 31, 2026 | – | – | ( | ) | ||||||||||||||||||||||||
| Adjustment 2 | ||||||||||||||||||||||||||||
| Warrants exercised, net of issuance costs | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | – | – | ||||||||||||||||||||||||||
| Balance — March 31, 2026 | – | – | ( | ) | ||||||||||||||||||||||||
| Other adjustments | ||||||||||||||||||||||||||||
| Net loss | – | – | ||||||||||||||||||||||||||
| Balance — March 31, 2026 | – | – | ||||||||||||||||||||||||||
| As Restated | ||||||||||||||||||||||||||||
| Common shares issued for services | – | |||||||||||||||||||||||||||
| Stock-based compensation | – | – | ||||||||||||||||||||||||||
| Warrants exercised, net of issuance costs | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance — March 31, 2026 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||
16
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) — FOR THE THREE MONTHS ENDED MARCH 31, 2026
| As Previously Reported | Adjustment 1 | Adjustment 2 | Other adjustments | As Restated | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | |||||||||
| Change in fair value of deferred equity consideration | ( | ) | ( | ) | ||||||||||||||||
| Amortization of debt discount and debt issuance costs | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Accounts receivable | ( | ) | ( | ) | ||||||||||||||||
| Prepaid and other current assets | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||||||||||
| Purchase of TCDC, net of cash acquired | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Investment in property, plant and equipment, net | ( | ) | ( | ) | ||||||||||||||||
| Cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Proceeds from exercise of warrants, net of issuance costs | ( | ) | ||||||||||||||||||
| Debt issuance costs (financing activities) | ( | ) | ( | ) | ||||||||||||||||
| Net cash provided by financing activities | $ | $ | ( | ) | $ | |||||||||||||||
The Restatement also affected the Company’s asset acquisition
disclosures in Note 4 and stock-based compensation disclosures in Note 16 as well as certain disclosures in Note 2. The total cost basis
of the asset acquisition increased $
NOTE 4: ASSET ACQUISITION
On January 16, 2026, the Company entered into a Membership Interest
Purchase Agreement (the “Purchase Agreement”) with SharonAI, Inc. (the “Seller”), pursuant to which the Company
acquired all of the Seller’s membership interests in TCDC, resulting in TCDC becoming a wholly owned subsidiary of the Company.
Prior to the transaction, the Company held a
TCDC’s primary asset consists of land. The Company concluded
that the transaction represents an asset acquisition rather than a business combination, as substantially all of the fair value of the
gross assets acquired is concentrated in a single identifiable asset. In addition, the Company did not acquire any substantive processes,
workforce, or outputs that would meet the definition of a business under ASC 805. The Company accounted for the transaction as an asset
acquisition using the cost accumulation and allocation model. Accordingly, the total consideration transferred was allocated to the identifiable
assets acquired and liabilities assumed on a relative fair value basis. As substantially all of the value of the acquired assets is concentrated
in land, the purchase price was primarily allocated to land. The aggregate purchase price for the acquired interests was approximately
$
In satisfaction of the equity consideration, the Company issued
17
The following tables present the reconciliation of consideration transferred to total cost basis, including the Company’s previously held equity method investment, and the preliminary allocation of such cost basis to the identifiable assets acquired and liabilities assumed.
| Consideration Transferred (As Restated): | ||||
| Related party note | $ | |||
| Cash | ||||
| Convertible Note | ||||
| Deferred equity consideration | ||||
| Total Consideration Transferred | ||||
| Previously held equity method investment | ||||
| Transaction costs | ||||
| Total cost basis | $ | |||
| Description | Amount | |||
| Land | $ | |||
| Other assets and liabilities, net | ||||
| Total net assets acquired | $ | |||
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
The Company will record depreciation expense for the processing plant over its estimated useful life.
Depreciation on the processing plant will commence once the processing
plant is placed into service. The Company records depreciation expense for computer equipment and furniture and fixtures over a useful
life of five years.
| March 31, 2026 | December 31, 2025 | |||||||
| Processing plant under construction - cost | $ | $ | ||||||
| Construction in progress - TCDC facility - cost | ||||||||
| Construction in progress - New Era facility - cost | ||||||||
| Computer equipment - cost | ||||||||
| Field equipment - cost | ||||||||
| Furniture and fixtures - cost | ||||||||
| Leasehold improvements - cost | ||||||||
| Total – cost | $ | $ | ||||||
| Processing plant under construction - accumulated depreciation and impairment | $ | ( | ) | $ | ( | ) | ||
| Construction in progress - TCDC facility - accumulated depreciation | ||||||||
| Construction in progress - New Era facility - accumulated depreciation | ||||||||
| Computer equipment - accumulated depreciation | ( | ) | ( | ) | ||||
| Field equipment - accumulated depreciation | ( | ) | ( | ) | ||||
| Furniture and fixtures - accumulated depreciation | ( | ) | ( | ) | ||||
| Leasehold improvements - accumulated depreciation | ( | ) | ( | ) | ||||
| Total - accumulated depreciation and impairment | $ | ( | ) | $ | ( | ) | ||
| Processing plant under construction - net | $ | $ | ||||||
| Construction in progress - TCDC facility - net | ||||||||
| Construction in progress - New Era facility - net | ||||||||
| Computer equipment - net | ||||||||
| Field equipment - net | ||||||||
| Furniture and fixtures - net | ||||||||
| Leasehold improvements - net | ||||||||
| Total Property, plant and equipment, net | $ | $ | ||||||
18
The Company
recorded depreciation expense in the amounts of $
The asset was written down to its estimated fair value, which was determined using a market-based assessment of expected recoverable value and was considered negligible. The impairment charge is included in impairment of long-lived assets in the Consolidated Statements of Operations and relates to the Company’s single reportable segment.
The Company recorded an additional impairment charge of $
NOTE 6. OIL AND NATURAL GAS PROPERTIES
The Company had unevaluated properties at March 31, 2026, and December 31, 2025.
The Company recorded depletion expense in the amounts of $
There were no ceiling test impairment recorded during the three months ended March 31, 2026 and March 31, 2025.
NOTE 7. NOTES PAYABLE
AirLife Note Payable
During 2025, the Company terminated its arrangements with AirLife Gases
USA Inc. (“AirLife”) and repaid all outstanding obligations under the related promissory note. On October 22, 2025, AirLife
provided notice of termination of the Liquid Helium Agreement effective November 30, 2025. In accordance with the termination provisions
of the promissory note, the Company became obligated to repay $
Fourth Amended and Restated Equity Purchase Facility Agreement
On December 6, 2024, following the closing of the Business Combination,
the Company and an institutional investor (the “EPFA Investor”) entered into an Equity Purchase Facility Agreement (the “EPFA”).
Pursuant to the EPFA, the Company had the right to issue and sell to the EPFA Investor, and the EPFA Investor was required to purchase
from the Company, up to an aggregate of $
19
As an inducement to entering into the EPFA, a designee of the EPFA
Investor received
On February 21, 2025, the Company and the Investor entered into an
Amended and Restated Equity Purchase Facility Agreement (the “A&R EPFA”), which amends and restates the Existing EPFA
in its entirety. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the A&R EPFA. Under the
terms of the A&R EPFA, the price per Advance Share (as defined in the A&R EPFA) is set at the product obtained by multiplying
the market price by
Pursuant to the terms of the A&R EPFA, the Floor Price is currently
set at $
On October 16, 2025, the Company provided the Investor with notice of termination of the EPFA, with such termination effective October 24, 2025, in accordance with the terms of the EPFA. The Company determined that it was sufficiently capitalized at present and does not expect to sell any additional shares to the Investor. The Company did not incur any termination penalties as a result of its termination of the EPFA.
Convertible Notes
The first pre-paid advance in the amount of $
The proceeds from the Second Pre-Paid Advance Note and sale of Advance
Shares were used by the Company first to pay the then monthly payment on any outstanding Notes and then the remainder in the manner for
working capital. Pursuant to the terms of the EPFA, the Company was required to hold a special meeting of stockholders no later than
(90) calendar days following December 6, 2024 to seek approval of (i) the issuance of all of the shares of common stock that could have
been issuable pursuant to the Notes and the EPFA in compliance with the rules and regulations of Nasdaq and (ii) an amendment to the Company’s
articles of incorporation to increase the number of authorized shares of capital stock of the Company to
20
The price per Advance Share was determined by multiplying the market
price by
While the Notes were outstanding, the Company could not issue, sell,
grant, or otherwise dispose of any securities, or enter into any agreement or arrangement to do so, at a price per security less than
Senior Secured Convertible Promissory Note
Each Convertible Note provided for a
On December 6, 2024, the Company drew the first prepaid advance of
$
On January 16, 2025, following the effectiveness of the Company’s
Registration Statement on Form S-1, on December 30, 2024, the Company issued another Senior Secured Convertible Promissory Note (the “Subsequent
Note”) to the Investor in an aggregate principal amount of $
The outstanding balance on the Convertible Notes discussed above as
of March 31, 2026 and December 31, 2025 was $
Amendment to Convertible Promissory Notes
On May 5, 2025, the Company and the Investor entered into two amendments
to the Promissory Notes, an amendment to the Senior Secured Convertible Promissory Note dated December 6, 2024 (the “First Amendment”)
and an amendment to the Subsequent Note dated January 16, 2025 (the “Second Amendment”) which, among other things, provided
that the Company could elect to defer the principal portion of the monthly payments that were due to the Investor in May 2025, June 2025,
or July 2025 until on or before the Maturity Date of the respective Promissory Note in exchange for the payment of a deferral fee (the
“Deferral Fee”) equal to
The Company evaluated the First and Second Amendment and as the effective borrowing rate under the restructured agreements was less than the effective annual interest rate on the old agreements, a concession is deemed to have been granted under ASC 470-60-55-10. As a concession was deemed to have been granted, the agreements were accounted for as a troubled debt restructuring (“TDR”) by debtors under ASC 470-60.
As of March 31, 2026, and December 31, 2025, the accrued interest on
the Convertible Note in the consolidated balance sheets was $
In September 2025, $
Conversion Rights
The Company reviewed the conversion option and determined that the scope exception within ASC 815-10-15-74(a) was met and the conversion option was not required to be bifurcated and accounted for as an embedded derivative under ASC 815.
21
Event of Default Conversion
The Company evaluated the Event of Default feature under ASC 815-15 and determined that the feature represented an embedded derivative that required bifurcation and fair value accounting, with subsequent changes in fair value recognized in the consolidated statements of operations.
Limitations on Conversion
A Holder did not have the right to convert any portion of the Note
to the extent that, after giving effect to such conversion, the Holder (together with its related parties) would beneficially own in excess
of
Redemption Rights
At any time, the Company could redeem in cash all, or any portion,
of the Note, in an amount equal to the outstanding principal balance being redeemed, plus a
Security Agreement
Also, on December 6, 2024, the Company, each of its subsidiaries (each, a “Grantor”), and the Investor, entered into a Security Agreement (the “Security Agreement”) with respect to the Notes. Pursuant to the Security Agreement, each Grantor granted a security interest in such Grantor’s right, title and interest in and to each type of property described in the Security Agreement, (collectively, the “Collateral”), including, but not limited to the Company’s Equipment, Inventory, Receivables, Related Contracts, Pledged Debt, Investment Property, Pledged Stock and Account Collateral. The Collateral secured and would secure all debts, obligations, liabilities, covenants and duties of every kind owed at any time to the Secured Parties by the Grantors under the Purchase Agreement, the Notes, the Guarantee and/or each other Transaction Document.
Subsidiary Guarantee
Also, on December 6, 2024, each of the Company’s subsidiaries (the “Guarantors”) executed a guarantee agreement (the “Subsidiary Guarantee”), whereby each such Guarantor guaranteed to the EPFA Investor the prompt and full payment and performance of the Guaranteed Obligations of the Company under and pursuant to the Security Agreement.
Senior Secured Convertible Promissory Note
On January 16, 2026, the Company issued a $
The Note bears interest at a rate of
The Note includes embedded features, including conversion and event
of default provisions. The Holder has the right to convert up to $
The Company evaluated the embedded features in accordance with ASC 815 and determined that certain features, including the conversion and event of default provisions, require bifurcation as a derivative liability due to provisions that may result in variable share settlement. The derivative is recorded at fair value at issuance, with subsequent changes in fair value recognized in earnings.
At issuance, the fair value of the embedded derivative liability was
approximately $
As of March 31, 2026, the fair value of the embedded derivative liability
was approximately $
The carrying value of the Note is presented net of the unamortized
debt discount. As of March 31, 2026, the outstanding principal balance of the Note was $
22
Interest expense related to the Note consists of both (i) contractual
interest at the stated rate and (ii) non-cash interest expense related to the amortization of the debt discount. For the three months
ended March 31, 2026, the Company recognized total interest expense of $
On April 24, 2026, the Company paid $
Note Payable
On March 25 2026, in connection with the amendment of certain real
property agreements, the Company, through its subsidiary, agreed to pay total consideration of approximately $
The Note bears interest at a fixed annual rate of
The Note is unsecured. As of March 31, 2026, the outstanding principal
balance of the Note was $
NOTE 8. RELATED PARTY TRANSACTIONS
Balance outstanding of related parties:
| Name of Party | Receivable/Payable | March 31, 2026 | December 31, 2025 | |||||||
| Sharon AI | $ | $ | ||||||||
| Total Receivable | ||||||||||
| Zachary Zhou | ||||||||||
| Charles Nelson | ||||||||||
| Ondrej Sestak | ||||||||||
| Total Payable | $ | $ | ||||||||
On March 31, 2026, the Company issued a $
The amended and restated note bore interest at
On April 10, 2026, the amended and restated promissory note was fully
converted into
NOTE 9. ASSET RETIREMENT OBLIGATIONS
The Company has a number of oil and gas wells in production and will have AROs that will be settled once the wells are permanently removed from service. The primary obligations involve the removal and disposal of surface equipment, plugging and abandoning the wells and site restoration.
AROs associated with the retirement of tangible long-lived assets are recognized as liabilities with an increase to the carrying amounts of the related long-lived assets in the period incurred. The fair value of AROs is recognized at the date a new well is completed or the acquisition date of the working interest. The cost of the tangible asset, including the asset retirement cost, is depleted over the life of the asset. AROs are recorded at estimated fair value, measured by reference to the expected future cash outflows required to satisfy the retirement obligations discounted at the Company’s credit-adjusted risk-free interest rate. Accretion expense is recognized over time as the discounted liabilities are accreted to their expected settlement value. If estimated future costs of AROs change, an adjustment is recorded to both the ARO and the long-lived asset. Revisions to estimated AROs can result from changes in retirement cost estimates including revisions to estimated inflation rates, revisions to estimated discount rates and changes in the estimated timing of abandonment.
23
The Company used the following inputs in its calculation of its AROs.
| March 31, 2026 | December 31, 2025 | |||||||
| Inflation rate | % | % | ||||||
| Discount factor | ||||||||
| Estimated asset life | ||||||||
The following table shows the change in the Company’s ARO liability for the three months ended March 31, 2026 and year ended December 31, 2025:
| Asset retirement obligations, December 31, 2024 | $ | |||
| Change in estimates | ||||
| Accretion expense | ||||
| Asset retirement obligations, December 31, 2025 | ||||
| Accretion expense | ||||
| Asset retirement obligations, March 31, 2026 | $ |
During 2025, the Company’s two helium contracts expired. With no supporting helium contracts, the Company was unable to justify carrying helium volumes in forecasted Proved Helium reserves. As a result, the estimated economic lives of many of our producing properties shortened considerably, therefore resulting in a large change in ARO estimates.
NOTE 10. EQUITY
Reorganization Agreement and Plan Share Exchange and Issuance of Shares
Preferred stock - The Company is authorized to issue
Common stock - The Company is authorized to issue
Share Issuances
During the three months ended March 31, 2026, the Company issued
The Company also issued
Amendment to Equity Purchase Facility Agreement
During 2025, the Company entered into a series of amendments to its
existing Equity Purchase Facility Agreement (EPFA) dated December 6, 2024. These amendments modified certain pricing restrictions and
ultimately increased the Company's right to sell common stock to the Investor from $
Warrants – As of March 31, 2026 and December 31, 2025, there
were
24
Pursuant to a securities purchase agreement, dated December 6, 2024,
by and between us and ATW AI Infrastructure II LLC (the “Investor”) (together with the Form of First Tranche Warrant and Form
of Second Tranche Warrant issued on December 6, 2024, the “Warrant Purchase Agreement”), we issued and sold to the Investor
warrants to purchase shares of our common stock, comprised of two tranches (the “First Tranche Warrant” and “Second
Tranche Warrant” and together, the “Investor Warrants”). The Warrant Purchase Agreement was amended by that certain
Amended and Restated Consent and Waiver, dated January 16, 2026, by and between us and the Investor (the “Waiver”), pursuant
to which, among other things, the Investor agreed to partially waive the anti-dilution provisions of the First Tranche Warrant and Second
Tranche Warrant such that the exercise prices of the First Tranche Warrant and Second Tranche Warrant were each adjusted down solely to
$
The number of shares of common stock issuable upon exercise of the
First Tranche Warrant is equal to the quotient of (i) the product of (x) $
During the period from February through March 2026, the Company received
exercise notices for a portion of the Investor Warrants, resulting in the issuance of an aggregate of approximately
The Company has analyzed the Public Warrants, Private Warrants, and Investor Warrants and determined they are considered to be freestanding instruments and do not exhibit any of the characteristics in ASC 480 and therefore are not classified as liabilities under ASC 480 or ASC 815.
On February 1, 2026, the Company entered into an Amended and Restated
Consent and Waiver (the “Amended Waiver”) with the Investor pursuant to which the Investor agreed to partially waive the anti-dilution
provisions of the First Tranche Warrant and Second Tranche Warrant such that the exercise prices of the First Tranche Warrant and Second
Tranche Warrant were each adjusted down solely to $
The Investor also waived certain provisions of the Securities Purchase
Agreement relating to restrictions on Variable Rate Transactions (as defined in the Securities Purchase Agreement), additional issuances
of equity securities, redemption or payment of cash dividends, and stock splits. The parties agreed to certain administrative updates
to the Securities Purchase Agreement including cashless exercise after
NOTE 11. LOSS PER SHARE
The Company calculated net income/(loss) per share using the treasury
stock method.
| For the Three Months Ended March 31, | ||||||||
| 2026 (As Restated) | 2025 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average common shares outstanding | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
| Basic and diluted weighted average common shares outstanding | ||||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | ||
25
NOTE 12. COMMITMENTS AND CONTINGENCIES
Legal Actions
From time to time, the Company may be a party to various proceedings and claims incidental to its business. While many of these matters involve inherent uncertainty, the Company believes that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on the Company’s consolidated financial position as a whole or on its liquidity, capital resources or future annual results of operations. The Company records reserves for contingencies when information available indicates that a loss is probable, and the amount of the loss can be reasonably estimated.
Environmental Matters
The Company, as a lessee of oil and gas properties, is subject to various federal, provincial, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. There can be no assurance, however, that current regulatory requirements will not change, or past noncompliance with environmental laws will not be discovered on the Company’s properties.
Irrevocable Standby Letter of Credit and Promissory Note
On September 24, 2020, the Company entered into an irrevocable standby
letter of credit (“LOC”) and a promissory note with West Texas National Bank in the amount of $
On October 29, 2021, the Company entered into an amendment of the LOC
a new promissory note, increasing the amount to $
Limited Liability Company Agreement
Texas Critical Data Centers (“TCDC”) Joint Venture
On January 21, 2025, the Company and SharonAI formed TCDC, a joint
venture designed to purchase, develop, and operate a Texas-based 250 MW gas-fired power plant and data center. The Company evaluated the
arrangement under ASC 810, Consolidation, and ASC 323, Investments—Equity Method and Joint Ventures, concluding that
the joint venture should not be consolidated and is appropriately accounted for under the equity method. During 2025, the Company made
total capital contributions to TCDC of $
On January 16, 2026, the Company acquired SharonAI’s equity
interests in TCDC pursuant to the Membership Interest Purchase Agreement, dated as of January 16, 2026, by and between the Company and
SharonAI, for an aggregate purchase price of $
26
Agreement with Arjae Design Solutions Ltd.
On September 22, 2025, the Company entered into an agreement with Arjae
Design Solutions Ltd (“Arjae”). In this agreement, the Company is required to make a $
Financing Agreement for Director and Officer Insurance
On December 6, 2025, the Company entered into a financing agreement
with First Insurance Funding (“the Finance Agreement”) to finance a portion of the Company’s directors’ and officers’
insurance policy. The agreement required a downpayment of $
NOTE 13: REVENUES
The following table presents the revenue by type as of the dates indicated:
| For the Three Months Ended | ||||||||
| March 31, 2026 (As Restated) | March 31, 2025 | |||||||
| Natural gas | $ | $ | ||||||
| Less gathering and processing | ( | ) | ( | ) | ||||
| Natural gas, net | ||||||||
| NGL | ||||||||
| Total revenue, net | $ | $ | ||||||
NOTE 14. FAIR VALUE MEASUREMENTS
The Company accounts for certain liabilities at fair value and classifies these liabilities with the fair value hierarchy. Our ARO liabilities are measured at fair value on a non-recurring basis.
Liabilities subject to fair value measurements are as follows:
| March 31, 2026 (As Restated) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liability: | ||||||||||||||||
| ARO liabilities | $ | $ | ||||||||||||||
| Deferred equity consideration liability | ||||||||||||||||
| Embedded derivative liability | $ | $ | ||||||||||||||
| December 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liability: | ||||||||||||||||
| ARO liabilities | $ | $ | ||||||||||||||
The carrying value of cash and cash equivalents, accounts receivable, prepaid and other current assets, related party receivable, accounts payable, accrued liabilities, due to related party, and other current liabilities, as reflected in the consolidated balance sheets, approximate fair value, due to the short-term maturity of these instruments. The carrying value of notes payable approximates their fair value due to immaterial changes in market interest rates.
27
The fair value of the deferred equity consideration was estimated using a Monte Carlo simulation model.
The fair value of the embedded derivative was estimated using a Monte Carlo simulation model, which incorporates the following key assumptions and unobservable inputs as of the measurement date and March 31, 2026.
| Embedded Derivative Liability January 16, 2026 (Initial Measurement) | Embedded Derivative Liability March 31, 2026 | |||||||
| Share price | $ | $ | ||||||
| Volatility | % | % | ||||||
| Probability of default | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Discount Rate | $ | $ | ||||||
The following table presents quantitative information regarding the Level 3 fair value measurements of the embedded derivative associated with the note as of March 31, 2026:
| Embedded derivative liability | Equity facility derivative asset | |||||||
| Initial fair value of embedded derivative of the Note as of January 16, 2026 | $ | $ | ||||||
| Change in valuation inputs or other assumptions | ( | ) | ||||||
| Fair value as of March 31, 2026 | $ | $ | ||||||
NOTE 15. SEGMENTATION
ASC Topic 280, Segment Reporting, establishes standards for companies to report in their financial statements information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which they may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s CODM in deciding how to allocate resources and assess performance.
Management evaluated the Company’s segment reporting conclusion following the acquisition of the remaining interests in TCDC. Management considered that TCDC represents a significant strategic initiative of the Company and comprises a substantial portion of the Company’s consolidated asset base following the acquisition. Management also considered that executive management devotes significant time to evaluating the development activities, financing arrangements, capital needs, and strategic direction of TCDC.
However, management concluded that TCDC did not constitute a separate operating and reportable segment as of March 31, 2026. Although discrete financial information related to TCDC exists for accounting and legal entity reporting purposes, the CODM did not regularly review standalone operating results, profitability measures, or other discrete measures of financial performance for purposes of assessing performance and allocating resources in the manner contemplated by ASC 280. During the period, TCDC remained in the development stage and had not yet commenced revenue-generating operations. Resource allocation decisions related to TCDC were made in the context of consolidated liquidity management, financing activities, and enterprise-wide capital planning rather than through a separate recurring review of operating results or segment profitability.
Accordingly, management determined that the Company operated as a operating and reportable segment as of March 31, 2026, as the CODM reviews operating results, allocates resources, and assesses performance on a consolidated basis.
The CODM assesses performance for the single segment and decides how
to allocate resources based on net income or loss as reported in the consolidated statements of operations. The measure of segment assets
and liabilities is reported on the consolidated balance sheets as total assets and total liabilities.
| March 31, 2026 | December 31, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Property and equipment, net | ||||||||
| Oil and natural gas properties, net | ||||||||
28
| For the Three Months Ended | ||||||||
| March 31, 2026 (As Restated) | March 31, 2025 | |||||||
| Revenue, net | $ | $ | ||||||
| Lease operating expenses | ||||||||
| General and administrative expenses | ||||||||
NOTE 16. STOCK-BASED COMPENSATION
A summary of stock option activity under the Equity Incentive Plan
(the “Plan”) for the
| Number of Options | Weighted-Average Exercise Price ($) | |||||||
| Outstanding at December 31, 2025 | $ | | ||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Forfeited | ||||||||
| Expired | ||||||||
| Outstanding at March 31, 2026 | $ | |||||||
| Exercisable at March 31, 2026 | $ | |||||||
At March 31, 2026, the aggregate intrinsic value of outstanding stock
options was $
Restricted Stock Awards
During the three months ended March 31, 2026, the Company granted
restricted stock units (“RSUs”) under the Plan. On January 28, 2026, the Company granted
The RSUs entitle the holder to receive
The grant-date fair value of the RSUs is based on the closing price of the Company’s common stock on the date of grant. Stock-based compensation expense related to RSUs is recognized on a straight-line basis over the requisite service period.
For the three months ended March 31, 2026, the Company recognized stock-based
compensation expense related to RSUs of approximately $
As of March 31, 2026, there was $
Performance Awards (As Restated)
During the three months ended March 31, 2026, the Company granted PSUs under the plan. On January 28, 2026, the Company granted an aggregate
of
The PSUs entitle the holder to receive shares of the Company’s common stock upon vesting. The PSUs vest based on the achievement of specified performance and market conditions over a performance period ending January 1, 2031, subject to certification by the Compensation Committee.
29
The grant-date fair value of PSUs with market conditions was determined using a Monte Carlo simulation model utilizing the following significant assumptions:
| Assumption | January 28, 2026 Grant | March 16, 2026 Grant | ||||||
| Grant-date stock price | $ | $ | ||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Measurement period end date | January
1, 2031 | January
1, 2031 | ||||||
| Market condition threshold price | $ | $ |
The awards include market-based vesting conditions tied to specified stock price thresholds through January 1, 2031.
During the three months ended March 31, 2026, the Company determined
the performance conditions were probable of achievement and recognized expense accordingly. For the three months ended March 31, 2026,
the Company recognized stock-based compensation expense related to PSUs of approximately $
As of March 31, 2026, there was approximately $
NOTE 17. SUBSEQUENT EVENTS
Term Loan Agreement with Macquarie Equipment Capital Inc.
On April 8, 2026, TCDC, entered into a Term Loan Agreement with Macquarie
Equipment Capital Inc. (“Macquarie”) for a senior secured term loan facility of up to $
The loans mature on
Equity Issuances
From time to time beginning with the initial funding of the Term Loan
Agreement, the Company may issue certain warrants to purchase common stock (the “Macquarie Warrants”) to Macquarie, with an
aggregate value of up to $
30
Shareholder Litigation
On April 1, 2026, a federal securities class action lawsuit was filed in the U.S. District Court for the Western District of Texas against the Company and certain members of its management. The complaint alleges violations of federal securities laws on behalf of investors who purchased the Company’s securities between November 6, 2024, and December 29, 2025. The Company intends to vigorously defend itself against these claims.
Underwritten Public Offering of Common Stock
On April 9, 2026, New Era Energy & Digital, Inc. announced the
pricing of an underwritten public offering of
On April 10, 2026, the underwriters exercised their option to purchase
an additional
Use of Proceeds and Repayment of Convertible Note
The Company generated approximately $
Issuance of Unregistered Equity Securities
On April 10, 2026, the Company issued
31
Acquisition Consideration and Share Issuance Cap
Pursuant to the January 16, 2026 Membership Interest Purchase Agreement,
the Company acquired SharonAI’s equity interests in Texas Critical Data Centers LLC for an aggregate purchase price of $
Convertible Note Prepayment
On April 10, 2026, the Company issued written notice to SharonAI, Inc.
of its irrevocable election to prepay its $
Executive Employment Agreement and Compensatory Arrangements
On April 14, 2026, the Company’s Board of Directors appointed
Andrew Casazza to serve as Chief Corporate Officer, effective April 28, 2026. In connection with this appointment, the Company entered
into an employment agreement establishing an annual base salary of $
Issuance of Inducement Restricted Stock Units
Concurrent with his appointment, the Company granted Mr. Casazza an
award of RSUs covering
32
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Amendment. This discussion and analysis has been amended to give effect to the Restatement, as more fully described in Note 3 — Restatement of Previously Issued Financial Statements in Part I, Item 1 to the restated condensed consolidated financial statements included in this Amendment. For further details regarding the Restatement, see “Explanatory Note” and Part I, Item 4 – “Controls and Procedures.”
The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Amendment, particularly in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”
Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “New Era,” “we”, “us”, “our”, and the “Company” are intended to refer to (i) following the Business Combination (as defined below), the business and operations of New Era Energy & Digital, Inc. and its consolidated subsidiaries, and (ii) prior to the Business Combination, New Era Energy & Digital, Inc. (the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiary.
Business Overview and Strategy
New Era Energy & Digital, Inc. was initially incorporated in the State of Delaware on November 5, 2020 under the name Roth CH Acquisition V Co., which was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Roth CH Acquisition V Co. consummated an initial public offering, after which its securities began trading on the Nasdaq on December 1, 2021. In December 2024, Roth CH Acquisition V Co. merged with and into Roth CH V Holdings, Inc., a Nevada corporation and a wholly owned subsidiary of Roth CH Acquisition V Co., formed on June 24, 2024, for the sole purpose of reincorporating Roth CH Acquisition V Co. into the State of Nevada, with Roth CH V Holdings, Inc. surviving such merger.
Immediately following the reincorporation, the Company completed its business combination (the “Business Combination”) with New Era Helium Corp., a Nevada corporation, pursuant to that certain Business Combination Agreement and Plan of Reorganization, dated as of January 3, 2024 (as amended on June 5, 2024, August 8, 2024, September 11, 2024, and September 30, 2024, the “BCA”), by and among New Era Helium Corp., Roth CH Acquisition V Co., Roth CH V Holdings, Inc., and Roth CH V Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Roth CH Acquisition V Co. The Company subsequently changed its name to “New Era Helium, Inc.” and later to “New Era Energy & Digital, Inc.”
We are a vertically-integrated developer and operator of next-generation digital infrastructure and integrated power assets accelerating speed-to-power for advanced AI hyperscalers. In the second half of 2025, we executed a strategic pivot from our legacy natural gas operations to focus exclusively on developing data center campuses where power, land, and connectivity can be assembled and delivered on accelerated timelines. Our mission is to deliver speed-to-power by converging behind-the-meter power flexibility with data center development capabilities. Our primary strategy is to aggregate and entitle “Powered Land” and to develop “Powered Shells” and build-to-suit assets in power-advantaged markets, beginning with the Permian Basin, which benefits from energy abundance, regulatory clarity, and fiber connectivity.
33
We are initially focused on our flagship project, TCDC, a 438-acre campus in Ector County, Texas, designed to support over 1 GW of potential compute capacity through phased development, with projected power delivery beginning as early as the end of 2027. We believe our proximity to major natural gas pipelines, fiber networks and CO2 pipelines will provide us with the ability to serve our customers lower transmission costs and best-in-class uptime for purposes of reliably generating AI compute to capitalize on the AI revolution. We intend to execute through partnering across engineering, construction, procurement, power generation and sustainability with a world-class developer partner to provide our hyperscaler tenants with certainty of execution and speed-to-power.
Recent Developments
Term Loan Agreement with Macquarie Equipment Capital Inc.
On April 8, 2026, TCDC, entered into a Term Loan Agreement with Macquarie Equipment Capital Inc. (“Macquarie”) for a senior secured term loan facility of up to $290,000,000 (the “Term Loan Agreement”). The facility consists of a committed $20,000,000 Term Loan A-1, a $30,000,000 Term Loan A-2, a $40,000,000 Term Loan A-3, and a $200,000,000 Delayed Draw Term Loan (as defined in the Term Loan Agreement). Borrowings under the Term Loan A-2, Term Loan A-3, and the Delayed Draw Term Loan are available solely at Macquarie’s discretion and are subject to certain conditions precedent. TCDC’s obligations under the Term Loan Agreement are secured by a first priority perfected security interest in all of the Collateral (as defined in the Term Loan Agreement), prior to all other liens on the Collateral except for certain permitted liens.
The loans mature on April 8, 2029, and bear interest at a rate equal to Term SOFR plus an applicable margin of 5.50% for Term Loans A-1 and A-2, and 7.75% for Term Loan A-3 and the Delayed Draw Term Loan. The borrowings are subject to a multiple on invested capital (“MOIC”) premium, which is fully earned upon execution of the agreement and payable upon repayment, prepayment, or acceleration. Depending on the staging of the loans and the timing of the repayment, the required MOIC ranges from 1.10 to 1.35. Funding of the Term Loan A-1 was conditioned upon, among other things, the Company closing an underwritten offering of at least $50 million. The Term Loan Agreement also includes certain post-closing covenants requiring the Company to establish an at-the-market program with an aggregate offering price of at least $100 million within 60 days of the closing date and close one or more sales of equity securities resulting in gross proceeds of at least $30 million within 60 days of the closing date. Furthermore, if a data center lease is not executed within six months of the closing date, or if aggregate loan drawings are less than $50 million, the lender may elect to require full prepayment or monthly repayment installments.
SharonAI Purchase Agreement
On January 21, 2025, we entered into a Limited Liability Company Agreement (the “LLC Agreement”) with SharonAI for the creation of TCDC as a joint venture of the Company and SharonAI (the “Joint Venture”). Pursuant to the terms of the LLC Agreement, the purpose of the Joint Venture was to engage in (i) the purchase, building, and development of a site in Texas with an initial 250 MW gas-fired power plant and corresponding data center, (ii) the operation of this site, and (iii) any and all lawful activities necessary or incidental thereto.
The Company made a $75,000 contribution to the Joint Venture on April 16, 2025. On July 16, 2025, the Company made an additional contribution of $750,000. On September 26, 2025, the Company made an additional contribution of $25,000. On November 21, 2025, the Company made an additional contribution of $12,500.
Senior Secured Convertible Promissory Note
On January 16, 2026, we acquired the remaining 50% member interest in TCDC, from SharonAI, pursuant to the Membership Interest Purchase Agreement (the “SharonAI Purchase Agreement”), dated as of January 16, 2026, by and between the Company and SharonAI, for an aggregate purchase price of $70 million, of which (a) $10 million is payable in cash, (b) $10 million is payable in equity securities to be issued in connection with the Company’s next equity financing transaction, and (c) $50 million is payable in the form of a senior secured convertible promissory note (the “Convertible Note”). The entirety of the acquisition consideration is subject to a 19.99% ownership cap. On March 31, 2026, the Company paid SharonAI $9.85 million in cash and issued to SharonAI 2,091,351 shares of common stock (at a price per share of $4.78) in satisfaction of the Company’s obligation to pay $10 million in equity securities under the Membership Interest Purchase Agreement. On April 24, 2026, the Company paid $50 million principal plus accrued interest in cash in satisfaction of its obligations under the Convertible Note.
Investor Waiver
On February 1, 2026, the Company entered into an Amended and Restated Consent and Waiver (the “Amended Waiver”) with ATW AI Infrastructure II LLC (the “Investor”) pursuant to which the Investor agreed to partially waive the anti-dilution provisions of the First Tranche Warrant and Second Tranche Warrant (the “Investor Warrants”) such that the exercise prices of the First Tranche Warrant and Second Tranche Warrant were each adjusted down solely to $2.00. As a result of the anti-dilution adjustments in the Investor Warrants, as modified by the Amended Waiver, the number of shares of common stock of the Company issuable pursuant to the First Tranche Warrant total 5.5 million shares and the number of shares of common stock issuable pursuant to the Second Tranche Warrant total 10.7 million shares.
34
The Investor also waived certain provisions of that certain Securities Purchase Agreement, dated December 6, 2024, between the Company and the Investor (the “Securities Purchase Agreement”), relating to restrictions on Variable Rate Transactions (as defined in the Securities Purchase Agreement), additional issuances of equity securities, redemption or payment of cash dividends, and stock splits. The parties agreed to certain administrative updates to the Securities Purchase Agreement including cashless exercise after 75 days from the effective date of the Amended Waiver (solely to the extent a resale registration statement is not effective), registration rights obligations, the provision of a transfer agent instruction letter, and a forced exercise provision granting the Company the right to force exercise of the Investor Warrants assuming certain conditions are met.
Option for Land Acquisition
On February 12, 2026, TCDC entered into a non-binding letter of intent (the “LOI”) with Jones Bros. Dirt & Paving Contractors, Inc. to acquire approximately 54 acres of vacant land located in Odessa, Ector County, Texas for an estimated total purchase price of $3,510,000. As part of the purchase price, TCDC deposited $100,000 as non-refundable earnest money following execution of the LOI. The exclusivity period runs for a period of 90 days following execution of the LOI. If the parties do not execute a mutually acceptable purchase and sale agreement within 30 days of the execution of the LOI, the LOI shall be terminated.
Management Changes and Commitments
On March 16, 2026, New Era Energy & Digital, Inc. appointed Ted Warner to serve as the Company’s Chief Financial Officer. Under his employment agreement, Mr. Warner will receive an annual base salary of $500,000 and has an annual target bonus opportunity of up to 40% of his base salary based on the achievement of specific performance goals. He may also be eligible for a one-time discretionary bonus of $200,000 upon the successful completion of certain operational and financial milestones. The agreement outlines severance terms detailing that if Mr. Warner is terminated without Cause or resigns for Good Reason prior to a Change in Control, he will receive 100% of his annual base salary, prorated and unpaid prior-year bonuses, and a lump sum payment to cover 12 months of benefit premiums. If such a termination occurs on or after a Change in Control, his severance compensation increases to 150% of his annual base salary, along with the prorated and unpaid prior-year bonuses, and a lump sum payment to cover 18 months of benefit premiums.
On April 28, 2026, the Company appointed Andrew Casazza to serve as the Company’s Chief Corporate Officer. Under his employment agreement, Mr. Casazza will receive an annual base salary of $415,000 and has an annual target bonus opportunity of up to 40% of his base salary based on the achievement of specific performance goals. He may also be eligible to participate in the Company’s employee benefit programs and receive grants of equity or equity-based awards under the Company’s Equity Incentive Plan, as approved by the Compensation Committee. The agreement outlines severance terms detailing that if Mr. Casazza is terminated without Cause or resigns for Good Reason prior to a Change in Control, he will receive 100% of his annual base salary, prorated and unpaid prior-year bonuses, and a lump sum payment to cover 12 months of benefit premiums. If such a termination occurs on or after a Change in Control, his severance compensation increases to 150% of his annual base salary, along with the prorated and unpaid prior-year bonuses, and a lump sum payment to cover 18 months of benefit premiums.
Stock-Based Compensation
In connection with his hiring, Mr. Warner was granted an award of 1,221,346 PSUs. These PSUs are eligible to vest over a five-year performance period that began on January 1, 2026, based on specific performance and time-based service conditions. The Company also granted Mr. Warner 610,673 RSUs. These RSUs are scheduled to vest monthly over a four-year period beginning March 16, 2026, subject to his continued employment. Both the PSU and RSU awards were issued strictly as inducement grants and were not issued pursuant to the Company’s Equity Incentive Plan.
Material Definitive Agreements and Commitments
On March 25, 2026, TCDC entered into amendments to two Special Warranty Deeds with Odessa Industrial Development Corporation (d/b/a Grow Odessa). These amendments were executed to eliminate certain rights of Grow Odessa to repurchase property from TCDC. In connection with the execution of the amendments, TCDC agreed to pay Grow Odessa an aggregate amount of $4,347,500. This total consideration is payable through a promissory note in the principal amount of $3,347,500 and a cash payment of $1,000,000.
35
Trends and Other Key Factors Affecting Results of Operations
We have set out below a discussion of the key factors that have affected our financial performance and that are expected to impact our performance going forward. These factors present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Amendment titled “Risk Factors”.
U.S. Power Demand and Supply Dynamics
The rapid expansion of AI, HPC, and cloud infrastructure, coupled with rising demand from data centers, broad-based electrification, and other emerging electrical needs, has driven record levels of power consumption while domestic electricity providers face significant supply constraints stemming from insufficient new generation capacity and aging infrastructure. We believe we are well positioned to help fill this need by providing consistent baseload generation, in part behind-the-meter to our customers. Powered land is becoming increasingly difficult for hyperscalers to access, and we believe our projects provide “speed-to-power” in a manner differentiated from our peers. However, there can be no assurance that U.S. power demand will continue to grow at current rates, or that advances in technology and efficiency applicable to new or existing power sources will not materially diminish the current trajectory of rising electricity demand.
Artificial Intelligence and Data Center Infrastructure Demand
Our partnerships with hyperscalers will depend, in part, on our ability to identify and secure sites capable of supporting the co-location of power assets and data centers. A decline or slowdown in the deployment of AI infrastructure, a reduction in the power requirements associated with AI workloads, or broader market saturation in the AI sector could adversely affect demand for our solutions and materially impact our business prospects.
Tenant Acquisition and Retention
Our revenue model is heavily dependent on securing multi-GW scale anchor tenants and maintaining long-term power delivery and leasing agreements. Our ability to attract high-credit-quality tenants—particularly large AI developers, hyperscalers, and sovereign compute platforms—is critical to achieving scale and recurring revenues. Changes in customer requirements, economic conditions, or competitive offerings could hinder tenant growth or increase churn risk. Delays in tenant onboarding or renegotiation of terms due to construction timelines may also impact financial performance.
Environmental Stewardship and Community Relations
Although we believe that public support for AI infrastructure remains at acceptable levels, public perception and environmental stewardship remain critical to the long-term viability of our business. Any material shift in local sentiment, changes in federal or state law, organized stakeholder opposition, or heightened perceptions of environmental risk could result in reputational harm or disruptions to our operations.
36
Geopolitical Environment and Policy Considerations
Energy infrastructure and computing capacity are increasingly viewed through the lens of national security and economic competitiveness. Changes in U.S. energy policy, particularly with respect to land use regulation, artificial intelligence governance, foreign investment review, or export controls, may materially affect our operations. Our ability to navigate this evolving policy landscape, especially as it pertains to the regulatory treatment of nuclear energy, grid resilience, and the designation of critical infrastructure, will be an important factor in our long-term scalability and strategic positioning.
Principal Components of Results of Operations
We operate our business within a single reportable segment, which is consistent with how our management reviews our business, makes investment and resource allocation decisions, and assesses operating performance. Management primarily reviews total assets and income (loss) from operations of the single reportable segment.
Revenues, net
Pursuant to the Company’s ongoing oil and gas and helium obligations that existed prior to its strategic pivot, the Company previously sold its oil to a single purchaser on a monthly basis, pursuant to a purchase agreement (the “Oil Purchase Agreement”), at a price based on an index price from the purchaser. The Oil Purchase Agreement will continue on a month-to-month basis thereafter unless and until terminated by the Company or the purchaser with a 30-day advance notice. Oil that is produced from the Company’s wells is stored in tank batteries located on the Company’s lease. When the purchaser’s truck connects to the storage tank and oil enters the truck, control of the oil is transferred to the purchaser, the Company’s obligations are satisfied, and revenue is recognized. During 2025, the Company did not have any oil sales as it disposed of its oil properties in 2024.
We currently sell our natural gas and natural gas liquids to Cimmaron Midstream, formerly known as IACX, (“Cimmaron”) a processor, pursuant to that certain Marketing Agreement, at a price based on an index price from the purchaser, which expired on May 31, 2024. This agreement currently continues on a month-to-month basis unless and until terminated by the Company or the purchaser with a 30-day advance notice. IACX processes our gas for natural gas liquids and other usable components in its facilities. We receive value for our natural gas and any associated natural gas liquids as further defined as hydrocarbons pursuant to the Marketing Agreement. Although the Company produces helium alongside its natural gas, IACX will not compensate us for our helium produced under our existing contract. To date, we have not generated any revenue from the production of helium.
Under our natural gas and natural gas liquid contracts with processors, when the unprocessed natural gas is delivered at the sales meter, control of the gas is transferred to the purchaser, the Company’s obligations are satisfied, and revenue is recognized. In the cases where the Company sells to a processor, management has determined that the processors are customers. The Company recognizes the revenue in these contracts based on the net proceeds received from the processor.
37
The Company has no unsatisfied performance obligations at the end of each reporting period.
Lease operating expenses
Lease operating expenses represent costs incurred in operations of producing properties and workover costs. The majority of these costs are comprised of labor costs, production taxes, compression, workover, and repair costs.
Depletion, depreciation, amortization, and accretion
The Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells, administrative costs directly attributable to those activities and asset retirement costs. The Company records depletion expense for oil and natural gas properties on a units of production basis over the life of the full cost pool’s reserves. The Company records depreciation expense for computer equipment and furniture and fixtures over a useful life of five years. The Company records depreciation expense for leasehold improvement over a useful life of five to fifteen years.
General and administrative costs
General and administrative costs primarily include costs incurred for overhead, consisting of payroll and benefits for the Company’s corporate staff, contractor and consulting costs, stock compensation expenses, accounting and legal costs, and office rent.
Other income and expense
Other income (expenses) primarily consists of interest income and expense, changes in the fair value of derivative instruments and interest expense. Interest income relates primarily to interest earned on certificates of deposit associated with operating bonds. Interest expense is primarily associated with interest on outstanding notes. Changes in the fair value of derivative instruments reflect periodic mark-to-market adjustments on derivative assets and liabilities.
Income taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.
38
The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not (likelihood of greater than 50 percent) that some portion or all the deferred tax assets will not be realized. The balance of the Company’s valuation allowance was $12,777,915 and $10,003,463 as of March 31, 2026 and December 31, 2025, respectively.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. If all or a portion of the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company’s deferred tax liability and will affect the Company’s effective tax rate in the period it is recognized.
The Company records any tax-related interest charges as interest expense and any tax-related penalties as other expense in the consolidated statements of operations of which there have been none to date. The Company is also subject to Texas Margin Tax. The Company realized no Texas Margin Tax in the accompanying condensed consolidated financial statements as we do not anticipate owing any Texas Margin Tax for the periods presented.
Stock-based compensation
The Company accounts for its stock-based compensation awards in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees and non-employees including grants of stock options, to be recognized as expense in the statements of operations based on their grant date fair values. The Company periodically issues common stock and common stock options to consultants and directors for various services. Costs of these transactions are measured at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.
Results of Operations
To provide readers with meaningful comparisons, the following analysis provides comparisons of the financial results for the three months ended March 31, 2026 and 2025. We analyze and explain the differences between periods in the specific line items of the Consolidated Statements of Operations and Comprehensive (Loss) Income.
39
The Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025
The following table sets forth our results of operations for the periods presented:
| For the Three Months Ended March 31, | Variance | |||||||||||||||
2026 | 2025 | ($) | (%) | |||||||||||||
| Revenues, Net | ||||||||||||||||
| Oil, natural gas, and product sales, net | $ | 514,587 | $ | 326,455 | $ | 188,132 | 57.6 | % | ||||||||
| Total Revenues, Net | 514,587 | 326,455 | 188,132 | 57.6 | ||||||||||||
| Costs and expenses | ||||||||||||||||
| Lease operating expenses | 296,053 | 260,480 | 35,573 | 13.7 | ||||||||||||
| Impairment expenses | 375,000 | - | 375,000 | 100.0 | ||||||||||||
| Depletion, depreciation, amortization, and accretion | 374,860 | 198,409 | 176,451 | 88.9 | ||||||||||||
| General and administrative expenses | 9,162,195 | 1,936,654 | 7,225,541 | 373.1 | ||||||||||||
| Total costs and expenses | 10,208,108 | 2,395,543 | 7,812,565 | 326.1 | ||||||||||||
| Loss from operations | (9,693,521 | ) | (2,069,088 | ) | (7,624,433 | ) | 368.5 | |||||||||
| Other income (expenses) | ||||||||||||||||
| Interest income | 11,586 | 15,380 | (3,794 | ) | (24.7 | ) | ||||||||||
| Interest expense | (1,801,424 | ) | (1,442,122 | (359,302 | ) | 24.9 | ||||||||||
| Change in fair value of deferred equity consideration | 346,691 | - | 346,691 | 100.0 | ||||||||||||
| Change in fair value of derivative asset | - | (15,403 | ) | 15,403 | (100.0 | ) | ||||||||||
| Change in fair value of derivative liability | 312,694 | 190,977 | 121,717 | 63.7 | ||||||||||||
| Total Other Income (Expenses) | (1,130,453 | ) | (1,251,168 | ) | 120,715 | (9.6 | ) | |||||||||
| Loss before income taxes | (10,823,974 | ) | (3,320,256 | ) | (7,503,718 | ) | 226.0 | |||||||||
| Net loss | $ | (10,823,974 | ) | $ | (3,320,256 | ) | $ | (7,503,718 | ) | 226.0 | % | |||||
Net Revenue by Product Category
The following table summarizes the Company’s net unaudited consolidated revenues disaggregated by product category:
| March 31, 2026 (As Restated) | March 31, 2025 | |||||||
| Natural gas | $ | 950,217 | $ | 682,161 | ||||
| Less gathering and processing | (505,377 | ) | (402,097 | ) | ||||
| Natural gas, net | 444,840 | 280,064 | ||||||
| NGL | 69,747 | 46,391 | ||||||
| Oil | - | - | ||||||
| Total revenue, net | $ | 514,587 | $ | 326,455 | ||||
40
Natural gas, net represented 86.4% of the revenue for the three months ended March 31, 2026, compared to 85.8% for the three months ended March 31, 2025, and increased $164,776 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase in revenue was primarily due to $122,000 increase related to a $0.55 per Mcf increase in gas prices net of processing and transportation, and $43,000 increase related to 30 MMcf increase in gas sales volumes.
Natural gas liquids (“NGLs”) represented 13.6% of the revenue for the three months ended March 31, 2026, compared to 14.2% for the three months ended March 31, 2025, and increased $23,356 for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase in revenue was primarily due to $38,000 increase related to a 638 per Bbl increase in NGL sales volumes, partially offset by $14,000 decrease related to $10.15 Bbl decrease in NGL prices.
Operating Expenses
| For the Three Months Ended March 31, | Variance | |||||||||||||||
2026 | 2025 | ($) | (%) | |||||||||||||
| Costs and expenses | ||||||||||||||||
| Lease operating expenses | $ | 296,053 | $ | 260,480 | $ | 35,573 | 13.7 | |||||||||
| Impairment expenses | 375,000 | - | 375,000 | 100.0 | ||||||||||||
| Depletion, depreciation, amortization, and accretion | 374,860 | 198,409 | 176,451 | 88.9 | ||||||||||||
| General and administrative expenses | 9,162,195 | 1,936,654 | 7,225,541 | 373.1 | ||||||||||||
| Total costs and expenses | $ | 10,208,108 | $ | 2,395,543 | $ | 7,812,565 | 326.1 | |||||||||
The Company experienced an overall increase in operating expenses of $7,812,565 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.
Lease operating expenses increased $35,573 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase was primarily due to an increase in severance tax expense related to higher revenues during the quarter ended March 31, 2026, compared to the quarter ended March 31, 2025.
Impairment expenses increased $375,000 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase in the first quarter of 2026 was due to impairment of the gas plant related to payments made towards the plan during the quarter ended March 31, 2026 and the change in the Company’s strategy that occurred in late 2025.
41
Depletion, depreciation, amortization and accretion increased $176,451 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily due to a $253,000 increase in accretion expense associated with asset retirement obligations, a $38,000 increase in depletion expense due to a 30 MMcf increase in gas sales volumes, and a $8,000 increase in depreciation expenses associated with the purchase of equipment during 2025 and 2026, partially offset by a $123,000 decrease in depletion expense related to a decrease in the depletion rate.
General and administrative costs increased $7,225,541 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was primarily due to a $5,156,800 increase in stock-based compensation cost, a $983,000 increase in legal expenses, a $711,000 increase in consulting and professional services costs, a $385,000 increase in public relations cost, and a $143,000 increase in travel costs, partially offset by a $100,000 decrease in insurance costs and a $53,000 decrease in other expenses.
Other (Expense) Income
| For the Three Months Ended March 31, | Variance | |||||||||||||||
| 2026 (As Restated) | 2025 | ($) | (%) | |||||||||||||
| Other income (expenses) | ||||||||||||||||
| Interest income | $ | 11,586 | $ | 15,380 | $ | (3,794 | ) | (24.7 | ) | |||||||
| Interest expense | (1,801,424 | ) | (1,442,122 | ) | (359,302 | ) | 24.9 | |||||||||
| Change in fair value of deferred equity consideration | 346,691 | - | 346,691 | 100.0 | ||||||||||||
| Change in fair value of derivative asset | - | (15,403 | ) | 15,403 | (100.0 | ) | ||||||||||
| Change in fair value of derivative liability | 312,694 | 190,977 | 121,717 | 63.7 | ||||||||||||
| Total Other Income (Expenses) | (1,130,453 | ) | (1,251,168 | ) | 120,715 | (9.6 | ) | |||||||||
Interest income decreased $3,794 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This interest income relates to interest earned on the Company’s certificates of deposit.
Interest expense increased $359,302 for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. This increase was primarily due to a $1,766,000 increase in interest due and debt discount on the Sharon AI convertible note, and a $32,000 increase related to interest expense associated with excise and withholding taxes, partially offset by a $1,391,000 decrease related to the convertible note interest, deferral fees and amortization of debt discount and debt issuance cost, and a $43,000 decrease related to interest on the AirLife note, and $7,000 decrease in interest due to the Office of Natural Resources.
42
Change in fair value of deferred equity consideration increased $346,691 as a result of the settlement of the deferred consideration on March 31, 2026 related to the TCDC asset acquisition.
Change in fair value of derivative asset decreased $15,403 as the company paid off the associated debt instrument in the quarter ended December 31, 2025.
Change in fair value of derivative liability increased $121,717 for the quarter ended March 31, 2026 as compared to the quarter ended March 31, 2025. The increase was primarily due to a change in fair value of the derivative associated with the Sharon AI note, partially offset by a change in the fair value of the derivative associated with the ATW convertible note which was paid off in December 31, 2025.
Liquidity and Capital Resources
Going Concern
Our cash and cash equivalents are not sufficient to fund our planned operations for a period of at least one year from the date these financial statements are issued. Until we can generate substantial revenue and achieve profitability, we will need to raise additional capital to fund our ongoing operations and capital needs. There is no assurance, however, that additional financing will be available when needed or that we will be able to obtain financing on terms acceptable to us. These conditions raise substantial doubt about our ability to continue as a going concern.
Sources of Liquidity
We are currently focused in the near-term on using our available liquidity for the development of our flagship data center project, TCDC. We expect our liquidity to be supported by a diversified mix of debt and equity capital, including project financing for the buildout of our flagship project as well as tenant prepayments and advances, strategic equity investments and government grants. Although we plan to fund near-term development activity through a combination of these methods, there can be no assurance that such capital will be available in the amounts required or on favorable terms. Access to financing may be constrained by changes in macroeconomic conditions, increases in interest rates, customer-specific credit risks, regulatory shifts, or other market factors beyond our control.
On January 23, 2026, we filed a shelf registration statement on Form S-3 (File No. 333-292892) with the SEC, which was declared effective on January 30, 2026 (the “Registration Statement”). The Registration Statement, which includes a base prospectus, allows us at any time to offer any combination of securities described in the prospectus in one or more offerings in an aggregate amount of up to $350 million. The Registration Statement is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions and our future capital needs. The terms of any future offering under the Registration Statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering. On April 10, 2026, we closed an underwritten public offering of 29,850,746 shares of common stock, at a price to the public of $3.35 per share, resulting in net proceeds to the Company of approximately $93.4 million pursuant to the Registration Statement. In connection with the underwritten public offering, the underwriters exercised their option to purchase an additional 4,477,611 shares of common stock at the public offering price, resulting in additional net proceeds of approximately $14 million.
From February through April 2026, we issued 5,171,540 shares of common stock underlying the First Tranche Warrant and 852,460 shares of common stock underlying the Second Tranche Warrant to the Investor at an exercise price of $2.00 per share for total proceeds of $12,048,000.
43
We may also experience delays in construction that extend beyond our estimated development timeline. Prolonged development periods could increase project costs beyond budgeted amounts and reduce the availability of construction loans from project partners or third party financing sources during interim periods. Any such timing misalignments could necessitate additional bridge capital or contingency financing, which may not be available on acceptable terms, or at all. Furthermore, unanticipated events—such as permitting delays, failure to secure required regulatory approvals, or force majeure events—could result in liquidity shortfalls or force us to amend our capital plan.
Market conditions may also affect our ability to raise capital. For example, credit providers or their regulators may shift policy away from funding projects involving nuclear generation assets, or may reduce exposure to long-duration infrastructure development with extended pre-revenue periods. Even if financing is available, we may be required to accept unfavorable terms, including higher cost of capital, restrictive covenants, or equity dilution, all of which could impair our ability to execute our business plan. If we are unable to raise capital in the amounts, timing, or terms we expect, we may be forced to delay capital expenditures, amend or terminate our purchase commitments for long-lead materials or surrender assets pledged as collateral under our financing agreements in order to preserve liquidity, which could materially extend our development timeline and delay one or more phases of our projects, preventing us from achieving planned operational and financial milestones within the anticipated timeframe.
Planned Use of Capital
The capital expenditures we expect to incur as we complete the development of our flagship project will be significant. We currently estimate that the total capital expenditures we will incur to complete the development of our flagship project could exceed $15 billion, excluding amounts expected to be financed by our tenants of which approximately $50 million to $300 million is expected to be incurred in the next twelve months across all phases. These near-term expenditures are expected to be funded through a combination of tenant prepayments, project-level debt financing, and strategic equity capital. Required capital expenditures are difficult to estimate with precision and will depend on final tenant composition, generation mix, supply chain dynamics, and site optimization decisions.
Uses and Availability of Funds
We measure our liquidity in a number of ways, including cash balances on hand, working capital, and operating cash flows.
We had a cash balance of $2,224,771 as of March 31, 2026. We also had a working capital deficit of $57,171,803 as of March 31, 2026.
The Company’s future capital requirements will depend on many factors, including its rate of revenue growth and the timing and extent of expenditures to support sales, marketing, and infrastructure development. The Company currently expects to require approximately $73.7 million over the next twelve months, including up to $50.0 million payable by June 30, 2026 related to outstanding financing arrangements. The Company also expects to incur approximately $10.0 million in general and administrative expenses and approximately $3.9 million of other costs. Upon execution of binding term sheets or definitive agreements with data center users, these expected costs may increase materially.
Since inception, the Company’s primary sources of liquidity have included operating cash flows, capital contributions, and borrowings.
44
Subsequent to March 31, 2026, the Company strengthened its liquidity position through a combination of debt and equity financings. On April 8, 2026, TCDC, the Company’s wholly owned subsidiary, entered into a senior secured term loan facility providing for borrowings of up to $290.0 million, including an initial committed tranche of $20.0 million, which was fully funded on April 13, 2026. In addition, on April 10, 2026, the Company completed an underwritten public offering, resulting in net proceeds of approximately $93.4 million. In connection with the underwritten public offering, the underwriters exercised their option to purchase additional shares of common stock at the public offering price, resulting in additional net proceeds of approximately $14 million. The Company used the proceeds from the offering to repay outstanding borrowings under its senior secured convertible promissory note, and intends to use any remaining proceeds available for general corporate purposes.
Access to additional amounts under the term loan facility beyond the initial committed tranche is subject to lender approval and the satisfaction of certain conditions.
Cash Flows
Cash flows for the three months ended March 31, 2026 and 2025
The following table summarizes our cash flow activity for the periods presented:
| For the Three Months Ended March 31, | |||||||
| 2026 (As Restated) | 2025 | |||||||
| Cash Provided by (Used in) | ||||||||
| Operating Activities | $ | (5,855,610 | ) | $ | (2,830,194 | ) | ||
| Investing Activities | (6,726,134 | ) | (677,547 | ) | ||||
| Financing Activities | 13,603,787 | 3,487,593 | ||||||
| Net increase in cash and cash equivalents | $ | 1,022,043 | $ | (20,148 | ) | |||
Net cash used in operating activities
Cash used in operating activities was $5,855,610 for the three months ended March 31, 2026, primarily driven by a net loss of $10,823,974. This was partially offset by non-cash adjustments, including stock-based compensation of $5,156,800, amortization of debt discount and debt issuance costs of $752,750, depletion, depreciation, amortization, and accretion of $374,860, and impairment expense of $375,000. Cash used in operating activities was also impacted by changes in working capital, including increases in accounts receivable of $382,706 and prepaid and other current assets of $1,211,506, partially offset by increases in accrued liabilities of $1,452,978 and accounts payable of $55,302.
Operating activities used cash of $2,830,194 for the three months ended March 31, 2025. Net loss of $3,320,256 was affected by depletion, depreciation, amortization, and accretion of $198,409, change in fair value of derivative asset of $15,403, and accrued interest on note payable and other liabilities of $42,515 and amortization of debt discount of $1,160,447, offset by change in fair value of derivative liability of $190,977 and interest income on investments and notes receivable of $15,380. Changes in operating assets and liabilities used $720,355 of cash for operating activities.
45
Net cash used in investing activities
Investing activities used cash of $6,726,134 for the three months ended March 31, 2026, related to the purchase of TCDC, purchase of property, plant and equipment and the purchase of land.
Investing activities used cash of $677,547 for the three months ended March 31, 2025, related to the purchasing of property, plant and equipment offset by proceeds from the sale of interest in oil and natural gas properties and proceeds from the sale of restricted investments.
Net cash provided by financing activities
Financing activities provided cash of $13,603,787 for the three months ended March 31, 2026, primarily driven by $11.3 million of proceeds from the exercise of warrants and $2.6 million of proceeds from a related party receivable.
Financing activities provided cash of $3,487,593 for the three months ended March 31, 2025, primarily related to proceeds from exercise of warrants and proceeds from the convertible note, offset by repayment on convertible note and debt issuance costs.
Seasonality
We typically do not experience seasonality in our operations.
Recent Accounting Pronouncements
Recent Accounting Pronouncements, not yet adopted:
ASU 2024-03, “Disaggregation of Income Statement Expenses” (“ASU 2024-03”) requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosure about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2027 with early adoption permitted. The Company is currently evaluating the impact of this ASU on its unaudited financial statements and disclosures.
In May 2025, the FASB issued ASU No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. The standard revises current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity (“VIE”) that meets the definition of a business. The amendments differ from current GAAP because, for certain transactions, they replace the requirement that the primary beneficiary of a VIE is always the acquirer with an assessment that requires an entity to consider the factors to determine which entity is the accounting acquirer. Under the amendments, acquisition transactions in which the legal acquiree is a VIE will, in more instances, result in the same accounting outcomes as economically similar transactions in which the legal acquiree is a voting interest entity. The ASU does not change the accounting for a transaction determined to be a reverse acquisition or a transaction in which the legal acquirer is not a business and is determined to be the accounting acquiree. The new guidance will become effective for interim and annual reporting periods beginning on January 1, 2027, will require a prospective transition method for business combinations that occur after the initial adoption date, and early adoption is permitted. Management is currently evaluating the impact of the new standard on the Company’s unaudited financial statements.
46
Recently Adopted Accounting Pronouncements:
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU was effective for the annual period ended December 31, 2025. The adoption of this guidance had no impact on the Company’s unaudited financial statements.
Critical Accounting Estimates
The Company prepares its condensed consolidated financial statements for inclusion in this Amendment in accordance with generally accepted accounting principles in the United States (“GAAP”). See Note 2 of Notes to Consolidated Financial Statements. The following is a discussion of the Company’s most critical accounting estimates, judgments and uncertainties that are inherent in the Company’s application of GAAP.
Reserves
The Company’s proved reserve information as of December 31, 2025 and December 31, 2024 was prepared by MKM Engineering, independent reservoir engineers. Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, proved reserve estimates will be different from the quantities of oil and natural gas that are ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may justify material revisions, positively or negatively, to the estimate of proved reserves. The Company’s estimates of proved reserves materially impact depreciation, depletion and amortization (“DD&A”) expense. If the estimates of proved reserves decline, the rate at which the Company records DD&A expense will increase, reducing future net income. Such a decline may result from lower commodity prices, which may make it uneconomical to drill for and produce higher cost fields. Under the full cost method of accounting, the Company performs a quarterly ceiling test in accordance with SEC Regulation S-X Rule 4-10. The ceiling test limits the net capitalized costs of oil and gas properties to the present value (PV-10) of estimated future net revenues from proved reserves, based on SEC-prescribed commodity prices, adjusted for discounted asset retirement obligations and income taxes. The calculation requires significant estimates and assumptions, including reserve quantities, future production timing, future operating and development costs and commodity prices. Declines in proved reserve estimates, reductions in projected future net revenues or other adverse changes in the underlying assumptions may reduce the calculated ceiling limitation and result in non-cash impairment charges.
47
Asset Retirement Obligations.
The Company has significant obligations to remove tangible equipment and facilities and to restore the land at the end of oil and natural gas production operations. The Company’s removal and restoration obligations are primarily associated with plugging and abandoning wells. Estimating the future restoration and removal costs is difficult and requires management to make estimates and judgments because most of the removal obligations are many years in the future and in some cases have vague descriptions of what constitutes removal. Asset removal technologies and costs are constantly changing, as are regulatory, political, environmental, safety and public relations considerations. Inherent in the present value calculation are numerous assumptions and judgments including the ultimate settlement amounts, credit-adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the present value of the existing asset retirement obligations, a corresponding adjustment is generally made to the crude oil and natural gas property balance.
Deferred Tax Asset Valuation Allowance.
The Company continually assesses both positive and negative evidence for recoverability of its deferred tax assets and based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences, the Company maintained a valuation allowance of $12,777,915 as of March 31, 2026. There can be no assurance that facts and circumstances will not materially change and require the Company to revise this valuation allowance in a future period.
Stock-based Compensation.
The Company calculates the fair value of stock-based compensation using various valuation methods. The Company determination on the appropriate valuation method requires the use of estimates to derive the inputs necessary to determine fair value. Costs of these transactions are measured at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable.
Warrants
The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480”), then in accordance with ASC 815-40 (“ASC 815”), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.
48
Related parties
Management approves all material related-party transactions. Management considers the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction, and the benefits to the Company and the relevant related party. In determining whether to approve a related party transaction, the following factors are considered: (1) if the terms are fair to the Company, (2) if there are business reasons to enter into the transaction, or (3) if the transaction would present an improper conflict of interest for any officer.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The hierarchy is broken down into three levels based on the observability of inputs as follows:
| ● | Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment; |
| ● | Level 2 — Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly; and |
| ● | Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
Commitments and Contingencies
Environmental Matters
The Company, as a lessee of oil and gas properties, is subject to various federal, provincial, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. There can be no assurance, however, that current regulatory requirements will not change, or past noncompliance with environmental laws will not be discovered on the Company’s properties.
Irrevocable Standby Letter of Credit and Promissory Note
On September 24, 2020, the Company entered into an irrevocable standby letter of credit (“LOC”) and a promissory note with West Texas National Bank in the amount of $25,000 with variable interest initially of 4.25% per annum and maturing on December 24, 2021. No amount was drawn down under this LOC up to the date it was amended on October 29, 2021.
On October 29, 2021, the Company entered into an amendment of the LOC a new promissory note, increasing the amount to $425,000 with variable interest initially of 4.25% per annum and maturing on September 29, 2026. On January 1, 2022, and March 29, 2022, the LOC was amended, and new promissory notes were executed increasing the amount to $650,000 and $920,000, respectively. As of March 31, 2026, and December 31, 2025, no amount was drawn down under the LOC.
49
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a smaller reporting company we are not required to make disclosures under this Item.
Item 4. Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our current principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive officer and principal financial officer and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Evaluation of Disclosure Controls and Procedures (Restated)
As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures in effect as of March 31, 2026. As a result of management’s evaluation, in connection with the filing of the Original Form 10-Q, our prior Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2026, because of the historical material weakness described below. Subsequent to the filing of the Original Form 10-Q, and in connection with this Amendment, the current Chief Executive Officer and the Chief Financial Officer reevaluated the effectiveness of the Company’s disclosure controls and procedures and continued to conclude that our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2026, because of both the historical and the additional material weaknesses in our internal control described below.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
| ● | Historical Material Weakness: In connection with the preparation of our consolidated financial statements for the fiscal year ended December 31, 2024, we concluded there was material weakness in financial reporting because management did not adequately evaluate and test its controls and procedures. We closed the Business Combination on December 6, 2024, and started trading on December 9, 2024. Prior to this, we were a private company with limited accounting personnel and other resources with which to address its internal controls over financial reporting. |
During 2025, the Company continued the process to develop and implement its internal controls over financial reporting. This included the documentation of processes and identification of existing controls. In addition, in order to address segregation of duties issues as a result of the Company’s limited accounting staff, the Company continues to engage a third party to assist in the monthly and quarterly accounting, a third party to assist in the evaluation of appropriate accounting treatment and disclosures related to complex transactions and new pronouncements, and a third party to assist in accounting for income taxes. The Company will develop and review plans in order to address the material weakness in its internal controls over financial reporting. These plans may include engaging a third party to assist in the development, evaluation, testing and monitoring of its internal controls over financial reporting. As of March 31, 2026, and as of the date of this filing, the Company has not completed development nor finalized plans to address its material weakness in its internal controls over financial reporting.
50
| ● | Additional Material Weaknesses: Subsequent to the filing of the Original Form 10-Q, management identified the following additional material weaknesses in internal control over financial reporting as of March 31, 2026: (i) we did not effectively operate controls related to the measurement of grant-date fair value and the attribution of compensation cost for share-based payment awards containing performance and market conditions, including management review of supporting schedules and third-party valuation reports, and (ii) we did not effectively operate controls over the review of significant transactions, including the review and classification of related professional fees and transaction costs. |
These material weaknesses resulted in material misstatements to general and administrative expenses, loss from operations, loss before income taxes, net loss, net loss per share, additional paid-in capital, and accumulated deficit, as well as to the presentation of net loss and non-cash stock-based compensation within the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in stockholders’ equity (deficit).
With the oversight of management and the Audit Committee, we are in the process of developing and implementing a remediation plan to address these material weaknesses. Elements of the plan include implementing additional management review and oversight, including consultation with external technical accounting resources as necessary, over equity awards and other significant transactions.
We believe our remediation plans will be sufficient to remediate our material weaknesses. However, the material weaknesses will not be considered remediated until the Company completes the design and implementation of the actions described above and the controls operate for a sufficient period of time, and management has concluded, through testing, that these controls are effective. As we test our internal controls over financial reporting, we may determine that additional measures or modifications to our remediation plans are necessary or appropriate.
The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. The elements of our remediation plans can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control Over Financial Reporting
Except as disclosed above, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
51
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be party to or otherwise involved in legal proceedings arising in the ordinary course of business. We recognize provisions for legal proceedings in our financial statements, in accordance with accounting rules, when we are advised by independent outside counsel that (i) it is probable that an outflow of resources will be required to settle the obligation and (ii) a reliable estimate can be made of the amount of the obligation. The assessment of the likelihood of loss includes analysis by outside counsel of available evidence, the hierarchy of laws, available case law, recent court rulings and their relevance in the legal system. Our provisions for probable losses arising from these matters are estimated and periodically adjusted by management. In making these adjustments our management relies on the opinions of our external legal advisors.
New Mexico Litigation
On December 23, 2025, the State of New Mexico filed a lawsuit against the Company and other parties, including Chief Executive Officer E. Will Gray II, in the First Judicial District Court for Santa Fe County (“New Mexico Litigation”). The complaint alleges several causes of action, including for unjust enrichment, violations of the New Mexico Oil and Gas Act, violations of the Uniform Voidable Transactions Act, Fraud Against Taxpayers Act, civil conspiracy, and veil piercing, and seeks, among other relief, damages, civil penalties, costs, and attorneys’ fees. The New Mexico Litigation was stayed shortly after it was initiated because of the ongoing bankruptcy proceedings for several unrelated defendants. The case is in its early stages and will remain in abeyance until the bankruptcy court lifts the stay.
In response to the New Mexico Litigation and reports by purported short sellers on subject matters similar to those alleged in the lawsuit, the independent members of the Board promptly initiated and conducted an internal investigation into the allegations, with the assistance of independent outside counsel. The investigation considered, among other things, the State of New Mexico’s allegations that the Company’s subsidiary, Solis Partners, LLC, and the Company’s Chief Executive Officer, Mr. Gray, tried to place the burden of plugging, abandoning, and reclaiming numerous oil and gas wells owned by Acacia Resources, LLC on the State of New Mexico. The investigation included review of documents and many interviews. No limits were placed on the scope of the investigation. The investigation found no facts supporting the allegations of wrongdoing in the short seller reports or the New Mexico Litigation by Solis Partners, LLC, Mr. Gray, the Company, or any entities associated with Mr. Gray.
We may incur significant legal and other fees and costs to resolve the New Mexico Litigation. We are not currently able to estimate the possible cost to us from the New Mexico Litigation, as this matter is currently at an early stage and we cannot be certain how long it may take to resolve this matter or the possible amount of any damages that we may be required to pay. We could, in the future, incur an adverse judgment or enter into a settlement for monetary damages as a result of the New Mexico Litigation. During the pendency of our litigation, we may be unable to consummate our contemplated sale of legacy natural gas assets. If the New Mexico Litigation results in the payment of substantial damages by us or our ability to monetize existing assets, it could adversely affect our business, financial condition or results of operations.
Shareholder Litigation
On April 1, 2026, a federal securities class action lawsuit was filed in the U.S. District Court for the Western District of Texas against the Company and certain members of its management, styled Annonio v. New Era Energy & Digital, Inc., et al., Case No. 7:26-cv-00120. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and seeks, among other relief, a determination that the action is a proper class action under Rule 23 of the Federal Rules of Civil Procedure, damages, costs, and attorneys’ fees.
The Company intends to vigorously defend itself against these claims. We believe that the resolution of this litigation will not have a material adverse effect on our business, financial condition or results of operations. Nonetheless, we cannot predict the outcome of these proceedings, as legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of this matter could have a material adverse effect on our business, financial condition or results of operations.
52
Item 1A. Risk Factors.
Except as set forth below, there have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. You should carefully read and consider such risks, together with all of the other information in our Annual Report on Form 10-K for the year ended December 31, 2025, in this Amendment (including the disclosures in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our condensed consolidated financial statements and related notes), and in the other documents that we file with the SEC.
Our management has identified certain disclosure control deficiencies, which management believes constitute material weaknesses. Our failure to establish and maintain proper and effective disclosure controls and procedures has caused, and could continue to cause, material misstatements of our financial statements, and investors may lose confidence in our financial reporting and the trading price of our common stock may decline.
Effective disclosure controls and procedures are necessary to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Any failure to establish and maintain effective disclosure controls and procedures, including due to a failure to remediate the material weaknesses mentioned below or the discovery or occurrence of any additional material weaknesses in the future, could adversely affect our ability to prepare financial statements within required time periods and record, process and report financial information accurately, which could result in material misstatements in our financial statements and cause us to fail to meet our reporting obligations.
In connection with the filing of the Original Form 10-Q, management concluded that our disclosure controls and procedures were not effective as of March 31, 2026 due to a historical material weakness in internal control over financial reporting. Subsequent to the filing of the Original Form 10-Q, management reevaluated the effectiveness of our disclosure controls and procedures and continued to conclude that our disclosure controls and procedures were not effective as of March 31, 2026 due to the foregoing historical material weakness and an additional material weakness in internal control over financial reporting that was identified relating to a misstatement of stock-based compensation expense and a misstatement in expense classification of professional fees and transaction costs.
We are in the process of developing and implementing a remediation plan to address the material weaknesses, however, we cannot assure you that any of the measures we implement will effectively mitigate or remedy such deficiencies. As a result, our investors could lose confidence in our reported financial information, the market price of our common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.
We have a material weakness in our internal control over financial reporting, which, if left unremedied, could materially and adversely affect the market price of our stock.
As of the date of this Amendment, we have not maintained effective controls over the control environment, including our internal control over financial reporting. We are a small company with few employees in our accounting and finance department. Although we utilize third parties to assist in the performance of certain accounting and tax related functions, we may still lack the ability to have adequate segregation of duties in the financial statement preparation process. In addition, we have not adequately evaluated and tested controls over the control environment, including our disclosure controls and our internal controls over financial reporting. Since these entity level controls have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. If we are unable to remediate this material weakness as a newly public company, our financial reporting may not be reliable, and the market price of our stock may be adversely affected.
53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) During the quarter ended March 31, 2026, there were no unregistered sales of our securities that were not reported in a Current Report on Form 8-K.
(b) Not applicable.
(c) None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
Item 6. Exhibits.
54
| * | Filed herewith. |
| ** | Furnished herewith. |
| + | Previously filed with the Original Form 10-Q. |
55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEW ERA ENERGY & DIGITAL, INC. | ||
| By: | /s/ Charles Nelson |
|
| Name: | Charles Nelson | |
| Title: | Chairman and Chief Executive Officer | |
| Date: | August 14, 2026 | |
| By: | /s/ Ted Warner |
|
| Name: | Ted Warner | |
| Title: | President and Chief Financial Officer | |
| Date: | August 14, 2026 |
56