New ERA Energy & Digital, Inc 8-K, filed Dec 12, 2024
New ERA Energy & Digital, Inc. (NUAI)
About this 8-K
New ERA Energy & Digital, Inc filed this 8-K on December 12, 2024, reporting on events of December 6, 2024.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.01: Completed an acquisition or sale of assets
- Item 3.03: Change to shareholders' rights
- Item 4.01: Change of auditor
- Item 5.01: Change in control
- Item 5.02: Director or officer change, or executive pay
- Item 5.03: Charter or bylaw amendment, or fiscal year change
- Item 5.05: Code of ethics change or waiver
- Item 5.06: Change in shell company status
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Securities Exchange Act of 1934
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Introductory Note
Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” “Combined Company,” and the “Company” refer to New Era Helium Inc., a Nevada corporation (formerly known as Roth CH V Holdings, Inc., a Delaware corporation), after giving effect to the Business Combination (as defined below). Furthermore, unless otherwise stated or unless the context otherwise requires, references to “Holdings” refer to Roth CH V Holdings, Inc., a Nevada corporation, prior to the Closing Date (as defined below). All references herein to the “Board” refer to the board of directors of the Company.
Terms used in this Current Report on Form 8-K (this “Report”) but not defined herein, or for which definitions are not otherwise incorporated by reference herein, shall have the meaning given to such terms in the Proxy Statement/Prospectus filed by Holdings with the U.S. Securities and Exchange Commission (the “SEC”) on November 6, 2024 (the “Proxy Statement/Prospectus”) and such definitions are incorporated herein by reference.
This Report incorporates by reference certain information from reports and other documents that were previously filed with the SEC, including certain information from the Proxy Statement/Prospectus. To the extent there is a conflict between the information contained in this Report and the information contained in such prior reports and documents and incorporated by reference herein, the information in this Report controls.
Closing of Business Combination
On December 6, 2024 (the “Closing Date”), New Era Helium Inc., formerly known as Roth CH V Holdings, Inc. (the “Company” or the “Registrant”), completed the business combination (the “Business Combination”) contemplated by the Business Combination and Plan of Organization dated January 3, 2024 (the “Business Combination Agreement”) by and among New Era Helium Corp., a Nevada corporation, Roth CH Acquisition V Co., a Delaware corporation (“ROCL”), and Roth CH V Merger Sub, a Delaware corporation and a wholly-owned subsidiary of ROCL (“Merger Sub”), and subsequent amendments to the Business Combination Agreement. Pursuant to the Business Combination Agreement, Merger Sub merged with and into New Era Helium Corp., with New Era Helium Corp. surviving the Business Combination as a wholly owned subsidiary of ROCL. The Business Combination Agreement was previously filed as Annex A in the Proxy Statement/Prospectus by Holdings with the SEC on November 6, 2024.
First Amendment to Business Combination Agreement
On June 5, 2024, ROCL and the Company entered into the First Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “First Amendment”) pursuant to which, among other things: (a) the Outside Date (as defined in the Business Combination Agreement) was extended to 270 days after the date of the Business Combination Agreement; (b) the structure of the Business Combination changed such that: (i) ROCL will merge (the “Initial Merger”) with and into a newly formed Nevada corporation, Holdings, a wholly owned subsidiary of ROCL, and Holdings would be the survivor of the Initial Merger; (ii) Holdings would sign a joinder and become a party to the Business Combination Agreement; and (iii) immediately subsequent to the Initial Merger, Merger Sub would merge with and into the Company, with the Company surviving the Business Combination as a wholly owned subsidiary of Holdings; and (c) the closing condition that the Company raise at least $45 million in a private placement of securities in order to fund its new plant construction was removed, and the closing condition that certain indebtedness of the Company be converted into shares of common stock of the Company was removed. The First Amendment was previously filed as Annex A in the Proxy Statement/Prospectus by Holdings with the SEC on November 6, 2024.
Second Amendment to the Business Combination Agreement
On August 8, 2024, the parties to the Business Combination Agreement entered into the Second Amendment (the “Second Amendment”) to the Business Combination Agreement, pursuant to which, among other things: (a) the Outside Date was extended to October 31, 2024 and (b) the definitions of “Company Merger Shares” and “Net Debt” were amended. The Second Amendment was previously filed as Annex A in the Proxy Statement/Prospectus by Holdings with the SEC on November 6, 2024.
Third Amendment to the Business Combination Agreement
On September 11, 2024, the parties to the Business Combination Agreement entered into the Third Amendment (the “Third Amendment”) to the Business Combination Agreement, pursuant to which, among other things, the parties clarified the effect that any variation in the Net Debt of NEH between January 3, 2024 and the date of closing of the Business Combination (“Closing”) might have on the number of Company Merger Shares to be delivered at Closing. The Third Amendment was previously filed as Annex A in the Proxy Statement/Prospectus by Holdings with the SEC on November 6, 2024.
Fourth Amendment to the Business Combination Agreement
On September 30, 2024, the parties to the Business Combination entered into the Fourth Amendment (the “Fourth Amendment”) to the Business Combination Agreement, pursuant to which, among other things, the parties extended the Outside Date to November 30, 2024. The Fourth Amendment was previously filed as Annex A in the Proxy Statement/Prospectus by Holdings with the SEC on November 6, 2024.
Conversion of Secured Convertible Debentures
In November, September, October, August, July, June and February of 2024, New Era Helium Corp. conducted bridge financing rounds exempt from registration under Regulation D of the Securities Act of 1933, as amended. In such bridge financing rounds, New Era Helium Corp. issued 10% Secured Convertible Debentures (the “Bridge Financing Debentures”) to certain investors, which were payable upon the earliest of: i) the date that the holder accelerates the obligations under the Bridge Financing Debentures; ii) March 1, 2025; or iii) the consummation of the Business Combination. The Bridge Financing Debentures were convertible into common stock of New Era Helium Corp. at a conversion rate determined by dividing (i) the principal and interest converted under each Bridge Financing Debenture by (ii) the per share valuation (on a fully diluted basis) of NEH’s common stock using a pre-money valuation of $20 million.
Since the earliest to occur of these payment events was the Closing Date, immediately prior to the Closing, New Era Helium Corp. converted all of the principal amount and accrued interest owed under the Bridge Financing Debentures Upon the Closing, shares of Holdings were issued to the equity holders of New Era Helium Corp. in connection with the Business Combination, including in exchange for the shares of New Era Helium Corp. issued to the holders of the Bridge Financing Debentures after conversion into shares of New Era Helium Corp. In connection with the conversion of the Bridge Financing Debentures, 2,409,270 shares of Holdings were issued to prior holders of the Bridge Financing Debentures.
Completion of the Business Combination
As previously reported on the Current Report on Form 8-K filed by ROCL with the SEC on December 5, 2024, ROCL held a special meeting of its stockholders on November 26, 2024 (the “Special Meeting”), at which holders of 3,728,929 shares of ROCL’s common stock ( the “ROCL Common Stock”), representing approximately 75.80% of the issued and outstanding shares of ROCL Common Stock, were present in person or by proxy, constituting a quorum for the transaction of business. Only stockholders of record as of the close of business on October 28, 2023, the record date (the “Record Date”) for the Special Meeting, were entitled to vote at the Special Meeting. As of the Record Date, 4,919,297 shares of ROCL Common Stock were outstanding and entitled to vote at the Special Meeting.
At the Special Meeting, ROCL’s stockholders approved the proposals outlined in the Proxy Statement/Prospectus, including, among other things, the adoption of the Business Combination Agreement and approval of the transactions contemplated by the Business Combination Agreement, including the Initial Merger and Merger Sub’s merger with and into the Company, with the Company surviving the Business Combination as a wholly owned subsidiary of Holdings, and the issuance of the Company’s securities as consideration thereunder, as described in the section titled “The Business Combination Proposal (Proposal 2)” beginning on page 112 of the Proxy Statement/Prospectus.
In connection with and in advance of the Business Combination, on December 6, 2024, ROCL filed the following documents:
| 1. | The Amended and Restated Articles of Incorporation, a copy of which is attached hereto as Exhibit 3.1. |
| 2. | The Articles of Merger between ROCL and Holdings, attached hereto as Exhibit 2.3. |
| 3. | The Articles of Merger between Merger Sub and New Era Helium Cop., attached hereto as Exhibit 2.4. |
The Merger Consideration and Treatment of Securities
At the Closing, pursuant to the terms of the Business Combination Agreement and after giving effect to the redemptions of shares of Roth Common Stock:
| 1. | the total consideration paid at the Closing (the “Merger Consideration”) by ROCL to New Era Helium Corp. security holders was 8,916,625 shares of common stock of Holdings. |
| 2. | each share of Merger Sub common stock, par value $0.0001 per share (“Merger Sub Common Stock”), issued and outstanding immediately prior to the Effective Time (as defined in the Business Combination Agreement) was converted into one newly issued share of the Company’s common stock. |
Following the filing of the Articles of Merger with the Secretary of State of the State of Nevada, ROCL merged with and into Holdings, with Holdings as the surviving company of the Initial Merger. The Articles of Merger of ROCL and Holdings is attached hereto as Exhibit 2.3. Following the filing of the Articles of Merger with the Secretary of State of the State of Nevada, Merger Sub merged with and into with New Era Helium Corp. as the surviving corporation of the Business Combination, effective December 6, 2024. Thus, New Era Helium Corp. became a wholly-owned subsidiary of ROCL. In connection with the Business Combination, Holdings changed its name to “New Era Helium Inc.” The Articles of Merger of Merger Sub and New Era Helium Cop. is attached hereto as Exhibit 2.4.
Equity Purchase Facility
The Equity Purchase Facility Agreement
On the Closing Date, 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”). The EPFA is incorporated by reference from the Form 8-K filed by the Company on December 9, 2024 (the “EPFA Current Report”). Pursuant to the EPFA, the Company has the right to issue and sell to the EPFA Investor, from time to time as provided therein, and the EPFA Investor must purchase from the Company, up to an aggregate of $75 million (the “Commitment Amount”) in newly issued shares (the “Advance Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), subject to the satisfaction or waiver of certain conditions. The Company may issue up to 866,873 Advance Shares assuming a purchase price of $8.075 per Advance Share.
The EFPA also provides for the issuance of two pre-paid advances in the aggregate amount of $10 million, the first pre-paid advance in the amount of $7 million and the second pre-paid advance in the amount of $3 million, each of which to be evidenced by a senior secured convertible promissory note (each, a “Note”), which is convertible into shares of Common Stock, the form of which Note is attached to the EPFA Current Report as Exhibit 10.2 and is incorporated herein by reference. On December 6, 2024, the EPFA Investor advanced to the Company the aggregate principal amount of $7 million following the Closing (the “First Pre-Paid Advance Note”). The second pre-paid advance of the aggregate principal amount of $3 million (the “Second Pre-Paid Advance Note”) will be advanced by the EPFA Investor to the Company no later than three (3) trading days following the date on which the initial Registration Statement (as defined in the EPFA) is declared effective by the U.S. Securities and Exchange Commission, subject to the satisfaction or waiver of certain conditions. The Notes are secured by all assets of the Company as described below. Based on the terms of the Note, the Company received proceeds under the First Pre-Paid Advance Note in an amount of approximately $6.5 million, after giving effect to a 7% original issue discount. These proceeds will be used by the Company first to pay the monthly payments of the First Pre-Paid Advance Note in accordance with its terms and then the remainder in the manner as will be set forth in the prospectus included in the Registration Statement. Currently, the Note for the First Pre-Paid Advance is initially convertible into 770,000 shares of Common Stock, assuming a conversion price of $10 and no accrued and unpaid interest. The Second Pre-Paid Advance Note will be initially convertible into 330,000 shares of Common Stock, assuming a conversion price of $10 and no accrued and unpaid interest.
The proceeds from the Second Pre-Paid Advance Note and sale of Advance Shares are expected to be 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 and as otherwise set forth in the prospectus included in the Registration Statement.
Pursuant to the terms of the EPFA, the Company is required to hold a special meeting of stockholders no later than ninety (90) calendar days following December 6, 2024 to seek approval of (i) the issuance of all of the shares of Common Stock that may be 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 250,000,000.
Upon the terms and subject to the conditions of the EPFA, at any time until the EPFA is terminated, the Company, in its sole discretion, has the right, but not the obligation, to issue and sell to the EPFA Investor, and the EPFA Investor must subscribe for and purchase from the Company, Advance Shares by the delivery to the EPFA Investor of Advance Notices (as defined below), on the following terms:
(i) The Company must, in its sole discretion, select the number of Advance Shares, not to exceed the Maximum Advance Amount (as defined below), it desires to issue and sell to the EPFA Investor in each Advance Notice and the time it desires to deliver each written notice to the EPFA Investor setting forth the number of Advance Shares that the Company desires to issue and sell to the EPFA Investor (the “Advance Notice”).
(ii) There is no mandatory minimum Advances and there is no non-usages fee for not utilizing the Commitment Amount or any part thereof.
(iii) For so long as any amount remains outstanding under the Notes, without the prior written consent of the EPFA Investor, the Company may only submit an Advance Notice if the aggregate purchase price owed to the Company from such Advances (“Advance Proceeds”) may be paid by the EPFA Investor by offsetting the amount of the Advance Proceeds against an equal amount outstanding under the subject Notes (first towards accrued and unpaid interest, and then towards outstanding principal), subject to the Advance Proceeds being used by the Company first to pay the monthly payments of the Notes in accordance with the terms of the Notes and then the remainder in the manner as will be set forth in the prospectus included in any registration statement filed pursuant to the EPFA (and any post-effective amendment thereto) and any prospectus supplement thereto filed pursuant to the EPFA, including for working capital purposes for the Company and its subsidiaries.
(iv) If there is any default under the Notes, the Company may only submit an Advance Notice if the Company obtains the prior written consent of the EPFA Investor and the Company must use the proceeds from the sale of the Advance Shares under the EPFA to first pay the Company’s senior Indebtedness, including amounts outstanding under any Notes as provided in Section 7.15 of the EPFA, subject to certain exceptions.
“Maximum Advance Amount” means:
· “Accelerated Purchase Maximum Advance Amount” in respect of each Advance Notice with an accelerated purchase pricing period, 400% of the average daily trading volume over the five trading days before the notice date, but not exceed the ownership and registration limitations in the EPFA; and
· “Regular Purchase Maximum Advance Amount” in respect of each Advance Notice with a regular purchase pricing period, 100% of the average daily trading volume over the five trading days before the notice date, also subject to the ownership and registration limitations in the EPFA.
The price per Advance Share will be determined by multiplying the market price by 95% in respect of an Advance Notice, which shall be reduced by one-third (1/3rd) for each Excluded Day Purchase Price (as defined in the EPFA), which is not known at the time an Advance Notice is delivered but shall be determined on each closing based on the daily prices of the Advance Shares that are the inputs to the determination of the purchase price.
While the Notes are outstanding, the Company cannot 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 120% of $2.00 per share of Common Stock (the “EPFA Floor Price”) on such date, or otherwise provide rights to acquire securities at an effective price per security below 120% of the EPFA Floor Price unless the Company uses the proceeds of such transaction to fully redeem such outstanding Notes.
Until the termination of the EPFA, the Company must maintain a minimum cash balance of $500,000.
As an inducement to entering into the EPFA, a designee of the EPFA Investor received 550,000 shares of Roth CH Acquisition V Inc. and such shares were converted into 550,000 shares of Common Stock in connection with Business Combination.
The Senior Secured Convertible Promissory Note
Each Note provides for a 7% original issue discount and is for a term of 15 months. Commencing on the ninetieth (90th) day following the applicable Issuance Date, and continuing on the same day of each successive calendar month until the entire outstanding principal amount has been repaid, the Company is required to make monthly payments to the holder of the Note (the “Holder”). Each monthly payment will be in an amount equal to the sum of (i) one twelfth (1/12) of the initial aggregate principal of the Note and all other notes issued pursuant to the EPFA, plus (ii) accrued and unpaid under the Note as of each payment date. Interest accrues on the outstanding principal balance hereof at an initial annual rate equal to 10% (“Interest Rate”), which Interest Rate will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Note).
Conversion Rights.
Conversion at Option of Holder. Each Note is convertible into shares of Common Stock at the option of the Investor at an initial conversion price of $10.00 per share (the “Conversion Price”). Subject to certain exceptions outlined in the Note, including, but not limited to, equity issuances in connection with its equity incentive plan and certain strategic acquisitions, if the Company sells, enters into an agreement to sell, or grants any option to purchase, or sells, enters into an agreement to sell, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, Common Stock, at an effective price per share less than the Conversion Price of the Note then in effect, the Conversion Price will be reduced to equal the effective price per share in such dilutive issuance. The Conversion Price is also subject to a downward adjustment if an Event of Default occurs. The Conversion Price is subject to an initial floor price of $2.00 per share of Common Stock, however beginning on the effective date of the initial Registration Statement, and on the same day of every six (6) months thereafter (each, a “Floor Price Reset Date”), the floor price will be reduced to 20% of the average volume weighted average price of the Common Stock for such trading day on the primary market of the Common Stock during regular trading hours as reported by Bloomberg L.P. (the “VWAP”) during the five (5) trading days immediately prior to such Floor Price Reset Date. Additionally, the Company may reduce the floor price to any amount set forth in a written notice to the Holder, provided that any such reduction will be irrevocable and will not be subject to increase thereafter. The Company may prepay the Note at its option, upon thirty (30) business days written notice, by paying a 10% redemption premium.
Event of Default Conversion. From and after the occurrence of an Event of Default, the Holder may elect to convert the Note into shares of the Common Stock at the “Event of Default Conversion Price”, which is equal to the lower of:
| · | The Conversion Price then in effect; and |
| · | 90% of the lowest VWAP of the Common Stock during the ten (10) consecutive trading days immediately prior to the date on which we received written notice of such conversion from such holder, subject to the Floor Price. |
Limitations on Conversion. A Holder shall 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 4.99% (the “Maximum Percentage”) of shares of our Common Stock outstanding immediately after giving effect to such conversion. The Maximum Percentage may be raised or lowered to any other percentage not in excess of 9.99%, at the option of the Holder, except that any increase will only be effective upon 61 days’ prior written notice to us.
Redemption Rights.
At any time, the Company may redeem in cash all, or any portion, of the Note, in an amount equal to the outstanding principal balance being redeemed, plus a 10% premium in respect of such principal amount, plus all accrued and unpaid interest, if any, on such principal amount.
The foregoing summary of the EPFA and the form of Note does not purport to be complete and is qualified in its entirety by reference to the agreements filed in the EFPA Current Report as Exhibit 10.1 and Exhibit 10.2, respectively, and are incorporated herein by reference.
Security Agreement
Also, on December 6, 2024, the Company, each of its subsidiaries (each, a “Grantor”), and the Investor, for itself and as the collateral agent (the “Collateral Agent”) for the benefit of the Secured Parties (as defined in the Security Agreement), entered into a Security Agreement (the “Security Agreement”) with respect to the Notes.
Pursuant to the Security Agreement, each Grantor granted to the Collateral Agent, for the benefit of the Secured Parties, a security interest in such Grantor’s right, title and interest in and to each type of property described in the Security Agreement, or in which or to which such Grantor has any rights, whether now owned or hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising (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 (each as defined therein).
The Collateral secures and will secure all debts, obligations, liabilities, covenants and duties of every kind now or hereafter existing, absolute or contingent 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 , or otherwise (whether or not evidenced by any note, indenture, guaranty or other agreement), whether principal, interest (including interest upon the occurrence of an Event of Default), fees, costs, expenses, including without limitation attorneys’ fees and expenses.
The foregoing description of the Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Security Agreement, a copy of which is filed as Exhibit 10.3 to the EFPA Current Report and is incorporated herein by reference.
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.
The foregoing description of the Subsidiary Guarantee does not purport to be complete and is qualified in its entirety by reference to the full text of the Subsidiary Guaranty, a copy of which is filed as Exhibit 10.4 to the EFPA Current Report and is incorporated herein by reference.
Warrant Purchase Agreement
Also, on December 6, 2024, the Company and an institutional investor (the “Warrant Investor”) entered into a securities purchase agreement (the “Warrant Purchase Agreement”) pursuant to which the Company issued and sold to the Investor warrants to purchase up to $30,000,000 shares of Common Stock (the “Warrant Shares”) comprised of two tranches, (a) a warrant to purchase up to $10,000,000 shares of Common Stock (the “First Tranche Warrant”) and (b) a warrant to purchase up to $20,000,000 shares of Common Stock (the “Second Tranche Warrant” and together with the First Tranche Warrant, the “Warrants”). The Warrants may be exercised on any day on or after December 6, 2024, in whole or in part at an initial exercise price of $10.00 per share (the “Exercise Price”), subject to certain adjustments as provided in the applicable Warrant.
The number of Warrant Shares issuable upon exercise of First Tranche Warrant is equal to the quotient of (i) the product of (x) $10 million minus any amounts previously paid to exercise the Warrants and (y) multiplied by 110%, and (ii) divided by the Exercise Price then in effect. Currently, the number of Warrant Shares issuable upon exercise of the First Tranche Warrant is equal to 1,100,000, assuming an Exercise Price of $10. The number of Warrant Shares issuable upon exercise of Second Tranche Warrant is equal to 2,140,000, subject to certain adjustments.
The First Tranche Warrant and the Second Tranche Warrant will expire on the twenty (20) month anniversary and the five (5) year anniversary, respectively, of the effective date of the registration statement registering the resale of the Warrant Shares. Subject to certain exceptions outlined in the Warrants, including, but not limited to, equity issuances in connection with its equity incentive plan and certain strategic acquisitions, if the Company sells, enters into an agreement to sell, or grants any option to purchase, or sells, enters into an agreement to sell, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, Common Stock, at an effective price per share less than the Exercise Price of the Warrants then in effect, the Exercise Price of the Warrants will be reduced to equal the effective price per share in such dilutive issuance. Further, the Exercise Price of the Warrants is subject to a floor price (the “Warrant Floor Price”) of $2.00 per share of Common Stock. Beginning the effective date of the initial registration statement, and on the same day of every six (6) months thereafter (each, a “Warrant Floor Price Reset Date”), the Warrant Floor Price will be reduced to 20% of the average VWAP during the five (5) trading days immediately prior to such Warrant Floor Price Reset Date. Additionally, the Company may reduce the Warrant Floor Price to any amount set forth in a written notice to the Warrant holder, provided that any such reduction will be irrevocable and will not be subject to increase thereafter.
Pursuant to the terms of the Warrant Purchase Agreement, the Company is required to hold a Stockholder Meeting, no later than ninety (90) calendar days following December 6, 2024, to seek approval of (i) the issuance of all of the Warrant Shares in compliance with the rules and regulations of Nasdaq and (ii) an amendment to the articles of incorporation to increase the number of authorized shares of capital stock of the Company to 250,000,000.
The Warrant Investor will not have the right to exercise any portion of the Warrants to the extent that, after giving effect to such exercise, the holder (together with certain related parties) would beneficially own in excess of the Maximum Percentage of shares of our Common Stock outstanding immediately after giving effect to such conversion. The Maximum Percentage may be raised or lowered to any other percentage not in excess of 9.99%, at the option of the holder, except that any increase will only be effective upon 61 days’ prior written notice to us.
The foregoing description of the Warrant Purchase Agreement, the First Tranche Warrant and the Second Tranche Warrant does not purport to be complete and is qualified in its entirety by reference to the full text of the Warrant Purchase Agreement, the form of First Tranche Warrant and the form of Second Tranche Warrant, copies of which are filed as Exhibits 10.5, 10.6 and 10.7, respectively, to this Form 8-K and are incorporated herein by reference.
Registration Rights Agreements
On December 6, 2024, the Company also entered into (a) a registration rights agreement with the EPFA Investor with respect to the resale of the shares of Common Stock issuable pursuant to the EPFA and the Notes, and (b) a registration rights agreement with the Warrant Investor with respect to the resale of the shares of Common Stock issuable pursuant to the terms of the Warrants (together, the “Registration Rights Agreements”).
The foregoing description of the Registration Rights Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreements, copies of which are filed as Exhibits 10.8 and 10.9, respectively, to this Form 8-K and are incorporated herein by reference.
Voting Agreements
Pursuant to the EPFA and the Warrant Purchase Agreement, and in connection with the Stockholder Meeting, stockholders holding at least 51% of the shares of Common Stock as of December 6, 2024 have executed voting agreements with the Company pursuant to which they have agreed to vote for the proposals to be approved in connection with each agreement.
The foregoing description of the Voting Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the forms of Voting Agreement, copies of which are filed as Exhibit 10.10 and 10.11 to the EFPA Current Report and are incorporated herein by reference.
Until stockholder approval is obtained, the total cumulative number of shares of Common Stock that may be issued to each Investor until the applicable agreements will be limited to 19.99% of the number of shares of Common Stock issued and outstanding (the “Exchange Cap”) pursuant to the requirements of the Nasdaq Stock Market LLC or other applicable rules of the principal market on which the Company’s securities are listed. The Exchange Cap will be calculated based on the number of shares of Common Stock issued and outstanding as of the date of such agreement, which number shall be reduced, on a share-for-share basis, by the number of shares of Common Stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by such agreement under the applicable rules of the principal market.
The EPFA, form of Note, Warrant Purchase Agreement, Warrants, Registration Rights Agreements and Voting Agreements contain customary representations, warranties, agreements and conditions, indemnification rights and obligations of the parties. Among other things, the EPFA Investor and Warrant Investor represented to the Company, that each of them is an “accredited investor” (as such term is defined in Rule 501(a) of Regulaion D of the Securities Act of 1933, as amended.
Item 1.01. Entry into Material Definitive Agreement.
The disclosure set forth in the “Introductory Note” above is incorporated into this Item 1.01 by reference.
The disclosure set forth in Item 1.01 of the Form 8-K filed by the Company on December 10, 2024 is incorporated into this Item 1.01 by reference.
Registration Rights Agreement
On December 6, 2024, in connection with the Closing, Holdings and certain stockholders of Holdings and New Era Helium Corp. (each, a “Holder”) entered into a registration rights agreement (“Registration Rights Agreement”), pursuant to which Holdings agreed to register for resale under Rule 415 of the Securities Act of 1933, as amended certain shares of Holdings common stock and warrants held by the Holders from time to time. The Registration Rights Agreement amends and restates the registration rights agreement that was entered into by ROCL and the other parties thereto in connection with ROCL’s initial public offering. The Registration Rights Agreement will terminate on the earlier of (a) the tenth-year anniversary of the date of the Registration Rights Agreement or (b) with respect to any Registrable Securities (as defined in the Registration Rights Agreement). The form of the Registration Rights Agreement is filed herein as Exhibit 10.1.
Lock-Up Agreement
On December 6, 2024, in connection with the Closing, Holdings and the certain holders of Holdings and New Era Helium Corp. entered into lock-up agreements (each, a “Lock-Up Agreement”), pursuant to which each signatory to Lock-Up Agreement agreed, subject to certain customary exceptions, not to sell, offer to sell, contract or agree to sell, pledge or otherwise dispose of, directly or indirectly, shares of the Company’s common stock held by them as part of the Merger Consideration (the “Lock-Up Shares”) for a period of six (6) months from the Closing Date ( the “Lock-Up Period”).
The material terms of the Lock-Up Agreements are described in the section of the Proxy Statement/Prospectus beginning on page 30 entitled “Summary of the Proxy Statement —Certain Related Agreements—Lock-Up Agreements” and is incorporated by reference herein. The foregoing description of Lock-Up Agreements does not purport to be complete and is qualified in its entirety by the terms and conditions of the Company Lock-Up Agreement which is attached hereto as Exhibit 10.2 and is incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of Assets.
The disclosure set forth in the “Introductory Note” above is incorporated into this Item 2.01 by reference.
On December 6, 2024, Holdings remitted, in the aggregate, 8,916,625 shares of Holdings’ common stock to New Era Helium Corp.’s equity holders.
In connection with the consummation of the Business Combination, public stockholders holding 1,245,770 of ROCL’s common stock exercised their right to redeem such shares, after giving effect to certain redemption elections prior to the Closing, for a pro rata portion of the funds in ROCL’s trust account (the “Trust Account”). As a result, $14,143,989 (approximately $11.35 per share) was removed from the Trust Account to pay such holders. Following redemptions, ROCL had 337,027 public shares outstanding.
On December 9, 2024, the Company’s common stock began trading on the Nasdaq under the symbol “NEHC.”
FORM 10 INFORMATION
Item 2.01(f) of Form 8-K states that if the predecessor registrant was a shell company, as Holdings was immediately before the Business Combination, then the registrant must disclose the information that would be required if the registrant were filing a general form for registration of securities on Form 10. Accordingly, the Company, as the successor issuer to Holdings, is providing the information below that would be included in a Form 10 if the Company were to file a Form 10. Please note that the information provided below relates to the Company as the combined company after the Closing, unless otherwise specifically indicated or the context otherwise requires.
Forward-Looking Statements
Certain statements contained in this Report may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and for purposes of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations, including as they relate to the Company. These statements constitute projections, forecasts, and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Report, forward-looking statements may be identified by the words “anticipate,” “believe,” “could,” “expect,” “estimate,” “future,” “intend,” “may,” “might,” “strategy,” “opportunity,” “plan,” “project,” “possible,” “potential,” “project,” “predict,” “scales,” “representative of,” “valuation,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” or other similar expressions that predict or indicate future events or trends or that are not statements of historical facts. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
The Company cautions readers of this Report that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control, which could cause the actual results to differ materially from the expected results. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of financial and performance metrics, revenue opportunities, anticipated future financial and operating performance and results, including estimates for growth, other performance metrics, projections of market opportunity, expected management and governance of the Company. These statements are based on various assumptions, whether or not identified in this Report, and on the current expectations of the Company’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. The risk factors and cautionary language contained in this Report, and incorporated herein by reference, provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described in such forward-looking statements, including among other things:
| · | changes in the competitive industries and markets in which the Company operates or plans to operate; |
| · | changes in applicable laws or regulations affecting the Company’s business; |
| · | the Company’s ability to implement business plans, forecasts, and other expectations after the completion of the Business Combination, and identify and realize additional opportunities; |
| · | risks related to the Company’s potential inability to achieve or maintain profitability and generate significant revenue; |
| · | current and future conditions in the global economy, including as a result of economic uncertainty, and its impact on the Company, its business and the markets in which it operates; |
| · | the Company’s potential inability to manage growth effectively; |
| · | the Company’s ability to recruit, train and retain qualified personnel; |
| · | estimates for the prospects and financial performance of the Company’s business may prove to be incorrect or materially different from actual results; |
| · | costs related to the Business Combination and the failure to realize anticipated benefits of the Business Combination; |
| · | risks related to the Company’s marketing and growth strategies; |
| · | the effects of competition on the Company’s business; |
| · | expectations with respect to future operating and financial performance and growth, including when the Company will generate positive cash flow from operations; |
| · | the Company’s ability to raise funding on reasonable terms as necessary to develop its products in the timeframe contemplated by its business plan; |
| · | other risks and uncertainties indicated in this Report, including those under “Risk Factors” beginning on page 41 in the Proxy Statement/Prospectus and other filings that have been made or will be made with the SEC by the Company. |
In addition, there may be events that the Company’s management is not able to predict accurately or over which the Company has no control.
Business
The business of the Company is described in the Proxy Statement/Prospectus in the section titled “Information About NEH” beginning on page 170, which is incorporated herein by reference.
Risk Factors
The risks associated with the Company are described in the Proxy Statement/Prospectus beginning on page 41 and specifically including in the in the sections titled “Risk Factors – Risks Related to NEH,” beginning on page 41 and “Risks related to the Ownership of the Combined Company’s common stock Following the Business Combination” beginning on page 65 of the Proxy Statement/Prospectus, which are incorporated herein by reference.
Financial Information
The Statement of Operations, cash flows data, and balance sheets data of NEH for the nine month period ended September 30, 2024 and nine month period ended September 30, 2023 are filed herein as Exhibit 99.1. The Statement of Operations, cash flows data, and balance sheets data of NEH for the fiscal year ended December 31, 2023 are included in the Proxy Statement/Prospectus beginning on page F-57 and incorporated herein by reference.
The Statement of Operations, cash flows data, and balance sheets data of ROCL for the nine months ended September 30, 2024 and September 30, 2023 are filed herein as Exhibit 99.2.
The Statement of Operations, cash flows data, and balance sheets data of Holdings from June 24, 2024 (inception) to September 30, 2024 and the balance sheets data of the Holdings as of September 30, 2024 are filed herein as Exhibit 99.4.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations of NEH for the nine months ended September 30, 2024 and 2023 is set forth below.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of ROCL for the nine months ended September 30, 2024 and 2023 is set forth below.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NEH
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our audited financial statements as of and for the years ended December 31, 2023 and 2022, and other information included in the Proxy Statement/Prospectus beginning on page 188. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this report. Additionally, our historical results are not necessarily indicative of the results that may be expected in any future period. Amounts are presented in U.S. dollars.
Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “NEH,” “we”, “us”, “our”, and the “Company” are intended to refer to (i) following the Business Combination, the business and operations of NEH, and (ii) prior to the Business Combination, New Era Helium Corp. (the predecessor entity of NEH in existence prior to the consummation of the Business Combination).
Risks Relating to Forward-Looking Statements
This discussion and analysis contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward- looking statements by the fact that they do not strictly relate to historical or current facts. They use words such as “anticipate”, “believe”, “continue”, “could”, “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” the negative version of these words, or other comparable words or phrases. Such forward-looking statements are subject to various risks and uncertainties. In particular, these include statements relating to future actions, statements regarding future performance or results and anticipated services or products, sales efforts, expenses, the outcome of contingencies, trends in operations and financial results. Actual results could differ materially from those expressed or implied in the forward-looking statements.
Business Overview and Strategy
New Era Helium Corp. is a corporation formed in Nevada on February 2, 2023. New Era Helium Inc. is the surviving entity of the Business Combination and is an exploration and production company whose primary operations include the exploration, development, and production of helium, natural gas, oil, and natural gas liquids The Company sources helium produced in association with natural gas reserves located in Chaves County, New Mexico. To date, the Company has not generated any revenue from the production of helium. Although hydrocarbons are currently the Company’s primary source of revenues, our business model is moving from a hydrocarbon focus to a helium focused model and centers on providing helium to various parties in the supply chain, namely helium refiners, non- refiners, Tier 1 multinational distributors, and smaller Tier 2 gas companies. We currently own and operate 137,000 acres in Southeast New Mexico and have 82,291.5 MMcfe of proved hydrocarbon reserves and 165,400.8 MMcfe of probable hydrocarbon reserves. In addition, the Company has approximately 389.1 MMcf of net proved undeveloped helium reserves and 703.8 MMcf of net probable undeveloped reserves. We believe our reliable helium supply distinguishes us from our competitors in the helium exploration and production space.
Presently, we operate through two subsidiaries, (i) Solis Partners, L.L.C., a Texas limited liability company (“Solis Partners”) formed on May 5, 2020, wholly owned by the Company and engaged in the oil and gas producing business, and (ii) (iii) NEH Midstream, a Texas limited liability company wholly owned by the Company which will own and operate the Pecos Slope Plant and gathering system located in Chaves County, New Mexico.
We aim to eventually capture one percent of all North American helium production and become a major consolidation for distribution across the continent.
We currently sell raw, natural gas extracted from its reserves to a third-party processor, IACX Roswell LLC (“IACX”) to produce helium and purified natural gas. See the discussion regarding the Gas Purchase Agreement with IACX (“Marketing Agreement”) below. Under current contractual arrangements, we do not retain revenue generated from the processed helium and natural gas produced by IACX. The Marketing Agreement is filed as Exhibit 10.13 to the Proxy Statement/Prospectus and is incorporated herein by reference.
We expect to generate revenue from the future operation of our own natural gas processing plant. We recently began construction of our own processing plant from the Pecos Slope Field, a gas field and gathering system in New Mexico (such plant, the “Pecos Slope Plant”). We expect the Pecos Slope Plant to commence operations in Q2 of 2025. We believe that the operation of our own plant will significantly increase production rates of helium and natural gas and lower costs, thereby generating much more revenue. Under ideal circumstances, we believe the Pecos Slope Plant can conceivably produce a sizeable revenue stream for decades to come and allow us to achieve our desired market share.
Aside from helium production, we currently plan on diversifying our resources through providing natural gas as feedstock for energy transition sources such as net zero energy, blue hydrogen, and blue ammonia. Additionally, we plan to engage in the MPC market by seeking designation of our natural gas production as “responsibly sourced gas” and subsequently trading the MPCs.
Business Combination with ROCL
On January 3, 2024, ROCL entered into a Business Combination Agreement with the Company and Merger Sub, a wholly-owned subsidiary of ROCL, pursuant to which Merger Sub would merge with and into the Company and the Company would be the surviving corporation of the Business Combination and becoming a wholly-owned subsidiary of ROCL. On June 5, 2024, ROCL and the Company entered into the First Amendment to the Business Combination Agreement, pursuant to which, among other things: (a) the Outside Date (as defined in the Business Combination Agreement) was extended to 270 days after the date of the Business Combination Agreement; (b) the structure of the Business Combination changed such that: (i) ROCL would merge (the “Initial Merger”) with and into Holdings, a wholly owned subsidiary of ROCL, and Holdings would be the survivor of the Initial Merger; (ii) Holdings would sign a joinder and become a party to the Business Combination Agreement; and (iii) immediately subsequent to the Initial Merger, Merger Sub would merge with and into the Company, with the Company surviving the Business Combination as a wholly owned subsidiary of Holdings; and (c) the closing condition that the Company raise at least $45 million in a private placement of securities in order to fund its new plant construction was removed, and the closing condition that certain indebtedness of the Company be converted into shares of common stock of the Company was removed.
On August 8, 2024, the parties to the Business Combination Agreement entered into the Second Amendment (the “Second Amendment”) to the Business Combination Agreement, pursuant to which, among other things: (a) the Outside Date was extended to October 31, 2024 and (b) the definitions of “Company Merger Shares” and “Net Debt” were amended.
On September 11, 2024, the parties to the Business Combination Agreement entered into the Third Amendment (the “Third Amendment”) to the Business Combination Agreement, pursuant to which, among other things, the parties clarified the effect that any variation in the Net Debt of NEH between January 3, 2024 and the date of closing of the Business Combination (“Closing”) might have on the number of Company Merger Shares to be delivered at Closing.
On September 30, 2024, the parties to the Business Combination Agreement entered into the Fourth Amendment (the “Fourth Amendment”) to the Business Combination Agreement, pursuant to which, among other things, the parties extended the Outside Date to November 30, 2024.
The Closing took place on December 6, 2024. In connection with the Business Combination, Holdings changed its name to “New Era Helium Inc.”
Immediately prior to Closing, all outstanding shares of preferred stock of New Era Helium Corp. converted into common stock. At the Closing, Holdings issued 8,916,625 shares of its common stock, par value $0.0001 per share (“Holdings Common Stock”) to the common stockholders of New Era Helium Corp., as further described in the Business Combination Agreement. The common stockholders of New Era Helium Corp. are also eligible to receive, as additional consideration for the Business Combination and within five (5) business days after the occurrence of a Triggering Event (as defined in the Business Combination Agreement), shares of Holdings Common Stock as set forth in the Business Combination Agreement.
Recent Developments
On December 10, 2024, the Company entered into a letter of intent with Sharon AI, Inc. (“Sharon AI”), a computing business specializing in artificial intelligence, for the parties’ joint development and operation of a 250MW net-zero energy data center in the Permian Basin through a joint venture entity. The parties believe this project aligns with their respective commitments to leverage clean energy solutions and innovative technologies to address the growing needs of the high-growth data industry. The letter of intent also provides for the parties’ potential entry into a supply agreement for natural gas at a mutually agreed fixed cost for five years, and three options of five years each. The letter of intent is binding in respect of the parties’ agreement to use best efforts to proceed with the joint venture and negotiate mutually acceptable documentation for the joint venture, as long as the business purpose set forth in the letter of intent is commercially achievable. The press release announcing the parties’ entry into this binding letter of intent is filed herein as Exhibit 99.6.
Equity Purchase Facility
Immediately prior to Closing, we entered into an equity purchase facility with an institutional investor. The “Equity Purchase Facility” subsection in the “Introductory Note” is incorporated herein by reference.
Helium Agreements
In anticipation of securing future revenue and establishing a more robust market position in the helium industry following the establishment of the Pecos Slope Plant, through our operating subsidiary NEH Midstream, we recently entered into certain sales agreements with various purchasers for the helium anticipated to be generated by the Pecos Slope Plant. We agreed to sell fifty percent (50%) of the helium generated from the Pecos Slope Plant each month to Air Life Gases USA, Inc., in the form of liquefied helium, pursuant to that certain Liquid Helium Agreement. We also agreed to sell fifty percent (50%) of the gaseous helium generated monthly at the Pecos Slope Plant to Matheson Tri-Gas, Inc (“Matheson”), pursuant to that certain Gaseous Helium Agreement. The Liquid Helium Agreement was filed as Exhibit 10.14 and the Gaseous Helium Agreement is filed as Exhibit 10.17 to the Proxy Statement/Prospectus and is incorporated herein by reference.
On October 1, 2023, the Company, through NEH Midstream, LLC, entered into the Amendment to Liquid Helium Agreement with AirLife Gases USA Inc. The Amendment to Liquid Helium Agreement incorporated the sale by NEH Midstream, LLC of additional quantities of liquid helium by the Company to AirLife that were not originally included in the between NEH Midstream and AirLife dated August 25, 2023. Following entry into the Amendment to Liquid Helium Agreement, the Company would provide to AirLife Gases USA, Inc., in sum: (i) fifty percent (50%) of the helium generated from the Pecos Slope Plant each month, in the form of liquefied helium (from all sources other than from the crude helium purchased from Badger (as described in the following paragraph), less two percent (2%) tolling losses, and (ii) all of the helium produced from the crude helium the Company purchases from Badger each month, minus two percent (2%) tolling losses. The Amendment to Liquid Helium Agreement was filed as Exhibit 10.15 to the Proxy Statement/Prospectus, which is incorporated herein by reference.
On August 25, 2023, the Company, through its wholly owned subsidiary NEH Midstream LLC, entered into the Crude Helium Agreement with Badger Midstream Energy, LP (“Badger”). Pursuant to the Crude Helium Agreement, the Company will purchase crude helium from Badger, starting on January 1, 2024 and continuing through an initial term through June 30, 2027. Badger agreed to supply all of the crude helium it could secure processing rights, purchasing rights, and clear title to during the term of the Purchase and Sale Agreement. The Crude Helium Agreement is filed as Exhibit 10.18 to the Proxy Statement/Prospectus, which is incorporated herein by reference.
We entered into that certain Tolling Agreement with KHC dated September 1, 2023, pursuant to which we would receive tolling services with respect to our crude helium and such crude helium would be purified and liquified by KHC into liquid helium and filled into containers. KHC agreed to provide tolling services to us on a firm basis, for a volume equivalent to the quantities sold by Badger to us pursuant to the Crude Helium Agreement with Badger. The Tolling Agreement is filed as Exhibit 10.16 to the Proxy Statement/Prospectus and incorporated herein by reference. Tolling services provided by KHC to NEH Midstream LLC under the Helium Tolling Agreement will be at volumes now sold to AirLife Gases USA Inc. by operation of the Assignment Agreement.
On April 19, 2024, NEH Midstream LLC, AirLife Gases USA Inc., and Badger entered into the Assignment Agreement, pursuant to which NEH Midstream LLC assigned all of its rights, title, interest and obligations in the Crude Helium Agreement to AirLife Gases USA Inc. The Assignment Agreement is filed as Exhibit 10.21 to the Proxy Statement/Prospectus and is incorporated herein by reference.
Principal Components of Results of Operations Revenues, net
The Company sells 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 with 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.
We currently sell our natural gas and natural gas liquids to IACX, 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. The Marketing Agreement is filed as Exhibit 10.13 to the Proxy statement/Prospectus and is incorporated herein by reference.
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.
The Company will sell its helium to two purchasers, each purchasing 50% of the helium production under a 10-year contracts. One of the contracts will commence upon delivery of gaseous helium production at the tailgate of the processing plant. The other contract will commence upon delivery of liquid helium from the Keyes Helium Company liquefaction plant located in Keys, Oklahoma. When the gaseous helium is loaded into the gaseous helium trailer, control of the helium is transferred to the purchaser, the Company’s obligations are satisfied, and revenue is recognized. With regards to liquid helium, the Company will transport the gaseous helium to the Key Helium liquefaction plant. Once the helium has been liquified and loaded into the liquid helium trailer, control of the helium is transferred to the purchaser, the Company’s obligations are satisfied, and revenue is recognized.
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. The Company will record depreciation expense for the processing plant over its estimated useful life. Depreciation on the processing plant will commence once the procession plant is put into service.
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.
Gain on sale of assets
Gain on sale of assets consists of gains recorded on significant sales of oil and natural gas properties. As a full cost company, disposition of oil and natural 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.
Other income and expense
Other income and expenses primarily include income and expenses associated with interest, gains or losses recorded on certain transactions, and fees charged by the Company to operate properties on behalf of a third party on a short term. Our interest income relates to interest earned on certificate of deposit associated with operating bonds. Our interest expenses are primarily associated with interest due on notes outstanding. Our other income and expense primarily consists of gains and losses recorded on certain transactions as well as operating fees charged by the Company.
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 has not established a valuation allowance as of September 30, 2024, December 31, 2023, and December 31, 2022.
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 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 (“ASC”) 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 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
For the fiscal quarter ended September 30, 2024 compared to the fiscal quarter ended September 30, 2023
The following table sets forth key components of our results of operations during the fiscal quarters ended September 30, 2024, and September 30, 2023:
| Three Months Ended 09/30/2024 | Three Months Ended 09/30/2023 | Variance ($) | Variance (%) | |||||||||||||
| Revenues: | ||||||||||||||||
| Natural gas | $ | 194,822 | $ | 267,495 | $ | (72,673 | ) | (27.2 | )% | |||||||
| Less transportation and processing | $ | (214,129 | ) | $ | (233,820 | ) | $ | 19,691 | (8.4 | )% | ||||||
| Natural gas, net | $ | (19,307 | ) | $ | 33,675 | $ | (52,982 | ) | (157.3 | )% | ||||||
| Natural gas liquids (NGL) | $ | 53,028 | $ | 31,673 | $ | 21,355 | 67.4 | % | ||||||||
| Oil | $ | 1,422 | $ | 37,180 | $ | (35,758 | ) | (96.2 | )% | |||||||
| Total Revenues, net | $ | 35,143 | $ | 102,528 | $ | (67,385 | ) | (65.7 | )% | |||||||
| Costs and expenses: | ||||||||||||||||
| Lease operating expenses | $ | 253,496 | $ | 40,803 | $ | 212,693 | 521.3 | % | ||||||||
| Depletion, depreciation, amortization, and accretion | $ | 193,712 | $ | 177,345 | $ | 16,367 | 9.2 | % | ||||||||
| General and administrative costs | $ | 966,227 | $ | 646,578 | $ | 319,649 | 49.4 | % | ||||||||
| Three Months Ended 09/30/2024 | Three Months Ended 09/30/2023 | Variance ($) | Variance (%) | |||||||||||||
| Total costs and expenses | $ | 1,413,435 | $ | 864,726 | $ | 548,709 | 63.5 | % | ||||||||
| Gain on sale of assets | $ | - | $ | 5,348,982 | $ | (5,348,982 | ) | (100.0 | )% | |||||||
| Income (loss) from operations | $ | (1,378,292 | ) | $ | 4,586,784 | $ | (5,965,076 | ) | (130.0 | )% | ||||||
| Other income (expenses): | ||||||||||||||||
| Interest income | $ | 12,919 | $ | 4,240 | $ | 8,679 | 204.7 | % | ||||||||
| Interest expense | $ | (128,016 | ) | $ | (32,532 | ) | $ | (95,484 | ) | 293.5 | % | |||||
| Other, net | $ | 66,799 | $ | - | $ | 66,799 | 100.0 | % | ||||||||
| Total other income (expenses) | $ | (48,298 | ) | $ | (28,292 | ) | $ | (20,006 | ) | 70.7 | % | |||||
| Net income (loss) before income taxes | $ | (1,426,590 | ) | $ | 4,558,492 | $ | (5,985,082 | ) | (131.3 | )% | ||||||
| Benefit (provision) for income taxes | $ | 349,348 | $ | (1,130,142 | ) | $ | 1,479,490 | (130.9 | )% | |||||||
| Net income (loss) | $ | (1,077,242 | ) | $ | 3,428,350 | $ | (4,505,592 | ) | (131.4 | )% | ||||||
Net revenues were $35,143 for the fiscal quarter ended September 30, 2024, compared to $102,528 for the fiscal quarter ended September 30, 2023, representing a decrease of $67,385, or 65.7%. This decrease was primarily due to a $90,000 decrease related to a $0.51 per mcf reduction in gas prices, a $36,000 decrease in oil revenues related to the assignment of the Pathfinder lease effective February 1, 2024, and a $28,000 decrease related to a $23.83 decrease in NGL prices, partially offset by $67,000 increase related to higher gas and NGL volumes, and a $20,000 reduction in processing and transportation costs.
Lease operating expenses were $253,496 for the fiscal quarter ended September 30, 2024, compared to $40,803 for the fiscal quarter ended September 30, 2023, representing an increase of $212,693, or 521.3%. This increase was primarily due to a $60,000 increase related to quarterly amortization of the Standby Retainer, Consulting, and Services Agreement, and a $57,000 increase in workover expenses.
Depletion, depreciation, amortization and accretion was $193,712 for the fiscal quarter ended September 30, 2024, compared to $177,345 for the fiscal quarter ended September 30, 2023, representing an increase of $16,367, or 9.2%. This increase was primarily due to $28,000 increase in accretion expense, a $12,000 increase in depletion expense related to higher oil and gas volumes and a $6,000 increase in amortization expense, partially offset by a $29,000 decrease related to lower depletion rates.
General and administrative expenses were $966,227 for the fiscal quarter ended September 30, 2024, compared to $646,578 for the fiscal quarter ended September 30, 2023, representing an increase of $319,649, or 49.4%. This increase was primarily due to a $168,000 increase in public relations and marketing expenses, a $60,000 increase in audit costs, a $60,000 increase in third party reservoir engineering costs, and a $44,000 increase in third party accounting and tax costs.
The Company recorded a gain on sale of assets of $0 for the fiscal quarter ended September 30, 2024, compared to $5,348,982 for the fiscal quarter ended September 30, 2023. The gain recorded in 2023 was related to the sale of certain properties located Chaves County, New Mexico.
The Company recorded interest income of $12,919 for the fiscal quarter ended September 30, 2024, compared to $4,240 for the fiscal quarter ended September 30, 2023, representing an increase of $8,679, or 204.7%. This increase was primarily due to increase in interest earned on the Company’s certificates of deposit.
The Company recorded interest expense of $128,016 for the fiscal quarter ended September 30, 2024, compared to $32,532 for the fiscal quarter ended September 30, 2023, representing an increase of $95,484, or 293,5%. This increase was primarily due to $63,000 of interest accrued during 2024 related to the bridge financing debentures, and a $28,000 increase in interest accrued on the promissory note with AirLife Gases.
The Company recorded other net income of $66,799 for the fiscal quarter ended September 30, 2024, compared to other net income of $0 for the fiscal quarter ended September 30, 2023, representing an increase of $66,799, or 100%. The other net income recorded in 2024 was due to operating fees charged by the Company to the purchase of properties previously owned by the Company.
The Company recorded an income tax benefit of $349,348 for the fiscal quarter ended September 30, 2024, compared to a provision of $1,130,142 for the fiscal quarter ended September 30, 2023, representing an increase of $1,479,490, or 130.9%. This increase was primarily due to a $5,985,000 increase in loss before provision for income taxes.
For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023
The following table sets forth key components of our results of operations during the nine months ended September 30, 2024, and September 30, 2023:
| Nine Months Ended 09/30/2024 | Nine Months Ended 09/30/2023 | Variance ($) | Variance (%) | |||||||||||||
| Revenues: | ||||||||||||||||
| Natural gas | $ | 902,931 | $ | 1,122,187 | $ | (219,256 | ) | (19.5 | )% | |||||||
| Less transportation and processing | $ | (736,928 | ) | $ | (900,441 | ) | $ | 163,513 | (18.2 | )% | ||||||
| Natural gas, net | $ | 166,033 | $ | 221,746 | $ | (55,743 | ) | (25.1 | )% | |||||||
| Natural gas liquids (NGL) | $ | 192,706 | $ | 102,784 | $ | 89,922 | 87.5 | % | ||||||||
| Oil | $ | 26,022 | $ | 113,675 | $ | (87,653 | ) | (77.1 | )% | |||||||
| Total Revenues, net | $ | 384,731 | $ | 438,205 | $ | (53,474 | ) | (12.2 | )% | |||||||
| Costs and expenses: | ||||||||||||||||
| Lease operating expenses | $ | 982,423 | $ | 829,728 | $ | 152,695 | 18.4 | % | ||||||||
| D Depletion, depreciation, amortization, and accretion | $ | 692,906 | $ | 672,774 | $ | 20,132 | 3.0 | % | ||||||||
| General and administrative costs | $ | 2,754,412 | $ | 3,864,048 | $ | (1,109,636 | ) | (28.7 | )% | |||||||
| Total costs and expenses | $ | 4,429,741 | $ | 5,366,550 | $ | (936,809 | ) | (17.5 | )% | |||||||
| Gain on sale of assets | $ | - | $ | 5,834,293 | $ | (5,834,293 | ) | (100.0 | )% | |||||||
| Income (loss) from operations | $ | (4,045,010 | ) | $ | 905,948 | $ | (4,950,958 | ) | (546.5 | )% | ||||||
| Other income (expenses): | ||||||||||||||||
| Interest income | $ | 37,587 | $ | 29,869 | $ | 7,718 | 25.8 | % | ||||||||
| Interest expense | $ | (267,838 | ) | $ | (107,930 | ) | $ | (159,908 | ) | 148.2 | % | |||||
| Other, net | $ | 200,396 | $ | (314,541 | ) | $ | 514,937 | (163.7 | )% | |||||||
| Total other income (expenses) | $ | (29,855 | ) | $ | (392,602 | ) | $ | 362,747 | (92.4 | )% | ||||||
| Net income (loss) before income taxes | $ | (4,074,865 | ) | $ | 513,346 | $ | (4,588,211 | ) | (893.8 | )% | ||||||
| Benefit (provision) for income taxes | $ | 1,048,832 | $ | 340,841 | $ | 707,991 | 207.7 | % | ||||||||
| Net income (loss) | $ | (3,026,033 | ) | $ | 854,187 | $ | (3,880,220 | ) | (454.3 | )% | ||||||
Net revenues were $384,731 for the nine months ended September 30, 2024, compared to $438,205 for the nine months ended September 30, 2023, representing a decrease of $53,474, or 1.2%. This decrease was due to a $329,000 decrease related to a $0.49 per mcf reduction in gas prices, a $100,000 decrease related to a $30.41 decrease in natural gas liquid (“NGL”) prices, and a $88,000 decrease in oil revenues related to the assignment of the Pathfinder lease effective February 1, 2024, partially offset by $189,000 increase related to higher NGL volumes, a $164,000 reduction in processing and transportation costs and a $109,000 increase related to natural gas volumes.
Lease operating expenses were $982,423 for the nine months ended September 30, 2024, compared to $829,728 for the nine months ended September 30, 2023, representing an increase of $152,695, or 18.4%. This increase was primarily due to a $274,000 increase in workover expenses. a $60,000 increase related to quarterly amortization of the Standby Retainer, Consulting, and Services Agreement, partially offset by a $235,000 decrease related to sale of certain properties located in Chaves County, New Mexico which occurred in 2023.
Depletion, depreciation, amortization and accretion was $692,906 for the nine months ended September 30, 2024, compared to $672,774 for the nine months ended September 30, 2023, representing an increase of $20,132, or 3.0%. This increase was primarily due to a $65,000 increase in depletion expense related to higher oil and gas volumes, a $44,000 increase in accretion expense, and a $14,000 increase in amortization expense, partially offset by a $104,000 decrease related to lower depletion rates.
General and administrative expenses were $2,754,412 for the nine months ended September 30, 2024, compared to $3,864,048 for the nine months ended September 30, 2023, representing a decrease of $1,109,636, or 28.7%. This decrease was primarily due to a $2,499,000 reduction in stock compensation expense, partially offset by a $291,000 increase in audit and review costs, a $269,000 increase related to compensation of consultants and employees and associated taxes and insurance, a $211,000 increase in public relation and marketing expenses, a $169,000 increase in legal fees primarily associated with proposed merger and registration statements, a $166,000 increase related to the assignment of certain properties as compensation, a $119,000 increase in third party accounting and tax service costs, a $94,000 decrease in administrative overhead recovery cost as a result of property sales in 2023, and a $20,000 increase in third party reservoir engineering costs .
The Company recorded a gain on sale of assets of $0 for the nine months ended September 30, 2024, compared to $5,834,293 for the nine months ended September 30, 2023. The gain recorded in 2023 was due to related to the sale of certain properties located Chaves County, New Mexico.
The Company recorded interest income of $37,587 for the nine months ended September 30, 2024, compared to $29,869 for the nine months ended September 30, 2023, representing an increase of $7,718, or 25.8%. This increase was primarily due to a $25,000 increase in interest earned on certificates of deposit held by the Company, partially offset by $17,000 of interest earned on a note during 2023 that was paid off in late 2023.
The Company recorded interest expense of $267,838 for the nine months ended September 30, 2024, compared to $107,930 for the nine months ended September 30, 2023, representing an increase of $159,908, or 148.2%. This increase was primarily due to a $109,000 increase in interest accrued on the promissory note with AirLife Gases and $90,000 of interest accrued during 2024 related to the bridge financing debentures, partially offset by a $31,000 reduction of interest due to the ONRR and State of New Mexico.
The Company recorded other net income of $200,396 for the nine months ended September 30, 2024, compared to other net expense of $314,541 for the nine months ended September 30, 2023, representing an increase of $514,937, or 163.7%. Other net income recorded in 2024 were due to operating fees charged by the Company to the purchase of properties previously owned by the Company. Other net expense recorded in 2023 was primarily due to a loss on the exchange of an overriding royalty interest for debt.
The Company recorded an income tax benefit of $1,048,832 for the nine months ended September 30, 2024, compared to a benefit of $340,841 for the nine months ended September 30, 2023, representing an increase of $707,991, or 207.7%. This increase was primarily due to a $4,588,000 increase in loss before provision for income taxes.
For the year ended December 31, 2023 compared to the year ended December 31, 2022
The following table sets forth key components of our results of operations during the years ended December 31, 2023, and 2022:
| Year Ended 12/31/2023 | Year Ended 12/31/2022 | Variance ($) | Variance (%) | |||||||||||||
| Revenues: | ||||||||||||||||
| Natural gas | $ | 1,480,319 | $ | 6,183,080 | $ | (4,702,761 | ) | -76.1 | % | |||||||
| Less transportation and processing | $ | (1,176,975 | ) | $ | (2,357,942 | ) | $ | 1,180,967 | -50.1 | % | ||||||
| Natural gas, net | $ | 303,344 | $ | 3,825,138 | $ | (3,521,794 | ) | -92.1 | % | |||||||
| Natural gas liquids (NGL) | $ | 147,877 | $ | 265,507 | $ | (117,630 | ) | 100.0 | % | |||||||
| Oil | $ | 160,971 | $ | 132,709 | $ | 28,262 | 21.3 | % | ||||||||
| Total Revenues, net | $ | 612,192 | $ | 4,223,354 | $ | (3,611,162 | ) | -85.5 | % | |||||||
| Costs and expenses: | ||||||||||||||||
| Lease operating expenses | $ | 1,332,548 | $ | 1,793,232 | $ | (460,684 | ) | -25.7 | % | |||||||
| Depletion, depreciation, amortization, and accretion | $ | 885,832 | $ | 916,983 | $ | (31,151 | ) | -3.4 | % | |||||||
| General and administrative costs | $ | 4,519,811 | $ | 1,230,427 | $ | 3,289,384 | 267.3 | % | ||||||||
| Total costs and expenses | $ | 6,738,191 | $ | 3,940,642 | $ | 2,797,549 | 71.0 | % | ||||||||
| Gain on sale of assets | $ | 5,834,293 | $ | — | $ | 5,834,293 | 100.0 | % | ||||||||
| Income (loss) from operations | $ | (291,706 | ) | $ | 282,712 | $ | (574,418 | ) | -203.2 | % | ||||||
| Year Ended 12/31/2023 | Year Ended 12/31/2022 | Variance ($) | Variance (%) | |||||||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income | $ | 46,437 | $ | 9,800 | $ | 36,637 | 373.8 | % | ||||||||
| Interest expense | $ | (172,143 | ) | $ | (111,038 | ) | $ | (61,105 | ) | 55.0 | % | |||||
| Other, net | $ | (180,943 | ) | $ | 16,000 | $ | (196,943 | ) | -1230.9 | % | ||||||
| Total other income (expenses) | $ | (306,649 | ) | $ | (85,238 | ) | $ | (221,411 | ) | 259.8 | % | |||||
| Net income (loss) before income taxes | $ | (598,355 | ) | $ | 197,474 | $ | (795,829 | ) | -403.0 | % | ||||||
| Provision for income taxes | $ | 608,500 | $ | — | $ | 608,500 | 100.0 | % | ||||||||
| Net income (loss) | $ | 10,145 | $ | 197,474 | $ | (187,329 | ) | -94.9 | % | |||||||
Net revenues were $612,192 for the year ended December 31, 2023, compared to $4,223,354 for the year ended December 31, 2022, representing a decrease of $3,611,162 or 85.5%. This decrease was primarily related to an $3,172,000 decrease in natural gas revenues related to a $3.82 per mcf decrease in realized natural gas prices, and a $1,531,000 decrease related to lower natural gas sales volumes, partially offset by a $1,181,000 decrease in processing and transportation costs as a result of lower natural gas volumes.
Lease operating expenses were $1,332,548 for the year ended December 31, 2023, compared to $1,793,232 for the year ended December 31, 2022, representing a decrease of $460,684 or 25.7%. This decrease was primarily related to a $316,000 decrease in production taxes as a result of lower revenues, and decreases in repair and workover costs, and compressor rental costs from 2022 levels.
Depletion, depreciation, amortization and accretion was $885,832 for the year ended December 31, 2023, compared to 916,983 for the year ended December 31, 2022, representing a decrease of $31,151 or 3.4%. This decrease was primarily related to a $404,000 decrease in ARO accretion expense due to changes costs and timing as well as sale of properties during 2023, partially offset by a $394,000 increase in depletion expense primarily as a result of inclusion of future development costs in the calculation of depletion expense for the full year in 2023 and only in the quarter ended December 31, 2022 during 2022, partially offset by sale of properties during 2023.
General and administrative expenses were $4,519,811 for the year ended December 31, 2023, compared to $1,230,427 for the year ended December 31, 2022, representing an increase of $3,289,384 or 267.3%. This increase was primarily related to a $2,499,000 increase related to issuance of stock-based compensation during 2023, a $413,000 increase in consulting costs, and a $347,000 increase in legal, accounting, and audit costs.
The Company recorded a gain on sale of asset of $5,834,293 during the year ended December 31, 2023. This gain related to the sale of certain oil and gas properties and related assets, including the gathering system, located in Chaves County, New Mexico. The Company received $2.5 million in cash and was relieved of the asset retirement obligations associated with the properties. As a full cost company, proceeds from the sale of oil and gas properties are normally accounted for as a reduction to capitalized costs unless such treatment causes a significant change in the relationship between costs and the estimated value of proved reserves, in which case a gain or loss is recognized. The normal treatment of this specific sale would have reduced the value of the capital costs to zero even though reserves still existed on the remaining properties, therefore it was necessary to record a gain on the sale. Of the gain recognized, $3,407,818 was related to the relief of asset retirement obligations associated with the assets sold.
The Company recorded interest income of $46,437 for the year ended December 31, 2023 compared to $9,800 for the year ended December 31, 2022 representing an increase of $36,637 or 373.8%. This increase was primarily related to an increase of $20,000 related to interest earned on the Company’s certificates of deposit which support federal and state bonds, and $17,000 related to interest earned on a note receivable from High Desert Resources.
The Company recorded interest expense of $172,143 for the year ended December 31, 2023 compared to $111,038 for the year ended December 31, 2022 representing an increase of $61,105 or 55.0%. This increase was primarily due to an interest expense accrual of $53,000 related to interest on a $2,000,000 note payable to AirLife Gases USA, Inc. which was entered into in August 2023.
The Company recorded a net expense of $180,943 in Other, net for the year ended December 31, 2023 compared to income of $16,000 for the year ended December 31, 2022 representing a decrease of $196,943. This decrease was primarily related to a $299,000 loss on the exchange of a notes receivable due to the Company for and overriding royalty interest in certain properties located in Howard Count, TX. This loss was partially offset by $134,000 of fees charged to the purchaser of certain properties located in Chaves County, NM that were sold effective 7/1/2023. These fees were related to an agreement for the Company to continue to operate the properties until the purchase was qualified to operate in the State of New Mexico.
Provision for income taxes was a $608,500 benefit for the year ended December 31, 2023 compared to zero benefit or expense for the year ended December 31, 2022. Prior to the Reorganization Agreement and Plan Share Exchange between the Company and Solis Partners, Solis Partners was treated as a pass-through entity for federal income tax purposes. As a result, the net taxable income of the Company and any related tax credits, for federal income tax purposes, were deemed to pass to the Investor Group and are included in their tax returns even though such net taxable income or tax credits may not have actually been distributed. Accordingly, no tax provision had been made in the financial statements for the year ended December 31, 2022, since the federal income tax is an obligation of the Investor Group.
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including cash balances on hand, working capital, and operating cash flows.
The Company had a cash balance of $409,250, $120,010 and $405 as of September 30, 2024, December 31, 2023 and December 31, 2022, respectively. The Company also had a working capital deficit of $4,933,508, $924,307 and $665,003 as of September 30, 2024, December 31, 2023, and December 31, 2022, respectively.
Since our inception, the Company’s primary sources of liquidity have been cash flow from operations, contributions from members, and borrowings. The Company is in the process of securing a project financing arrangement to fund construction of a processing plant, the construction or acquisition of a gather system, and a production enhancement program that will consist of workovers, recompletions, new drilling, or acquisition of properties. The Company estimates the capital requirements during 2024 and 2025 to be approximately $40 million to $45 million. The Company anticipates that cash flows from operations during 2024 and 2025 will increase as a result of this capital spending. While there can be no assurances that the Company will be able to secure the financing required to fund its capital programs, the Company also intends to raise additional capital through additional equity raises. The equity raises will be effectuated via a private placement, as well as the potential go-public process.
If additional financing is required from outside sources, the Company may not be able to raise it on terms acceptable to the Company or at all. If the Company is unable to raise additional capital when desired, the Company’s business, results of operations and financial condition, and liquidity would be materially and adversely affected and may impact the Company’s ability to continue as a going concern.
See Risk Factors — Risks Related to NEH included in the Proxy Statement/Prospectus and incorporated herein by reference.
The implementation of our business plan, as discussed in “Business,” will require the receipt of sufficient grant, equity and/or debt financing to purchase necessary technology and materials, fund our research and development efforts, and otherwise fund our operations. We anticipate our business plan will require approximately $46 to $51 million to fund our anticipated operations for the next 18 to 24 months.
Cash Flow
For the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023
The following table summarizes the Company’s cash flows for the nine months ended September 30, 2024 and 2023:
| Nine Months Ended 09/30/2024 | Nine Months Ended 09/30/2023 | Variance ($) | Variance (%) | |||||||||||||
| Statement of Cash Flows Data: | ||||||||||||||||
| Net cash used in operating activities | $ | (2,369,251 | ) | $ | (2,059,192 | ) | $ | (310,059 | ) | 15.1 | % | |||||
| Net cash provided by (used in) investing activities | $ | (305,538 | ) | $ | (1,093,845 | ) | $ | 788,307 | 72.1 | % | ||||||
| Net cash provided by financing activities | $ | 2,964,029 | $ | 3,609,835 | $ | (645,806 | ) | (17.9 | )% | |||||||
Net cash used in operating activities was $2,369,251 for the nine months ended September 30, 2024, compared to $2,059,192 for the nine months ended September 30, 2023, representing an increase in cash used of $310,059, or 15.1%. This decrease was primarily due to a $1,222,000 increase in cash general and administrative expense net of stock compensation and compensation related to assignment of properites, a $152,000 increase in lease operating expenses, and a $53,000 reduction in net revenues, partially offset by an $812,000 increase in cash provided by changes in operating assets and liabilities, a $134,000 increase in operating fees charged by the Company to the purchaser of properties previously owned by the Company, and a $37,000 decrease in interest payments.
Cash provided by changes in operating assets and liabilities were $672,856 during the nine months ended September 30, 2024 compared to $139,472 used in changes in operating assets and liabilities during the nine months ended September 30, 2023. Cash provided by changes in operating assets and liabilities of $672,856 during the nine months ended September 30, 2024 was primarily related to a $616,000 increase in trade and related party payables, an $89,000 increase in accrued liabilities, and an $85,000 increase in prepaid expenses, partially offset by a $81,000 decrease in other liabilities, and a $28,000 settlement on asset retirement obiligations. The increase in payables primarily resulted from less cash available to pay accounts payable as a result of lease operating and general and administrative expenses in excess of revenues and net funding received from investing and financial activities during the nine months ended September 30, 2024.
Cash used in changes in operating assets and liabilities of $139,472 during the nine months ended September 30, 2024 was primarily related to a a $152,000 decrease in other liabilities, and a $99,000 decreasse in accrued liabilities, partially offset by a $110,000 increase in trade and related party payables. The increase in payables primarily resulted from less cash available to pay accounts payable as a result of lease operating and general and administrative expenses in excess of revenues and net funding received from investing and financial activities during the nine months ended September 30, 2023.
Net cash used in investing activities was $305,538 for the nine months ended September 30, 2024, compared to $1,093,845 for the nine months ended September 30, 2023, representing a decrease of $788,307, or 72.1%. This decrease was primarily due to a 3,379,000 decrease in costs assiated with the gas processing plant,, and a $208,000 decrease in investments in oil and gas properties partially offset by receipt of $2,500,000 related to the sale of certain properties located in Chaves County, New Mexico which occurred in 2023, and $193,000 of proceeds received from the sale of Company certificates of deposit during 2023, and $106,000 of asset retirement costs in excess of the ARO liability.
Net cash provided by financing activities was $2,964,029 for the nine months ended September 30, 2024, compared to $3,609,835 for the nine months ended September 30, 2023, representing a decrease of $645,806, or 17.9%. This decrease was primarily due to a receipt of $3,170,000 related to bridge financing received by the Company during 2024, and a $20,000 decrease in repayments of notes payable, partially offset by a $2,000,000 receipt from AirLife related to a liquid helium contract, a $1,369,000 decrease in the sale of common stock, a $285,000 increase in repayments made by the Company to a related party, a $95,000 decrease in proceeds from related parties, and a $86,000 reduction related to net member contributions made in the fiscal quarter ended March 31, 2023.
For the year ended December 31, 2023, compared to the year ended December 31, 2022
The following table summarizes the Company’s cash flows for years ended December 31, 2023, and 2022:
| Year Ended 12/31/2022 | Year Ended 12/31/2022 | Variance ($) | Variance (%) | |||||||||||||
| Statement of Cash Flows Data: | ||||||||||||||||
| Net cash provided by operating activities | $ | (2,682,921 | ) | $ | 763,904 | $ | (3,446,825 | ) | -451.2 | % | ||||||
| Net cash used in investing activities | $ | (1,283,200 | ) | $ | (505,725 | ) | $ | (777,475 | ) | 153.7 | % | |||||
| Net cash used in financing activities | $ | 4,085,726 | $ | (744,006 | ) | $ | 4,829,732 | -649.2 | % | |||||||
Net cash used in operating activities was $2,682,921 for the year ended December 31, 2023, compared to cash flow provided by operating activities of $763,904 for the year ended December 31, 2022, representing a decrease in cash provided of $3,446,825 or 451.2%. This decrease was primarily due to a $3,611,000 decrease in net revenues, an increase of $916,000 in G&A costs net of stock compensation and allowance for losses and bad debt write offs, partially offset by a $532,000 increase in cash flow provided by changes in operating assets and liabilities, and a $461,000 decrease in lease operating expenses.
Cash provided by changes in operating assets and liabilities were $89,000 during the year ended December 31, 2023 compared $443,000 used in changes in operating assets and liabilities during the year ended December 31, 2022. Cash provided by changes in operating assets and liabilities during the year ended December 31, 2023 were primarily related to a $294,000 increase in trade and related party payables, partially offset by a $130,000 decrease in accrued expenses primarily related to timing expense at December 31, 2023 as compared to December 31, 2022, and a $117,000 reduction of other current liabilities primarily as a result of net payments to the Office of Natural Resources Revenue. The increase in payables primarily resulted from field costs incurred with related party vendors not paid as of March 31, 2024. Cash used in changes in operating assets and liabilities during the year ended December 31, 2022 was primarily related to a $468,000 decrease in other liabilities primarily as a result of net payments to the Office of Natural Resources Revenue, $297,000 of payments related to settlement of asset retirement obligations, partially offset by a $367,000 increase in trade and related party payables. The increase in payables primarily resulted from less cash available to pay accounts payable as a result of lease operating and general and administrative expenses in excess of revenues and net funding received from investing and financial activities and payments of asset retirement obligations during the year ended December 31, 2022.
Net cash used in investing activities was $1,283,200 for the year ended December 31, 2023, compared to $505,725 for the year ended December 31, 2022, representing a decrease in cash provided of $777,475 or 153.7%. This decrease was primarily due to $3,582,000 increase in capital spending related to the processing plant currently under construction, a $373,000 increase in capital spending related to costs associated with studies and construction of a gathering system, partially offset by $2,500,000 in proceed from the sale of certain properties in Chaves County, NM, a $526,000 decrease in the purchase of certificates of deposit, and a $162,000 increase in proceeds from the redemption of certificates of deposit.
Net cash provided by financing activities was $4,085,726 for the year ended December 31, 2023, compared to $744,006 used in financing activities for the year ended December 31, 2022, representing an increase in cash provided of $4,829,732 or 649.2%. This increase was primarily related to a $2,000,000 increase related to cash provided by the AirLife notes payable, a $1,565,000 increase related to sale of common stock, a $1,029,000 increase due to a change in net cash provided by member’s withdrawals and contributions which occurred prior to the Company’s reorganization in February 2023, a $160,000 increase related to changes in related party funding and repayments, and a $75,000 decrease related to a reduction of repayments on notes payable.
Indebtedness
As of September 30, 2024, the Company had $6,482,029 in outstanding loans and financing, excluding accounts payable and accrued interest. The following is a description of our material indebtedness. These descriptions are only summaries and do not purport to describe all of the terms of the financing arrangements that may be important.
The table below reflects the Company indebtedness as of September 30, 2024:
| Principal Amount | Maturity Date | Interest Rate | ||||||||||
| Beaufort Acquisitions, Inc. | $ | 465,000 | 12/1/2024 | 14.5 | % | |||||||
| AirLife Gases | $ | 2,000,000 | (1 | ) | 8.0 | % | ||||||
| Will Gray | $ | 75,000 | (2 | ) | N/A | |||||||
| Adrian Beeston | $ | 52,500 | (3 | ) | N/A | |||||||
| Joel Solis | $ | 720,000 | (4 | ) | 10.0 | % | ||||||
| Bridge Financing - various | $ | 3,169,529 | (5 | ) | 10.0 | % | ||||||
(1) The earlier of May 30, 2027 or 18 months after commencement date as defined the Purchase and Sale Agreement between NEH Midstream and AirLife dated August 25, 2023. As of September 30, 2024, the Company has accrued $175,191 of interest on this note
(2) The earlier of (i) February 15, 2024, or (ii) the closing of the Company’s business combination with Roth CH Acquisitions V Co. As of September 30, 2024, the company has repaid $95,000 of the $170,000 due to Mr. Gray.
(3) As of September 30, 2024, the company has repaid $25,000 of the $50,000 due to Mr. Beeston. In addition, $27,500 was invested by Mr. Beeston as a Bridge Financing Debenture. As of September 30, 2024, the Company has accrued $985 of interest on Mr. Beeston’s debenture.
(4) In July 2024, the Company entered into a Standby Retainer, Consulting and Services Agreement with Tall City Well Service, a company controlled by Mr. Solis. As payment for the agreement, Mr. Solis entered into a $720,000 Bridge Financing Debenture. As of September 30 2024, the Company has accrued $18,200 of interest on Mr. Solis’ note.
(5) To be repaid by the Company on the earliest of: i) the date that the holder accerlates the obligations under the Bridge Financing Debentures; ii) March 1, 2025; iii) the consummation of the Business combination. As of September 30, 2024, the Company has accrued $69,939 of interest on these debentures.
As of December 31, 2023, we had $2,810,000 in outstanding loans and financing, excluding accounts payable and accrued interest. The following is a description of our material indebtedness. These descriptions are only summaries and do not purport to describe all of the terms of the financing arrangements that may be important.
The table below reflects the Company indebtedness as of December 31, 2023:
| Principal Amount | Maturity Date | Interest Rate | ||||||||||
| Beaufort Acquisitions., Inc. | $ | 465,000 | 6/1/2024 | 14.5 | % | |||||||
| AirLife Gases | $ | 2,000,000 | (1 | ) | 8.0 | % | ||||||
| Will Gray | $ | 170,000 | (2 | ) | N/A | |||||||
| Joel Solis | $ | 175,000 | (3 | ) | N/A | |||||||
(1) The earlier of May 30, 2027 or 18 months after commencement date as defined the Purchase and Sale Agreement between NEH Midstream and AirLife dated August 25, 2023.
(2) The earlier of (i) February 15, 2024, or (ii) the closing of the Company’s business combination with Roth CH Acquisitions V Co.
(3) To be repaid by the Company no later than September 30, 2024.
The Company received $50,000 on January 22, 2024 from Adrian Beeston, an investor, and received $150,000 on January 30, 2024 from Joel Solis, the Company’s Chairman of the Board. These loans bear no interest and shall be repaid by the Company no later than April 1, 2024. On February 29, 2024 the Company repaid the $150,000 due to Mr. Solis. On September 26, 2024, the Company repaid $25,000 of the amount due to Mr. Beeston.
Tabular Disclosure of Contractual Obligations
The following is a summary of our contractual obligations as of September 30, 2024:
| Less than | ||||||||||||||||
| 1 year | 1-3 Years | 3-5 Years | Total | |||||||||||||
| Notes Payable – AirLife (1) | $ | $ | 2,000,000 | $ | 2,000,000 | |||||||||||
| Notes Payable – Beaufort Acquisitions (2) | 465,000 | 465,000 | ||||||||||||||
| Notes Payable – Bridge Financing (3) | 3,169,529 | 3,169,529 | ||||||||||||||
| Notes Payable – Related Parties (4) | 100,000 | 100,000 | ||||||||||||||
| Notes Payable – Related Parties – Bridge Financing (5) | 747,500 | 747,500 | ||||||||||||||
| Interest Expenses Related to Notes Payables | 169,998 | 447,227 | 617,225 | |||||||||||||
| $ | 4,652,027 | $ | 2,447,227 | $ | - | $ | 7,099,254 | |||||||||
| (1) | Assumes monthly payments will begin in July 2025 and last payment made December 2026. This note carries an annual interest rate of 8%. As of September 30, 2024, the Company has accrued $175,191 of interest on this note. |
| (2) | Assumes note matures December 1, 2024. This note carries an annual interest rate of 14.5%. |
| (3) | Assumes these notes mature on December 2, 2024. As of September 30, 2024, the Company has accrued $69,939 of interest on these notes. |
| (4) | Assumes these notes are paid no later than December 31, 2024. |
| (5) | Assumes these notes mature on December 2, 2024. As of September 30, 2024, the Company as accrued $19,185 of interest on these notes. |
The following is a summary of our contractual obligations as of December 31, 2023:
| Less than 1 year | 1-3 Years | 3-5 Years | Total | |||||||||||
| Notes Payable – AirLife (1) | $ | $ | 2,000,000 | $ | 2,000,000 | |||||||||
| Notes Payable – Beaufort Acquisitions (2) | 465,000 | 465,000 | ||||||||||||
| Interest Expenses Related to Notes Payables | 192,904 | 137,352 | 330,256 | |||||||||||
| Office Lease (3) | 12,690 | 12,690 | ||||||||||||
| $ | 670,594 | $ | 2,137,352 | $ | - | $2,807,946 | ||||||||
| (1) | Assumes monthly payments will begin in January 2025 and last payment made June 2026. This note carries an annual interest rate of 8%. | |
| (2) | Note matures June 1, 2024. This note carries an annual interest rate of 14.5%. | |
| (3) | The Company leases office space in Hermosa Beach, California. This lease terminated on May 31, 2023. It is the Company’s intention to remain in this space on a month-to-month basis until May 31, 2024 |
Off-Balance Sheet Arrangements
During the fiscal year ended December 31, 2023 and the nine months ended September 30, 2024, the Company did not engage in any off-balance sheet arrangements as defined in Item 303(a)(4) of the SEC’s Regulation S-K.
Quantitative and Qualitative Disclosures about Market Risk
Foreign Exchange Risk
The Company does not currently have exposure to the foreign exchange risk arising from foreign currency exposures, primarily in relation to the US dollar.
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates affect our revenues or the fair value of our financial instruments. Our exposure to the risk of changes in market interest rates arises primarily from short-term investments and long-term borrowings. Each of the Company borrowings are subject to fixed interest rates (see Indebtedness above). The Company has no variable rate instruments and all instruments are subject to fixed interest rates.
Credit Risk
Credit risk is the risk of financial loss to us if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from our receivables from customers. The carrying amounts of financial assets and contract assets represent the maximum credit exposure. We believe we are not exposed to significant credit risk concentration, whether through exposure to individual customers, specific industry sectors and/or regions.
Liquidity Risk
We manage liquidity risk by monitoring cash balances on hand, working capital, and operating cash flows. When operating cash flows are not sufficient to fund the company’s operations, the Company will need to raise additional financing. The Company intends to raise such capital through additional equity and debt raises. The equity raises will continue to be effectuated via a private placement, continuation of the business combination transaction with ROCL, or other transactions. See “Liquidity and Capital Resources.”
Cyber-Security Risk
The Company relies heavily on its information systems, and the availability and integrity of these systems is essential to conducting its business and operations. As a producer of oil and natural gas, the Company faces various security threats, including cybersecurity threats, to gain unauthorized access to its sensitive information or to render its information or systems unusable, and threats to the security of its facilities and infrastructure or third-party facilities and infrastructure, such as gathering and processing and other facilities, and pipelines. This risk may be heightened as a result of an increased remote working environment, similar to the one created by the COVID-19 outbreak in 2020. The potential for such security threats subjects its operations to increased risks that could have a material adverse effect on its business, financial condition, results of operations and cash flows.
As the Company implements various procedures and controls to monitor and mitigate such security threats and to increase security for its information, systems, facilities and infrastructure it may result in increased costs. Moreover, there can be no assurance that such procedures and controls will be sufficient to prevent security breaches from occurring. If any of these security breaches were to occur, they could lead to losses of, or damage to, sensitive information or facilities, infrastructure and systems essential to its business and operations, as well as data corruption, communication interruptions or other disruptions to its operations, which, in turn, could have a material adverse effect on its business, financial position, results of operations and cash flows.
Significant Changes in Accounting Policies
On February 6, 2023, the Company entered into a Reorganization Agreement and Plan Share exchange with Solis Partners. Subject to the terms of the agreement, all issued and outstanding member interest in Solis LLC was automatically converted and exchanged for 5 million shares of the Company’s common stock. Prior to the Reorganization Agreement and Plan Share Exchange, Solis Partners was treated as a pass through entity for federal income tax purposes. As a result, the net taxable income of the Company and any related tax credits, for federal income tax purposes, were deemed to pass to the Investor Group and are included in their tax returns even though such net taxable income or tax credits may not have actually been distributed. Accordingly, no tax provision had been made in the financial statements for the year ended December 31, 2022, since the federal income tax is an obligation of the Investor Group.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which changes accounting requirements for the recognition of credit losses from an incurred or probable impairment methodology to a Current Expected Credit Losses (“CECL”) methodology. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including but not limited to trade receivables. The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company did not experience a material impact upon implementation of the standard.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures. The amendments address more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in the ASU are effective for public business entities for annual periods beginning after December 31, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense and information used to assess segment performance. The amendments in the ASU are effective for public entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is still evaluating the effect of the adoption of this guidance.
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public business entities to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. The amendments in the ASU are effective for public entities for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is still evaluating the effect of the adoption of this guidance.
Critical Accounting Estimates
The Company prepares its consolidated financial statements for inclusion in this Annual Report in accordance with 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, 2023 and 2022 was prepared by the Company’s independent petroleum 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 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. In addition, a decline in proved reserve estimates may impact the outcome of the Company’s ceiling test calculations of its proved properties for impairment.
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, if necessary, may establishes a valuation allowance based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences. There can be no assurance that facts and circumstances will not materially change and require the Company to establish deferred tax asset valuation allowances or revise an existing 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.
Facilities/Properties
We currently own and operate 137,000 acres in Southeast New Mexico and have over 389.1 MMcf of net proved undeveloped helium reserves and 703.8 MMcf of net probable undeveloped reserves. These reserves are strategically located, just 20 miles north of Roswell, New Mexico and no more than 550 miles away from six out of the seven helium liquefication plants in the United States. The reserves are also located next to El Paso National Gas Facility, a pipeline system owned by Kinder Morgan that transports for natural gas suppliers to end users. This suitable location creates efficiency for the Company’s supply of natural gas to various players in the helium production space.
The Pecos Slope Plant mentioned above is expected to commence operations in Q2 of 2025, and is located in the Pecos Slope Field of New Mexico.
We currently lease office space at 4501 Santa Rosa Drive, Midland, Texas 79707 and 200 Pier Avenue, Unit # 224, Hermosa Beach, California.
On May 27, 2022, the Company entered into a 12-month lease agreement for office space at 200 Pier Avenue, Unit # 224 in Hermosa Beach, California 90254. This lease expired on May 31, 2023. The Company reached an agreement with the lessor to continue occupancy of this space on a month-to-month basis.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ROCL
As used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations of ROCL” section, “we,” “our,” and “us” refers to ROCL.
Overview
We are a blank check company formed under the laws of the State of Delaware on November 5, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Units, our capital stock, debt or a combination of cash, stock and debt.
The issuance of additional shares of our stock in an initial business combination:
| · | may significantly reduce the equity interest of our stockholders; |
| · | may subordinate the rights of holders of common stock if we issue preferred shares with rights senior to those afforded to our shares of common stock; |
| · | will likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and may adversely affect prevailing market prices for our securities. |
| · | Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in: default and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations; |
| · | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and |
| · | our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding. |
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial business combination will be successful.
Recent Developments
Merger Agreement
On January 3, 2024, ROCL (or “Acquiror”), entered into a Business Combination Agreement and Plan of Reorganization (as it may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among Acquiror, Roth CH V Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Acquiror (“Merger Sub”), and New Era Helium Corp., a Nevada corporation (“NEH”). The transactions set forth in the Merger Agreement, including the Merger (defined below), will constitute a “Business Combination” as contemplated by Acquiror’s Amended and Restated Certificate of Incorporation. Unless expressly stated otherwise herein, capitalized terms used but not defined herein shall have such meanings ascribed to them in the Merger Agreement.
The Merger Consideration
Subject to the terms and conditions set forth in the Merger Agreement, in consideration of the Merger, the holders of shares of NEH Common Stock (including shares of NEH Common Stock resulting from the conversion of NEH Preferred Stock) will receive an aggregate of 9.0 million shares of Acquiror’s common stock, which number will be subject to adjustment based upon the Net Debt (as defined in the Merger Agreement) (which shares do not include the Earnout Shares (as defined below)) (the “NEH Merger Shares”). For purposes of the NEH Merger Shares, such amount assumes $37,300,000 of Net Debt. For every dollar of Net Debt lower than $37,300,000 at Closing, the NEH Merger Shares will be increased by 1/10 of one share and for every dollar of Net Debt higher than $37,300,000 at Closing, the NEH Merger Shares will be decreased by 1/10 of one share.
The Merger Agreement also provides, among other things, that the holders of shares of NEH Common Stock immediately prior to the Effective Time have the contingent right to receive up to an aggregate of 1.0 million additional shares of Acquiror’s common stock (the “Earnout Shares”), subject to the following contingencies:
| (i) | 500,000 Earnout Shares, in the event that, based upon the audited financial statements of NEH for the year ended December 31, 2025, it meets or exceeds a total EBITDA of $25.268 million as calculated by the Company; and |
| (ii) | 500,000 Earnout Shares, if, at any time during the period between the Closing Date and 180 days after the filing of the Form 10-K for the fiscal year ended December 31, 2025, the average of the reported sales prices on Nasdaq (or the exchange on which Acquiror’s common stock is then listed) for any twenty (20) Trading Days during any thirty (30) consecutive Trading Days is greater than or equal to $12.50. |
Representations and Warranties
The Merger Agreement contains customary representations and warranties of the parties thereto with respect to the parties, the transactions contemplated by the Merger Agreement and their respective business operations and activities, including, with respect to NEH, its mineral properties, leases and contracts. The representations and warranties of the parties do not survive the Closing.
Covenants
The Merger Agreement contains customary covenants of the parties thereto, including: (a) conduct of business pending the Merger, (b) preparation and filing of a Form S-4 with respect to the shares of Acquiror’s common stock issuable under the Merger Agreement, which Form S-4 will contain a proxy statement for Acquiror’s stockholders, (c) the requirement to make appropriate filings and obtain clearance pursuant to the HSR Act, and (d) the preparation and delivery of updated audited financial statements for NEH.
The Merger Agreement also contains mutual exclusivity provisions prohibiting the parties thereto and their respective representatives and subsidiaries from soliciting initiating, continuing or otherwise encouraging or participating in an Alternative Transaction (subject to certain limited exceptions specified therein), or entering into any contracts or agreements in connection therewith.
The parties to the Merger Agreement agreed to use commercially reasonable efforts to identify additional sources of financing from third party financing sources, on terms mutually agreed upon between Acquiror and NEH.
Conditions to Consummation of the Transactions
Consummation of the transactions contemplated by the Merger Agreement is subject to conditions of the respective parties that are customary for a transaction of this type, including, among others: (a) obtaining Acquiror stockholders’ approval of the Roth Proposals; (b) obtaining the NEH Stockholder Approval; (c) there being no laws or injunctions by governmental authorities or other legal restraint prohibiting consummation of the transactions contemplated under the Merger Agreement; (d) the required filings under the HSR Act having been completed and the waiting period applicable to the Merger under the HSR Act having expired or terminated; (e) Acquiror’s common stock being listed on Nasdaq, or another national securities exchange mutually agreed to by the parties; (f) the Form S-4 having become effective and no stop order suspending the effectiveness of the Form S-4 having been issued by the SEC; and (g) Acquiror (including, following the Effective Time, NEH) having equal to or in excess of $5,000,000 in cash and cash equivalents.
Acquiror has separate conditions to closing, including, among others, that (a) no material adverse effect having occurred with respect to NEH, (b) NEH having raised at least $45,000,000 in a private placement of securities in order to fund its new plant construction, and (c) certain indebtedness of NEH having been converted into shares of common stock of NEH. NEH has separate conditions to closing, including, among others, that no material adverse effect has occurred with respect to Acquiror.
Termination
The Merger Agreement may be terminated under certain customary and limited circumstances prior to the Closing of the Merger, including: (a) by mutual written consent of Acquiror and NEH; (b) by either party if the Closing has not occurred prior to the date that is 180 days after the date of the Merger Agreement; (c) there is a final non-appealable order issued by a governmental authority preventing or making illegal the consummation of the transactions contemplated by the Merger Agreement; (d) by either Acquiror or NEH if any of the Roth Proposals fails to be approved at the Roth Stockholders’ Meeting; (e) by Acquiror if NEH fails to obtain NEH Stockholder Approval within five (5) Business Days following the date in which the SEC declares the Form S-4 effective; (f) by Acquiror if NEH has not delivered: (i) its Audited Financial Statements for the year ended December 31, 2022 and December 31, 2021 by January 8, 2024, (ii) its Interim Financials by February 1, 2024, and (iii) the Audited Financial Statements for the year ended December 31, 2023 within 90 days after the date of the Merger Agreement; and (g) by either party if the other party’s representations or warranties are not true and correct or if the other party breached any of its covenants set forth in the Merger Agreement such that the conditions to Closing would not be satisfied and such breach cannot or has not been cured within the earlier of thirty (30) days’ notice by the other party.
If the Merger Agreement is validly terminated, none of the parties will have any liability or any further obligation under the Merger Agreement with certain limited exceptions, including liability arising out of willful material breach of the Merger Agreement.
Governance
The executive management of NEH is expected to serve as the executive management of Acquiror following Closing. Pursuant to the Merger Agreement, for a period of three years following the Closing, Acquiror’s board of directors will consist of five members, with Acquiror’s current board of directors having the right to designate one director.
Employment Agreements
In connection with the Merger Agreement, prior to the filing of the definitive Proxy Statement, NEH agreed to amend and restate the employment agreements, or enter into new employment agreements, with certain key employees of NEH, in forms reasonably acceptable to Acquiror, NEH and such key employees and containing market terms for a public company of similar size and industry to NEH.
The Merger Agreement contains representations, warranties and covenants that the parties to the Merger Agreement made to each other as of the date of the Merger Agreement or other specific dates. The assertions embodied in those representations, warranties and covenants were made for purposes of the contract among the parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Merger Agreement. The Merger Agreement has been attached to provide investors with information regarding its terms and is not intended to provide any other factual information about ROCL, NEH or any other party to the Merger Agreement. In particular, the representations, warranties, covenants and agreements contained in the Merger Agreement, which were made only for purposes of the Merger Agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties (including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts) and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors and reports and documents filed with the SEC. Investors should not rely on the representations, warranties, covenants and agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any party to the Merger Agreement. In addition, the representations, warranties, covenants and agreements and other terms of the Merger Agreement may be subject to subsequent waiver or modification. Moreover, information concerning the subject matter of the representations and warranties and other terms may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in ROCL’s public disclosures.
Certain Related Agreements
Insider Support Agreement
Contemporaneously with the execution of the Merger Agreement, Acquiror entered into an insider support agreement (the “Insider Support Agreement”) with NEH and certain stockholders of Acquiror (the “Sponsor Parties”), whereby the Sponsor Parties have agreed, among other things, (i) not to transfer or redeem any Acquiror Common Stock held by such Sponsor Parties, (ii) to vote in favor of the adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated hereby, and (iii) to vote against any Alternative Transaction with respect to Acquiror or any proposal in opposition to approval of the Merger Agreement or in competition with or inconsistent with the Merger Agreement and any other action or proposal that is intended, or would reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the Transactions.
Company Support Agreement
Contemporaneously with the execution of the Merger Agreement, Acquiror entered into a stockholder support agreement (the “Company Support Agreement”) with NEH and certain shareholders of NEH (the “Company Supporting Shareholders”), pursuant to which the Company Supporting Shareholders have agreed, among other things, (i) not to transfer any NEH Common Stock held by such Company Supporting Shareholders, (ii) to vote in favor of the Merger and the transactions contemplated by the Merger Agreement, and (iii) to vote against any Alternative Transaction with respect to NEH or any proposal in opposition to approval of the Merger Agreement or in competition with or inconsistent with the Merger Agreement, and any other action or proposal that is intended, or would reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the Transactions.
Registration Rights Agreement
The Merger Agreement contemplates that, at the Closing, Acquiror and certain stockholders of Acquiror and NEH (collectively, the “Holders”) will enter into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which Acquiror will agree to register for resale, pursuant to Rule 415 under the Securities Act, certain shares of Acquiror Common Stock and warrants that are held by the Holders from time to time.
The Registration Rights Agreement amends and restates the registration rights agreement that was entered into by ROCL and the other parties thereto in connection with ROCL’s initial public offering. The Registration Rights Agreement will terminate on the earlier of (a) the tenth-year anniversary of the date of the Registration Rights Agreement or (b) with respect to any Holder, on the date that such Holder no longer holds any Registrable Securities (as defined therein).
Lock-up Agreement
The Merger Agreement contemplates that, prior to the Closing, certain shareholders of NEH (“Lock-up Holders”) will enter into lock-up agreements (each, a “Lock-up Agreement”) with NEH and Acquiror. Pursuant to the Lock-up Agreements, the Lock-up Holders will agree, among other things, that for a period of six (6) months following the Closing, not to transfer their shares received as Merger consideration or any securities convertible into or exercisable or exchangeable for shares of Acquiror Common Stock owned by such Lock-up Holders nor make any demand for or exercise any right with respect to the registration of such lock-up securities.
Termination of Business Combination Marketing Agreement
Concurrently with the execution of the Merger Agreement, Acquiror and NEH entered into a letter agreement (the “Letter Agreement”) with Roth Capital Partners, LLC and Craig-Hallum Capital Group LLC (together the “Advisors”) to terminate that certain Business Combination Marketing Agreement, dated as of November 30, 2021, by and among Acquiror and the Advisors (the “BCMA”).
Pursuant to the Letter Agreement, in exchange for the termination of the BCMA, Acquiror and NEH mutually agree, jointly and severally, on the date of closing of the Business Combination, to issue to the Advisors an aggregate of 575,000 shares of Acquiror Common Stock and to include such shares as a “registrable security” in the Registration Rights Agreement. Such shares will not be subject to any lock-up agreement or other restrictions on transfer. The Letter Agreement will terminate and be of no force or effect if the Merger Agreement is terminated in accordance with its terms.
Amendments to Merger Agreement
On June 5, 2024, the Company and NEH entered into the First Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Amendment”) pursuant to which, among other things:
| (a) | the Outside Date has been extended to 270 days after the date of the Merger Agreement |
| (b) | the structure of the Business Combination has changed such that: (1) the Company will merge (the “Initial Merger”) with and into a newly formed Nevada corporation named Roth CH V Holdings, Inc. (“Holdings”), a wholly owned subsidiary of the Company, and Holdings will be the survivor of the Initial Merger; (ii) Holdings shall sign a joinder and become a party to the Merger Agreement; and (iii) immediately subsequent to the Initial Merger, Merger Sub will merge with and into NEH, with NEH surviving the Merger as a wholly owned subsidiary of Holdings; and |
| (c) | the closing condition that NEH raise at least $45 million in a private placement of securities in order to fund its new plant construction has been removed, and the closing condition that certain indebtedness of NEH be converted into shares of common stock of NEH has been removed. |
On August 8, 2024, the parties to the BCA entered into the Second Amendment to the Business Combination Agreement and Plan of Reorganization Amendment, pursuant to which, among other things: (a) the Outside Date was extended to October 31, 2024 and (b) the definitions of “Company Merger Shares” and “Net Debt” were amended.
On September 11, 2024, the Company and NEH entered into the Third Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Third Amendment”) pursuant to which, among other things:
| (a) | The definition of “Company Merger Shares” in Section 1.01 is amended to read as follows: “Company Merger Shares” means 9,000,000 shares of Holdings Common Stock which number shall be subject to adjustment based upon the Net Debt at closing in that is different from the Net Debt at the date of the Original Business Combination Agreement (the “Net Debt Variation”). For the avoidance of doubt, the Company Merger Shares do not include Earnout Shares in an amount up to 1,000,000 shares of Roth Common stock. For every dollar of decrease in the Net Debt Variation the Company Merger Shares shall be increased by 1/10 of one share and for every dollar of increase in the Net Debt Variation the Company Merger Shares shall be decreased by 1/10 of one share. |
| (b) | The definition of “Net Debt” in Section 1.01 is amended to read as follows: “Net Debt means the total Indebtedness of NEH and the NEH Subsidiaries (excluding any existing Indebtedness that converts, exchanges or is exercised into share of capital stock of NEH) after subtracting all cash and liquid assets, which calculation shall be mutually agreed upon between NEH and Roth no later than three business days prior to Closing. In the event of any dispute with respect to such calculation, the parties shall promptly (and in no event more than 15 days after the Closing) engage a mutually agreed upon independent third party to resolve such dispute and make an independent determination of the Company Merger Shares and Net Debt. NEH shall make all work papers, back up materials, and financial staff involved in preparation of the calculations available to such third party. The cost of such third party shall be paid by Holdings. |
| (c) | A new section 3.02(k) shall be added as follows: In the event that the parties are unable to mutually agree on the Company Merger Shares or Net Debt prior to the Closing, the number of shares in dispute shall not be distributed as part of the Per Share Merger Consideration at the Closing and shall only be distributed upon resolution of any dispute pursuant to Section 1.01 hereof. |
On September 30, 2024, the Company and NEH entered into the Fourth Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Fourth Amendment”) pursuant to which, among other things the parties extended the Outside Date to November 30, 2024.
Extensions of the Combination Period
On May 17, 2023, we held a special meeting of stockholders (the “May 2023 Meeting”), at which our stockholders approved an amendment (the “May Extension Amendment”) to the Company’s amended and restated certificate of incorporation to give the Company the right to extend the date by which the Company has to consummate a business combination (the “Combination Period”) up to six (6) times, each such extension for an additional one (1) month period, from June 3, 2023 to December 4, 2023. In connection with the stockholders’ vote at the May 2023 Meeting, 8,989,488 shares of common stock were tendered for redemption.
On May 3 and 4, 2023, we entered into non-redemption agreements with certain stockholders owning, in the aggregate, 2,000,000 shares of the Company’s common stock, pursuant to which such stockholders agreed, among other things, not to redeem or exercise any right to redeem such public shares in connection with the May Extension Amendment. Certain initial stockholders of the Company agreed to pay the stockholders that entered into such agreements $0.04 per share for each one-month extension in connection with such agreements. On July 20, 2023, we entered into amendments to the non-redemption agreements to provide that the Company or certain initial stockholders of the Company, or their affiliates or designees, will pay such stockholders that entered into such non-redemption agreements $0.04 per share for each one-month extension in connection with such agreements. On May 30, 2023, June 29, 2023, July 31, 2023, August 31, 2023, October 2, 2023 and November 6, 2023, we issued payments to the Non-redeeming Stockholders in the aggregate amount of $480,000 in relation to the extension of the Combination Period through December 4, 2023.
On December 1, 2023, we held a special meeting of stockholders (the “December 2023 Meeting”), at which our stockholders approved an amendment to the Company’s amended and restated certificate of incorporation to (A) give the Company the right to extend the Combination Period up to twelve (12) times, each such extension for an additional one (1) month period, from December 4, 2023 to December 3, 2024 (i.e., for a period of time ending 36 months from the consummation of the IPO) and (B) expand the methods that the Company may employ to not become subject to the “penny stock” rules of the Securities and Exchange Commission. In connection with the stockholders’ vote at the December 2023 Meeting, 927,715 shares of common stock were tendered for redemption. As of September 30, 2024, we paid an aggregate amount of $405,000 to the Trust account for each one-month extension to extend the date by which the Company must consummate its Business Combination from December 4, 2023 to July 4, 2024.
On October 28, 2024, we held a special meeting of stockholders, at which our stockholders approved an amendment to the Company’s amended and restated certificate of incorporation to give the Company the right to extend the Combination Period up to six (6) times, each such extension for an additional one (1) month period, from December 3, 2024 to June 3, 2025.
At the Special Meeting, ROCL’s stockholders approved the proposals outlined in the Proxy Statement/Prospectus, including, among other things, the adoption of the Business Combination Agreement and approval of the transactions contemplated by the Business Combination Agreement, including the Initial Merger and Merger Sub’s merger with and into the Company, with the Company surviving the Business Combination as a wholly owned subsidiary of Holdings, and the issuance of the Company’s securities as consideration thereunder, as described in the section titled “The Business Combination Proposal (Proposal 2)” beginning on page 112 of the Proxy Statement/Prospectus.
In connection with and in advance of the Business Combination, on December 6, 2024, ROCL filed the following documents:
| 1. | The Amended and Restated Articles of Incorporation, a copy of which is attached hereto as Exhibit 3.1. |
| 2. | The Articles of Merger between ROCL and Holdings, attached hereto as Exhibit 2.3. |
| 3. | The Articles of Merger between Merger Sub and New Era Helium Cop., attached hereto as Exhibit 2.4. |
Nasdaq Matters
On October 9, 2023, The Nasdaq Stock Market LLC (“Nasdaq”) notified the Company that it did not comply with Nasdaq’s minimum 400 Total Holders requirement set forth in Listing Rule 5450(a)(2) (the “Rule”). Based on Nasdaq’s further review and the materials submitted by the Company on November 24, 2023, January 5, 2024, and February 19, 2024, Nasdaq determined to grant the Company an extension of time to regain compliance with the Rule. On May 13, 2024, Nasdaq notified the Company that it did not regain compliance with the requirement during the extension period. On May 17, 2023, the Company requested a hearing before a Nasdaq Hearing Panel (the “Panel”). A hearing on this matter was held on June 27, 2024 and on July 3, 2024, Nasdaq notified the Company that the Panel has determined to grant the Company’s request to continue its listing on Nasdaq subject to the condition that on or before November 11, 2024, the Company shall demonstrate compliance with the Rule.
On November 8, 2024, the Panel received a written update and request (the “Amendment Request”) from the Company to modify the terms of the Panel’s decision dated July 3, 2024, that granted an exception to the Company to continue its listing on Nasdaq subject to the satisfaction of certain milestones described in the decision.
In the Amendment Request, the Company proposed changes to its compliance plan initially presented at the hearing. Specifically, as an alternative to the completion of the business combination with New Era Helium that the Company outlined at the hearing, the Company proposed to file a phase down transfer listing application to transfer its listing from the Nasdaq Global Market to the Nasdaq Capital Market. The Company informed the Panel that upon the transfer, the Company would be positioned to evidence compliance with all continued listing requirements on the Nasdaq Capital Market. Based on the facts and information presented in the Amendment Request, the Panel granted the Company’s request for continued listing on the Exchange until November 12, 2024, subject to the requirement that on or before November 12, 2024, the Company will demonstrate compliance with all applicable requirements for continued listing on the Nasdaq Capital Market. On November 12, 2024, the Company submitted to Nasdaq documentary evidence of its compliance with all continued listing requirements on the Nasdaq Capital Market.
On November 18, 2024, the Company received a letter from Nasdaq indicating that is has regained compliance with the minimum total shareholders requirement in the Rule, as required by the Panel’s decision dated July 3, 2024, as amended. Accordingly, the Panel has determined to continue the listing of the Company’s securities on Nasdaq and is closing this matter.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities through September 30, 2024 were organizational activities, those necessary to prepare for the Initial Public Offering described below, and subsequent to the Initial Public Offering, identifying a target company for an initial business combination. We do not expect to generate any operating revenues until after the completion of our initial business combination, at the earliest. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account (as defined below). We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, an initial business combination.
For the three months ended September 30, 2024, we had a net loss of $195,976, which consisted of operating costs of $368,098 and provision for income taxes of $59,527, offset by of interest earned on marketable securities held in Trust Account of $229,375 and other interest income of $2,274.
For the nine months ended September 30, 2024, we had a net loss of $1,036,605, which consisted of operating costs of $1,540,761, interest and penalties of $463 and provision for income taxes of $174,717, offset by of interest earned on marketable securities held in Trust Account of $677,062 and other interest income of $2,274.
For the three months ended September 30, 2023, we had a net loss of $646,092, which consisted of interest earned on marketable securities held in Trust Account of $343,491 and change in fair value of due to non-redeeming stockholders of $8,811, offset by of operating costs of $908,357 and provision for income taxes of $90,037.
For the nine months ended September 30, 2023, we had a net income of $156,857, which consisted of interest earned on marketable securities held in Trust Account of $2,641,366, offset by of operating costs of $1,293,488, provision for income taxes of $719,832 and finance costs for non-redemption agreements of $471,189.
Liquidity and Capital Resources
On December 3, 2021, we consummated our initial public offering (the “Initial Public Offering”) of 11,500,000 units (the “Units” and, with respect to the shares of common stock included in the Units sold, the “Public Shares”), which included the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $115,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 461,500 units (the “Private Units”), at a price of $10.00 per Private Unit, in a private placement to certain of the holders of ours shares prior to the Initial Public Offering (the “Initial Stockholders”), generating gross proceeds of $4,615,000.
Following the Initial Public Offering, including the full exercise of the over-allotment option by the underwriters, and the sale of the Private Units, a total of $116,725,000 was placed in a trust account located in the United States (the “Trust Account”). We incurred $1,625,220 in transaction costs, consisting of $1,150,000 of underwriting fees and $475,220 of other offering costs.
For the nine months ended September 30, 2024, cash used in operating activities was $921,973. Net loss of $1,036,605 was affected by interest earned on marketable securities held in the Trust Account of $677,062 and other interest income of $2,274, offset by changes in operating assets and liabilities, which provided $924,247.
For the nine months ended September 30, 2023, cash used in operating activities was $1,800,678. Net income of $156,857 was affected by interest earned on marketable securities held in the Trust Account of $2,641,366 offset by fair value of due to non-redeeming shareholders of $471,189, and changes in operating assets and liabilities, which provided $212,642.
On May 31, 2023, in connection with the stockholders’ vote at the May Special Meeting, stockholders exercised their right to redeem 8,989,488 shares of common stock and $93,010,772 was released from the Trust account in connection with the share redemption. In connection with the stockholders’ vote at the December Special Meeting, stockholders exercised their right to redeem 927,715 shares of common stock and $9,889,573 was released from the Trust account in connection with the share redemption. In connection with the share redemptions, we recorded $1,029,003 of excise tax liability calculated as 1% of shares redeemed on May 31, 2023 and December 11, 2023. As of September 30, 2024, we had cash and marketable securities held in the Trust Account of $17,928,070. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our initial business combination. We may withdraw interest to pay taxes. Through September 30, 2024, we withdrew an amount of $132,152 of interest income from the Trust Account. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2024, we had $6,620 of cash held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.
In order to finance transaction costs in connection with an initial business combination, the Initial Stockholders, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete an initial business combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that an initial business combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would be repaid upon consummation of an initial business combination, without interest. On July 26, 2023, we issued an unsecured promissory note in the aggregate amount of up to $750,000 (the “July Note”) to individuals or entities listed on the Note. The July Note is non-interest bearing and is payable on the earlier of (i) the date on which the Company consummates an initial business combination or (ii) the date the Company liquidates if a Business Combination is not consummated. The July Note will be repaid only from amounts remaining outside of the Company’s Trust Account, if any. The proceeds will be used by the Company to pay various expenses of the Company, including the extension payments, and for general corporate purposes. On March 27, 2024, we issued an unsecured promissory note in the aggregate principal amount of up to $600,000 (the “December Note”) to individuals or entities listed on the Note (the “Payees”). Pursuant to the December Note, the Payees agreed to loan to the Company an aggregate amount of up to $600,000 that shall be payable on the earlier of (i) the date on which the Company consummates an initial business combination as such term is defined in the Company’s Amended and Restated Certificate of Incorporation (the “Business Combination”), or (ii) the date the Company liquidates if a Business Combination is not consummated. The December Note bears no interest rate. In the event that the Company does not consummate a Business Combination, the December Note will be repaid only from amounts remaining outside of the Company’s trust account, if any. The proceeds of the December Note will be used for the Company to pay various expenses of the Company and for general corporate purposes.
As of September 30, 2024, there were $1,287,944 of Working Capital Loans outstanding.
If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our Public Shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such initial business combination.
Going Concern
We will need to raise additional capital through loans or additional investments from the Initial Stockholders and our officers and directors. The Initial Stockholders and our officers and directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. If an initial business combination is not consummated by December 3, 2024, there will be a mandatory liquidation and subsequent dissolution. These conditions raise substantial doubt about our ability to continue as a going concern one year from the date that these financial statements are issued. We plan to address this uncertainty through working capital loans and through consummation of our initial business combination. There is no assurance that working capital loans will be available to the Company or that our plans to consummate a business combination will be successful; therefore, there is substantial doubt about our ability to continue as a going concern. There is no assurance that working capital loans will be available to us or that our plans to consummate an initial business combination will be successful.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as described below.
As of September 30, 2024 and December 31, 2023, there were Working Capital Loans outstanding of $1,287,944 and $416,841, respectively.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our balance sheets.
Net (Loss) Income Per Common Share
We have two types of common stock – redeemable common stock and non-redeemable common stock. We calculate our earnings per share to allocate net (loss) income pro rata to redeemable and non-redeemable common stock. This presentation contemplates an initial business combination as the most likely outcome, in which case, both classes of common stock share pro rata in our (loss) income. Net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding for the period. In order to determine the net (loss) income attributable to both the redeemable and non-redeemable common stock, we first considered the total (loss) income allocable to both sets of shares. This is calculated using the total net (loss) income less any dividends paid. For the purposes of calculating net (loss) income per share, any remeasurement of the accretion to redemption value of the redeemable common stock subject to redemption and the excise tax calculated on the redemption of shares were considered to be dividends paid to the holders of the redeemable common stock. Subsequent to calculating the total (loss) income allocable to both sets of shares, we split the amount to be allocated pro rata between redeemable and non-redeemable common stock for the three and nine months ended September 30, 2024.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial ownership of shares of the Company’s common stock as of December 6, 2024, following the consummation of the Business Combination, by:
| · | each person known by the Company to be the beneficial owner of more than 5% of a class of voting securities on December 6, 2024; |
| · | each of the Company’s officers and directors; and |
| · | all executive officers and directors of the Company as a group. |
Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to securities. Except as indicated by the footnotes below, the Company believes, based on the information furnished to it, that the persons and entities named in the table below have, or will have immediately after Closing, sole voting and investment power with respect to all shares of the Company’s common stock that they beneficially own, subject to applicable community property laws.
Subject to the paragraph above, percentage ownership of the Company’s common stock and voting percentage is based on 13,165,152 shares of our Company’s common stock outstanding upon consummation of the Business Combination on December 6, 2024.
| Name and Address of Beneficial Owner 1 | Number of Shares of Common Stock |
% | |||||||
| E. Will Gray II2 | 879,819 | 6.68 | % | ||||||
| Mike Rugen | - | - | % | ||||||
| Phil Kornbluth | - | - | % | ||||||
| Stan Borowiec | - | - | % | ||||||
| Charles Nelson | - | - | % | ||||||
| All directors and executive officers after the Business Combination as a group (4 individuals) | 879,819 | 6.68 | % | ||||||
| Five Percent Holders | |||||||||
| Joel G. Solis | 2,115,581 | 16.07 | % | ||||||
| Casey Solis | 1,034,898 | 7.86 | % | ||||||
| Robert Solis | 1,034,898 | 7.86 | % | ||||||
Directors and Executive Officers
The Company’s directors and executive officers after the Closing are described in the Proxy Statement/Prospectus in the section titled “Executive Officers and Directors of the Combined Company,” beginning on page 180, which is incorporated herein by reference.
Director and Executive Compensation
The following persons constitute the executive officers and directors of the Company:
| Name | Age | Position | ||
| E. Will Gray II | 48 | Chief Executive Officer, Chairman | ||
| Mike Rugen | 63 | Chief Financial Officer | ||
| Phil Kornbluth | 68 | Independent Director | ||
| William H. Flores | 70 | Independent Director | ||
| Charles Nelson | 36 | Independent Director | ||
| Stan Borowiec | 69 | Independent Director |
Information regarding the compensation of the named executive officers and directors of the Company before and after the Business Combination is set forth in the Proxy Statement/Prospectus in the section titled “Executive Officers and Directors of NEH - Compensation of Executive Officers and Directors of NEH,” beginning on page 185 and “Executive Officers and Directors of NEH - Management Agreements” and “Executive Officers and Directors of NEH - Director Agreements” on page 186 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
1 c/o 4501 Santa Rosa Drive, Midland, TX 79707.
2 E. Will Gray II owns all of his shares through his wholly owned entity, Pecos Slope Holdings, LLC.
Committees of the Board
Audit Committee
The Company’s audit committee of the Board of Directors consists of William H. Flores, Phil Kornbluth, and Charles Nelson, who are independent directors under Nasdaq’s listing standards.
William H. Flores is the Chairperson of the audit committee.
The audit committee’s duties, which are specified in the Company’s Audit Committee Charter, include, but are not limited to:
| · | reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K; |
| · | discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements; |
| · | discussing with management major risk assessment and risk management policies; |
| · | monitoring the independence of the independent auditor; |
| · | verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law; |
| · | reviewing and approving all related-party transactions; |
| · | inquiring and discussing with management our compliance with applicable laws and regulations; |
| · | pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed; |
| · | appointing or replacing the independent auditor; |
| · | determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; |
| · | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and |
| · | approving reimbursement of expenses incurred by our management team in identifying potential target businesses. |
Corporate Governance and Nominating Committee
The Company’s corporate governance and nominating committee consists of Phil Kornbluth, Stan Boroweic, and Charles Nelson. Phil Kornbluth is the Chairperson of the corporate governance and nominating committee. The corporate governance and nominating committee is responsible for overseeing the selection of persons to be nominated to serve on the Board. The corporate governance and nominating committee considers persons identified by its members, management, stockholders, investment bankers and others.
Compensation Committee
The Company’s compensation committee consists of Charles Nelson, William H. Flores, and Stan Boroweic. Charles Nelson is the Chairperson of the compensation committee. The compensation committee’s duties, which are specified in our Compensation Committee Charter, include, but are not limited to:
| · | reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer’s based on such evaluation; |
| · | reviewing and approving the compensation of all of our other executive officers; |
| · | reviewing our executive compensation policies and plans; |
| · | implementing and administering our incentive compensation equity-based remuneration plans; |
| · | assisting management in complying with our proxy statement and annual report disclosure requirements; |
| · | approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees; |
| · | if required, producing a report on executive compensation to be included in our annual proxy statement; and reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors. |
Certain Relationships and Related Transactions, and Director Independence
Certain relationships and related person transactions of New Era Helium Corp. and Roth are described in the Proxy Statement/Prospectus in the section titled “Certain Relationships and Related Transactions” beginning on page 221 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
Nasdaq listing rules require that a majority of the board of directors of a company listed on Nasdaq be composed of “independent directors,” which is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the Board, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. The Combined Company’s board of directors has determined that each of William H. Flores, Phil Kornbluth, Stan Boroweic, and Charles Nelson will each be an independent director under the Nasdaq listing rules and Rule 10A-3 of the Exchange Act.
Reference is made to the disclosure regarding director independence in the section of the Proxy Statement/Prospectus titled “Executive Officers and Directors of NEH and Executive Officers and Directors of the Combined Company,” beginning on page 180 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
The information set forth under “Item 1.01 Entry into a Material Definitive Agreement- Registration Rights Agreement,” and “Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers” of this Report is incorporated into this Item 2.01 by reference.
The Company adopted a formal written Related Party Transactions Policy (“Related Party Transactions Policy”) effective upon the Business Combination providing that the Company’s executive officers, directors, director nominees, beneficial owners of more than 5% of any class of the Company’s voting securities and any member of the immediate family of any of the foregoing persons are not permitted to enter into a related party transaction with the Company without reporting the transaction to the company counsel and the approval of the Company’s audit and risk committee, subject to the exceptions described below.
A related party transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which the Company was or is to be a participant in which the amount involves exceeds $120,000 in the aggregate in any fiscal year, and in which a related party had or will have a direct or indirect material interest. Transactions involving compensation provided to the Company as an employee or director and certain other transactions were reviewed and approved by the compensation committee of the Board.
Under the Related Party Transactions Policy, the audit committee of the Board will review all of the relevant material facts and circumstances of the proposed related party transaction, satisfy itself that it has been fully informed as to the material facts of the applicable related party’s relationship and interest, will determine if the proposed related party transaction is in the best interests of the Company and its shareholders, and will either approve or disapprove of the entry into the proposed related party transaction. In addition, under the Company’s Code of Business Conduct and Ethics, directors and executive officers have an affirmative responsibility to seek determinations and prior authorizations or approvals of potential conflicts of interest exclusively from the Board.
Legal Proceedings
Reference is made to the disclosure regarding legal proceedings in the section of the Proxy Statement/Prospectus titled “Information About NEH - Legal Proceedings” beginning on page 111 which is incorporated herein by reference.
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Following the Closing the Company’s common stock began trading on the Nasdaq Global Market under the symbol “NEHC.” The Company has not paid any cash dividends on its common stock to date.
The Board, in its sole discretion, will make any determination from time to time with respect to the use of any excess cash accumulated, which may include, among other uses, the payment of dividends on the Company’s common stock. It is not contemplated that the Company will pay cash dividends for the foreseeable future.
Description of Registrant’s Securities to be Registered
The description of the Company’s securities is contained in the Proxy Statement/Prospectus in the section titled “Description of the Combined Company’s Securities,” beginning on page 211 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
The Company has authorized 70,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. The outstanding shares of the Company’s Common Stock are fully paid and non-assessable. As of the Closing Date, there were 8,745,403 shares of the Company’s common stock outstanding. Company stockholders who hold their shares in electronic format in U.S. brokerage accounts are not deemed to be separate stockholders, as such shares are held of record by CEDE and Co., which is counted by our transfer agent as a single stockholder of record. Such holder numbers do not include Depository Trust Company participants or beneficial owners holding shares through nominee names.
Indemnification of Directors and Officers
The description of the indemnification arrangements with the Company’s directors and officers is contained in Item 1.01 of this Report, which is incorporated herein by reference.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Financial Statements and Supplementary Data
Reference is made to the disclosure set forth under Item 9.01 of this Report concerning the Company’s financial statements and supplementary information.
Financial Statements and Exhibits
Reference is made to the disclosure set forth under Item 9.01 of this Report concerning the financial information of the Company.
Quantitative and Qualitative Disclosures about Market Risk
The description of the Company’s quantitative and qualitative disclosures about market risk is contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations of NEH” section.
Item 3.03. Material Modification to Rights of Security Holders.
At the Special Meeting, ROCL’s stockholders also approved the Second Amended and Restated Certificate of Incorporation of ROCL (“Amended Charter”) to, among other things, change the Combined Company’s name to “New Era Helium Inc.”, increase the total number of authorized shares of the Company’s common stock from 25,000,000 to 75,000,000 shares of capital stock, consisting of 70,000,000 shares of common stock and 5,000,000 shares of preferred stock; create a class of preferred stock and authorize 5,000,000 shares of preferred stock; and remove provisions relating to the operation of ROCL as a special purpose acquisition corporation prior to the Closing. The terms of the Amended Charter are described in greater detail in the Proxy Statement/Prospectus beginning on page 31 of the Proxy Statement/Prospectus and is incorporated herein by reference. The Amended Charter, which became effective upon filing with the Secretary of State of the State of Nevada on the Closing Date, includes the amendments proposed by the Charter Amendment Proposal.
The Board approved and adopted the Amended and Restated Bylaws of Holdings (the “Amended Bylaws”) to among other things, set the procedures to nominate directors. Copies of the Amended Charter and the Bylaws are filed herein as Exhibits 3.1 and 3.2, respectively.
The description of the Amended Charter and the general effect of the Amended Charter and the Amended Bylaws upon the rights of holders of the Company’s capital stock are included in the Proxy Statement/Prospectus under the sections titled (i) “Proposal 3: The Charter Amendment Proposal” beginning on page 134 and (ii) “Description of the Combined Company’s Securities” beginning on page 211 of the Proxy Statement/Prospectus, which are incorporated herein by reference.
Item 4.01 Changes in Registrant’s Certifying Accountant.
| (a) | Dismissal of independent registered public accounting firm |
On December 6, 2024, (“the Dismissal Date”), the Company dismissed Grant Thornton LLP (“Grant Thornton”) as the independent registered public accounting firm for ROCL and Roth CH V Holdings, Inc. (“Holdings”). The dismissal was approved by the Audit Committee (the “Committee”) of the Board of Directors (the “Board”). This change in independent registered public accounting firm is not the result of any disagreement with Grant Thornton.
Grant Thornton’s audit reports on ROCL’s financial statement as of and for the years ended December 31, 2023 and 2022 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that such reports contained an explanatory paragraph relating to substantial doubt about ROCL’s ability to continue as a going concern. Additionally, Grant Thornton’s audit report on Holdings financial statements as of June 30, 2024 and for the period June 24, 2024 (inception) to June 30, 2024 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
For ROCL’s two most recent fiscal years, and in the subsequent interim period through the Dismissal Date and Holdings period ended June 30, 2024, and in the subsequent interim period through the Dismissal Date, there were (i) no “disagreements” within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions between ROCL or Holdings, and Grant Thornton on any matters of accounting principles or practices, financial statement disclosures or auditing scope or procedures which, if not resolved to Grant Thornton’s satisfaction, would have caused Grant Thornton to make reference thereto in its reports on the financial statements of ROCL and Holdings for such periods, and (ii) no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).
The Company has provided Grant Thornton with a copy of the disclosures in this Item 4.01. Grant Thornton has furnished the Company with a letter agreeing with the statements made by the Company in response to Item 304(a). This letter is filed as Exhibit 16.1 herein.
| (b) | Engagement of new independent registered public accounting firm |
On December 6, 2024, as recommended and approved by the audit committee, the Company engaged Weaver and Tidwell, L.L.P. (“Weaver”) as the Company’s independent public accounting firm to audit the Company’s financial statements for the fiscal year ending December 31, 2024.
Neither ROCL, Holdings, nor the Company, for the periods noted above through the dismissal date consulted Weaver regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the financial statements, and either a written report was provided to ROCL, Holdings, or the Company or oral advice was provided that Weaver concluded was an important factor considered in reaching a decision as to the accounting, auditing or financial reporting issue; or any matter that was the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K (i.e. issues required to be disclosed pursuant to Item 304(a)(2)(i)-(ii) of Regulation S-K).
Item 5.01. Changes in Control of Registrant.
The information set forth above under “Introductory Note” and Item 2.01 of this Report is incorporated herein by reference. Reference is also made to the disclosure in the Proxy Statement/Prospectus in the section titled “The Business Combination Proposal (Proposal 1)” beginning on page 112, which is incorporated herein by reference. Further reference is made to the information contained in Item 2.01 to this Report, which is incorporated herein by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Directors and Executive Officers
The following directors of ROCL resigned in connection with the Business Combination: Byron Roth, John Lipman, Adam Rothstein, Sam Chawla, and Pamela Ellison. The following officers of ROCL resigned in connection with the Business Combination: Byron Roth, John Lipman, Gordon Roth, Rick Hartfiel, Aaron Gurewitz, Andrew Costa, Matthew Day, Ryan Hulstrand, and Joe Tonnos.
The information set forth above in the sections titled “Directors and Executive Officers,” “Executive Compensation,” “Certain Relationships and Related Person Transactions, and Director Independence” and “Indemnification of Directors and Officers” in Item 2.01 is incorporated herein by reference.
Further, in connection with the Business Combination and effective December 6, 2024, Joel G. Solis resigned as Chairman of NEH.
The information set forth above in the sections titled “Directors and Executive Officers,” “Director Independence,” “Committees of the Board of Directors”, “Director and Executive Compensation”, “Certain Relationships and Related Transactions” and “Indemnification of Directors and Officers” in Item 2.01 of this Report are incorporated herein by reference.
Management Equity Incentive Plan
In connection with the Business Combination, the Board approved the New Era Helium Inc. Management Equity Incentive Plan (“2024 Plan”) described in the Proxy Statement/Prospectus in the section entitled “Proposal No. 7 — The Management Equity Incentive Plan Proposal” beginning on page 32 and incorporated herein by reference. That summary of the 2024 Plan does not purport to be complete and is qualified in its entirety by reference to the text of the 2024 Plan, which is filed as Annex C to the Proxy Statement/Prospectus and is incorporated herein by reference. The plan allows the Company to make equity and equity-based incentive awards, as well as cash awards, to employees, directors and consultants.
Decisions with respect to the compensation of the Company’s executive officers will be made by the compensation committee of the Board
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The information set forth in Item 3.03 of this Report is incorporated by reference into this Item 5.03.
Item 5.05. Amendments to Registrants Code of Ethics, or Waiver of a Provision of the Code of Ethics
In connection with the Business Combination, on December 6, 2024, the Board approved and adopted a new Code of Ethics and Business Conduct applicable to all employees, officers and directors of the Company, including the Company’s principal executive officer, principal financial officer and principal accounting officer or controller (or persons performing similar functions to the aforementioned officers). A copy of the Code of Ethics and Business Conduct is attached to this Report as Exhibit 14.1.
Item 5.06. Change in Shell Company Status.
As a result of the Business Combination, ROCL ceased being a shell company. Reference is made to the disclosure in the Proxy Statement/Prospectus in the section titled “Proposal 2: The Business Combination Proposal,” beginning on page 112 of the Proxy Statement/Prospectus, and such disclosure is incorporated herein by reference. Further, the information contained in Item 2.01 of this Report is incorporated by reference into this Item 5.06.
Item 7.01 Regulation FD Disclosure
On December 7, 2024, New Era Helium Inc. issued a press release (the “Release”) announcing that the Business Combination had closed on December 6, 2024. A copy of the Release is attached hereto as Exhibit 99.3.
The information in this Item 7.01, including Exhibit 99.3, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act or the Exchange Act, regardless of any general incorporation language in such filings. This Report will not be deemed an admission as to the materiality of any information of the information contained in this Item 7.01, including Exhibit 99.3.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The financial statements of Holdings for the period from June 24, 2024 (inception) through June 30, 2024, the related notes and report of independent registered public accounting firm are attached hereto as Exhibit 99.4.
NEH’s Unaudited Condensed Financial Statements for nine-months ended September 30, 2024 and 2023, the related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations are attached hereto as Exhibit 99.1, respectively, and are incorporated herein by reference.
(b) Pro Forma Financial Information.
Certain unaudited pro forma condensed combined financial information is attached hereto as Exhibit 99.3 and is incorporated herein by reference.
(c) Exhibits.
The following exhibits are filed as part of, or incorporated by reference into, this Report.
| * | Filed herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: December 12, 2024 | ||
| NEW ERA HELIUM INC. | ||
| By: | /s/ E. Will Gray II | |
| Name: | E. Will Gray II | |
| Title: | Chief Executive Officer | |
| Filed in the Office of Secretary of State State Of Nevada Business Number E41406802024-7 Filing Number 20244517045 Filed On 12/6/2024 2:15:00 PM Number of Pages 12 |
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| Filed in the Office of Secretary of State State Of Nevada Business Number E29288652023-6 Filing Number 20244519075 Filed On 12/6/2024 3:43:00 PM Number of Pages 4 |
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Exhibit 3.1
Exhibit 10.1
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (this “Agreement”), dated as of December __, 2024, is made and entered into by and among Roth CH V Holdings, Inc., a Nevada corporation (the “Company”), certain investors who were party to the original Registration Rights Agreement with Roth CH Acquisition V Co, the predecessor in interest to the Company (the “Existing Holders”), and the undersigned parties listed under Holder on the signature pages hereto (each such party, together with the Existing Holders and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2 of this Agreement, a “Holder” and collectively, the “Holders”).
RECITALS
WHEREAS, on November 30, 2021, Roth CH Acquisition V Co. and the Existing Holders entered into that certain Registration Rights Agreement (the “Existing Registration Rights Agreement”) pursuant to which Roth CH Acquisition V Co. granted the Existing Holders certain registration rights with respect to certain securities of Roth CH Acquisition V Co.;
WHEREAS, on January 3, 2024, Roth CH Acquisition V Co., Roth CH V Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of Roth CH Acquisition V Co. (“Merger Sub”), and New Era Helium Corp., a Nevada corporation (“NEH”), entered into that certain Business Combination Agreement and Plan of Reorganization, as amended from time to time (the “BCA”), pursuant to which, among other things, Roth CH Acquisition V Co. will merge with and into the Company and then Merger Sub will merge with and into NEH on or about the date hereof, with NEH surviving the merger as a wholly owned subsidiary of the Company (the “Business Combination”);
WHEREAS, after the closing of the Business Combination, the Holders will own shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and the Existing Holders will also own warrants to purchase 230,750 shares of Common Stock (the “Private Placement Warrants”); and
WHEREAS, the Company and the Existing Holders desire to amend and restate the Existing Registration Rights Agreement pursuant to which the Company shall grant the Holders certain registration rights with respect to certain securities of the Company, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions. The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings set forth below:
“Agreement” shall have the meaning given in the Preamble.
“BCA” shall have the meaning given in the Recitals hereto.
“Board” shall mean the Board of Directors of the Company.
“Business Combination” shall have the meaning given in the Recitals hereto.
“Commission” shall mean the Securities and Exchange Commission.
“Common Stock” shall have the meaning given in the Recitals hereto.
“Company” shall have the meaning given in the Preamble.
“Demanding Holder” shall mean any Holder or group of Holders that together elects to dispose of Registrable Securities having an aggregate value of at least $25 million, at the time of the Underwritten Demand, under a Registration Statement pursuant to an Underwritten Offering.
“Effectiveness Period” shall have the meaning given in subsection 3.1.1 of this Agreement.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.
“Existing Holders” shall have the meaning given in the Recitals hereto.
“Existing Registration Rights Agreement” shall have the meaning given in the Recitals hereto.
“Holder Indemnified Persons” shall have the meaning given in subsection 4.1.1 of this Agreement.
“Holders” shall have the meaning given in the Preamble.
“Maximum Number of Securities” shall have the meaning given in subsection 2.1.3 of this Agreement.
“Merger Sub” shall have the meaning given in the Recitals hereto.
“Misstatement” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus (in the light of the circumstances under which they were made) not misleading.
“NEH” shall have the meaning given in the Recitals hereto.
“Piggyback Registration” shall have the meaning given in subsection 2.2.1 of this Agreement.
“Private Placement Warrants” shall have the meaning given in the Recitals hereto.
“Pro Rata” shall have the meaning given in subsection 2.1.3 of this Agreement.
“Prospectus” shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
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“Registrable Security” shall mean (a) the Private Placement Warrants (including any shares of Common Stock issued or issuable upon the exercise of any such Private Placement Warrants), (b) any outstanding shares of Common Stock held by a Holder as of the date of this Agreement (including any shares of Common Stock issued or issuable upon exercise of any other outstanding equity securities of the Company (other than equity securities issued pursuant to an employee stock option or other benefit plan) held by a Holder as of the date of this Agreement), (c) any shares of Common Stock issued to a Holder after the date of this Agreement pursuant to the terms of the BCA, (d) any equity securities (including the shares of Common Stock issued or issuable upon the exercise of any such equity security) of the Company issuable upon conversion of any working capital loans in an amount up to $1,500,000 made to the Company by a Holder and (e) any other equity security of the Company issued or issuable with respect to any such shares of Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization; provided, however, that, as to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; or (D) such securities may be sold without registration pursuant to Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission) (but with no volume or other restrictions or limitations).
“Registration” shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and any such registration statement having been declared effective by, or become effective pursuant to rules promulgated by, the Commission.
“Registration Expenses” shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:
(A) all registration and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority and any securities exchange on which the Common Stock is then listed);
(B) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities);
(C) printing, messenger, telephone and delivery expenses;
(D) reasonable fees and disbursements of counsel for the Company;
(E) reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration; and
(F) reasonable fees and expenses of one (1) legal counsel selected by the majority-in-interest of Registrable Securities held by the Demanding Holders initiating an Underwritten Demand to be registered for offer and sale in the applicable Underwritten Offering, not to exceed $50,000.
“Registration Statement” shall mean any registration statement under the Securities Act that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Requesting Holder” shall have the meaning given in subsection 2.1.2 of this Agreement.
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.
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“Sponsor” shall have the meaning given in the Preamble.
“Suspension Event” shall have the meaning given in Section 3.4 of this Agreement.
“Underwriter” shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.
“Underwritten Demand” shall have the meaning given in subsection 2.1.2 of this Agreement.
“Underwritten Offering” shall mean a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.
ARTICLE
II
REGISTRATIONS
2.1 Registration.
2.1.1 Registration Statement. The Company agrees that, within thirty (30) business days after the consummation of the Business Combination, the Company will file with the Commission (at the Company’s sole cost and expense) a Registration Statement registering the resale of all Registrable Securities permitted to be registered for resale from time to time pursuant to Rule 415 on a Registration Statement on Form S-1. The Company shall use its commercially reasonable efforts to cause such Registration Statement to become effective as soon as reasonably practicable after the initial filing of the Registration Statement in accordance with Section 3.1 of this Agreement.
2.1.2 Underwritten Offering. Subject to the provisions of subsection 2.1.3 and Section 2.3 of this Agreement, any Demanding Holder may make a written demand to the Company for an Underwritten Offering pursuant to a Registration Statement filed with the Commission in accordance with Section 2.1.1 of this Agreement or a new Registration Statement if such Demanding Holders’ Registrable Securities are not then registered by a Registration Statement filed with the Commission in accordance with subsection 2.1.1 or permitted to be offered in an Underwritten Offering pursuant to a Registration Statement filed with the Commission in accordance with subsection 2.1.1 (an “Underwritten Demand”). The Company shall, within ten (10) days of the Company’s receipt of the Underwritten Demand, notify, in writing, all other Holders of such demand, and each Holder who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in such Underwritten Offering pursuant to an Underwritten Demand (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such Underwritten Offering, a “Requesting Holder”) shall so notify the Company, in writing, within five (5) days after the receipt by the Holder of the notice from the Company. Upon receipt by the Company of any such written notification from a Requesting Holder(s), such Requesting Holder(s) shall be entitled to have their Registrable Securities included in the Underwritten Offering pursuant to an Underwritten Demand. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.1.2 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company in consultation with the Demanding Holders initiating the Underwritten Offering. Notwithstanding the foregoing, the Company is not obligated to effect (i) more than an aggregate of three (3) Underwritten Offerings pursuant to this subsection 2.1.2 in any twelve (12)-month period, (ii) more than an aggregate of four (4) Underwritten Offerings pursuant to this section 2.1.3 in total, (iii) an Underwritten Offering pursuant to this subsection 2.1.2 within ninety (90) days after the closing of an Underwritten Offering or (iv) an Underwritten Offering unless the reasonably expected aggregate gross proceeds from the offering of the Registrable Securities to be registered in connection with such Underwritten Offering are at least $75,000,000 (the “Minimum Amount”).
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2.1.3 Reduction of Underwritten Offering. If the managing Underwriter or Underwriters in an Underwritten Offering pursuant to an Underwritten Demand, in good faith, advises or advise the Company, the Demanding Holders, the Requesting Holders and other persons or entities holding Common Stock or other equity securities of the Company that the Company is obligated to include pursuant to separate written contractual arrangements with such persons or entities (if any) in writing that the dollar amount or number of Registrable Securities or other equity securities of the Company requested to be included in such Underwritten Offering exceeds the maximum dollar amount or maximum number of equity securities of the Company that can be sold in the Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, as follows: (i) first, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata based on the respective number of Registrable Securities that each Demanding Holder and Requesting Holder (if any) has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Demanding Holders and Requesting Holders have requested be included in such Underwritten Offering (such proportion is referred to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Securities; (ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), Common Stock or other equity securities of the Company that the Company desires to sell and that can be sold without exceeding the Maximum Number of Securities; and (iii) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), Common Stock or other equity securities of the Company held by other persons or entities that the Company is obligated to include pursuant to separate written contractual arrangements with such persons or entities and that can be sold without exceeding the Maximum Number of Securities.
2.1.4 Registration Withdrawal. The Demanding Holders initiating an Underwritten Offering pursuant to subsection 2.1.2 of this Agreement shall have the right to withdraw from such Underwritten Offering for any or no reason whatsoever upon written notification to the Company of their intention to withdraw from such Underwritten Offering prior to the launch of such Underwritten Offering or, if applicable, the effectiveness of the Registration Statement filed with the Commission with respect to the Underwritten Offering; provided, however, that upon the withdrawal of an amount of Registrable Securities that results in the remaining amount of Registrable Securities included by the Demanding Holders and participating Holders in such Underwritten Offering being less than the Minimum Amount, the Company may cease all efforts to complete the Underwritten Offering and, for the avoidance of doubt, if such efforts are ceased, such Underwritten Offering shall not be counted as an Underwritten Offering for the purpose of the final sentence of subsection 2.1.2. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with an Underwritten Demand prior to its withdrawal under this subsection 2.1.4.
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2.2 Piggyback Registration.
2.2.1 Piggyback Rights. If the Company proposes to (i) file a Registration Statement under the Securities Act with respect to an offering of equity securities of the Company, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities of the Company, for its own account or for the account of stockholders of the Company, other than a Registration Statement (A) filed in connection with any employee stock option or other benefit plan, (B) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (C) for an offering of debt that is convertible into equity securities of the Company or (D) for a dividend reinvestment plan, or (ii) consummate an Underwritten Offering for its own account or for the account of stockholders of the Company, then the Company shall give written notice of such proposed action to all of the Holders of Registrable Securities as soon as practicable (but in the case of filing a Registration Statement, not less than ten (10) days before the anticipated filing date of such Registration Statement), which notice shall (x) describe the amount and type of securities to be included, the intended method(s) of distribution and the name of the proposed managing Underwriter or Underwriters, if any, and (y) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within (a) five (5) days in the case of filing a Registration Statement and (b) two (2) days in the case of an Underwritten Offering (unless such offering is an overnight or bought Underwritten Offering, then one (1) day), in each case after receipt of such written notice (such Registration, a “Piggyback Registration”). The Company shall, in good faith, cause such Registrable Securities to be included in such Piggyback Registration and shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders pursuant to this subsection 2.2.1 to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company included in such Piggyback Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. If no written request for inclusion from a Holder is received within the specified time, each such Holder shall have no further right to participate in such Piggyback Registration. All such Holders proposing to include Registrable Securities in an Underwritten Offering under this subsection 2.2.1 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.
2.2.2 Reduction of Piggyback Registration. If the managing Underwriter or Underwriters in an Underwritten Offering that is to be a Piggyback Registration, in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration in writing that the dollar amount or number of shares of the equity securities of the Company that the Company desires to sell, taken together with (i) the shares of equity securities of the Company, if any, as to which Registration or Underwritten Offering has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder, (ii) the Registrable Securities as to which Registration or Underwritten Offering has been requested pursuant to Section 2.2 of this Agreement and (iii) the shares of equity securities of the Company, if any, as to which Registration or Underwritten Offering has been requested pursuant to separate written contractual piggyback registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:
(a) If the Registration or Underwritten Offering is undertaken for the Company’s account, the Company shall include in any such Registration or Underwritten Offering (A) first, the Common Stock or other equity securities of the Company that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 of this Agreement, Pro Rata, which can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), Common Stock or other equity securities of the Company, if any, as to which Registration or Underwritten Offering has been requested pursuant to written contractual piggyback registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities; or
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(b) If the Registration or Underwritten Offering is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Registration or Underwritten Offering (A) first, Common Stock or other equity securities of the Company, if any, of such requesting persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 of this Agreement, Pro Rata, which can be sold without exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), Common Stock or other equity securities of the Company that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), Common Stock or other equity securities of the Company for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.
2.2.3 Piggyback Registration Withdrawal. Any Holder of Registrable Securities shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw from such Piggyback Registration prior to, as applicable, the effectiveness of the Registration Statement filed with the Commission with respect to such Piggyback Registration or the launch of the Underwritten Offering with respect to such Piggyback Registration. The Company (whether on its own good faith determination or as the result of a request for withdrawal by persons or entities pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement or abandon an Underwritten Offering in connection with a Piggyback Registration at any time prior to the launch of such Underwritten Offering. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this subsection 2.2.3.
2.2.4 Unlimited Piggyback Registration Rights. For purposes of clarity, any Registration or Underwritten Offering effected pursuant to Section 2.2 of this Agreement shall not be counted as an Underwritten Offering pursuant to an Underwritten Demand effected under Section 2.1 of this Agreement.
2.3 Restrictions on Registration Rights. If (A) the Holders have requested an Underwritten Offering pursuant to an Underwritten Demand and the Company and the Holders are unable to obtain the commitment of underwriters to firmly underwrite the offer; or (B) the Holders have requested an Underwritten Offering pursuant to an Underwritten Demand and in the good faith judgment of the Board that such Underwritten Offering would be seriously detrimental to the Company and the Board concludes as a result that it is essential to defer the filing of such Registration Statement or the undertaking of such Underwritten Offering at such time, then in each case the Company shall furnish to such Holders a certificate signed by the Chairman of the Board stating that in the good faith judgment of the Board it would be seriously detrimental to the Company for such Registration Statement to be filed or to undertake such Underwritten Offering in the near future and that it is therefore essential to defer the filing of such Registration Statement or undertaking of such Underwritten Offering. In such event, the Company shall have the right to defer such filing or offering for a period of not more than thirty (30) days; provided, however, that the Company shall not defer its obligation in this manner more than once in any twelve (12)-month period.
ARTICLE
III
COMPANY PROCEDURES
3.1 General Procedures. The Company shall use its commercially reasonable efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall, as expeditiously as possible and to the extent applicable:
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3.1.1 prepare and file with the Commission, within the time frame required by Section 2.1.1, a Registration Statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such Registration Statement to become effective and remain effective, including filing a replacement Registration Statement, if necessary, until all Registrable Securities covered by such Registration Statement have been sold or are no longer outstanding (such period, the “Effectiveness Period”);
3.1.2 prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be reasonably requested by the Demanding Holders or any Underwriter or as may be required by the rules, regulations or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus or are no longer outstanding;
3.1.3 prior to filing a Registration Statement or Prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and the Holders of Registrable Securities included in such Registration or Underwritten Offering, and such Holders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus (including each preliminary Prospectus) and such other documents as the Underwriters and the Holders of Registrable Securities included in such Registration or the legal counsel for any such Holders may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holders; provided, that the Company will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system;
3.1.4 prior to any Registration of Registrable Securities, use its commercially reasonable efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;
3.1.5 cause all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;
3.1.6 provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;
3.1.7 advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its commercially reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;
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3.1.8 during the Effectiveness Period, furnish a conformed copy of each filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, promptly after such filing of such documents with the Commission to each seller of such Registrable Securities or its counsel; provided, that the Company will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system;
3.1.9 notify the Holders at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act;
3.1.10 subject to the provisions of this Agreement, notify the Holders of the happening of any event as a result of which a Misstatement exists, and then to correct such Misstatement as set forth in Section 3.4 of this Agreement;
3.1.11 permit a representative of the Holders (such representative to be selected by a majority of the Holders), the Underwriters, if any, and any attorney or accountant retained by such Holders or Underwriter to participate, at each such person’s own expense, in the preparation of the Registration Statement or the Prospectus, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided, however, that such representatives or Underwriters enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information;
3.1.12 obtain a comfort letter from the Company’s independent registered public accountants in the event of an Underwritten Offering, in customary form and covering such matters of the type customarily covered by comfort letters as the managing Underwriter may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders;
3.1.13 on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel representing the Company for the purposes of such Registration, addressed to the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions and negative assurance letters, and reasonably satisfactory to such placement agent, sales agent or Underwriter;
3.1.14 in the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing Underwriter of such offering;
3.1.15 make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission); provided that the Company will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system;
3.1.16 if the Registration involves the Registration of Registrable Securities in an Underwritten Offering in excess of the Minimum Amount, use its reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any Underwritten Offering; and
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3.1.17 otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holders, in connection with such Registration.
3.2 Registration Expenses. The Registration Expenses in respect of all Registrations shall be borne by the Company. It is acknowledged by the Holders that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts, brokerage fees, applicable taxes, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders.
3.3 Requirements for Participation in Underwritten Offerings. No person may participate in any Underwritten Offering for equity securities of the Company pursuant to a Registration initiated by the Company hereunder unless such person (i) agrees to sell such person’s securities on the basis provided in any underwriting arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.
3.4 Suspension of Sales. Notwithstanding anything to the contrary in this Agreement, the Company shall be entitled to (A) delay or postpone the (i) initial effectiveness of any Registration Statement or (ii) launch of any Underwritten Offering, in each case, filed or requested pursuant to this Agreement, and (B) from time to time to require the Holders not to sell under any Registration Statement or Prospectus or to suspend the effectiveness thereof, if the negotiation or consummation of a transaction by the Company or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event, the Board reasonably believes, upon the advice of legal counsel, would require additional disclosure by the Company in the applicable Registration Statement or Prospectus of material information that the Company has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement or Prospectus would be expected, in the reasonable determination of the Board, upon the advice of legal counsel, to cause the Registration Statement or Prospectus to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); provided, however, that the Company may not delay or suspend a Registration Statement, Prospectus or Underwritten Offering on more than two occasions, for more than sixty (60) consecutive calendar days, or more than ninety (90) total calendar days, in each case during any twelve-month period. Upon receipt of any written notice from the Company of a Suspension Event while a Registration Statement filed pursuant to this Agreement is effective or if as a result of a Suspension Event a Misstatement exists, each Holder agrees that (i) it will immediately discontinue offers and sales of Registered Securities under each Registration Statement filed pursuant to this Agreement until the Holder receives copies of a supplemental or amended Prospectus (which the Company agrees to promptly prepare) that corrects the relevant misstatements or omissions and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Company that it may resume such offers and sales and (ii) it will maintain the confidentiality of information included in such written notice delivered by the Company unless otherwise required by law or subpoena. If so directed by the Company, the Holders will deliver to the Company or, in Holders’ sole discretion destroy, all copies of each Prospectus covering Registrable Securities in Holders’ possession; provided, however, that this obligation to deliver or destroy shall not apply (A) to the extent the Holders are required to retain a copy of such Prospectus (x) to comply with applicable legal, regulatory, self-regulatory or professional requirements or (y) in accordance with a bona fide pre-existing document retention policy or (B) to copies stored electronically on archival servers as a result of automatic data back-up.
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3.5 Reporting Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Registrable Securities held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission), including providing any legal opinions. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.
ARTICLE
IV
INDEMNIFICATION AND CONTRIBUTION
4.1 Indemnification.
4.1.1 The Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and each person who controls such Holder (within the meaning of the Securities Act) (collectively, the “Holder Indemnified Persons”) against all losses, claims, damages, liabilities and expenses (including reasonable attorneys’ fees and inclusive of all reasonable attorneys’ fees arising out of the enforcement of each such persons’ rights under this Section 4.1) resulting from any Misstatement or alleged Misstatement, except insofar as the same are caused by or contained in any information furnished in writing to the Company by or on behalf of such Holder Indemnified Person specifically for use therein.
4.1.2 In connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall, severally and not jointly, indemnify the Company, its directors and officers and agents and each person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses (including reasonable attorneys’ fees and inclusive of all reasonable attorneys’ fees arising out of the enforcement of each such persons’ rights under this Section 4.1) resulting from any Misstatement or alleged Misstatement, but only to the extent that the same are made in reliance on and in conformity with information relating to the Holder so furnished in writing to the Company by or on behalf of such Holder specifically for use therein. In no event shall the liability of any selling Holder hereunder be greater in amount than the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement giving rise to such indemnification obligation.
4.1.3 Any person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim or there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
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4.1.4 The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities.
4.1.5 If the indemnification provided under Section 4.1 is held by a court of competent jurisdiction to be unavailable to an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall to the extent permitted by law contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or such indemnified party and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that the liability of any Holder under this subsection 4.1.5 shall be limited to the amount of the net proceeds received by such Holder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in subsections 4.1.1, 4.1.2 and 4.1.3 of this Agreement, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection 4.1.5 were determined by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this subsection 4.1.5. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this subsection 4.1.5 from any person who was not guilty of such fraudulent misrepresentation.
ARTICLE
V
MISCELLANEOUS
5.1 Notices. Any notice or communication under this Agreement must be in writing and given by (i) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) delivery in person or by courier service providing evidence of delivery or (iii) transmission by hand delivery, telecopy, telegram, facsimile or email. Each notice or communication that is mailed, delivered or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received, in the case of mailed notices, on the third (3rd) business day following the date on which it is mailed, in the case of notices delivered by courier service, hand delivery, telecopy or telegram, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit of messenger) or at such time as delivery is refused by the addressee upon presentation, and in the case of notices delivered by facsimile or email, at such time as it is successfully transmitted to the addressee. Any notice or communication under this Agreement must be addressed, (i) if to the Company or the Sponsor prior to the closing of the Business Combination or to the Sponsor after the closing of the Business Combination, to: 888 San Clemente Dr., STE 400, Newport Beach, CA 92660 or by email at: rothch@roth.com, with a copy, which will not constitute notice, to: Loeb & Loeb LLP 345 Park Avenue, New York, New York 10154, and by email to:akane@loeb.com; (ii) if to the Company after the closing of the Business Combination, to: New Era Helium Corp., 4501 Santa Rosa Drive, Midland, TX 79707, Attention: E. Will Gray II, or by email at: will@newerahelium.com, with a copy, which will not constitute notice, to: Sichenzia Ross Ference Carmel LLP, 1185 Avenue of the Americas, 31st Floor, New York, NY 10036, and by email to rcarmel@srfc.law, and, if to any Holder, to the address of such Holder as it appears in the applicable register for the Registrable Securities or such other address as may be designated in writing by such Holder (including on the signature pages hereto). Any party may change its address for notice at any time and from time to time by written notice to the other parties hereto, and such change of address shall become effective thirty (30) days after delivery of such notice as provided in this Section 5.1.
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5.2 Assignment; No Third Party Beneficiaries.
5.2.1 This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part.
5.2.2 This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and its successors.
5.2.3 This Agreement shall not confer any rights or benefits on any persons that are not parties hereto or do not hereafter become a party to this Agreement pursuant to Section 5.2 of this Agreement.
5.2.4 No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice provided in accordance with Section 5.1 of this Agreement and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer or assignment made other than as provided in this Section 5.2 shall be null and void.
5.3 Counterparts. This Agreement may be executed in multiple counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original, and all of which together shall constitute the same instrument, but only one of which need be produced.
5.4 Governing Law; Venue. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS AMONG NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION.
5.5 Amendments and Modifications. Upon the written consent of the Company and the Holders of at least a majority in interest of the Registrable Securities at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, however, that notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder, solely in his, her or its capacity as a holder of the shares of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity) shall require the consent of the Holder so affected. No course of dealing between any Holder or the Company and any other party hereto or any failure or delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.
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5.6 Other Registration Rights. The Company represents and warrants that no person, other than a Holder of Registrable Securities has any right to require the Company to register any securities of the Company for sale or to include such securities of the Company in any Registration filed by the Company for the sale of securities for its own account or for the account of any other person. Further, the Company represents and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.
5.7 Term. This Agreement shall terminate upon the earlier of (i) the tenth (10th) anniversary of the date of this Agreement and (ii) with respect to any Holder, the date as of which such Holder ceases to hold any Registrable Securities. The provisions of Article IV shall survive termination of this Agreement for any reason.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the undersigned have caused this Registration Rights Agreement to be executed as of the date first written above.
| COMPANY: | |||
| ROTH CH V HOLDINGS, INC. | |||
| a Nevada corporation | |||
| By: | |||
| Name: | John Lipman | ||
| Title: | President | ||
| HOLDERS: | |||
| INVESTORS: | |||
Signature Page to Amended and Restated Registration Rights Agreement
Exhibit 10.2
Form of Lock-Up Agreement
[DATE]
Roth CH Acquisition V Co.
888 San Clemente Drive, Suite 400
Newport Beach, CA 92660
Ladies and Gentlemen:
The undersigned understands that New Era Helium Corp., a Nevada corporation (“NEH”) has entered into a Business Combination Agreement (the “Business Combination Agreement”) with Roth CH Acquisition V Co., a Delaware corporation (the “Company”), providing for a business combination between NEH and the Company (the “Business Combination”) and the registration of shares of common stock, par value $0.0001 per share, of the Company (“Shares”).
To induce the Company to continue its efforts in connection with the Business Combination, the undersigned hereby agrees that, without the prior written consent of the Company, the undersigned will not, during the period commencing on the date hereof and ending on the six (6) month anniversary of the closing of the Business Combination (the “Lock-Up Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of any Lock- Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Company in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Business Combination; provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall be required or shall be voluntarily made in connection with subsequent sales of Lock-Up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of a family member (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; or (d) if the undersigned, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers of Lock-Up Securities to any shareholder, partner or member of, or owner of similar equity interests in, the undersigned, as the case may be; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or (d), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Company a lock-up agreement substantially in the form of this lock-up agreement and (iii) no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.
If (i) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Lock- Up Period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this lock-up agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of such material news or material event, as applicable, unless the Company waives, in writing, such extension; provided, however, that this extension of the Lock-Up Period shall not apply to the extent that FINRA has amended or repealed FINRA Rule 2241(b)(2)(I), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or member of a national securities association from publishing or distributing any research report, with respect to the securities of an Emerging Growth Company prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the Emerging Growth Company or its shareholders that restricts or prohibits the sale of securities held by the Emerging Growth Company or its shareholders after the Business Combination date.
The undersigned agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this lock-up agreement during the period from the date hereof to and including the 34th day following the expiration of the initial Lock-Up Period, the undersigned will give notice thereof to the Company and will not consummate any such transaction or take any such action unless it has received written confirmation from the Company that the Lock-Up Period (as may have been extended pursuant to the previous paragraph) has expired.
No provision in this agreement shall be deemed to restrict or prohibit the exercise, exchange or conversion by the undersigned of any securities exercisable or exchangeable for or convertible into Shares, as applicable; provided that the undersigned does not transfer the Common Stock acquired on such exercise, exchange or conversion during the Lock-Up Period, unless otherwise permitted pursuant to the terms of this lock-up agreement. In addition, no provision herein shall be deemed to restrict or prohibit the entry into or modification of a so-called “10b5-1” plan at any time (other than the entry into or modification of such a plan in such a manner as to cause the sale of any Lock-Up Securities within the Lock-Up Period).
The undersigned understands that the Company and NEH are relying upon this lock-up agreement in proceeding toward consummation of the Business Combination. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
| Very truly yours, | |
| (Name - Please Print) | |
| (Signature) | |
| (Name of Signatory, in the case of entities - Please Print) |
| (Title of Signatory, in the case of entities - Please Print) |
| Address: | |||
Exhibit 14.1
CODE OF CONDUCT AND ETHICS
| 1. | Introduction |
The Board of Directors of New Era Helium Inc. (the “Board of Directors”) has adopted this code of conduct and ethics (this “Code”), which is applicable to all directors, officers and employees, to:
| · | promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| · | promote the full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”), as well as in other public communications made by or on behalf of the Company; |
| · | promote compliance with applicable governmental laws, rules and regulations; |
| · | deter wrongdoing; and |
| · | require prompt internal reporting of breaches of, and accountability for adherence to, this Code. |
This Code may be amended only by resolution of the Board of Directors. In this Code, references to the “Company” means New Era Helium Inc.
| 2. | Honest, Ethical and Fair Conduct |
Each person owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest, fair and candid. Deceit, dishonesty and subordinating one’s principles are inconsistent with integrity. Service to the Company never should be subordinated to personal gain an advantage.
Each person must:
| · | act with integrity, including being honest and candid while still maintaining the confidentiality of the Company’s information where required or in the Company’s interests. |
| · | observe all applicable governmental laws, rules and regulations. |
| · | comply with the requirements of applicable accounting and auditing standards, as well as Company policies, in order to maintain a high standard of accuracy and completeness in the Company’s financial records and other business-related information and data. |
| · | adhere to a high standard of business ethics and not seek a competitive advantage through unlawful or unethical business practices. |
| · | deal fairly with the Company’s customers, suppliers, competitors and employees. |
| · | refrain from taking advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair-dealing practice. |
| · | protect the assets of the Company and ensure their proper use. |
| · | refrain from taking for themselves personally opportunities that are discovered through the use of corporate assets or by using corporate assets, information or position for general personal gain outside the scope of employment with the Company. |
| · | disclose conflicts of interest and only enter into “related-party transactions” under guidelines or resolutions approved by the Board of Directors (or the appropriate committee of the Board of Directors). For purposes of this Code, “related-party transactions” are defined as transactions in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) the Company or any of its subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 4% beneficial owner of the Company’s shares of common stock, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position. Anything that would be a conflict for a person subject to this Code also will be a conflict if it is related to a member of his or her family or a close relative. Examples of conflict of interest situations include, but are not limited to, the following: |
| • | any significant ownership interest in any supplier or customer; |
| • | any consulting or employment relationship with any customer, supplier or competitor; |
| • | any outside business activity that detracts from an individual’s ability to devote appropriate time and attention to his or her responsibilities with the Company; |
| • | the receipt of any money, non-nominal gifts or excessive entertainment from any company with which the Company has current or prospective business dealings; |
| • | being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any close relative; |
| • | selling anything to the Company or buying anything from the Company, except on the same terms and conditions as comparable officers or directors are permitted to so purchase or sell; and |
| • | any other circumstance, event, relationship or situation in which the personal interest of a person subject to this Code interferes – or even appears to interfere – with the interests of the Company as a whole. |
| 3. | Disclosure |
The Company strives to ensure that the contents of and the disclosures in the reports and documents that the Company files with the SEC and other public communications shall be full, fair, accurate, timely and understandable in accordance with applicable disclosure standards, including standards of materiality, where appropriate. Each person must:
| · | not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s independent auditors, governmental regulators, self-regulating organizations and other governmental officials, as appropriate; and |
| · | in relation to his or her area of responsibility, properly review and critically analyze proposed disclosure for accuracy and completeness. |
In addition to the foregoing, the Chief Executive Officer and the Chief Financial Officer of the Company and each subsidiary of the Company (or persons performing similar functions), and each other person that typically is involved in the financial reporting of the Company must familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company.
Each person must promptly bring to the attention of the Chairman of the Audit Committee of the Company’s Board of Directors (the “Audit Committee”) any information he or she may have concerning (a) significant deficiencies in the design or operation of internal and/or disclosure controls which could adversely affect the Company’s ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls.
| 4. | Compliance |
It is the Company’s obligation and policy to comply with all applicable governmental laws, rules and regulations. It is the personal responsibility of each person to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting and auditing matters.
| 5. | Reporting and Accountability |
The Audit Committee of the Company is responsible for applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular situation. Any person who becomes aware of any existing or potential breach of this Code is required to notify the Chairman of the Audit Committee promptly. Failure to do so is itself a breach of this Code.
Specifically, each person must:
| · | notify the Chairman promptly of any existing or potential violation of this Code; and |
| · | not retaliate against any other person for reports of potential violations that are made in good faith. |
The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code:
| · | The Audit Committee will take all appropriate action to investigate any breaches reported to it. |
| · | If the Audit Committee, determines (by majority decision) that a breach has occurred, it will inform the Board of Directors. |
| · | Upon being notified that a breach has occurred, the Board of Directors (by majority decision) will take or authorize such disciplinary or preventive action as it deems appropriate, after consultation with the Audit Committee and/or counsel, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities. |
No person following the above procedure shall, as a result of following such procedure, be subject by the Company or any officer or employee thereof to discharge, demotion suspension, threat, harassment or, in any manner, discrimination against such person in terms and conditions of employment.
| 6. | Waivers and Amendments |
Any waiver (as defined below) or an implicit waiver (as defined below) from a provision of this Code for the principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions or any amendment (as defined below) to this Code is required to be disclosed in the Company’s Annual Report on Form 10-K or in a Current Report on Form 8-K filed with the SEC. A “waiver” means the approval by the Company’s Board of Directors of a material departure from a provision of the Code. An “implicit waiver” means the Company’s failure to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an executive officer of the Company. An “amendment” means any amendment to this Code other than minor technical, administrative or other non-substantive amendments hereto.
All persons should note that it is not the Company’s intention to grant or to permit waivers from the requirements of this Code. The Company expects full compliance with this Code.
| 7. | Other Policies and Procedures |
Any other policy or procedure set out by the Company in writing or made generally known to employees, officers or directors of the Company prior to the date hereof or hereafter are separate requirements and remain in full force and effect.
| 8. | Inquiries |
All inquiries and questions in relation to this Code or its applicability to particular people or situations should be addressed to the Company’s Secretary.
Exhibit 16.1
December 12, 2024
U.S. Securities and Exchange Commission
Office of the Chief Accountant
100 F Street, NE
Washington, DC 20549
Re: New Era Helium Inc.
File No. 001-42433
Dear Sir or Madam:
We have read Item 4.01 of Form 8-K of New Era Helium Inc. dated December 6, 2024, and agree with the statements concerning our Firm contained therein.
Very truly yours,
/s/ GRANT THORNTON LLP
Exhibit 99.1
NEW ERA HELIUM CORP.
INDEX TO FINANCIAL STATEMENTS
| Page No. | ||
| Unaudited Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 | 2 | |
| Unaudited Consolidated Statements of Operations for the three months and nine months ended September 30, 2024 and 2023 | 3 | |
| Unaudited Consolidated Statements of Changes in Stockholders’ (Deficit) Equity and Members’ Equity for the three months and nine months ended September 30, 2024 and 2023 | 4 | |
| Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 | 5 | |
| Notes to Unaudited Consolidated Financial Statements | 6 to 23 |
| 1 |
NEW ERA HELIUM CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 409,250 | $ | 120,010 | ||||
| Accounts receivables, net | 698,016 | 692,351 | ||||||
| Prepaid expenses - current | 327,079 | 113,726 | ||||||
| Right of use asset - current | — | 12,690 | ||||||
| Restricted investments | 1,320,425 | 1,282,838 | ||||||
| Total current assets | 2,754,770 | 2,221,615 | ||||||
| Oil and natural gas properties, net (full cost) | 466,402 | 941,691 | ||||||
| Property, plant and equipment, net | 3,802,489 | 3,610,728 | ||||||
| Prepaid expenses - noncurrent | 420,000 | — | ||||||
| Deferred tax asset | 1,657,332 | 608,500 | ||||||
| TOTAL ASSETS | $ | 9,100,993 | $ | 7,382,534 | ||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | 1,746,252 | 1,472,961 | ||||||
| Accrued liabilities | 471,330 | 259,131 | ||||||
| Notes payable - current | 3,704,607 | 469,968 | ||||||
| Due to related parties | 1,692,951 | 886,113 | ||||||
| Lease liabilities - current | — | 12,690 | ||||||
| Other current liabilities | 73,138 | 45,059 | ||||||
| Total current liabilities | $ | 7,688,278 | $ | 3,145,922 | ||||
| Asset retirement obligation | 1,722,926 | 1,654,968 | ||||||
| Notes payable - noncurrent | 2,175,191 | 2,053,013 | ||||||
| Total liabilities | $ | 11,586,395 | $ | 6,853,903 | ||||
| Commitments and Contingencies (Note 14) | ||||||||
| Stockholders’ (Deficit) Equity | ||||||||
| Preferred stock, 10,000,000 shares authorized: | ||||||||
| Series X Preferred stock, $0.001 par value, 5,000 shares issued and outstanding at September 30, 2024 and December 31, 2023 | 1 | 1 | ||||||
| Common stock, $0.001 par value, authorized 190,000,000 shares, 6,208,935 and 6,205,506 shares issued and outstanding at September 30, 2024 and December 31, 2023 | 6,209 | 6,206 | ||||||
| Additional paid-in capital | 524,276 | 512,279 | ||||||
| Retained (deficit) earnings | (3,015,888 | ) | 10,145 | |||||
| Total Stockholders’ (Deficit) Equity | $ | (2,485,402 | ) | 528,631 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | 9,100,993 | $ | 7,382,534 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| 2 |
NEW ERA HELIUM CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues, net | ||||||||||||||||
| Oil, natural gas, and product sales, net | $ | 35,143 | $ | 102,528 | $ | 384,731 | $ | 438,205 | ||||||||
| Total Revenues, net | 35,143 | 102,528 | 384,731 | 438,205 | ||||||||||||
| Costs and expenses | ||||||||||||||||
| Lease operating expenses | 253,496 | 40,803 | 982,423 | 829,728 | ||||||||||||
| Depletion, depreciation, amortization, and accretion | 193,712 | 177,345 | 692,906 | 672,774 | ||||||||||||
| General and administrative expenses | 966,227 | 646,578 | 2,754,412 | 3,864,048 | ||||||||||||
| Total Costs and expenses | 1,413,435 | 864,726 | 4,429,741 | 5,366,550 | ||||||||||||
| Gain on sale of assets | — | 5,348,982 | — | 5,834,293 | ||||||||||||
| Income (loss) from operations | (1,378,292 | ) | 4,586,784 | (4,045,010 | ) | 905,948 | ||||||||||
| Other income (expenses) | ||||||||||||||||
| Interest income | 12,919 | 4,240 | 37,587 | 29,869 | ||||||||||||
| Interest expense | (128,016 | ) | (32,532 | ) | (267,838 | ) | (107,930 | ) | ||||||||
| Other, net | 66,799 | — | 200,396 | (314,541 | ) | |||||||||||
| Total Other income (expenses), net | (48,298 | ) | (28,292 | ) | (29,855 | ) | (392,602 | ) | ||||||||
| Income (loss) before provision for income taxes | (1,426,590 | ) | 4,558,492 | (4,074,865 | ) | 513,346 | ||||||||||
| Benefit (provision) for income taxes | 349,348 | (1,130,142 | ) | 1,048,832 | 340,841 | |||||||||||
| Net income (loss) | $ | (1,077,242 | ) | $ | 3,428,350 | $ | (3,026,033 | ) | $ | 854,187 | ||||||
| Net income (loss) per share – basic and diluted | ||||||||||||||||
| Basic and diluted | $ | (0.17 | ) | $ | 0.57 | $ | (0.49 | ) | $ | 0.15 | ||||||
| Weighted-average shares outstanding – basic and diluted | ||||||||||||||||
| Basic and diluted | 6,208,935 | 6,055,564 | 6,208,922 | 5,847,020 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 3 |
NEW ERA HELIUM CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY AND MEMBERS’ EQUITY
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(Unaudited)
| Retained | ||||||||||||||||||||||||||
| Common Stock | Preferred Stock | (Deficit) | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Paid-in Capital | Earnings | Total | ||||||||||||||||||||
| Balance, January 1, 2024 | 6,205,506 | $ | 6,206 | 5,000 | $ | 1 | $ | 512,279 | $ | 10,145 | $ | 528,631 | ||||||||||||||
| Sale of common stock | 3,429 | 3 | 11,997 | 12,000 | ||||||||||||||||||||||
| Net loss | (859,032 | ) | (859,032 | ) | ||||||||||||||||||||||
| Balance, March 31, 2024 | 6,208,935 | $ | 6,209 | 5,000 | $ | 1 | $ | 524,276 | $ | (848,887 | ) | $ | (318,401 | ) | ||||||||||||
| Net loss | (1,089,759 | ) | (1,089,759 | ) | ||||||||||||||||||||||
| Balance, June 30, 2024 | 6,208,935 | $ | 6,209 | 5,000 | $ | 1 | $ | 524,276 | $ | (1,938,646 | ) | $ | (1,408,160 | ) | ||||||||||||
| Net loss | (1,077,242 | ) | (1,077,242 | ) | ||||||||||||||||||||||
| Balance, September 30, 2024 | 6,208,935 | $ | 6,209 | 5,000 | $ | 1 | $ | 524,276 | $ | (3,015,888 | ) | $ | (2,485,402 | ) | ||||||||||||
| Members’ Equity | Stockholders’ Equity | |||||||||||||||||||||||||
| Retained | ||||||||||||||||||||||||||
| Units | Common Stock | Paid-in | (Deficit) | |||||||||||||||||||||||
| Outstanding | Amount | Shares | Amount | Capital | Earnings | Total | ||||||||||||||||||||
| Balance, January 1, 2023 | 5,000,000 | $ | (3,786,949 | ) | $ | — | ||||||||||||||||||||
| Pre-Reorganization: | ||||||||||||||||||||||||||
| Members’ contributions | 145,500 | |||||||||||||||||||||||||
| Member’s withdrawals | (59,294 | ) | ||||||||||||||||||||||||
| Common shares issued in exchange for common units | (5,000,000 | ) | 3,700,743 | 5,000,000 | 5,000 | (3,705,743 | ) | (3,700,743 | ) | |||||||||||||||||
| Post Reorganization: | ||||||||||||||||||||||||||
| Common shares issued for services | 714,000 | 714 | 2,498,286 | 2,499,000 | ||||||||||||||||||||||
| Issuance of preferred stock | * | 5,000 | 1 | 1 | ||||||||||||||||||||||
| Sale of common stock | 108,642 | 109 | 380,141 | 380,250 | ||||||||||||||||||||||
| Net loss | (2,034,074 | ) | (2,034,074 | ) | ||||||||||||||||||||||
| Balance, March 31, 2023 | * | — | $ | — | 5,822,642 | $ | 5,823 | $ | (827,316 | ) | $ | (2,034,074 | ) | $ | (2,855,566 | ) | ||||||||||
| Sale of common stock | 142,859 | 143 | 499,837 | 499,980 | ||||||||||||||||||||||
| Net loss | (540,089 | ) | (540,089 | ) | ||||||||||||||||||||||
| Balance, June 30, 2023 | * | $ | 5,965,501 | $ | 5,966 | $ | (327,479 | ) | $ | (2,574,163 | ) | $ | (2,895,675 | ) | ||||||||||||
| Sale of common stock | 142,858 | 142 | 499,837 | 499,979 | ||||||||||||||||||||||
| Net income | 3,428,350 | 3,428,350 | ||||||||||||||||||||||||
| Balance, September 30, 2023 | * | $ | 6,108,359 | $ | 6,108 | $ | 172,358 | $ | 854,187 | $ | 1,032,654 | |||||||||||||||
*The issuance of preferred shares is not included in the amounts reflected in Balance, March 31, 2023, Balance, June 30, 2023, and Balance, September 30, 2023.
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
NEW ERA HELIUM CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | (3,026,033 | ) | $ | 854,187 | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depletion, depreciation, amortization, and accretion | 692,906 | 672,774 | ||||||
| Deferred income tax benefit | (1,048,832 | ) | (427,471 | ) | ||||
| Accrued interest expense on note payable and other current liabilities | 210,990 | 13,548 | ||||||
| Interest income on investments and notes receivable | (37,587 | ) | (13,282 | ) | ||||
| Gain on asset sales | — | (5,834,293 | ) | |||||
| Loss on exchange of debt for ORRI | — | 316,531 | ||||||
| Stock-based compensation | — | 2,498,286 | ||||||
| Compensation – assignment of property | 166,449 | — | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivables | (8,191 | ) | 18,652 | |||||
| Prepaid expenses and other assets | 84,860 | (16,465 | ) | |||||
| Accounts payable | 331,318 | (382,316 | ) | |||||
| Accrued liabilities | 89,301 | (99,401 | ) | |||||
| Due to related parties | 285,153 | 491,948 | ||||||
| Asset retirement obligations settled | (28,087 | ) | — | |||||
| Other liabilities - current | (81,498 | ) | (151,890 | ) | ||||
| Net cash used in operating activities | (2,369,251 | ) | (2,059,192 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Investment in property, plant and equipment, net | (200,000 | ) | (3,579,000 | ) | ||||
| Proceeds from sale of interest in oil and natural gas properties | — | 2,499,920 | ||||||
| Investment of interest in oil and natural gas properties | — | (208,177 | ) | |||||
| Loss on settlement of asset retirement obligations | (105,538 | ) | — | |||||
| Proceeds from sale of restricted investments | — | 193,412 | ||||||
| Net cash used in investing activities | (305,538 | ) | (1,093,845 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Members’ contributions prior to reorganization | — | 145,500 | ||||||
| Members’ withdrawals prior to reorganization | — | (59,294 | ) | |||||
| Issuance of common stock | 12,000 | 1,380,923 | ||||||
| Issuance of preferred stock | — | 1 | ||||||
| Proceeds from note payable | 3,169,529 | 2,000,000 | ||||||
| Repayment of note payable | — | (20,000 | ) | |||||
| Repayment from related party | — | — | ||||||
| Proceeds from related party | 227,500 | 322,705 | ||||||
| Repayment to related party | (445,000 | ) | (160,000 | ) | ||||
| Net cash provided by financing activities | 2,964,029 | 3,609,835 | ||||||
| Net Change in Cash and cash equivalents | 289,240 | 456,798 | ||||||
| Cash and cash equivalents – Beginning of period | 120,010 | 405 | ||||||
| Cash and cash equivalents – End of period | $ | 409,250 | $ | 457,203 | ||||
| Supplemental cash flow information: | ||||||||
| Cash interest payments | $ | 55,603 | $ | 92,495 | ||||
| Supplemental Non-Cash Investing and Financing Activities: | ||||||||
| Asset retirement obligations sold recorded as a reduction of oil and natural gas properties | $ | — | $ | 3,407,818 | ||||
| ORRI interest acquired through and exchange of debt | $ | — | $ | 652,560 | ||||
| Partial purchase of note payable by related party | $ | — | $ | 70,000 | ||||
| Debentures associated with Standby Retainer, Consulting, and Services Agreement | $ | 720,000 | $ | — | ||||
| Capital expenditures accrued in accounts payable and accrued liabilities | $ | (157,241 | ) | $ | — | |||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Organization and Nature of Operations
New Era Helium Corp. (the “Company”) 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 primary operations include 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 190 million shares of common stock with a par value of $0.001 per share and 10 million shares of preferred stock with a par value of $0.001 per share. Subject to the terms of the Agreement, all issued and outstanding member interests in Solis Partners was automatically converted and exchanged for 5 million shares of the Company’s common stock.
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 is the owner of the helium offtake and tolling agreements. NEH Midstream is in the process of constructing a natural gas processing facility in which NEH Midstream will be the owner and operator.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of the Company as of September 30, 2024, and September 30, 2023, have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) issued by the Financial Accounting Standards Board (“FASB”) on a going concern basis, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated balance sheet as December 31, 2023, is derived from the audited financial statements. In the opinion of management, all adjustments, consisting primarily of normal recurring accruals, considered necessary for a fair presentation for the periods presented have been included. Management has made certain estimates and assumptions that affect reported amounts in the unaudited consolidated financial statements and disclosures. Actual results may differ from those estimates. Operating results for the nine months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the year ended December 31, 2024 or thereafter.
These interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting, and the Company believes that the disclosures made are adequate to make the information not misleading. Certain disclosures have been condensed or omitted from the consolidated financial statements. Accordingly, they do not include all the information and notes required by US GAAP for complete consolidated financial statements and should be read in conjunction with the Company’s financial statements and footnotes for the year ended December 31, 2023.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exemptions 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 un the Securities and Exchange Act of 1934, as amended ) 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 by 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.
| 6 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
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
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of all significant intercompany transactions and balances.
Segments
Based on the Company’s organization structure, the Company has one operating segment, which is the development, exploration and production of natural gas, helium, NGLs and oil. In addition, the Company has a single company-wide management team that allocates capital resources to maximize profitability and measures financial performance 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
The Company recorded a net loss of $(3,026,033) for the nine months ended September 30, 2024, net income of $10,145 for the year ended December 31, 2023 and net income of $197,474 for the year ended December 31, 2022. As of September 30, 2024, the Company had a working capital deficit of $(4,933,508) and a cash balance of $409,250.
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 have 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 the Company’s revenue growth rate, the timing and extent of spending to support further sales and marketing efforts. In order to finance these opportunities, the Company will need to raise additional financing. While there can be no assurances, the Company intends to raise such capital through additional equity raises. The equity raises will continue to be effectuated via a private placement, continuation of the business combination transaction, or other transaction. If additional financing is required from outside sources, the Company may not be able to raise it on terms acceptable to the Company or at all. If the Company is unable to raise additional capital when desired, the Company’s business, results of operations and financial condition would be materially and adversely affected.
As a result of the above, 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 twelve months from the date these consolidated financial statements are available to be issued. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
| 7 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
Use of Estimates
The preparation of financial statements in conformity with US 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 financial statements, as well as the reported amounts of expenses during the reporting period. Significant estimates affecting the 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 10), the estimate of proved natural gas, oil, helium, 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 11). 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 September 30, 2024 and December 31, 2023, the Company did not hold any cash equivalents other than cash on deposit.
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 oil, 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. Receivables associated with joint interest billings are regularly reviewed by Management for collectability, and they establish or adjust an allowance for expected losses as necessary. The Company determines its allowance for each type of receivable by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the debtor’s current ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole. Management has determined that an allowance for expected losses was not required for the nine months ended September 30, 2024, and the year ended December 31, 2023.
| September 30, 2024 | December 31, 2023 | |||||||
| Oil, natural gas and NGL sales | $ | 11,586 | $ | 76,115 | ||||
| Joint interest accounts receivable | 625,294 | 494,587 | ||||||
| Unbilled joint interest expense | 1,401 | (852 | ) | |||||
| Total joint interest related receivables | 626,695 | 493,735 | ||||||
| Other accounts receivable | 59,735 | 122,501 | ||||||
| Allowance for expected losses | — | — | ||||||
| Total Accounts receivable, net | $ | 698,016 | $ | 692,351 | ||||
The beginning accounts receivable balance at January 1, 2023 was $835,173.
| 8 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
The Company did not write off any accounts receivables during the nine months ended September 30, 2024, but the Company did write off $31,851 of joint interest accounts receivables during the year ended December 31, 2023.
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.
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 no impairment charges during the nine months ended September 30, 2024 and 2023.
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 (10%), plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged to operations. For purposes of the ceiling test calculation, current prices are defined as the un-weighted arithmetic average of the first day of the month price for each month within the 12-month period prior to the end of the reporting period. Prices are adjusted for basis or location differentials. Unless sales contracts specify otherwise, prices are held constant for the productive life of each well. Similarly, current costs are assumed to remain constant over the entire calculation period.
| 9 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
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 no ceiling test impairment charges during the nine months ended September 30, 2024 and 2023.
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 100% of most operating costs, then bills the non-operating partners for their share of the costs. The Company records the Company’s share these costs in its consolidated statements of operations. Accounts payables are generally due within 30 of receipt of the invoices by the Company and do not bear any interest. The table below represents the accounts payable recorded in the Company’s consolidated balance sheets.
| September 30, 2024 | December 31, 2023 | |||||||
| Trade payable | $ | 1,014,197 | $ | 773,387 | ||||
| Suspense payable | 732,055 | 727,153 | ||||||
| Total accounts payable | $ | 1,746,252 | $ | 1,500,540 | ||||
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets.
Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 2.37%. Significant judgement is required when determining the incremental borrowing rate. Rent expense for lease payments is recognized on a straight-line basis over the lease term.
Asset retirement obligations
The Company records a liability for asset retirement obligations (“ARO”) 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.
| 10 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
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. One purchaser accounted for all of the Company’s oil sales revenues for the three and nine months ended September 30, 2024 and 2023. A separate purchaser accounted for all the natural gas and NGL revenues for the three and nine months ended September 30, 2024 and 2023. The Company does not require collateral. While the Company believes its recorded receivables will be collected, in the event of default the Company will follow normal collection procedures. The Company does not believe the loss of either purchaser would materially impact its operating results as oil, natural gas and NGLs are fungible products with a well-established market and numerous purchasers.
Revenue recognition
The Company records revenue in accordance with FASB 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.
Performance obligations and significant judgments
The Company sells 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 is typically sold in an unprocessed state to processors and other third parties for processing and sale to customers. The Company recognizes 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 oil to a single purchaser under a month-to-month purchase agreement at a price based on an index price from the purchaser. This 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.
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 30-day advance notice. Under our natural gas and NGL 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.
The Company will sell its helium to two purchasers, each purchasing 50% of the helium production under 10-year contracts. One of the contracts will commence upon delivery of gaseous helium production at the tailgate of the processing plant. The other contract will commence upon delivery of liquid helium from the Keyes Helium Company (“Keyes Helium”) liquefaction plant located in Keyes, Oklahoma. When the gaseous helium is loaded into the gaseous helium trailer, control of the helium is transferred to the purchaser, the Company’s obligations will be satisfied, and revenue will be recognized. With regards to liquid helium, the Company will transport the gaseous helium to the Keyes Helium liquefaction plant. Once the helium has been liquified and loaded into the liquid helium trailer, control of the helium is transferred to the purchaser, the Company’s obligations are satisfied, and revenue is recognized.
| 11 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
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. |
Our asset retirement obligation liabilities are measured at fair value on a non-recurring basis and estimated as follows:
| September 30, 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| ARO liabilities | $ | — | $ | — | $ | 1,722,926 | $ | 1,722,926 | ||||||||
| Assignment of interest in certain properties | $ | — | $ | — | $ | 166,449 | $ | 166,449 | ||||||||
| December 31, 2023 | ||||||||||||||||
| ARO liabilities | $ | — | $ | — | $ | 1,654,968 | $ | 1,654,968 | ||||||||
| Stock-based compensation | $ | — | $ | — | $ | 2,499,000 | $ | 2,499,000 | ||||||||
The properties assigned were valued at $166,449, the fair market value on the effective date of the assignment. The Company determined fair market value using various economic parameters including annual cash flows, discounted future net revenues, and return on investment. (See NOTE 8. RELATED PARTY TRANSACTIONS)
The shares issued in the stock-based compensation were valued at $2,499,000, the fair market values on the grant date using the share price of common stock sold to investors approximately 30 days from the grant date.
The carrying value of cash and cash equivalents, trade receivable, prepaid and other current assets, due from related parties, 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.
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.
| 12 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
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 has not established a valuation allowance as of September 30, 2024, and December 31, 2023.
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. (See NOTE 12. INCOME TAXES)
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 the Texas Margin Tax. The Company realized no Texas Margin Tax in the accompanying 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 (“ASC”) 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 consolidated statements of operations based on their grant date fair values.
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.
Recent accounting pronouncements
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures. The amendments address more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in the ASU are effective for public business entities for annual periods beginning after December 31, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This ASU updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense and information used to assess segment performance. The amendments in the ASU are effective for public entities for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is still evaluating the effect of the adoption of this guidance.
| 13 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public business entities to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. The amendments in the ASU are effective for public entities for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is still evaluating the effect of the adoption of this guidance.
NOTE 3: PREPAID EXPENSES
The following table presents the components of prepaid expenses as of the dates indicated:
| September 30, 2024 | December 31, 2023 | |||||||
| Retainer for workover rigs | $ | 240,000 | $ | — | ||||
| Prepaid expense | 68,003 | 90,273 | ||||||
| Deferred closing costs | 4,040 | 8,417 | ||||||
| Security deposit | 5,050 | 5,050 | ||||||
| Other | 9,986 | 9,986 | ||||||
| Total prepaid expenses - current | $ | 327,079 | $ | 113,726 | ||||
| Retainer for workover rigs | $ | 420,000 | $ | — | ||||
| Total prepaid expenses - noncurrent | $ | 420,000 | $ | — | ||||
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
The Company will record depreciation expense for 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. The Company records depreciation expense for leasehold improvement over the lesser of their estimated useful lives or the underlying terms of the associated leases.
| September 30, 2024 | December 31, 2023 | |||||||
| Processing plant under construction – cost | $ | 3,781,736 | $ | 3,581,736 | ||||
| Computer equipment – cost | 9,820 | 9,820 | ||||||
| Furniture and fixtures – cost | 22,101 | 22,101 | ||||||
| Leasehold improvements – cost | 23,006 | 23,006 | ||||||
| Total – cost | 3,836,663 | 3,636,663 | ||||||
| Processing plant under construction – accumulated depreciation | — | — | ||||||
| Computer equipment – accumulated depreciation | (6,383 | ) | (4,910 | ) | ||||
| Furniture and fixtures – accumulated depreciation | (15,166 | ) | (11,850 | ) | ||||
| Leasehold improvements – accumulated depreciation | (12,625 | ) | (9,175 | ) | ||||
| Total – accumulated depreciation | (34,174 | ) | (25,935 | ) | ||||
| Processing plant under construction – net | 3,781,736 | 3,581,736 | ||||||
| Computer equipment – net | 3,437 | 4,910 | ||||||
| Furniture and fixtures – net | 6,935 | 10,251 | ||||||
| Leasehold improvements – net | 10,381 | 13,831 | ||||||
| Total Property, plant and equipment, net | $ | 3,802,489 | $ | 3,610,728 | ||||
| 14 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
The Company recorded depreciation expense in the amounts of $8,239 and $7,703 during the nine months ended September 30, 2024, and 2023, respectively.
NOTE 5. OIL AND NATURAL GAS PROPERTIES
| September 30, 2024 | December 31, 2023 | |||||||
| Evaluated oil and natural gas properties – cost | $ | 6,440,255 | $ | 6,368,179 | ||||
| Total – cost | 6,440,255 | 6,368,179 | ||||||
| Accumulated depletion and impairment | (5,973,853 | ) | (5,426,488 | ) | ||||
| Oil and natural gas properties, net | $ | 466,402 | $ | 941,691 | ||||
The Company had no unevaluated properties at September 30, 2024 and December 31, 2023.
The Company recorded depletion expense in the amounts of $547,365 and $586,659 during the nine months ended September 30, 2024, and 2023, respectively.
Additions
During the nine months ended September 30, 2024, the Company incurred approximately $34,000 of cost primarily associated with staking various locations in Chaves County, New Mexico, approximately $123,000 of costs associated with the evaluation of a new field gathering system, and approximately $106,000 of costs related to plugging and abandonment costs in excess of liability recorded for asset retirement obligations.
Disposals
In June 2024, the Company assigned interest in certain properties located in Chaves County, New Mexico to Earnest Producing Corporation (“Earnest”), an entity controlled by Joel Solis, the Company’s chairman. The amount recorded as a deduction of Evaluated oil and natural gas properties – cost was $193,229. This was based on a $166,449 fair value calculated for the properties and assumption of the asset retirement obligations by Earnest. At the time of the assignment, the asset retirement costs recorded on the Company’s consolidated balance sheets associated with these properties was $26,780. (See NOTE 8. RELATED PARTY TRANSACTIONS)
NOTE 6. NOTES PAYABLE
On June 1, 2023, the Company renewed a secured Promissory Note (“the Note”) with a balance of $475,000, an interest rate of 14%, and requiring a principal reduction payment of $10,000, and a fee payment of $16,341 upon renewal and maturing on December 1, 2023. On December 1, 2023, the balance of $465,000 of the Note was renewed, requiring fee payment of $15,719 upon renewal and maturing on June 1, 2024. On July 1, 2024, the balance of $465,000 of the Note was renewed, requiring fee payment of $15,719 upon renewal and maturing on December 1, 2024. The Note carries an interest rate of 14.5%. As of September 30, 2024 and December 31, 2023, there were $465,139 and $469,968, respectively, payable on the Note which includes accrued interest. These amounts were recorded as Notes payable - current on the Company’s consolidated balance sheets.
| 15 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
On August 25, 2023, the Company, through its wholly owned subsidiary NEH Midstream, LLC., entered into a Promissory Note (“AirLife Note”) with AirLife Gases USA Inc. (“AirLife”). Under the AirLife Note, NEH Midstream agreed to pay AirLife the principal sum of $2,000,000 or such lesser amount as shall equal the outstanding principal amount of the Advance made to NEH Midstream by AirLife. The entire balance will be due on the earlier of (i) the date that is 18 months after the commencement date as defined the Purchase and Sale Agreement between NEH Midstream and AirLife dated August 25, 2023, or (ii) May 30, 2027. Interest shall accrue at 0.0211%, compounded daily, equivalent to an annual interest rate of 8%, commencing on the date the advance was made and continuing until repaid. The Company’s interest in certain oil and natural gas properties, included within the Oil and natural gas properties, net (full cost) balance on the Company’s consolidated balance sheets are pledged as collateral for the AirLife Note. As of September 30, 2024 and December 31, 2023, this amount, including accrued interest of $175,191 and $53,013, respectively and was recorded as Notes payable - noncurrent on the Company’s consolidated balance sheets.
Starting in February 2024, NEH conducted a bridge financing round, pursuant to which it issued 10% Secured Convertible Debentures (the “Bridge Financing Debentures”) to certain investors. The Bridge Financing Debentures are payable on the earliest of: i) the date that the holder accelerates the obligations under the Bridge Financing Debentures; ii) March 1, 2025; or iii) the consummation of the business combination. The Bridge Financing Debentures are not eligible for prepayment and interest accrues monthly. Provided that the date of consummation of the business combination occurs prior to either March 1, 2025 or the date on which the holder accelerates the obligations under the Bridge Financing Debentures, the Bridge Financing Debentures are convertible into common stock of the Combined Company at a conversion rate determined by dividing (i) the principal and interest converted hereunder by (ii) the per share valuation (on a fully diluted basis) of the Combined Company’s common stock using a pre-money valuation of the Company of $20 million. The Company’s interest in certain oil and natural gas properties, included within the Oil and natural gas properties, net (full cost) balance on the Company’s consolidated balance sheets are pledged as collateral for the Bridge Financing Debentures. As of September 30, 2024, there as $4,006,153 payable on the Bridge Financing Debentures which includes accrued interest. Of this amount $766,685 was recorded as Due to related parties on the Company’s consolidated balance sheets. The remaining amount was recorded as Notes payable - current on the Company’s consolidated balance sheets.
| September 30, 2024 | December 31, 2023 | |||||||
| The Note – principal | $ | 465,000 | $ | 465,000 | ||||
| The Note – accrued interest | 139 | 4,968 | ||||||
| Bridge Financing Debentures – principal | 3,917,029 | — | ||||||
| Bridge Financing Debentures – principal – recorded as Due to related parties | (747,500 | ) | — | |||||
| Bridge Financing Debentures – accrued interest | 89,124 | — | ||||||
| Bridge Financing Debentures – accrued interest – recorded as Due to related parties | (19,185 | ) | — | |||||
| Notes payable – current | $ | 3,704,607 | $ | 469,968 | ||||
| AirLife Note – principle | $ | 2,000,000 | $ | 2,000,000 | ||||
| AirLife Note – accrued interest | 175,191 | 53,013 | ||||||
| Notes payable – noncurrent | $ | 2,175,191 | 2,053,013 | |||||
NOTE 7. LEASE LIABILITIES
The Company currently occupies office space in Midland, Texas under a month-to-month arrangement. The Company is reviewing its options regarding continued use of this office space and will continue to expense the cost to use this office.
On May 27, 2022, the Company entered into a 12-month lease agreement for office space in Hermosa Beach, California. The lease had a base monthly rent of approximately $2,550 expired on May 31, 2023. The Company reached an agreement with the lessor to continue occupancy of this space on a month-to-month basis. It is the Company’s intention to remain at this location though May 31, 2024. The Company will review options regarding the continuation of using this office space but has begun to expense the cost to use this office starting June 1, 2024.
| 16 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
Other information related to leases as of September 30, 2024 and December 31, 2023, is as follows:
| September 30, 2024 | December 31, 2023 | |||||||
| Weighted-average remaining lease term | ||||||||
| Operating leases | — | 0.21 years | ||||||
| Weighted-average discount rate | ||||||||
| Operating leases | — | 2.85 | % | |||||
The are no future minimum rental payments required under the operating leases as of September 30, 2024.
A reconciliation of current lease liabilities as recognized in the consolidated balance sheets as of September 30, 2024 and December 31, 2023, is as follows:
| September 30, 2024 | December 31, 2023 | |||||||
| Lease liabilities – current | $ | — | $ | 12,750 | ||||
| Total future minimum lease payments | — | 12,750 | ||||||
| Less imputed interest | — | (60 | ) | |||||
| Total | $ | — | $ | 12,690 | ||||
NOTE 8. RELATED PARTY TRANSACTIONS
Balance outstanding of related parties:
| Name of Party | Receivable / Payable | September 30, 2024 | December 31, 2023 | |||||||
| Will Gray | Payable (note) | $ | 75,000 | $ | 170,000 | |||||
| Will Gray | Payable (expenses) | 3,119 | 6,464 | |||||||
| Mike Rugen | Payable (consulting fees and expenses) | — | 21,115 | |||||||
| Joel Solis | Payable (note) | — | 175,000 | |||||||
| Joel Solis | Payable (Bridge Financing Debentures – principal) | 720,000 | — | |||||||
| Joel Solis | Payable (Bridge Financing Debentures – interest) | 18,200 | — | |||||||
| Adrian Beeston | Payable (note) | 25,000 | — | |||||||
| Adrian Beeston | Payable (Bridge Financing Debentures – principal) | 27,500 | — | |||||||
| Adrian Beeston | Payable (Bridge Financing Debentures – interest) | 985 | — | |||||||
| Liberty Pump & Supply, Co. | Payable (field operations, insurance) | 668,616 | 393,072 | |||||||
| Tall City Well Service | Payable (field operations) | 154,531 | 120,462 | |||||||
| Total | Payable | $ | 1,692,951 | $ | 886,113 | |||||
| 17 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
On December 28, 2023, the Company entered into a series of agreements with E. Will Gray II, the Company’s CEO and Director. One agreement had an effective date of March 29, 2023, and acknowledges the Company’s receipt from Mr. Gray of $45,000. The Company promises to pay Mr. Gray the full amount on or before the earlier of (i) February 15, 2024, or (ii) the closing of the Company’s business combination with Roth CH Acquisitions V Co. Another agreement had an effective date of April 19, 2023, and acknowledges the Company’s receipt from Mr. Gray of $35,000. The Company promises to pay Mr. Gray the full amount on or before the earlier of (i) February 15, 2024, or (ii) the closing of the Company’s business combination with Roth CH Acquisitions V Co. The final agreement had an effective date of December 22, 2023, and acknowledges the Company’s receipt from Mr. Gray of $90,000. The company promises to pay Mr. Gray the full amount on or before the earlier of (i) February 15, 2024, or (ii) the closing of the Company’s business combination with Roth CH Acquisitions V Co. On August 5, 2024, the Company repaid $45,000 and on September 26, 2024, the Company repaid an additional $45,000 of the amounts due to Mr. Gray.
The Company received $50,000 on January 22, 2024 from Adrian Beeston, an investor, and received $150,000 on January 30, 2024 from Joel Solis, the Company’s Chairman of the Board. These loans bear no interest and shall be repaid by the Company no later than April 1, 2024. On February 29, 2024 the Company repaid the $150,000 due to Mr. Solis. On September 26, 2024, the Company repaid $25,000 of the amount due to Mr. Beeston.
On March 5, 2024, the Company entered into an agreement with Joel G. Solis, the Company’s Chairman and Director. This agreement acknowledges the Company’s receipt from Mr. Solis of $50,000 on February 9, 2023, $45,000 on February 14, 2023, $20,000 on February 17, 2023, and $60,000 on February 27, 2023 (the “Loans”). The Loans bear no interest and shall be repaid by no later than June 30, 2024. On August 1, 2024, the Company repaid $70,000 and on September 26, 2024, the Company repaid the remaining $105,000 due to Mr. Solis.
On May 14, 2024, Adrian Beeston contributed $27,500 to the Company. This payment was contributed as part of the Bridge Financing Debentures process. (See NOTE 6. NOTES PAYABLE)
In June 2024, the Company assigned interest in certain properties located in Chaves County, New Mexico to Earnest Producing Corporation, an entity controlled by Joel Solis, the Company’s chairman. The properties assigned were valued at $166,449, the fair market value on the effective date of the assignment. The Company determined fair market value using various economic parameters including annual cash flows, discounted future net revenues, and return on investment. This transaction is compensation for Mr. Solis’ past contributions to the Company and for Mr. Solis not continuing as a director once the Company completes its transaction with Roth CH Acquisitions V Co.
In July 2024, Tall City Well Service Co., LP (“Tall City”), a Company controlled by Joel Solis, entered into a Standby Retainer, Consulting and Services Agreement and a 10% Secured Convertible Debenture with the Company.
NOTE 9: OTHER CURRENT LIABILITIES
The following table presents the components of other current liabilities as of the dates indicated:
| September 30, 2024 | December 31, 2023 | |||||||
| Royalty payable – ONRR | $ | 15,838 | $ | 45,059 | ||||
| Installment agreement – ONRR | 57,300 | — | ||||||
| Total other current liabilities | $ | 73,138 | $ | 45,059 | ||||
NOTE 10. 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.
| 18 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
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. The Company used the following inputs in its calculation of its asset retirement obligations.
| Nine Months Ended | Year Ended | |||||||
| September 30, 2024 | December 31, 2023 | |||||||
| Inflation rate | 3.087 | % | 3.087 | % | ||||
| Discount factor | 10.0 | % | 10.0 | % | ||||
| Estimated asset life | 9.25 – 49.25 years | 11 – 50 years | ||||||
The following table shows the change in the Company’s ARO liability for the nine months ended September 30, 2024 and year ended December 31, 2023:
| Asset retirement obligations, January 1, 2023 | $ | 5,485,915 | ||
| Liabilities incurred | 85,802 | |||
| Liabilities sold | (3,510,966 | ) | ||
| Change in estimates | (497,407 | ) | ||
| Accretion expense | 91,624 | |||
| Asset retirement obligations, December 31, 2023 | 1,654,968 | |||
| Liabilities sold | (26,780 | ) | ||
| Liabilities settled | (28,087 | ) | ||
| Accretion expense | 122,825 | |||
| Asset retirement obligations, September 30, 2024 | $ | 1,722,926 |
The liabilities sold during the nine months ended September 30, 2024 represented the asset retirement obligations associated with certain properties located in Chaves County, New Mexico that were assigned to Earnest Producing Corporation by the Company. (See NOTE 8. RELATED PARTY TRANSACTIONS)
NOTE 11. EQUITY
Reorganization Agreement and Plan Share Exchange and Issuance of Shares
On February 6, 2023, the Company entered into the Agreement (See NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION)
Common Shares Issued for Services
On February 6, 2023, the Company issued a total of 714,000 shares of its common stock for services rendered. These shares were valued at $2,499,000, the fair market values on the grant date using the share price of common stock sold to investors approximately 30 days from the grant date. The Company recognized stock-based compensation expense of approximately $2,499,000 during the year ended December 31, 2023. This amount was recorded by the Company in general and administrative expenses in the Company’s consolidated statements of operations.
| 19 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
On February 7, 2023, the Board approved the designation of 5,000 shares of preferred stock as Series X Preferred Stock. These shares will not be entitled to receive dividends, shall not be entitled to any liquidation preference, shall not have any rights to convert to common stock, and will not be subject to redemption. The holders of the Series X Preferred Stock will have the right to vote in an amount equal to 1,000 votes per share of Series X Preferred Stock.
The Board approved the issuance of the Series X Preferred shares as follows:
- 2,000 to Joel G. Solis (Chairman)
- 1,000 to Pecos Slope Holdings (controlled by Will Gray – CEO and Director)
- 1,000 to Casey J. Solis (investor)
- 1,000 to Robert C. Solis (investor)
Sale of Common Shares
During the period January 1, 2023 through September 30, 2024, the Company entered into subscription agreements and approved the issuance of the following shares of common stock:
| Month | Number of Common Shares | Price Per Share | Proceeds | |||||||||
| March 2023 | 108,642 | $ | 3.50 | $ | 380,250 | |||||||
| April 2023 | 42,858 | 3.50 | 150,000 | |||||||||
| May 2023 | 57,143 | 3.50 | 200,000 | |||||||||
| June 2023 | 42,858 | 3.50 | 150,000 | |||||||||
| July 2023 | 85,715 | 3.50 | 300,000 | |||||||||
| August 2023 | 57,143 | 3.50 | 200,000 | |||||||||
| October 2023 | 22,856 | 3.50 | 80,000 | |||||||||
| November 2023 | 30,005 | 3.50 | 105,019 | |||||||||
| December 2023 | 44,286 | (1 | ) | (1 | ) | |||||||
| Total 2023 | 491,506 | $ | 1,565,269 | |||||||||
| January 2024 | 3,429 | $ | 3.50 | 12,000 | ||||||||
| Total 2024 | 3,429 | $ | 12,000 | |||||||||
| (1) | On December 28, 2023, the Company entered into a Convertible Promissory Note with Joel Solis, Chairman, in the amount of $155,000 (the “Solis Note”). On the earlier of (i) February 15, 2024 or (ii) closing of the Company’s business combination with Roth CH Acquisition V Co., the Company shall, except if elected otherwise by Mr. Solis, pay an amount representing all the outstanding principal, accrued and unpaid interest and unpaid late charges. The Company may prepay any portion of the Solis Note at any time. Mr. Solis may convert the outstanding balance of Solis Note (“Conversion Amount”) into a validly issued, fully paid and non-assessable share of common stock. The number of shares shall be determined by dividing the Conversion Amount by $3.50. On December 28, 2023, Mr. Solis elected to convert the Solis Note into 44,286 shares of common stock. |
On October 3, 2023, the Board approved the Company’s sale and issuance of up to 750,000 shares of common stock. On November 14, 2023, the Board authorized the sale and issuance of an additional 650,000 of common stock.
NOTE 12. INCOME TAXES
On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA 2022”). The IRA 2022, among other tax provisions, imposes a 15% corporate alternative minimum tax based on financial statement income, effective for tax years beginning after December 31, 2022. The IRA 2022 also establishes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations, effective for stock repurchases after December 31, 2022. The IRA 2022 did not impact the Company’s current year tax provision or the Company’s consolidated financial statements.
| 20 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
The Company files a consolidated federal income tax return and various state income tax returns. The amount of income taxes the Company records requires the interpretation of complex rules and regulations of federal and state taxing jurisdictions.
The components of the Company’s consolidated provision for income taxes from operations are as follows:
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Current provision for income taxes: | ||||||||
| Federal | $ | — | $ | 69,858 | ||||
| State | — | 16,773 | ||||||
| Total Current provision for income taxes | $ | — | $ | 86,631 | ||||
| Deferred income tax benefit: | ||||||||
| Federal | $ | (840,870 | ) | $ | (362,089 | ) | ||
| State | (207,962 | ) | (65,383 | ) | ||||
| Total Deferred income tax benefit | $ | (1,048,832 | ) | $ | (427,472 | ) | ||
| Total provision for income taxes | $ | (1,048,832 | ) | $ | (340,841 | ) | ||
A reconciliation of the U.S. federal statutory rate to the Company’s effect income tax rate is as follows:
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Tax statutory rate | 21.0 | % | 21.0 | % | ||||
| Income tax benefit at the federal statutory rate | $ | (855,721 | ) | $ | 107,803 | |||
| Change in entity tax status * | — | (1,088,171 | ) | |||||
| Change in tax rates | (21,329 | ) | — | |||||
| Nondeductible expenses | 1,161 | 620,061 | ||||||
| Return-to-provision adjustment | 16,729 | — | ||||||
| State taxes, net of federal benefit | (189,672 | ) | 13,250 | |||||
| Other | — | 6,216 | ||||||
| Income tax benefit | $ | (1,048,832 | ) | $ | (340,841 | ) | ||
| Effective income tax rate | 25.7 | % | (66.4 | )% | ||||
*See NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
| 21 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
GAAP requires deferred income tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Significant components of net deferred tax assets (liabilities) at September 30, 2024 and December 31, 2023 are as follows:
| September 30, 2024 | December 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Depreciation and depletion on oil and gas assets | $ | 656,774 | $ | 466,890 | ||||
| Net operating loss carryforwards | 1,009,008 | 154,976 | ||||||
| Total deferred tax assets | $ | 1,665,782 | $ | 621,866 | ||||
| Deferred tax liabilities: | ||||||||
| Prepaid expenses | $ | (3,125 | ) | $ | (6,178 | ) | ||
| Other PPE depreciation | (5,325 | ) | (7,188 | ) | ||||
| Total deferred tax liabilities | $ | (8,450 | ) | $ | (13,366 | ) | ||
| Net Deferred tax assets (liabilities) | $ | 1,657,332 | $ | 608,500 | ||||
| Net | $ | 1,657,332 | $ | 608,500 | ||||
A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. To assess that likelihood, we use estimates and judgment regarding our future taxable income, and we consider the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include our current financial position, our results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies as well as the current and forecasted business economics of our industry. The Company did not record a valuation allowance for the nine months ended September 30, 2024, or the year ended December 31, 2023.
NOTE 13. EARNINGS PER SHARE AND MEMBERS’ UNIT
The Company calculated net income/(loss) per share using the treasury stock method. The table below sets for the computation of basic and diluted net income/(loss) per share for the period presented below.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net income (loss) | $ | (1,077,242 | ) | $ | 3,428,350 | $ | (3,026,033 | ) | $ | 854,187 | ||||||
| Basic weighted average common shares outstanding | 6,208,935 | 6,055,564 | 6,208,922 | 5,847,020 | ||||||||||||
| Diluted weighted average common shares outstanding | — | — | — | — | ||||||||||||
| Basic and diluted weighted average common shares outstanding | 6,208,935 | 6,055,564 | 6,208,922 | 5,847,020 | ||||||||||||
| Basic and diluted net income (loss) per share | $ | (0.17 | ) | $ | 0.57 | $ | (0.49 | ) | $ | 0.15 | ||||||
| 22 |
New Era Helium Corp.
Notes to Unaudited Consolidated Financial Statements
NOTE 14. 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, 2025. 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 September 30, 2024 and December 31, 2023, no amount was drawn down under the LOC.
NOTE 15: REVENUES
The following table presents the revenue by type as of the dates indicated:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Natural gas | 194,822 | 267,495 | 902,931 | 1,122,187 | ||||||||||||
| Less gathering and processing | (214,129 | ) | (233,820 | ) | (736,928 | ) | (900,441 | ) | ||||||||
| Natural gas, net | (19,307 | ) | 33,675 | 166,003 | 221,746 | |||||||||||
| NGL | 53,028 | 31,673 | 192,706 | 102,784 | ||||||||||||
| Oil | 1,422 | 37,180 | 26,022 | 113,675 | ||||||||||||
| Total Revenue, net | 35,143 | 102,528 | 384,731 | 438,205 | ||||||||||||
NOTE 16. SUBSEQUENT EVENTS
During October 2024, the Company received $82,000 in exchange for the Bridge Financing Debentures.
On November 11, 2024, the Company executed a non-binding letter of intent to form a joint venture with Sharon AI, Inc. Under the terms of the 50/50 joint venture, the parties will jointly design, build and operate an initial 90MW power plant and subsequent deployment of Tier 3 data centers. As part of the joint venture, the Company will enter into a gas supply agreement with the joint venture at a mutually agreed fixed cost for five years plus three options of five years each.
On November 14, 2024, the Board of Directors of the Company approved an increase in the amount of Bridge Financing Debentures that could be issued from $4,000,000 to $4,250,000.
| 23 |
Exhibit 99.2
Table of Contents
ROTH CH ACQUISITION V CO.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
| Page | ||
| Part I. Financial Information | | |
| Item 1. Financial Statements | | 1 |
| Condensed Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023 (Unaudited) | | 1 |
| Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023(Unaudited) | | 2 |
| Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited) | | 3 |
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 (Unaudited) | | 4 |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | | 5 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 23 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | | 32 |
| Item 4. Controls and Procedures | | 33 |
| Part II. Other Information | | |
| Item 1. Legal Proceedings | | 34 |
| Item 1A. Risk Factors | | 34 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | | 34 |
| Item 3. Defaults Upon Senior Securities | | 34 |
| Item 4. Mine Safety Disclosures | | 34 |
| Item 5. Other Information | | 34 |
| Item 6. Exhibits | | 35 |
| Signatures | | 36 |
i
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ROTH CH ACQUISITION V CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| | | | | | | |
| | September 30, | December 31, | ||||
| | | 2024 | | 2023 | ||
| ASSETS | | | ||||
| Current assets | | | ||||
| Cash | | $ | 6,620 | | $ | 200,059 |
| Prepaid expenses | | 25,490 | | | 62,174 | |
| Cash and marketable securities held in Trust Account | | | 17,928,070 | | | 16,978,160 |
| Total Current Assets | | 17,960,180 | | | 17,240,393 | |
| Total Assets | | $ | 17,960,180 | | $ | 17,240,393 |
| | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | |||
| Current liabilities | | | | |||
| Accounts payable and accrued expenses | | $ | 2,113,329 | | $ | 1,099,863 |
| Promissory note – related party | | | 1,287,944 | | | 416,841 |
| Excise taxes payable | | | 1,029,003 | | | 1,029,003 |
| Income taxes payable | | | 14,323 | | | 142,500 |
| Total Current Liabilities | | 4,444,599 | | | 2,688,207 | |
| | | | | | | |
| Commitments and Contingencies | | | | |||
| Common stock subject to possible redemption, $0.0001 par value; 1,582,797 shares at $11.22 per share and $10.71 per share redemption value as of September 30, 2024 and December 31, 2023, respectively | | 17,751,247 | | | 16,949,887 | |
| | | | | | | |
| Stockholders’ Deficit | | | | |||
| Common stock, $0.0001 par value; 50,000,000 shares authorized; 3,336,500 shares issued and outstanding (excluding 1,582,797 shares subject to possible redemption) as of September 30, 2024 and December 31, 2023, respectively | | 334 | | | 334 | |
| Additional paid-in capital | | — | | | — | |
| Accumulated deficit | | (4,236,000) | | | (2,398,035) | |
| Total Stockholders’ Deficit | | (4,235,666) | | | (2,397,701) | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | | $ | 17,960,180 | | $ | 17,240,393 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1
Table of Contents
ROTH CH ACQUISITION V CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| | | | | | | | | | | | | |
| | | For the Three Months Ended | | For the Nine Months Ended | ||||||||
| | | September 30, | | September 30, | ||||||||
| | 2024 | 2023 | 2024 | 2023 | ||||||||
| General and administrative expenses | | $ | 368,098 | | $ | 908,357 | | $ | 1,540,761 | | $ | 1,293,488 |
| Loss from operations | | (368,098) | | | (908,357) | | | (1,540,761) | | (1,293,488) | ||
| | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | ||
| Interest earned on marketable securities held in Trust Account | | 229,375 | | | 343,491 | | | 677,062 | | 2,641,366 | ||
| Interest income - other | | | 2,274 | | | — | | | 2,274 | | | — |
| Finance costs for non-redemption agreements | | | — | | | 8,811 | | | — | | | (471,189) |
| Interest and penalties | | | — | | | — | | | (463) | | | — |
| Total other income, net | | 231,649 | | | 352,302 | | | 678,873 | | 2,170,177 | ||
| | | | | | | | | | | | | |
| (Loss) income before provision for income taxes | | | (136,449) | | | (556,055) | | | (861,888) | | | 876,689 |
| Provision for income taxes | | | (59,527) | | | (90,037) | | | (174,717) | | | (719,832) |
| Net (loss) income | | $ | (195,976) | | $ | (646,092) | | $ | (1,036,605) | | $ | 156,857 |
| | | | | | | | | | | | | |
| Basic and diluted weighted average shares outstanding, common stock subject to possible redemption | | 1,582,797 | | | 2,510,512 | | | 1,582,797 | | 7,482,720 | ||
| Basic and diluted net income (loss) per common share, common stock subject to possible redemption | | $ | 0.06 | | $ | (0.07) | | $ | 0.13 | | $ | 0.13 |
| | | | | | | | | | | | | |
| Basic and diluted weighted average shares outstanding, non-redeemable common stock | | 3,336,500 | | | 3,336,500 | | | 3,336,500 | | 3,336,500 | ||
| Basic and diluted net loss per share, non-redeemable common stock | | $ | (0.09) | | $ | (0.14) | | $ | (0.37) | | $ | (0.24) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
Table of Contents
ROTH CH ACQUISITION V CO.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
| | | | | | | | | | | | | | | |
| | | | | | | | Additional | | | | | Total | ||
| | | Common Stock | | Paid-in | | Accumulated | | Stockholders’ | ||||||
| | Shares | Amount | Capital | Deficit | Deficit | |||||||||
| Balance – January 1, 2024 | 3,336,500 | | $ | 334 | | $ | — | | $ | (2,398,035) | | $ | (2,397,701) | |
| | | | | | | | | | | | | | | |
| Accretion of carrying value to redemption value | | — | | | — | | | — | | | (319,636) | | | (319,636) |
| | | | | | | | | | | | | | | |
| Net loss | | — | | | — | | | — | | | (121,197) | | | (121,197) |
| | | | | | | | | | | | | | | |
| Balance – March 31, 2024 | | 3,336,500 | | $ | 334 | | $ | — | | $ | (2,838,868) | | $ | (2,838,534) |
| | | | | | | | | | | | | | | |
| Accretion of carrying value to redemption value | | — | | | — | | | — | | | (257,115) | | | (257,115) |
| | | | | | | | | | | | | | | |
| Net loss | | — | | | — | | | — | | | (719,432) | | | (719,432) |
| | | | | | | | | | | | | | | |
| Balance – June 30, 2024 | | 3,336,500 | | $ | 334 | | $ | — | | $ | (3,815,415) | | $ | (3,815,081) |
| | | | | | | | | | | | | | | |
| Accretion of carrying value to redemption value | | — | | | — | | | — | | | (224,609) | | | (224,609) |
| | | | | | | | | | | | | | | |
| Net loss | | — | | | — | | | — | | | (195,976) | | | (195,976) |
| | | | | | | | | | | | | | | |
| Balance – September 30, 2024 | | 3,336,500 | | $ | 334 | | $ | — | | $ | (4,236,000) | | $ | (4,235,666) |
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
| | | | | | | | | | | | | | | |
| | | | | | | | Additional | | | | | Total | ||
| | | Common Stock | | Paid-in | | Accumulated | | Stockholders’ | ||||||
| | Shares | Amount | Capital | Deficit | (Deficit) Equity | |||||||||
| Balance — January 1, 2023 | 3,336,500 | | $ | 334 | | $ | 205,072 | | $ | 554,471 | | $ | 759,877 | |
| | | | | | | | | | | | | | | |
| Accretion of carrying value to redemption value | — | | — | | (205,072) | | (669,501) | | (874,573) | |||||
| | | | | | | | | | | | | | | |
| Net income | — | | — | | — | | 708,556 | | 708,556 | |||||
| | | | | | | | | | | | | | | |
| Balance — March 31, 2023 | | 3,336,500 | | | 334 | | | — | | | 593,526 | | | 593,860 |
| | | | | | | | | | | | | | | |
| Accretion of carrying value to redemption value | | — | | | — | | | — | | | (729,454) | | | (729,454) |
| | | | | | | | | | | | | | | |
| Excise taxes on stock redemption | | — | | | — | | | — | | | (930,108) | | | (930,108) |
| | | | | | | | | | | | | | | |
| Net income | | — | | | — | | | — | | | 94,393 | | | 94,393 |
| | | | | | | | | | | | | | | |
| Balance — June 30, 2023 | | 3,336,500 | | | 334 | | | — | | | (971,643) | | | (971,309) |
| | | | | | | | | | | | | | | |
| Accretion of carrying value to redemption value | | — | | | — | | | — | | | (188,932) | | | (188,932) |
| | | | | | | | | | | | | | | |
| Net loss | | — | | | — | | | — | | | (646,092) | | | (646,092) |
| | | | | | | | | | | | | | | |
| Balance — September 30, 2023 | | 3,336,500 | | $ | 334 | | $ | — | | $ | (1,806,667) | | $ | (1,806,333) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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ROTH CH ACQUISITION V CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | |
| | | For the Nine Months Ended September 30, | ||||
| | 2024 | 2023 | ||||
| Cash Flows from Operating Activities: | | | | | | |
| Net (loss) income | $ | (1,036,605) | $ | 156,857 | ||
| Adjustment to reconcile net (loss) income to net cash used in operating activities: | | | | | ||
| Interest earned on marketable securities held in Trust Account | | (677,062) | | (2,641,366) | ||
| Interest income - other | | | (2,274) | | | — |
| Changes in operating assets and liabilities: | | | | | ||
| Prepaid expenses | | 36,684 | | 73,484 | ||
| Accrued expenses | | | 1,013,466 | | | 508,696 |
| Due to Non-redeeming Stockholders | | | — | | | 471,189 |
| Income taxes payable | | (125,903) | | (369,538) | ||
| Net cash used in operating activities | | (791,694) | | (1,800,678) | ||
| | | | | | | |
| Cash Flows from Investing Activities: | | | | | | |
| Cash withdrawn from Trust Account to pay franchise and income taxes | | | 132,152 | | | 1,296,148 |
| Investment of cash into Trust Account | | | (405,000) | | | — |
| Cash withdrawn from Trust Account in connection with redemption | | | — | | | 93,010,772 |
| Net cash (used in) provided by investing activities | | | (272,848) | | | 94,306,920 |
| | | | | | | |
| Cash Flows from Financing Activities: | | | | | ||
| Payments to Non-redeeming Stockholders | | | — | | | (320,000) |
| Proceeds from promissory note - related party | | | 871,103 | | | 250,000 |
| Redemption of common stock | | | — | | | (93,010,772) |
| Net cash provided by (used in) financing activities | | 871,103 | | (93,080,772) | ||
| | | | | | | |
| Net Change in Cash | | (193,439) | | (574,530) | ||
| Cash – Beginning of period | | 200,059 | | 687,471 | ||
| Cash – End of period | $ | 6,620 | $ | 112,941 | ||
| | | | | | | |
| Non-cash financing activities: | | | | | | |
| Change in value of common stock subject to possible redemption | | $ | 801,360 | | $ | 1,792,959 |
| Excise taxes on stock redemption | | $ | — | | $ | 930,108 |
| | | | | | | |
| Supplemental information | | | | | | |
| Income taxes paid | | $ | 440,973 | | $ | 1,089,370 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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ROTH CH ACQUISITION V CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Roth CH Acquisition V Co. (the “Company”) was incorporated in Delaware on November 5, 2020. The Company is a blank check company 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 businesses or entities (the “Business Combination”).
As of September 30, 2024, the Company had not commenced any operations. All activity through September 30, 2024 related to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on marketable securities held in the Trust Account (as defined below).
The registration statement for the Company’s Initial Public Offering was declared effective on November 30, 2021. On December 3, 2021, the Company consummated the Initial Public Offering of 11,500,000 units (the “Units” and, with respect to the shares of common stock included in the Units sold, the “Public Shares”), which included the full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at $10.00 per Unit, generating gross proceeds of $115,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 461,500 units (the “Private Units”) at a price of $10.00 per Private Unit in a private placement to certain of the Company’s initial stockholders, generating gross proceeds of $4,615,000, which is described in Note 4.
Transaction costs amounted to $1,625,220, consisting of $1,150,000 of underwriting fees, and $475,220 of other offering costs.
Following the closing of the Initial Public Offering on December 3, 2021, an amount of $116,725,000 ($10.15 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Units was placed in a trust account (the “Trust Account”), located in the United States and held in cash items or invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the proceeds from the Trust Account, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.15 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
The Company initially would not proceed with a Business Combination if the Company had net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC containing substantially the same information as would be included in a proxy statement prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the holders of the Company’s shares prior to the Initial Public Offering (the “Initial Stockholders”) have agreed (a) to vote their Founder Shares (as defined in Note 5), Private Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination and (b) not to redeem any shares in connection with a stockholder vote to approve a Business Combination or sell any shares to the Company in a tender offer in connection with a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of how or whether they vote on the proposed transaction or do not vote at all. On December 1, 2023, the Company’s stockholders approved an amendment to the Amended and Restated Certificate of Incorporation which expanded the methods that the Company may employ to not become subject to the “penny stock” rules of the SEC.
The Initial Stockholders have agreed (a) to waive their redemption rights with respect to their Founder Shares, Private Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation that would affect a public stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
The Company will have until December 3, 2024 (unless the Company extends the period of time it has to complete an initial business combination) to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes and liquidation expenses, divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
On May 17, 2023, the Company held a special meeting of stockholders (the “May Special Meeting”), at which the Company’s stockholders approved an amendment (the “Extension Amendment”) to the Amended and Restated Certificate of Incorporation to give the Company the right to extend the date by which the Company has to consummate a business combination up to six (6) times, each such extension for an additional one (1) month period, from June 3, 2023 to December 4, 2023. In connection with the May Special Meeting stockholders exercised their right to redeem 8,989,488 shares of common stock for an aggregate price of approximately $10.36 per share, for an aggregate redemption amount of $93,010,772.
On October 9, 2023, the Nasdaq Stock Market LLC (“Nasdaq”) notified the Company that it did not comply with Nasdaq’s minimum 400 Total Holders requirement set forth in Listing Rule 5450(a)(2) (the “Rule”). Based on Nasdaq’s further review and the materials submitted by the Company on November 24, 2023, January 5, 2024, and February 19, 2024, Nasdaq determined to grant the Company an extension of time to regain compliance with the Rule. On May 13, 2024, Nasdaq notified the Company that it did not regain compliance with the requirement during the extension period. On May 17, 2023, the Company requested a hearing before a Nasdaq Hearing Panel (the “Panel”). A hearing on this matter was held on June 27, 2024 and on July 3, 2024, Nasdaq notified the Company that
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
the Panel has determined to grant the Company’s request to continue its listing on Nasdaq subject to the condition that on or before November 11, 2024, the Company shall demonstrate compliance with the Rule.
On November 8, 2024, the Panel received a written update and request (the “Amendment Request”) from the Company to modify the terms of the Panel’s decision dated July 3, 2024, that granted an exception to the Company to continue its listing on Nasdaq subject to the satisfaction of certain milestones described in the decision.
In the Amendment Request, the Company proposed changes to its compliance plan initially presented at the hearing. Specifically, as an alternative to the completion of the business combination with New Era Helium that the Company outlined at the hearing, the Company proposed to file a phase down transfer listing application to transfer its listing from the Nasdaq Global Market to the Nasdaq Capital Market. The Company informed the Panel that upon the transfer, the Company would be positioned to evidence compliance with all continued listing requirements on the Nasdaq Capital Market. Based on the facts and information presented in the Amendment Request, the Panel granted the Company’s request for continued listing on the Exchange until November 12, 2024, subject to the requirement that on or before November 12, 2024, the Company will demonstrate compliance with all applicable requirements for continued listing on the Nasdaq Capital Market. On November 12, 2024, the Company submitted to Nasdaq documentary evidence of its compliance with all continued listing requirements on the Nasdaq Capital Market.
On November 18, 2024, the Company received a letter from Nasdaq indicating that is has regained compliance with the minimum total shareholders requirement in the Rule, as required by the Panel’s decision dated July 3, 2024, as amended. Accordingly, the Panel has determined to continue the listing of the Company’s securities on Nasdaq and is closing this matter.
On December 1, 2023, the Company held a special meeting of stockholders (the “December Special Meeting”), at which the Company’s stockholders approved an amendment to its amended and restated certificate of incorporation (the “Charter Amendment”), to, among other things, (i) give the Company the right to extend the date by which the Company has to consummate a business combination up to twelve (12) times, each such extension for an additional one (1) month period (each, an “Extension”), from December 4, 2023 to December 3, 2024 (i.e., for a period of time ending 36 months from the consummation of the IPO) provided that an extension amount of the lesser of $45,000 or $0.03 per public share for each one-month extension (the “Extension Payment”) is deposited into the Trust Account in connection with each Extension and (ii) expand the methods that the Company may employ to not become subject to the “penny stock” rules of the Securities and Exchange Commission. As of September 30, 2024, the Company paid an aggregate amount of $450,000 to the Trust account for each one-month extension to extend the date by which the Company must consummate its Business Combination from December 4, 2023 to October 4, 2024.
In connection with the stockholders’ vote at the December Special Meeting, stockholders exercised their right to redeem 927,715 shares of common stock for an aggregate redemption price of approximately $10.66 per share, or for an aggregate redemption amount of approximately $9,889,573.
The Initial Stockholders have agreed to waive their liquidation rights with respect to the Founder Shares and Private Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders acquire Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the per share value deposited into the Trust Account ($10.15).
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
In order to protect the amounts held in the Trust Account, the Initial Stockholders have agreed to be liable to the Company if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below $10.15 per Public Share, except as to any claims by a third party who executed a valid and enforceable agreement with the Company waiving any right, title, interest or claim of any kind they may have in or to any monies held in the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Initial Stockholders will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Initial Stockholders will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant balances and transactions have been eliminated in consolidation.
Liquidity and Going Concern
As of September 30, 2024, the Company had $6,620 in its operating bank account and a working capital deficit of $4,412,489.
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for performing due diligence on prospective target businesses, paying for travel expenditures, and structuring, negotiating, and consummating the Business Combination.
On July 26, 2023, the Company issued an unsecured promissory note in the aggregate amount of up to $750,000 (the “July Note”) to individuals or entities listed on the Note. The Note is non-interest bearing and is payable on the earlier of (i) the date on which the Company consummates an initial business combination or (ii) the date the Company liquidates if a Business Combination is not consummated. The July Note will be repaid only from amounts remaining outside of the Company’s Trust Account, if any. The proceeds will be used by the Company to pay various expenses of the Company, including the extension payments, and for general corporate purposes. At September 30, 2024, there was $750,000 outstanding under the July Note.
On March 27, 2024, the Company issued an unsecured promissory note in the aggregate amount of up to $600,000 (the “March Note”) to individuals or entities listed on the Note. The March Note is non-interest bearing and is payable on the earlier of (i) the date on which the Company consummates an initial business combination or (ii) the date the Company liquidates if a Business Combination is not consummated. The March Note will be repaid only from amounts remaining outside of the Company’s Trust Account, if any. The proceeds will be used by the Company to pay various expenses of the Company, including the extension payments, and for general corporate purposes. At September 30, 2024, there was $537,944 outstanding under the March Note.
The Company will need to raise additional capital through loans or additional investments from the Initial Stockholders or its officers, directors or their affiliates. The Initial Stockholders and the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. If an initial business combination is not consummated by December 3, 2024, there will be a mandatory liquidation and subsequent dissolution. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the date that these financial statements are issued. The Company plans to address this uncertainty through working capital loans and through consummation
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
of our initial business combination. There is no assurance that working capital loans will be available to the Company or that our plans to consummate a business combination will be successful; therefore, there is substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Risks and Uncertainties
The Company continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that COVID-19 could have a negative effect on the Company’s search for a target company for a Business Combination, the specific impact is not readily determinable as of the date of these condensed consolidated financial statements. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
In connection with the stockholders’ vote at the May Special Meeting, public stockholders exercised their right to redeem 8,989,488 shares of common stock for a total of $93,010,772. In connection with the stockholders’ vote at the December Special Meeting, 927,715 shares of common stock were tendered for redemption as of December 1, 2023. Excise tax should be recognized in the period incurred, that is when the repurchase occurs. Any reduction in the tax liability due to a subsequent stock issuance, or an event giving rise to an exception, which occurs within a tax year should be recorded in the period of such stock issuance or event giving rise to an exception. As of September 30, 2024, the Company recorded $1,029,003 of excise tax liability calculated as 1% of shares redeemed on May 31, 2023 and December 1, 2023.
During the second quarter, the IRS issued final regulations with respect to the timing and payment of the excise tax. Pursuant to those regulations, the Company would need to file a return and remit payment for any liability incurred during the period from January 1, 2023 to December 31, 2023 on or before October 31, 2024.
The Company is currently evaluating its options with respect to payment of this obligation. If the Company is unable to pay its obligation in full, it will be subject to additional interest and penalties which are currently estimated at 10% interest per annum and a
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
5% underpayment penalty per month or portion of a month up to 25% of the total liability for any amount that is unpaid from November 1, 2024 until paid in full.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in 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 consolidated 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 Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC. The interim results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future periods.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2024 and December 31, 2023.
Marketable Securities Held in Trust Account
At September 30, 2024 and December 31, 2023, all of the assets held in the Trust Account were held in money market funds which are invested primarily in U. S. Treasury securities.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as
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September 30, 2024
(Unaudited)
stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2024 and December 31, 2023, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in a charge against additional paid-in capital to the extent possible, and when additional paid-in capital is reduced to zero, to retained earnings.
At September 30, 2024 and December 31, 2023, the common stock subject to possible redemption reflected in the balance sheets is reconciled in the following table:
| | | | |
| Gross proceeds | $ | 115,000,000 | |
| Less: | | | |
| Common stock issuance costs | | (1,625,220) | |
| Plus: | | | |
| Accretion of carrying value to redemption value | | 3,350,220 | |
| Common stock subject to possible redemption, December 31, 2021 | | | 116,725,000 |
| Plus: | | | |
| Accretion of carrying value to redemption value | | | 1,084,374 |
| Common stock subject to possible redemption, December 31, 2022 | | | 117,809,374 |
| Less: | | | |
| Shares Redeemed | | | (102,900,344) |
| Plus: | | | |
| Accretion of carrying value to redemption value | | | 2,040,857 |
| Common stock subject to possible redemption, December 31, 2023 | | | 16,949,887 |
| Plus: | | | |
| Accretion of carrying value to redemption value | | | 801,360 |
| Common stock subject to possible redemption, September 30, 2024 | | $ | 17,751,247 |
Income Taxes
The Company accounts for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of September 30, 2024 and 2023, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate was 43.63% and 16.19% for the three months ended September 30, 2024 and 2023, respectively, 20.27% and (82.11%) for the nine months ended September 30, 2024 and 2023. The effective tax rate differs from the statutory tax rate of 21% for the three and nine months ended September 30, 2024 and 2023, due to state taxes, net of federal tax benefit, merger and acquisition expenses, and the valuation allowance on the deferred tax assets.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2024 and December 31, 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
Net (Loss) Income per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two types of common stock – redeemable common stock and non-redeemable common stock. The Company calculates its earnings per share to allocate net (loss) income pro rata to redeemable and non-redeemable common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock share pro rata in the (loss) income of the Company. In order to determine the net (loss) income attributable to both the redeemable and non-redeemable common stock, the Company first considered the total (loss) income allocable to both sets of shares. This is calculated using the total net (loss) income less any dividends paid. For the purposes of calculating net (loss) income per share, any remeasurement of the accretion to redemption value of the redeemable common stock subject to redemption and the excise tax calculated on the redemption of shares are considered to be dividends paid to the holders of the redeemable common stock.
The calculation of diluted (loss) income per common share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 5,980,750 shares of common stock in the aggregate. As a result, diluted net (loss) income per common share is the same as basic net (loss) income per common share for the periods presented.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
The following tables reflect the calculation of basic and diluted net (loss) income per common share (in dollars, except per share amounts):
| | | | | | | | | | | | | |
| | | For the Three Months | | For the Nine Months | ||||||||
| | | Ended September 30, | | Ended September 30, | ||||||||
| | 2024 | 2023 | 2024 | 2023 | ||||||||
| Net (loss) income | $ | (195,976) | | $ | (646,092) | | $ | (1,036,605) | $ | 156,857 | ||
| Accretion of redeemable common stock to redemption amount | | (224,609) | | | (188,932) | | | (801,360) | | (1,792,959) | ||
| Excise taxes on stock redemption | | | — | | | — | | | — | | | (930,108) |
| Net (loss) income including accretion of temporary equity to redemption value and excise taxes on stock redemption | | $ | (420,585) | | $ | (835,024) | | $ | (1,837,965) | | $ | (2,566,210) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended September 30, | | For the Nine Months Ended September 30, | ||||||||||||||||||||
| | | 2024 | | 2023 | | 2024 | | 2023 | ||||||||||||||||
| | | Redeemable | | Non-redeemable | | Redeemable | | Non-redeemable | | Redeemable | | Non-redeemable | | Redeemable | | Non-redeemable | ||||||||
| | Common stock | Common stock | Common stock | Common stock | Common stock | Common stock | Common stock | Common stock | ||||||||||||||||
| Basic and diluted net income (loss) per common share | | | | | | | | | | | | | | | | | ||||||||
| Numerator: | | | | | | | | | | | | | | | | | ||||||||
| Allocation of net income (loss) including accretion of temporary equity to redemption value | | $ | (135,324) | | $ | (285,261) | | $ | (358,531) | | $ | (476,493) | | $ | (591,370) | | $ | (1,246,595) | | $ | (1,774,826) | | $ | (791,384) |
| Accretion of common stock to redemption value | | | 224,609 | | | — | | | 188,932 | | | — | | | 801,360 | | | — | | | 1,792,959 | | | — |
| Excise taxes on stock redemption | | | — | | | — | | | — | | | — | | | — | | | — | | | 930,108 | | | — |
| Net income (loss) | | $ | 89,285 | | $ | (285,261) | | $ | (169,599) | | $ | (476,493) | | $ | 209,990 | | $ | (1,246,595) | | $ | 948,241 | | $ | (791,384) |
| Denominator: | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic and diluted weighted average shares outstanding | | | 1,582,797 | | | 3,336,500 | | | 2,510,512 | | | 3,336,500 | | | 1,582,797 | | | 3,336,500 | | | 7,482,720 | | | 3,336,500 |
| Basic and diluted net income (loss) per common share | | $ | 0.06 | | $ | (0.09) | | $ | (0.07) | | $ | (0.14) | | $ | 0.13 | | $ | (0.37) | | $ | 0.13 | | $ | (0.24) |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.
Warrant Classification
The Company accounts for warrants as either equity-classified instruments or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification(“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
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September 30, 2024
(Unaudited)
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Company’s has analyzed the Public Warrants and Private 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.
NOTE 3. INITIAL PUBLIC OFFERING
On December 3, 2021, pursuant to the Initial Public Offering, the Company sold 11,500,000 Units, which included a full exercise by the underwriters of their over-allotment option in the amount of 1,500,000 Units, at a price of $10.00 per Unit. Each Unit consists of one share of common stock and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder thereof to purchase one share of common stock at an exercise price of $11.50 per full share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, certain of the Initial Stockholders purchased from the Company an aggregate of 461,500 Private Units at a price of $10.00 per Private Unit, for an aggregate purchase price of $4,615,000, in a private placement. Each Private Unit consists of one share of common stock (“Private Share”) and one-half of one redeemable warrant (“Private Warrant”). Each whole Private Warrant entitles the holder thereof to purchase one share of common stock at a price of $11.50 per full share, subject to adjustment (see Note 7). The proceeds from the Private Units were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law).
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September 30, 2024
(Unaudited)
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
In December 2020, certain of the Initial Stockholders purchased an aggregate of 4,312,500 shares of common stock from the Company for an aggregate purchase price of $25,000. In September 2021, certain of the Initial Stockholders sold an aggregate of 1,547,802 shares back to the Company for an aggregate purchase price of $959.14. Of those shares, 1,437,500 shares were cancelled, and the remaining 110,302 shares were purchased by certain of the Initial Stockholders from the Company for an aggregate purchase price of $959.14, resulting in an aggregate of 2,875,000 shares of common stock being held by the Initial Stockholders (the “Founder Shares”). On November 22, 2021, CR Financial Holdings, Inc. sold an aggregate of 56,932 shares to the Company’s independent directors for an aggregate purchase price of $495.05.
The sale of the Founder Shares to certain of the Company’s Initial Stockholders and independent directors, as described above, is within the scope of FASB ASC Topic 718, “Compensation-Stock Compensation” (“ASC 718”). Under ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The fair value of the 167,234 shares sold to the Company’s Initial Stockholders and independent directors was approximately $788,900, or $4.72 per share. The Founder Shares were effectively sold subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founder Shares is recognized only when the performance condition is probable of occurrence. Stock-based compensation will be recognized at the date a Business Combination is considered probable in an amount equal to the number of Founder Shares times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founder Shares. As of September 30, 2024, the Company determined that a Business Combination is not considered probable, and, therefore, no stock-based compensation expense has been recognized.
The Initial Stockholders have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until (1) with respect to 50% of the Founder Shares, the earlier of six months after the completion of a Business Combination and the date on which the closing price of the common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing after a Business Combination and (2) with respect to the remaining 50% of the Founder Shares, six months after the completion of a Business Combination, or earlier, in either case, if, subsequent to a Business Combination, the Company completes a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Working Capital Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Initial Stockholders, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would be repaid upon consummation of a Business Combination, without interest. On July 26, 2023, the Company issued an unsecured promissory note in the aggregate amount of up to $750,000 (the “July Note”) to individuals or entities listed on the Note. The July Note is non-interest bearing and is payable on the earlier of (i) the date on which the Company consummates an initial business combination or (ii) the date the Company liquidates if a Business Combination is not consummated. The July Note will be repaid only from amounts remaining outside of the Company’s Trust Account, if any. The proceeds were used by the Company to pay various expenses of the Company, including the extension payments, and for general corporate purposes.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
On March 27, 2024, the Company issued an unsecured promissory note in the aggregate principal amount of up to $600,000 (the “December Note”) to individuals or entities listed on the Note (the “Payees”). Pursuant to the December Note, the Payees agreed to loan to the Company an aggregate amount of up to $600,000 that shall be payable on the earlier of (i) the date on which the Company consummates an initial business combination as such term is defined in the Company’s Amended and Restated Certificate of Incorporation (the “Business Combination”), or (ii) the date the Company liquidates if a Business Combination is not consummated. The December Note bears no interest rate. In the event that the Company does not consummate a Business Combination, the December Note will be repaid only from amounts remaining outside of the Company’s trust account, if any. The proceeds of the December Note will be used for the Company to pay various expenses of the Company and for general corporate purposes.
As of September 30, 2024 and December 31, 2023, there were Working Capital Loans outstanding of $1,287,944 and $416,841, respectively.
Underwriting Agreement and Business Combination Marketing Agreement
The Company entered into an underwriting agreement and a business combination marketing agreement with Roth Capital Partners, LLC (“Roth”) and Craig-Hallum Capital Group LLC (“Craig-Hallum”), the underwriters in the Initial Public Offering. The underwriters are related parties of the Company.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on November 30, 2021, the holders of the Founder Shares, as well as the holders of the Private Units (and underlying securities), are entitled to registration rights. The holders of a majority of these securities are entitled to make up to two demands that the Company register such securities. They can elect to exercise these registration rights (i) at any time commencing three months prior to the date of release from escrow with respect to the Founder Shares or (ii) at any time after the Company consummates a Business Combination with respect to the Private Units (and the underlying securities). In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements. Notwithstanding the foregoing, they may not exercise demand or piggyback rights after five (5) and seven (7) years, respectively, from the effective date of the Initial Public Offering and may not exercise demand rights on more than one occasion in respect of all registrable securities.
Underwriting Agreement
The underwriters received an underwriting discount of 1.0% of the gross proceeds of the Initial Public Offering, or $1,150,000.
Business Combination Marketing Agreement
Pursuant to a business combination marketing agreement entered into on November 30, 2021, the Company engaged Roth and Craig-Hallum, the underwriters in the Initial Public Offering, as advisors in connection with its Business Combination to assist in the transaction structuring and negotiation of a definitive purchase agreement with respect to the Business Combination, hold meetings with the stockholders to discuss the Business Combination and the target’s attributes, introduce the Company to potential investors to purchase its securities in connection with the Business Combination, and assist with financial analysis, presentations, press releases and filings related to the Business Combination. Roth and Craig-Hallum were initially to receive a fee for such services upon the consummation of a Business Combination in an amount equal to, in the aggregate, 4.5% of the gross proceeds of the Initial Public Offering (or $5,175,000 in the aggregate). As a result, Roth and Craig-Hallum would not be entitled to such fee unless the Company consummates a Business Combination. On January 2, 2024, the Company entered into a letter agreement with Roth and Craig-Hallum to terminate the business combination marketing agreement. In exchange for termination of the business combination marketing
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
agreement, the Company and Roth and Craig-Hallum mutually agreed to issue to Roth and Craig-Hallum 575,000 shares of common stock on the date of the closing of the Business Combination.
Merger Agreement
As previously reported, on January 3, 2024, the Company (“ROCL” or “Acquiror”), entered into a Business Combination Agreement and Plan of Reorganization (as it may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among Acquiror, Roth CH V Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of Acquiror (“Merger Sub”), and New Era Helium Corp., a Nevada corporation (“NEH” or the “Company”). The transactions set forth in the Merger Agreement, including the Merger (defined below), will constitute a “Business Combination” as contemplated by Acquiror’s Amended and Restated Certificate of Incorporation. Unless expressly stated otherwise herein, capitalized terms used but not defined herein shall have such meanings ascribed to them in the Merger Agreement.
The Merger
Upon the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the Nevada Revised Statutes and the Delaware General Corporation Law, Merger Sub will merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of Acquiror (the “Merger”). Upon the closing of the Transactions, subject to approval by ROCL’s stockholders and other customary closing conditions, the combined company with be named “New Era Helium Corp.” and is expected to list on The Nasdaq Stock Market.
Consideration
Subject to the terms and conditions set forth in the Merger Agreement, in consideration of the Merger, the holders of shares of Company Common Stock (including shares of Company Common Stock resulting from the conversion of Company Preferred Stock) will receive an aggregate of 9.0 million shares of Acquiror’s common stock, which number will be subject to adjustment based upon the Net Debt (as defined in the Merger Agreement) (which shares do not include the Earnout Shares (as defined below)) (the “Company Merger Shares”). For purposes of the Company Merger Shares, such amount assumes $37,300,000 of Net Debt. For every dollar of Net Debt lower than $37,300,000 at Closing, the Company Merger Shares will be increased by 1/10 of one share and for every dollar of Net Debt higher than $37,300,000 at Closing, the Company Merger Shares will be decreased by 1/10 of one share.
The Merger Agreement also provides, among other things, that the holders of shares of Company Common Stock immediately prior to the Effective Time have the contingent right to receive up to an aggregate of 1.0 million additional shares of Acquiror’s common stock (the “Earnout Shares”), subject to the following contingencies:
(i) 500,000 Earnout Shares, in the event that, based upon the audited financial statements of the Company for the year ended December 31, 2025, it meets or exceeds a total EBITDA of $25.268 million as calculated by the Company; and
(ii) 500,000 Earnout Shares, if, at any time during the period between the Closing Date and 180 days after the filing of the Form 10-K for the fiscal year ended December 31, 2025, the average of the reported sales prices on Nasdaq (or the exchange on which Acquiror’s common stock is then listed) for any twenty (20) Trading Days during any thirty (30) consecutive Trading Days is greater than or equal to $12.50.
Conditions to Consummation of the Transactions
Consummation of the transactions contemplated by the Merger Agreement is subject to conditions of the respective parties that are customary for a transaction of this type, including, among others: (a) obtaining Acquiror stockholders’ approval of the Roth Proposals; (b) obtaining the Company Stockholder Approval; (c) there being no laws or injunctions by governmental authorities or other legal restraint prohibiting consummation of the transactions contemplated under the Merger Agreement; (d) the required filings under the HSR Act having been completed and the waiting period applicable to the Merger under the HSR Act having expired or terminated; (e)
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September 30, 2024
(Unaudited)
Acquiror’s common stock being listed on Nasdaq, or another national securities exchange mutually agreed to by the parties; (f) the Form S-4 having become effective and no stop order suspending the effectiveness of the Form S-4 having been issued by the SEC; and (g) Acquiror (including, following the Effective Time, the Company) having equal to or in excess of $5,000,000 in cash and cash equivalents.
Acquiror has separate conditions to closing, including, among others, that (a) no material adverse effect having occurred with respect to the Company, (b) the Company having raised at least $45,000,000 in a private placement of securities in order to fund its new plant construction, and (c) certain indebtedness of the Company having been converted into shares of common stock of the Company. The Company has separate conditions to closing, including, among others, that no material adverse effect has occurred with respect to Acquiror.
Termination
The Merger Agreement may be terminated under certain customary and limited circumstances prior to the Closing of the Merger, including: (a) by mutual written consent of Acquiror and the Company; (b) by either party if the Closing has not occurred prior to the date that is 180 days after the date of the Merger Agreement; (c) there is a final non-appealable order issued by a governmental authority preventing or making illegal the consummation of the transactions contemplated by the Merger Agreement; (d) by either Acquiror or the Company if any of the Roth Proposals fails to be approved at the Roth Stockholders’ Meeting; (e) by Acquiror if the Company fails to obtain Company Stockholder Approval within five (5) Business Days following the date in which the SEC declares the Form S-4 effective; (f) by Acquiror if the Company has not delivered: (i) its Audited Financial Statements for the year ended December 31, 2022 and December 31, 2021 by January 8, 2024, (ii) its Interim Financials by February 1, 2024, and (iii) the Audited Financial Statements for the year ended December 31, 2023 within 90 days after the date of the Merger Agreement; and (g) by either party if the other party’s representations or warranties are not true and correct or if the other party breached any of its covenants set forth in the Merger Agreement such that the conditions to Closing would not be satisfied and such breach cannot or has not been cured within the earlier of thirty (30) days’ notice by the other party.
If the Merger Agreement is validly terminated, none of the parties will have any liability or any further obligation under the Merger Agreement with certain limited exceptions, including liability arising out of willful material breach of the Merger Agreement.
Insider Support Agreement
Contemporaneously with the execution of the Merger Agreement, Acquiror entered into an insider support agreement (the “Insider Support Agreement”) with NEH and certain stockholders of Acquiror (the “Sponsor Parties”), whereby the Sponsor Parties have agreed, among other things, (i) not to transfer or redeem any Acquiror Common Stock held by such Sponsor Parties, (ii) to vote in favor of the adoption of the Merger Agreement and approval of the Merger and the other transactions contemplated hereby, and (iii) to vote against any Alternative Transaction with respect to Acquiror or any proposal in opposition to approval of the Merger Agreement or in competition with or inconsistent with the Merger Agreement and any other action or proposal that is intended, or would reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the Transactions.
Company Support Agreement
Contemporaneously with the execution of the Merger Agreement, Acquiror entered into a stockholder support agreement (the “Company Support Agreement”) with NEH and certain shareholders of NEH (the “Company Supporting Shareholders”), pursuant to which the Company Supporting Shareholders have agreed, among other things, (i) not to transfer any NEH Common Stock held by such Company Supporting Shareholders, (ii) to vote in favor of the Merger and the transactions contemplated by the Merger Agreement, and (iii) to vote against any Alternative Transaction with respect to NEH or any proposal in opposition to approval of the Merger Agreement or in competition with or inconsistent with the Merger Agreement, and any other action or proposal that is intended, or would reasonably be expected, to prevent, impede, interfere with, delay, postpone or adversely affect the Transactions.
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September 30, 2024
(Unaudited)
Amendments to Merger Agreement
On June 5, 2024, the Company and NEH entered into the First Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “First Amendment”) pursuant to which, among other things:
| (a) | the Outside Date has been extended to 270 days after the date of the Merger Agreement |
| (b) | the structure of the Business Combination has changed such that: (1) the Company will merge (the “Initial Merger”) with and into a newly formed Nevada corporation named Roth CH V Holdings, Inc. (“Holdings”), a wholly owned subsidiary of the Company, and Holdings will be the survivor of the Initial Merger; (ii) Holdings shall sign a joinder and become a party to the Merger Agreement; and (iii) immediately subsequent to the Initial Merger, Merger Sub will merge with and into NEH, with NEH surviving the Merger as a wholly owned subsidiary of Holdings; and |
| (c) | the closing condition that NEH raise at least $45 million in a private placement of securities in order to fund its new plant construction has been removed, and the closing condition that certain indebtedness of NEH be converted into shares of common stock of NEH has been removed. |
On August 8, 2024, the Company and NEH entered into the Second Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Second Amendment”), pursuant to which, among other things:
| (a) | The Outside Date was extended to October 31, 2024; and |
| (b) | The definition of “Company Merger Shares” and “Net Debt” were amended. |
On September 11, 2024, the Company and NEH entered into the Third Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Third Amendment”) pursuant to which, among other things:
| (a) | The definition of “Company Merger Shares” in Section 1.01 is amended to read as follows: “Company Merger Shares” means 9,000,000 shares of Holdings Common Stock which number shall be subject to adjustment based upon the Net Debt at closing in that is different from the Net Debt at the date of the Original Business Combination Agreement (the “Net Debt Variation”). For the avoidance of doubt, the Company Merger Shares do not include Earnout Shares in an amount up to 1,000,000 shares of Roth Common stock. For every dollar of decrease in the Net Debt Variation the Company Merger Shares shall be increased by 1/10 of one share and for every dollar of increase in the Net Debt Variation the Company Merger Shares shall be decreased by 1/10 of one share. |
| (b) | The definition of “Net Debt” in Section 1.01 is amended to read as follows: “Net Debt means the total Indebtedness of NEH and the NEH Subsidiaries (excluding any existing Indebtedness that converts, exchanges or is exercised into share of capital stock of NEH) after subtracting all cash and liquid assets, which calculation shall be mutually agreed upon between NEH and Roth no later than three business days prior to Closing. In the event of any dispute with respect to such calculation, the parties shall promptly (and in no event more than 15 days after the Closing) engage a mutually agreed upon independent third party to resolve such dispute and make an independent determination of the Company Merger Shares and Net Debt. NEH shall make all work papers, back up materials, and financial staff involved in preparation of the calculations available to such third party. The cost of such third party shall be paid by Holdings. |
| (c) | A new section 3.02(k) shall be added as follows: In the event that the parties are unable to mutually agree on the Company Merger Shares or Net Debt prior to the Closing, the number of shares in dispute shall not be distributed as part of the Per Share Merger Consideration at the Closing and shall only be distributed upon resolution of any dispute pursuant to Section 1.01 hereof. |
On September 30, 2024, the Company and NEH entered into the Fourth Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Fourth Amendment”) pursuant to which, among other things the parties extended the Outside Date to November 30, 2024.
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ROTH CH ACQUISITION V CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
NOTE 7. STOCKHOLDERS’ DEFICIT
Common Stock — The Company is authorized to issue 50,000,000 shares of common stock with a par value of $0.0001 per share. On May 31, 2023, in connection with the stockholders’ vote at the May Special Meeting, stockholders exercised their right to redeem 8,989,488 shares of common stock and on December 1, 2023, at the December Special Meeting, stockholders exercised their right to redeem 927,715 shares of common stock. At September 30, 2024 and December 31, 2023, there were 3,336,500 shares of common stock issued and outstanding, excluding 1,582,797 shares of common stock subject to possible redemption which are presented as temporary equity, respectively.
Warrants — At September 30, 2024 and December 31, 2023, there were 5,750,000 Public Warrants outstanding and 230,750 Private Warrants outstanding.
The Company will not issue fractional warrants. The Public Warrants will become exercisable 30 days after the completion of a Business Combination. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if the registration statement of which the prospectus for the Company’s Initial Public Offering forms a part is not available and a new registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within 120 days following the consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. The warrants will expire five years from the closing of a Business Combination.
The Company may redeem the Public Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | at any time after the warrants become exercisable; |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; |
| ● | if, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share, for any 20 trading days within a 30-day trading period commencing after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and |
| ● | if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
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ROTH CH ACQUISITION V CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the Market Value and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the Market Price.
Except with respect to certain registration rights and transfer restrictions, the Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering.
NOTE 8. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
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ROTH CH ACQUISITION V CO.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
At September 30, 2024, assets held in the Trust Account were comprised of $17,928,070 in mutual funds. For the nine month period ended September 30, 2024, the Company withdrew $132,152 of interest earned on the Trust Account to pay for its tax obligations.
At December 31, 2023, assets held in the Trust Account were comprised of $16,978,160 in mutual funds. For the year ended December 31, 2023, the Company withdrew $1,511,689 of interest earned on the Trust Account to pay for its tax obligations and $102,900,344 for redemption of shares in connection with the stockholders’ vote at the May Special Meeting and December Special Meeting.
The following table presents
information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2024 and December 31,
2023 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. Level 1 instruments
include investments in money market funds. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from
dealers or brokers, and other similar sources to determine the fair value of its investments.
| | | | | | | | | |
| | | | | September 30, | | December 31, | ||
| Description | Level | 2024 | 2023 | |||||
| Assets: | | | ||||||
| U.S. Mutual Funds Held in Trust Account | 1 | | $ | 17,928,070 | | $ | 16,978,160 | |
NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review the Company did not identify any subsequent events, other than disclosed, that would have required adjustment or disclosure in the condensed consolidated financial statements.
On October 25, 2024, the Company announced a Special Meeting of Stockholders (the “Special Meeting”) to be held on November 29, 2024 at which the stockholders will be asked to vote on a proposal to allow the Company, without further stockholder approval, to amend (the “Extension Amendment”) the Company’s amended and restated certificate of incorporation to extend the date by which the Company has to consummate a business combination up to six (6) times, each such extension for an additional one (1) month period from December 4, 2024 to June 4, 2025.
22
Exhibit 99.3
New Era Helium Announces Closing of Business Combination
FOR IMMEDIATE RELEASE
MIDLAND, Texas – December 6, 2024. New Era Helium, Inc. (“NEH,” “New Era Helium” or the “Company”), an exploration and production company sourcing helium produced in association with the production of natural gas reserves within the Permian Basin, is pleased to announce it has closed on its previously announced business combination with Roth CH V Holdings, Inc. (“Holdings”), and Roth CH Acquisition V. Co. (Nasdaq: ROCL; ROCLU and ROCLW) (the “Business Combination”), in which NEH merged with Roth CH V Merger Sub Corp., a wholly-owned subsidiary of Holdings. The transaction was approved by ROCL’s stockholders on November 26, 2024.
With the transaction now complete, Holdings has changed its name to “New Era Helium”, The Company’s common stock and public warrants are expected to begin trading on Nasdaq shortly after closing under the symbols "NEHC” and “NEHCW”, respectively. The combined company will operate under the new name, “New Era Helium, Inc.”
The trading of the Company’s shares on Nasdaq represents a pivotal milestone in New Era Helium’s mission to establish itself as a leading consolidator of helium and natural gas production. With over 137,000 acres in Southeast New Mexico and 1.5 billion cubic feet of proved and probable helium reserves, NEH is well-positioned to drive growth in this critical sector, expected to see a surge in demand amid growth in data centers powering artificial intelligence.
Last month [read here], NEH announced a non-binding joint venture with Sharon AI, Inc. (“Sharon AI”) to build a 90MW net-zero Tier 3 data center to be located within the Permian Basin. This joint venture combines Sharon AI’s expertise in high-performance computing with NEH’s extensive helium and natural gas reserves. The state-of-the-art facility will feature a liquid-cooled Tier 3 data center powered by sustainable energy, offsetting approximately 250,000 metric tons of CO2 annually through carbon capture technology.
NEH believes the Nasdaq listing will enhance its visibility and attract U.S. investors interested in energy infrastructure and sustainable innovation, further underscoring the value of its assets and forward-looking projects.
E. Will Gray II, Chairman and Chief Executive Officer of New Era Helium, said: “Our Nasdaq listing marks a significant moment in our corporate journey, enhancing our public profile within the industry, and broadening our reach to institutional investors in the AI datacenter, and Helium markets.Thank you to all of our shareholders and partners whose unwavering support has been instrumental in driving our ongoing success.”
About New Era Helium, Inc.
New Era Helium, Inc. is an exploration and production company that sources helium produced in association with the production of natural gas reserves in North America. The Company currently owns and operates over 137,000 acres in Southeast New Mexico and has over 1.5 billion cubic feet of proved and probable helium reserves. For more information, visit www.newerahelium.com. Follow New Era Helium on LinkedIn and X.
Forward Looking Statements
This press release contains forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any expected future results, performance, or achievements. Forward-looking statements are typically identified by words or phrases, such as “about,” “believe,” “expect,” “plan,” “goal,” “target,” “strategy,” and similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based on our current estimates or expectations of future events or future results and are subject to risks and uncertainties and actual results could differ materially from those indicated by these statements. including risks relating to our industry, business operations, financing and liquidity, regulation and other risks described in the registration statement. A discussion of these and other factors with respect to the Company is set forth in the Company’s reports filed with the Securities and Exchange Commission. The forward-looking statements included in this press release are made and based on information available at the time of the press release, and the Company assumes no obligation to revise or update any forward-looking statement as a result of new information, future events or otherwise.
Contact Information
New Era Helium Inc.
E. Will Gray II
CEO, New Era Helium
Will@NewEraHelium.com
Jonathan Paterson
Harbor Access Investor Relations
Jonathan.Paterson@harbor-access.com
Tel +1 475 477 9401
Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below shall have the same meaning as terms defined and included elsewhere in this Current Report on Form 8-K (the “Form 8-K”) filed with the Securities and Exchange Commission (the “SEC”.)
Introduction
The following unaudited pro forma condensed combined financial information presents the combination of financial information of ROCL, Holdings, and NEH, adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). ROCL has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.
The following unaudited pro forma condensed combined balance sheet as of September 30, 2024, assumes that the Business Combination occurred September 30, 2024. The following unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2024 and for the year ended December 31, 2023, presents pro forma effect to the Business Combination as if it had occurred on January 1, 2023.
The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the Combined Company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. Further, the pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the Combined Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The unaudited pro forma condensed combined balance sheet as of September 30, 2024, has been derived from:
| · | The historical unaudited financial statements of ROCL as of September 30, 2024, and the related notes thereto included elsewhere in this Report; |
| · | The historical unaudited financial statements of NEH as of September 30, 2024, and the related notes thereto included elsewhere in this Report; and |
| · | The historical unaudited financial statements of Holdings as of September 30, 2024, and the related notes thereto included elsewhere in this Report. |
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2024, has been derived from:
| · | The historical unaudited financial statements of ROCL for the nine months ended September 30, 2024, and the related notes thereto included elsewhere in this Report; |
| · | The historical unaudited financial statements of NEH for the nine months ended September 30, 2024, and the related notes thereto included elsewhere in this Report; and |
| · | The historical unaudited financial statements of Holdings as of September 30, 2024, and the related notes thereto included elsewhere in this Report. |
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, has been derived from:
| · | The historical audited financial statements of ROCL for the year ended December 31, 2023, and the related notes thereto included elsewhere in this Report; |
| · | The historical audited financial statements of NEH for the year ended December 31, 2023, and the related notes thereto included elsewhere in this Report; and |
| · | Holdings was incorporated on June 24, 2024, therefore there is no December 31, 2023, statement of operations included in the pro forma condensed combined statement of operation as of December 31, 2023. |
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as in effect on the date of this Report which incorporates Transaction Accounting Adjustments. NEH, Holdings, and ROCL have elected not to present any estimates related to potential synergies and other transaction effects that are reasonably expected to occur or have already occurred and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.
This information should be read together with the financial statements and related notes, as applicable, of each of Holdings, NEH and ROCL included in this Report and NEH’s and ROCL’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this Report.
Description of the Transactions
Business Combination
On January 3, 2024, ROCL entered into a Business Combination Agreement and Plan of Reorganization (as amended on June 5, 2024, August 8, 2024, September 11, 2024, September 30, 2024 and as it may be further amended, supplemented or otherwise modified from time to time, the “BCA”), by and among ROCL, Roth CH V Merger Sub Corp., a Delaware corporation and a wholly owned subsidiary of ROCL (“Merger Sub”), and NEH. Upon the terms and subject to the conditions set forth in the BCA and in accordance with the Nevada Revised Statutes and the Delaware General Corporation Law, (i) ROCL will merge (the “Redomestication Merger”) with and into a newly formed Nevada corporation named Roth CH V Holdings, Inc. (“Holdings”), a wholly owned subsidiary of ROCL, and Holdings will be the survivor of the Redomestication Merger; (ii) Holdings shall sign a joinder and become a party to the Merger Agreement; and (iii) immediately subsequent to the Redomestication Merger, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Holdings (the “Business Combination”). Upon the closing of the transaction, subject to approval by ROCL’s stockholders and other customary closing conditions, the combined company will be named “New Era Helium Inc.” and is expected to list on The Nasdaq Stock Market.
Subject to the terms and conditions set forth in the BCA, in consideration of the Merger, the holders of shares of NEH Common Stock (including shares of NEH Common Stock resulting from the conversion of NEH Preferred Stock) will receive an aggregate of 9.0 million shares of Holdings’ common stock, which number will be subject to adjustment based upon the difference between the Net Debt (as defined below) at Closing from the Net Debt at the date of the Original Business Combination Agreement (the “Net Debt Variation”) (which shares do not include the Earnout Shares (as defined below)) (the “Company Merger Shares”). For every dollar decrease in the Net Debt Variation the Company Merger Shares shall be increased by 1/10 of one share and for every dollar increase in the Net Debt Variation the Company Merger Shares shall be decreased by 1/10 of one share
The BCA also provides, among other things, that the holders of shares of NEH Common Stock immediately prior to the Effective Time have the contingent right to receive up to an aggregate of 1.0 million additional shares of ROCL’s common stock (the “Earnout Shares”), subject to the following contingencies:
| (i) | 500,000 Earnout Shares, in the event that, based upon the audited financial statements of NEH for the year ended December 31, 2025, it meets or exceeds a total EBITDA of $25.268 million as calculated by NEH; and |
| (ii) | 500,000 Earnout Shares, if, at any time during the period between the Closing Date and 180 days after the filing of the Form 10-K for the fiscal year ended December 31, 2025, the average of the reported sales prices on Nasdaq (or the exchange on which ROCL’s common stock is then listed) for any twenty (20) Trading Days during any thirty (30) consecutive Trading Days is greater than or equal to $12.50. |
Business Combination Agreement Amendments
On June 5, 2024, each of ROCL and the Company entered into the First Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Amendment”) pursuant to which, among other things:
| (a) | the Outside Date has been extended to September 30, 2024; |
| (b) | the structure of the Business Combination has changed such that: (i) ROCL will merge (the “Redomestication Merger”) with and into a newly formed Nevada corporation named Roth CH V Holdings, Inc. (“Holdings”), a wholly owned subsidiary of ROCL, and Holdings will be the survivor of the Redomestication Merger; (ii) Holdings shall sign a joinder and become a party to the Merger Agreement; and (iii) immediately subsequent to the Redomestication Merger, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Holdings; and |
| (c) | the closing condition that the Company raises at least $45 million in a private placement of securities in order to fund its new plant construction has been removed, and the closing condition that certain indebtedness of the Company be converted into shares of common stock of the Company has been removed. |
On August 8, 2024, the parties to the BCA entered into the Second Amendment to the Business Combination Agreement and Plan of Reorganization Amendment, pursuant to which, among other things:
(a) the Outside Date was extended to October 31, 2024, and (b) the definitions of “Company Merger Shares” and “Net Debt” were amended.
On September 11, 2024, the parties to the BCA entered into the Third Amendment to the Business Combination Agreement and Plan of Reorganization, pursuant to which, among other things, the parties clarified the effect that any variation in the Net Debt of NEH between January 3, 2024, and the date of Closing might have on the number of Company Merger Shares to be delivered at Closing.
On September 30, 2024, the parties to the BCA entered into the Fourth Amendment to the Business Combination Agreement and Plan of Reorganization, pursuant to which, among other things, the parties extended the Outside Date to November 30, 2024.
Equity Purchase Facility
The Equity Purchase Facility Agreement
On the Closing Date, 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”). The EPFA is incorporated by reference from the Form 8-K filed by the Company on December 9, 2024 (the “EPFA Current Report”). Pursuant to the EPFA, the Company has the right to issue and sell to the EPFA Investor, from time to time as provided therein, and the EPFA Investor must purchase from the Company, up to an aggregate of $75 million (the “Commitment Amount”) in newly issued shares (the “Advance Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), subject to the satisfaction or waiver of certain conditions. The Company may issue up to 866,873 Advance Shares assuming a purchase price of $8.075 per Advance Share.
The EFPA also provides for the issuance of two pre-paid advances in the aggregate amount of $10 million, the first pre-paid advance in the amount of $7 million and the second pre-paid advance in the amount of $3 million, each of which to be evidenced by a senior secured convertible promissory note (each, a “Note”), which is convertible into shares of Common Stock, the form of which Note is attached to the EPFA Current Report as Exhibit 10.2 and is incorporated herein by reference. On December 6, 2024, the EPFA Investor advanced to the Company the aggregate principal amount of $7 million following the Closing (the “First Pre-Paid Advance Note”). The second pre-paid advance of the aggregate principal amount of $3 million (the “Second Pre-Paid Advance Note”) will be advanced by the EPFA Investor to the Company no later than three (3) trading days following the date on which the initial Registration Statement (as defined in the EPFA) is declared effective by the U.S. Securities and Exchange Commission, subject to the satisfaction or waiver of certain conditions. The Notes are secured by all assets of the Company as described below. Based on the terms of the Note, the Company received proceeds under the First Pre-Paid Advance Note in an amount of approximately $6.5 million, after giving effect to a 7% original issue discount. These proceeds will be used by the Company first to pay the monthly payments of the First Pre-Paid Advance Note in accordance with its terms and then the remainder in the manner as will be set forth in the prospectus included in the Registration Statement. Currently, the Note for the First Pre-Paid Advance is initially convertible into 770,000 shares of Common Stock, assuming a conversion price of $10 and no accrued and unpaid interest. The Second Pre-Paid Advance Note will be initially convertible into 330,000 shares of Common Stock, assuming a conversion price of $10 and no accrued and unpaid interest.
The proceeds from the Second Pre-Paid Advance Note and sale of Advance Shares are expected to be 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 and as otherwise set forth in the prospectus included in the Registration Statement.
Pursuant to the terms of the EPFA, the Company is required to hold a special meeting of stockholders no later than ninety (90) calendar days following December 6, 2024 to seek approval of (i) the issuance of all of the shares of Common Stock that may be 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 250,000,000.
Upon the terms and subject to the conditions of the EPFA, at any time until the EPFA is terminated, the Company, in its sole discretion, has the right, but not the obligation, to issue and sell to the EPFA Investor, and the EPFA Investor must subscribe for and purchase from the Company, Advance Shares by the delivery to the EPFA Investor of Advance Notices (as defined below), on the following terms:
(i) The Company must, in its sole discretion, select the number of Advance Shares, not to exceed the Maximum Advance Amount (as defined below), it desires to issue and sell to the EPFA Investor in each Advance Notice and the time it desires to deliver each written notice to the EPFA Investor setting forth the number of Advance Shares that the Company desires to issue and sell to the EPFA Investor (the “Advance Notice”).
(ii) There is no mandatory minimum Advances and there is no non-usages fee for not utilizing the Commitment Amount or any part thereof.
(iii) For so long as any amount remains outstanding under the Notes, without the prior written consent of the EPFA Investor, the Company may only submit an Advance Notice if the aggregate purchase price owed to the Company from such Advances (“Advance Proceeds”) may be paid by the EPFA Investor by offsetting the amount of the Advance Proceeds against an equal amount outstanding under the subject Notes (first towards accrued and unpaid interest, and then towards outstanding principal), subject to the Advance Proceeds being used by the Company first to pay the monthly payments of the Notes in accordance with the terms of the Notes and then the remainder in the manner as will be set forth in the prospectus included in any registration statement filed pursuant to the EPFA (and any post-effective amendment thereto) and any prospectus supplement thereto filed pursuant to the EPFA, including for working capital purposes for the Company and its subsidiaries.
(iv) If there is any default under the Notes, the Company may only submit an Advance Notice if the Company obtains the prior written consent of the EPFA Investor and the Company must use the proceeds from the sale of the Advance Shares under the EPFA to first pay the Company’s senior Indebtedness, including amounts outstanding under any Notes as provided in Section 7.15 of the EPFA, subject to certain exceptions.
“Maximum Advance Amount” means:
• “Accelerated Purchase Maximum Advance Amount” in respect of each Advance Notice with an accelerated purchase pricing period, 400% of the average daily trading volume over the five trading days before the notice date, but not exceed the ownership and registration limitations in the EPFA; and
• “Regular Purchase Maximum Advance Amount” in respect of each Advance Notice with a regular purchase pricing period, 100% of the average daily trading volume over the five trading days before the notice date, also subject to the ownership and registration limitations in the EPFA.
The price per Advance Share will be determined by multiplying the market price by 95% in respect of an Advance Notice, which shall be reduced by one-third (1/3rd) for each Excluded Day Purchase Price (as defined in the EPFA), which is not known at the time an Advance Notice is delivered but shall be determined on each closing based on the daily prices of the Advance Shares that are the inputs to the determination of the purchase price.
While the Notes are outstanding, the Company cannot 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 120% of $2.00 per share of Common Stock (the “EPFA Floor Price”) on such date, or otherwise provide rights to acquire securities at an effective price per security below 120% of the EPFA Floor Price unless the Company uses the proceeds of such transaction to fully redeem such outstanding Notes.
Until the termination of the EPFA, the Company must maintain a minimum cash balance of $500,000.
As an inducement to entering into the EPFA, a designee of the EPFA Investor received 550,000 shares of Roth CH Acquisition V Inc. and such shares were converted into 550,000 shares of Common Stock in connection with Business Combination.
The Senior Secured Convertible Promissory Note
Each Note provides for a 7% original issue discount and is for a term of 15 months. Commencing on the ninetieth (90th) day following the applicable Issuance Date, and continuing on the same day of each successive calendar month until the entire outstanding principal amount has been repaid, the Company is required to make monthly payments to the holder of the Note (the “Holder”). Each monthly payment will be in an amount equal to the sum of (i) one twelfth (1/12) of the initial aggregate principal of the Note and all other notes issued pursuant to the EPFA, plus (ii) accrued and unpaid under the Note as of each payment date. Interest accrues on the outstanding principal balance hereof at an initial annual rate equal to 10% (“Interest Rate”), which Interest Rate will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Note).
Conversion Rights.
Conversion at Option of Holder. Each Note is convertible into shares of Common Stock at the option of the Investor at an initial conversion price of $10.00 per share (the “Conversion Price”). Subject to certain exceptions outlined in the Note, including, but not limited to, equity issuances in connection with its equity incentive plan and certain strategic acquisitions, if the Company sells, enters into an agreement to sell, or grants any option to purchase, or sells, enters into an agreement to sell, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, Common Stock, at an effective price per share less than the Conversion Price of the Note then in effect, the Conversion Price will be reduced to equal the effective price per share in such dilutive issuance. The Conversion Price is also subject to a downward adjustment if an Event of Default occurs. The Conversion Price is subject to an initial floor price of $2.00 per share of Common Stock, however beginning on the effective date of the initial Registration Statement, and on the same day of every six (6) months thereafter (each, a “Floor Price Reset Date”), the floor price will be reduced to 20% of the average volume weighted average price of the Common Stock for such trading day on the primary market of the Common Stock during regular trading hours as reported by Bloomberg L.P. (the “VWAP”) during the five (5) trading days immediately prior to such Floor Price Reset Date. Additionally, the Company may reduce the floor price to any amount set forth in a written notice to the Holder, provided that any such reduction will be irrevocable and will not be subject to increase thereafter. The Company may prepay the Note at its option, upon thirty (30) business days written notice, by paying a 10% redemption premium.
Event of Default Conversion. From and after the occurrence of an Event of Default, the Holder may elect to convert the Note into shares of the Common Stock at the “Event of Default Conversion Price”, which is equal to the lower of:
| • | The Conversion Price then in effect; and |
| • | 90% of the lowest VWAP of the Common Stock during the ten (10) consecutive trading days immediately prior to the date on which we received written notice of such conversion from such holder, subject to the Floor Price. |
Limitations on Conversion. A Holder shall 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 4.99% (the “Maximum Percentage”) of shares of our Common Stock outstanding immediately after giving effect to such conversion. The Maximum Percentage may be raised or lowered to any other percentage not in excess of 9.99%, at the option of the Holder, except that any increase will only be effective upon 61 days’ prior written notice to us.
Redemption Rights.
At any time, the Company may redeem in cash all, or any portion, of the Note, in an amount equal to the outstanding principal balance being redeemed, plus a 10% premium in respect of such principal amount, plus all accrued and unpaid interest, if any, on such principal amount.
The foregoing summary of the EPFA and the form of Note does not purport to be complete and is qualified in its entirety by reference to the agreements filed in the EFPA Current Report as Exhibit 10.1 and Exhibit 10.2, respectively, and are incorporated herein by reference.
Security Agreement
Also, on December 6, 2024, the Company, each of its subsidiaries (each, a “Grantor”), and the Investor, for itself and as the collateral agent (the “Collateral Agent”) for the benefit of the Secured Parties (as defined in the Security Agreement), entered into a Security Agreement (the “Security Agreement”) with respect to the Notes.
Pursuant to the Security Agreement, each Grantor granted to the Collateral Agent, for the benefit of the Secured Parties, a security interest in such Grantor’s right, title and interest in and to each type of property described in the Security Agreement, or in which or to which such Grantor has any rights, whether now owned or hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising (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 (each as defined therein).
The Collateral secures and will secure all debts, obligations, liabilities, covenants and duties of every kind now or hereafter existing, absolute or contingent 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 , or otherwise (whether or not evidenced by any note, indenture, guaranty or other agreement), whether principal, interest (including interest upon the occurrence of an Event of Default), fees, costs, expenses, including without limitation attorneys’ fees and expenses.
The foregoing description of the Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Security Agreement, a copy of which is filed as Exhibit 10.3 to the EFPA Current Report and is incorporated herein by reference.
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.
The foregoing description of the Subsidiary Guarantee does not purport to be complete and is qualified in its entirety by reference to the full text of the Subsidiary Guaranty, a copy of which is filed as Exhibit 10.4 to the EFPA Current Report and is incorporated herein by reference.
Warrant Purchase Agreement
Also, on December 6, 2024, the Company and an institutional investor (the “Warrant Investor”) entered into a securities purchase agreement (the “Warrant Purchase Agreement”) pursuant to which the Company issued and sold to the Investor warrants to purchase up to $30,000,000 shares of Common Stock (the “Warrant Shares”) comprised of two tranches, (a) a warrant to purchase up to $10,000,000 shares of Common Stock (the “First Tranche Warrant”) and (b) a warrant to purchase up to $20,000,000 shares of Common Stock (the “Second Tranche Warrant” and together with the First Tranche Warrant, the “Warrants”). The Warrants may be exercised on any day on or after December 6, 2024, in whole or in part at an initial exercise price of $10.00 per share (the “Exercise Price”), subject to certain adjustments as provided in the applicable Warrant.
The number of Warrant Shares issuable upon exercise of First Tranche Warrant is equal to the quotient of (i) the product of (x) $10 million minus any amounts previously paid to exercise the Warrants and (y) multiplied by 110%, and (ii) divided by the Exercise Price then in effect. Currently, the number of Warrant Shares issuable upon exercise of the First Tranche Warrant is equal to 1,100,000, assuming an Exercise Price of $10. The number of Warrant Shares issuable upon exercise of Second Tranche Warrant is equal to 2,140,000, subject to certain adjustments.
The First Tranche Warrant and the Second Tranche Warrant will expire on the twenty (20) month anniversary and the five (5) year anniversary, respectively, of the effective date of the registration statement registering the resale of the Warrant Shares. Subject to certain exceptions outlined in the Warrants, including, but not limited to, equity issuances in connection with its equity incentive plan and certain strategic acquisitions, if the Company sells, enters into an agreement to sell, or grants any option to purchase, or sells, enters into an agreement to sell, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, Common Stock, at an effective price per share less than the Exercise Price of the Warrants then in effect, the Exercise Price of the Warrants will be reduced to equal the effective price per share in such dilutive issuance. Further, the Exercise Price of the Warrants is subject to a floor price (the “Warrant Floor Price”) of $2.00 per share of Common Stock. Beginning the effective date of the initial registration statement, and on the same day of every six (6) months thereafter (each, a “Warrant Floor Price Reset Date”), the Warrant Floor Price will be reduced to 20% of the average VWAP during the five (5) trading days immediately prior to such Warrant Floor Price Reset Date. Additionally, the Company may reduce the Warrant Floor Price to any amount set forth in a written notice to the Warrant holder, provided that any such reduction will be irrevocable and will not be subject to increase thereafter.
Pursuant to the terms of the Warrant Purchase Agreement, the Company is required to hold a Stockholder Meeting, no later than ninety (90) calendar days following December 6, 2024, to seek approval of (i) the issuance of all of the Warrant Shares in compliance with the rules and regulations of Nasdaq and (ii) an amendment to the articles of incorporation to increase the number of authorized shares of capital stock of the Company to 250,000,000.
The Warrant Investor will not have the right to exercise any portion of the Warrants to the extent that, after giving effect to such exercise, the holder (together with certain related parties) would beneficially own in excess of the Maximum Percentage of shares of our Common Stock outstanding immediately after giving effect to such conversion. The Maximum Percentage may be raised or lowered to any other percentage not in excess of 9.99%, at the option of the holder, except that any increase will only be effective upon 61 days’ prior written notice to us.
The foregoing description of the Warrant Purchase Agreement, the First Tranche Warrant and the Second Tranche Warrant does not purport to be complete and is qualified in its entirety by reference to the full text of the Warrant Purchase Agreement, the form of First Tranche Warrant and the form of Second Tranche Warrant, copies of which are filed as Exhibits 10.5, 10.6 and 10.7, respectively, to this Form 8-K and are incorporated herein by reference.
Registration Rights Agreements
On December 6, 2024, the Company also entered into (a) a registration rights agreement with the EPFA Investor with respect to the resale of the shares of Common Stock issuable pursuant to the EPFA and the Notes, and (b) a registration rights agreement with the Warrant Investor with respect to the resale of the shares of Common Stock issuable pursuant to the terms of the Warrants (together, the “Registration Rights Agreements”).
The foregoing description of the Registration Rights Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreements, copies of which are filed as Exhibits 10.8 and 10.9, respectively, to this Form 8-K and are incorporated herein by reference.
Voting Agreements
Pursuant to the EPFA and the Warrant Purchase Agreement, and in connection with the Stockholder Meeting, stockholders holding at least 51% of the shares of Common Stock as of December 6, 2024 have executed voting agreements with the Company pursuant to which they have agreed to vote for the proposals to be approved in connection with each agreement.
The foregoing description of the Voting Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the forms of Voting Agreement, copies of which are filed as Exhibit 10.10 and 10.11 to the EFPA Current Report and are incorporated herein by reference.
Until stockholder approval is obtained, the total cumulative number of shares of Common Stock that may be issued to each Investor until the applicable agreements will be limited to 19.99% of the number of shares of Common Stock issued and outstanding (the “Exchange Cap”) pursuant to the requirements of the Nasdaq Stock Market LLC or other applicable rules of the principal market on which the Company’s securities are listed. The Exchange Cap will be calculated based on the number of shares of Common Stock issued and outstanding as of the date of such agreement, which number shall be reduced, on a share-for-share basis, by the number of shares of Common Stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by such agreement under the applicable rules of the principal market.
The EPFA, form of Note, Warrant Purchase Agreement, Warrants, Registration Rights Agreements and Voting Agreements contain customary representations, warranties, agreements and conditions, indemnification rights and obligations of the parties. Among other things, the EPFA Investor and Warrant Investor represented to the Company, that each of them is an “accredited investor” (as such term is defined in Rule 501(a) of Regulaion D of the Securities Act of 1933, as amended.
NEH is evaluating the proper accounting treatment of the EPFA, the Note, and the Warrants.
Net Debt Calculation and its Impact on the Company Merger Shares
The calculation of the Net Debt, and its impact on the Company Merger Shares, is set forth below. Pursuant to the Third Amendment to the Business Combination, Net Debt means the total Indebtedness of NEH and the NEH Subsidiaries, excluding any existing Indebtedness that converts, exchanges or is exercised into share capital of the Company, after subtracting all cash and liquid assets.
The 9,000,000 shares of Holdings common stock were subject to adjustment based on the Net Debt at closing that is different from the Net Debt at the date of the Original Business Combination Agreement (the “Net Debt Variation”). For every dollar decrease in the Net Debt Variation the Company Merger Shares shall be increased by 1/10 of one share and for every dollar increase in the Net Debt Variation the Company Merger Shares shall be decreased by 1/10 of one share.
The table below shows the calculation of the Net Debt Variation. Based on these amounts, there was an adjustment in the Company Merger Shares in the amount of 83,414.
| Balance at September 30, 2024 | ||||
| Notes payable (1) | 925,782 | |||
| Less: cash and liquid assets | 91,642 | |||
| Total Net Debt | 834,140 | |||
| (1) | Includes $720,000 plus accrued interest of the NEH 10% Secured Convertible Debenture which is not convertible into shares at the consummation of the Business Combination. |
The table below shows the calculation of the Company Merger shares adjusted for the increase in the Net Debt Variation resulting in the issuance of 8,916,625 shares to the shareholders of NEH.
| Original Company Merger Shares | 9,000,000 | |||
| Less: Adjustment (1) | (83,375 | ) | ||
| Adjusted Company Merger Shares | 8,916,625 |
| (1) | Includes the Net Dent adjustment of 83,414, net of round up share adjustment of 39. |
| (2) | The following table summarizes the pro forma number of shares of Holdings Common Stock outstanding following the consummation of the Business Combination, discussed further in the sections below, excluding the potential dilutive effect of the Holdings Public Warrants, Private Warrants and the Earnout Shares. |
| Equity Capitalization Summary | Shares | % | ||||||
| NEH Stockholders | 8,916,625 | 67.8 | % | |||||
| ROCL Public Stockholders | 337,027 | 2.5 | % | |||||
| Sponsor Stockholders | 2,786,500 | 21.2 | % | |||||
| Advisor Shares | 1,125,000 | 8.5 | % | |||||
| Total common stock | 13,165,152 | 100.0 | % | |||||
The following table shows the per share value of Holdings Common Stock held by non-redeeming holders of Holdings Common Stock:
| Shares | 337,027 | |||
| Book equity per share | $ | (3.75 | ) |
Accounting for the Business Combination
The Business Combination was accounted for as a reverse recapitalization with ROCL being treated as the acquired company in accordance with U.S. GAAP. Accordingly, the financial statements of the combined entity will represent a continuation of the financial statements of NEH with the business combination treated as the equivalent of NEH issuing stock for the net assets of ROCL, accompanied by a recapitalization. The net assets of ROCL were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination were those of NEH.
NEH was determined to be the accounting acquirer based on an evaluation of the following facts and circumstances:
| · | NEH’s current shareholders hold a majority of the voting power of Holdings post Business Combination; |
| · | The post-combination Board consists of five (5) directors, including two of the existing directors from NEH, two (2) members who qualify as an independent director under the applicable SEC and Nasdaq rules and one (1) director designated by certain holders of Holdings common stock and warrants subject to the consent of NEH; |
| · | NEH’s operations substantially comprise the ongoing operations of Holdings; |
| · | NEH’s senior management comprises three members of the NEH senior management, and those other persons as mutually agreed by Holdings and NEH. |
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2024(1)
| Holdings (Historical) |
NEH (Historical) |
ROCL (Historical) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Current assets | |||||||||||||||||||||||
| Cash | $ | - | $ | 409,250 | $ | 6,620 | $ | 3,826,473 | A | $ | 4,615,386 | ||||||||||||
| (5,253,512 | ) | B | |||||||||||||||||||||
| 162,499 | I | ||||||||||||||||||||||
| 92,056 | J | ||||||||||||||||||||||
| (1,470,000 | ) | F | |||||||||||||||||||||
| 332,000 | M | ||||||||||||||||||||||
| 6,510,000 | Q | ||||||||||||||||||||||
| Cash and marketable securities held in Trust Account | - | - | 17,928,070 | (3,826,473 | ) | A | - | ||||||||||||||||
| 90,000 | H | ||||||||||||||||||||||
| (47,608 | ) | I | |||||||||||||||||||||
| (14,143,989 | ) | P | |||||||||||||||||||||
| Accounts receivable, net | - | 698,016 | - | - | 698,016 | ||||||||||||||||||
| Restricted investments | - | 1,320,425 | - | - | 1,320,425 | ||||||||||||||||||
| Prepaid expenses | - | 327,079 | 25,490 | 395,000 | B | 747,569 | |||||||||||||||||
| Prepaid income taxes | - | - | - | - | - | ||||||||||||||||||
| Total current assets | - | 2,754,770 | 17,960,180 | (13,333,554 | ) | 7,381,396 | |||||||||||||||||
| Non-current assets | |||||||||||||||||||||||
| Deferred tax asset | - | 1,657,332 | - | - | 1,657,332 | ||||||||||||||||||
| Prepaid expenses - noncurrent | - | 420,000 | - | - | 420,000 | ||||||||||||||||||
| Oil and natural gas properties, net (full cost) | - | 466,402 | - | - | 466,402 | ||||||||||||||||||
| Other property, plant and equipment, net | - | 3,802,489 | - | - | 3,802,489 | ||||||||||||||||||
| Total non-current assets | - | 6,346,223 | - | - | 6,346,223 | ||||||||||||||||||
| Total assets | $ | - | $ | 9,100,993 | $ | 17,960,180 | $ | (13,333,554 | ) | $ | 13,727,619 | ||||||||||||
| LIABILITIES | |||||||||||||||||||||||
| Current liabilities | |||||||||||||||||||||||
| Accrued expenses | $ | - | $ | 471,330 | $ | 2,113,329 | $ | (2,256,612 | ) | B | $ | 328,047 | |||||||||||
| Accounts payable | - | 1,746,252 | - | - | 1,746,252 | ||||||||||||||||||
| Income taxes payable | - | - | 14,323 | - | 14,323 | ||||||||||||||||||
| Notes payable - current | - | 3,704,607 | - | 332,000 | M | 477,913 | |||||||||||||||||
| (3,634,232 | ) | M | |||||||||||||||||||||
| 75,538 | M | ||||||||||||||||||||||
| Due to related parties | 12,583 | 1,692,951 | - | (751,600 | ) | B | 913,492 | ||||||||||||||||
| (27,859 | ) | M | |||||||||||||||||||||
| (12,583 | ) | O | |||||||||||||||||||||
| Other current liabilities | - | 73,138 | - | - | 73,138 | ||||||||||||||||||
| Promissory note - related party | - | - | 1,287,944 | 90,000 | H | - | |||||||||||||||||
| 92,056 | J | ||||||||||||||||||||||
| (1,470,000 | ) | F | |||||||||||||||||||||
| Excise tax payable | - | - | 1,029,003 | 1,029,003 | |||||||||||||||||||
| Total current liabilities | 12,583 | 7,688,278 | 4,444,599 | (7,563,292 | ) | 4,582,168 | |||||||||||||||||
| Non-current liabilities | |||||||||||||||||||||||
| Asset retirement obligation | 1,722,926 | - | - | 1,722,926 | |||||||||||||||||||
| Notes payable non-current | 2,175,191 | - | - | - | 2,175,191 | ||||||||||||||||||
| Convertible promissory note | 7,000,000 | Q | 7,000,000 | ||||||||||||||||||||
| Discount on note | (490,000 | ) | Q | (490,000 | ) | ||||||||||||||||||
| Total non-current liabilities | - | 3,898,117 | - | 6,510,000 | 10,408,117 | ||||||||||||||||||
| Total liabilities | 12,583 | 11,586,395 | 4,444,599 | (1,053,292 | ) | 14,990,285 | |||||||||||||||||
| Common stock subject to possible redemption | - | 17,751,247 | (3,826,474 | ) | E | - | |||||||||||||||||
| 219,216 | I | ||||||||||||||||||||||
| (14,143,989 | ) | P | |||||||||||||||||||||
| EQUITY | |||||||||||||||||||||||
| NEH Series X preferred stock | - | 1 | - | (1 | ) | L | - | ||||||||||||||||
| NEH common stock | - | 6,209 | - | (8,623 | ) | C | - | ||||||||||||||||
| 5 | L | ||||||||||||||||||||||
| 2,409 | M | ||||||||||||||||||||||
| Holdings common stock | - | - | - | 334 | N | 1,318 | |||||||||||||||||
| 892 | C | ||||||||||||||||||||||
| 34 | E | ||||||||||||||||||||||
| 58 | G | ||||||||||||||||||||||
| ROCL common stock | - | - | 334 | (334 | ) | N | - | ||||||||||||||||
| Additional paid-in capital | - | 524,276 | - | (313,045 | ) | B | 7,227,658 | ||||||||||||||||
| 7,731 | C | ||||||||||||||||||||||
| (12,657,264 | ) | D | |||||||||||||||||||||
| 3,826,440 | E | ||||||||||||||||||||||
| 788,900 | K | ||||||||||||||||||||||
| (4 | ) | L | |||||||||||||||||||||
| 6,209,942 | G | ||||||||||||||||||||||
| 3,659,682 | M | ||||||||||||||||||||||
| 5,181,000 | R | ||||||||||||||||||||||
| Accumulated deficit | (12,583 | ) | (3,015,888 | ) | (4,236,000 | ) | (1,537,255 | ) | B | (8,491,642 | ) | ||||||||||||
| 12,657,264 | D | ||||||||||||||||||||||
| (788,900 | ) | K | |||||||||||||||||||||
| (6,210,000 | ) | G | |||||||||||||||||||||
| 114,891 | I | ||||||||||||||||||||||
| (219,216 | ) | I | |||||||||||||||||||||
| (75,538 | ) | M | |||||||||||||||||||||
| 12,583 | O | ||||||||||||||||||||||
| (5,181,000 | ) | R | |||||||||||||||||||||
| Total equity | (12,583 | ) | (2,485,402 | ) | (4,235,666 | ) | 5,470,985 | (1,262,666 | ) | ||||||||||||||
| Total equity and liabilities | $ | - | $ | 9,100,993 | $ | 17,960,180 | $ | (13,333,554 | ) | $ | 13,727,619 | ||||||||||||
| (1) | The unaudited pro forma condensed combined balance sheet as of September 30, 2024, combines the unaudited balance sheet of Holdings as of September 30, 2024, with the unaudited balance sheet of NEH as of September 30, 2024, with the unaudited balance sheet of ROCL as of September 30, 2024. |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024(2)
| Holdings (Historical) |
NEH (Historical) |
ROCL (Historical) |
Transaction Accounting Adjustments |
Pro Forma Combined |
||||||||||||||||||
| Revenue | $ | - | $ | 384,731 | $ | - | $ | - | $ | 384,731 | ||||||||||||
| Costs and expenses | ||||||||||||||||||||||
| Lease operating expenses | - | (982,423 | ) | - | - | (982,423 | ) | |||||||||||||||
| Depletion, depreciation, amortization, and accretion | - | (692,906 | ) | - | - | (692,906 | ) | |||||||||||||||
| General and administrative expenses | (12,583 | ) | (2,754,412 | ) | (1,540,761 | ) | (296,250 | ) | CC | (4,591,423 | ) | |||||||||||
| 12,583 | DD | |||||||||||||||||||||
| Total costs and expenses | (12,583 | ) | (4,429,741 | ) | (1,540,761 | ) | (283,667 | ) | (6,266,752 | ) | ||||||||||||
| Income (loss) from operations | (12,583 | ) | (4,045,010 | ) | (1,540,761 | ) | (283,667 | ) | (5,882,021 | ) | ||||||||||||
| Other income (expense) | ||||||||||||||||||||||
| Interest and penalties | - | - | (463 | ) | - | (463 | ) | |||||||||||||||
| Interest income | - | 37,587 | 2,274 | - | 39,861 | |||||||||||||||||
| Interest expense | - | (267,838 | ) | - | (98,000 | ) | EE | (408,989 | ) | |||||||||||||
| (43,151 | ) | FF | ||||||||||||||||||||
| Other, net | - | 200,396 | - | - | 200,396 | |||||||||||||||||
| Interest income on marketable securities held in Trust Account | - | - | 677,062 | (677,062 | ) | AA | - | |||||||||||||||
| Total other income (expenses) | - | (29,855 | ) | 678,873 | (818,213 | ) | (169,195 | ) | ||||||||||||||
| Income (loss) before income tax expense | (12,583 | ) | (4,074,865 | ) | (861,888 | ) | (1,101,880 | ) | (6,051,216 | ) | ||||||||||||
| Income tax benefit (expense) | - | 1,048,832 | (174,717 | ) | 174,717 | BB | 1,048,832 | |||||||||||||||
| Net loss | $ | (12,583 | ) | $ | (3,026,033 | ) | $ | (1,036,605 | ) | $ | (927,163 | ) | $ | (5,002,384 | ) | |||||||
| Basic and diluted net income per share, common stock subject to possible redemption | $ | 0.13 | ||||||||||||||||||||
| Basic and diluted net loss per share, non-redeemable common stock | $ | (0.37 | ) | |||||||||||||||||||
| Pro forma weighted average number of shares outstanding - basic and diluted | 13,165,152 | (2) | ||||||||||||||||||||
| Pro forma earnings per share - basic and diluted | $ | (0.38 | ) | |||||||||||||||||||
| (1) | Please refer to Note 7 (“Net Loss per Share”) for details. |
| (2) | The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2024, combines the unaudited statement of operations of Holdings for the nine months ended September 30, 2024, with the unaudited statement of operations of NEH for nine months ended September 30, 2024, with the unaudited statement of operations of ROCL for the nine months ended September 30, 2024. |
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023(2)
| Holdings (Historical) |
NEH (Historical) |
ROCL (Historical) |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||||
| Revenue | $ | - | $ | 612,192 | $ | - | $ | - | $ | 612,192 | |||||||||||||
| Costs and expenses | |||||||||||||||||||||||
| Lease operating expenses | - | (1,332,548 | ) | - | - | (1,332,548 | ) | ||||||||||||||||
| Depletion, depreciation, amortization, and accretion | - | (885,832 | ) | - | - | (885,832 | ) | ||||||||||||||||
| General and administrative expenses | - | (4,519,811 | ) | (1,764,792 | ) | (1,537,255 | ) | CC | (8,216,858 | ) | |||||||||||||
| (395,000 | ) | FF | |||||||||||||||||||||
| Stock-based compensation expense | (6,210,000 | ) | DD | (12,179,900 | ) | ||||||||||||||||||
| (788,900 | ) | EE | |||||||||||||||||||||
| (5,181,000 | ) | II | |||||||||||||||||||||
| Total costs and expenses | - | (6,738,191 | ) | (1,764,792 | ) | (14,112,155 | ) | (22,615,138 | ) | ||||||||||||||
| Gain on sale of assets | - | 5,834,293 | - | - | 5,834,293 | ||||||||||||||||||
| Income (loss) from operations | - | (291,706 | ) | (1,764,792 | ) | (14,112,155 | ) | (16,168,653 | ) | ||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest income | - | 46,437 | - | - | 46,437 | ||||||||||||||||||
| Interest expense | - | (172,143 | ) | - | (392,000 | ) | GG | (915,422 | ) | ||||||||||||||
| (351,279 | ) | HH | |||||||||||||||||||||
| Other, net | - | (180,943 | ) | - | - | (180,943 | ) | ||||||||||||||||
| Change in the fair value of due to non-redeeming stockholders | - | - | (480,000 | ) | - | (480,000 | ) | ||||||||||||||||
| Interest income on marketable securities held in Trust Account | - | - | 2,967,733 | (2,967,733 | ) | AA | - | ||||||||||||||||
| Total other income (expenses) | - | (306,649 | ) | 2,487,733 | (3,711,012 | ) | (1,529,928 | ) | |||||||||||||||
| Income (loss) before income tax expense | - | (598,355 | ) | 722,941 | (17,823,167 | ) | (17,698,581 | ) | |||||||||||||||
| Income tax benefit (expense) | - | 608,500 | (810,659 | ) | 810,659 | BB | 608,500 | ||||||||||||||||
| Net income (loss) | $ | - | $ | 10,145 | $ | (87,718 | ) | $ | (17,012,508 | ) | $ | (17,090,081 | ) | ||||||||||
| Basic and diluted net income per share, common stock subject to possible redemption | $ | 0.17 | |||||||||||||||||||||
| Basic and diluted net loss per share, non-redeemable common stock | $ | (0.33 | ) | ||||||||||||||||||||
| Pro forma weighted average number of shares outstanding - basic and diluted | 13,165,152 | (2) | |||||||||||||||||||||
| Pro forma earnings per share - basic and diluted | $ | (1.30 | ) | ||||||||||||||||||||
| (1) | Please refer to Note 7 (“Net Loss per Share”) for details. |
| (2) | The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, combines the audited statement of operations of NEH for year ended December 31, 2023, with the audited statement of operations of ROCL for the year ended December 31, 2023. Holdings was incorporated on June 24, 2024, therefore there is no December 31, 2023, statement of operations included in the pro forma condensed combined statement of operation as of December 31, 2023. |
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 — Basis of Presentation and Accounting Policies
The Business Combination was accounted for as a reverse recapitalization, in accordance with U.S. GAAP. Under this method of accounting, Holdings will be treated as the “acquired” company for financial reporting purposes, and NEH will be the accounting “acquirer”. This determination was primarily based on the assumption that:
| · | NEH’s current shareholders hold a majority of the voting power of Holdings post Business Combination; |
| · | The post-combination Board consists of five (5) directors, including two of the existing directors from NEH, two (2) members who qualify as an independent director under the applicable SEC and Nasdaq rules and one (1) director designated by certain holders of Holdings common stock and warrants subject to the consent of NEH; |
| · | NEH’s operations substantially comprises the ongoing operations of Holdings; |
| · | NEH’s senior management comprises three members of the NEH senior management, and those other persons as mutually agreed by Holdings and NEH. |
Under this method of accounting, although Holdings acquired all of the outstanding equity interests of NEH in the Business Combination, Holdings was treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of NEH issuing stock for the net assets of Holdings, accompanied by a recapitalization. The net assets of Holdings were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination were those of NEH.
The unaudited pro forma condensed combined balance sheet as of September 30, 2024, assumes that the Business Combination and related transactions occurred on September 30, 2024. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2024, and for the year ended December 31, 2023, presents pro forma effect to the Business Combination as if it had been completed on January 1, 2023.
The unaudited pro forma condensed combined balance sheet as of September 30, 2024, has been prepared using, and should be read in conjunction with, the following:
| ● | ROCL’s unaudited balance sheet as of September 30, 2024, and the related notes for the nine months ended September 30, 2024; and | |
| ● | Holdings’ unaudited balance sheet as of September 30, 2024, and the related notes for the nine months ended September 30, 2024; and | |
| ● | NEH’s unaudited consolidated balance sheet as of September 30, 2024, and the related notes for the nine months ended September 30, 2024. |
The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2024, has been prepared using, and should be read in conjunction with, the following:
| ● | ROCL’s unaudited statement of operations for the nine months ended September 30, 2024, and the related notes; and | |
| ● | Holding’s unaudited statement of operations for the nine months ended September 30, 2024, and the related notes; and | |
| ● | NEH’s unaudited consolidated statement of operations for the nine months ended September 30, 2024, and the related notes. |
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, has been prepared using, and should be read in conjunction with, the following:
| ● | ROCL’s audited statement of operations for the year ended December 31, 2023, and the related notes; and | |
| ● | NEH’s audited consolidated statement of operations for the year ended December 31, 2023, and the related notes. | |
| ● |
Holdings was incorporated on June 24, 2024, therefore there is no December 31, 2023, statement of operations included in the pro forma condensed combined statement of operation as of December 31, 2023. |
As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The historical financial statements of NEH have been prepared in accordance with U.S. GAAP. The historical financial statements of ROCL have been prepared in accordance with U.S. GAAP. The historical financial statements of Holdings have been prepared in accordance with U.S. GAAP. The unaudited pro forma condensed combined financial information reflects U.S. GAAP, the basis of accounting used by NEH.
The share amounts and ownership percentages set forth above are not indicative of voting percentages and do not take into account ROCL Warrants that will remain outstanding immediately following the Business Combination and may be exercised thereafter or the Earnout Shares that may be earned at a future point in time.
Upon consummation of the Business Combination, management has performed a comprehensive review of the two entities’ accounting policies. As a result of the review, management has not identified differences between the accounting policies of the two entities which have a material impact on the financial statements of the Combined Company. Based on its analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.
Note 2 — Adjustments to Unaudited Pro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only.
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). EFHAC has elected not to present Management’s Adjustments and is only presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to include all necessary Transaction Accounting Adjustments pursuant to Article 11 of Regulation S-X, including those that are not expected to have a continuing impact.
The audited and unaudited historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to transaction accounting adjustments that reflect the accounting for the transaction under GAAP. NEH and Holdings have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of the Combined Company’s shares outstanding, assuming the Business Combination occurred on January 1, 2023.
Transaction Accounting Adjustments to Unaudited Pro Foma Condensed Combined Balance Sheet
The Transaction Accounting Adjustments to the unaudited pro forma condensed combined balance sheet as of September 30, 2024, are as follows:
| A. | Reflects the liquidation and reclassification of $3.8 million of funds held in the Trust Account to cash that became available following the Business Combination. |
| B. | Reflects the payments of $1.6 million of Business Combination related fees and expenses of NEH and the payment of $3.6 million of ROCL Business Combination related fees and expenses at the closing of the Business Combination. |
| C. | Represents the exchange of 8,623,25 outstanding NEH shares into 8,916,625 shares of Company Merger shares of common stock at a par value of $0.0001 per share at the Business Combination. |
| D. | Represents the elimination of ROCL’s historical accumulated losses after recording the transaction costs to be incurred by ROCL of $1,537,255 as described in (B) above, the advisor shares of $6,210,000 as described in (G) below, the stock-based compensation expense of $788,900 as described in (K) below, and the recording of interest earned in the Trust account subsequent to September 30, 2024, as described in (I) below. |
| E. | Reflects the reclassification of 337,027 shares of ROCL common stock subject to possible redemption to permanent equity. |
| F. | Reflects the repayment of the ROCL promissory note – related party. |
| G. | Reflects the issuance of 575,000 shares of ROCL common stock to advisors for services rendered in connection with the Business Combination, at $10.80 per share as of December 4, 2024, par value $0.0001. |
| H. | Reflects the borrowings from the ROCL Initial Stockholders in order to fund extension payments into the Trust account subsequent to September 30, 2024. |
| I. | Reflects withdrawals from the Trust account for certain tax obligations of $162,499, net of interest earned in the Trust account subsequent to September 30, 2024, of $114,891 and to record the accretion of the ROCL common stock subject to redemption of $219,216. |
| J. | Reflects the receipts of amounts from the ROCL Initial Stockholders for working capital purposes. |
| K. | Reflects the recognition of stock-based compensation at the consummation of the Business Combination related to the sales of Founders Shares to certain ROCL Initial Stockholders and independent directors. |
| L. | Reflects the conversion of 5,000 shares of NEH Series X preferred shares into 5,000 NEH common shares on a one-for-one basis. |
| M. | Reflects the additional NEH debenture proceeds of $332,000 and the accrual of interest of $75,358on the additional proceeds received subsequent to September 30, 2024. Reflects the conversion of $3.7 million of the convertible bridge financing debentures to NEH common stock, par value $0.001 per share, at the consummation of the Business Combination at a conversion amount of $1.52 per share based on a pre-money value of $20.0 million. |
| NEH debentures issued as of September 30, 2024 | $ | 3,254,553 | ||
| Interest accrued subsequent to September 30, 2024 | 75,538 | |||
| Proceeds received subsequent to September 30, 2024 | 332,000 | |||
| Total pro forma NEH debentures issued | $ | 3,662,091 |
| Scenario 2 | ||||
| Conversion rate: | ||||
| Pre-money value | $ | 20,000,000 | ||
| Shares | 13,165,152 | |||
| Conversion rate – Pre-money value/ shares | $ | 1.52 | ||
| NEH debentures issued | $ | 3,662,091 | ||
| Conversion shares – NEH debenture issued/conversion rate | 2,409,270 | |||
| N. | Reflects the merger of ROCL with Roth CH Holdings, Inc. |
| O. | Reflects the elimination of the intercompany expenses between ROCL and Holdings. |
| P. | Reflects the redemption of 1,245,770 shares of ROCL common stock subsequent to September 30, 2024, at approximately $11.35 per share for an aggregate amount of $14.1 million. |
| Q. | Reflects the proceeds received from the senior secured promissory note under the EPFA of $7.0 million, net of 7% original issues discount of $490,000. NEH is currently evaluating the proper accounting treatment of the convertible note and the warrants issued. | |
| R. | Reflects the recognition of stock-based compensation of $5.2 million related to the transfer of 550,000 Founders Shares to ATW, valued at $9.42 per share, as part of the Equity Purchase Facility Agreement, at the consummation of the Business Combination. |
Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations
The Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statement of operations for nine months ended September 30, 2024, are as follows:
| AA. | Reflects the elimination of interest income generated from the investments held in the Trust Account after giving effect to the Business Combination as if it had occurred on January 1, 2023. |
| BB. | Reflects the elimination of the ROCL tax provision since the interest income generated from the investments held in the Trust account is eliminated in adjustment (AA) above. |
| CC. | Reflects the amortization of the prepaid D&O insurance policy. |
| DD. | Reflects the elimination of the intercompany expenses between ROCL and Holdings. |
| EE. | Reflects the amortization of the note discount. |
| FF. | Reflects the interest accrued on the convertible promissory note for January 2024 through March 2024, assuming that the payments on the note commenced on April 1, 2023, which is the 90th day following the issuance date in the sum of one twelfth (1/12) of the initial principal of the note. |
The Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, are as follows:
| AA. | Reflects the elimination of interest income generated from the investments held in the Trust Account after giving effect to the Business Combination as if it had occurred on January 1, 2023. |
| BB. | Reflects the elimination of the ROCL tax provision since the interest income generated from the investments held in the Trust account is eliminated in adjustment (AA) above. |
| CC. | Reflects the transaction costs of ROCL. |
| DD. | Reflects the recognition of stock-based compensation expense related to the issuance of shares to third party advisors for services rendered in connection with the Business Combination. |
| EE. | Reflects the recognition of stock-based compensation at the consummation of the Business Combination related to the sale of Founders Shares to certain ROCL Initial Stockholders and independent directors. |
| FF. | Reflects the amortization of the prepaid D&O policy. |
| GG. | Reflects the amortization of the note discount. |
| HH. | Reflects the interest accrued on the convertible promissory note for January 2023 through December 2023, assuming that the payments on the note commenced on April 1, 2023, which is the 90th day following the issuance date in the sum of one twelfth (1/12) of the initial principal of the note. | |
| II. | Reflects the recognition of stock-based compensation of $5.2 million related to the transfer of 550,000 Founders Shares to ATW, valued at $9.42 per share, as part of the Equity Purchase Facility Agreement, at the consummation of the Business Combination. |
Note 3 — Net Loss per Share
Represents the loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2023. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted loss per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented.
The unaudited pro forma condensed combined financial information has been prepared with the actual redemptions of Public Shares by ROCL’s Public Shareholders for the nine months ended September 30, 2024:
| Nine Months Ended September 30, 2024 | ||||
| Pro forma net loss | $ | (5,002,384 | ) | |
| Weighted average shares outstanding of common stock – basic and diluted | 13,165,152 | |||
| Net loss per share – basic and diluted | $ | (0.38 | ) | |
| Excluded securities:(1) | ||||
| Public Warrants | 5,750,000 | |||
| Private Warrants | 230,750 | |||
| Earnout Shares | 1,000,000 | |||
| Convertible Note Warrants | 3,240,000 | |||
| Year Ended December 31, 2023 | ||||
| Pro forma net loss | $ | (17,030,081 | ) | |
| Weighted average shares outstanding of common stock – basic and diluted | 13,165,152 | |||
| Net loss per share – basic and diluted | $ | (1.30 | ) | |
| Excluded securities:(1) | ||||
| Public Warrants | 5,750,000 | |||
| Private Warrants | 230,750 | |||
| Earnout Shares | 1,000,000 | |||
| Convertible Note Warrants | 3,240,000 | |||
| (1) | The potentially dilutive outstanding securities were excluded from the computation of pro forma net loss per share, basic and diluted, because their effect would have been anti-dilutive. |
Exhibit 99.5
Roth CH V Holdings, Inc.
INDEX TO THE FINANCIAL STATEMENTS
| Balance Sheet as of September 30, 2024 | 2 |
| Statement of Operations from June 24, 2024 (inception) to September 30, 2024 | 3 |
| Statement of Changes in Stockholder’s Deficit from June 24, 2024 (inception) to September 30, 2024 | 4 |
| Statement of Cash Flows from June 24, 2024 (inception) to September 30, 2024 | 5 |
| Notes to Financial Statements | 6-8 |
1
ROTH CH V HOLDINGS, INC.
BALANCE SHEET
| September 30, 2024 | ||||
| ASSETS | ||||
| Total current assets | $ | - | ||
| TOTAL ASSETS | $ | - | ||
| LIABILITIES AND STOCKHOLDER’S EQUITY | ||||
| Due to related party | $ | 12,583 | ||
| Total current liabilities | 12,583 | |||
| TOTAL LIABILITIES | $ | 12,583 | ||
| STOCKHOLDER’S DEFICIT | ||||
| Common stock, par value $0.01; 1 share authorized, issued and outstanding | - | |||
| Additional paid-in capital | - | |||
| Accumulated deficit | (12,583 | ) | ||
| Total stockholder’s deficit | (12,583 | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT | $ | - | ||
The accompanying notes are an integral part of these financial statements.
2
ROTH CH V HOLDINGS, INC.
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
For the period from June 24, 2024 (inception) to September 30, 2024
| | For
the Three Months Ended September 30, 2024 | For
the Period from June 24, 2024 (inception) to September 30, 2024 | ||||||
| Operating expenses | $ | 11,200 | $ | 12,583 | ||||
| Loss from operations | (11,200 | ) | (12,583 | ) | ||||
| Net loss | $ | (11,200 | ) | $ | (12,583 | ) | ||
| Weighted average shares outstanding, basic and diluted | 1 | 1 | ||||||
| Basic and diluted net loss per share of common stock | $ | (11,200 | ) | $ | (12,583 | ) | ||
The accompanying notes are an integral part of these financial statements.
3
ROTH CH V HOLDINGS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER’S DEFICIT
For the period from June 24, 2024 (inception) to September 30, 2024
| Common Stock | Additional | Accumulated | Total Stockholder’s | |||||||||||||||||
| Shares | Amount | Paid-in Capital | Deficit | Deficit | ||||||||||||||||
| Balance, June 24, 2024 (inception) | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Shares issued for common stock | 1 | - | - | - | - | |||||||||||||||
| Net loss | - | - | - | (1,383 | ) | (1,383 | ) | |||||||||||||
| Balance, June 30, 2024 | 1 | $ | - | $ | - | $ | (1,383 | ) | $ | (1,383 | ) | |||||||||
| Net loss | - | - | - | (11,200 | ) | (11,200 | ) | |||||||||||||
| Balance, September 30, 2024 | 1 | $ | - | $ | - | $ | (12,583 | ) | $ | (12,583 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
4
ROTH CH V HOLDINGS, INC.
STATEMENT OF CASH FLOWS
| For the period from June 24, 2024 (inception) to September 30, 2024 |
||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Net loss | $ | (12,583 | ) | |
| Adjustments to reconcile net income to net cash used in operations: | ||||
| Changes in operating assets and liabilities: | ||||
| Due to related party | 12,583 | |||
| CASH USED IN OPERATING ACTIVITIES | - | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | - | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | - | |||
| NET CHANGE IN CASH | ||||
| Cash, beginning of period | - | |||
| Cash, end of period | $ | - | ||
The accompanying notes are an integral part of these financial statements.
5
ROTH CH V HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
For the period from June 24, 2024 (inception) to September 30, 2024
Note 1. Organization
Description of Business
Roth CH V Holdings, Inc. (“the Company”) was incorporated in Nevada on June 24, 2024, and the Company’s registered office is at 888 San Clemente Drive, Suite 400, Newport Beach, CA. The Company was formed for the purpose of merging with Roth CH Acquisition V Co. (“ROCL”) prior to the transactions contemplated in the Business Combination Agreement and Plan of Reorganization, as defined below, to facilitate the consummation of the Business Combination.
Proposed Business Combination
On January 3, 2024, ROCL entered into a Business Combination Agreement and Plan of Reorganization (as it may be amended, supplemented or otherwise modified from time to time, the “Business Combination Agreement”), by and among ROCL, Roth CH V Merger Sub Corp., a Delaware corporation and a wholly owned subsidiary of ROCL (“Merger Sub”), and New Era Helium Corp, a Nevada corporation (“NEH”). Upon the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the Nevada Revised Statutes and the Delaware General Corporation Law, Merger Sub will merge with and into the NEH, with NEH surviving as a wholly owned subsidiary of ROCL (the “Merger”). Upon the closing of the transaction, subject to approval by ROCL’s stockholders and other customary closing conditions, the combined company will be named “New Era Helium Corp.” and is expected to list on The Nasdaq Stock Market.
On June 5, 2024, each of ROCL and NEH entered into the First Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Amendment”) pursuant to which, among other things:
| (a) | the Outside Date has been extended to September 30, 2024; | |
| (b) | the structure of the Business Combination has changed such that (i) ROCL will merge with and into the Company, a wholly owned subsidiary of ROCL (the “Initial Merger”), and the Company will be the survivor of the Initial Merger; (ii) the Company shall sign a joinder and become a party to the Merger Agreement; and (iii) immediately subsequent to the Initial Merger, Merger Sub will merge with and into NEH (the “Merger”), with NEH surviving the Merger as a wholly owned subsidiary of the Company; | |
| (c) | the closing condition that NEH raise at least $45 million in private placement of securities in order to fund its new plant construction has been removed, and the closing condition that certain indebtedness of NEH be converted into shares of common stock of NEH has been removed. |
On August 8, 2024, the Company and NEH entered into the Second Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Second Amendment”), pursuant to which, among other things:
| (a) | The Outside Date was extended to October 31, 2024; and | |
| (b) | The definition of “Company Merger Shares” and “Net Debt” were amended. |
On September 11, 2024, the Company and NEH entered into the Third Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Third Amendment”) pursuant to which, among other things:
| (a) | The definition of “Company Merger Shares” in Section 1.01 is amended to read as follows: “Company Merger Shares” means 9,000,000 shares of Holdings Common Stock which number shall be subject to adjustment based upon the Net Debt at closing in that is different from the Net Debt at the date of the Original Business Combination Agreement (the “Net Debt Variation”). For the avoidance of doubt, the Company Merger Shares do not include Earnout Shares in an amount up to 1,000,000 shares of Roth Common stock. For every dollar of decrease in the Net Debt Variation the Company Merger Shares shall be increased by 1/10 of one share and for every dollar of increase in the Net Debt Variation the Company Merger Shares shall be decreased by 1/10 of one share. | |
| (b) | The definition of “Net Debt” in Section 1.01 is amended to read as follows: “Net Debt means the total Indebtedness of NEH and the NEH Subsidiaries (excluding any existing Indebtedness that converts, exchanges or is exercised into share of capital stock of NEH) after subtracting all cash and liquid assets, which calculation shall be mutually agreed upon between NEH and Roth no later than three business days prior to Closing. In the event of any dispute with respect to such calculation, the parties shall promptly (and in no event more than 15 days after the Closing) engage a mutually agreed upon independent third party to resolve such dispute and make an independent determination of the Company Merger Shares and Net Debt. NEH shall make all work papers, back up materials, and financial staff involved in preparation of the calculations available to such third party. The cost of such third party shall be paid by Holdings. | |
| (c) | A new section 3.02(k) shall be added as follows: In the event that the parties are unable to mutually agree on the Company Merger Shares or Net Debt prior to the Closing, the number of shares in dispute shall not be distributed as part of the Per Share Merger Consideration at the Closing and shall only be distributed upon resolution of any dispute pursuant to Section 1.01 hereof. |
6
ROTH CH V HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
For the period from June 24, 2024 (inception) to September 30, 2024
On September 30, 2024, the Company and NEH entered into the Fourth Amendment to the Business Combination Agreement and Plan of Reorganization Amendment (the “Fourth Amendment”) pursuant to which, among other things the parties extended the Outside Date to November 30, 2024
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting rules and regulations of the SEC.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate is the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considering in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity date of three months or less when purchased to be cash equivalents. The Company did not have any cash or cash equivalents as of September 30, 2024.
Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
For purposes of calculating diluted loss per common stock, the denominator includes both the weighted- average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive.
Recently Issued Accounting Pronouncements
The Company has reviewed recently issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any recently issued pronouncements to have a material impact on its results of operations or financial position.
Note 3. Related Party Transactions
The Company’s stockholder is expected to pay the accrued expenses of the Company at the closing of the Business Combination.
7
ROTH CH V HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
For the period from June 24, 2024 (inception) to September 30, 2024
Note 4. Stockholder’s Deficit
Common stock
The Company is authorized to issue a total of 1 share of common stock with a par value of $0.01 each. As of September 30, 2024, there was 1 share of common stock issued and outstanding.
Each share of common stock entitles the holder to one vote.
Note 5. Subsequent events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the financial statements are issued. The Company did not identify any subsequent events, other than disclosed below, that would have required adjustment or disclosure in these unaudited financial statements.
Closing of Business Combination
On December 6, 2024 (the “Closing Date”), 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”) by and among New Era Helium Corp., a Nevada corporation, Roth CH Acquisition V Co., a Delaware corporation (“ROCL”), and Roth CH V Merger Sub, a Delaware corporation and a wholly-owned subsidiary of ROCL (“Merger Sub”), and subsequent amendments to the Business Combination Agreement. Pursuant to the Business Combination Agreement, Merger Sub merged with and into New Era Helium Corp., with New Era Helium Corp. surviving the Business Combination as a wholly owned subsidiary of ROCL.
8
Exhibit 99.6
FOR IMMEDIATE RELEASE
New Era Helium and Sharon AI Expand and Accelerate Plans for a Net-Zero Energy Data Center in the Permian Basin
MIDLAND, Texas – December 11, 2024. New Era Helium, Inc. (Nasdaq:NEHC) (“NEH,” “New Era Helium” or the “Company”), an exploration and production (E&P) company sourcing helium produced in association with natural gas reserves within the Permian Basin, is pleased to announce significant progress on its 50/50 joint venture (“JV”) with Sharon AI, Inc. (“Sharon AI”), a High-Performance Computing business specializing in Artificial Intelligence, Cloud GPU Compute Infrastructure, and Cloud Storage.
The two companies have executed a binding letter of intent (LOI) to develop and operate a 250MW net-zero energy data center in the Permian Basin, a significant increase from the originally announced 90MW facility [read here]. This expansion reflects heightened demand for power from potential off-takers and highlights the strategic importance of the planned data center in Texas. The project aligns with both companies’ commitment to leverage clean energy solutions and innovative technologies to address the growing needs of the high-growth data industry.
Key updates include:
| · | Binding LOI Signed: Sharon AI and New Era Helium have formalized their commitment by signing a binding Letter of Intent (LOI) from a previously announced non-binding LOI. |
| · | Increased Capacity: The proposed data center’s capacity has been significantly expanded to 250MW from 90MW following due diligence and discussions with prospective clients seeking access to additional electricity. |
| · | Location Finalized: After extensive evaluations, the joint venture has narrowed the site selection to a prime location within the prolific Permian Basin in West Texas. |
| · | Definitive Agreement Timeline: The companies anticipate formalizing the joint venture agreement on or before December 23, 2024. |
| · | Gas Supply Agreement: As part of the joint venture agreement, New Era Helium will enter into a gas supply agreement at a mutually agreed fixed cost for five years plus three options of five years each. |
Sharon AI will continue to be the exclusive AI/HPC provider and to design, build and operate the high density, liquid cooled, Tier III data center at the project site. Sharon AI also expects to work with its ecosystem relationships, including NVIDIA and Lenovo, on the data center, GPU, network architecture and design, which is expected to deliver optimal performance for AI/HPC training and inference workloads.
New Era Helium will be the exclusive provider and build partner of the energy infrastructure required to power the project, including gas-fired power plant design and construction, CO2 carbon capture and associated pipeline works.
The initial 250MW gas-fired power plant has the potential to significantly expand over time, with the JV partners working to identify project expansion opportunities, including with offtake partners, which may include hyperscalers and other large energy users.
E. Will Gray II, CEO of New Era Helium, Inc. commented: “This JV partnership with Sharon AI highlights our commitment to innovative energy solutions and represents a significant step forward, building on the momentum of our successful trading debut on Nasdaq this past Monday. Our public listing reflects New Era Helium’s ability to support today’s high-growth, in-demand industries with environmentally responsible energy solutions. Together with Sharon AI, we believe we are well-positioned to deliver cutting-edge energy infrastructure that meets the evolving demands of the AI-driven digital age.”
Wolf Schubert, CEO of Sharon AI Inc. commented: “We are excited that inital planning and scoping is now complete, marking a crucial step in our JV project with New Era Helium. We look forward to advancing into the engineering phase and engaging in further offtake discussions, which will bring us closer to delivering this groundbreaking net-zero energy data center in the Permian Basin.”
About New Era Helium, Inc.
New Era Helium, Inc. is an exploration and production company that sources helium produced in association with the production of natural gas reserves in North America. The company currently owns and operates over 137,000 acres in Southeast New Mexico and has over 1.5 billion cubic feet of proved and probable helium reserves. For more information, visit www.newerahelium.com. Follow New Era Helium on LinkedIn and X.
Investor and Media Contact:
Investor Relations
Jonathan.Paterson@harbor-access-com
Tel +1 475 477 9401
About Sharon AI, Inc.
Sharon AI, Inc. is a High-Performance Computing company focused on Artificial Intelligence, GPU Compute Infrastructure, and Cloud Data Storage. Sharon AI has a hybrid operational model that sees it deploy in Tier III and Tier IV co-location data centers as well as design, build and operate its own proprietary Tier III data center facilities. For more information, visit: www.sharonai.com
Media contact at info@sharonai.com
Cautionary Note Regarding Forward-Looking Statements
Some of the statements in this press release may be forward-looking statements or statements of future expectations based on currently available information. Such statements are naturally subject to risks and uncertainties. Factors such as the development of general economic conditions, future market conditions, unusual catastrophic loss events, changes in the capital markets and other circumstances may cause the actual events or results to be materially different from those anticipated by such statements. The Company does not make any representation or warranty, express or implied, as to the accuracy, completeness or updated status of such statements. Therefore, in no case whatsoever will the Company and its affiliates be liable to anyone for any decision made or action taken in conjunction with the information and/or statements in this press release or for any related damages.