| Summary of Significant Accounting Policies | Note
2. Summary of Significant Accounting Policies Principles
of Consolidation The
accompanying financial statements are consolidated and include the accounts of the Company and its wholly owned subsidiaries. Intercompany
balances and transactions have been eliminated in consolidation. Use
of Estimates The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. These
estimates and assumptions include estimates for reserves of uncollectible accounts, accruals for potential liabilities, estimates and
assumptions made in valuing assets and debt instruments issued in the Merger, and realization of deferred tax assets. Industry
Segment and Geographic Information We
currently operate in one industry segment, which is the acquisition and development of crude oil, natural gas and natural gas liquids.
All of our operations are conducted in the continental United States. Concentration
of Credit Risk Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents. The Company
places its cash with high quality financial institutions and at times may exceed the FDIC $ 250,000 The
Company does not anticipate incurring any losses related to these credit risks. Cash
and cash equivalents Cash
and cash equivalents are defined by the Company as short-term, highly liquid investments that have an original maturity of three months
or less and deposits in money market mutual funds that are readily convertible into cash. Management considers cash and cash equivalents
to have minimal credit and market risk. The Company had $ 4.0 $13.0 Accounts
receivable Accounts
receivable represents revenue recognized, but for which payment has not yet been received. The Company had no accounts receivable associated
with its continuing operations at March 31, 2024 or December 31, 2023. Note
receivable Note
receivable represents the amount due from the sale of the cryptocurrency mining assets (see Note 1) inclusive of accrued interest. The
note receivable balance was $ 951,760 zero Deferred financing costs Deferred financing costs represent
costs represent legal costs associated with a future revolving credit facility and future issuance of equity both expected to be completed
no later than December 31, 2024 and were $ 10,000 1.0 Property
and equipment We
follow the successful efforts method of accounting for our oil and natural gas properties. Under this method, exploration costs such
as exploratory geological and geophysical costs, expiration of unproved leasehold, delay rentals and exploration overhead are expensed
as incurred. All costs related to production, general corporate overhead and similar activities are also expensed as incurred. All property
acquisition costs and development costs are capitalized when incurred. Exploratory
drilling costs are initially capitalized, or suspended, pending the determination of proved reserves. If proved reserves are found, drilling
costs remain capitalized and are classified as proved properties. Costs of unsuccessful wells are charged to exploration expense. For
exploratory wells that find reserves that cannot be classified as proved when drilling is completed, costs continue to be capitalized
as suspended exploratory drilling costs if there have been sufficient reserves found to justify completion as a producing well and sufficient
progress is being made in assessing the reserves and the economic and operational viability of the project. If we determine that future
appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed. In some
instances, this determination may take longer than one year. We review the status of all suspended exploratory drilling costs quarterly.
Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of natural
gas and oil, are capitalized. Costs
of drilling and equipping successful wells, costs to construct or acquire facilities, and associated asset retirement costs are depreciated
using the unit-of-production (“UOP”) method based on total estimated proved developed oil and natural gas reserves. Costs
of acquiring proved properties, including leasehold acquisition costs transferred from unproved properties, are depleted using the UOP
method based on total estimated proved developed and undeveloped reserves. Proceeds
from the sales of individual oil and natural gas properties and the capitalized costs of individual properties sold or abandoned are
credited and charged, respectively, to accumulated depreciation, depletion and amortization, if doing so does not materially impact the
depletion rate of an amortization base. Generally, no gain or loss is recognized until an entire amortization base is sold. However,
a gain or loss is recognized from the sale of less than an entire amortization base if the disposition is significant enough to materially
impact the depletion rate of the remaining properties in the amortization base. When
circumstances indicate that the carrying value of proved oil and natural gas properties may not be recoverable, we compare unamortized
capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which
identifiable cash flows are independent of cash flows of other assets. If the expected undiscounted pre-tax future cash flows, based
on our estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant
data, are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value. Fair value is generally estimated
using the income approach described in Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 820,
Fair Value Measurements. If applicable, we utilize prices and other relevant information generated by market transactions involving assets
and liabilities that are identical or comparable to the item being measured as the basis for determining fair value. The expected future
cash flows used for impairment reviews and related fair value measurements are typically based on judgmental assessments of commodity
prices, pricing adjustments for differentials, operating costs, capital investment plans, future production volumes, and estimated proved
reserves, considering all available information at the date of review. These assumptions are applied to develop future cash flow projections
that are then discounted to estimated fair value, using a market-based weighted average cost of capital. Leases The
Company determines if a contract contains a lease at its inception or as a result of an acquisition. A lease is defined as a contract,
or part of a contract, that conveys the right to control the use of identified property, plant or equipment (an identified asset) for
a period of time in exchange for consideration. A right-of-use asset and corresponding lease liability are recognized on the balance
sheet at commencement at an amount based on the present value of the remaining lease payments over the lease term as determined using
the implicit rate of the lease. Operating right-of-use assets and operating lease liabilities are presented separately on the consolidated
balance sheet. The Company does not have any finance leases as of March 31, 2024 or December 31, 2023. Leases with an initial term of
twelve months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line
basis, and variable lease payments are recognized in the period as incurred. Certain
leases contain both lease and non-lease components. The Company has chosen to account for the lease and non-lease components separately. The
Company leases office space and vehicles under non-cancelable operating leases expiring through 2027. Certain lease agreements include
options to renew the lease, early terminate the lease or purchase the underlying asset(s). The Company determines the lease term at the
lease commencement date as the non-cancelable period of the lease, including options to extend or terminate the lease when such an option
is reasonably certain to be exercised. Warrant
liabilities The
Company evaluates all of its financial instruments, including issued private placement stock purchase warrants, to determine if such
instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to GAAP. The Company accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable
GAAP. Management’s assessment considers whether the warrants are freestanding financial instruments, whether they meet the definition
of a liability, and whether the warrants meet all of the requirements for equity classification. For
warrants that meet all of the criteria for equity classification, they are recorded as a component of additional paid-in capital at the
time of issuance. For warrants that are precluded from equity classification, they are recorded as a liability at their fair value on
the date of such classification and subject to remeasurement on each balance sheet date with changes in the estimated fair value of the
warrants to be recognized in the statements of operations. As
of March 31, 2024 and December 31, 2023, the Company had no Commitments
and Contingencies The
Company recognizes a liability for loss contingencies when it believes it is probable a liability has been incurred, and the amount can
be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within
the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount the Company accrues
the minimum amount in the range. Revenue
Recognition The
Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. The underlying principle of ASC 606 is
to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. Revenues
are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration
that we expect to receive in exchange for those goods or services. The Company applies the following five steps in order to determine
the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:
● identify
the contract with a customer;
● identify
the performance obligations in the contract;
● determine
the transaction price;
● allocate
the transaction price to performance obligations in the contract; and
● recognize
revenue as the performance obligation is satisfied. The
Company’s cryptocurrency mining assets that were in service during the three months ended March 31, 2024 until the Crypto Sale
were operating under a contract with Atlas Power Hosting, LLC (“Atlas”) whereby Atlas hosted, operated, and managed the
Company’s assets (the “Atlas MSA”). The Company received payment in U.S. dollars for the daily net mining revenue representing the dollar value
of the cryptocurrency award generated less power and other costs. The Company did not receive or own cryptocurrencies under this
contract. Upon
the Crypto Sale as described in Note 1, the Company no longer owns cryptocurrency mining
assets nor earns cryptocurrency mining revenues. Income
taxes We
account for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their respective tax basis. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. At March 31, 2024,
the Company had a full valuation allowance to offset its net deferred tax assets. Discontinued
Operations On
January 23, 2024, the Company sold all of its Mining Equipment (as defined herein) for consideration consisting of (i) $ 1.0 1.0 (i)
20% of the monthly net revenues received by the buyer associated with or otherwise attributable to the Mining Equipment until the
aggregate amount of such payments equals $250,000 and (ii) thereafter, 50% of the monthly net revenues received by the buyer
associated with or otherwise attributable to the Mining Equipment until the aggregate amount of such payments equals the Deferred
Purchase Price, plus accrued interest. 1.1 The
related assets and liabilities associated with the discontinued operations in our condensed consolidated balance sheets for the three
months ended March 31, 2024 and the year ended December 31, 2023, are classified as discontinued operations. Additionally, the financial
results associated with discontinued operations are classified as discontinued operations in our condensed consolidated statements of
operations and condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023. Earnings
(Loss) Per Common Share The
two-class method of computing earnings per share is required for entities that have participating securities. The two-class method
is an earnings allocation formula that determines earnings per share for participating securities according to dividends declared
(or accumulated) and participation rights in undistributed earnings. Our Series D Preferred Stock and Series E Preferred Stock (each
as defined herein) are participating securities. These participating securities do not have a contractual obligation to share in the
Company’s losses. Therefore, in periods of net loss, no portion of such losses are allocated to participating
securities. Basic
earnings (loss) per common share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders
by the weighted average number of shares of common stock outstanding each period. Dilutive EPS is calculated by dividing adjusted net
income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding each period, which
includes the effect of potentially dilutive securities. Potentially dilutive securities for the diluted EPS calculation consists of (i)
Series D Preferred Stock, (ii) Series E Preferred Stock (iii) warrants for common stock and (iv) exercisable common stock options. Diluted
EPS reflects the dilutive effect of the participating securities using the two-class method or the treasury stock method, whichever is
more dilutive. Basic
and diluted earnings (loss) attributable to common stockholders is the same for the three months ended March 31, 2024 because the Company
has only incurred losses and all potentially dilutive securities are anti-dilutive. Potentially dilutive securities that were not included
in the computation of diluted earnings (loss) attributable to common stockholders at March 31, 2024 because their inclusion would be
anti-dilutive are as follows: Schedule
of Anti-dilutive Securities Excluded from Earnings Per Share
Potentially
Dilutive Security Quantity Stated
Value Per Share Total
Value or Stated Value Assumed Conversion
Price Resulting
Common Shares
Merger
Options and restricted stock units (1) 8,547,574 $ — $ — $ — 547,574
Common
stock warrants 365,323,672 — — — 12,775,829
Series
D preferred stock 19,402 1,000 19,402,130 5.00 3,880,426
Series
E preferred stock 20,000 1,000 20,000,000 5.00 4,000,000
Total 21,203,829
(1) Not
exercisable or vested as of March 31, 2024 (see Notes 13 and 14). As
of and for the three months ended March 31, 2023, there were no potentially dilutive units exercisable and outstanding. Related
parties The
Company follows ASC 850-10, Related Parties, for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20, the related parties include: (a) affiliates of the Company (“affiliate” means, with respect
to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by
or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act of 1933,
as amended); (b) entities for which investments in their equity securities would be required, absent
the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity
method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by
or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which
the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent
that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can
significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of
the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented
from fully pursuing its own separate interests. Recently
Issued Accounting Pronouncements Recent
accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants,
and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future consolidated financial statements. |
