Annual report
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to EON Resources, Inc(Exact name of registrant as specified in its charter) Delaware 001-41278 85- 4359124(State or other jurisdiction of incorporation or organization) (Commission File Number) (I.R.S. Employer Identification Number) 3730 Kirby Drive, Suite 1200 Houston, TX 77098(Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (713) 834-1145 HNR Acquisition Corp.(Former name or former address, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class: Trading Symbol: Name of Each Exchange on Which Registered:Class A Common Stock, par value $0.0001 per share EONR NYSE American LLCWarrants, each whole warrant exercisable for three quartersof one share of Class A Common Stock at an exercise price of$11.50 per whole share EONR.WS NYSE American LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) duringthe preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “largeaccelerated filer,” “accelerated filer, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standardsprovided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error topreviously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that require a recovery analysis of incentive-based compensation received by any of the registrant’s executive officersduring the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the Registrant was approximately $8.3 million based on the last sale price on June 28, 2024. As of April 15, 2025, 18,312,626 shares of Class A Common Stock, par value $0.0001 per share, and 0 shares of Class B Common Stock, par value $0.0001 per share, were issued and outstanding.
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TABLE OF CONTENTS PAGECAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS iii PART I 1 Item 1 Business 1Item 1.A. Risk Factors 25Item 1.B. Unresolved Staff Comments 48Item 1.C. Cybersecurity 48Item 2. Properties 49Item 3. Legal Proceedings 49Item 4. Mine Safety Disclosures 49 PART II 50 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 50Item 6. [Reserved] 51Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 52Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61Item 8. Financial Statements and Supplementary Data 61Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 61Item 9A. Controls and Procedures 61Item 9B. Other Information. 62Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections. 62 PART III 63 Item 10. Directors, Executive Officers and Corporate Governance 63Item 11. Executive Compensation 69Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 79Item 13. Certain Relationships and Related Transactions, and Director Independence 80Item 14. Principal Accountant Fees and Services 82 PART IV 83 Item 15. Exhibits and Financial Statement Schedules 83Item 16. Form 10-K Summary 85 i
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CERTAIN TERMS Unless otherwise stated in this Annual Report on Form 10-K (this “Report”), or the context otherwise requires, references to: ● “Class A Common Stock” is to our Class A Common Stock, par value $0.0001 per share; ● “Class B Common Stock” is to our Class B Common Stock, par value $0.0001 per share; ● “founder shares” are to shares of our Class A Common Stock initially purchased by our sponsor in a private placement prior to our Initial Public Offering; ● “initial business combination” or “Purchase” refers to the completion of our initial business combination on November 15, 2023, pursuant to the closing of the transactions contemplated by theMIPA whereby we acquired (through our subsidiaries) 100% of the outstanding membership interests of EON Resources, LLC, a Texas limited liability company (“EON” or the “Target”); ● “Initial Public Offering” refers to the Initial Public Offering closed on February 15, 2022; ● “initial stockholders” are to our holders of our founder shares prior to our Initial Public Offering (or their permitted transferees); ● “management” or our “management team” are to our officers and directors; ● “MIPA” means that that certain Amended and Restated Membership Interest Purchase Agreement, dated August 28, 2023, as amended (the “MIPA”), by and among us, HNRA Upstream, LLC, anewly formed Delaware limited liability company which is managed by us, and is a subsidiary of ours (“OpCo”), and HNRA Partner, Inc., a newly formed Delaware corporation and whollyowned subsidiary of ours (“SPAC Subsidiary”, and together with us and OpCo, “Buyer” and each a “Buyer”), CIC EON LP, a Delaware limited partnership (“CIC”), DenCo Resources, LLC, aTexas limited liability company (“DenCo”), EON Resources Management, LLC, a Texas limited liability company (“EON Management”), 4400 Holdings, LLC, a Texas limited liability company(“4400” and, together with CIC, DenCo and EON Management, collectively, “Seller” and each a “Seller”), and, solely with respect to Section 6.20 of the MIPA, Sponsor. ● “Predecessor” refers to the historical business of EON prior to the Purchase on November 15, 2023. ● “private placement units” are to the units issued to our sponsor in a private placement simultaneously with the closing of our Initial Public Offering; ● “private placement warrants” are to the warrants sold as part of the private placement units, and to any private placement warrants or warrants issued in connection with working capital loans thatwere sold to third parties, our executive officers, or our directors (or permitted transferees). ● “public shares” are to shares of our Class A Common Stock sold as part of the units in our Initial Public Offering (whether they were purchased in our Initial Public Offering or thereafter in theopen market); ● “public stockholders” are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our managementteam purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares; ● “public warrants” are to our redeemable warrants sold as part of the units in our Initial Public Offering (whether they were purchased in our Initial Public Offering or thereafter in the openmarket); ● “Sponsor” refers to HNRAC Sponsors, LLC, a Delaware limited liability company; ● “warrants” are to our redeemable warrants, which includes the public warrants as well as the private placement warrants to the extent they are no longer held by the initial purchasers of theprivate placement units or their permitted transferees; ● “HNR” and “HNRA” are to the Company prior to the date of the Company’s name change on September 17, 2024. ● “Registrant,” “we,” “us,” “company”, “our company”, “EON”, “EON Resources” and “Successor” are to EON Resources, Inc. (and the business of EON which became the business of theCompany after giving effect to the Purchase). ii
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Some statements contained in this Report may constitute “forward-looking statements” for purposes of United States federal securities laws. Our forward-looking statements include, but are not limited to,statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or othercharacterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”“intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words doesnot mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about: ● our expectations around the performance of our business; ● our success in retaining or recruiting, or changes required in, our officers, key employees or directors; ● our potential ability to obtain additional financing; ● the level of production on our properties; ● overall and regional supply and demand factors, delays, or interruptions of production; ● our public securities’ potential liquidity and trading; ● the lack of a market for our securities; ● competition in the oil and natural gas industry; ● the trust account not being subject to claims of third parties; or ● future operating results. The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance thatfuture developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or otherassumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are notlimited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results mayvary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information,future events or otherwise, except as may be required under applicable securities laws. These risks and others described under “Risk Factors” may not be exhaustive. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you thatforward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate maydiffer materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, anddevelopments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results ordevelopments in subsequent periods. iii
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SUMMARY OF SIGNIFICANT RISKS AFFECTING OUR COMPANY Our business is subject to multiple risks and uncertainties, as more fully described in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. We urge you to read the disclosures under thecaption “Risk Factors” and this Annual Report in full. Our significant risks may be summarized as follows: ● Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”EON ● The Company’s producing properties are located in the Permian Basin, making it vulnerable to risks associated with operating in a single geographic area. ● Title to the properties in which EON is acquiring an interest may be impaired by title defects. ● EON depends on various services for the development and production activities on the properties it operates. Substantially all EON’s revenue is derived from these producing properties. Areduction in the expected number of wells to be developed on EON’s acreage by or the failure of EON to develop and operate the wells on its acreage could have an adverse effect on its results ofoperations and cash flows adequately and efficiently. ● EON’s identified development activities are susceptible to uncertainties that could materially alter the occurrence or timing of their development activities. ● Acquisitions and EON’s development of EON’s leases will require substantial capital, and our company may be unable to obtain needed capital or financing on satisfactory terms or at all. ● EON currently plans to enter hedging arrangements with respect to the production of crude oil, and possibly natural gas which is a smaller portion of the reserves. EON will mitigate the exposureto the impact of decreases in the prices by establishing a hedging plan and structure that protects the earnings to a reasonable level, and the debt service requirements. ● EON’s estimated reserves are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affectthe quantities and present value of its reserves. ● We believe EON currently has ineffective internal control over its financial reporting. iv
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● A substantial majority of EON’s revenues from crude oil and gas producing activities are derived from its operating properties that are based on the price at which crude oil and natural gasproduced from the acreage underlying its interests are sold. Prices of crude oil and natural gas are volatile due to factors beyond EON’s control. A substantial or extended decline in commodityprices may adversely affect EON’s business, financial condition, results of operations and cash flows. ● If commodity prices decrease to a level such that EON’s future undiscounted cash flows from its properties are less than their carrying value, EON may be required to take write-downs of thecarrying values of its properties. ● The unavailability, high cost or shortages of rigs, equipment, raw materials, supplies or personnel may restrict or result in increased costs to develop and operate EON’s properties. ● The marketability of crude oil and natural gas production is dependent upon transportation and processing and refining facilities, which EON cannot control. Any limitation in the availability ofthose facilities could interfere with EON’s ability to market its production and could harm EON’s business. ● Drilling for and producing crude oil and natural gas are high-risk activities with many uncertainties that may materially adversely affect EON’s business, financial condition, results of operationsand cash flows. ● Crude oil and natural gas operations are subject to various governmental laws and regulations. Compliance with these laws and regulations can be burdensome and expensive for EON, and failureto comply could result in EON incurring significant liabilities, either of which may impact its willingness to develop EON’s interests. ● Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could cause EON to incur increased costs, additional operating restrictions or delays and have fewer potentialdevelopment locations. ● The unaudited pro forma condensed consolidated combined financial information and EON’s respective unaudited forecasted financial information included in this report may not be indicative ofwhat the actual financial position or results of operations would have been or will be. Our future results following the Purchase may differ, possibly materially, from the unaudited pro formacondensed consolidated combined financial information and EON’s respective unaudited forecasted financial information presented in this report. ● The historical financial results of EON and the unaudited pro forma condensed consolidated combined financial information included elsewhere in this report may not be indicative of whatEON’s actual financial position or results of operations would have been if it were a public company. v
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PART I ITEM 1. BUSINESS Overview EON Resources, Inc. (formerly HNR Acquisition Corp) (the “Company” or “EON”), was incorporated in Delaware as a blank check company formed for the purpose of effecting a merger, capital stockexchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities. Prior to closing the Purchase, our efforts were limited to organizationalactivities, completion of an initial public offering and the evaluation of possible business combinations. On February 15, 2022, we consummated the Initial Public Offering of 7,500,000 units (the“Units”), at $10.00 per Unit, generating proceeds of $75,000,000. Additionally, the underwriter fully exercised its option to purchase 1,125,000 additional Units, for which we received cash proceeds of$11,250,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 505,000 private placement units at a price of $10.00 per unit generating proceeds of $5,050,000 ina private placement to our Sponsor and EF Hutton (formerly Kingswood Capital Markets) (“EF Hutton”). On April 4, 2022, the Units separated into Class A Common Stock and warrants, and ceasedtrading. On April 4, 2022, the Class A Common Stock and warrants commenced trading on the NYSE American. On September 16, 2024, the Company filed a Certificate of Amendment (the “Certificateof Amendment”) to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to change the Company’s name from “HNR Acquisition Corp” to “EONResources Inc.”, effective on September 17, 2024. We identified as the initial target for our initial business combination. Our efforts to identify a prospective target business were limited to a particular industry or geographic region. While we werepermitted to pursue an acquisition opportunity in any industry or sector, we focused on assets used in exploring, developing, producing, transporting, storing, gathering, processing, fractionating, refining,distributing or marketing of natural gas, natural gas liquids, crude oil or refined products in North America. Purchase On December 27, 2022, we, entered into a Membership Interest Purchase Agreement (the “Original MIPA”) with CIC Pogo LP, a Delaware limited partnership (“CIC”), DenCo Resources, LLC, a Texaslimited liability company (“DenCo”), Pogo Resources Management, LLC, a Texas limited liability company (“Pogo Management”), 4400 Holdings, LLC, a Texas limited liability company (“4400” and,together with CIC, DenCo and Pogo Management, collectively, “Seller” and each a “Seller”), and, solely with respect to Section 7.20 of the Original MIPA, HNRAC Sponsors LLC, a Delaware limitedliability company (“Sponsor”). On August 28, 2023, we, HNRA Upstream, LLC, a newly formed Delaware limited liability company which is managed by us, and is a subsidiary of ours (“OpCo”), andHNRA Partner, Inc., a newly formed Delaware corporation and wholly owned subsidiary of ours (“SPAC Subsidiary”, and together with us and OpCo, “Buyer” and each a “Buyer”), entered into anAmended and Restated Membership Interest Purchase Agreement (the “A&R MIPA”) with Seller, and, solely with respect to Section 6.20 of the A&R MIPA, the Sponsor, which amended and restated theOriginal MIPA in its entirety (as amended and restated, the “MIPA”). Our stockholders approved the transactions contemplated by the MIPA at a special meeting of stockholders that was originallyconvened October 30, 2023, adjourned, and then reconvened on November 13, 2023 (the “Special Meeting”). On November 15, 2023 (the “Closing Date”), as contemplated by the MIPA: ● We filed a Second Amended and Restated Certificate of Incorporation (the “Second A&R Charter”) with the Secretary of State of the State of Delaware, pursuant to which the number ofauthorized shares of our capital stock, par value $0.0001 per share, was increased to 121,000,000 shares, consisting of (i) 100,000,000 shares of Class A Common Stock, (ii) 20,000,000 shares ofClass B Common Stock, and (iii) 1,000,000 shares of preferred stock, par value $0.0001 per share; ● Our shares of common stock were reclassified as Class A Common Stock; the Class B Common Stock has no economic rights but entitles its holder to one vote on all matters to be voted on bystockholders generally; holders of shares of Class A Common Stock and shares of Class B Common Stock will vote together as a single class on all matters presented to our stockholders for theirvote or approval, except as otherwise required by applicable law or by the Second A&R Charter; 1
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● (A) We contributed to OpCo (i) all of our assets (excluding our interests in OpCo and the aggregate amount of cash required to satisfy any exercise by our stockholders of their RedemptionRights (as defined below)) and (ii) 2,000,000 newly issued shares of Class B Common Stock (such shares, the “Seller Class B Shares”) and (B) in exchange therefor, OpCo issued to us a numberof Class A common units of OpCo (the “OpCo Class A Units”) equal to the number of total shares of Class A Common Stock issued and outstanding immediately after the closing (the“Closing”) of the transactions contemplated by the MIPA (following the exercise by EON stockholders of their Redemption Rights) (such transactions, the “SPAC Contribution”); and ● Immediately following the SPAC Contribution, OpCo contributed $900,000 to SPAC Subsidiary in exchange for 100% of the outstanding common stock of SPAC Subsidiary (the “SPACSubsidiary Contribution”); ● Immediately following the SPAC Subsidiary Contribution, Seller sold, contributed, assigned, and conveyed to (A) OpCo, and OpCo acquired and accepted from Seller, ninety-nine percent(99.0%) of the outstanding membership interests of Pogo Resources, LLC, a Texas limited liability company (“Pogo” or the “Target”), and (B) SPAC Subsidiary, and SPAC Subsidiary purchasedand accepted from Seller, one percent (1.0%) of the outstanding membership interest of Target (together with the ninety-nine percent (99.0%) interest, the “Target Interests”), in each case, inexchange for (x) $900,000 of the Cash Consideration (as defined below) in the case of SPAC Subsidiary and (y) the remainder of the Aggregate Consideration (as defined below) in the case ofOpCo (such transactions, together with the SPAC Contribution and SPAC Subsidiary Contribution and the other transactions contemplated by the MIPA, the “Purchase”). The “Aggregate Consideration” for the Target Interests was: (a) cash in the amount of $31,074,127 in immediately available funds (the “Cash Consideration”), (b) 2,000,000 Class B common units ofOpCo (“OpCo Class B Units”) valued at $10.00 per unit (the “Common Unit Consideration”), which will be equal to and exchangeable into 2,000,000 shares of Class A Common Stock issuable uponexercise of the OpCo Exchange Right (as defined below), as reflected in the amended and restated limited liability company agreement of OpCo that became effective at Closing (the “A&R OpCo LLCAgreement”), (c) the Seller Class B Shares, (d) $15,000,000 payable through a promissory note to Seller (the “Seller Promissory Note”), (e) 1,500,000 preferred units (the “OpCo Preferred Units” andtogether with the Opco Class A Units and the OpCo Class B Units, the “OpCo Units”) of OpCo (the “Preferred Unit Consideration”, and, together with the Common Unit Consideration, the “UnitConsideration”), and (f) an agreement for Buyer, on or before November 21, 2023, to settle and pay to Seller $1,925,873 from sales proceeds received from oil and gas production attributable to Pogo,including pursuant to its third party contract with affiliates of Chevron. At Closing, 500,000 Seller Class B Shares (the “Escrowed Share Consideration”) were placed in escrow for the benefit of Buyerpursuant to an escrow agreement and the indemnity provisions in the MIPA. The Aggregate Consideration is subject to adjustment in accordance with the MIPA. In connection with the Purchase, holders of 3,323,707 shares of common stock sold in EON’s initial public offering (the “public shares”) properly exercised their right to have their public shares redeemed(the “Redemption Rights”) for a pro rata portion of the trust account (the “Trust Account”) which held the proceeds from EON’s initial public offering, funds from EON’s payments to extend the time toconsummate a business combination and interest earned, calculated as of two business days prior to the Closing, which was approximately $10.95 per share, or $49,362,479 in the aggregate. Theremaining balance in the Trust Account (after giving effect to the Redemption Rights) was $12,979,300. Immediately upon the Closing, Pogo Royalty exercised the OpCo Exchange Right as it relates to 200,000 OpCo Class B units (and 200,000 shares of Class B Common Stock). After giving effect to thePurchase, the redemption of public shares as described above and the exchange mentioned in the preceding sentence, were (i) 5,097,009 shares of Class A Common Stock issued and outstanding, (ii)1,800,000 shares of Class B Common Stock issued and outstanding and (iii) no shares of preferred stock issued and outstanding. The Class A Common Stock and EON warrants continue to trade, but now as an operating company, on the NYSE American under the symbols “EONR” and “EONR.WS”. 2
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First Amendment to Amended and Restated Membership Interest Purchase Agreement On November 15, 2023, Buyer, Seller, and Sponsor entered into the MIPA Amendment, whereby the Parties agreed to extend the outside date for the transaction to November 30, 2023, and to place500,000 shares of Seller Class B Shares into escrow instead of 500,000 OpCo Class B Units. Settle Up Letter Agreement On November 15, 2023, Buyer and Seller entered into the Settle Up Letter Agreement, whereby Seller agreed to accept a minimum amount of cash at Closing less than $33,000,000, provided that, on orbefore November 21, 2023, Buyer must settle and pay to Seller $1,925,873 from sales proceeds received from oil and gas production attributable to Pogo, including pursuant to its third party contract withaffiliates of Chevron. OpCo A&R LLC Agreement In connection with the Closing, EON and Pogo Royalty, LLC, a Texas limited liability company, an affiliate of Seller and Seller’s designated recipient of the Aggregate Consideration (“Pogo Royalty”),entered into an amended and restated limited liability company agreement of OpCo (the “OpCo A&R LLC Agreement”). Pursuant to the A&R OpCo LLC Agreement, each OpCo unitholder (excludingEON) will, subject to certain timing procedures and other conditions set forth therein, have the right (the “OpCo Exchange Right”) to exchange all or a portion of its OpCo Class B Units for, at OpCo’selection, (i) shares of Class A Common Stock at an exchange ratio of one share of Class A Common Stock for each OpCo Class B Unit exchanged, subject to conversion rate adjustments for stock splits,stock dividends and reclassifications and other similar transactions, or (ii) an equivalent amount of cash. Additionally, the holders of OpCo Class B Units will be required to exchange all of their OpCoClass B Units (a “Mandatory Exchange”) upon the occurrence of the following: (i) upon the direction of EON with the consent of at least fifty percent (50%) of the holders of OpCo Class B Units; or(ii) upon the one-year anniversary of the Mandatory Conversion Trigger Date. In connection with any exchange of OpCo Class B Units pursuant to the OpCo Exchange Right or acquisition of OpCoClass B Units pursuant to a Mandatory Exchange, a corresponding number of shares of Class B Common Stock held by the relevant OpCo unitholder will be cancelled. The OpCo Preferred Units will be automatically converted into OpCo Class B Units on the two-year anniversary of the issuance date of such OpCo Preferred Units (the “Mandatory Conversion TriggerDate”) at a rate determined by dividing (i) $20.00 per unit (the “Stated Conversion Value”), by (ii) the Market Price of the Class A Common Stock (the “Conversion Price”). The “Market Price” means thesimple average of the daily VWAP of the Class A Common Stock during the five (5) trading days prior to the date of conversion. On the Mandatory Conversion Trigger Date, EON will issue a number ofshares of Class B Common Stock to Pogo Royalty equivalent to the number of OpCo Class B Units issued to Pogo Royalty. If not exchanged sooner, such newly issued OpCo Class B Units shallautomatically exchange into Class A Common Stock on the one-year anniversary of the Mandatory Conversion Trigger Date at a ratio of one OpCo Class B Unit for one share of Class Common Stock. Anequivalent number of shares of Class B Common Stock must be surrendered with the OpCo Class B Units to us in exchange for the Class A Common Stock. As noted above, the OpCo Class B Units mustbe exchanged upon the one-year anniversary of the Mandatory Conversion Trigger Date. Promissory Note In connection with the Closing, OpCo issued the Seller Promissory Note to Pogo Royalty in the principal amount of $15,000,000. The Seller Promissory Note provides for a maturity date that is six(6) months from the Closing Date, bears an interest rate equal to 12% per annum, and contains no penalty for prepayment. If the Seller Promissory Note is not repaid in full on or prior to its statedmaturity date, OpCo will owe interest from and after default equal to the lesser of 18% per annum and the highest amount permissible under law, compounded monthly. The Seller Promissory Note issubordinated to the Term Loan (as defined herein). 3
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Registration Rights Agreement In connection with the Closing, EON and Pogo Royalty entered into a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant to which EON has agreed to provide Pogo Royaltywith certain registration rights with respect to the shares of Class A Common Stock issuable upon exercise of the OpCo Exchange Right, including filing with the SEC an initial registration statement onForm S-1 covering the resale by the Pogo Royalty of the shares of Class A Common Stock issuable upon exercise of the OpCo Exchange Right so as to permit their resale under Rule 415 under theSecurities Act, no later than thirty (30) days following the Closing, use its commercially reasonable efforts to have the initial registration statement declared effective by the SEC as soon as reasonablypracticable following the filing thereof with the SEC, and use commercially reasonable efforts to convert the Form S-1 (and any subsequent registration statement) to a shelf registration statement onForm S-3 as promptly as practicable after EON is eligible to use a Form S-3 Shelf. In certain circumstances, Pogo Royalty can demand our assistance with underwritten offerings, and Pogo Royalty will be entitled to certain piggyback registration rights. Option Agreement In connection with the Closing, EON, HNRA Royalties, LLC, a newly formed Delaware limited liability company and wholly owned subsidiary of EON (“HNRA Royalties”) and Pogo Royalty enteredinto an Option Agreement (the “Option Agreement”). Pogo Royalty owns certain overriding royalty interests in certain oil and gas assets owned by Pogo (the “ORR Interest”). Pursuant to the OptionAgreement, Pogo Royalty granted irrevocable and exclusive option to HNRA Royalty to purchase the ORR Interest for the Option Price (as defined below) at any time prior to November 15, 2024. Theoption is not exercisable while the Seller Promissory Note is outstanding. The purchase price for the ORR Interest upon exercise of the option is: (i) (1) $30,000,000 the (“Base Option Price”), plus (2) an additional amount equal to interest on the Base Option Price of twelvepercent (12%), compounded monthly, from the Closing Date through the date of acquisition of the ORR Interest, minus (ii) any amounts received by Pogo Royalty in respect of the ORR Interest from themonth of production in which the effective date of the Option Agreement occurs through the date of the exercise of the option (such aggregate purchase price, the “Option Price”). The Option Agreement and the option will immediately terminate upon the earlier of (a) Pogo Royalty’s transfer or assignment of all of the ORR Interest in accordance with the Option Agreement and(b) November 15, 2024. Pursuant to the Option Agreement, upon execution, EON issued to Pogo Royalty 10,000 shares of Class A Common Stock. Director Nomination and Board Observer Agreement In connection with the Closing, we entered into Director Nomination and Board Observer Agreement (the “Board Designation Agreement”) with CIC. Pursuant to the Board Designation Agreement, CIChas the right, at any time CIC beneficially owns our capital stock, to appoint two board observers to attend all meetings of our Board of Directors. In addition, after the time of the conversion of the OpCoPreferred Units owned by Pogo Royalty, CIC will have the right to nominate a certain number of members of the board of directors depending on Pogo Royalty’s ownership percentage of Class ACommon Stock as further provided in the Board Designation Agreement. Backstop Agreement In connection with the Closing, EON entered a Backstop Agreement (the “Backstop Agreement”) with Pogo Royalty and certain of EON’s founders listed therein (the “Founders”) whereby Pogo Royaltywill have the right (“Put Right”) to cause the Founders to purchase Pogo Royalty’s OpCo Preferred Units at a purchase price per unit equal to $10.00 per unit plus the product of (i) the number of dayselapsed since the effective date of the Backstop Agreement and (ii) $10.00 divided by 730. Seller’s right to exercise the Put Right will survive for six (6) months following the date the Trust Shares (asdefined below) are not restricted from transfer under the Letter Agreement (as defined in the MIPA) (the “Lockup Expiration Date”). 4
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As security that the Founders will be able to purchase the OpCo Preferred Units upon exercise of the Put Right, the Founders agreed to place at least 1,300,000 shares of Class A Common Stock intoescrow (the “Trust Shares”), which the Founders can sell or borrow against to meet their obligations upon exercise of the Put Right, with the prior consent of Seller. EON is not obligated to purchase theOpCo Preferred Units from Pogo Royalty under the Backstop Agreement. Until the Backstop Agreement is terminated, Pogo Royalty and its affiliates are not permitted to engage in any transaction whichis designed to sell short the Class A Common Stock or any other publicly traded securities of EON. Founder Pledge Agreement In connection with the Closing, EON entered a Founder Pledge Agreement (the “Founder Pledge Agreement”) with the Founders whereby, in consideration of placing the Trust Shares into escrow andentering into the Backstop Agreement, EON agreed: (a) by January 15, 2024, to issue to the Founders an aggregate number of newly issued shares of Class A Common Stock equal to 10% of the numberof Trust Shares; (b) by January 15, 2024, to issue to the Founders number of warrants to purchase an aggregate number of shares of Class A Common Stock equal to 10% of the number of Trust Shares,which such warrants shall be exercisable for five years from issuance at an exercise price of $11.50 per shares; (c) if the Backstop Agreement is not terminated prior to the Lockup Expiration Date, toissue an aggregate number of newly issued shares of Class A Common Stock equal to (i) (A) the number of Trust Shares, divided by (B) the simple average of the daily VWAP of the Class A CommonStock during the five (5) Trading Days prior to the date of the termination of the Backstop Agreement, subject to a minimum of $6.50 per share, multiplied by (C) a price between $10.00-$13.00 per share(as further described in the Founder Pledge Agreement), minus (ii) the number of Trust Shares; and (d) following the purchase of OpCo Preferred Units by a Founder pursuant to the Put Right, to issue anumber of newly issued shares of Class A Common Stock equal to the number of Trust Shares sold by such Founder. Until the Founder Pledge Agreement is terminated, the Founders are not permitted toengage in any transaction which is designed to sell short the Class A Common Stock or any other publicly traded securities of EON. Purchase, Sale, Termination and Exchange Agreement On February 10, 2025, the Company entered into a Purchase, Sale, Termination and Exchange Agreement (the “Agreement”), by and among the Company, OpCo, SPAC Subsidiary, HNRA Royalties,Pogo Royalty, CIC, DenCo, Pogo Management, and 4400. The closing of the transactions contemplated by the Agreement (the “Closing”) is subject to the satisfaction of various conditions, including theCompany obtaining financing. Pursuant to the Agreement, the Company agreed to purchase the ORRI from Pogo Royalty for $14,000,000, payable in cash at the Closing. In addition, at the Closing, Pogo Royalty agreed to waive alloutstanding interest accrued under the Seller Note, reduce the outstanding principal amount of the Seller Note to $8,000,000 and settle and discharge the Seller Note in exchange for the payment of$8,000,000 in cash. Pogo Royalty further agreed to assign and transfer the OpCo Preferred Units to OpCo in exchange for the issuance by the Company of 3,000,000 shares of Class A Common Stock atthe Closing. As consideration for entering into the Agreement, the Company agreed to release the Escrow Shares to Pogo Royalty and to promptly process any exchange notice delivered by Pogo Royalty to exchangethe Escrow Share for shares of Class A Common Stock, and Pogo Royalty agreed to deliver such exchange notice within two days of the date of the Agreement. The Agreement contains customaryrepresentations, warranties, indemnification provisions closing conditions, and covenants. The Closing is contingent upon the occurrence of certain conditions, including (i) the availability of financing to the Company, (ii) the receipt by Pogo Royalty of a consent of First International Bank &Trust to the Agreement and a written termination agreement, executed by the Company and First International Bank & Trust, terminating that certain Subordination Agreement, dated as of November 15,2023, by and among First International Bank & Trust, the Company and Pogo Royalty, (iii) the receipt by the Company of any required stockholder consents, (iv) the respective representations andwarranties of the parties being true and correct, subject to certain materiality exceptions and (v) the performance by the parties in all material respects of their respective obligations under the Agreement. The Agreement may be terminated at any time by mutual consent of the parties thereto or by any one party if the counterparty is in material breach of the Agreement. If the Closing does not occur prior to1:00 p.m. Central Time on June 3, 2025, the Agreement will automatically terminate. No assurances can be made that the Company will satisfy these conditions or that the Closing will otherwise occur. 5
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Overview Pogo is an exploration and production company that began operations in February 2017. Pogo is based in Dallas, Texas, and a field office in Loco Hills, New Mexico. As of December 31, 2024, ouroperating focus is the Northwest Shelf of the Permian Basin, with a specific emphasis on oil and gas producing properties located in the Grayburg-Jackson Field in Eddy County, New Mexico. Pogo is theOperator of Record of its oil and gas properties, operating its properties through its wholly owned subsidiary, LH Operating LLC. Pogo completed multiple acquisitions in 2018 and 2019. Theseacquisitions included multiple producing properties in Lea and Eddy counties, New Mexico. In 2020, after identifying its core development property, Pogo successfully completed a series of divestures ofits non-core properties. Then, with one key asset, its Grayburg-Jackson Field in Eddy County, New Mexico, Pogo focused all of its efforts on developing this asset. This has been Pogo’s focus for 2022and 2023. Currently, we have 12 employees (5 executive officers where 4 are in Houston and 1 in Lubbock; 7 field staff in Loco Hills). From time to time, on an as needed basis, contract workers handle additionalnecessary responsibilities. Pogo owns, manages, and operates, through its wholly owned subsidiary, LH Operating, LLC, 100% working interest in a gross 13,700 acres located on the Northwest Shelf of the prolific oil and gasproducing Permian Basin. Pogo benefits from cash flow growth through continued development of its working interest’s ownership, with relatively low capital cost and lease operating expenses. As ofDecember 31, 2024, average net daily production associated with Pogo’s working interests was 811 barrel of oil equivalent (“BOE”) per day consisting of 86% oil and 14% natural gas. Pogo expects tocontinue to grow its cash flow by production enhancements in its operations on its gross 13,700-acre leasehold. Furthermore, Pogo intends to make additional acquisitions within the Permian Basin, aswell as other oil and gas producing regions in the USA, that meet its investment criteria for minimum risk, geologic quality, operator capability, remaining growth potential, cash flow generation and, mostimportantly, rate of return. As of December 31, 2024, 100% of Pogo’s gross 13,700 leasehold acres were located in Eddy County, New Mexico, where 100% of the leasehold working interests owned by Pogo consist of state andfederal lands. Pogo believes the Permian Basin offers some of the most compelling rates of return for Pogo and significant potential for cash flow growth. As a result of compelling rates of return,development activity in the Permian Basin has outpaced all other onshore U.S. oil and gas basins since the end of 2016. This development activity has driven basin-level production to grow faster thanproduction in the rest of the United States. Pogo’s working interests entitle it to receive an average of 97% of the net revenue from crude oil and natural gas produced from the oil and gas reservoirs underlying its acreage. Pogo is not under anymandatory obligation to fund drilling and completion costs associated with oil and gas development because 100% of its lease holdings are held by production. As a working interest owner withsignificant net earnings, Pogo seeks to fully capture all remaining oil and gas reserves underlying its leasehold acres by systematically developing its low risk, predictable, proven reserves by means ofadding perforations in previously drilled and completed wells, were applicable, and drilling new wells in a predetermined drilling pattern. Accordingly, Pogo’s development model generates strongmargins greater than 60%, at low risk, predictable, production outcomes that requires low overhead and is highly scalable. For the year ended December 31, 2024, Pogo’s lifting cost was about $28.92 perbarrel of oil equivalent at a realized price of $77.01 per BOE, excluding the impact of settled commodity derivatives. Pogo is led by a management team with extensive oil and gas engineering, geologicand land expertise, long-standing industry relationships and a history of successfully managing a portfolio of working and leasehold interests, producing crude oil and natural gas assets. Pogo intends tocapitalize on its management team’s expertise and relationships to increase production and cash flow in the field. 6
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Pogo Market Conditions The price that Pogo receives for the oil and natural gas we produce is largely a function of market supply and demand. Because Pogo’s oil and gas revenues are heavily weighted toward oil, Pogo is moresignificantly impacted by changes in oil prices than by changes in the price of natural gas. World-wide supply in terms of output, especially production from properties within the United States, theproduction quota set by OPEC, and the strength of the U.S. dollar can adversely impact oil prices. Historically, commodity prices have been volatile, and Pogo expects the volatility to continue in the future. Factors impacting the future oil supply balance are world-wide demand for oil, as well as thegrowth in domestic oil production. Key Producing Region As of December 31, 2024, all of the Company’s properties were located exclusively within the Northwest Shelf of the Permian Basin. As of December 2023, the Permian Basin had the highest level ofdrilling activity in the United States with greater than 300 drilling rigs operating. By comparison, The Eagle Ford Shale region located in Southwest-central Texas has less than 60 rigs operating. ThePermian Basin includes three major geologic provinces: the Delaware Basin to the west, the Midland Basin to the east and the Central Basin Platform in between. The Northwest Shelf is the western limitsof the Delaware Basin, a sub-basin within the Permian Basin complex. The Delaware Basin is identified by an abundant amount of oil-in-place, stacked pay potential across an approximately 3,900-foot hydrocarbon column, attractive well economics, favorable operating environment, well developed network of oilfield service providers, and significant midstream infrastructure in place or activelyunder construction. One hundred percent (100%) of our working interests are located as of December 31, 2024, on the New Mexico side of the Delaware Basin. According to the USGS, the DelawareBasin contains the largest recoverable reserves among all unconventional basins in the United States. We believe the stacked-play potential of the Delaware Basin combined with favorable drilling economics support continued production growth as Pogo develops its leasehold position and improve well-spacing and completion techniques. Relative to other basins in the continental United States, Pogo believes the Delaware Basin is in a mid-stage of well development and that per-well returns will improveas Pogo continues to employ enhanced oil recovery technologies on its leasehold acreage. Pogo believes these enhanced oil recoveries will continue to support development activity where it holdssignificant working interest, with predictable returns leading to increasing cash flows with low maintenance costs. Working Interests in Grayburg-Jackson Field As of December 31, 2024, the Company owns a 100% working interest in 13,700 gross acres located in Eddy County, New Mexico, with a 74% weighted average net revenue. The 13,700 gross acres arestrategically located in the prolific oil field, Grayburg-Jackson field. Working interests granted to the Lessee (Pogo) under an Oil and Gas Lease are real property interests that grant ownership of the crudeoil and natural gas underlying a specific tract of land and the rights to explore for, drill for and produce crude oil and natural gas on that land or to lease those exploration and development rights to a thirdparty. Those rights to explore for, drill for and produce crude oil and natural gas on that land have a set period of time for the working interest owner to exercise those rights. Typically, an Oil and GasLease can be automatically extended beyond the initial lease term with continuous drilling, production or other operating activities or through negotiated contractual lease extension options. Only whenproduction and drilling cease, the lease terminates. As of December 31, 2024, 100% of the Company’s working interests are held by production (“HBP”) meaning that Pogo is not under time sensitive obligation to drill or work-over any wells on its 13,700acres. As of December 31, 2023, 100% of the wells and leases are operated by Pogo. Pogo is the official Operator of record with the state and federal regulatory agencies. As of December 31, 2024, theCompany generates a substantial majority of its revenues and cash flows from its working interests when crude oil and natural gas are produced and sold from its acreage. Currently, Pogo’s working interests reside entirely in the Northwest Shelf of the Permian Basin, which Pogo believes is one of the premier crude oil and natural gas producing regions in the United States.As of December 31, 2024, Pogo’s working interests covered 13,700 gross acres, with the royalty owners retaining a weighted average 26% royalty. The following table summarizes Pogo’s workinginterest’s position in the lands comprising its leasehold as of December 31, 2024. 7
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LH Operating, LLC Northwest Shelf (Permian Basin) Leasehold Date of Acquisition GrossAcres FederalLeases StateLeases WorkingInterest NRI(weightedavg.)(1) RoyaltyInterest(2) Operations HBP 2018 13,700 20 3 100% 74% 26% 100% 100% (1) Pogo’s net revenue interests are based on its weighted average royalty interests across its entire leasehold(2) No unleased royalty interests as of December 31, 2024. As of December 31, 2024, Pogo has working interests in 342 shallow (above 4,000 ft), vertical wells producing oil and gas in paying quantities. Ninety-five of the 342 producing wells were completedbetween 2019 and June 2022 by Pogo. In 2019, Pogo initiated a 4-well pilot water injection project into the Seven Rivers (“7R”) oil reservoir underlying its 13,700-acre leasehold. After an evaluationperiod extending into early 2020, Pogo determined the pilot project was successful by producing oil in paying quantities by simply adding perforations in the 7R reservoir in previously drilled andcompleted wells. Following the successful completion of the 4-well pilot project, Pogo commenced a work-over program by adding perforations in the 7R reservoir in 91 previously drilled wells between2019 and June 2022. Prior to initiating the 4-well pilot project the legacy wells were averaging 275 BOE/d. By December 2023, the total production increased to 1,022 BOE/d. Pogo’s management teamhas determined, and verified by Haas and Cobb Petroleum Consultants, LLC (“Cobb ”), that 115 proved well patterns, developed but non-producing, are scheduled to be brought into production between2024 and 2027. As of December 31, 2024, the estimated proved crude oil and natural gas reserves attributable to Pogo’s interests in its underlying acreage were 14,492 MBOE (97% oil and 3% natural gas), based on areserve report prepared by Cobb , worldwide petroleum consultants. Of these reserves, approximately 28% were classified as proved developed producing (“PDP”) reserves, 42% were classified as proveddeveloped non-producing (“PDNP”) reserves and 30% were classified as proved undeveloped (“PUD”) reserves. PUD reserves included in these estimates relate solely to wells that are not yet drilled norwere not yet producing in paying quantities as of December 31, 2024. Estimated proved reserves included in this section is presented on an actual basis, without giving pro forma effect to transactionscompleted after such dates. Pogo believes its production and discretionary cash flows will grow significantly as Pogo completes its substantial PDNP inventory of 7R well patterns located on its gross 13,700 acreage. As ofDecember 31, 2024, Pogo had production from 342 vertical wells, and it has identified 127 additional PDNP well patterns based on its assessment of current geological, engineering and land data. As ofDecember 31, 2024, Pogo has identified 43 PUD well patterns based on its assessment of current geological, engineering and land data Pogo’s working interest development strategy anticipates shifting any drilling activity associated with its PUD reserves following Pogo’s completion of its PDNP reserves. The work-over costsattributable to adding perforations in wells previously drilled and completed is significantly less than drilling new wells. As of December 31, 2024, Pogo’s leasehold position has 25.7 wells per squaremile. Pogo expects to see increases in its production, revenue and discretionary cash flows from the development of 115 well patterns in the 7R reservoir. Pogo believes its current leasehold workinginterests provide the potential for significant long-term organic revenue growth as Pogo develops its PDNP reserves to increase crude oil and natural gas production. 8
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Business Strategies The Company’s primary business objective is to generate discretionary cash flow by maintaining its strong cash flow from the PDP reserves and increasing cash flow by developing predictable, low costPDNP reserves in its Permian Basin asset. The Company intends to accomplish this objective by executing the following strategies: Generate strong cash flow supported by means of disciplined development of its PDNP Reserves. As the sole working interest owner, the Company benefits from the continued organic development ofits acreage in the Permian Basin. As of December 31, 2024, EON, in conjunction with Cobb, a third-party engineering consulting firm, has confirmed that EON has 127, low cost, well patterns to bedeveloped during 2025 to 2028. The total costs to complete these 127 well patterns have been predetermined by historical analysis. The estimated cost to complete each PDNP pattern is $339,252 and theestimated cost to complete each PUD pattern is $1,187,698. A single well pattern consists of one each producing well with its corresponding or dedicated water injection wells, with each injection wellsituated on four sides of the producing well. Water injection wells are necessary to maintain reservoir pressure in its original state and to move the oil in place toward the producing well. Pressuremaintenance helps ensure maximum oil and gas recovery. Without pressure maintenance, oil recoveries from a producing oil reservoir generally do not exceed 10% of the original oil in place (“OOIP”).With pressure maintenance by re-injecting produced water into the oil reservoir, then Pogo expects to see ultimate oil recoveries 25% or greater of the OOIP. Offsetting oil wells on its leasehold also takeadvantage of the water injected into the oil reservoir, and is able to convert a high percentage of its revenue to discretionary cash flow. Because Pogo owns 100% working interests it incurs 100% of themonthly leasehold operating costs for the production of crude oil and natural gas or capital costs for the drilling and completion of wells on its acreage. Because these wells are shallow oil producers, withvertical depths between 1500 ft and 4000 ft, the monthly operating expenses are relatively low. Focus primarily on the Permian Basin. All of the Company’s working interests are currently located in the Permian Basin, one of the most prolific oil and gas basins in the United States. Pogo believesthe Permian Basin provides an attractive combination of highly-economic and oil-weighted geologic and reservoir properties, opportunities for development with significant inventory of drilling locationsand zones to be delineated our top-tier management team. ● Business Relations. Leverage expertise and relationships to continue acquiring Permian Basin targets with high working interests in actively producing oil fields from top-tier E&P operators,with predictable, stable cash flow, and with significant growth potential. the Company has a history of evaluating, pursuing and consummating acquisitions of crude oil and natural gas targets inthe Permian Basin and other oil producing basins. the Company’s management team intends to continue to apply this experience in a disciplined manner when identifying and acquiring workinginterests. The Company believes that the current market environment is favorable for oil and gas acquisitions in the Permian Basin and other oil generating basins. Numerous asset packages fromsellers presents attractive opportunities for assets that meet the Company’s target investment criteria. With sellers seeking to monetize their investments, Pogo intends to continue to acquireworking interests that have substantial resource potential in the Permian Basin. Pogo expects to focus on acquisitions that complement its current footprint in the Permian Basin while targetingworking interests underlying large scale, contiguous acreage positions that have a history of predictable, stable oil and gas production rates, and with attractive growth potential. Furthermore, theCompany seeks to maximize its return on capital by targeting acquisitions that meet the following criteria: ● sufficient visibility to production growth; ● attractive economics; ● de-risked geology supported by stable production; ● targets from top-tier E&P operators; and ● a geographic footprint that Pogo believes is complementary to its current Permian Basin asset and maximizes its potential for upside reserve and production growth. Maintain conservative and flexible capital structure to support the Company’s business and facilitate long-term operations. The Company is committed to maintaining a conservative capitalstructure that will afford it the financial flexibility to execute its business strategies on an ongoing basis. Pogo believes that internally generated cash flows from its working interests and operations,available borrowing capacity under its revolving credit facility, and access to capital markets will provide it with sufficient liquidity and financial flexibility to continue to acquire attractive targets withhigh working interests that will position it to grow its cash flows in order to distributed to its shareholders as dividends and/or reinvested to further expand its base of cash flow generating assets. Pogointends to maintain a conservative leverage profile and utilize a mix of cash flows from operations and issuance of debt and equity securities to finance future acquisitions. 9
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Competitive Strengths The Company believes that the following competitive strengths will allow it to successfully execute its business strategies and achieve its primary business objective: ● Permian Basin focused public company positioned as a preferred buyer in the basin. The Company believes that its focus on the Permian Basin will position it as a preferred buyer of PermianBasin working interests in known producing oil and gas fields. As of December 31, 2024, 100% of its current leasehold is located in an area with proven results from multiple stacked productivezones. The Company’s properties in the Permian Basin are high-quality, high-margin, and oil weighted, and the Company believes we will be viewed favorably by the investment community ascompared to equity consideration diluted by lower quality assets located in less prolific basins. Pogo targets acquisitions of operated properties with high working interest percentages that arerelatively undeveloped in the Permian Basin, and it believes the organic development of its acreage will result in substantial production growth regardless of acquisition activity. ● Favorable and stable operating environment in the Permian Basin. With over 400,000 wells drilled in the Permian Basin since 1900, the region features a reliable and predictable geologicaland regulatory environment, according to Enverus. The Company believes that the impact of new technology, combined with the substantial geological information available about the PermianBasin, also reduces the risk of development and exploration activities as compared to other, emerging hydrocarbon basins. As of December 31, 2024, 100% of the Company’s acreage was locatedin New Mexico and does not require federal approval to develop its 115 well patterns classified as PDNP reserves and does not have impediments in order to deliver Pogo’s production to market. ● Experienced team with an extensive track record. the Company’s team has deep industry experience focused on development in the Permian Basin as well as other significant oil producingregions and has a track record of identifying acquisition targets, negotiating agreements, and successfully consummating acquisitions, and operating the acquired target using industry standards.Pogo plans to continue to evaluate and pursue acquisitions of all sizes. Pogo expects to benefit from the industry relationships fostered by its management team’s decades of experience in the oiland natural gas industry with a focus on the Permian Basin, in addition to leveraging its relationships with many E & P company executives. ● Development potential of the properties underlying the Company’s Permian Basin working interests. The Company’s assets consist of 100% working interests in a gross 13,700 acres located inthe Northwest Shelf of the Permian Basin. The Company expects production from its working interest ownership to increase its oil and gas production by 1,358 BOE/d as it develops its PDNPreserves after completing 115 well patterns. The Company believes its assets in the Permian Basin is in an earlier to mid-stage of development and that the average number of producing wells persection in its 13,700-acre leasehold will increase as Pogo continues to add PUD well patterns, which would allow the Company to achieve higher realized cash flows to distributed to itsshareholders as dividends and/or reinvested to further expand its base of cash flow generating assets. The Company believes that once it completes its PDNP and PUD program as detailed in theCobb reserve report, The Company expects its BOE/d will increase to 2,853 BOE/d combined with PDP. Crude Oil and Natural Gas Data In this report, we include estimates of reserves associated with the assets located in New Mexico as of December 31, 2024 and 2023. Such reserve estimates are based on evaluations prepared by theindependent petroleum engineering firm of Cobb, in accordance with Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of PetroleumEvaluation Engineers and definitions and guidelines established by the SEC. The December 31, 2024 and 2023 reserve reports include the total interests of Pogo Resources, LLC, including the 10%overriding royalty interest not acquired in the Purchase, and the reserve report as of December 31, 2024 is included in this filing. As such, the estimates of proved oil and gas and discounted future netcash flows include the total interests of Pogo Resources, LLC. Cobb is an independent consulting firm founded in 1983. Its compensation is not contingent on the results obtained or reported. Frank J. Marek, a Registered Texas Professional Engineer and a seniortechnical advisor of Cobb, is primarily responsible for overseeing the preparation of the reserve report. His professional qualifications meet or exceed the qualifications of reserve estimators set forth inthe “Standards Pertaining to Estimation and Auditing of Oil and Gas Reserves Information” promulgated by the Society of Petroleum Engineers. His qualifications include: Bachelor of Science degree inPetroleum Engineering from Texas A&M University 1977; member of the Society of Petroleum Engineers; member of the Society of Petroleum Evaluation Engineers; and 40 years of experience inestimating and evaluating reserve information and estimating and evaluating reserves; he is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as wellas applying SEC and other industry reserve definitions and guidelines. 10
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Preparation of Reserve Estimates Our reserve estimates as of December 31, 2024 and 2023 included in this report is included are based on evaluations prepared by the independent petroleum engineering firm of Cobb PetroleumConsultants, LLC in accordance with Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Evaluation Engineers anddefinitions and guidelines established by the SEC. The December 31, 2024 and 2023 reserve reports include the total interests of Pogo Resources, LLC, including the 10% overriding royalty interest notacquired in the Purchase, and the reserve report as of December 31, 2024 is included in this filing. As such, the estimates of proved oil and gas and discounted future net cash flows include the totalinterests of Pogo Resources, LLC. We selected Cobb as its independent reserve engineer for its historical experience and geographic expertise in engineering similar resources. In accordance with rules and regulations of the SEC applicable to companies involved in crude oil and natural gas producing activities, proved reserves are those quantities of crude oil and natural gas,which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existingeconomic conditions, operating methods, and government regulations. The term “reasonable certainty” means deterministically, the quantities of crude oil and/or natural gas are much more likely to beachieved than not, and probabilistically, there should be at least a 90% probability of recovering volumes equal to or exceeding the estimate. All of our proved reserves were estimated using adeterministic method. The estimation of reserves involves two distinct determinations. The first determination results in the estimation of the quantities of recoverable crude oil and natural gas and thesecond determination results in the estimation of the uncertainty associated with those estimated quantities in accordance with the definitions established under SEC rules. The process of estimating thequantities of recoverable reserves relies on the use of certain generally accepted analytical procedures. These analytical procedures fall into four broad categories or methods: (i) production performance-based methods, (ii) material balance-based methods; (iii) volumetric-based methods and (iv) analogy. These methods may be used singularly or in combination by the reserve evaluator in the process ofestimating the quantities of reserves. Reserves for proved developed producing wells were estimated using production performance methods. Non-producing reserve estimates, for developed andundeveloped properties, were forecast using a pattern simulation model. To estimate economically recoverable proved reserves and related future net cash flows, EON considered many factors and assumptions, including the use of reservoir parameters derived from geologicaland engineering data that cannot be measured directly, economic criteria based on current costs and the SEC pricing requirements and forecasts of future production rates. Under SEC rules, reasonable certainty can be established using techniques that have been proven effective by actual production from projects in the same reservoir or an analogous reservoir or by otherevidence using reliable technology that establishes reasonable certainty. Reliable technology is a grouping of one or more technologies (including computational methods) that have been field tested andhave been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. To establish reasonable certainty withrespect to EON’s estimated proved reserves, the technologies and economic data used in the estimation of its proved reserves have been demonstrated to yield results with consistency and repeatability,and include production and well test data, downhole completion information, geologic data, electrical logs, radioactivity logs, core data, and historical well cost and operating expense data. Internal Controls Our internal staff of petroleum engineers and geoscience professionals work closely with its independent reserve engineer to ensure the integrity, accuracy and timeliness of data furnished to suchindependent reserve engineer in their preparation of reserve estimates. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation.As a result, the estimates of different engineers often vary. In addition, the results of drilling, testing and production may justify revisions of such estimates. Accordingly, reserve estimates often differfrom the quantities of oil and natural gas that are ultimately recovered. See “Risk Factors Related to Our Business” appearing elsewhere in this report. Our engineering group is responsible for the internalreview of reserve estimates. No portion of EON’s engineering group’s compensation is directly dependent on the quantity of reserves booked. The engineering group reviews the estimates with the third-party petroleum consultant,Cobb , an independent petroleum engineering firm. 11
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Reconciliation of Standardized Measure to PV-10 Neither PV-10 nor PV-10 after ARO are financial measures defined under accounting principles generally accepted in the United States of America (“GAAP”); therefore, the following table reconcilesthese amounts to the standardized measure of discounted future net cash flows, which is the most directly comparable GAAP financial measure. Management believes that the non-GAAP financialmeasures of PV-10 and PV-10 after ARO are relevant and useful for evaluating the relative monetary significance of oil and natural gas properties. PV-10 and PV-10 after ARO are used internally whenassessing the potential return on investment related to oil and natural gas properties and in evaluating acquisition opportunities. Management believes that the presentation of PV-10 and PV-10 after AROprovide useful information to investors because they are widely used by professional analysts and sophisticated investors in evaluating oil and natural gas companies. PV-10 and PV-10 after ARO are notmeasures of financial or operating performance under GAAP, nor are they intended to represent the current market value of our estimated oil and natural gas reserves. PV-10 after ARO is equivalent to thestandardized measure of discounted future net cash flows as defined under GAAP. Investors should not assume that PV-10, or PV-10 after ARO, of our proved oil and natural gas reserves shown aboverepresent a current market value of our estimated oil and natural gas reserves. The reconciliation of PV-10 and PV-10 after ARO to the standardized measure of discounted future net cash flows relating to our estimated proved oil and natural gas reserves is as follows (in thousands): December 31,2024 December 31,2023 Present value of estimated future net revenues (PV-10) $ 207,666 $ 280,791 Present value of estimated ARO, discounted at 10% (404) (173)Standardized measure $ 207,262 $ 280,618 Summary of Reserves The following table presents EON’s estimated proved reserves as of December 31, 2024 and 2023. The reserve report include the total interests of Pogo Resources, LLC, including the 10% overridingroyalty interest not acquired in the Purchase, and the December 31, 2024 reserve report is included in this filing as an exhibit. As such, the estimates of proved oil and gas and discounted future net cashflows include the total interests of Pogo Resources, LLC. The reserve estimates presented in the table below are based on reports prepared by Cobb, EON’s independent petroleum engineers, whichreports were prepared in accordance with current SEC rules and regulations regarding oil and natural gas reserve reporting: December 31,2024(1) December 31,2023(2) Estimated proved developed producing reserves: Crude Oil (MBbls) 3,870 4,002 Natural Gas (MMcf) 931 1,149 NGLs (MBbls) - - Total (MBOE) 4,025 4,194 Estimated proved non-producing reserves: Crude Oil (MBbls) 5,933 7,275 Natural Gas (MMcf) 1,125 1,526 NGLs (MBbls) - - Total (MBOE) 6,120 7,529 Estimated proved undeveloped reserves: Crude Oil (MBbls) 4,215 4,137 Natural Gas (MMcf) 784 850 NGLs (MBbls) - - Total (MBOE) 4,346 4,279 Estimated proved reserves: Crude Oil (MBbls) 14,018 15,414 Natural Gas (MMcf) 2,840 3,525 NGLs (MBbls) - - Total (MBOE) 14,491 16,002 (1) EON’s estimated proved reserves were determined using average first-day-of-the-month prices for the prior 12 months in accordance with SEC guidance. For crude oil volumes, the average WTIposted price of $75.48 per Bbl as of December 31, 2024, was adjusted for quality, transportation fees and a regional price differential. For natural gas volumes, the average Henry Hub spot price of$2.13 per MMBtu as of December 31, 2024, was adjusted for energy content, transportation fees and a regional price differential. The average adjusted product prices weighted by production over theremaining lives of the proved properties are $77.10 per Bbl of crude oil and $1.62 per Mcf of natural gas as of December 31, 2024.(2) EON’s estimated proved reserves were determined using average first-day-of-the-month prices for the prior 12 months in accordance with SEC guidance. For crude oil volumes, the average WTIposted price of $71.89 per Bbl as of December 31, 2023, was adjusted for quality, transportation fees and a regional price differential. For natural gas volumes, the average Henry Hub spot price of$2.52 per MMBtu as of December 31, 2023, was adjusted for energy content, transportation fees and a regional price differential. The average adjusted product prices weighted by production over theremaining lives of the proved properties are $78.40 per Bbl of crude oil and $2.38 per Mcf of natural gas as of December 31, 2023. 12
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Reserve engineering is a process of estimating volumes of economically recoverable crude oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is afunction of the quality of available data and of engineering and geological interpretation. As a result, the estimates of different engineers often vary. In addition, the results of drilling, testing, andproduction may justify revisions of such estimates. Accordingly, reserve estimates often differ from the quantities of crude oil and natural gas that are ultimately recovered. Estimates of economicallyrecoverable crude oil and natural gas and of future net revenues are based on a number of variables and assumptions, all of which may vary from actual results, including geologic interpretation, prices,and future production rates and costs. Please read “Risk Factors Related to Our Business.” PUDs As of December 31, 2024, EON estimated its PUD reserves to be 4,215 MBbls of crude oil and 784 MMcf of natural gas for a total of 4,346 MBOE. As of December 31, 2023, EON estimated its PUDreserves to be 4,137 MBbls of crude oil and 850 MMcf of natural gas for a total of 4,279 MBOE. PUDs will be converted from undeveloped to developed as the applicable wells begin production. The following table summarizes EON’s changes in PUD reserves during the year ended December 31, 2023 (in MBOE): Proved Undeveloped Reserves (MBOE) Balance, December 31, 2022 4,730 Acquisitions of Reserves 0 Extensions and Discoveries 0 Revisions of Previous Estimates (451)Transfers to Estimated Proved Developed 0 Balance, December 31, 2023 4,279 The following table summarizes EON’s changes in PUD reserves during the year ended December 31, 2024 (in MBOE): ProvedUndevelopedReserves (MBOE) Balance, December 31, 2023 4,279 Acquisitions of Reserves 0 Extensions and Discoveries 0 Revisions of Previous Estimates 147 Transfers to Estimated Proved Developed 0 Balance, December 31, 2024 4,346 Changes in EON’s PUD reserves that occurred during the year ended December 31, 2024 and 2023 were primarily due to increased operating costs. EON has not made any capital expenditures in order to convert its existing PUDs because EON has been allocating its capital resources to convert PDNP reserves to PDP reserves and not to convert itsPUD reserves to PDNP or PDP reserves. EON’s PUD reserves at December 31, 2024 and 2023 are based on a development plan instituted by our management. All of such reserves are scheduled to be developed within five years from the datesuch locations were initially disclosed as PUD reserves. Our development plan is prepared annually by management and approved by the Board of Directors. Our PUD reserves only represent reservesthat are scheduled, based on such plan, to be developed within five years from the date such locations were initially disclosed as PUDs. At December 31, 2024, we estimate that our future developmentcosts relating to the development of PUD reserves are $0 in 2025, $15.7 million in 2026, $46.1 million in 2027 and $32.3 million in 2028. Under our development plan, our existing PUDs are expected tobe converted to PDP reserves by 2028. 13
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Crude Oil and Natural Gas Production Prices and Costs Production and Price History The following table sets forth information regarding net production of crude oil and natural gas and certain price and cost information for each of the periods indicated: Year EndedDecember 31,2024 Year Ended December 31, 2023 Production data: Crude Oil (MBbls) 256 349 Natural Gas (MMcf) 213 355 NGLs (MBbls) 0 0 Total (MBOE) 291 373 Average realized prices: Crude Oil (per Bbl) $ 75.52 $ 72.69 Natural Gas (per Mcf) $ 2.27 $ 2.48 NGLs (per Bbl) $ 0.00 $ 0.00 Total (per BOE)(1) $ 67.96 $ 64.31 Average cost (per BOE): Lease Operating Expenses $ 29.59 $ 24.86 Production and ad valorem taxes $ 5.89 $ 5.74 (1) “Btu-equivalent” production volumes are presented on an oil-equivalent basis using a conversion factor of six Mcf of natural gas per Bbl of “oil equivalent,” which is based on approximate energyequivalency and does not reflect the price or value relationship between crude oil and natural gas. Productive Wells Productive wells located on our leasehold consist of producing vertical wells that are capable of producing oil and gas in paying quantities and are not dry wells. As of December 31, 2024, we ownedworking interests in 342 producing wells, 207 water injectors, and one water source well, all located on its 13,700 gross acre leasehold. Only one well owned by the Company is approved to be pluggedand abandoned. Pogo is not aware of any dry holes drilled on the acreage underlying its working interest during the relevant periods. The following table sets forth the total number of gross and net productive wells, all of which are oil wells. As of December 31, 2024 Gross Net Productive 342 342 Dry holes — — Total 342 342 14
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Drilling and other exploration and development activities For the years ended 2024 and 2023, we did not drill any new wells. As of December 31, 2024, there were no wells being completed or waiting on completion. Furthermore, we were not installing any waterfloods or pressure maintenance systems or engaging in any otherdevelopment activity as of such date. Acreage and Ownership The following figures sets forth information relating to our acreage for its working interests as of December 31, 2024: We own 100% working interests that is subject to a 26% weighted average net royalty interest across its 13,700 gross acres as of December 31, 2024. For information regarding the impact of leaseexpirations on our interests, please see “Risks Related to Our Business.” All of our 13,700 acres are held by production and or not under any mandatory lease expiration. Pogo’s leasehold is 100% operated through its wholly owned subsidiary LH Operating and 100% of its 13,700 gross acre leasehold is HBP. The leasehold is comprised of 23 total leases, 20 BLM and 3NM State leases. Ninety-seven percent of its leasehold classified as PDP has title opinion coverage. For regulatory purposes, the current producing reservoirs, 7R, Queen, Grayburg, and San Andres, areconsidered a single, unitized pool (“pool”) for all current PDP reserves and PDNP reserves. No regulatory approval is required prior to performing workovers on existing wells within the pool (i.e.,perforations, fracking, or acidizing, etc.). 15
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LH Operating, LLC was created to solely manage this asset on behalf of Pogo. LH Operating has performed its duties for two (2) years without any known liabilities, and are in good standing withregulatory agencies. LH Operating is fully bonded to operate in New Mexico. Leasehold acreage The following table sets forth certain information regarding the total developed and undeveloped acreage in which we owned an interest as of December 31, 2024. Developed Acres Undeveloped Acres Gross Net Gross Net Total 13,700 13,700 — — All leasehold acreage of Pogo is considered to be “Developed Acres” because completed producing wells or wells capable of producing in economic quantities are located throughout the entirety of theacreage such that the acreage allocated to such wells for production on a spacing, allocated, unitized or pooled basis comprise the entire 13,700 acres leased by Pogo. The interests of Pogo in the oil, gasand other minerals in “Developed Acres” are, or may be, composed of one or multiple stratigraphic zones producing or capable of producing oil and gas in economic quantities. The leasehold of Pogo has undergone development activities, including drilling, completion, and production operations in the Grayburg/San Andres zones (“legacy zones”) and/or the Seven Riverswaterflood zones. As a result, there are no remaining leasehold portions that require initial development. Pogo has identified new potential proved undeveloped reserves within the incremental waterfloodzone of the Seven Rivers. Pogo intends to develop and produce the Seven Rivers zone comprised of approximately 1,677 acres underlying a portion of the Developed Acres including, without limitation,infield drilling or perforation and recompletion of existing wells. Regulation The following disclosure describes regulations directly associated with E&P companies who are classified with state and federal regulatory agencies as Operator of record of crude oil and natural gasproperties, including Pogo. Crude oil and natural gas operations are subject to various types of legislation, regulation and other legal requirements enacted by governmental authorities. This legislation and regulation affecting thecrude oil and natural gas industry is under constant review for amendment or expansion. Some of these requirements carry substantial penalties for failure to comply. The regulatory burden on the crudeoil and natural gas industry increases the cost of doing business. Environmental Matters Crude oil and natural gas exploration, development and production operations are subject to stringent laws and regulations governing the discharge of materials into the environment or otherwise relatingto protection of the environment or occupational health and safety. These laws and regulations have the potential to impact production on the properties in which Pogo owns working interest, which couldmaterially adversely affect its business and its prospects. Numerous federal, state and local governmental agencies, such as the EPA, issue regulations that often require difficult and costly compliancemeasures that carry substantial administrative, civil and criminal penalties and may result in injunctive obligations for non-compliance. These laws and regulations may require the acquisition of a permitbefore drilling commences, restrict the types, quantities and concentrations of various substances that can be released into the environment in connection with drilling and production activities, limit orprohibit construction or drilling activities on certain lands lying within wilderness, wetlands, ecologically sensitive and other protected areas, require action to prevent or remediate pollution from currentor former operations, such as plugging abandoned wells or closing earthen pits, result in the suspension or revocation of necessary permits, licenses and authorizations, require that additional pollutioncontrols be installed and impose substantial liabilities for pollution resulting from operations. The strict, joint and several liability nature of such laws and regulations could impose liability upon theOperator of record regardless of fault. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by therelease of hazardous substances, hydrocarbons or other waste products into the environment. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringentand costly pollution control or waste handling, storage, transport, disposal or cleanup requirements could materially adversely affect our business and prospects. 16
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Non-Hazardous and Hazardous Waste The Resource Conservation and Recovery Act (“RCRA”), and comparable state statutes and regulations promulgated thereunder, affect crude oil and natural gas exploration, development, and productionactivities by imposing requirements regarding the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. With federal approval, the individual statesadminister some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Administrative, civil and criminal penalties can be imposed for failure to complywith waste handling requirements. Although most wastes associated with the exploration, development and production of crude oil and natural gas are exempt from regulation as hazardous wastes underRCRA, these wastes typically constitute nonhazardous solid wastes that are subject to less stringent requirements. From time to time, the EPA and state regulatory agencies have considered the adoptionof stricter disposal standards for nonhazardous wastes, including crude oil and natural gas wastes. Moreover, it is possible that some wastes generated in connection with exploration and production of oiland gas that are currently classified as nonhazardous may, in the future, be designated as “hazardous wastes,” resulting in the wastes being subject to more rigorous and costly management and disposalrequirements. On May 4, 2016, a coalition of environmental groups filed a lawsuit against EPA in the U.S. District Court for the District of Columbia for failing to update its RCRA Subtitle D criteriaregulations governing the disposal of certain crude oil and natural gas drilling wastes. In December 2016, EPA and the environmental groups entered into a consent decree to address EPA’s alleged failure.In response to the consent decree, in April 2019, the EPA signed a determination that revision of the regulations is not necessary at this time. However, any changes in the laws and regulations could havea material adverse effect on the Operator of record (Pogo) of its properties’ capital expenditures and operating expenses, which in turn could affect production from the acreage underlying our workinginterests and adversely affect our business and prospects. Remediation The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and analogous state laws generally impose strict, joint and several liability, without regard to fault or legalityof the original conduct, on classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the current owner or operator ofa contaminated facility, a former owner or operator of the facility at the time of contamination, and those persons that disposed or arranged for the disposal of the hazardous substance at the facility. UnderCERCLA and comparable state statutes, persons deemed “responsible parties” may be subject to strict, joint and several liability for the costs of removing or remediating previously disposed wastes(including wastes disposed of or released by prior owners or operators) or property contamination (including groundwater contamination), for damages to natural resources and for the costs of certainhealth studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substancesreleased into the environment. In addition, the risk of accidental spills or releases could expose Pogo’s working interests underlying its leasehold acreage to significant liabilities that could have a materialadverse effect on the operators’ businesses, financial condition and results of operations. Liability for any contamination under these laws could require us to make significant expenditures to investigateand remediate such contamination or attain and maintain compliance with such laws and may otherwise have a material adverse effect on their results of operations, competitive position or financialcondition. Water Discharges The Clean Water Act (“CWA”), the SDWA, the Oil Pollution Act of 1990 (“OPA”), and analogous state laws and regulations promulgated thereunder impose restrictions and strict controls regarding theunauthorized discharge of pollutants, including produced waters and other crude oil and natural gas wastes, into regulated waters. The definition of regulated waters has been the subject of significantcontroversy in recent years. The EPA and U.S. Army Corps of Engineers published a revised definition on January 18, 2023, which has been challenged in court. To the extent any future rule expands thescope of jurisdiction, it may impose greater compliance costs or operational requirements on Pogo.as the Operator of record. The discharge of pollutants into regulated waters is prohibited, except inaccordance with the terms of a permit issued by the EPA or the state. The CWA and regulations implemented thereunder also prohibit the discharge of dredge and fill material into regulated waters,including jurisdictional wetlands, unless authorized by an appropriately issued permit. In addition, spill prevention, control and countermeasure plan requirements under federal law require appropriatecontainment berms and similar structures to help prevent the contamination of navigable waters in the event of a petroleum hydrocarbon tank spill, rupture or leak. Production EPA has also adoptedregulations requiring certain crude oil and natural gas facilities to obtain individual permits or coverage under general permits for storm water discharges, and in June 2016, the EPA finalized effluentlimitation guidelines for the discharge of wastewater from hydraulic fracturing. 17
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The OPA is the primary federal law for crude oil spill liability. The OPA contains numerous requirements relating to the prevention of and response to petroleum releases into regulated waters, includingthe requirement that operators of offshore facilities and certain onshore facilities near or crossing waterways must develop and maintain facility response contingency plans and maintain certain significantlevels of financial assurance to cover potential environmental cleanup and restoration costs. The OPA subject’s owners of facilities to strict, joint and several liability for all containment and cleanup costsand certain other damages arising from a release, including, but not limited to, the costs of responding to a release of crude oil into surface waters. Noncompliance with the CWA, the SDWA, or the OPA may result in substantial administrative, civil and criminal penalties, as well as injunctive obligations, for the Operator of record (Pogo) underlyingits leasehold working interest. Air Emissions The CAA, and comparable state laws and regulations, regulate emissions of various air pollutants through the issuance of permits and the imposition of other requirements. The EPA has developed, andcontinues to develop, stringent regulations governing emissions of air pollutants at specified sources. New facilities may be required to obtain permits before work can begin, and existing facilities may berequired to obtain additional permits and incur capital costs in order to remain in compliance. For example, in June 2016, the EPA established criteria for aggregating multiple small surface sites into asingle source for air quality permitting purposes, which could cause small facilities, on an aggregate basis, to be deemed a major source subject to more stringent air permitting processes andrequirements. These laws and regulations may increase the costs of compliance for crude oil and natural gas producers and impact production of the acreage underlying Pogo’s working interests. Inaddition, federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the federal CAA and associated statelaws and regulations. Moreover, obtaining or renewing permits has the potential to delay the development of crude oil and natural gas projects. Climate Change Climate change continues to attract considerable public and scientific attention. As a result, numerous proposals have been made and are likely to continue to be made at the international, national,regional and state levels of government to monitor and limit emissions of carbon dioxide, methane and other GHGs. These efforts have included consideration of cap-and-trade programs, carbon taxes,GHG reporting and tracking programs and regulations that directly limit GHG emissions from certain sources. In the United States, no comprehensive climate change legislation has been implemented at the federal level. However, President Biden has highlighted addressing climate change as a priority of hisadministration and has issued several executive orders addressing climate change. Moreover, following the U.S. Supreme Court finding that GHG emissions constitute a pollutant under the CAA, the EPAhas adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reportingof GHG emissions from certain petroleum and natural gas system sources in the United States, and together with the DOT, implementing GHG emissions limits on vehicles manufactured for operation inthe United States. The regulation of methane from oil and gas facilities has been subject to uncertainty in recent years. In September 2020, the Trump Administration revised regulations initiallypromulgated in June 2016 to rescind certain methane standards and remove the transmission and storage segments from the source category for certain regulations. However, subsequently, theU.S. Congress approved, and President Biden signed into law, a resolution under the Congressional Review Act to repeal the September 2020 revisions to the methane standards, effectively reinstating theprior standards. Additionally, in November 2021, the EPA issued a proposed rule that, if finalized, would establish new source and first-time existing source standards of performance for methane andvolatile organic compound emissions for oil and gas facilities. Operators of affected facilities will have to comply with specific standards of performance to include leak detection using optical gasimaging and subsequent repair requirement, and reduction of emissions by 95% through capture and control systems. The EPA issued supplemental rules regarding methane emissions on December 6,2022. The IRA established the Methane Emissions Reduction Program, which imposes a charge on methane emissions from certain petroleum and natural gas facilities, which may apply to our operationsin the future and may require us to expend material sums. We cannot predict the scope of any final methane regulatory requirements or the cost to comply with such requirements. However, given thelong-term trend toward increasing regulation, future federal GHG regulations of the oil and gas industry remain a significant possibility. 18
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Separately, various states and groups of states have adopted or are considering adopting legislation, regulation or other regulatory initiatives that are focused on such areas as GHG cap and trade programs,carbon taxes, reporting and tracking programs, and restriction of emissions. For example, New Mexico has adopted regulations to restrict the venting or flaring of methane from both upstream andmidstream operations. At the international level, the United Nations-sponsored “Paris Agreement” requires member states to submit non-binding, individually-determined reduction goals known asNationally Determined Contributions every five years after 2020. President Biden has recommitted the United States to the Paris Agreement and, in April 2021, announced a goal of reducing theUnited States’ emissions by 50-52% below 2005 levels by 2030. Additionally, at COP26 in Glasgow in November 2021, the United States and the European Union jointly announced the launch of aGlobal Methane Pledge, an initiative committing to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030, including “all feasible reductions” in theenergy sector. The full impact of these actions cannot be predicted at this time. Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States, including climate change relatedpledges made by certain candidates now in public office. There are also increasing financial risks for fossil fuel producers as shareholders currently invested in fossil-fuel energy companies may elect in the future to shift some or all of their investments into non-fossil fuel related sectors. Institutional lenders who provide financing to fossil fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not toprovide funding for fossil fuel energy companies. For example, at COP26, GFANZ announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in capitalcommitted to net zero goals. The various sub-alliances of GFANZ generally require participants to set short-term, sector-specific targets to transition their financing, investing, and/or underwritingactivities to net zero emissions by 2050. There is also a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector. In late2021, the Federal Reserve announced that it had joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financialsector. Subsequently, in November 2021, the Federal Reserve issued a statement in support of the efforts of the Network for Greening the Financial System to identify key issues and potential solutions forthe climate-related challenges most relevant to central banks and supervisory authorities. Limitation of investments in and financing for fossil fuel energy companies could result in the restriction, delay orcancellation of drilling programs or development or production activities. Additionally, the SEC announced its intention to promulgate rules requiring climate disclosures. Although the form andsubstance of these requirements is not yet known, this may result in additional costs to comply with any such disclosure requirements. The adoption and implementation of new or more stringent international, federal or state legislation, regulations or other regulatory initiatives that impose more stringent standards for GHG emissionsfrom the oil and natural gas sector or otherwise restrict the areas in which this sector may produce oil and natural gas or generate the GHG emissions could result in increased costs of compliance or costsof consuming, and thereby reduce demand for oil and natural gas, which could reduce the profitability of Pogo’s working interests. Additionally, political, litigation and financial risks may result in Pogorestricting or cancelling production activities, incurring liability for infrastructure damages as a result of climatic changes, or impairing their ability to continue to operate in an economic manner, whichalso could reduce the profitability of Pogo’s working interests. One or more of these developments could have a material adverse effect on Pogo’s business, financial condition and results of operation. Climate change may also result in various physical risks, such as the increased frequency or intensity of extreme weather events or changes in meteorological and hydrological patterns, that couldadversely impact our operations and Pogo’s supply chains. Such physical risks may result in damage to Pogo’s facilities or otherwise adversely impact our operations, such as if they become subject towater use curtailments in response to drought, or demand for their products, such as to the extent warmer winters reduce the demand for energy for heating purposes. Extreme weather conditions caninterfere with production and increase costs and damage resulting from extreme weather may not be fully insured. However, at this time, Pogo is unable to determine the extent to which climate changemay lead to increased storm or weather hazards affecting its business. 19
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Regulation of Hydraulic Fracturing Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons from tight formations. The process involves the injection of water, sand and chemicalsunder pressure into formations to fracture the surrounding rock and stimulate production. Hydraulic fracturing operations have historically been overseen by state regulators as part of their crude oil andnatural gas regulatory programs. However, several agencies have asserted regulatory authority over certain aspects of the process. For example, in August 2012, the EPA finalized regulations under the federal CAA that establish new airemission controls for crude oil and natural gas production and natural gas processing operations. Federal regulation of methane emissions from the oil and gas sector has been subject to substantialcontroversy in recent years. In addition, governments have studied the environmental aspects of hydraulic fracturing practices. These studies, depending on their degree of pursuit and whether any meaningful results are obtained,could spur initiatives to further regulate hydraulic fracturing under the SDWA or other regulatory authorities. For example, in December 2016, the EPA issued its final report on a study it had conductedover several years regarding the effects of hydraulic fracturing on drinking water sources. The final report, concluded that “water cycle” activities associated with hydraulic fracturing may impact drinkingwater under certain limited circumstances. Several states have adopted, or are considering adopting, regulations that could restrict or prohibit hydraulic fracturing in certain circumstances and/or require the disclosure of the composition ofhydraulic fracturing fluids. For example, the Railroad Commission of Texas has previously issued a “well integrity rule,” which updates the requirements for drilling, putting pipe down, and cementingwells. The rule also includes new testing and reporting requirements, such as: (i) the requirement to submit cementing reports after well completion or after cessation of drilling, whichever is later; and(ii) the imposition of additional testing on wells less than 1,000 feet below usable groundwater. The well integrity rule took effect in January 2014. Local governments also may seek to adopt ordinanceswithin their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular or prohibit the performance of well drilling in general orhydraulic fracturing in particular. State and federal regulatory agencies recently have focused on a possible connection between the hydraulic fracturing related activities, particularly the disposal of produced water in undergroundinjection wells, and the increased occurrence of seismic activity. When caused by human activity, such events are called induced seismicity. In some instances, operators of injection wells in the vicinity ofseismic events have been ordered to reduce injection volumes or suspend operations. Some state regulatory agencies, including those in Colorado, Ohio, Oklahoma and Texas, have modified theirregulations to account for induced seismicity. For example, in October 2014, the Railroad Commission published a new rule governing permitting or re-permitting of disposal wells that would require,among other things, the submission of information on seismic events occurring within a specified radius of the disposal well location, as well as logs, geologic cross sections and structure maps relating tothe disposal area in question. If the permittee or an applicant of a disposal well permit fails to demonstrate that the produced water or other fluids are confined to the disposal zone or if scientific dataindicates such a disposal well is likely to be or determined to be contributing to seismic activity, then the agency may deny, modify, suspend or terminate the permit application or existing operating permitfor that well. The Railroad Commission of Texas has used this authority to deny permits for waste disposal wells. In some instances, regulators may also order that disposal wells be shut in. In late 2021,the Railroad Commission of Texas issued a notice to operators of disposal wells in the Midland area, to reduce saltwater disposal well actions and provide certain data to the commission. Separately, inNovember 2021, New Mexico implemented protocols requiring operators to take various actions within a specified proximity of certain seismic activity, including a requirement to limit injection rates if aseismic event is of a certain magnitude. As a result of these developments, Pogo as the Operator of record may be required to curtail operations or adjust development plans, which may adversely impactPogo’s business. The USGS has identified six states with the most significant hazards from induced seismicity, including New Mexico, Oklahoma and Texas. In addition, a number of lawsuits have been filed, mostrecently in Oklahoma, alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating waste disposal. These developmentscould result in additional regulation and restrictions on the use of injection wells and hydraulic fracturing. Such regulations and restrictions could cause delays and impose additional costs and restrictionson Pogo’s properties and on their waste disposal activities. 20
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If new laws or regulations that significantly restrict hydraulic fracturing and related activities are adopted, such laws could make it more difficult or costly to perform fracturing to stimulate productionfrom tight formations. In addition, if hydraulic fracturing is further regulated at the federal or state level, fracturing activities could become subject to additional permitting and financial assurancerequirements, more stringent construction specifications, increased monitoring, reporting and recordkeeping obligations, plugging and abandonment requirements and also to attendant permitting delaysand potential increases in costs. Such legislative changes could cause Pogo to incur substantial compliance costs, and compliance or the consequences of any failure to comply could have a materialadverse effect on Pogo’s financial condition and results of operations. At this time, it is not possible to estimate the impact on Pogo’s business of newly enacted or potential federal or state legislationgoverning hydraulic fracturing. Endangered Species Act The ESA restricts activities that may affect endangered and threatened species or their habitats. The designation of previously unidentified endangered or threatened species could cause E&P operators toincur additional costs or become subject to operating delays, restrictions or bans in the affected areas. Recently, there have been renewed calls to review protections currently in place for the dunessagebrush lizard, whose habitat includes parts of the Permian Basin, and to reconsider listing the species under the ESA. For example, in October 2019 environmental groups filed a lawsuit against theFWS seeking to compel the agency to list the species under the ESA, and in July 2020, FWS agreed to initiate a 12-month review to determine whether listing the species was warranted, whichdetermination remains outstanding. Additionally, in June 2021, the FWS proposed to list two distinct population sections of the Lesser Prairie Chicken, including one in portions of the Permian Basin,under the ESA, which was finalized on November 25, 2022. To the extent species are listed under the ESA or similar state laws, or previously unprotected species are designated as threatened orendangered in areas where Pogo’s properties are located, operations on those properties could incur increased costs arising from species protection measures and face delays or limitations with respect toproduction activities thereon. Employee Health and Safety Operations on Pogo’s properties are subject to a number of federal and state laws and regulations, including the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes,whose purpose is to protect the health and safety of workers. In addition, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal SuperfundAmendment and Reauthorization Act, and comparable state statutes require that information be maintained concerning hazardous materials used or produced in operations and that this information beprovided to employees, state and local government authorities and citizens. Other Regulation of the Crude Oil and Natural Gas Industry The crude oil and natural gas industry is extensively regulated by numerous federal, state and local authorities. Legislation affecting the crude oil and natural gas industry is under constant review foramendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue rules and regulations that arebinding on the crude oil and natural gas industry and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on the crude oil and naturalgas industry increases the cost of doing business, these burdens generally do not affect us any differently or to any greater or lesser extent than they affect other companies in the industry with similartypes, quantities and locations of production. The availability, terms and conditions and cost of transportation significantly affect sales of crude oil and natural gas. The interstate transportation of crude oil and natural gas and the sale for resale ofnatural gas is subject to federal regulation, including regulation of the terms, conditions and rates for interstate transportation, storage and various other matters, primarily by the Federal EnergyRegulatory Commission (“FERC”). Federal and state regulations govern the price and terms for access to crude oil and natural gas pipeline transportation. FERC’s regulations for interstate crude oil andnatural gas transmission in some circumstances may also affect the intrastate transportation of crude oil and natural gas. Pogo cannot predict whether new legislation to regulate crude oil and natural gas might be proposed, what proposals, if any, might actually be enacted by the U.S. Congress or the various statelegislatures, and what effect, if any, the proposals might have on its operations. Sales of crude oil and condensate are not currently regulated and are made at market prices. 21
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Drilling and Production The operations on Pogo’s properties are subject to various types of regulation at the federal, state and local level. These types of regulation include requiring permits for the drilling of wells, drilling bondsand reports concerning operations. The state, and some counties and municipalities, in which Pogo operates also regulate one or more of the following: ● the location of wells; ● the method of drilling and casing wells; ● the timing of construction or drilling activities, including seasonal wildlife closures; ● the rates of production or “allowables”; ● the surface use and restoration of properties upon which wells are drilled; ● the plugging and abandoning of wells; ● and notice to, and consultation with, surface owners and other third parties. State laws regulate the size and shape of drilling and spacing units or proration units governing the pooling of crude oil and natural gas properties. Some states allow forced pooling or integration of tractsto facilitate exploration while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization may be implemented by third parties and may reduce Pogo’sinterest in the unitized properties. In addition, state conservation laws establish maximum rates of production from crude oil and natural gas wells, generally prohibit the venting or flaring of natural gasand impose requirements regarding the ratability of production. These laws and regulations may limit the amount of crude oil and natural gas that the Pogo’s properties can produce from Pogo’s wells orlimit the number of wells or the locations at which can be drill. Moreover, each state generally imposes a production or severance tax with respect to the production and sale of crude oil and natural gaswithin its jurisdiction. States do not regulate wellhead prices or engage in other similar direct regulation, but Pogo cannot assure you that they will not do so in the future. The effect of such futureregulations may be to limit the amounts of crude oil and natural gas that may be produced from our wells, negatively affect the economics of production from these wells or to limit the number oflocations operators can drill. Federal, state and local regulations provide detailed requirements for the abandonment of wells, closure or decommissioning of production facilities and pipelines and for site restoration in areas wherePogo operates. The U.S. Army Corps of Engineers and many other state and local authorities also have regulations for plugging and abandonment, decommissioning and site restoration. Although theU.S. Army Corps of Engineers does not require bonds or other financial assurances, some state agencies and municipalities do have such requirements. Natural Gas Sales and Transportation FERC has jurisdiction over the transportation and sale for resale of natural gas in interstate commerce by natural gas companies under the Natural Gas Act of 1938 (“NGA”) and the Natural Gas PolicyAct of 1978. Since 1978, various federal laws have been enacted which have resulted in the complete removal of all price and non-price controls for sales of domestic natural gas sold in “first sales.” Under the Energy Policy Act of 2005, FERC has substantial enforcement authority to prohibit the manipulation of natural gas markets and enforce its rules and orders, including the ability to assesssubstantial civil penalties. FERC also regulates interstate natural gas transportation rates and service conditions and establishes the terms under which Pogo’s properties may use interstate natural gaspipeline capacity, as well as the revenues received for release of natural gas pipeline capacity. Interstate pipeline companies are required to provide nondiscriminatory transportation services to producers,marketers and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company. FERC’s initiatives have led to the development of a competitive, open access marketfor natural gas purchases and sales that permits all purchasers of natural gas to buy gas directly from third-party sellers other than pipelines. Gathering service, which occurs upstream of jurisdictional transmission services, is regulated by the states onshore and in state waters. Section 1(b) of the NGA exempts natural gas gathering facilitiesfrom regulation by FERC under the NGA. FERC has in the past reclassified certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, which may increase the operators’ costs oftransporting gas to point-of-sale locations. This may, in turn, affect the costs of marketing natural gas that Pogo’s properties produce. Historically, the natural gas industry was more heavily regulated; therefore, we cannot guarantee that the regulatory approach currently pursued by FERC and the U.S. Congress will continue indefinitelyinto the future nor can we determine what effect, if any, future regulatory changes might have on its natural gas related activities. 22
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Crude Oil Sales and Transportation Crude oil sales are affected by the availability, terms and cost of transportation. The transportation of crude oil in common carrier pipelines is also subject to rate regulation. FERC regulates interstatecrude oil pipeline transportation rates under the Interstate Commerce Act and intrastate crude oil pipeline transportation rates are subject to regulation by state regulatory commissions. The basis forintrastate crude oil pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate crude oil pipeline rates, varies from state to state. Insofar as effective interstate and intrastaterates are equally applicable to all comparable shippers, we believe that the regulation of crude oil transportation rates will not affect its operations in any materially different way than such regulation willaffect the operations of its competitors. Further, interstate and intrastate common carrier crude oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to allsimilarly situated shippers requesting service on the same terms and under the same rates. When crude oil pipelines operate at full capacity, access is governed by pro-rationing provisions set forth in thepipelines’ published tariffs. Accordingly, Pogo believes that access to crude oil pipeline transportation services of Pogo’s properties will not materially differ from our competitors’ access to crude oilpipeline transportation services. State Regulation New Mexico regulates the drilling for, and the production, gathering and sale of, crude oil and natural gas, including imposing severance taxes and requirements for obtaining drilling permits. NewMexico currently imposes a 3.75% severance tax on the market value of crude oil and natural gas production as well as other production taxes for conservation, schools, ad valorem, and equipment.Combined, these taxes amount to 8-9% tax on market value of crude and natural gas production. States also regulate the method of developing new fields, the spacing and operation of wells and theprevention of waste of crude oil and natural gas resources. States may regulate rates of production and may establish maximum daily production allowables from crude oil and natural gas wells based on market demand or resource conservation, or both. States donot regulate wellhead prices or engage in other similar direct economic regulation, but Pogo cannot assure you that they will not do so in the future. Should direct economic regulation or regulation ofwellhead prices by the states increase, this could limit the amount of crude oil and natural gas that may be produced from wells on Pogo’s properties and the number of wells or locations Pogo’s propertiescan drill. The petroleum industry is also subject to compliance with various other federal, state and local regulations and laws. Some of those laws relate to resource conservation and equal employmentopportunity. Pogo does not believe that compliance with these laws will have a material adverse effect on its business. Title to Properties Prior to completing an acquisition of a target or working interests, Pogo performs a title review on each tract to be acquired. Pogo’s title review is meant to confirm the working interests owned by aprospective seller, the property’s lease status and royalty amount as well as encumbrances or other related burdens. As a result, title examinations have been obtained on substantially all of Pogo’sproperties. In addition to Pogo’s initial title work, Pogo often will conduct a thorough title examination prior to leasing any new acres, and/or drilling a well. Should any further title work uncover any further titledefects, Pogo will perform curative work with respect to such defects. Pogo generally will not commence drilling operations on a property until any material title defects on such property have been cured. Pogo believes that the title to its assets is satisfactory in all material respects. Although title to these properties is in some cases subject to encumbrances, such as customary royalty interest generallyretained in connection with the acquisition of crude oil and gas interests, non-participating royalty interests and other burdens, easements, restrictions or minor encumbrances customary in the crude oiland natural gas industry, Pogo believes that none of these encumbrances will materially detract from the value of these properties or from its interest in these properties. 23
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Competition The crude oil and natural gas business is highly competitive; we primarily competes with companies for the acquisition of targets with high percentage of working interests underlying crude oil andnatural gas leases. Many of our competitors not only own and acquire working interests but also explore for and produce crude oil and natural gas and, in some cases, carry on midstream and refiningoperations and market petroleum and other products on a regional, national or worldwide basis. By engaging in such other activities, our competitors may be able to develop or obtain information that issuperior to the information that is available to us. In addition, certain of our competitors may possess financial or other resources substantially larger than Pogo possesses. Our ability to acquire additionalworking interests and properties and to discover reserves in the future will be dependent upon its ability to evaluate and select suitable properties and to consummate transactions in a highly competitiveenvironment. In addition, crude oil and natural gas products compete with other forms of energy available to customers, primarily based on price. These alternate forms of energy include electricity, coal, and fuel oils.Changes in the availability or price of crude oil and natural gas or other forms of energy, as well as business conditions, conservation, legislation, regulations, and the ability to convert to alternate fuelsand other forms of energy may affect the demand for crude oil and natural gas. Seasonality of Business Weather conditions affect the demand for, and prices of, natural gas and can also delay drilling activities, disrupting Pour overall business plans. Additionally, Pogo’s properties are located in areasadversely affected by seasonal weather conditions, primarily in the winter and spring. During periods of heavy snow, ice or rain, Pogo may be unable to move their equipment between locations, therebyreducing its ability to operate Pogo’s wells, reducing the amount of crude oil and natural gas produced from the wells on Pogo’s properties during such times. Additionally, extended drought conditions inthe areas in which Pogo’s properties are located could impact its ability to source sufficient water or increase the cost for such water. Furthermore, demand for natural gas is typically higher during thewinter, resulting in higher natural gas prices for Pogo’s natural gas production during its first and fourth quarters. Certain natural gas users utilize natural gas storage facilities and purchase some of theiranticipated winter requirements during the summer, which can lessen seasonal demand fluctuations. Seasonal weather conditions can limit drilling and producing activities and other crude oil and naturalgas operations in Pogo’s operating areas. Due to these seasonal fluctuations, our results of operations for individual quarterly periods may not be indicative of the results that it may realize on an annualbasis. Employees and Human Working Capital We have salaried and regular pay employees in the field as well as management at our corporate offices. As of December 31, 2024, we employed 7 full-time salaried and regular pay field individualsunder no ongoing employment contracts who provided direct support to Pogo’s operations. As of December 31, 2024, we employed 5 full-time salaried employees at our corporate offices, 5 of which haveongoing employment contracts. None of these employees are covered by collective bargaining agreements. Human capital management is critical to our ongoing business success, which requires investing in our people. Our aim is to create a highly engaged and motivated workforce where employees areinspired by leadership, engaged in purpose-driven, meaningful work and have opportunities for growth and development. We are an equal opportunity employer and we are fundamentally committed tocreating and maintaining a work environment in which employees are treated with respect and dignity. All human resources policies, practices and actions related to hiring, promotion, compensation,benefits and termination are administered in accordance with the principles of equal employment opportunity and other legitimate criteria without regard to race, color, religion, sex, sexual orientation,gender expression or identity, ethnicity, national origin, ancestry, age, mental or physical disability, genetic information, any veteran status, any military status or application for military service, ormembership in any other category protected under applicable laws. An effective approach to human capital management requires that we invest in talent, development, culture and employee engagement. We aim to create an environment where our employees areencouraged to make positive contributions and fulfill their potential. Our Board of Directors is also actively involved in reviewing and approving executive compensation, selections and succession plans so that we have leadership in place with the requisite skills andexperience to deliver results the right way. 24
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Emerging Growth Company We are an “emerging growth company,” as defined in the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to otherpublic companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executivecompensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading marketfor our securities and the prices of our securities may be more volatile. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act forcomplying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply toprivate companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, the information we provide to you may be different than you might get from other publiccompanies in which you hold securities. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the closing of our Initial Public Offering, or December 31, 2027,(ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as definedin Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 millionas of the last business day of the second fiscal quarter of such year or (iv) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. Facilities We currently maintain our executive offices at 3730 Kirby Drive, Suite 1200, Houston, Texas 77098. We recently leased a space at 10810 Old Katy Rd, Katy, TX 77494 just beyond the Houston citylimits for our engineering and geological center. The cost for the two spaces combined is approximately $3,000 per month. We consider our current office space adequate for our current operations. ITEM 1A. RISK FACTORS An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Report, before making adecision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of oursecurities could decline, and you could lose all or part of your investment. Risks Related to Our Business There is substantial doubt about our ability to continue as a “going concern.” As of December 31, 2024, we had $2,971,558 in cash and a working capital deficit of $31,231,674. Further, we had positive cash flow from operations of $3,700,686 for the year ended December 31,2024. These factors raise substantial doubt about our ability to continue as a going concern. Management’s plans to alleviate this substantial doubt include improving profitability through streamliningcosts, maintaining active hedge positions for its proven reserve production, and the issuance of additional shares of Class A Common Stock through the Common Stock Purchase Agreement with WhiteLion, which can fund our operations and production growth, and be used to reduce our liabilities. While management believes that its plans and the overall outlook of the oil and gas industry sufficientlyalleviate the factors raising substantial doubt about its ability to continue as a going concern, there can be no assurance of success. Our producing properties are located in the Permian Basin, making it vulnerable to risks associated with operating in a single geographic area. All of our producing properties are currently geographically concentrated in the Permian Basin. As a result of this concentration, we may be disproportionately exposed to the impact of regional supplyand demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing or transportation capacity constraints, availability of equipment, facilities,personnel or services market limitations, natural disasters, adverse weather conditions, plant closures for scheduled maintenance or interruption of the processing or transportation of crude oil and naturalgas. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic crude oil and natural gas producing areas such as the Permian Basin, which maycause these conditions to occur with greater frequency or magnify the effects of these conditions. Due to the concentrated nature of Pogo’s portfolio of properties, a number of our properties couldexperience any of the same conditions at the same time, resulting in a relatively greater impact on its results of operations than they might have on other companies that have a more diversified portfolio ofproperties. Such delays or interruptions could have a material adverse effect on our financial condition and results of operations. As a result of our exclusive focus on the Permian Basin, it may be less competitive than other companies in bidding to acquire assets that include properties both within and outside of that basin. Althoughwe are currently focused on the Permian Basin, it may from time to time evaluate and consummate the acquisition of asset packages that include ancillary properties outside of that basin, which may resultin the dilution of its geographic focus. 25
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Title to the properties in which we have an interest may be impaired by title defects. Pogo is not required to, and under certain circumstances it may elect not to, incur the expense of retaining lawyers to examine the title to its operating interests. In such cases, we would rely upon thejudgment of oil and gas lease brokers or landmen who perform the fieldwork in examining records in the appropriate governmental office before acquiring an operating interest. The existence of amaterial title deficiency can render an interest worthless and can materially adversely affect our results of operations, financial condition and cash flows. No assurance can be given that Pogo will notsuffer a monetary loss from title defects or title failure. Additionally, undeveloped acreage has a greater risk of title defects than developed acreage. If there are any title defects in properties in which weholds an interest, it may suffer a financial loss. We depends on various services for the development and production activities on the properties it operates. Substantially all our revenue is derived from these producing properties. A reduction in theexpected number of wells to be developed on Pogo’s acreage by or the failure of EON to develop and operate the wells on its acreage could have an adverse effect on its results of operations and cashflows adequately and efficiently. Our assets consist primarily of operating interests. The failure of the Company to perform operations adequately or efficiently or to act in ways that are not in our best interests could reduce productionand revenues. Additionally, certain investors have requested that operators adopt initiatives to return capital to investors, which could also reduce the capital available to us for investment in developmentand production activities. Moreover, should a low commodity price environment incur, we may also opt to reduce development activity that could further reduce production and revenues. If production on our acreage decreases due to decreased development activities, because of a low commodity price environment, limited availability of development capital, production-related difficultiesor otherwise, our results of operations may be adversely affected. Pogo is not obligated to undertake any development activities other than those required to maintain their leases on our acreage. In theabsence of a specific contractual obligation, any development and production activities will be subject to their reasonable discretion (subject to certain implied obligations to develop imposed by the lawsof some states). Pogo could determine to develop wells on our acreage than is currently expected. The success and timing of development activities on our properties, depends on a number of factors thatare largely outside of our control, including: ● the capital costs required for development activities on Pogo’s acreage, which could be significantly more than anticipated; ● the ability to access capital; ● prevailing commodity prices; ● the availability of suitable equipment, production and transportation infrastructure and qualified operating personnel; ● the availability of storage for hydrocarbons, expertise, operating efficiency and financial resources; ● Pogo’s expected return on investment in wells developed on Pogo’s acreage as compared to opportunities in other areas; ● the selection of technology; ● the selection of counterparties for the marketing and sale of production; ● and the rate of production of the reserves. Pogo may elect not to undertake development activities, or may undertake these activities in an unanticipated fashion, which may result in significant fluctuations in Pogo’s results of operations and cashflows. Sustained reductions in production by Pogo on Pogo’s properties may also adversely affect Pogo’s results of operations and cash flows. Additionally, if Pogo were to experience financial difficulty,Pogo might not be able to pay invoices to continue its operations, which could have a material adverse impact on Pogo’s cash flows. 26
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Our future success depends on replacing reserves through acquisitions and the exploration and development activities. Producing crude oil and natural gas wells are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future crude oil and natural gas reservesand our production thereof and our cash flows are highly dependent on the successful development and exploitation of our urrent reserves and its ability to successfully acquire additional reserves that areeconomically recoverable. Moreover, the production decline rates of our properties may be significantly higher than currently estimated if the wells on its properties do not produce as expected. We mayalso not be able to find, acquire or develop additional reserves to replace the current and future production of its properties at economically acceptable terms. If we are not able to replace or grow its oiland natural gas reserves, its business, financial condition and results of operations would be adversely affected. Our failure to successfully identify, complete and integrate acquisitions of properties or businesses could materially and adversely affect its growth, results of operations and cash flows. We depend, in part, on acquisitions to grow its reserves, production and cash flows. Our decision to acquire a property will depend in part on the evaluation of data obtained from production reports andengineering studies, geophysical and geological analyses and seismic data, and other information, the results of which are often inconclusive and subject to various interpretations. The successfulacquisition of properties requires an assessment of several factors, including: ● recoverable reserves; ● future crude oil and natural gas prices and their applicable differentials; ● development plans; ● operating costs Pogo’s E&P operators would incur to develop and operate the properties; ● and potential environmental and other liabilities that E&P operators may incur. The accuracy of these assessments is inherently uncertain and we may not be able to identify attractive acquisition opportunities. In connection with these assessments, we perform a review of the subjectproperties that it believes to be generally consistent with industry practices, given the nature of its interests. Our review will not reveal all existing or potential problems, nor will it permit it to becomesufficiently familiar with the properties to assess fully their deficiencies and capabilities. Inspections are often not performed on every well, and environmental problems, such as groundwatercontamination, are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the seller may be unwilling or unable to provide effective contractual protectionagainst all or part of the problems. Even if we do identify attractive acquisition opportunities, it may not be able to complete the acquisition or do so on commercially acceptable terms. Unless we furtherdevelop our existing properties, we will depend on acquisitions to grow our reserves, production and cash flow. There is intense competition for acquisition opportunities in our industry. Competition for acquisitions may increase the cost of, or cause us to refrain from, completing acquisitions. Additionally,acquisition opportunities vary over time. Our ability to complete acquisitions is dependent upon, among other things, our ability to obtain debt and equity financing and, in some cases, regulatoryapprovals. Further, these acquisitions may be in geographic regions in which Pogo does not currently hold assets, which could result in unforeseen operating difficulties. In addition, if we acquire interestsin new states, it may be subject to additional and unfamiliar legal and regulatory requirements. Compliance with regulatory requirements may impose substantial additional obligations on Pogo and itsmanagement, cause it to expend additional time and resources in compliance activities and increase its exposure to penalties or fines for non-compliance with such additional legal requirements. Further,the success of any completed acquisition will depend on Pourability to effectively integrate the acquired business into its existing business. The process of integrating acquired businesses may involveunforeseen difficulties and may require a disproportionate amount of our managerial and financial resources. In addition, potential future acquisitions may be larger and for purchase prices significantlyhigher than those paid for earlier acquisitions. No assurance can be given that we will be able to identify suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquireidentified targets. Our failure to achieve consolidation savings, to integrate the acquired assets into its existing operations successfully or to minimize any unforeseen difficulties could materially andadversely affect its financial condition, results of operations and cash flows. The inability to effectively manage these acquisitions could reduce Our focus on subsequent acquisitions and currentoperations, which, in turn, could negatively impact its growth, results of operations and cash flows. 27
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We may acquire properties that do not produce as projected, and it may be unable to determine reserve potential, identify liabilities associated with such properties or obtain protection from sellersagainst such liabilities. Acquiring crude oil and natural gas properties requires us to assess reservoir and infrastructure characteristics, including recoverable reserves, development and operating costs and potentialenvironmental and other liabilities. Such assessments are inexact and inherently uncertain. In connection with the assessments, we perform a review of the subject properties, but such a review will notnecessarily reveal all existing or potential problems. In the course of due diligence, we may not inspect every well or pipeline. We cannot necessarily observe structural and environmental problems, suchas pipe corrosion, when an inspection is made. We may not be able to obtain contractual indemnities from the seller for liabilities created prior to its purchase of the property. We may be required toassume the risk of the physical condition of the properties in addition to the risk that the properties may not perform in accordance with its expectations. Any acquisitions that Pogo completes will be subject to substantial risks. Even if we makes acquisitions that we believes will increase its cash generated from operations, these acquisitions may nevertheless result in a decrease in its cash flows. Any acquisition involvespotential risks, including, among other things: ● the validity of our assumptions about estimated proved reserves, future production, prices, revenues, capital expenditures, the operating expenses and costs to develop the reserves; ● a decrease in our liquidity by using a significant portion of our cash generated from operations or borrowing capacity to finance acquisitions; ● a significant increase in our interest expense or financial leverage if we incur debt to finance acquisitions; ● the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which any indemnity it receives is inadequate; ● mistaken assumptions about the overall cost of equity or debt; ● Our ability to obtain satisfactory title to the assets it acquires; ● an inability to hire, train or retain qualified personnel to manage and operate our growing business and assets; ● and the occurrence of other significant changes, such as impairment of crude oil and natural gas properties, goodwill or other intangible assets, asset devaluation or restructuring charges. Our identified development activities are susceptible to uncertainties that could materially alter the occurrence or timing of our development activities. The ability of the Company to perform development activities depends on a number of uncertainties, including the availability of capital, construction of and limitations on access to infrastructure,inclement weather, regulatory changes and approvals, crude oil and natural gas prices, costs, development activity results and the availability of water. Further, any identified potential developmentactivities are in various stages of evaluation, ranging from wells that are ready to be developed to wells that require substantial additional interpretation. The use of technologies and the study of producingfields in the same area will not enable we to know conclusively prior to development activities whether crude oil and natural gas will be present or, if present, whether crude oil and natural gas will bepresent in sufficient quantities to be economically viable. Even if enough crude oil or natural gas exist, we may damage the potentially productive hydrocarbon-bearing formation or experiencemechanical difficulties while performing development activities, possibly resulting in a reduction in production from the well or abandonment of the well. If Pogo performs additional developmentactivities on wells that do not respond or they produce at quantities less than desired these wells may materially harm our business. There is no guarantee that the conclusions we draw from available data and other wells near the Pogo acreage will be applicable to our development activities. Further, initial production rates reported byus in the areas in which ours reserves are located may not be indicative of future or long-term production rates. Additionally, actual production from wells may be less than expected. For example, anumber of E&P operators have recently announced that newer wells drilled close in proximity to already producing wells have produced less oil and gas than forecast. Because of these uncertainties, Pogodoes not know if the potential development activities that have been identified will ever be able to produce crude oil and natural gas from these or any other potential development activities. As such, theactual development activities of Pogo may materially differ from those presently identified, which could adversely affect our business, results of operation and cash flows. 28
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Acquisitions and development of our leases will require substantial capital, and our company may be unable to obtain needed capital or financing on satisfactory terms or at all. The crude oil and natural gas industry is capital intensive. Pogo made substantial capital expenditures in connection with the acquisition and development of its properties. Our company may continue tomake substantial capital expenditures in connection with the acquisition and development of properties. Our company will finance capital expenditures primarily with funding from cash generated byoperations and borrowings under its revolving credit facility. In the future, Pogo may need capital more than the amounts it retains in its business or borrows under its revolving credit facility. The level of borrowing base available under our revolving credit facilityis largely based on its estimated proved reserves and its lenders’ price decks and underwriting standards in the reserve-based lending space and may be reduced to the extent commodity prices decreaseand cause underwriting standards to tighten or the lending syndication market is not sufficiently liquid to obtain lender commitments to a full borrowing base in an amount appropriate for our assets.Furthermore, Pogo cannot assure you that it will be able to access other external capital on terms favorable to it or at all. For example, a significant decline in prices for crude oil and broader economicturmoil may adversely impact our ability to secure financing in the capital markets on favorable terms. Additionally, our ability to secure financing or access the capital markets could be adverselyaffected if financial institutions and institutional lenders elect not to provide funding for fossil fuel energy companies in connection with the adoption of sustainable lending initiatives or are required toadopt policies that have the effect of reducing the funding available to the fossil fuel sector. If Pogo is unable to fund its capital requirements, Pogo may be unable to complete acquisitions, take advantageof business opportunities or respond to competitive pressures, any of which could have a material adverse effect on its results of operation and free cash flow. Pogo is also dependent on the availability of external debt, equity financing sources and operating cash flows to maintain its development program. If those financing sources are not available onfavorable terms or at all, then Pogo expects the development of its properties to be adversely affected. If the development of our properties is adversely affected, then revenues from our operations maydecline. If we issue additional equity securities or securities convertible into equity securities, existing stockholders will experience dilution and the new equity securities could have rights senior to thoseof our Class A Common Stock. The widespread outbreak of an illness, pandemic (like COVID-19) or any other public health crisis may have material adverse effects on our business, financial position, results of operations and/orcash flows. Pogo faces risks related to the outbreak of illnesses, pandemics and other public health crises that are outside of its control and could significantly disrupt its operations and adversely affect its financialcondition. For example, the COVID-19 pandemic has caused a disruption to the oil and natural gas industry and to our business. The COVID-19 pandemic negatively impacted the global economy,disrupted global supply chains, reduced global demand for oil and gas, and created significant volatility and disruption of financial and commodity markets, but has been improving since 2020. The degree to which the COVID-19 pandemic or any other public health crisis adversely impacts our operations, financial results and dividend policy will also depend on future developments, which arehighly uncertain and cannot be predicted. These developments include, but are not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, itsimpact on the economy and market conditions, and how quickly and to what extent normal economic and operating conditions can resume. While this matter may disrupt its operations in some way, thedegree of the adverse financial impact cannot be reasonably estimated at this time. 29
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Pogo currently plans to enter hedging arrangements with respect to the production of crude oil, and possibly natural gas which is a smaller portion of the reserves. Pogo will mitigate the exposure tothe impact of decreases in the prices by establishing a hedging plan and structure that protects the earnings to a reasonable level, and the debt service requirements. Pogo does currently plan to enter into hedging arrangements to establish, in advance, a price for the sale of the crude oil and possibly natural gas produced from its properties. The hedging plan andstructure will be at a level to balance the debt service requirements and also allow Pogo to realize the benefit of any short-term increase in the price of crude oil and natural gas. A portion of the crude oiland natural gas produced from its properties will not be protected against decreases in the price of crude oil and natural gas, or prolonged periods of low commodity prices. Hedging arrangements maylimit our ability to realize the benefit of rising prices and may result in hedging losses. The intent of the hedging arrangements is to mitigate the volatility in its cash flows due to fluctuations in the price of crude oil and natural gas. However, these hedging activities may not be as effective asour company intends in reducing the volatility of its cash flows and, if entered into, are subject to the risks of the terms of the derivative instruments derivative contract, there may be a change in theexpected differential between the underlying commodity price in the derivative instrument and the actual price received, our company’s hedging policies and procedures may not be properly followed andthe steps our company takes to monitor its derivative financial instruments may not detect and prevent violations of its risk management policies and procedures, particularly if deception or otherintentional misconduct is involved. Further, our company may be limited in receiving the full benefit of increases in crude oil as a result of these hedging transactions. The occurrence of any of these riskscould prevent Pogo from realizing the benefit of a derivative contract. Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect thequantities and present value of its reserves. It is not possible to measure underground accumulation of crude oil and natural gas in an exact way. Crude oil and natural gas reserve engineering is not an exact science and requires subjective estimatesof underground accumulations of crude oil and natural gas and assumptions concerning future crude oil and natural gas prices, production levels, ultimate recoveries and operating and development costs.As a result, estimated quantities of proved reserves, projections of future production rates and the timing of development expenditures may turn out to be incorrect. Estimates of our proved reserves andrelated valuations as of December 31, 2024 and December 31, 2023 were prepared by Cobb. Cobb conducted a detailed review of all of our properties for the period covered by its reserve report usinginformation provided by Pogo. Over time, Pogo may make material changes to reserve estimates taking into account the results of actual drilling, testing and production and changes in prices. In addition,certain assumptions regarding future crude oil and natural gas prices, production levels and operating and development costs may prove incorrect. For example, due to the deterioration in commodityprices and operator activity in 2020 as a result of the COVID-19 pandemic and other factors, the commodity price assumptions used to calculate our reserves estimates declined, which in turn lowered itsproved reserve estimates. A substantial portion of our reserve estimates are made without the benefit of a lengthy production history, which are less reliable than estimates based on a lengthy productionhistory. Any significant variance from these assumptions to actual figures could greatly affect our estimates of reserves and future cash generated from operations. Numerous changes over time to theassumptions on which our reserve estimates are based, as described above, often result in the actual quantities of crude oil and natural gas that are ultimately recovered being different from its reserveestimates. Furthermore, the present value of future net cash flows from our proved reserves is not necessarily the same as the current market value of its estimated reserves. In accordance with rules established bythe SEC and the Financial Accounting Standards Board (the “FASB”), Pogo bases the estimated discounted future net cash flows from its proved reserves on the twelve-month average oil and gas indexprices, calculated as the unweighted arithmetic average for the first-day-of-the-month price for each month, and costs in effect on the date of the estimate, holding the prices and costs constant throughoutthe life of the properties. Actual future prices and costs may differ materially from those used in the present value estimate, and future net present value estimates using then current prices and costs maybe significantly less than the current estimate. In addition, the 10% discount factor Pogo uses when calculating discounted future net cash flows may not be the most appropriate discount factor based oninterest rates in effect from time to time and risks associated with Pogo or the crude oil and natural gas industry in general. 30
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Operating hazards and partially insured or uninsured risks may result in substantial losses to Pogo and any losses could adversely affect our results of operations and cash flows. The operations of Pogo will be subject to all of the hazards and operating risks associated with drilling for and production of crude oil and natural gas, including the risk of fire, explosions, blowouts,surface cratering, uncontrollable flows of crude oil and natural gas and formation water, pipe or pipeline failures, abnormally pressured formations, casing collapses and environmental hazards such ascrude oil spills, natural gas leaks and ruptures or discharges of toxic gases. In addition, their operations will be subject to risks associated with hydraulic fracturing, including any mishandling, surfacespillage or potential underground migration of fracturing fluids, including chemical additives. The occurrence of any of these events could result in substantial losses to Pogo due to injury or loss of life,severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigations and penalties, suspension ofoperations and repairs required to resume operations. Loss of our information and computer systems, including as a result of cyber-attacks, could materially and adversely affect our business. Pogo relies on electronic systems and networks to control and manage our respective businesses. If any of such programs or systems were to fail for any reason, including as a result of a cyber-attack, orcreate erroneous information in our hardware or software network infrastructure, possible consequences could be significant, including loss of communication links and inability to automatically processcommercial transaction or engage in similar automated or computerized business activities. Although Pogo has multiple layers of security to mitigate risks of cyber-attacks, cyber-attacks on business haveescalated in recent years. Moreover, Pogo is becoming increasingly dependent on digital technologies to conduct certain exploration, development, production and processing activities, includinginterpreting seismic data, managing drilling rigs, production activities and gathering systems, conducting reservoir modeling and estimating reserves. The U.S. government has issued public warnings thatindicate that energy assets might be specific targets of cyber security threats. If Pogo becomes the target of cyber-attacks of information security breaches, their business operations may be substantiallydisrupted, which could have an adverse effect on our results of operations. In addition, our efforts to monitor, mitigate and manage these evolving risks may result in increased capital and operating costs,and there can be no assurance that such efforts will be sufficient to prevent attacks or breaches from occurring. A terrorist attack or armed conflict could harm our business. Terrorist activities, anti-terrorist activities and other armed conflicts involving the United States or other countries may adversely affect the United States and global economies and could prevent Pogofrom meeting its financial and other obligations. For example, on February 24, 2022, Russia launched a large-scale invasion of Ukraine that has led to significant armed hostilities. As a result, theUnited States, the United Kingdom, the member states of the European Union and other public and private actors have levied severe sanctions on Russia. To date, this conflict has resulted in a decreasedsupply of hydrocarbons which has resulted in higher commodity prices. The geopolitical and macroeconomic consequences of this invasion and associated sanctions cannot be predicted, and such events,or any further hostilities in Ukraine or elsewhere, could severely impact the world economy. If any of these events occur, the resulting political instability and societal disruption could reduce overalldemand for crude oil and natural gas potentially putting downward pressure on demand for our services and causing a reduction in our revenues. Crude oil and natural gas related facilities, including thoseof Pogo, could be direct targets of terrorist attacks, and, if infrastructure integral to Pogo is destroyed or damaged, they may experience a significant disruption in their operations. Any such disruptioncould materially adversely affect our financial condition, results of operations and cash flows. Costs for insurance and other security may increase as a result of these threats, and some insurance coveragemay become more difficult to obtain, if available at all. We believe Pogo currently has ineffective internal control over its financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual orinterim consolidated financial statements may not be prevented or detected on a timely basis. We identified a material weakness and believe that Pogo currently has ineffective internal control overfinancial reporting, primarily due to: not maintaining a sufficient complement of personnel to permit segregation of duties among personnel with access to our accounting and information systemscontrols, lacking proper review evidence of controls over the reserves report prepared by the reservoir engineer, and lacking the controls needed to ensure that the accounting for certain items is accurateand complete. We intend to remediate these deficiencies by putting into place proper internal controls and accounting systems to ensure effective internal control over its financial reporting. We plan to enhance ourprocesses to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements.Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals withwhom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives willultimately have the intended effects. However, completion of remediation does not provide assurance that our remediation or other controls will continue to operate properly or remain adequate and we cannot assure you that we will notidentify additional material weaknesses in our internal control over financial reporting in the future. If we are unable to maintain effective internal control over financial reporting or disclosure controlsand procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the SEC, could beadversely affected. This failure could negatively affect the market price and trading liquidity of our stock, cause investors to lose confidence in our reported financial information, subject us to civil andcriminal investigations and penalties and generally materially and adversely impact our business and financial condition. 31
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We are dependent upon our executive officers and directors and their departure could adversely affect our ability to operate. Our operations are dependent upon a relatively small group of individuals. We believe that our success depends on the continued service of our executive officers and directors. In addition, our executiveofficers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating management time among various businessactivities. The unexpected loss of the services of one or more of our directors or executive officers could have a detrimental effect on us. Certain of our executive officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those conducted by us. Our executive officers and directors are, or may in the future become, affiliated with entities that are engaged in business activities similar to our own. Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties.Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potentialtarget business may be presented to another entity prior to its presentation to us. Our Second A&R Charter provides that we renounce our interest in any corporate opportunity offered to any director orofficer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractuallypermitted to undertake and would otherwise be reasonable for us to pursue. Our executive officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests. We have not adopted a policy that expressly prohibits our directors, executive officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to beacquired or disposed of by us or in any transaction to which we are a party or have an interest. We also do not have a policy that expressly prohibits any such persons from engaging for their own accountin business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours. Increased costs of capital could adversely affect our business. Our business and ability to raise capital and make acquisitions could be harmed by factors such as the availability, terms, and cost of capital, increases in interest rates or a reduction in our credit rating.Changes in any one or more of these factors could cause our cost of doing business to increase, limit its access to capital, limit its ability to pursue acquisition opportunities, and place it at a competitivedisadvantage. A significant reduction in the availability of capital could materially and adversely affect our ability to achieve our planned growth and operating results. For example, since March 2022, the Federal Reserve has raised its target range for the federal funds rate multiple times, and additional rate hikes may continue to occur. An increase in the interest ratesassociated with our floating rate debt would increase our debt service costs and affect our results of operations and cash flow available for payments of our debt obligations. In addition, an increase ininterest rates could adversely affect our future ability to obtain financing or materially increase the cost of any additional financing. Pogo may be involved in legal proceedings that could result in substantial liabilities. Like many crude oil and natural gas companies, Pogo may from time to time be involved in various legal and other proceedings, such as title, royalty or contractual disputes, regulatory compliancematters and personal injury or property damage matters, in the ordinary course of its business. Such legal proceedings are inherently uncertain and their results cannot be predicted. Regardless of theoutcome, such proceedings could have an adverse impact on Pogo because of legal costs, diversion of management and other personnel and other factors. In addition, it is possible that a resolution of oneor more such proceedings could result in liability, penalties or sanctions, as well as judgments, consent decrees or orders requiring a change in our business practices, which could materially and adverselyaffect our business, operating results and financial condition. Accruals for such liability, penalties or sanctions may be insufficient. Judgments and estimates to determine accruals or range of losses relatedto legal and other proceedings could change from one period to the next, and such changes could be material. 32
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Risks Related to Our Industry A substantial majority of our revenues from crude oil and gas producing activities are derived from its operating properties that are based on the price at which crude oil and natural gas producedfrom the acreage underlying its interests are sold. Prices of crude oil and natural gas are volatile due to factors beyond our control. A substantial or extended decline in commodity prices mayadversely affect our business, financial condition, results of operations and cash flows. Our revenues, operating results, discretionary cash flows, profitability, liquidity and the carrying value of its interests depend significantly upon the prevailing prices for crude oil and natural gas.Historically, crude oil and natural gas prices and their applicable basis differentials have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and avariety of additional factors that are beyond our control, including: ● the regional, domestic foreign supply of and demand for crude oil and natural gas; ● the level of prices and market expectations about future prices of crude oil and natural gas; ● the level of global crude oil and natural gas E&P; ● the cost of exploring for, developing, producing and delivering crude oil and natural gas; ● the price and quantity of foreign imports and U.S. exports of crude oil and natural gas; ● the level of U.S. domestic production; ● political and economic conditions and events in foreign oil and natural gas producing countries, including embargoes, continued hostilities in the Middle East and other sustained militarycampaigns, the armed conflict in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America and China and acts of terrorism or sabotage; ● global or national health concerns, including the outbreak of an illness pandemic (like COVID-19), which may reduce demand for crude oil and natural gas due to reduced global or nationaleconomic activity; ● the ability of members of OPEC and its allies and other oil exporting nations to agree to and maintain crude oil price and production controls; ● speculative trading in crude oil and natural gas derivative contracts; ● the level of consumer product demand; ● weather conditions and other natural disasters, such as hurricanes and winter storms, the frequency and impact of which could be increased by the effects of climate change; ● technological advances affecting energy consumption, energy storage and energy supply; ● domestic and foreign governmental regulations and taxes; ● the continued threat of terrorism and the impact of military and other action, including U.S. military operations in the Middle East and economic sanctions such as those imposed by the U.S. onoil and gas exports from Iran; ● the proximity, cost, availability and capacity of crude oil and natural gas pipelines and other transportation facilities; ● the impact of energy conservation efforts; ● the price and availability of alternative fuels; and ● overall domestic and global economic conditions. 33
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These factors and the volatility of the energy markets make it extremely difficult to predict future oil and natural gas price movements accurately. Lower commodity prices may reduce our operatingmargins, cash flow and borrowing ability. If we are unable to obtain needed capital or financing on satisfactory terms, our ability to develop future reserves or make acquisitions could be adverselyaffected. Also, using lower prices in estimating proved reserves may result in a reduction in proved and reserve volumes due to economic limits. In addition, sustained periods with oil and natural gasprices at levels lower than current West Texas Intermediate (“WTI”) and Henry Hub strip prices may adversely affect our drilling economics, cash flow and our ability to raise capital, which may requireus to re-evaluate and postpone or substantially restrict our development program, and result in the reduction of some of our proved undeveloped reserves and related PV-10. Any substantial decline in the price of crude oil and natural gas, or prolonged period of low commodity prices will materially adversely affect our business, financial condition, results of operations andcash flows. In addition, lower crude oil and natural gas may reduce the amount of crude oil and natural gas that can be produced economically, which may reduce our willingness to develop its properties.This may result in Pogo having to make substantial downward adjustments to our estimated proved reserves, which could negatively impact its ability to fund its operations. If this occurs or if productionestimates change or exploration or development results deteriorate, the successful efforts method of accounting principles may require Pogo to write down, as a non-cash charge to earnings, the carryingvalue of its crude oil and natural gas properties. Pogo could also determine during periods of low commodity prices to shut in or curtail production from wells on our properties. In addition, we coulddetermine during periods of low commodity prices to plug and abandon marginal wells that otherwise may have been allowed to continue to produce for a longer period under conditions of higher prices.Specifically, they may abandon any well if they reasonably believe that the well can no longer produce crude oil or natural gas in commercially paying quantities. Pogo may choose to use variousderivative instruments in connection with anticipated crude oil and natural gas to minimize the impact of commodity price fluctuations. However, we cannot hedge the entire exposure of our operationsfrom commodity price volatility. To the extent we does not hedge against commodity price volatility, or its hedges are not effective, our results of operations and financial position may be diminished. If commodity prices decrease to a level such that our future undiscounted cash flows from its properties are less than their carrying value, Pogo may be required to take write-downs of the carryingvalues of its properties. Accounting rules require that Pogo periodically review the carrying value of its properties for possible impairment. Based on specific market factors and circumstances at the time of prospectiveimpairment reviews, production data, economics and other factors, Pogo may be required to write down the carrying value of its properties. Pogo evaluates the carrying amount of its proved oil andnatural gas properties for impairment whenever events or changes in circumstances indicate that a property’s carrying amount may not be recoverable. If the carrying value exceeds the estimatedundiscounted future cash flows Pogo would estimate the fair value of its properties and record an impairment charge for any excess of the carrying value of the properties over the estimated fair value ofthe properties. Factors used to estimate fair value may include estimates of proved reserves, future commodity prices, future production estimates and a commensurate discount rate. The risk that Pogowill be required to recognize impairments of its crude oil and natural gas properties increases during periods of low commodity prices. In addition, impairments would occur if Pogo were to experiencesufficient downward adjustments to its estimated proved reserves or the present value of estimated future net revenues. An impairment recognized in one period may not be reversed in a subsequentperiod. Pogo may incur impairment charges in the future, which could materially adversely affect its results of operations for the periods in which such charges are taken. The unavailability, high cost or shortages of rigs, equipment, raw materials, supplies or personnel may restrict or result in increased costs to develop and operate our properties. The crude oil and natural gas industry is cyclical, which can result in shortages of drilling/workover rigs, equipment, raw materials (particularly water and sand and other proppants), supplies andpersonnel. When shortages occur, the costs and delivery times of rigs, equipment and supplies increase and demand for, and wage rates of, qualified drilling/workover rig crews also rise with increases indemand. Pogo cannot predict whether these conditions will exist in the future and, if so, what their timing and duration will be. In accordance with customary industry practice, Pogo relies on independentthird-party service providers to provide many of the services and equipment necessary to drill new development wells. If Pogo is unable to secure a sufficient number of drilling/workover rigs atreasonable costs, our financial condition and results of operations could suffer. Shortages of drilling/workover rigs, equipment, raw materials, supplies, personnel, trucking services, tubulars, hydraulicfracturing and completion services and production equipment could delay or restrict our development operations, which in turn could have a material adverse effect on our financial condition, results ofoperations and cash flows. 34
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The marketability of crude oil and natural gas production is dependent upon transportation and processing and refining facilities, which Pogo cannot control. Any limitation in the availability ofthose facilities could interfere with our ability to market its production and could harm our business. The marketability of our production depends in part on the availability, proximity and capacity of pipelines, gathering lines, tanker trucks and other transportation methods, and processing and refiningfacilities owned by third parties. Pogo does not control these third-party facilities and our access to them may be limited or denied. Insufficient production from the wells on our acreage or a significantdisruption in the availability of third-party transportation facilities or other production facilities could adversely impact our ability to deliver, to market or produce oil and natural gas and thereby cause asignificant interruption in our operations. If we are unable, for any sustained period, to implement acceptable delivery or transportation arrangements or encounter production related difficulties, they maybe required to shut in or curtail production. In addition, the amount of crude oil that can be produced and sold is subject to curtailment in certain other circumstances outside of our control, such aspipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage or lack of available capacity on these systems, tanker truck availability and extreme weatherconditions. Also, production from our wells may be insufficient to support the construction of pipeline facilities, and the shipment of our crude oil and natural gas on third-party pipelines may be curtailedor delayed if it does not meet the quality specifications of the pipeline owners. The curtailments arising from these and similar circumstances may last from a few days to several months. In many cases,Pogo is provided only with limited, if any, notice as to when these circumstances will arise and their duration. Any significant curtailment in gathering system or transportation, processing or refining-facility capacity, or an inability to obtain favorable terms for delivery of the crude oil and natural gas produced from our acreage, could reduce our ability to market the production from our properties andhave a material adverse effect on our financial condition, results of operations and cash flows. our access to transportation options and the prices we receives can also be affected by federal and stateregulation — including regulation of crude oil and natural gas production, transportation and pipeline safety — as well by general economic conditions and changes in supply and demand. In addition, the third parties on whom Pogo relies for transportation services are subject to complex federal, state, tribal and local laws that could adversely affect the cost, manner or feasibility ofconducting our business. Drilling for and producing crude oil and natural gas are high-risk activities with many uncertainties that may materially adversely affect our business, financial condition, results of operations andcash flows. The development drilling activities of our properties will be subject to many risks. For example, Pogo will not be able to assure you that wells drilled by the E&P operators of its properties will beproductive. Drilling for crude oil and natural gas often involves unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient crude oil and natural gasto return a profit at then realized prices after deducting drilling, operating and other costs. The seismic data and other technologies used do not provide conclusive knowledge prior to drilling a well thatcrude oil and natural gas are present or that a well can be produced economically. The costs of exploration, exploitation and development activities are subject to numerous uncertainties beyond ourcontrol and increases in those costs can adversely affect the economics of a project. Further, our development drilling and producing operations may be curtailed, delayed, canceled or otherwise negativelyimpacted as a result of other factors, including: ● unusual or unexpected geological formations; ● loss of drilling fluid circulation; ● title problems; ● facility or equipment malfunctions; ● unexpected operational events; ● shortages or delivery delays of equipment and services; ● compliance with environmental and other governmental requirements; and ● adverse weather conditions, including the recent winter storms in February 2021 that adversely affected operator activity and production volumes in the southern United States, including in theDelaware Basin. Any of these risks can cause substantial losses, including personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution, environmental contamination orloss of wells and other regulatory penalties. In the event that planned operations, including the drilling of development wells, are delayed or cancelled, or existing wells or development wells have lowerthan anticipated production due to one or more of the factors above or for any other reason, our financial condition, results of operations and cash flows may be materially adversely affected. 35
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Competition in the crude oil and natural gas industry is intense, which may adversely affect our ability to succeed. The crude oil and natural gas industry is intensely competitive, and our properties compete with other companies that may have greater resources. Many of these companies explore for and produce crudeoil and natural gas, carry on midstream and refining operations, and market petroleum and other products on a regional, national or worldwide basis. In addition, these companies may have a greaterability to continue exploration activities during periods of low crude oil and natural gas market prices. our larger competitors may be able to absorb the burden of present and future federal, state, local andother laws and regulations more easily than we can, which would adversely affect our competitive position. Pogo may have fewer financial and human resources than many companies in our industry andmay be at a disadvantage in bidding producing crude oil and natural gas properties. Furthermore, the crude oil and natural gas industry has experienced recent consolidation among some operators, whichhas resulted in certain instances of combined companies with larger resources. Such combined companies may compete against Pogo and thus limit our ability to acquire additional properties and addreserves. A deterioration in general economic, business, political or industry conditions would materially adversely affect our results of operations, financial condition and cash flows. Concerns over global economic conditions, energy costs, geopolitical issues, the impacts of the COVID-19 pandemic, inflation, the availability and cost of credit and slow economic growth in theUnited States have contributed to economic uncertainty and diminished expectations for the global economy. Additionally, acts of protest and civil unrest have caused economic and political disruption inthe United States. Meanwhile, continued hostilities in the Middle East, Ukraine and the occurrence or threat of terrorist attacks in the United States or other countries could adversely affect the economiesof the United States and other countries. Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices. An oversupply and decreaseddemand of crude oil in 2020 led to a severe decline in worldwide crude oil prices in 2020. If the economic climate in the United States or abroad deteriorates, worldwide demand for petroleum products could further diminish, which could impact the price at which crude oil and natural gas fromour properties are sold, affect the ability of the Company to continue operations and ultimately materially adversely impact our results of operations, financial condition and cash flows. Conservation measures, technological advances and increasing attention to ESG matters could materially reduce demand for crude oil and natural gas, availability of capital and adversely affect ourresults of operations. Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to crude oil and natural gas, technological advances in fuel economy and energy-generation devices could reduce demand for crude oil and natural gas. The impact of the changing demand for crude oil and natural gas services and products may have a material adverse effect on ourbusiness, financial condition, results of operations and cash flows. It is also possible that the concerns about the production and use of fossil fuels will reduce the sources of financing available toPogo. For example, certain segments of the investor community have developed negative sentiment towards investing in the oil and gas industry. Recent equity returns in the sector versus other industrysectors have led to lower oil and gas representation in certain key equity market indices. In addition, some investors, including investment advisors and certain sovereign wealth, pension funds, universityendowments and family foundations, have stated policies to divest from, or not provide funding to, the oil and gas sector based on their social and environmental considerations. Furthermore,organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to environmental, social andgovernance (“ESG”) matters. Such ratings are used by some investors and other financial institutions to inform their investment, financing and voting decisions, and unfavorable ESG ratings may lead toincreased negative sentiment toward oil and gas companies from such institutions. Additionally, the SEC proposed rules on climate change disclosure requirements for public companies which, if adoptedas proposed, could result in substantial compliance costs. Certain other stakeholders have also pressured commercial and investment banks to stop financing oil and gas and related infrastructure projects.Such developments, including environmental activism and initiatives aimed at limiting climate change and reducing air pollution, could result in downward pressure on the stock prices of oil and gascompanies, and also adversely affect our availability of capital. 36
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Risks Related to Environmental and Regulatory Matters Crude oil and natural gas operations are subject to various governmental laws and regulations. Compliance with these laws and regulations can be burdensome and expensive for Pogo, and failureto comply could result in Pogo incurring significant liabilities, either of which may impact its willingness to develop our interests. Our activities on the properties in which Pogo holds interests are subject to various federal, state and local governmental regulations that may change from time to time in response to economic andpolitical conditions. Matters subject to regulation include drilling operations, production and distribution activities, discharges or releases of pollutants or wastes, plugging and abandonment of wells,maintenance and decommissioning of other facilities, the spacing of wells, unitization and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls andlimitations on production by restricting the rate of flow of crude oil and natural gas wells below actual production capacity to conserve supplies of crude oil and natural gas. Further actions, includingactions focused on addressing climate change, may negatively impact oil and gas operations and favor renewable energy projects in the United States, which may negatively impact the demand for oil andnatural gas. In addition, the production, handling, storage and transportation of crude oil and natural gas, as well as the remediation, emission and disposal of crude oil and natural gas wastes, by-products thereof andother substances and materials produced or used in connection with crude oil and natural gas operations are subject to regulation under federal, state and local laws and regulations primarily relating toprotection of worker health and safety, natural resources and the environment. Failure to comply with these laws and regulations may result in the assessment of sanctions on Pogo, includingadministrative, civil or criminal penalties, permit revocations, requirements for additional pollution controls and injunctions limiting or prohibiting some or all of our operations on our properties.Moreover, these laws and regulations have generally imposed increasingly strict requirements related to water use and disposal, air pollution control, species protection, and waste management, amongother matters. Laws and regulations governing E&P may also affect production levels. Pogo must comply with federal and state laws and regulations governing conservation matters, including, but not limited to: ● provisions related to the unitization or pooling of the crude oil and natural gas properties; ● the establishment of maximum rates of production from wells; ● the spacing of wells; ● the plugging and abandonment of wells; and ● the removal of related production equipment. Additionally, federal and state regulatory authorities may expand or alter applicable pipeline-safety laws and regulations, compliance with which may require increased capital costs for third-party crudeoil and natural gas transporters. These transporters may attempt to pass on such costs to Pogo, which in turn could affect profitability on the properties in which Pogo owns an interest. Pogo must also comply with laws and regulations prohibiting fraud and market manipulations in energy markets. To the extent our properties are shippers on interstate pipelines, they must comply withthe tariffs of those pipelines and with federal policies related to the use of interstate capacity. Pogo may be required to make significant expenditures to comply with the governmental laws and regulations described above and may be subject to potential fines and penalties if they are found to haveviolated these laws and regulations. Pogo believes the trend of more expansive and stricter environmental legislation and regulations will continue. The laws and regulations that affect Pogo could increasethe operating costs of Pogo and delay production and may ultimately impact our ability and willingness to develop our properties. 37
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Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could cause Pogo to incur increased costs, additional operating restrictions or delays and have fewer potentialdevelopment locations. Pogo engages in hydraulic fracturing. Hydraulic fracturing is a common practice that is used to stimulate production of hydrocarbons from tight formations, including shales. The process involves theinjection of water, sand and chemicals under pressure into formations to fracture the surrounding rock and stimulate production. Currently, hydraulic fracturing is generally exempt from regulation underthe Underground Injection Control program of the U.S. Safe Drinking Water Act (“SDWA”) and is typically regulated by state oil and gas commissions or similar agencies. However, several federal agencies have asserted regulatory authority over certain aspects of the process. For example, in June 2016, the Environmental Protection Agency (the “EPA”) published aneffluent limit guideline final rule prohibiting the discharge of wastewater from onshore unconventional oil and gas extraction facilities to publicly owned wastewater treatment plants. Also, from time totime, legislation has been introduced, but not enacted, in the U.S. Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulicfracturing process. This or other federal legislation related to hydraulic fracturing may be considered again in the future, though Pogo cannot predict the extent of any such legislation at this time. Moreover, some states and local governments have adopted, and other governmental entities are considering adopting, regulations that could impose more stringent permitting, disclosure and well-construction requirements on hydraulic fracturing operations, including states in which our properties are located. For example, Texas, among others, has adopted regulations that impose new or morestringent permitting, disclosure, disposal and well construction requirements on hydraulic fracturing operations. States could also elect to prohibit high volume hydraulic fracturing altogether. In additionto state laws, local land use restrictions, such as city ordinances, may restrict drilling in general and/or hydraulic fracturing in particular. Increased regulation and attention given to the hydraulic fracturing process, including the disposal of produced water gathered from drilling and production activities, could lead to greater opposition to,and litigation concerning, crude oil and natural gas production activities using hydraulic fracturing techniques in areas where Pogo owns properties. Additional legislation or regulation could also lead tooperational delays or increased operating costs for Pogo in the production of crude oil and natural gas, including from the development of shale plays, or could make it more difficult for Pogo to performhydraulic fracturing. The adoption of any federal, state or local laws or the implementation of regulations regarding hydraulic fracturing could potentially cause a decrease in our completion of new crudeoil and natural gas wells and result in an associated decrease in the production attributable to our interests, which could have a material adverse effect on our business, financial condition and results ofoperations. Legislation or regulatory initiatives intended to address seismic activity could restrict our development and production activities, as well as our ability to dispose of produced water gathered from suchactivities, which could have a material adverse effect on our future business, which in turn could have a material adverse effect on our business. State and federal regulatory agencies have recently focused on a possible connection between hydraulic fracturing related activities, particularly the underground injection of wastewater into disposalwells, and the increased occurrence of seismic activity, and regulatory agencies at all levels are continuing to study the possible linkage between oil and gas activity and induced seismicity. For example,in 2015, the United States Geological Study (“USGS”) identified eight states, including New Mexico, Oklahoma and Texas, with areas of increased rates of induced seismicity that could be attributed tofluid injection or oil and gas extraction. In addition, a number of lawsuits have been filed alleging that disposal well operations have caused damage to neighboring properties or otherwise violated state and federal rules regulating wastedisposal. In response to these concerns, regulators in some states are seeking to impose additional requirements, including requirements in the permitting of produced water disposal wells or otherwise toassess the relationship between seismicity and the use of such wells. For example, the Texas Railroad Commission has previously published a rule governing permitting or re-permitting of disposal wellsthat would require, among other things, the submission of information on seismic events occurring within a specified radius of the disposal well location, as well as logs, geologic cross sections andstructure maps relating to the disposal area in question. If the permittee or an applicant of a disposal well permit fails to demonstrate that the produced water or other fluids are confined to the disposalzone or if scientific data indicates such a disposal well is likely to be or determined to be contributing to seismic activity, then the agency may deny, modify, suspend or terminate the permit application orexisting operating permit for that well. The Texas Railroad Commission has used this authority to deny permits for waste disposal wells. In some instances, regulators may also order that disposal wells beshut in. In late 2021, the Texas Railroad Commission issued a notice to operators of disposal wells in the Midland area to reduce saltwater disposal well actions and provide certain data to the commission.Separately, in November 2021, New Mexico implemented protocols requiring operators to take various actions within a specified proximity of certain seismic activity, including a requirement to limitinjection rates if a seismic event is of a certain magnitude. As a result of these developments, Pogo may be required to curtail operations or adjust development plans, which may adversely impact Pogo’sbusiness. Pogo will likely dispose of produced water volumes gathered from their production operations by injecting it into wells pursuant to permits issued by governmental authorities overseeing such disposalactivities. While these permits will be issued pursuant to existing laws and regulations, these legal requirements are subject to change, which could result in the imposition of more stringent operatingconstraints or new monitoring and reporting requirements, owing to, among other things, concerns of the public or governmental authorities regarding such gathering or disposal activities. The adoptionand implementation of any new laws or regulations that restrict Pogo’s ability to use hydraulic fracturing or dispose of produced water gathered from drilling and production activities by limiting volumes,disposal rates, disposal well locations or otherwise, or requiring them to shut down disposal wells, could have a material adverse effect on Pogo’s business, financial condition and results of operations. 38
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Restrictions on the ability of to obtain water may have an adverse effect on our financial condition, results of operations and cash flows. Water is an essential component of crude oil and natural gas production during both the drilling and hydraulic fracturing processes. Over the past several years, parts of the country, and in particular Texas,have experienced extreme drought conditions. As a result of this severe drought, some local water districts have begun restricting the use of water subject to their jurisdiction for hydraulic fracturing toprotect local water supply. Such conditions may be exacerbated by climate change. If we are unable to obtain water to use in their operations from local sources, or if we are unable to effectively utilizeflowback water, they may be unable to economically drill for or produce crude oil and natural gas from our properties, which could have an adverse effect on our financial condition, results of operationsand cash flows. Our operations are subject to a series of risks arising from climate change. Climate change continues to attract considerable public and scientific attention. As a result, numerous proposals have been made and are likely to continue to be made at the international, national,regional and state levels of government to monitor and limit emissions of carbon dioxide, methane and other “greenhouse gases” (“GHGs”). These efforts have included consideration of cap-and-trade programs, carbon taxes, GHG reporting and tracking programs and regulations that directly limit GHG emissions from certain sources. In the United States, no comprehensive climate change legislation has been implemented at the federal level. However, following the U.S. Supreme Court finding that GHG emissions constitute apollutant under the Clean Air Act (the “CAA”), the EPA has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain largestationary sources, require the monitoring and annual reporting of GHG emissions from certain petroleum and natural gas system sources in the United States, and together with the U.S. Department ofTransportation (the “DOT”), implementing GHG emissions limits on vehicles manufactured for operation in the United States. The regulation of methane from oil and gas facilities has been subject touncertainty in recent years. In September 2020, the Trump Administration revised prior regulations to rescind certain methane standards and remove the transmission and storage segments from the sourcecategory for certain regulations. However, subsequently, the U.S. Congress approved, and President Biden signed into law, a resolution under the Congressional Review Act to repeal the September 2020revisions to the methane standards, effectively reinstating the prior standards. Additionally, in November 2021, the EPA issued a proposed rule that, if finalized, would establish OOOO(b) new source andOOOO(c) first-time existing source standards of performance for methane and volatile organic compound emissions for oil and gas facilities. Operators of affected facilities will have to comply withspecific standards of performance to include leak detection using optical gas imaging and subsequent repair requirement, and reduction of emissions by 95% through capture and control systems. The EPAissued supplemental rules regarding methane emissions on December 6, 2022. The IRA established the Methane Emissions Reduction Program, which imposes a charge on methane emissions fromcertain petroleum and natural gas facilities, which may apply to our operations in the future and may require us to expend material sums. We cannot predict the scope of any final methane regulatoryrequirements or the cost to comply with such requirements. Given the long-term trend toward increasing regulation, future federal GHG regulations of the oil and gas industry remain a significantpossibility. Separately, various states and groups of states have adopted or are considering adopting legislation, regulation or other regulatory initiatives that are focused on such areas as GHG cap and trade programs,carbon taxes, reporting and tracking programs, and restriction of emissions. For example, New Mexico has adopted regulations to restrict the venting or flaring of methane from both upstream andmidstream operations. At the international level, the United Nations-sponsored “Paris Agreement” requires member states to submit non-binding, individually-determined reduction goals known asNationally Determined Contributions every five years after 2020. President Biden recommitted the United States to the Paris Agreement and, in April 2021, announced a goal of reducing theUnited States’ emissions by 50-52% below 2005 levels by 2030. Additionally, at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (“COP26”) inGlasgow in November 2021, the United States and the European Union jointly announced the launch of a Global Methane Pledge, an initiative committing to a collective goal of reducing global methaneemissions by at least 30% from 2020 levels by 2030, including “all feasible reductions” in the energy sector. However, in January 2025, President Trump withdrew from the Paris Agreement. The fullimpact of these actions cannot be predicted at this time. Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States, including climate change relatedpledges made by certain candidates now in public office. Litigation risks are also increasing as a number of entities have sought to bring suit against various oil and natural gas companies in state orfederal court, alleging among other things, that such companies created public nuisances by producing fuels that contributed to climate change or alleging that the companies have been aware of theadverse effects of climate change for some time but defrauded their investors or customers by failing to adequately disclose those impacts. There are also increasing financial risks for fossil fuel producers as shareholders currently invested in fossil-fuel energy companies may elect in the future to shift some or all of their investments into non-fossil fuel related sectors. Institutional lenders who provide financing to fossil fuel energy companies also have become more attentive to sustainable lending practices and some of them may elect not toprovide funding for fossil fuel energy companies. For example, at COP26, the Glasgow Financial Alliance for Net Zero (“GFANZ”) announced that commitments from over 450 firms across 45 countrieshad resulted in over $130 trillion in capital committed to net zero goals. The various sub-alliances of GFANZ generally require participants to set short-term, sector-specific targets to transition theirfinancing, investing, and/or underwriting activities to net zero emissions by 2050. There is also a risk that financial institutions will be required to adopt policies that have the effect of reducing thefunding provided to the fossil fuel sector. In late 2020, the Federal Reserve announced that is has joined the Network for Greening the Financial System, a consortium of financial regulators focused onaddressing climate-related risks in the financial sector. Subsequently, in November 2021, the Federal Reserve issued a statement in support of the efforts of the Network for Greening the Financial Systemto identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory authorities. Limitation of investments in and financing for fossil fuel energycompanies could result in the restriction, delay or cancellation of drilling programs or development or production activities. Additionally, the SEC announced its intention to promulgate rules requiringclimate disclosures. Although the form and substance of these requirements is not yet known, this may result in additional costs to comply with any such disclosure requirements. 39
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The adoption and implementation of new or more stringent international, federal or state legislation, regulations or other regulatory initiatives that impose more stringent standards for GHG emissionsfrom the oil and natural gas sector or otherwise restrict the areas in which this sector may produce oil and natural gas or generate the GHG emissions could result in increased costs of compliance or costsof consuming, and thereby reduce demand for oil and natural gas, which could reduce the profitability of our interests. Additionally, political, litigation and financial risks may result in Pogo restricting orcancelling production activities, incurring liability for infrastructure damages as a result of climatic changes, or impairing their ability to continue to operate in an economic manner, which also couldreduce the profitability of its interests. One or more of these developments could have a material adverse effect on our business, financial condition and results of operation. Climate change may also result in various physical risks, such as the increased frequency or intensity of extreme weather events or changes in meteorological and hydrological patterns, that couldadversely impact our operations, as well as those of our operators and their supply chains. Such physical risks may result in damage to operators’ facilities or otherwise adversely impact their operations,such as if they become subject to water use curtailments in response to drought, or demand for their products, such as to the extent warmer winters reduce the demand for energy for heating purposes. Increased attention to ESG matters and conservation measures may adversely impact our business. Increasing attention to climate change, societal expectations on companies to address climate change, investor and societal expectations regarding voluntary ESG disclosures and consumer demand foralternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, and increased investigations and litigation. Increasing attention to climate change andenvironmental conservation, for example, may result in demand shifts for oil and natural gas products and additional governmental investigations and private litigation against Pogo. Additionally, the SECproposed rules on climate change disclosure requirements for public companies which, if adopted as proposed, could result in substantial compliance costs. To the extent that societal pressures or politicalor other factors are involved, it is possible that such liability could be imposed without regard to our causation of, or contribution to, the asserted damage, or to other mitigating factors. Moreover, while Pogo may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures are based on hypothetical expectationsand assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith. Such expectations andassumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and the lack of an established single approach to identifying, measuringand reporting on many ESG matters. In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.Such ratings are used by some investors to inform their investment and voting decisions. Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with energy-related assets could lead to increased negative investor sentiment toward Pogo and its industry and to the diversion of investment to other industries, which could have a negative impact on our access toand costs of capital. Also, institutional lenders may decide not to provide funding for fossil fuel energy companies based on climate change related concerns, which could affect our access to capital forpotential growth projects. Our results of operations may be materially impacted by efforts to transition to a lower-carbon economy. Concerns over the risk of climate change have increased the focus by global, regional, national, state and local regulators on GHG emissions, including carbon dioxide emissions, and on transitioning to alower-carbon future. A number of countries and states have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures mayinclude, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards, prohibitions on the sales of new automobiles with internal combustion engines, and incentives ormandates for battery-powered automobiles and/or wind, solar or other forms of alternative energy. Compliance with changes in laws, regulations and obligations relating to climate change could result inincreased costs of compliance for Pogo or costs of consuming crude oil and natural gas for such products, and thereby reduce demand, which could reduce the profitability of Pogo. For example, Pogomay be required to install new emission controls, acquire allowances or pay taxes related to their greenhouse gas emissions, or otherwise incur costs to administer and manage a GHG emissions program.Additionally, Pogo could incur reputational risk tied to changing customer or community perceptions of its, customers contribution to, or detraction from, the transition to a lower-carbon economy. Thesechanging perceptions could lower demand for oil and gas products, resulting in lower prices and lower revenues as consumers avoid carbon-intensive industries, and could also pressure banks andinvestment managers to shift investments and reduce lending. Separately, banks and other financial institutions, including investors, may decide to adopt policies that restrict or prohibit investment in, or otherwise funding, Pogo based on climate change-related concerns, which could affect its or our access to capital for potential growth projects. Approaches to climate change and transition to a lower-carbon economy, including government regulation, company policies, and consumer behavior, are continuously evolving. At this time, Pogo cannotpredict how such approaches may develop or otherwise reasonably or reliably estimate their impact on its or its operators’ financial condition, results of operations and ability to compete. However, anylong-term material adverse effect on the oil and gas industry may adversely affect our financial condition, results of operations and cash flows. 40
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Additional restrictions on development activities intended to protect certain species of wildlife may adversely affect our ability to conduct development activities. In the United States, the Endangered Species Act (the “ESA”) restricts activities that may affect endangered or threatened species or their habitats. Similar protections are offered to migratory birds underthe Migratory Bird Treaty Act (the “MBTA”). To the extent species that are listed under the ESA or similar state laws, or are protected under the MBTA, live in the areas where Pogo operates, our abilityto conduct or expand operations could be limited, or Pogo could be forced to incur additional material costs. Moreover, our development drilling activities may be delayed, restricted or precluded inprotected habitat areas or during certain seasons, such as breeding and nesting seasons. For example, in June 2021, the U.S. Fish & Wildlife Service (the “FWS”) proposed to list two distinct populationsections (“DPS”) of the Lesser Prairie Chicken, including one in portions of the Permian Basin, under the ESA (the “southern DPS”). On November 25, 2022, the FWS finalized the proposed rule, listingthe southern DPS of the Lesser Prairie-Chicken as endangered and the northern DPS of the Lesser Prairie-Chicken as threatened. Recently, there have also been renewed calls to review protections currently in place for the dunes sagebrush lizard, whose habitat includes parts of the Permian Basin, and to reconsider listing the speciesunder the ESA. In addition, as a result of one or more settlements approved by the FWS, the agency was required to make a determination on the listing of numerous other species as endangered or threatened under theESA by the end of the FWS’ 2017 fiscal year. The FWS did not meet that deadline, but continues to evaluate whether to take action with respect to those species. The designation of previouslyunidentified endangered or threatened species could cause our operations to become subject to operating restrictions or bans, and limit future development activity in affected areas. The FWS and similarstate agencies may designate critical or suitable habitat areas that they believe are necessary for the survival of threatened or endangered species. Such a designation could materially restrict use of oraccess to federal, state and private lands. Risks Related to Our Financial and Debt Arrangements Restrictions in our current and future debt agreements and credit facilities could limit our growth and our ability to engage in certain activities. EON (for purposes of the Loan Agreement, the “Borrower”), OpCo, SPAC Subsidiary, Pogo, and LH Operating, LLC (for purposes of the Loan Agreement, collectively, the “Guarantors” and togetherwith the Borrower, the “Loan Parties”), and FIBT entered into a Senior Secured Term Loan Agreement on November 15, 2023 (the “Loan Agreement”), setting forth the terms of a senior secured termloan facility in an aggregate principal amount of $28 million (the “Term Loan”). On April 18, 2024, the Company and FIBT entered into a Second Amendment to Term Loan Agreement (the“Amendment”) effective as of March 31, 2024. Pursuant to the Amendment, the Term Loan Agreement was modified to provide that the Company must, on or before December 31, 2024, deposit funds ina Debt Service Reserve Account (as defined in the Loan Agreement) such that the balance of the account equals $5,000,000 and FIBT waived the provision that such amount had to be deposited within 60days of the closing date of the Loan Agreement. In addition, the Amendment provides that, if at any time prior to December 31, 2024, the Company or any of its affiliates enter into a sale leasebacktransaction with respect to any of its equipment, the Company will deposit an amount equal to the greater of (A) $500,000 or (B) 10% of the proceeds of such transaction into the Debt Service ReserveAccount on the effective date of such sale and leaseback transaction. The Term Loan contains certain customary representations and warranties and various covenants and restrictive provisions that limit our ability to, among other things: ● incur or guarantee additional debt; ● enter into certain hedging contracts; ● pay dividends on, or redeem or repurchase, their equity interests, return capital to the holders of their equity interests, or make other distributions to holders of their equity interests; ● amend our organizational documents or certain material contracts; ● make certain investments and acquisitions; ● incur certain liens or permit them to exist; ● enter into certain types of transactions with affiliates; ● merge or consolidate with another company; ● transfer, sell or otherwise dispose of assets; ● enter into certain other lines of business; 41
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● repay or redeem certain debt; ● use the proceeds from the Term Loan for certain purposes; ● allow certain gas imbalances, take-or-pay, or other prepayments; A failure to comply with the provisions of the Term Loan could result in an event of default, which could enable the Lender to declare, subject to the terms and conditions of the Term Loan, anyoutstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of the debt is accelerated, cash flows from our operations may beinsufficient to repay such debt in full. The Term Loan contains events of default customary for transactions of this nature, including the occurrence of a change of control. If we are unable to comply with the restrictions and covenants in our debt agreements, there could be an event of default under the terms of such agreements, which could result in an acceleration ofrepayment. If we are unable to comply with the restrictions and covenants in the Term Loan Agreement, the Seller Note or any future debt agreement or if we default under the terms of the Term Loan Agreement, theSeller Note or any future debt agreement, there could be an event of default. Our ability to comply with these restrictions and covenants, including meeting any financial ratios and tests, may be affectedby events beyond our control. We cannot assure that we will be able to comply with these restrictions and covenants or meet such financial ratios and tests. In the event of a default under the Term LoanAgreement, the Seller Note or any future debt agreement, the lenders could terminate accelerate the loans and declare all amounts borrowed due and payable. If any of these events occur, our assets mightnot be sufficient to repay in full all of our outstanding indebtedness and we may be unable to find alternative financing. Even if we could obtain alternative financing, it might not be on terms that arefavorable or acceptable to us. Additionally, we may not be able to amend the Term Loan Agreement, the Seller Note or any future debt agreement or obtain needed waivers on satisfactory terms. Therecan be no assurance that, if needed to avoid noncompliance with our debt agreements in the future, we will obtain the necessary waivers from the applicable lenders on satisfactory terms or at all. As aresult, there could be an event of default under such agreements, which could result in an acceleration of repayment. Our debt levels may limit our flexibility to obtain additional financing and pursue other business opportunities. Our existing and any future indebtedness could have important consequences to it, including: ● our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired, or such financing may not be available on termsacceptable to it; ● covenants in the Term Loan require, and in any future credit and debt arrangement may require, us to meet financial tests that may affect our flexibility in planning for and reacting to changes inits business, including possible acquisition opportunities; ● our access to the capital markets may be limited; ● our borrowing costs may increase; ● we will use a portion of its discretionary cash flows to make principal and interest payments on its indebtedness, reducing the funds that would otherwise be available for operations, futurebusiness opportunities and payment of dividends to its stockholders; and ● our debt level will make us more vulnerable than competitors with less debt to competitive pressures or a downturn in its business or the economy generally. Our ability to service our indebtedness will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial,business, regulatory and other factors, some of which are beyond its control. If our operating results are not sufficient to service its current or future indebtedness, we will be forced to take actions such asreducing distributions, reducing or delaying business activities, acquisitions, investments and/or capital expenditures, selling assets, restructuring or refinancing its indebtedness, or seeking additionalequity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms or at all. Our borrowings under the Term Loan Agreement expose us to interest rate risk. Our results of operations are exposed to interest rate risk associated with borrowings under the Term Loan Agreement, which bears interest at rates based on the Secured Overnight Financing Rate(“SOFR”) or an alternative floating interest rate benchmark. In response to inflation, the U.S. Federal Reserve increased interest rates multiple times in 2022 through 2024 and signaled that additionalinterest rate increases may be expected in 2025. Raising or lowering of interest rates by the U.S. Federal Reserve generally causes an increase or decrease, respectively, in SOFR and other floating interestrate benchmarks. As such, if interest rates increase, so will our interest costs. If interest rates continue to increase, it may have a material adverse effect on our results of operations and financial condition. 42
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Risks Related to Our Common Stock Our stock price is volatile, which could result in substantial losses to investors and litigation. In addition to changes to market prices based on our results of operations and the factors discussed elsewhere in this “Risk Factors” section, the market price of and trading volume for our Class ACommon Stock may continue to change for a variety of other reasons, not necessarily related to our actual operating performance. The capital markets have experienced extreme volatility that has oftenbeen unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Class A Common Stock. In addition, the average dailytrading volume of the securities of small companies can be very low, which may contribute to future volatility. Factors that could cause the market price of our Class A Common Stock to fluctuatesignificantly include: ● the results of operating and financial performance and prospects of other companies in our industry; ● strategic actions by us or our competitors, such as acquisitions or restructurings; ● announcements of innovations, increased service capabilities, new or terminated customers or new, amended or terminated contracts by our competitors; ● the public’s reaction to our press releases, other public announcements, and filings with the Securities and Exchange Commission; ● lack of securities analyst coverage or speculation in the press or investment community about us or market opportunities in our industry; ● changes in government policies in the United States; ● changes in earnings estimates or recommendations by securities or research analysts who track our Class A Common Stock or failure of our actual results of operations to meet thoseexpectations; ● market and industry perception of our success, or lack thereof, in pursuing our growth strategy; ● changes in accounting standards, policies, guidance, interpretations or principles; ● any lawsuit involving us, our services or our products; ● arrival and departure of key personnel; ● sales of Class A Common Stock by us, our investors or members of our management team; and ● changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters. Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the trading volume of our Class A Common Stock and could seriously harm the marketprice of our Class A Common Stock, regardless of our operating performance. This may prevent you from being able to sell your shares at or above the price you paid for your shares of our Class ACommon Stock, if at all. In addition, following periods of volatility in the market price of a company’s securities, stockholders often institute securities class action litigation against that company. Ourinvolvement in any class action suit or other legal proceeding could divert our senior management’s attention and could adversely affect our business, financial condition, results of operations andprospects. The sale or availability for sale of substantial amounts of our Class A Common Stock could adversely affect the market price of our Class A Common Stock. Sales of substantial amounts of shares of our Class A Common Stock, or the perception that these sales could occur, could adversely affect the market price of our Class A Common Stock and couldimpair our future ability to raise capital through common stock offerings. We have never paid cash dividends on our Class A Common Stock and do not anticipate paying any cash dividends on our Class A Common Stock. We have never paid cash dividends and do not anticipate paying any cash dividends on our Class A Common Stock in the foreseeable future. We currently intend to retain any earnings to finance ouroperations and growth. As a result, any short-term return on your investment will depend on the market price of our Class A Common Stock, and only appreciation of the price of our Class A CommonStock, which may never occur, will provide a return to stockholders. The decision whether to pay dividends will be made by our board of directors in light of conditions then existing, including, but notlimited to, factors such as our financial condition, results of operations, capital requirements, business conditions, and covenants under any applicable contractual arrangements. Investors seeking cashdividends should not invest in our Class A Common Stock. 43
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If equity research analysts do not publish research or reports about our business, or if they issue unfavorable commentary or downgrade our Class A Common Stock, the market price of our Class ACommon Stock will likely decline. The trading market for our Class A Common Stock will rely in part on the research and reports that equity research analysts, over whom we have no control, publish about us and our business. We maynever obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the market price for our Class A Common Stock could decline.In the event we obtain securities or industry analyst coverage, the market price of our Class A Common Stock could decline if one or more equity analysts downgrade our Class A Common Stock or ifthose analysts issue unfavorable commentary, even if it is inaccurate, or cease publishing reports about us or our business. The NYSE American may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. We have listed our Class A Common Stock and public warrants on the NYSE American. We cannot assure you that our securities will continue to be listed on the NYSE American in the future. In order tocontinue listing our securities on the NYSE American, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity(generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). On April 17, 2024, we received a notice from the NYSE American that we were not in compliance with NYSE American listing standards as a result of our failure to timely file our Annual Report onForm 10-K for the fiscal year ended December 31, 2023 with the SEC. On May 3, 2024, we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and regained compliancewith NYSE American rules. Although we believe that the failure to timely file our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 was primarily as a result of the additionaltime needed to account for the Purchase and we expect to file our required subsequent reports in a timely fashion, there can be no assurance that we will be able to timely file required reports or meet othercontinued listing requirements in the future. However, in determining whether to afford a company a cure period prior to commencing suspension or delisting procedures, the NYSE American analyzes allrelevant facts including any past history of late filings, and thus the late filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 could be used as a factor by the NYSEAmerican in any future decision to delist our securities from trading on its exchange. If the NYSE American delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on anover-the-counter market. If this were to occur, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our securities; ● reduced liquidity for our securities; ● a determination that our Class A Common Stock is a “penny stock” which will require brokers trading in our Class A Common Stock to adhere to more stringent rules and possibly result in areduced level of trading activity in the secondary trading market for our securities; ● a limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future. We may redeem your public warrants prior to their exercise at a time that is disadvantageous to you, thereby making such warrants worthless. We may redeem your public warrants prior to their exercise at a time that is disadvantageous to you, thereby making such warrants worthless. We have the ability to redeem outstanding public warrants atany prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of the shares of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for sharesubdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which a noticeof redemption is sent to the warrantholders. Please note that the closing price of our Class A Common Stock has not exceeded $18.00 per share for any of the 30 trading days prior to the date of thisreport. We will not redeem the warrants as described above unless a registration statement under the Securities Act covering the shares of the Class A Common Stock issuable upon exercise of suchwarrants is effective and a current prospectus relating to shares of the Class A Common Stock is available throughout the 30-day redemption period. If and when the public warrants become redeemableby us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding publicwarrants could force you (i) to exercise your public warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your public warrants s at the then-current market price when you might otherwise wish to hold your public warrants, or (iii) to accept the nominal redemption price which, at the time the outstanding public warrants are called forredemption, is likely to be substantially less than the market value of your public warrants. The value received upon exercise of the public warrants (1) may be less than the value the holders would have received if they had exercised their public warrants at a later time where the underlyingshare price is higher and (2) may not compensate the holders for the value of the public warrants. The fair value of the public warrants that may be retained by redeeming shareholders is $0.4 millionbased on recent trading prices, and 8,625,000 public warrants held by public shareholders. 44
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We may amend the terms of the public warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 50% of the then-outstanding publicwarrants. As a result, the exercise price of the public warrants could be increased, the exercise period could be shortened and the number of shares of our Class A Common Stock purchasable uponexercise of a warrant could be decreased, all without a holder’s approval. Our public warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that theterms of the warrants may be amended without the consent of any holder (i) to cure any ambiguity or to correct any mistake, including to conform the provisions therein to the descriptions of the terms ofthe warrants, or to cure, correct or supplement any defective provision, or (ii) to add or change any other provisions with respect to matters or questions arising under the warrant agreement as the partiesto the warrant agreement may deem necessary or desirable and that the parties deem to not adversely affect the interests of the registered holders of the warrants. The warrant agreement requires theapproval by the holders of at least 50% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we mayamend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding public warrants approve of such amendment. Although our ability to amend theterms of the public warrants with the consent of at least 50% of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase theexercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our Class A CommonStock purchasable upon exercise of a warrant. Purchases made pursuant to our ELOC Purchase Agreement will be made at a discount to the volume weighted average price of Class A Common Stock, which may result in negative pressure on thestock price following the Closing of the Purchase. On October 17, 2022, we entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”) and a related registration rights agreement (the “White Lion RRA”) with WhiteLion Capital, LLC, a Nevada limited liability company (“White Lion”). Pursuant to the Common Stock Purchase Agreement, we have the right, but not the obligation to require White Lion to purchase,from time to time, up to $150,000,000 in aggregate gross purchase price of newly issued shares of our Class A Common Stock, subject to certain limitations and conditions set forth in the Common StockPurchase Agreement. On March 7, 2024, the Company entered into an Amendment No. 1 to Common Stock Purchase Agreement (the “White Lion Amendment”) with White Lion. Pursuant to the WhiteLion Amendment, the Company and White Lion agreed to a fixed number of Commitment Shares equal to 440,000 shares of Common Stock to be issued to White Lion in consideration for commitmentsof White Lion under the Common Stock Purchase Agreement, which the Company agreed to include all of the Commitment Shares on the initial registration statement filed by the Company related to theCommon Stock Purchase Agreement. We are obligated under the Common Stock Purchase Agreement and the White Lion RRA to maintain a registration statement with the SEC to register the Class A Common Stock under the SecuritiesAct of 1933, as amended, for the resale by White Lion of shares of Class A Common Stock that we may issue to White Lion under the Common Stock Purchase Agreement. The purchase price to be paidby White Lion for any shares of Class A Common Stock will equal 96% of the lowest daily volume-weighted average price of Class A Common Stock during a period of two consecutive trading daysfollowing the applicable Notice Date. Such purchases will dilute our stockholders and could adversely affect the prevailing market price of our Class A Common Stock and impair our ability to raise capital through future offerings of equity orequity-linked securities, although we intend to carefully control such purchases as to minimize the impact. Accordingly, the adverse market and price pressures resulting from the purchase and registrationof Class A Common Stock pursuant to the Common Stock Purchase Agreement may continue for an extended period of time and continued negative pressure on the market price of our Class A CommonStock could have a material adverse effect on our ability to raise additional equity capital. It is not possible to predict the actual number of shares of Class A Common Stock, if any, we will sell under the ELOC Purchase Agreement with White Lion or the actual gross proceeds resultingfrom those sales. We generally have the right to control the timing and amount of any sales of the Class A Common Stock to White under the Common Stock Purchase Agreement. Sales of Class A Common Stock, if any,to White Lion under the Common Stock Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to White Lion all, some ornone of the Class A Common Stock that may be available for us to sell to White Lion pursuant to the Common Stock Purchase Agreement. Because the purchase price per share of Class A Common Stock to be paid by White Lion will fluctuate based on the market prices of the Class A Common Stock at the time we elect to sell Class ACommon Stock to White Lion pursuant to the Common Stock Purchase Agreement, if any, it is not possible for us to predict, as of the date of this report and prior to any such sales, the number of sharesof Class A Common Stock that we will sell to White Lion under the Common Stock Purchase Agreement, the purchase price per share that White Lion will pay for Class A Common Stock purchasedfrom us under the Common Stock Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by White Lion under the Common Stock Purchase Agreement. The number of shares of Class A Common Stock ultimately offered for sale by White Lion is dependent upon the number of shares of Class A Common Stock, if any, we ultimately elect to sell to WhiteLion under the Common Stock Purchase Agreement. However, even if we elect to sell Class A Common Stock to White Lion pursuant to the Common Stock Purchase Agreement, White Lion may resellall, some or none of such shares at any time or from time to time in its sole discretion and at different prices. To date, the Company has issued 7,000,000 shares of common stock under the Common StockPurchase Agreement. Because the purchase price per share to be paid by White Lion for the shares of Class A Common Stock that we may elect to sell to White Lion under the Common Stock Purchase Agreement, if any, willfluctuate based on the market prices of our common stock for each purchase made pursuant to the Common Stock, if any, it is not possible for us to predict, as of the date of this report and prior to anysuch sales, the number of shares of Class A Common Stock that we will sell to White Lion under the Common Stock Purchase Agreement, the purchase price per share that While Lion will pay for sharespurchased from us under the Common Stock Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by White Lion under the Purchase Agreement, if any. 45
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The sale and issuance of Class A Common Stock to White Lion will cause dilution to our existing securityholders, and the resale of the Class A Common Stock acquired by White Lion, or theperception that such resales may occur, could cause the price of our Class A Common Stock to decrease. The purchase price per share of Class A Common Stock to be paid by White Lion for the Class A Common Stock that we may elect to sell to White Lion under the Common Stock Purchase Agreement, ifany, will fluctuate based on the market prices of our Class A Common Stock at the time we elect to sell Class A Common Stock to White Lion pursuant to the Common Stock Purchase Agreement.Depending on market liquidity at the time, resales of such Class A Common Stock by White Lion may cause the trading price of our Class A Common Stock to decrease. If and when we elect to sell Class A Common Stock to White Lion, sales of newly issued Class A Common Stock by us to White Lion could result in substantial dilution to the interests of existing holdersof our Class A Common Stock. Additionally, the sale of a substantial number of Class A Common Stock to White Lion, or the anticipation of such sales, could make it more difficult for us to sell equityor equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. We expect to grant equity awards to employees and directors under our equity incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we maymake or receive investments in companies, solutions or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional share capital may causeshareholders to experience significant dilution of their ownership interests and the per share value of our Class A Common Stock to decline. To date, the Company has issued 7,000,000 shares of commonstock under the Common Stock Purchase Agreement Investors who buy shares at different times will likely pay different prices than White Lion under the ELOC Purchase Agreement with them. Pursuant to the Common Stock Purchase Agreement, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to White Lion. If and when we do elect tosell shares of our Class A Common Stock to White Lion pursuant to the Common Stock Purchase Agreement, after White Lion has acquired such shares, White Lion may resell all, some or none of suchshares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from White Lion in this offering at different times will likely pay different pricesfor those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the valueof the shares they purchase from White Lion in this offering as a result of future sales made by us to White Lion at prices lower than the prices such investors paid for their shares in this offering. Management will have broad discretion as to the use of the proceeds from the sale of shares to White Lion, and uses may not improve our financial condition or market value. Because we have not designated the amount of net proceeds from the sale of shares of our Class A Common Stock to be used for any particular purpose, our management will have broad discretion as tothe application of such net proceeds and could use them for purposes other than those contemplated hereby. Our management may use the net proceeds for corporate purposes that may not improve ourfinancial condition or market value. The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerginggrowth companies. We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we take advantage of certain exemptions from various reportingrequirements applicable to other public companies that are not emerging growth companies, including (a) the exemption from the auditor attestation requirements with respect to internal control overfinancial reporting under Section 404 of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosureobligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remainan emerging growth company until the earliest of (a) the last day of the fiscal year of (i) the fifth anniversary of the closing of our Initial Public Offering, or December 31, 2027, (ii) in which we havetotal annual gross revenue of at least $1.235 billion (as adjusted for inflation pursuant to SEC rules from time to time) or (iii) in which we are deemed to be a large accelerated filer, which means themarket value of our Class A Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued morethan $1.0 billion in non-convertible debt during the prior three year period. 46
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In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided inSection 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until thosestandards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected to irrevocably opt out of such extended transition period, which means that when a standard is issued orrevised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time public companies adopt the new or revised standard. This may makecomparison of our financial statements with another emerging growth company that has not opted out of using the extended transition period difficult or impossible because of the potential differences inaccounting standards used. We cannot predict if investors will find our Class A Common Stock less attractive because we will rely on these exemptions. If some investors find our Class A Common Stock less attractive as a result,there may be less active trading market for our Class A Common Stock and our stock price may be more volatile. The Second A&R Charter designates state courts within the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, whichcould limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents. The Second A&R Charter provides that, unless we consent in writing to the selection of an alternative forum, (a) the Court of Chancery of the State of Delaware shall, to the fullest extent permitted bylaw, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the company, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or otherwrongdoing by, any current or former director, officer, employee or agent of the company to us or our stockholders, or a claim of aiding and abetting any such breach of fiduciary duty, (iii) any actionasserting a claim against us or any of our directors, officers, employees or agents arising pursuant to any provision of the DGCL, the Second A&R Charter (as may be amended, restated, modified,supplemented or waived from time to time), (iv) any action to interpret, apply, enforce or determine the validity of the Second A&R Charter (as may be amended, restated, modified, supplemented orwaived from time to time), (v) any action asserting a claim against us or any of our directors, officers, employees or agents that is governed by the internal affairs doctrine or (vi) any action asserting an“internal corporate claim” as that term is defined in Section 115 of the DGCL. In addition, the Second A&R Charter provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullestextent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and the rules and regulations promulgatedthereunder. Notwithstanding the foregoing, the Second A&R Charter provides that the exclusive forum provision will not apply to claims seeking to enforce any liability or duty created by theExchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees orstockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules andregulations thereunder. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incuradditional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. 47
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The Second A&R Charter contains a waiver of the corporate opportunities doctrine for our directors and officers, and therefore such persons have no obligations to make opportunities available tous. The “corporate opportunities” doctrine provides that directors and officers of a corporation, as part of their duty of loyalty to the corporation and its shareholders, generally have a fiduciary duty todisclose opportunities to the corporation that are related to its business and are prohibited from pursuing those opportunities unless the corporation determines that it is not going to pursue them. Ouramended and restated certificate of incorporation waives the corporate opportunities doctrine. It states that, to the extent allowed by law, the doctrine of corporate opportunity, or any other analogousdoctrine, shall not apply with respect to us or any of our officers or directors or any of their respective affiliates, in circumstances where the application of any such doctrine would conflict with anyfiduciary duties or contractual obligations they may have as of the date of the amended and restated certificate of incorporation or in the future, and we renounce any expectancy that any of pir directors orofficers will offer any such corporate opportunity of which he or she may become aware to us, except, the doctrine of corporate opportunity shall apply with respect to any of our directors or officers withrespect to a corporate opportunity that was offered to such person solely in his or her capacity as a director or officer of the company and (i) such opportunity is one that we are legally and contractuallypermitted to undertake and would otherwise be reasonable for us to pursue and (ii) the director or officer is permitted to refer that opportunity to us without violating any legal obligation. Our directors and officers or their respective affiliates may pursue acquisition opportunities that may be complementary to our business and, as a result of the waiver described above, those acquisitionopportunities may not be available to us. In addition, our directors and officers or their respective affiliates may have an interest in pursuing acquisitions, divestitures and other transactions that, in itsjudgment, could enhance its investment, even though such transactions might involve risks to you. We are a holding company with no operations of our own, and we depend on our subsidiaries for cash to fund all of our operations, taxes and other expenses and any dividends that we may pay. Our operations are conducted entirely through our subsidiaries. Our ability to generate cash to meet our debt and other obligations, to cover all applicable taxes payable and to declare and pay anydividends on our Class A Common Stock is dependent on the earnings and the receipt of funds through distributions from our subsidiaries. Our subsidiaries’ respective abilities to generate adequate cashdepends on a number of factors, including development of reserves, successful acquisitions of complementary properties, advantageous drilling conditions, natural gas, oil prices, compliance with allapplicable laws and regulations and other factors. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 1C. CYBERSECURITY We acknowledge the increasing importance of cybersecurity in today’s digital and interconnected world. Cybersecurity threats pose significant risks to the integrity of our systems and data, potentiallyimpacting our business operations, financial condition and reputation. As a smaller reporting company, we currently do not have formalized cybersecurity measures, a dedicated cybersecurity team or specific protocols in place to manage cybersecurity risks. Our approach tocybersecurity is in the developmental stage, and we have only begun to conduct comprehensive risk assessments, establish an incident response plan, and engage with external cybersecurity consultantsfor assessments or services. As of the date of this report, we have adopted an incident response plan which governs our assessment and response upon the occurrence of a material cybersecurity incident,including the process for informing senior management and our Board of Directors. Our Vice President of Finance and Administration has been designated as the lead for implanting our incident responseplan. In addition, in 2024, we have acquired a cybersecurity insurance policy. Given our current stage of cybersecurity development, we have not experienced any significant cybersecurity incidents to date. However, we recognize that the absence of a formalized cybersecurityframework may leave us vulnerable to cyberattacks, data breaches and other cybersecurity incidents. Such events could potentially lead to unauthorized access to, or disclosure of, sensitive information,disrupt our business operations, result in regulatory fines or litigation costs and negatively impact our reputation among customers and partners. 48
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We are in the process of evaluating our cybersecurity needs and developing appropriate measures to enhance our cybersecurity posture. This includes considering the engagement of external cybersecurityexperts to advise on best practices, conducting vulnerability assessments and developing an incident response strategy. Our goal is to establish a cybersecurity framework that is commensurate with oursize, complexity and the nature of our operations, thereby reducing our exposure to cybersecurity risks. In addition, our board of directors will oversee any cybersecurity risk management framework and a dedicated committee of our board of directors will review and approve any cybersecurity policies,strategies and risk management practices. Despite our efforts to improve our cybersecurity measures, there can be no assurance that our initiatives will fully mitigate the risks posed by cyber threats. The landscape of cybersecurity risks isconstantly evolving, and we will continue to assess and update our cybersecurity measures in response to emerging threats. For a discussion of potential cybersecurity risks affecting us, please refer to the “Risk Factors” section. ITEM 2. PROPERTIES We currently maintain our executive offices at 3730 Kirby Drive, Suite 1200, Houston, Texas 77098. We recently leased a space at 10810 Old Katy Rd, Katy, TX 77494 just beyond the Houston citylimits for our engineering and geological center. The cost for the two spaces combined are approximately $3,000 per month. We consider our current office space adequate for our current operations. ITEM 3. LEGAL PROCEEDINGS To the knowledge of our management, there is no material litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 49
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PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (a) Market Information Our Class A Common Stock and public warrants are currently listed on the NYSE American under the symbol “EONR” and “EONR.WS”, respectively. On March 31, 2025, the closing sale price of ourClass A Common Stock was $0.48 per share. (b) Holders As of March 31, 2025, there were approximately 41 holders of record of our Class A Common Stock and there were no holders of record of our Class B Common Stock. The number of record holders wasdetermined from the records of our transfer agent and does not include beneficial owners of our shares of Class A Common Stock whose shares are held in the names of various security brokers, dealersand registered clearing agencies. (c) Dividends Our Board of Directors has not adopted a formal dividend policy for a recurring fixed dividend payment to shareholders. We have not paid any cash dividends on our Class A Common Stock to date. Thepayment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination.The payment of any cash dividends in the future will be within the discretion of our Board of Directors at such time. In addition, our Board of Directors is not currently contemplating and does notanticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to inconnection therewith. (d) Securities Authorized for Issuance Under Equity Compensation Plans Information about our equity compensation plans in Item 11 of Part III of this report is incorporated herein by reference. (e) Performance Graph Not applicable. (f) Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings In March 2024, we issued 50,000 warrants to a third-party having terms substantially similar to the private placement warrants in connection with the receipt of $50,000 in cash and the issuance of apromissory note. In March 2024, we issued 100,000 warrants to a third-party having terms substantially similar to the private placement warrants in connection with the receipt of $100,000 in cash and the issuance of apromissory note. In March 2024, we issued 50,000 warrants to a third-party having terms substantially similar to the private placement warrants in connection with the receipt of $50,000 in cash and the issuance of apromissory note. In March 2024, we issued 40,000 RSUs to a director for services. The RSUs vest 1/3 on November 15, 2024, 1/3 on November 15, 2025, and 1/3 on November 15, 2026. We also issued 37,500 RSUs tosuch director that vest on November 15, 2024. 50
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In March 2024, we issued 37,000 RSUs to a director for services. The RSUs vest 1/3 on November 15, 2024, 1/3 on November 15, 2025, and 1/3 on November 15, 2026. We also issued 37,500 RSUs tosuch director that vest on November 15, 2024. In March 2024, we issued 35,000 RSUs to a director for services. The RSUs vest 1/3 on November 15, 2024, 1/3 on November 15, 2025, and 1/3 on November 15, 2026. We also issued 37,500 RSUs tosuch director that vest on November 15, 2024. In March 2024, we issued 50,000 RSUs to our Chief Executive Officer for services. The RSUs vest 1/3 on November 15, 2024, 1/3 on November 15, 2025, and 1/3 on November 15, 2026. In March 2024, we issued 50,000 RSUs to our Chief Financial Officer for services. The RSUs vest 1/3 on November 15, 2024, 1/3 on November 15, 2025, and 1/3 on November 15, 2026. In March 2024, we issued 50,000 RSUs to our General Counsel for services. The RSUs vest 1/3 on November 15, 2024, 1/3 on November 15, 2025, and 1/3 on November 15, 2026. In March 2024, we issued 40,000 RSUs to an officer for services. The RSUs vest 1/3 on November 15, 2024, 1/3 on November 15, 2025, and 1/3 on November 15, 2026. In March 2024, we issued 35,000 RSUs to an officer for services. The RSUs vest 1/3 on November 15, 2024, 1/3 on November 15, 2025, and 1/3 on November 15, 2026. In March 2024, we issued 35,000 RSUs to a former officer for services. The RSUs vested on issuance. In March 2024, we issued 60,000 RSUs to a consultant for services. The RSUs vest on November 15, 2024. In March 2024, we issued 30,000 RSUs to a consultant for services. The RSUs vest on November 15, 2024. In April 2024, the Company issued 100,000 warrants to an officer of the Company having terms substantially similar to the Private Placement Warrants in connection with the receipt of $100,000 in cashand the issuance of a promissory note. In May 2024, the Company issued 100,000 warrants to a director of the Company having terms substantially similar to the Private Placement Warrants in connection with the receipt of $100,000 in cashand the issuance of a promissory note. In October 2024, the Company issued 75,000 shares to a consultant for services, and 60,000 shares to a former employee. The Company also issued 150,000 shares to Rhône Merchant House, Ltd. In October 2024, the Company issued an aggregate of 22,213 shares to three officers of the Company, 2,500 shares to a director of the Company, and 3,250 shares to an employee. In December 2024, we issued 34,000 shares to four consultants for services. All issuances described above were not registered under the Securities Act in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. (g) Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. [RESERVED] 51
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in thisReport. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties – See “CAUTIONARY NOTE REGARDINGFORWARD-LOOKING STATEMENTS”. Overview We are an independent oil and natural gas company based in Texas and formed in 2017 that is focused on the acquisition, development, exploration, production and divestiture of oil and natural gasproperties in the Permian Basin. The Permian Basin is located in west Texas and southeastern New Mexico and is characterized by high oil and liquids-rich natural gas content, multiple vertical andhorizontal target horizons, extensive production histories, long-lived reserves and historically high drilling success rates. our properties are in the Grayburg-Jackson Field in Eddy County, New Mexico,which is a sub-area of the Permian Basin. Pogo focuses primarily on production through waterflooding recovery methods. The Company’s assets as mentioned above consist of contiguous leasehold positions of approximately 13,700 gross (13,700 net) acres with an average working interest of 100%. We operate 100% of thenet acreage across the Company’s assets, all of which is net operated acreage of vertical wells with average depths of approximately 3,810 feet. Our average daily production for the year ended December 31, 2024, was 798 barrel of oil equivalent (“BOE”) per day, and for the year ended December 31, 2023, was 1,022 BOE per day. The decreasein production is due to an increase in well downtime, field conditions requiring certain enhancements, and the conveyance of the 10% Override royalty interest to Pogo Royalty. Selected Factors That Affect Our Operating Results Our revenues, cash flows from operations and future growth depend substantially upon: ● the timing and success of production and development activities; ● the prices for oil and natural gas; ● the quantity of oil and natural gas production from our wells; ● changes in the fair value of the derivative instruments we use to reduce our exposure to fluctuations in the price of oil and natural gas; ● our ability to continue to identify and acquire high-quality acreage and development opportunities; and ● the level of our operating expenses. In addition to the factors that affect companies in our industry generally, the location of substantially all of our acreage discussed above subjects our operating results to factors specific to these regions.These factors include the potential adverse impact of weather on drilling, production and transportation activities, particularly during the winter and spring months, as well as infrastructure limitations,transportation capacity, regulatory matters and other factors that may specifically affect one or more of these regions. The price at which our oil and natural gas production are sold typically reflects either a premium or discount to the New York Mercantile Exchange (“NYMEX”) benchmark price. Thus, our operatingresults are also affected by changes in the oil price differentials between the applicable benchmark and the sales prices we receive for our oil production. Our oil price differential to the NYMEXbenchmark price during the years ended December 31, 2024 and 2023, was $(1.03) and $(4.95) per barrel, respectively. Our natural gas price differential during the years ended December 31, 2024 and2023, was $0.08 and $(0.06) per one thousand cubic feet (“Mcf”), respectively. Fluctuations in our price differentials and realizations are due to several factors such as gathering and transportation costs,takeaway capacity relative to production levels, regional storage capacity, gain/loss on derivative contracts and seasonal refinery maintenance temporarily depressing demand. 52
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Market Conditions The price that we receive for the oil and natural gas we produce is largely a function of market supply and demand. Because our oil and gas revenues are heavily weighted toward oil, we are moresignificantly impacted by changes in oil prices than by changes in the price of natural gas. World-wide supply in terms of output, especially production from properties within the United States, theproduction quota set by OPEC, and the strength of the U.S. dollar can adversely impact oil prices. Historically, commodity prices have been volatile, and we expect the volatility to continue in the future. Factors impacting the future oil supply balance are world-wide demand for oil, as well as thegrowth in domestic oil production. Prices for various quantities of natural gas and oil that we produce significantly impact our revenues and cash flows. The following table lists average NYMEX prices for oil and natural gas for the yearsended December 31, 2024 and 2023. For the years endedDecember 31, 2024 2023 Average NYMEX Prices (1) Oil (per Bbl) $ 76.55 $ 77.64 Natural gas (per Mcf) $ 2.19 $ 2.54 (1) Based on average NYMEX closing prices. For the year ended December 31, 2024, the average NYMEX oil pricing was $76.55 per barrel of oil or 1% lower than the average NYMEX price per barrel for the year ended December 31, 2023. Oursettled derivatives decreased our realized oil price per barrel by $1.91 and $3.63 in the years ended December 31, 2024, and 2023, respectively. Our average realized oil price per barrel after reflectingsettled derivatives and location differentials was $73.61 for the year ended December 31, 2024 compared to $69.06 for the year ended December 31, 2023. The average NYMEX natural gas pricing for the year ended December 31, 2024, was $2.19 per Mcf, or 14% lower than the average NYMEX price per Mcf for the year ended December 31, 2023. Pogo Royalty Overriding Royalty Interest Transaction Effective July 1, 2023, the Predecessor transferred to Pogo Royalty, a related party, an assigned and undivided overriding royalty interest (“ORRI”) equal in amount to ten percent (10%) of PogoResources, LLC’s and LH Operating, LLC’s interest all oil, gas and minerals in, under and produced from each lease. The consideration received for the 10% ORRI was $10. Thus, a loss of $816,011 wasrecorded as a result of the conveyance during the period from January 1, 2023 to November 14, 2023 of the Predecessor. Additionally, because of this transaction, our reserve balance was decreased aswell our current net production volumes and revenues. Additional details are discussed in Note 1 and Note 13 of notes to the consolidated financial statements. Results of Operations For the year ended December 31, 2024, 86% and 14% of sales volumes from the assets were attributable to crude and natural gas, respectively. As of December 31, 2024, the company was continuingdevelopment of the Seven River waterflood interval. Further, as of December 31, 2024, the Company owned an interest in approximately 342 gross (342 net) producing wells. 53
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The following table sets forth selected operating data for the periods indicated. Average sales prices are derived from accrued accounting data for the relevant period indicated. Successor Successor Predecessor For the year endedDecember 31, 2024 November 15,2023 toDecember 31, 2023 January 1,2023 toNovember 14,2023 Revenues Crude oil $ 19,298,698 $ 2,513,197 $ 22,856,521 Natural gas and natural gas liquids 483,486 70,918 809,553 Gain (loss) on derivative instruments, net (850,374) 340,808 51,957 Other revenue 487,109 50,738 520,451 Total revenues 19,418,919 2,975,661 24,238,482 Average sales prices: Oil (per Bbl) $ 75.52 $ 65.11 $ 73.58 Effect on gain (loss) of settled oil derivatives on average price (per Bbl) (1.91) (2.66) 0.17 Oil net of settled oil derivatives (per Bbl) 73.61 62.45 73.75 Natural gas (per Mcf) 2.27 2.41 2.48 Realized price on a BOE basis excluding settled commodity derivatives 67.96 59.40 64.84 Effect of gain (loss) on settled commodity derivatives on average price (per BOE) (1.68) (2.36) (3.19)Realized price on a BOE basis including settled commodity derivatives $ 66.28 $ 57.04 $ 61.66 Expenses Production taxes, transportation and processing 1,715,792 226,062 2,117,800 Lease operating 8,614,080 1,453,367 8,692,752 Depletion, depreciation and amortization 2,407,098 352,127 1,497,749 Accretion of asset retirement obligations 144,988 11,062 848,040 General and administrative 10,381,095 3,553,117 3,700,267 Acquisition costs - 9,999,860 - Total expenses 23,263,053 15,595,595 16,856,608 Costs and expenses (per BOE): Production taxes, transportation, and processing $ 5.89 $ 5.20 $ 5.80 Lease operating expenses 29.59 33.41 23.82 Depreciation, depletion, and amortization expense 8.27 8.09 4.10 Accretion of asset retirement obligations 0.50 0.25 2.32 General and administrative 35.66 81.67 10.14 Net producing wells at period-end 342 341 341 54
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Oil and Natural Gas Sales Our revenues vary from year to year primarily as a result of changes in realized commodity prices and production volumes. For the year ended December 31, 2024, our oil and natural gas sales decreased15% from the year ended December 31, 2023 on a combined Successor and Predecessor basis, driven by a 28% decrease in production volumes offset by a 6% increase in realized prices, excluding theeffect of settled commodity derivatives. The higher average price in the year ended December 31, 2024 compared to the combined year 2023, was driven by higher average NYMEX oil and natural gasprices during the first nine months of the year. Realized production from oil and gas properties decreased due to an increase in well downtime. Production for the comparable periods is set forth in the following table: For the year ended December 31, 2024 2023 Production: Oil (MBbl) 256 349 Natural gas (MMcf) 213 355 Total (MBOE)(1) 291 373 Average daily production: Oil (Bbl) 700 957 Natural gas (Mcf) 585 974 Total (BOE)(1) 798 1,022 (1) Natural gas is converted to BOE at the rate of one-barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not necessarily indicative of therelationship of oil and natural gas prices. Derivative Contracts We enter into commodity derivatives instruments to manage the price risk attributable to future oil production. We recorded a loss on derivative contracts of $850,374 for the year ended December 31, 2024 compared to a gain of $392,765 on a combined Successor and Predecessor basis for the year endedDecember 31, 2023. Lower commodity prices in 2024, resulted in realized losses of $489,084 for the year ended December 31, 2024 compared to realized losses of $1,266,277 on a combined Successorand Predecessor basis for the year ended December 31, 2023. For the year ended December 31, 2024, our average realized oil price per barrel after reflecting settled derivatives was $73.61, compared to$73.82 on a combined Successor and Predecessor basis for the year ended December 31, 2023. As of December 31, 2024, we ended the period with a $106,397 net derivative asset compared to $467,687 as of December 31, 2023. Other Revenue Other revenue was $487,109 for the year ended December 31, 2024, compared to $571,189 on a combined Successor and Predecessor basis for the year ended December 31, 2023. The revenue is relatedto providing water services to a third party and the slight decrease is due to lower volumes in 2024 from supply line disruptions during the third quarter of 2024 Lease Operating Expenses Lease operating expenses were $8,614,080 for the year ended December 31,2024, compared to $10,146,119 on a combined Successor and Predecessor basis for the year ended December 31, 2023. On aper unit basis, production expenses increased 19% from $27.20 per BOE for the combined Successor and Predecessor year ended December 31, 2023, to $29.59 per BOE for the year ended December 31,2024, due to increases in proactive maintenance activities, higher labor costs, and increased oil field service and supplies costs. Additionally, because of the conveyance of the 10% ORRI in July 2023, thenet production volumes decreased, which increases the “per BOE” amounts. 55
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Production Taxes, Transportation and Processing We pay production taxes, transportation and processing costs based on realized oil and natural gas sales. Production taxes, transportation and processing costs were $1,715,792 for the year endedDecember 31, 2024 compared to $2,343,862 on a combined Successor and Predecessor basis for the year ended December 31, 2023. As a percentage of oil and natural gas sales, these costs were 8.7% and8.9% for the years ended December 31, 2024 and 2023 respectively. Production taxes, transportation, and processing as a percent of total oil and natural gas sales are consistent with historical trends. Depletion, Depreciation and Amortization Depletion, depreciation and amortization (“DD&A”) was $2,407,098 as of December 31, 2024, compared to $1,849,876 on a combined Successor and Predecessor basis for the year ended December 31,2023. DD&A was $8.27 per BOE for the year ended December 31, 2024, compared to $4.53 per BOE on a combined Successor and Predecessor basis for the year ended December 31, 2023. Theaggregate increase in DD&A expense for the year ended December 31, 2024 compared to 2023 was driven by a 48% increase in the DD&A rate per BOE, partially offset by a 28% decrease in productionlevels. The increase in the DD&A rate per BOE was driven by the increase in the oil and gas properties balance due to the development of the Seven Rivers waterflood interval and the decrease in thereserves balance due to the conveyance of the 10% overriding royalty interest to Royalty. Accretion of Asset Retirement Obligations Accretion expense was $144,988 as of December 31, 2024, compared to $859,102 on a combined Successor and Predecessor basis for the year ended December 31, 2023. Accretion expense was $0.50per BOE for the year ended December 31, 2024, compared to $2.32 per BOE on a combined Successor and Predecessor basis for the year ended December 31, 2023. The aggregate decrease in accretionexpense for the fiscal year ended December 31, 2024 compared to 2023 was driven by changes in certain assumptions, specifically the inflation factor and discount rate as a result of the acquisition datewhere we revised our estimates as part of its fair value estimates for the acquired business. General and Administrative General and administrative expenses were $10,381,095 as of December 31, 2024 compared to $7,253,384 on a combined Successor and Predecessor basis for the year ended December 31, 2023. Theincrease for general and administrative expenses is primarily due to increased cost of outsourced legal, professional, and accounting services as a result of the transaction disclosed in Note 1 in the notes tothe consolidated financial statements and the costs of being a public company, and includes stock-based compensation expense of $2,778,991 for the year ended December 31, 2024. The general andadministrative expense total of $3,553,117 for the period from November 15, 2023 to December 31, 2023 for the Successor includes $1,500,000 from the 138,122 shares of Class A common stock issuedto White Lion for the commitment fee on the Common Stock Purchase Agreement, $910,565 in stock-based compensation to certain Founders under the Founder Pledge Agreement, and $135,400 in otherstock-based compensation. Acquisition costs There were no acquisition costs as of December 31, 2024, compared to $9,999,860 during the Successor period from November 15, 2023 to December 31, 2023, and included an aggregate of $7,854,660in costs related to the Forward Purchase Agreement and the Non-Redemption Agreements, due diligence and broker fees related to closing the Purchase. 56
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Interest Expense and amortization of debt discount Interest expense was $7,643,200 as of December 31, 2024, compared to $1,043,312 for the period from November 15, 2023 to December 31, 2023 (Successor), $1,834,208 for the period from January 1,2023 to November 14, 2023 (Predecessor), The Successor period interest expense is driven by the Senior Secured Term loan entered into as part of the Closing, and the Private Notes Payable. The interestexpense during the Predecessor period from January 1, 2023 to November 15, 2023 was primarily due to an increase in the average amount of the Predecessor’ revolving credit facility outstanding and anincrease in the weighted average interest rate. The revolving credit facility was not assumed in the Acquisition. Amortization of debt discount was $2,361,627 as of December 31, 2024 compared to $1,191,553 period from November 15, 2023 to December 31, 2023 (Successor), and attributable to deferred financecosts paid on the Senior Secured Term Loan, and discounts associated with the Private Notes Payable during 2023. Change in fair value of forward purchase agreement The change in fair value of forward purchase agreement consisted of a gain of $561,099 for the year ended December 31, 2024, for the Successor related to the inputs used in the Company’s fair valueestimate of the FPA Put Option. The key inputs to the fair value estimate include the Company’s stock price, which declined during the Successor period, and the likelihood, timing and price of a potentialdilutive offering. Gain on extinguishment of liabilities The Company recognized a gain on extinguishment of liabilities of $1,638,138 during the year ended December 31, 2024. In November 2024, the Company entered into a settlement agreement with theFPA Seller to fully release the Company from the terms of the FPA. We agreed to issue to the FPA Seller 450,000 restricted Class A Common shares which had a fair value of $450,000 based on theclosing price of the Company’s common stock at the agreement date. The Company recognized a gain on settlement of the FPA liability of $82,998, which is included in Gain on Extinguishment ofLiabilities on the Company’s consolidated statement of operations for the year ended December 31, 2024. The Company also recognized a gain of $1,720,000 related to the settlement of royalties payable and other claims with the Sellers. The Company recognized a loss on extinguishment of accounts payableof $76,200, and recognized a loss of $88,660 related to the exchange of certain notes payable and warrant liabilities for convertible note agreements. Change in fair value of warrant and convertible note liabilities The change in fair value of warrant liabilities consisted of a loss of $804,004 as of December 31, 2024, compared to a gain of $187,704 for the period from November 15, 2023 to December 31, 2023 forthe Successor related to fluctuations in the trading price of the Company’s warrants, a portion of which are accounted for as liabilities due to the redemption provisions in those issued to Private Noteholders. The Company also recognized a loss of $192,744 from the change in fair value of its convertible note liabilities during the year ended December 31, 2024. Loss on asset sales Loss on asset sales was $816,011 on a combined Successor and Predecessor basis for the year ended December 31, 2023, compared to $0 for the year ended December 31, 2024. The decrease was due tothe loss that was recognized as a result of the conveyance of the 10% overriding royalty interest to Pogo Royalty in July 2023. Liquidity and Capital Resources Liquidity Our main sources of liquidity have been internally generated cash flows from operations, credit facility borrowings and equity line financing sales and issuances. Our primary use of capital has been forthe development of oil and gas properties, payment to vendors, payment of debt obligations [and the return of initial invested capital to our founders]. We continually monitor potential capital sources foropportunities to enhance liquidity or otherwise improve our financial position. 57
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As of December 31, 2024, we had outstanding debt of $23,641,517 under our Senior Secured Term Loan, $15,000,000 under the Seller Promissory Note, $3,556,750 of outstanding private notes payable,and $948,982 from short term merchant loans. A total of $9,080,910 of this is due within one year. As of December 31, 2024, we had $2,971,558 of cash and cash equivalents on hand, of whichapproximately $2,600,000 is in an escrow account pursuant to the requirements of the Senior Secured Term Loan. At December 31, 2024 we had a working capital deficit of $31,213674. These conditionsraise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. The Company had positive cash flow from operations of $3,700,686 for the year ended December 31, 2024. Additionally, management’s plans to alleviate this substantial doubt include improvingprofitability through streamlining costs, maintaining active hedge positions for its proven reserve production, and the issuance of additional shares of Class A common stock. We have a three-year equity line (ELOC) Common Stock Purchase Agreement with a maximum funding limit of $150,000,000 that can fund our operations and production growth, and be used to reduceliabilities. Through the date of this filing, we have received $6,992,906 in cash proceeds related to the sale of 7,000,000 shares of common stock under this agreement and expect to continue to utilize it tofund current operational needs. We cannot assure you, however, that any additional capital will be available to us on favorable terms or at all. Our capital expenditures could be curtailed if our cash flowsdecline from expected levels. Cash Flows Sources and uses of cash for the years ended December 31, 2024, and 2023, are as follows: Successor Predecessor Year EndedDecember 31,2024 November 15,2023 toDecember 31,2023 January 1,2023 toNovember 14, 2023 Net cash provided by operating activities $ 3,700,686 $ 484,474 $ 8,190,563 Net cash (used in) provided by investing activities (3,575,062) 18,296,176 (6,960,555)Net cash used in financing activities (659,520) (17,866,128) (3,000,000)Net change in cash and cash equivalents $ (533,896) $ 914,522 $ (1,769,992) Operating Activities The decrease in net cash flow provided by operating activities for the year ended December 31, 2024, as compared to 2023 on a combined Successor and Predecessor basis is primarily due to increasednet loss as a result of decreased prices and production volumes, and higher general and administrative costs associated with public filings. Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was primarily due to the development of crude oil and gas properties. Net cash provided by investing activities in the Successorperiod from November 15, 2023 to December 31, 2023 was primarily due to Trust Account withdrawals associated with the Closing in November 2023 of $49,362,479, partially offset by the cash paid tothe Sellers of EON of $30,827,804 at the Closing, net of cash acquired. Cash flows used in investing activities in the Predecessor period ending November 14, 2023 consisted of $6,769,557 of cash paidfor oil and gas property costs, primarily due to significant expenditures in the previous year to upgrade certain wells and meet compliance requirements. 58
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Financing Activities Net cash used in financing activities for the year ended December 31, 2024 was primarily due to repayments of long-term debt offset by the proceeds from the sale of common stock under the CommonStock Purchase Agreement. Net cash used by financing activities during the Successor period from November 15, 2023 to December 31, 2023 were primarily related to the redemptions of common stockof Public Shares at Closing of $44,737,839, partially offset by the net proceeds from the Senior Secured Term Loan of $27,191,008. Off Balance Sheet Arrangements As of December 31, 2024 and 202, the Company did not have any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission (SEC). Contractual Obligations We have contractual commitments under our Senior Secured Term Loan, the Seller Promissory Note and the Private Notes Payable which include periodic interest payments. See Note 5 to our interimcondensed consolidated unaudited financial statements. We have contractual commitments that may require us to make payments upon future settlement of our commodity derivative contracts. See Note 4to our interim condensed consolidated unaudited financial statements. Our other liabilities represent current and noncurrent other liabilities that are primarily comprised of environmental contingencies, asset retirement obligations and other obligations for which neither theultimate settlement amounts nor their timings can be precisely determined in advance. Critical Accounting Estimates The following is a discussion of our most critical accounting estimates, judgements and uncertainties that are inherent in the Company’s application of GAAP. Proved Reserve Estimates Estimates of our proved reserves included in this report are prepared in accordance with GAAP and SEC guidelines. The accuracy of a proved reserve estimate is a function of: ● the quality and quantity of available data; ● the interpretation of that data; ● the accuracy of various mandated economic assumptions; and ● the judgment of the persons preparing the estimate. 59
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Our proved reserve information included in this filing as of December 31, 2024 and 2023, was prepared by independent petroleum engineers. Because these estimates depend on many assumptions, all ofwhich may substantially differ from future actual results, proved reserve estimates will be different from the quantities of oil and gas that are ultimately recovered. In addition, results of drilling, testingand production after the date of an estimate may justify, positively or negatively, material revisions to the estimate of proved reserves. It should not be assumed that the standardized measure included as of December 31, 2024, is the current market value of our estimated proved reserves. In accordance with SEC requirements, we basedthe 2024 standardized measure on a twelve-month average of commodity prices on the first day of each month in 2024 and prevailing costs on the date of the estimate. Actual future prices and costs maybe materially higher or lower than the prices and costs utilized in the estimate. See Note 13 of notes to the consolidated financial statements for additional information. Our estimates of proved reserves materially impact depletion expense. If the estimates of proved reserves decline, the rate at which we records depletion 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 theoutcome of our assessment of our proved properties for impairment. Impairment of Proved Oil and Gas Properties We review our proved properties to be held and used whenever management determines that events or circumstances indicate that the recorded carrying value of the properties may not be recoverable.Management assesses whether or not an impairment provision is necessary based upon estimated future recoverable proved reserves, commodity price outlooks, production and capital costs expected tobe incurred to recover the reserves, discount rates commensurate with the nature of the properties and net cash flows that may be generated by the properties. Proved oil and gas properties are reviewed forimpairment at the level at which depletion of proved properties is calculated. See Note 2 of notes to the consolidated financial statements. Asset Retirement Obligations We have significant obligations to remove tangible equipment and facilities and to restore the land at the end of crude oil and natural gas production operations. Our removal and restoration obligations areprimarily 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 theremoval obligations are many years in the future and contracts and regulations often have vague descriptions of what constitutes removal. Asset removal technologies and costs are constantly changing, asare 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 adjustmentis generally made to the crude oil and natural gas property or other property and equipment balance. See Note 5 of notes to the consolidated financial statements. Litigation and Environmental Contingencies We make judgments and estimates in recording liabilities for ongoing litigation and environmental remediation. Actual costs can vary from such estimates for a variety of reasons. The costs to settlelitigation can vary from estimates based on differing interpretations of laws and opinions and assessments on the amount of damages. Similarly, environmental remediation liabilities are subject to changebecause of changes in laws and regulations, developing information relating to the extent and nature of site contamination and improvements in technology. A liability is recorded for these types ofcontingencies if we determine the loss to be both probable and reasonably estimable. See Note 10 of notes to the consolidated financial statements. 60
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Forward Purchase Agreement Valuation The Company has determined that the FPA Put Option, including the Maturity Consideration, within the Forward Purchase Agreement is (i) a freestanding financial instrument and (ii) a liability (i.e., anin-substance written put option). This liability was recorded as a liability at fair value on the consolidated balance sheet as of the reporting date in accordance with ASC 480. The fair value of the liabilitywas estimated using a Monte-Carlo Simulation in a risk-neutral framework. Specifically, the future stock price is simulated assuming a Geometric Brownian Motion (“GBM”). For each simulated path,the forward purchase value is calculated based on the contractual terms and then discounted back to present. Finally, the value of the forward is calculated as the average present value over all simulatedpaths. The model also considered the likelihood of a dilutive offering of common stock. Derivative Instruments The Company uses derivative financial instruments to mitigate its exposure to commodity price risk associated with oil prices. The Company’s derivative financial instruments are recorded on theconsolidated balance sheets as either an asset or a liability measured at fair value. The Company has elected not to apply hedge accounting for its existing derivative financial instruments, and as a result,the Company recognizes the change in derivative fair value between reporting periods currently in its consolidated statements of operations. The fair value of the Company’s derivative financialinstruments is determined using industry-standard models that consider various inputs including: (i) quoted forward prices for commodities, (ii) time value of money and (iii) current market andcontractual prices for the underlying instruments, as well as other relevant economic measures. Realized gains and losses from the settlement of derivative financial instruments and unrealized gains andunrealized losses from valuation changes in the remaining unsettled derivative financial instruments are reported in a single line item as a component of revenues in the consolidated statements ofoperations. Cash flows from derivative contract settlements are reflected in operating activities in the accompanying consolidated statements of cash flows. See Note 4 for additional information about theCompany’s derivative instruments. New Accounting Pronouncements The effects of new accounting pronouncements are discussed in Note 2 to the consolidated financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This information appears following Item 16 of this report and is included herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act isrecorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief ExecutiveOfficer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer) and Controller (Principal Accounting Officer), as appropriate to allow timely decisions regarding requireddisclosure. 61
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As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer) and Controller (PrincipalAccounting Officer) carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024. Based upon his evaluation, our ChiefExecutive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer) and Controller (Principal Accounting Officer) concluded that, our disclosure controls and procedureswere not effective related to the lack of sufficient accounting personnel to manage the Company’s financial accounting process, lack of segregation of duties, proper accounting for complex financialinstruments and lack of design and implementation of controls related to oil and gas activities which combined constituted a material weakness in our internal control over financial reporting. As a result,we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, managementbelieves that the financial statements included in this Annual Report on Form 10-K present fairly in all material respects our financial position, results of operations and cash flows for the periodpresented. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’sannual or interim financial statements will not be prevented or detected on a timely basis. Management concluded that a deficiency in internal control over financial reporting existed relating to the lack ofsufficient accounting personnel to manage the Company’s financial accounting process, lack of segregation of duties, proper accounting for complex financial instruments and lack of design andimplementation of controls related to oil and gas activities constituted a material weakness as defined in the SEC regulations. Management’s Report on Internal Controls Over Financial Reporting As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financialreporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financialstatements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financialstatements. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2024. In making these assessments, management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did notmaintain effective internal control over financial reporting as of December 31, 2024 due to the material weakness in our internal control over financial reporting described above. We plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply toour financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that theseinitiatives will ultimately have the intended effects. This Annual Report on Form 10-K does not include an attestation report on internal control over financial reporting from our independent registered public accounting firm due to our status as anemerging growth company under the JOBS Act. Changes in Internal Control over Financial Reporting During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that hasmaterially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. During the three months ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated a “Rule 10b5-1 tradingarrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. 62
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PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Executive Officers Our Board of Directors consists of five directors. Three of the five directors are independent. Our current directors and executive officers are as follows: Name Age TitleDante Caravaggio 67 Chief Executive Officer, President and DirectorMitchell B. Trotter 65 Chief Financial Officer and DirectorDavid M. Smith 69 General Counsel and SecretaryJoseph V. Salvucci Sr 68 Director and ChairmanJoseph V. Salvucci Jr. 39 DirectorByron Blount 66 Director Dante Caravaggio — Chief Executive Officer, President and Director. Mr. Caravaggio joined the company and has served as our Chief Executive Officer, President, and Director since December2023. Since April 2021, Mr. Caravaggio has served as Chairman of SWI Excavating, one of the leading regional underground utility contractors in Colorado. From January 2020 to April 2022, Mr.Caravaggio served on the board of directors of McCarl’s Inc., a leading energy constructor in the northeast United States. Prior to joining McCarl’s Inc., Mr. Caravaggio was Senior Vice President,Hydrocarbons Americas for KBR (US) since January 2018. Prior to his role with KBR (US), Mr. Caravaggio held a number of roles as an executive and project manager with Parsons Corp. and JacobsEngineering, overseeing upstream and downstream hydrocarbon projects. Mr. Caravaggio received his MBA at Pepperdine University in Malibu, California and his BS and MS in Petroleum Engineeringat the University of Southern California. Mr. Caravaggio is qualified to serve as CEO and as a member of our board of directors based on our review of his qualifications, attributes, and skills, including his oil and gas management experienceand oil and gas acquisition experience. Mitchell B. Trotter — Chief Financial Officer and Director. Mr. Trotter joined the company and has served as our Senior Vice President of Finance since October 2022 and became Chief FinancialOfficer and Director in November 2023. Mr. Trotter has 41 years of experience beginning his career in 1981 as an auditor with Coopers & Lybrand for seven years. He then served as CFO of two privateinvestor backed private companies where the first was in real estate development and the latter in the engineering and construction industry. For the next 30 years, Mr. Trotter served in various CFO andController positions with three publicly traded companies in the engineering and construction services industry which were: Earth Tech to 2002; Jacobs Engineering to 2017; and AECOM to 2022. Inthose roles Mr. Trotter managed up to 400 plus staff across six continents supporting global operations with clients in multiple industries across private, semi-public and public sectors. Mr. Trotter earnedhis BS Accounting from Virginia Tech in 1981 and his MBA from Virginia Commonwealth University in 1994. He professional credentials are: Certified Public Accountant in Virginia; CertifiedManagement Accountant; and Certified in Financial Management. David M. Smith, Esq. — Vice President, General Counsel and Secretary of the Company. Mr. Smith has served as our General Counsel and Secretary since November 2023. Mr. Smith is a licensedattorney in Texas with over 40 years’ experience in the legal field of oil and gas exploration and production, manufacturing, purchase and sale agreements, exploration agreements, land and leaseholds,right of ways, pipelines, surface use, joint operating agreements, joint interest agreements, participation agreements and operations as well as transactional and litigation experience in oil and gas, realestate, bankruptcy and commercial industries. Mr. Smith purchased 142,500 shares as a founder. Mr. Smith has represented a number of companies in significant oil and gas transactions, mergers andacquisitions, intellectual property research and development and sales in the oil and gas drilling business sector. Mr. Smith began his career by serving in a land and legal capacity as Vice President ofLand and, subsequently, as President of a public Canadian company until beginning his legal practice as a partner with several law firms and ultimately creating his own independent legal practice. Mr.Smith holds a degree in Finance from Texas A&M University, a Doctor of Jurisprudence from South Texas College of Law and is licensed before the Texas Supreme Court. 63
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Joseph V. Salvucci, Sr. — Independent Director and Chairman of the Board. Joseph V. Salvucci, Sr. has served as a member of our board of directors since December 2021. JVS Alpha Property,LLC, an entity which the majority is beneficially owned by Mr. Salvucci, with the balance owned by his immediate family, purchased 940,000 shares as a founder. Mr. Salvucci acquired PEAK TechnicalStaffing USA (“PEAK”), peaktechnical.com in 1986 and has grown the business to be a premier provider of USA-based contract engineers and technical specialists, on assignment worldwide through acomprehensive, customer focused, enterprise-wide Managed Staffing Solution. During his 35-year tenure as owner of the company, PEAK has expanded from Pittsburgh to do business in all 50 States,Canada, Europe, South America, India, and the Philippines. He served 10 years on the board of directors culminating as President and Board Chairman of the National Technical Services Association, atrade association representing 300,000 contractors on assignment in the technical staffing industry that later merged with the American Staffing Association. He is an active member of the YoungPresidents Organization (YPO GOLD), formerly known as the World Presidents Organization (WPO) and has served as a member of the WPO International Board, as well as chairman of East Central US(ECUS) Region and Pittsburgh chapters as Chairman of the Board. As a 1976 Civil Engineering graduate of the University of Pittsburgh, he was a member of the Triangle (Engineering) Fraternity and itsAlumni Association. He earned the Triangle Fraternity Distinguished Alumnus Citation in 2011 and currently serves on the Board of Directors. After earning the rank of Eagle Scout in 1970, he hasremained active with the Boy Scouts of America, having served as the founding Chairman of the Board of the Pittsburgh Chapter of the National Eagle Scout Association, earning the NOESA (NationalOutstanding Eagle Scout Award) and the Silver Beaver Award and is past VP of Development and a board member of the Laurel Highlands Council in Western Pennsylvania. He was awarded theManifesting the Kingdom of God Award by the Catholic Diocese of Pittsburgh in 2011. He was awarded the “Big Mac Award” from the Ronald McDonald Charities. As well as earning his BS in CivilEngineering from the University of Pittsburgh in 1976 and attended Harvard Business School’s OPM 33, graduating in 2003. Joseph V. Salvucci, Jr. — Independent Director. Joseph V. Salvucci, Jr. has served as a member of our board of directors since December 2021. Mr. Salvucci began his career with PEAK TechnicalStaffing USA in November 2010 and is currently serving as the Chief Executive Officer overseeing nine branches with several hundred employees, and managing strategic initiatives for the company,including Staff Training, Career Pathing, and Organic Growth. Mr. Salvucci Jr received his Executive MBA from the University of Pittsburgh. In addition to his responsibilities as President/COO ofPEAK, Mr. Salvucci serves on the board of Temporary Services Insurance Limited, a Workers’ Compensation company serving staffing companies. Byron Blount — Independent Director. Mr. Blount joined the board of directors and is the chair of the audit committee since November 2023. Mr. Blount has extensive experience in finance,investments, and acquisitions. He was Managing Director for the Blackstone Real Estate Group from 2011 to 2021 where he: had Primary Asset Management responsibilities for several industries andportfolio companies; oversaw the onboarding of acquisitions and establishment of Blackstone-affiliated portfolio companies; and had Primary Disposition responsibilities for several portfolios andcompanies across several industries. Mr. Blount was the LXR/Blackstone Executive Vice President from 2005 to 2010. His primary responsibilities involved: underwriting and acquisition of domestic andinternational property and mortgage loan portfolios; asset management; renovation and reconstruction projects, debt, and business model restructuring; and dispute resolution. He was a Principal ofColony Capital from 1993 to 2004 and was responsible for sourcing and structuring new investments, consummating transactions valued in excess of $5 billion. His Primary Acquisitions responsibilitiesincluded domestic and international acquisitions of real property, distressed mortgage debt, and real estate-related assets and entities. From 1987 to 1992, Mr. Blount was Vice President of WSGP whichwas formed to capitalize on the struggles of the US Savings and Loan industry and the FSLIC. He was responsible for structuring and managing/working out new investment opportunities, generallyacquired from failed financial institutions. He graduated from University of Southern California in 1982 with a B.S. in Business Administration. Mr. Blount earned his MBA from University of SouthernCalifornia’s Marshall School of Business in 1987 and is a member Beta Gamma Sigma (International Business Honor Society). 64
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Family Relationships There are no family relationships between any of our officers and directors, except that Mr. Joseph V. Salvucci, Sr. and Mr. Joseph V. Salvucci, Jr. are father and son, respectively. Number and Terms of Office of Officers and Directors Our board of directors has five directors. Our board of directors is divided into two classes with only one class of directors being elected in each year and each class (except for those directors appointedprior to our first annual meeting of stockholders) serving a two-year term. The class I directors consist of Dante Caravaggio and Joseph V. Salvucci, Jr., and their term will expire at the annual meeting ofstockholders in even-numbered years. The class II directors consist of Mitchell Trotter, Byron Blount, and Joseph V. Salvucci, Sr. and their term will expire at the annual meeting of stockholders in odd-numbered years. Our officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to theoffices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary,Assistant Secretaries, Treasurer and such other offices as may be determined by the board of directors. Director Independence The NYSE American listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of thecompany or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment incarrying out the responsibilities of a director. Of the current members of our board of directors, Messrs. Salvucci Sr., Salvucci Jr., and Byron Blount are each considered an “independent director” underthe NYSE American listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present. Committees of the Board of Directors The standing committees of our Board of Directors consist of an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”), and a Nominating and CorporateGovernance Committee (the “Nominating Committee”). The Audit Committee, Compensation Committee, and the Nominating Committee report to the Board of Directors. Audit Committee The members of our Audit Committee are Messrs. Blount and Salvucci Sr., and Mr. Blount serves as chairman of the Audit Committee. As a smaller reporting company under the NYSE American listingstandards, we are required to have at least two members on the Audit Committee. The rules of the NYSE American and Rule 10A-3 of the Exchange Act require that the audit committee of a listedcompany be comprised solely of independent directors. Each of Messrs. Salvucci Sr. and Blount qualifies as an independent director under applicable rules. Each member of the Audit Committee isfinancially literate and our board of directors has determined that Mr. Blount qualifies as an “audit committee financial expert” as defined in applicable SEC rules. We have adopted an audit committee charter, which details the principal functions of the audit committee, including: ● the appointment, compensation, retention, replacement, and oversight of the work of the independent registered accounting firm and any other independent registered public accounting firmengaged by us; 65
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● pre-approving all audit and non-audit services to be provided by the independent registered accounting firm or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; ● reviewing and discussing with the independent registered accounting firm all relationships the auditors have with us in order to evaluate their continued independence; ● setting clear hiring policies for employees or former employees of the independent registered accounting firm; ● setting clear policies for audit partner rotation in compliance with applicable laws and regulations; ● obtaining and reviewing a report, at least annually, from the independent registered accounting firm describing (i) the independent registered accounting firm’s internal quality-control proceduresand (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professionalauthorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues; ● reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and ● reviewing with management, the independent registered accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence withregulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significantchanges in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities. Compensation Committee The members of our Compensation Committee are Messrs. Salvucci Sr., Salvucci, Jr., and Blount. Mr. Salvucci, Jr. serves as chairman of the Compensation Committee. Under the NYSE American listingstandards and applicable SEC rules, we are required to have at least two members on the Compensation Committee, all of whom must be independent. We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including: ● 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 inlight of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer 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; ● 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. 66
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The charter also provides that the Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directlyresponsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or anyother adviser, the compensation committee will consider the independence of each such adviser, including the factors required by the NYSE American and the SEC. Nominating and Corporate Governance Committee The members of our Nominating Committee are Messrs. Blount, Salvucci Sr. and Salvucci Jr. Mr. Salvucci Jr. serves as chair of Nominating Committee. The primary purposes of our Nominating Committee is to assist the board in: ● identifying, screening and reviewing individuals qualified to serve as directors and recommending to the board of directors candidates for nomination for election at the annual meeting ofstockholders or to fill vacancies on the board of directors; ● developing, recommending to the board of directors and overseeing implementation of our corporate governance guidelines; ● coordinating and overseeing the annual self-evaluation of the board of directors, its committees, individual directors and management in the governance of the company; and ● reviewing on a regular basis our overall corporate governance and recommending improvements as and when necessary. The Nominating Committee is governed by a charter that complies with the rules of the NYSE American. A copy of each of our Nominating Committee Charter, Compensation Committee Charter, and Audit Committee Charter are accessible at https://hnra-nyse.com/. Director Nominations Our Nominating Committee will recommend to the board of directors candidates for nomination for election at the annual meeting of the stockholders. The board of directors will also consider directorcandidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, aspecial meeting of stockholders). We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director,the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability torepresent the best interests of our stockholders. Compensation Committee Interlocks and Insider Participation None of our future executive officers currently serves, and in the past year has not served, as a member of the board of directors or compensation committee of any entity that has one or more executiveofficers serving on our board of directors. Short Swing Profit Disgorgement Dante Caravaggio, our Chief Executive Officer, has disbursed $[ ] to us in order for us to recapture short swing profits received by him when he sold shares and repurchased them for a profit in 2025. 67
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Code of Ethics We have adopted a Code of Ethics applicable to our directors, officers and employees. The Code of Ethics is available on our website accessible at https://hnra-nyse.com/. In addition, a copy of the Codeof Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K. Insider Trading Policy Our board of directors has adopted an Insider Trading Policy which prohibits trading based on “material, nonpublic information” regarding our company or any company whose securities are listed fortrading or quotation in the United States. The policy covers all officers and directors of the company and its subsidiaries, all other employees of the company and its subsidiaries, and consultants orcontractors to the company or its subsidiaries who have or may have access to material non-public information and members of the immediate family or household of any such person. The policy isreasonably designed to promote compliance with insider trading laws, rules and regulations, and Nasdaq listing standards. The policy is filed as an exhibit to this Annual Report on Form 10-K. Clawback Policy Our board of directors has adopted a clawback policy, which provides that in the event we are required to prepare an accounting restatement due to noncompliance with any financial reportingrequirements under the securities laws or otherwise erroneous data or we determine there has been a significant misconduct that causes financial or reputational harm, we shall recover a portion or all ofany incentive compensation. The policy is filed as an exhibit to this Annual Report on Form 10-K. Timing of Option Awards We provide the following discussion of the timing of option awards in relation to the disclosure of material nonpublic information, as required by Item 402(x) of Regulation S-K. We have no policy orpractice regarding option grant timing because we do not grant, and have not granted, options to our NEOs. We have not timed the disclosure of material nonpublic information to affect the value ofexecutive compensation. During 2024, we did not grant any stock options to the NEOs during any period beginning four business days before the filing of a periodic report on Form 10-Q or Form 10-K orthe filing or furnishing of a current report on Form 8-K disclosing material non-public information (other than a current report on Form 8-K disclosing a material new stock option award under Item5.02(e) of such Form 8-K), and ending one business day after the filing or furnishing of such report with the SEC. Executive Officers Our executive officers are: Name Position AgeDante Caravaggio Chief Executive Officer 67Mitchell B. Trotter Chief Financial Officer 65David M. Smith General Counsel and Secretary 69 Biographical information for these individuals is set forth above. Limitation on Liability and Indemnification of Officers and Directors Our Second A&R Charter provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition,our Second A&R Charter provides that our directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, except to the extent such exemption fromliability or limitation thereof is not permitted by the DGCL. 68
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Our bylaws also permit us to maintain insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit suchindemnification. We have obtained a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in somecircumstances and insures us against our obligations to indemnify our officers and directors. These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood ofderivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adverselyaffected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions. We believe that these provisions, the directors’ and officers’ liability insurance and the indemnification agreements are necessary to attract and retain talented and experienced officers and directors. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our executive officers, directors and persons who beneficially own more than 10% of a registered class ofour equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our shares of common stock and other equity securities.These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons. Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our executive officers, directorsand greater than 10% beneficial owners were filed in a timely manner, except for: (i) one late Form 4 filing for Joseph Salvucci, Jr., (ii) two late Form 4 filings for Dante Caravaggio (which one such filinghas not been made as of the date of this Annual Report on Form 10-K, and (iii) one late Form 4 filing for Byron Blount. ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Table The following table sets forth information regarding compensation earned during the years ended December 31, 2024 and 2023 by our principal executive officers and our two other most highlycompensated executive officers as of the end of December 31, 2024 (“NEOs”). (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Name and Principal Position Year Salary Bonus StockAwards (1) OptionAwards(2) Non-equityIncentiveplancompensation Nonqualifieddeferredcompensationearnings All othercompensation Total ($) ($) ($) ($) ($) ($) ($) ($) Dante Caravaggio 2024 104,000 - 96,000 118,285 - 146,000 20,100 484,385 Chief Executive Officer and President 2023 4,000 - - - - 6,417 - 10,417 Mitchell B. Trotter 2024 104,000 - 96,000 78,857 - 146,000 4,448 429,305 Chief Financial Officer 2023 12,000 - - - - 19,250 - 31,250 David M. Smith 2024 104,000 - 96,000 78,857 - 146,000 20,100 444,957 General Counsel and Secretary 2023 12,000 - - - - 19,250 - 31,250 (1) The fair value of the stock awards to Messrs. Caravaggio, Trotter and Smith were based on the closing price of the Company’s Class A Common Stock on March 4, 2024 in accordance with FASBASC 718.(2) The fair value of the option awards to Messrs. Caravaggio, Trotter and Smith were estimated under FASB ASC 718 using a Black-Scholes Option Pricing Model and the following assumptions: (1)expected volatility of 110.42% based on a group of comparable peer companies; (2) an exercise price of $2.02; (3) a stock price of $2.02 based on the closing price of the Company’s Class ACommon Stock on the grant date of March 12, 2024; (4) an expected term of 4.5 years; (5) a risk-free rate of 4.26%; and (6) a dividend rate of 0%. 69
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Narrative Disclosures Regarding Compensation; Employment Agreements None of our NEOs received any cash compensation prior to the Closing of the Purchase on November 15, 2023, other than the $10,000 per month, including the deferred payments, administrative fee foroffice space, utilities, secretarial and administrative services, and the reimbursement for out-of-pocket expenses paid to Rhône Merchant Resources Inc., and $5,000 per month paid to Donald W. Orr, nocompensation or fees of any kind was paid to the Sponsor, or members of our management team or their respective affiliates, for services rendered prior to or in connection with the consummation of ourinitial business combination. Dante Caravaggio Effective December 18, 2023, we entered into an employment agreement (the “Caravaggio Employment Agreement”) with Dante Caravaggio, pursuant to which he serves as our Chief Executive Officer,President, and a member of our board of directors. The Caravaggio Employment Agreement is on our standard form for executives, and provides that we pay to Mr. Caravaggio an annual base salary of$250,000. In addition, we agreed to issue a one-time Equity Sign-On Incentive to Mr. Caravaggio under the 2023 HNR Acquisition Corp Omnibus Incentive Plan (the “2023 Plan”), which consists ofrestricted stock units (“RSUs”), equal to 200% of base salary divided by $10 (i.e. 50,000 RSUs), subject to time-based vesting as follows: 1/3 on the first anniversary of the date of grant, 1/3 on the secondanniversary of the date of grant, and 1/3 on the third anniversary of the date of grant, so long as Mr. Caravaggio continues to provide service through such vesting date. As of December 31, 2023, theRSUs had not yet been granted to Mr. Caravaggio. Mr. Caravaggio will be permitted to participate in any broad-based retirement, health and welfare plans that will be offered to all of our employees. Pursuant to the Caravaggio Employment Agreement, if we terminate Mr. Caravaggio’s employment without Cause (as defined in the Caravaggio Employment Agreement) or Mr. Caravaggio terminateshis employment for Good Reason (as defined in the Caravaggio Employment Agreement), then Mr. Caravaggio will be entitled to: (i) any accrued obligations as of the date of termination, including basesalary, PTO and holidays, and continued benefits required by our employee benefit plans; (ii) continued base salary for 12 months following the date of termination, paid in accordance with our payrollpractices; (iii) the total monthly cost of coverage for Mr. Caravaggio and his covered dependents under COBRA, if elected; and (iv) full vesting in all equity grants as of the date of termination. To receivesuch severance benefits, Mr. Caravaggio will be required to execute a non-competition agreement, non-solicitation agreement, or confidentiality agreement or invention assignment agreement and releaseof claims. Mitchell B. Trotter Effective November 15, 2023, we entered into an employment agreement (the “Trotter Employment Agreement”) with Mitchell B. Trotter, pursuant to which he serves as our Chief Financial Officer and amember of our board of directors. The Trotter Employment Agreement is on our standard form for executives, and provides that we pay to Mr. Trotter an annual base salary of $250,000. In addition, weagreed to issue a one-time Equity Sign-On Incentive to Mr. Trotter under the 2023 Plan, which consists of RSUs equal to 200% of base salary divided by $10 (i.e. 50,000 RSUs), subject to time-basedvesting as follows: 1/3 on the first anniversary of the date of grant, 1/3 on the second anniversary of the date of grant, and 1/3 on the third anniversary of the date of grant so long as Mr. Trotter continuesto provide service through such vesting date. As of December 31, 2023, the RSUs had not yet been granted to Mr. Trotter. Mr. Trotter will be permitted to participate in any broad-based retirement, healthand welfare plans that will be offered to all of our employees. Pursuant to the Trotter Employment Agreement, if we terminate Mr. Trotter’s employment without Cause (as defined in the Trotter Employment Agreement) or Mr. Trotter terminates his employment forGood Reason (as defined in the Trotter Employment Agreement), then Mr. Trotter will be entitled to: (i) any accrued obligations as of the date of termination, including base salary, PTO and holidays, andcontinued benefits required by our employee benefit plans; (ii) continued base salary for 12 months following the date of termination, paid in accordance with our payroll practices; (iii) the total monthlycost of coverage for Mr. Trotter and his covered dependents under COBRA, if elected; and (iv) full vesting in all equity grants as of the date of termination. To receive such severance benefits, Mr. Trotterwill be required to execute a non-competition agreement, non-solicitation agreement, or confidentiality agreement or invention assignment agreement and release of claims. David M. Smith Effective November 15, 2023, we entered into an employment agreement (the “Smith Employment Agreement”) with David M. Smith, pursuant to which he serves as our General Counsel and Secretary.The Smith Employment Agreement is on our standard form for executives, and provides that we pay to Mr. Smit Pursuant to the Smith Employment Agreement, if we terminate Mr. Smith’s employmentwithout Cause (as defined in the Smith Employment Agreement) or Mr. Smith terminates his employment for Good Reason (as defined in the Smith Employment Agreement), then Mr. Smith will beentitled to: (i) any accrued obligations as of the date of termination, including base salary, PTO and holidays, and continued benefits required by our employee benefit plans; (ii) continued base salary for12 months following the date of termination, paid in accordance with our payroll practices; (iii) the total monthly cost of coverage for Mr. Smith and his covered dependents under COBRA, if elected; and(iv) full vesting in all equity grants as of the date of termination. To receive such severance benefits, Mr. Smith will be required to execute a non-competition agreement, non-solicitation agreement, orconfidentiality agreement or invention assignment agreement and release of claims. 70
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Compensation Advisor The Compensation Committee retained Pearl Meyer & Partners, LLC (“Pearl Meyer”), a compensation consulting firm, to assist it in evaluating the elements and levels of our executive compensation,including base salaries, annual cash incentive awards and equity-based incentives for our executive officers, consultant, and directors. In November 2022, the Compensation Committee determined thatPearl Meyer is independent from management and that Pearl Meyer’s work has not raised any conflicts of interest. Pearl Meyer reports directly to the Compensation Committee and the CompensationCommittee has the sole authority to approve Pearl Meyer’s compensation and may terminate the relationship at any time. Outstanding Equity Awards at Fiscal Year End The following table sets forth information regarding the outstanding equity awards held by our Named Executive Officers as of December 31, 2024: Option Awards Stock Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) Dante Caravaggio - - 75,000 2.02 March 11, 2034 - - 33,333 $ 27,333 Mitchell B. Trotter - - 50,000 2.02 March 11, 2034 - - 33,333 $ 27,333 David M. Smith - - 50,000 2.02 March 11, 2034 - - 33,333 $ 27,333 Donald W. Orr - - - - - - - - $ - Donald H. Goree - - - - - - - - $ - Option Re-pricings We have not engaged in any option re-pricings or other modifications to any of our outstanding equity awards to our NEOs during fiscal years 2024 and 2023. Payments Upon Termination or Change in Control None of our NEOs are entitled to receive payments or other benefits upon termination of employment or a change in control. Retirement Plans We do not maintain any deferred compensation, retirement, pension or profit-sharing plans. Employee Benefits All of our full-time employees are eligible to participate in health and welfare plans maintained by us, including: ● medical, dental and vision benefits; and ● basic life and accidental death & dismemberment insurance. Our NEOs participate in these plans on the same basis as other eligible employees. We do not maintain any supplemental health and welfare plans for our NEOs. 71
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Nonqualified Deferred Compensation During the years ended December 31, 2024 and 2023, our NEOs deferred a portion of their salaries not paid by us during the years 2024 and 2023, as disclosed in the table above. Such payments weredeferred because timely payments further jeopardize our ability to continue as a going concern. We intend to make such payments as soon as we are able. Omnibus Equity Incentive Plan On November 15, 2023, we adopted the 2023 Plan, the material terms of which are described below. Purpose and Eligibility. The purpose of the 2023 Plan is (i) to provide eligible persons with an incentive to contribute to our success and to operate and manage our business in a manner that will providefor our long-term growth and profitability and that will benefit our stockholders and other important stakeholders, including our employees and customers, and (ii) to provide a means of recruiting,rewarding, and retaining key personnel. Equity awards may be granted under the 2023 Plan to officers, directors, including non-employee directors, other employees, advisors, consultants or other service providers of the company or oursubsidiaries or other affiliates, and to any other individuals who are approved by the Compensation Committee as eligible to participate in the 2023 Plan. Only our employees or employees of ourcorporate subsidiaries are eligible to receive incentive stock options. Effective Date and Term. The 2023 Plan is effective as of November 15, 2023 and will terminate automatically at 11:59PM ET on the day before the 10th anniversary of the such date, unless earlierterminated by our board of directors or in accordance with the terms of the 2023 Plan. Administration, Amendment and Termination. The 2023 Plan will generally be administered by the Compensation Committee. Except where the authority to act on such matters is specifically reserved tothe full board of directors under the 2023 Plan or applicable law, the Compensation Committee will have full power and authority to interpret and construe all provisions of the 2023 Plan, any award, andany award agreement, and take all actions and to make all determinations required or provided for under the 2023 Plan, any award, and any award agreement, including the authority to: ● designate grantees of awards; ● determine the type or types of awards to be made to a grantee; ● determine the number of shares of Class A Common Stock subject to an award or to which an award relates; ● establish the terms and conditions of each award; ● prescribe the form of each award agreement; ● subject to limitations in the 2023 Plan (including the prohibition on repricing of options or share appreciation rights without stockholder approval), amend, modify, or supplement the terms of anyoutstanding award; and ● make substitute awards. Our board of directors is also authorized to appoint one or more committees of the board of directors consisting of one or more directors who need not meet the independence requirements under thelisting rules of any stock exchange on which Class A Common Stock is listed for certain limited purposes permitted by the 2023 Plan, and to the extent permitted by applicable law, the CompensationCommittee is authorized to delegate authority to the Chief Executive Officer and/or any other officers of the company for certain limited purposes permitted by the 2023 Plan. Our board of directors willretain the authority under the 2023 Plan to exercise any or all of the powers and authorities related to the administration and implementation of the 2023 Plan. Our board of directors may amend, suspend, or terminate the 2023 Plan at any time; provided that with respect to awards that are granted under the 2023 Plan, no amendment, suspension or terminationmay materially impair the rights of the award holder without such holder’s consent. No such action may amend the 2023 Plan without the approval of stockholders if the amendment is required to besubmitted for stockholder approval by our board of directors, the terms of the 2023 Plan, or applicable law. 72
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Awards. Awards under the 2023 Plan may be made in the form of: ● stock options, which may be either incentive stock options or nonqualified stock options; ● stock appreciation rights or “SARs”; ● restricted stock; ● restricted stock units; ● dividend equivalent rights; ● performance awards, including performance shares; ● other equity-based awards; or ● cash. An incentive stock option is an option that meets the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), and a nonqualified stock option is an option that doesnot meet those requirements. A SAR is a right to receive upon exercise, in the form of stock, cash or a combination of stock and cash, the excess of the fair market value of one share on the exercise dateover the exercise price of the SAR. Restricted stock is an award of common stock subject to restrictions over restricted periods that subject the shares to a substantial risk of forfeiture, as defined inSection 83 of the Code. A restricted stock unit or deferred stock unit is an award that represents a conditional right to receive shares in the future and that may be made subject to the same types ofrestrictions and risk of forfeiture as restricted stock. Dividend equivalent rights are awards entitling the grantee to receive cash, shares, other awards under the 2023 Plan or other property equal in value todividends or other periodic payments paid or made with respect to a specified number of shares of stock. Performance awards are awards made subject to the achievement of one or more performancegoals over a performance period established by the Compensation Committee. Other equity-based awards are awards representing a right or other interest that may be denominated or payable in, valued inwhole or in part by reference to, or otherwise based on or related to stock, other than an option, SAR, restricted stock, restricted stock unit, unrestricted stock, dividend equivalent right, or a performanceaward. The 2023 Plan provides that each award will be evidenced by an award agreement, which may specify terms and conditions of the award that differ from the terms and conditions that would otherwiseapply under the 2023 Plan in the absence of the different terms and conditions in the award agreement. In the event of any inconsistency between the 2023 Plan and an award agreement, the provisions ofthe 2023 Plan will control. Awards under the 2023 Plan may be granted alone or in addition to, in tandem with, or in substitution or exchange for any other award under the 2023 Plan, other awards under another compensatory planof the company or any of our affiliates (or any business entity that has been a party to a transaction with the company or any of our affiliates), or other rights to payment from the company or any of ouraffiliates. Awards granted in addition to or in tandem with other awards may be granted either at the same time or at different times. The Compensation Committee may permit or require the deferral of any payment pursuant to any award into a deferred compensation arrangement, which may include provisions for the payment orcrediting of interest or dividend equivalent rights, in accordance with rules and procedures established by the Compensation Committee. Awards under the 2023 Plan generally will be granted for noconsideration other than past services by the grantee of the award or, if provided for in the award agreement or in a separate agreement, the grantee’s promise to perform future services to the company orone of our subsidiaries or other affiliates. Forfeiture; Recoupment. We may reserve the right in an award agreement to cause a forfeiture of the gain realized by a grantee with respect to an award on account of actions taken by, or failed to betaken by, such grantee in violation or breach of, or in conflict with, any employment agreement, non-competition agreement, agreement prohibiting solicitation of employees or clients of the company orany affiliate, confidentiality obligations with respect to the company or any affiliate, or otherwise in competition with the company or any affiliate, to the extent specified in such award agreement. If thegrantee is an employee and is terminated for “Cause” (as defined in the 2023 Plan), the Compensation Committee may annul the grantee’s award as of the date of the grantee’s termination. 73
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In addition, any award granted pursuant to the 2023 Plan will be subject to mandatory repayment by the grantee to the company to the extent (i) set forth in the 2023 Plan or in an award agreement, or(ii) the grantee is or becomes subject to our clawback policy, or any applicable laws which impose mandatory recoupment. Shares Subject to the 2023 Plan. Subject to adjustment as described below, the maximum number of shares of common stock reserved for issuance under the 2023 Plan is equal to 1,400,000 shares ofClass A Common Stock. The maximum number of shares of Class A Common Stock available for issuance pursuant to incentive stock options granted under the 2023 Plan will be the same as the totalnumber of shares of Class A Common Stock reserved for issuance under the 2023 Plan. Shares issued under the 2023 Plan may be authorized and unissued shares, or treasury shares, or a combination ofthe foregoing. Any shares covered by an award, or portion of an award, granted under the 2023 Plan that are not purchased or forfeited or canceled, or expire or otherwise terminate without the issuance of shares or aresettled in cash in lieu of shares, will again be available for issuance under the 2023 Plan. Shares subject to an award granted under the 2023 Plan will be counted against the maximum number of shares reserved for issuance under the 2023 Plan as one share for every one share subject to suchan award. In addition, at least the target number of shares of stock issuable under a performance award will be counted against the maximum number of shares reserved for issuance under the 2023 Plan asof the grant date, but such number will be adjusted to equal the actual number of shares of stock issued upon settlement of the performance award to the extent different from such number initially countedagainst the share reserve. The number of shares available for issuance under the 2023 Plan will not be increased by the number of shares of Class A Common Stock: (i) tendered or withheld or subject to an award surrendered inconnection with the purchase of shares upon exercise of an option; (ii) that were not issued upon the net settlement or net exercise of a stock-settled SAR, (iii) deducted or delivered from payment of anaward in connection with our tax withholding obligations; or (iv) purchased by us with proceeds from option exercises. Options. The 2023 Plan authorizes the Compensation Committee to grant incentive stock options (under Section 422 of the Code) and options that do not qualify as incentive stock options. An optiongranted under the 2023 Plan will be exercisable only to the extent that it is vested. Each option will become vested and exercisable at such times and under such conditions as the CompensationCommittee may approve consistent with the terms of the 2023 Plan. No option may be exercisable more than ten years after the option grant date, or five years after the option grant date in the case of anincentive stock option granted to a “ten percent stockholder” (as defined in the 2023 Plan); provided that, to the extent deemed necessary or appropriate by the Compensation Committee to reflectdifferences in local law, tax policy, or custom with respect to any option granted to a grantee who is a foreign national or is a natural person who is employed outside of the United States, such option mayterminate, and all rights to purchase shares of stock thereunder may cease, upon the expiration of a period longer than ten (10) years from the date of grant of such option as the Compensation Committeeshall determine. The Compensation Committee may include in the option agreement provisions specifying the period during which an option may be exercised following termination of the grantee’sservice. The exercise price of each option will be determined by the Compensation Committee, provided that the per share exercise price will be equal to or greater than 100% of the fair market value of ashare of Class A Common Stock on the grant date (other than as permitted for substitute awards). If we were to grant incentive stock options to any ten percent stockholder, the per share exercise pricewill not be less than 110% of the fair market value of a share of Class A Common Stock on the grant date. Incentive stock options and nonqualified stock options are generally non-transferable, except for transfers by will or the laws of descent and distribution. The Compensation Committee may, in itsdiscretion, determine that a nonqualified stock option may be transferred to family members by gift or other transfers deemed not to be for value. 74
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Share Appreciation Rights. The 2023 Plan authorizes the Compensation Committee to grant SARs that provide the recipient with the right to receive, upon exercise of the SAR, cash, Class A CommonStock, or a combination of the two. The amount that the recipient will receive upon exercise of the SAR generally will equal the excess of the fair market value of shares of Class A Common Stock on thedate of exercise over the fair market value of shares of Class A Common Stock on the grant date. SARs will become exercisable in accordance with terms determined by the Compensation Committee.SARs may be granted in tandem with an option grant or independently from an option grant. The term of a SAR cannot exceed ten (10) years from the date of grant. The per share exercise price of a SARwill be no less than the fair market value of one share of Class A Common Stock on the grant date of such SAR. SARs will be nontransferable, except for transfers by will or the laws of descent and distribution. The Compensation Committee may determine that all or part of a SAR may be transferred to certainfamily members of the grantee by gift or other transfers deemed not to be for value. Fair Market Value. For so long as the Class A Common Stock remains listed on NYSE American, the fair market value of the Class A Common Stock on an award’s grant date, or on any other date forwhich fair market value is required to be established under the 2023 Plan, will be the closing price of the Class A Common Stock as reported on NYSE American on such date. If there is no such reportedclosing price on such date, the fair market value of the Class A Common Stock will be the closing price of the Class A Common Stock as reported on such market on the next preceding date on which anysale of Class A Common Stock will have been reported. If the Class A Common Stock ceases to be listed on NYSE American and is listed on another established national or regional stock exchange, or traded on another established securities market, fairmarket value will similarly be determined by reference to the closing price of the Class A Common Stock on the applicable date as reported on such other stock exchange or established securities market. If the Class A Common Stock ceases to be listed on NYSE American or another established national or regional stock exchange, or traded on another established securities market, the CompensationCommittee will determine the fair market value of the Class A Common Stock by the reasonable application of a reasonable valuation method in a manner consistent with Section 409A of the Code. No Repricing. Except in connection with a corporate transaction involving the company (including, without limitation, any stock dividend, distribution (whether in the form of cash, shares of stock, othersecurities or other property), stock split, extraordinary dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of sharesof stock or other securities or similar transaction), we may not, without obtaining stockholder approval, (a) amend the terms of outstanding options or SARs to reduce the exercise price of suchoutstanding options or SARs, (b) cancel outstanding options or SARs in exchange for, or in substitution of, options or SARs with an exercise price that is less than the exercise price of the original optionsor SARs, (c) cancel outstanding options or SARs with an exercise price above the current price of Class A Common Stock in exchange for cash or other securities, in each case, unless such action is(i) subject to and approved by our stockholders or (ii) would not be deemed to be a repricing under the rules of any stock exchange or securities market on which the Class A Common Stock is listed orpublicly traded. Restricted Stock; Restricted Stock Units. The 2023 Plan authorizes the Compensation Committee to grant restricted stock and restricted stock units. Subject to the provisions of the 2023 Plan, theCompensation Committee will determine the terms and conditions of each award of restricted stock and restricted stock units, including the restricted period for all or a portion of the award, therestrictions applicable to the award, and the purchase price, if any, for the shares of stock subject to the award. The restrictions, if any, may lapse over a specified period of time or through the satisfactionof conditions, in installments or otherwise, as the Compensation Committee may determine. A grantee of restricted stock will have all of the rights of a stockholder as to those shares, including, withoutlimitation, the right to vote the shares and receive dividends or distributions on the shares, except to the extent limited by the Compensation Committee. The Compensation Committee may provide in anaward agreement evidencing a grant of restricted stock that (a) cash dividend payments or distributions paid on restricted stock will be reinvested in shares of stock, which may or may not be subject to thesame vesting conditions and restrictions as applicable to such shares of restricted stock or (b) any dividend payments or distributions declared or paid on shares of restricted stock will only be made orpaid upon satisfaction of the vesting conditions and restrictions applicable to such shares of restricted stock. Dividend payments or distributions declared or paid on shares of restricted stock which vest orare earned based on upon the achievement of performance goals will not vest unless such performance goals for such shares of restricted stock are achieved, and if such performance goals are notachieved, the grantee of such shares of restricted stock will promptly forfeit and, to the extent already paid or distributed, repay to us such dividend payments or distributions. Grantees of restricted stockunits and deferred stock units will have no voting or dividend rights or other rights associated with share ownership, although the Compensation Committee may award dividend equivalent rights on suchunits. 75
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During the restricted period, if any, when restricted stock and restricted stock units are non-transferable or forfeitable, a grantee is prohibited from selling, transferring, assigning, pledging, exchanging,hypothecating, or otherwise encumbering or disposing of the grantees’ restricted stock and restricted stock units. Dividend Equivalent Rights. The 2023 Plan authorizes the Compensation Committee to grant dividend equivalent rights. Dividend equivalent rights may be granted independently or in connection withthe grant of any equity-based award, except that no dividend equivalent right may be granted in connection with, or related to an option or SAR. Dividend equivalent rights may be paid currently (with orwithout being subject to forfeiture or a repayment obligation) or may be deemed to be reinvested in additional shares of stock or awards which may thereafter accrue additional dividend equivalent rights(with or without being subject to forfeiture or a repayment obligation) and may be payable in cash, common shares, or a combination of the two. Dividend equivalent rights granted as a component ofanother award may (a) provide that such dividend equivalent right will be settled upon exercise, settlement, or payment of, or lapse of restriction on, such other award and that such dividend equivalentwill expire or be forfeited or annulled under the same conditions as such award or (b) contain terms and conditions which are different from the terms and conditions of such other award, provided thatdividend equivalent rights credited pursuant to a dividend equivalent right granted as a component of another award which vests or is earned based on the achievement of performance goals will not vestunless such performance goals for such underlying award are achieved, and if such performance goals are not achieved, the grantee of such dividend equivalent right will promptly forfeit and, to theextent already paid or distributed, repay to us payments or distributions made in connection with such dividend equivalent rights. Performance Awards. The 2023 Plan authorizes the Compensation Committee to grant performance awards. The Compensation Committee will determine the applicable performance period, theperformance goals, and such other conditions that apply to the performance award. Any performance measures may be used to measure the performance of the company and our subsidiaries and otheraffiliates as a whole or any business unit of the company, our subsidiaries, and/or our affiliates or any combination thereof, as the Compensation Committee may deem appropriate, or any performancemeasures as compared to the performance of a group of comparable companies, or published or special index that the Compensation Committee deems appropriate. Performance goals may relate to ourfinancial performance or the financial performance of our operating units, the grantee’s performance, or such other criteria determined by the Compensation Committee. If the performance goals are met,performance awards will be paid in cash, shares of stock, other awards, or a combination thereof. Other Equity-Based Awards. The 2023 Plan authorizes the Compensation Committee to grant other types of stock-based awards under the 2023 Plan. The terms and conditions that apply to other equity-based awards are determined by the Compensation Committee. Forms of Payment. The exercise price for any option or the purchase price (if any) for restricted stock, and vested restricted stock units is generally payable (i) in cash or in cash equivalents acceptable tothe company, (ii) to the extent the award agreement provides, by the tender (or attestation of ownership) of shares of Class A Common Stock having a fair market value on the date of tender (orattestation) equal to the exercise price or purchase price, (iii) to the extent permitted by law and to the extent permitted by the award agreement, through a broker-assisted cashless exercise, or (iv) to theextent the award agreement provides and/or unless otherwise specified in an award agreement, any other form permissible by applicable law, including net exercise or net settlement and service renderedto us or our affiliates. Change in Capitalization. The Compensation Committee may adjust the terms of outstanding awards under the 2023 Plan to preserve the proportionate interests of the holders in such awards on accountof any recapitalization, reclassification, share split, reverse share split, spin-off, combination of share, exchange of shares, share dividend or other distribution payable in capital shares, or other increase ordecrease in such shares effected without receipt of consideration by the company. The adjustments will include proportionate adjustments to (i) the number and kind of shares subject to outstandingawards and (ii) the per share exercise price of outstanding options or SARs. 76
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Transaction not Constituting a Change in Control. If the company is the surviving entity in any reorganization, merger, or consolidation with one or more other entities which does not constitute a“change in control” (as defined in the 2023 Plan), any awards will be adjusted to pertain to and apply to the securities to which a holder of the number of common shares subject to such award would havebeen entitled immediately after such transaction, with a corresponding proportionate adjustment to the per share price of options and SARs so that the aggregate price per share of each option or SARthereafter is the same as the aggregate price per share of each option or SAR subject to the option or SAR immediately prior to such transaction. Further, in the event of any such transaction, performanceawards (and the related performance measures if deemed appropriate by the Compensation Committee) will be adjusted to apply to the securities that a holder of the number of Class A Common Stocksubject to such performance awards would have been entitled to receive following such transaction. Effect of a Change in Control in which Awards are not Assumed. Except as otherwise provided in the applicable award agreement, in another agreement with the grantee, or as otherwise set forth inwriting, upon the occurrence of a change in control in which outstanding awards are not being assumed or continued, the following provisions will apply to such awards, to the extent not assumed orcontinued: ● Immediately prior to the occurrence of such change in control, in each case with the exception of performance awards, all outstanding shares of restricted stock and all restricted stock units, anddividend equivalent rights will be deemed to have vested, and all shares of stock and/or cash subject to such awards will be delivered; and either or both of the following two actions will betaken: ● At least 15 days prior to the scheduled consummation of such change in control, all options and SARs outstanding will become immediately exercisable and will remain exercisable for a periodof 15 days. Any exercise of an option or SAR during this 15-day period will be conditioned on the consummation of the applicable change in control and will be effective only immediatelybefore the consummation thereof, and upon consummation of such change in control, the 2023 Plan and all outstanding but unexercised options and SARs will terminate, with or withoutconsideration as determined by the Compensation Committee in its sole discretion; and/or ● The Compensation Committee may elect, in its sole discretion, to cancel any outstanding awards of options, SARs, restricted stock, restricted stock units, and/or dividend equivalent rights andpay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or capital stock having a value (as determined by the Compensation Committee acting in good faith), in thecase of restricted stock, restricted stock units, deferred stock units, and dividend equivalent rights (for shares of stock subject thereto), equal to the formula or fixed price per share paid to holdersof shares of stock pursuant to such change in control and, in the case of options or SARs, equal to the product of the number of shares of stock such subject to such options or SARs multiplied bythe amount, if any, which (i) the formula or fixed price per share paid to holders of shares of stock pursuant to such change in control exceeds (ii) the option price or SAR price applicable to suchoptions or SARs. ● For performance awards, if less than half of the performance period has lapsed, such awards will be treated as though the target performance thereunder has been achieved. If at least half of theperformance period has lapsed, such performance awards will be earned, as of immediately prior to but contingent on the occurrence of such change in control, based on the greater of (i) deemedachievement of target performance or (ii) determination of actual performance as of a date reasonably proximate to the date of consummation of the change in control as determined by theCompensation Committee, in its sole discretion. ● Other Equity-Based Awards will be governed by the terms of the applicable award agreement. Effect of a Change in Control in which Awards are Assumed. Except as otherwise provided in the applicable award agreement, in another agreement with the grantee, or as otherwise set forth in writing,upon the occurrence of a change in control in which outstanding awards are being assumed or continued, the following provisions will apply to such awards, to the extent not assumed or continued: The2023 Plan and the options, SARs, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based equity awards granted under the 2023 Plan will continue in the manner andunder the terms so provided in the event of any change in control to the extent that provision is made in writing in connection with such change in control for the assumption or continuation of suchawards, or for the substitution for such awards of new options, SARs, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based awards relating to the capital stock of asuccessor entity, or a parent or subsidiary thereof, with appropriate adjustment as to the number of shares and exercise price of options and SARs. 77
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In general, a “change in control” means: ● a transaction or series of related transactions whereby a person or group (other than the company or any of our affiliates) becomes the beneficial owner of 50% or more of the total voting powerof the our voting stock on a fully diluted basis; ● individuals who constitute the our board of directors, cease to constitute a majority of the members of our board of directors then in office; ● a merger or consolidation of the company, other than any such transaction in which the holders of our voting stock immediately prior to the transaction own directly or indirectly at least amajority of the voting power of the surviving entity immediately after the transaction; ● a sale of substantially all of our assets to another person or entity; or ● the consummation of a plan or proposal for the dissolution or liquidation of the company. Compensation of Directors The following Director Compensation Table sets forth information concerning compensation for services rendered by our independent directors for fiscal year 2024. Name Fees Earnedor Paid in Cash ($) Stock Awards ($) Option Awards ($) All Other Compensation ($) Total ($) Byron Blount(1) $ 125,000 $ 139,200 $ - $ 5,025 $ 369,225 Joseph Salvucci, Jr.(2) 110,000 143,040 - - 253,040 Joseph Salvucci, Sr. (3) 100,000 148,800 - - 248,800 Total: $ 335,000 $ 431,040 $ - $ 5,025 $ 771,065 (1) Mr. Blount was appointed to serve as a member of the Board of Directors in November 2023.(2) Mr. Salvucci, Jr. was appointed to serve as a member of the Board of Directors in December 2021.(3) Mr. Salvucci, Sr. was appointed to serve as a member of the Board of Directors in December 2021. Messrs. Caravaggio and Trotter have not been included in the Director Compensation Table because there were NEOs of our company for all of our 2024 fiscal year, and all compensation paid to orearned by each of them during our 2024 fiscal year is reflected in the Summary Compensation Table above. Director Compensation Program We believe that attracting and retaining qualified directors is critical to our ability to grow in a manner that is consistent with our corporate governance principles and that is designed to create value forstockholders. We also believe that structuring director compensation with a significant equity component is key to achieving our goals. We believe that this structure will also allow directors to carry outtheir responsibilities with respect to oversight of the Company while also maintaining alignment with stockholder interests and fiduciary obligations. We anticipate that embedding these core principlesand values of alignment and solid governance will enhance our ability to grow and unlock value for stockholders. We have implemented a director compensation policy for our non-employee directors,which consists of: ● An annual retainer for non-employee directors of $75,000; ● An annual grant for non-employee directors of RSUs, calculated by dividing $75,000 by the then current-stock price, which will vest on the first anniversary of the grant; ● An additional annual retainer payment of $50,000 to the Chairman; $25,000 to the Chair of the Audit Committee; $20,000 to the Chair of the Compensation Committee; and $15,000 to the Chairof the Nominating Committee. 78
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth information known to us regarding the beneficial ownership of Class A Common Stock as of March 31, 2025 by: ● each person who is the beneficial owner of more than 5% of the outstanding shares of Class A Common Stock; ● each of the Company’s named executive officers and directors; and ● all of the Company’s executive officers and directors as a group. Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting orinvestment power over that security. Under those rules, beneficial ownership includes securities that the individual or entity has the right to acquire, such as through the exercise of warrants or stockoptions or the vesting of restricted stock units, within 60 days of March 31, 2025. Shares subject to warrants or options that are currently exercisable or exercisable within 60 days of March 31, 2025 orsubject to restricted stock units that vest within 60 days of March 31, 2025 are considered outstanding and beneficially owned by the person holding such warrants, options or restricted stock units for thepurpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Shares issuable pursuant tothe exchange of OpCo Class B Units listed in the table below are represented in shares of Class A Common Stock. Except as described in the footnotes below and subject to applicable community property laws and similar laws, the Company believes that each person listed above has sole voting and investment powerwith respect to such shares. The beneficial ownership of EON securities is based on (i) 17,862,626 shares of Class A Common Stock issued and outstanding as of March 31, 2025, and (ii) 0 shares of Class B Common Stock issuedand outstanding as of March 31, 2025. Name and Address of Beneficial Owners(1) Number of Shares % of Total VotingPower Directors of officers: Byron Blount(2) 187,292 1.04%Dante Caravaggio(3) 830,190 4.60%Joseph V. Salvucci, Sr.(4) 2,076,227 11.27%Joseph V. Salvucci, Jr.(5) 932,617 4.99%Mitchell B. Trotter(6) 249,963 1.36%David M. Smith(7) 209,516 1.17% All directors and officers after as a group (6 persons) 4,481,805 22.97% Five Percent Holders: JVS Alpha Property, LLC(8) 2,482,929 13.18%Donald H. Gorée(9) 924,064 5.05%Steve Wright(10) 1,500,000 7.75% * Less than one percent (1%)(1) Unless otherwise noted, the business address of each of the following entities or individuals is 3730 Kirby Drive, Suite 1200, Houston, Texas 77098.(2) Consists of (1) 91,072 shares of Class A Common Stock held by Mr. Blount, (2) 53,053 shares of Class A Common Stock underlying 70,737 warrants held by Mr. Blount, and (3) 49,167 sharesunderlying vested RSUs.(3) Consists of (1) 1,400 shares of Class A Common Stock held by Mr. Caravaggio, (2) 460,040 shares of Class A Common Stock held by Dante Caravaggio, LLC, of which Mr. Caravaggio has votingand dispositive control over the shares held by such entity, (3) 89,000 shares of Class A Common Stock held by Alexandria VMA Capital, LLC, of which Mr. Caravaggio’s son has voting anddispositive control over the shares held by such entity, (4) 141,750 shares of Class A Common Stock underlying 189,000 warrants held by Dante Caravaggio, LLC, (5) 100,000 shares of Class ACommon Stock held by Donna Caravaggio, the wife of Mr. Caravaggio (6) 13,000 shares underlying vested RSUs, and (7) 25,000 shares underlying vested common stock options.(4) Consists of 1,732,929 shares of Class A Common Stock held by JVS Alpha Property, LLC, over which Mr. Salvucci, Sr. has voting and dispositive control, (2) 292,465 shares of Class A CommonStock underlying 389,953 warrants and (3) 50,833 shares underlying vested RSUs.(5) Consists of (1) 132,784 shares of Class A Common Stock held directly by Mr. Salvucci, Jr., (2) 750,000 shares of Class A Common Stock underlying 1,000,000 warrants held by JVS Alpha Property,LLC, over which Mr. Salvucci, Jr. has voting and dispositive control and (4) 49,833 shares underlying vested RSUs.(6) Consists of (1) 73,796 shares of Class A Common Stock held by Mr. Trotter, (2) 142,500 shares of Class A Common Stock underlying 190,000 warrants held by Mr. Trotter, (3) 13,000 sharesunderlying vested RSUs, and (4) 16,667 shares underlying stock options vesting on March 12, 2025.(7) Consists of (1) 159,693 shares of Class A Common Stock held directly by Mr. Smith, (2) 20,156 shares of Class A Common Stock underlying warrants held by Mr. Smith, (3) 13,000 sharesunderlying vested RSUs, and (4) 16,667 shares underlying stock options vesting on March 12, 2025.(8) JVS Alpha Property, LLC’s Manager is Joseph V. Salvucci, Jr., who has voting and dispositive control over the shares held by such entity. The business address for this holder is 583 Epsilon Drive,Pittsburgh, PA 15238.(9) Mr. Gorée has sole voting and dispositive control over the securities held by Rhône Merchant House Ltd, which indirectly holds 286,758 private placement shares by virtue of its 75% ownership inHNRAC Sponsors LLC, which owns 382,344 private placement shares. Includes the assumption that 284,063 shares of Class A Common Stock underlying 378,750 warrants held by HNRACSponsors LLC have been issued, and includes 150,000 shares of Class A Common Stock issued to Rhône Merchant House Ltd pursuant to the May 6, 2024 settlement agreement. The businessaddress of Rhône Merchant House Ltd. is 81 Rue de France, 5TH Floor, Nice, France 06000.(10) Consists of 1,500,000 shares of Class A Common Stock underlying 2,000,000 warrants held by Mr. Wright. The business address of Mr. Wright is 1121 Boyce Rd, Suite 400, Pittsburgh, PA 15241. Changes in Control None. 79
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Other than compensation arrangements for our named executive officers and directors, we describe below each transaction or series of similar transactions, since January 1, 2024, to which we were a partyor will be a party, in which: ● the amounts involved exceeded or will exceed $120,000; and ● any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirectmaterial interest. See Item 11 of Part III of this report for a description of certain arrangements with our executive officers and directors. Related Party Loans and Costs In March 2024, we issued 100,000 warrants to our Vice President of Finance and Administration having terms substantially similar to the private placement warrants in connection with the receiptof $100,000 in cash and the issuance of a promissory note. In April 2024, we issued 100,000 warrants to our Chief Financial Officer having terms substantially similar to the private placement warrants in connection with the receipt of $100,000 in cash and theissuance of a promissory note. In May 2024, we issued 100,000 warrants to a stockholder controlled by a director having terms substantially similar to the private placement warrants in connection with the receipt of $100,000 in cashand the issuance of a promissory note. Founder Pledge Agreement In connection with the Closing, we entered into the Founder Pledge Agreement with the Founders whereby, in consideration of placing the Trust Shares into escrow and entering into the BackstopAgreement, we agreed: (a) by January 15, 2024, to issue to the Founders an aggregate number of newly issued shares of Class A Common Stock equal to 10% of the number of Trust Shares; (b) byJanuary 15, 2024, to issue to the Founders a number of warrants to purchase an aggregate number of shares of Class A Common Stock equal to 10% of the number of Trust Shares, which such warrantsshall be exercisable for five years from issuance at an exercise price of $11.50 per shares; (c) if the Backstop Agreement is not terminated prior to the Lockup Expiration Date, to issue an aggregatenumber of newly issued shares of Class A Common Stock equal to (i) (A) the number of Trust Shares, divided by (B) the simple average of the daily VWAP of the Class A Common Stock during the five(5) Trading Days prior to the date of the termination of the Backstop Agreement, subject to a minimum of $6.50 per share, multiplied by (C) a price between $10.00-$13.00 per share (as further describedin the Founder Pledge Agreement), minus (ii) the number of Trust Shares; and (d) following the purchase of OpCo Preferred Units by a Founder pursuant to the Put Right, to issue a number of newlyissued shares of Class A Common Stock equal to the number of Trust Shares sold by such Founder. Until the Founder Pledge Agreement is terminated, the Founders are not permitted to engage in anytransaction which is designed to sell short the Class A Common Stock or any other publicly traded securities of EON. Pursuant to the Founder Pledge Agreement, the Company issued (i) 94,000 shares of Class A Common Stock to JVS Alpha Property, LLC, an entity controlled by Joseph Salvucci, Jr., a member of ourBoard of Directors, (ii) 2,500 shares of Class A Common Stock to Byron Blount, a member of our Board of Directors, and (iii) 30,000 shares of Class A Common Stock to Dante Caravaggio, LLC, anentity controlled by Dante Caravaggio, our Chief Executive Officer, President, and member of our Board of Directors. 80
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Consulting Agreement In connection with a Referral Fee and Consulting Agreement (the “Consulting Agreement”) by and between us and Alexandria VMA Capital, LLC, an entity controlled by Dante Caravaggio, our ChiefExecutive Officer, President, and member of our Board of Directors (“Consultant”), we issued 89,000 shares of Class A Common Stock to Consultant in connection with the closing of the Purchase asconsideration for services rendered with a value of $900,000. The Consultant also earned an additional $900,000 transaction fee, of which the Company owes $403,000 as of December 31, 2024. Other In October 2024, we issued 27,963 shares of Class A Common Stock (the “Pledge Shares”) issued to Dante Caravaggio, Mitch Trotter, David Smith, Byron Blount, and Jesse Allen (our VP of Operations)in connection with their agreement to pledge equity in favor of First International Bank & Trust (“FIBT”). In October 2024, we issued 50,000 shares of Class A Common Stock to Mark Williams in connection with the forgiveness of $50,000 of accounts payable due to him for his services as a consultant priorto our initial business combination. Policy for Approval of Related Party Transactions Our Audit Committee must review and approve any related person transaction we propose to enter into. Our Audit Committee charter details the policies and procedures relating to transactions that maypresent actual, potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with the best interest of our company and our stockholders. A summary ofsuch policies and procedures is set forth below. Any potential related party transaction that is brought to the Audit Committee’s attention will be analyzed by the Audit Committee, in consultation with outside counsel or members of management, asappropriate, to determine whether the transaction or relationship does, in fact, constitute a related party transaction. At its meetings, the Audit Committee will be provided with 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 us and to the relevant related party. In determining whether to approve a related party transaction, the Audit Committee must consider, among other factors, the following factors to the extent relevant: ● whether the terms of the transaction are fair to us and on the same basis as would apply if the transaction did not involve a related party; ● whether there are business reasons for us to enter into the transaction; ● whether the transaction would impair the independence of an outside director; ● whether the transaction would present an improper conflict of interest for any director or executive officer; and ● any pre-existing contractual obligations. 81
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Any member of the Audit Committee who has an interest in the transaction under discussion must abstain from any voting regarding the transaction, but may, if so requested by the chairman of the AuditCommittee, participate in some or all of the Audit Committee’s discussions of the transaction. Upon completion of its review of the transaction, the Audit Committee may determine to permit or toprohibit the transaction. Our Audit Committee reviews on a quarterly basis all payments that were made to our sponsor, officers or directors, or our or their affiliates. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following is a summary of fees paid or to be paid to CBIZ Inc. (formerly Marcum LLP (“CBIZ”), for services rendered. Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by CBIZ in connection withregulatory filings. The aggregate fees to be billed by CBIZ for professional services rendered for the audit of our annual financial statements for the year ended December 31, 2024 and 2023 and interimreview of our financial statements were $412,539 and $383,655, respectively. The above amounts include interim procedures and audit fees. Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are notreported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We incurredfees of $81,369 and $241,844 for audit-related services from CBIZ for consultations concerning financial accounting and reporting standards for the years ended December 31, 2024 and 2023. Tax Fees. We paid no fees to CBIZ for tax planning and tax advice for the years ended December 31, 2024 and 2023. All Other Fees. We incurred $0 in other fees for services from CBIZ during the years ended December 31, 2024 and 2023, respectively. Pre-Approval Policy Since the formation of our Audit Committee, and on a going-forward basis, the Audit Committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us byour auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the Audit Committee prior to thecompletion of the audit). 82
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PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES (a) The following documents are filed as part of this Report: (1) Financial Statements: PageReport of Independent Registered Public Accounting Firm (PCAOB ID#[ ]) F-2Report of Independent Registered Public Accounting Firm (PCAOB ID#688) F-2Balance Sheets F-3Statements of Operations F-4Statements of Changes in Stockholders’ Equity F-5Statements of Cash Flows F-6Notes to Financial Statements F-7 (2) Financial Statement Schedules: None. (3) Exhibits We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilitiesmaintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E.,Washington, D.C. 20549, at prescribed rates or on the SEC website at www.sec.gov. Exhibit No. Description 2.1† Amended and Restated Membership Interest Purchase Agreement, dated August 28, 2023, by and among Buyer, Seller, and Sponsor (incorporated by reference to Exhibit 2.1 to theCurrent Report on Form 8-K filed by the Registrant on August 30, 2023).2.2 Amendment No. 1 to the Amended and Restated Membership Interest Purchase Agreement, dated November 15, 2023, by and among Buyer, Seller, and Sponsor (incorporated byreference to Exhibit 2.2 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023).2.3 Letter Agreement between Buyer and Seller Re: Settle Up between Parties, dated November 15, 2023 (incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-Kfiled by the Registrant on November 21, 2023).2.4 Purchase, Sale, Termination and Exchange Agreement by and among Company, OpCo, SPAC Subsidiary, HNRA Royalties, Pogo Royalty, CIC, DenCo, Pogo Management, and 4400Holdings LLC dated February 10, 2025 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by the Registration on February 13, 2025).3.1 Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on November 21,2023).3.2 Certificate of Amendment to Certificate of Incorporation as filed with the Secretary of State of the State of Delaware on September 16, 2024 (incorporated by reference to Exhibit 3.1to the Current Report on Form 8-K filed by the Registrant on September 18, 2024).3.3 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed by the Registrant on September 18, 2024).3.4 Amendedment No. 1 to the Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on November 26,2024).4.1 Description of Registrant’s Securities (filed as Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed on May 3, 2024 and incorporated herein by reference).4.2 Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed bythe Registrant on April 15, 2022).4.3 Warrant issued by EON Resources Inc. to Pryor Cashman LLP, dated October 18, 2024 (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 21, 2024and incorporated herein by reference).10.1 Insider Letter between the Company and each of its executive officers, directors, HNRAC Sponsors LLC and its permitted transferees (incorporated by reference to Exhibit 10.1 to theAnnual Report on Form 10-K filed by the Registrant on April 15, 2022).10.2 Investment Management Trust Agreement between Continental Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 10.2 to the Annual Report onForm 10-K filed by the Registrant on April 15, 2022).10.3 Securities Subscription Agreement (founder shares), dated December 24, 2020, between the Company and HNRAC Sponsors LLC (incorporated by reference to Exhibit 10.4 to theAnnual Report on Form 10-K filed by the Registrant on April 15, 2022).10.4 Unit Subscription Agreement between the Company and HNRAC Sponsors LLC (private placement units) (incorporated by reference to Exhibit 10.5 to the Annual Report on Form10-K filed by the Registrant on April 15, 2022). 83
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10.6 Registration Rights Agreement, dated as of October 17, 2022, by and between HNR Acquisition Corp and White Lion Capital LLC (incorporated by reference to Exhibit 10.2 to theCurrent Report on Form 8-K as filed by the Registrant on October 21, 2022).10.7 Amended and Restated Limited Liability Company Agreement of HNRA Upstream, LLC by and among HNRA Upstream, LLC, EON Royalty, LLC, and HNR Acquisition Corp,dated November 15, 2023 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023).10.8† Senior Secured Term Loan Agreement, dated November 15, 2023, by and among First International Bank & Trust, HNR Acquisition Corp, HNRA Upstream, LLC, HNRA Partner,Inc., EON Resources, LLC, and LH Operating, LLC (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023).10.9 Security Agreement, dated November 15, 2023, by and among First International Bank & Trust, HNR Acquisition Corp, HNRA Upstream, LLC, HNRA Partner, Inc., PogoEONResources, LLC, and LH Operating, LLC (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023).10.10 Second Amendment to Term Loan Agreement dated April 18, 2024, effective March 31, 2024 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed bythe Registrant on April 23, 2024).10.11 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 filed by the Registrant on December 28, 2021).10.12+ 2023 HNR Acquisition Corp Omnibus Incentive Plan (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023).10.13 Guaranty Agreement, dated as of November 15, 2023 (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023). 10.14 Promissory Note, dated November 15, 2023 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023). 10.15 Registration Rights Agreement, dated November 15, 2023 between the Registrant and certain security holders (incorporated by reference to Exhibit 10.3 to the Current Report onForm 8-K filed by the Registrant on November 21, 2023).10.16 Option Agreement, dated as of November 15, 2023 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023).10.17 Director Nomination and Board Observer Agreement, dated as of November 15, 2023, by and between the Company and CIC EON LP, (incorporated by reference to Exhibit 10.5 tothe Current Report on Form 8-K filed by the Registrant on November 21, 2023).10.18 Backstop Agreement, dated as of November 15, 2023 (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed by the Registrant on November 21, 2023).10.19 Founder Pledge Agreement, dated as of November 15, 2023 (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed by the Registrant on November 21,2023).10.20 Satisfaction and Discharge of Indebtedness pursuant to Underwriting Agreement, dated September 7, 2023, by and between the Company and EF Hutton, a division of BenchmarkInvestments, LLC (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K filed by the Registrant on September 13, 2023). 84
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10.21+ Executive Employment Agreement, dated January 29, 2024, by and between the Company and Mark Williams (incorporated by reference to Exhibit 10.1 to the Current Report onForm 8-K filed by the Registrant on February 1, 2024).10.22+ Separation and Release Agreement, dated December 17, 2023, by and between the Company and Diego Rojas (incorporated by reference to Exhibit 10.1 on the Current Report onForm 8-K filed by the Registrant on December 20, 2023).10.23+ Executive Employment Agreement, dated December 18, 2023, by and between the Company and Dante Caravaggio (incorporated by reference to Exhibit 10.2 on the Current Reporton Form 8-K filed by the Registrant on December 20, 2023).10.24 Amendment No.1 to the Common Stock Purchase Agreement, dated March 7, 2024, by and between the Company and White Lion Capital, LLC (incorporated by reference to Exhibit10.1 on the Current Report on Form 8-K filed by the Registrant on March 7, 2024).10.25 Employment Agreement, dated December 13, 2023, by and between the Company and Mitchell B. Trotter (incorporated by reference to Exhibit 10.31 to the Company’s RegistrantStatement on Form S-1/A filed on August 5, 2024).10.26 Employment Agreement, dated December 13, 2023, by and between the Company and David M. Smith (incorporated by reference to Exhibit 10.32 to the Company’s RegistrantStatement on Form S-1/A filed on August 5, 2024).10.27 Amendment No. 2 to Common Stock Purchase Agreement between the Company and White Lion Capital LLC, dated June 17, 2024 (incorporated by reference to Exhibit 10.1 to theCompany’s Current Report on Form 8-K filed by the Registrant on June 20, 2024).10.28 Form of Exchange Agreement (incorporated by reference to Exhibit 10.1 on the Current Report on Form 8-K filed by the Registrant on January 24, 2025).10.29 Form of Convertible Note (incorporated by reference to Exhibit 10.2 on the Current Report on Form 8-K filed by the Registrant on January 24, 2025).19.1* Insider Trading Policy21.1 List of Subsidiaries of EON Resources Inc. (incorporated by reference to Exhibit 21.1 on the Annual Report on Form 10-K filed by the Registrant on May 3, 2024).23.1* Consent of Haas and Cobb Petroleum Consultants, LLC31.1* Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2* Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1** Certification of Principal Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2** Certification of Principal Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.97.1 Clawback Policy (incorporated by reference to Exhibit 97.1 on the Annual Report on Form 10-K filed by the Registrant on May 3, 2024).99.1* Report of William M. Cobb & Associates, Inc.101.INS* Inline XBRL Instance Document.101.SCH* Inline XBRL Taxonomy Extension Schema Document.101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Filed herewith.** Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall suchexhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwisespecifically stated in such filing.† Schedules and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(b)(2). The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC uponrequest.+ Denotes a management contract or compensatory plan or arrangement. ITEM 16. FORM 10-K SUMMARY Not applicable. 85
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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. April 15, 2025 EON Resources Inc. /s/ Dante Caravaggio Name: Dante Caravaggio Title: Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on thedates indicated. Name Position Date /s/ Dante Caravaggio Chief Executive Officer, President and Director April 15, 2025Dante Caravaggio (Principal Executive Officer) /s/ Mitchell B. Trotter Chief Financial Officer and Director April 15, 2025Mitchell B. Trotter (Principal Financial Officer) /s/ Mark Williams Controller and VP Finance and Admin April 15, 2025Mark Williams (Principal Accounting Officer) /s/ Joseph V. Salvucci, Sr. Chairman and Director April 15, 2025Joseph V. Salvucci, Sr. /s/ Joseph V. Salvucci, Jr. Director April 15, 2025Joseph V. Salvucci, Jr. /s/ Byron Blount. Director April 15, 2025Byron Blount 86
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EON RESOURCES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID#688) F-2Consolidated Financial Statements: Consolidated Balance Sheets F-3Consolidated Statements of Operations F-4Consolidated Statements of Changes in Stockholders’ Equity F-5Consolidated Statements of Cash Flows F-6Notes to Consolidated Financial Statements F-7 F-1
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors ofEON Resources Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of EON Resources Inc. (Formerly HNR Acquisition Corp.) (the “Company”) as of December 31, 2024 and 2023, the related consolidatedstatements of operations, stockholders’ equity (deficit) and cash flows for the year ended December 31, 2024, the related consolidated statements of operations, stockholders’ equity (deficit) and cashflows for each of the periods from November 15, 2023 to December 31, 2023 (Successor), the period from January 1, 2023 to November 14, 2023 (Predecessor), and the related notes (collectively referredto as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results ofits operations and its cash flows for the year in the period ended December 31, 2024, the results of its operations and its cash flows for the period from November 15, 2023 to December 31, 2023, and theperiod from January 1, 2023 to November 14, 2023 in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significantworking capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about theCompany's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments thatmight result from the outcome of this uncertainty. Restatement of September 30, 2024 Financial Statements We draw attention to Note 14 to the financial statements, which describes the restatement of previously issued consolidated financial statements due to a material misstatement as of and for the three andnine months ended September 30, 2024. The restatement has been made to ensure that the financial statements are in conformity with generally accepted accounting principles. Our opinion on thefinancial statements is not modified with respect to this matter. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a publicaccounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financialstatements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internalcontrol over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used andsignificant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Marcum LLP Marcum LLP We have served as the Company’s auditor since 2022. Houston, TexasApril 15, 2025 F-2
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EON RESOURCES INC(FORMERLY HNR ACQUISITION CORP)CONSOLIDATED BALANCE SHEETS December 31, 2024 December 31, 2023 ASSETS Cash and cash equivalents $ 2,971,558 $ 3,505,454 Accounts receivable Crude Oil and natural gas sales 1,777,846 2,103,341 Other 4,418 90,163 Short-term derivative instrument asset 106,397 391,488 Prepaid expenses and other current assets 298,886 722,002 Total current assets 5,159,105 6,812,448 Crude oil and natural gas properties, successful efforts method: Proved Properties 100,285,138 94,189,372 Accumulated depreciation, depletion, amortization and impairment (2,759,226) (352,127)Total oil and natural gas properties, net 97,525,912 93,837,245 Other property, plant and equipment, net 20,000 - Long-term derivative instrument asset - 76,199 TOTAL ASSETS $ 102,705,017 $ 100,725,892 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities Accounts payable $ 8,870,324 $ 4,033,208 Accounts payable – related parties 445,349 762,000 Accrued liabilities and other 7,923,613 4,422,183 Revenue and royalties payable 3,191,171 461,773 Revenue and royalties payable - Related Parties 132,563 1,523,138 Deferred underwriting fee payable 1,065,000 1,300,000 Related party notes payable, net of discount 3,556,750 2,359,048 Current portion of warrant liability 5,681,849 - Current portion of long term debt 5,524,160 4,157,602 Forward purchase agreement liability - 1,094,097 Total current liabilities 36,390,779 20,113,049 Long-term debt, net of current portion and discount 33,286,385 37,486,206 Warrant liability - 4,777,971 Convertible note liability 891,364 - Deferred tax liability 2,692,733 6,163,140 Asset retirement obligations 1,049,285 904,297 Other liabilities 675,000 675,000 Total for non-current liabilities 38,594,767 50,006,614 Total liabilities 74,985,546 70,119,663 Commitments and Contingencies Stockholders’ (deficit) equity Preferred stock, $0.0001 par value; 1,000,000 authorized shares, 0 shares issued and outstanding at December 31, 2024 and 2023, respectively - - Class A Common stock, $0.0001 par value; 100,000,000 authorized shares, 10,323,205 and 5,235,131 shares issued and outstanding at December 31, 2024and 2023, respectively 1,032 524 Class B Common stock, $0.0001 par value; 20,000,000 authorized shares, 500,000 and 1,800,000 shares issued and outstanding at December 31, 2024 and2023, respectively 50 180 Additional paid in capital 31,312,003 16,317,856 Accumulated deficit (28,199,028) (19,118,745)Total stockholders’ equity (deficit) attributable to HNR Acquisition Corp 3,114,057 (2,800,185)Noncontrolling interest 24,605,414 33,406,414 Total stockholders’ equity 27,719,471 30,606,229 Total liabilities and stockholders’ equity $ 102,705,017 $ 100,725,892 The accompanying notes are an integral part of these consolidated financial statements. F-3
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EON RESOURCES INC(FORMERLY HNR ACQUISITION CORP)CONSOLIDATED STATEMENTS OF OPERATIONS Successor Predecessor Year EndedDecember 31,2024 November 15,2023 toDecember 31,2023 January 1,2023 toNovember 14,2023 Revenues Crude oil $ 19,298,698 $ 2,513,197 $ 22,856,521 Natural gas and natural gas liquids 483,486 70,918 809,553 Gain (loss) on derivative instruments, net (850,374) 340,808 51,957 Other revenue 487,109 50,738 520,451 Total revenues 19,418,919 2,975,661 24,238,482 Expenses Production taxes, transportation and processing 1,715,792 226,062 2,117,800 Lease operating 8,614,080 1,453,367 8,692,752 Depletion, depreciation and amortization 2,407,098 352,127 1,497,749 Accretion of asset retirement obligations 144,988 11,062 848,040 General and administrative 10,381,095 3,553,117 3,700,267 Acquisition costs - 9,999,860 - Total expenses 23,263,053 15,595,595 16,856,608 Operating income (loss) (3,844,134) (12,619,934) 7,381,874 Other Income (expenses) Change in fair value of warrant liability (804,004) 187,704 - Change in fair value of convertible note liability (192,744) Change in fair value of FPA liability 561,099 3,268,581 - Amortization of debt discount (2,361,627) (1,191,553) - Interest expense (7,643,200) (1,043,312) (1,834,208)Interest income 58,793 6,736 313,401 Gain on extinguishment of liabilities 1,638,138 - - Loss on sale of assets - - (816,011)Other Income (expense) 36,989 2,937 (74,193)Total other income (expenses) (8,706,556) 1,231,093 (2,411,011)Loss before income taxes (12,550,690) (11,388,841) 4,970,863 Income tax provision (benefit) 3,470,407 2,387,639 - Net income (loss) (9,080,283) (9,001,202) 4,970,863 Net income (loss) attributable to noncontrolling interests - - - Net income (loss) attributable to HNR Acquisition Corp. $ (9,080,283) $ (9,001,202) $ 4,970,863 Weighted average share outstanding, common stock - basic and diluted 6,477,052 5,235,131 - Net income (loss) per share of common stock – basic and diluted $ (1.40) $ (1.72) $ - The accompanying notes are an integral part of these consolidated financial statements. F-4
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EON RESOURCES INC(FORMERLY HNR ACQUISITION CORP)CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) Predecessor Owner’s Equity Balance at December 31, 2022 28,504,247 Net income 4,970,863 Equity-based compensation Balance at November 14, 2023 $ 33,475,110 Total Stockholders’ Class A Class B Additional (Deficit) EquityAttributable toHNR TotalStockholders’ Common Stock Common Stock Common Stock Paid-In Accumulated Acquisition Noncontrolling (Deficit) Successor Shares Amount Shares Amount Shares Amount Capital deficit Corp. Interest Equity Balance – November 15, 2023 3,457,813 346 - - - $ - $(9,719,485) $(10,079,371) $ (19,798,856) $ - $ (19,798,856)Reclassification of shares undertwo class structure and non-redemptions (3,457,813) (346) 3,457,813 346 - - - - - - - Reclassification of Public sharesnot redeemed - - 445,626 45 - - 4,878,030 - 4,878,075 - 4,878,075 Shares reclassified under Nonredemption agreement - - 600,000 60 - - 6,567,879 - 6,567,939 - 6,567,939 Shares not redeemed under forwardpurchase agreement to FPASeller - - 140,070 14 - - 1,533,272 - 1,533,286 - 1,533,286 Excise tax imposed on commonstock redemptions - - - - - - - (38,172) (38,172) - (38,172)Forward purchase agreementprepayment - - - - - - 8,190,554 - 8,190,554 - 8,190,554 Share-based compensation - - 381,622.00 38 - - 3,445,927 - 3,445,965 - 3,445,965 Shares issued for Acquisition - - 210,000.00 21 1,800,000 180 1,421,679 - 1,421,880 33,406,414 34,828,297 Net loss - - - - - - - (9,001,202) (9,001,202) - (9,001,202)Balance – December 31, 2023 - $ - 5,235,131 $ 524 1,800,000 $ 180 $16,317,856 $(19,118,745) $ (2,800,185) $ 33,406,414 $ 30,606,229 Share-based compensation - - 848,074 84 - - 2,778,907 - 2,778,991 - 2, 778,991 Shares issued under equity line ofcredit - - 2,230,000 223 - - 2,628,111 - 2,628,334 - 2,628,334 Class B exchanged for Class A - - 1,300,000 130 (1,300,000) (130) 8,801,000 - 8,801,000 (8,801,000) - Shares issued to settle FPA - - 450,000 45 - - 449,955 - 450,000 - 450,000 Shares issued to settle accountspayable - - 260,000 26 - - 336,174 - 336,200 336,200 Net loss - - - - - - - (9,080,283) (9,080,283) - (9,080,283)Balance – December 31, 2024 - $ - 10,323,205 $ 1,032 500,000 $ 50 $31,312,003 $(28,199,028) $ 3,114,057 $ 24,605,414 $ 27,719,471 The accompanying notes are an integral part of these consolidated financial statements. F-5
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EON RESOURCES INC(FORMERLY HNR ACQUISITION CORP)CONSOLIDATED STATEMENTS OF CASH FLOWS Successor Predecessor Year EndedDecember 31, 2024 November 15,2023 toDecember 31,2023 January 1, 2023 toNovember 14,2023 Operating activities: Net income (loss) $ (9,080,283) $ (9,001,202) $ 4,970,863 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization expense 2,407,098 352,127 1,497,749 Accretion of asset retirement obligations 144,988 11,062 843,865 Equity-based compensation 2,778,991 3,445,965 - Deferred income tax benefit (3,470,407) (2,365,632) - Amortization of operating lease right-of-use assets - - (403)Amortization of debt issuance costs 2,361,627 1,191,553 3,890 Gain on extinguishment of liabilities (1,638,138) - - Change in fair value of unsettled derivatives 361,290 (443,349) (1,215,693)Change in fair value of convertible note liability 192,744 - - Change in fair value of warrant liability 804,004 (187,704) - Change in fair value of forward purchase agreement (561,099) (3,268,581) - Change in other property, plant, and equipment, net - - 83,004 Loss on sale of assets - - 816,011 Changes in operating assets and liabilities: Accounts receivable 411,240 1,793,055 (921,945)Prepaid expenses and other assets 423,116 (258,431) 26,833 Related party note receivable interest income - - (313,401)Accounts payable 3,024,413 8,091,598 1,480,138 Accounts payable – related parties (316,651) (138,000) - Accrued liabilities and other 3,018,930 1,251,677 753,595 Royalties payable 2,729,398 (313,381) 157,991 Royalties payable, related party 109,425 323,717 8,066 Net cash provided by operating activities 3,700,686 484,474 8,190,563 Investing activities: Development of crude oil and gas properties (3,555,062) (238,499) (6,769,557)Purchases of other equipment (20,000) - - Acquisition of business, net of cash acquired - (30,827,804) - Trust Account withdrawals - 49,362,479 - Issuance of related party note receivable - - (190,998)Net cash provided by (used in) investing activities (3,575,062) 18,296,176 (6,960,555)Financing activities: Proceeds from issuance of long-term debt - 28,000,000 - Payment of debt issuance costs - (808,992) - Repayments of long-term debt (3,984,286) (319,297) (3,000,000)Proceeds of short-term notes payable 1,298,200 - - Repayment of short-term notes payable (989,018) - - Proceeds from related party notes payable 450,000 - - Repayment of related party notes payable (62,750) - - Proceeds from sale of common stock 2,628,334 - - Redemptions of common stock - (44,737,839) - Net cash used in financing activities (659,520) (17,866,128) (3,000,000)Net change in cash and cash equivalents (533,896) 914,522 (1,769,992)Cash and cash equivalents at beginning of period 3,505,454 2,590,932 2,016,315 Cash and cash equivalents at end of period $ 2,971,558 $ 3,505,454 $ 246,323 Cash paid during the period for: Interest on debt $ 6,146,139 $ 370,625 $ 2,002,067 Income taxes $ - $ 154,000 $ - Amounts included in the measurement of operating lease liabilities $ - $ - $ 56,625 Supplemental disclosure of non-cash investing and financing activities: Operating lease assets obtained in exchange for operating lease obligations $ - $ - $ - Accrued purchases of property and equipment at period end $ 2,540,703 $ 141,481 $ 256,237 The accompanying notes are an integral part of these consolidated financial statements. F-6
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EON RESOURCES INC(FORMERLY HNR ACQUISITION CORP)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS Organization and General EON Resources, Inc., Formerly HNR Acquisition Corp (the “Company”) was incorporated in Delaware on December 9, 2020. The Company was a blank check company formed for the purpose ofeffecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company isan “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the “Securities Act,” as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBSAct”). The registration statement for the Company’s IPO was declared effective on February 10, 2022 (the “Effective Date”). On February 15, 2022, the Company consummated the IPO of 7,500,000 units (the“Units” and, with respect to the common stock included in the Units sold, the “Public Shares”), at $10.00 per Unit. Additionally, the underwriter fully exercised its option to purchase 1,125,000 additionalUnits. Simultaneously with the closing of the IPO, the Company consummated the sale of 505,000 units (the “Private Placement Units”) at a price of $10.00 per unit generating proceeds of $5,050,000 ina private placement to HNRAC Sponsors, LLC, the Company’s sponsor (the “Sponsor”) and EF Hutton (formerly Kingswood Capital Markets) (“EF Hutton”). The Sponsor and other parties, purchased, in the aggregate, 505,000 units (“Private Placement Units”) at a price of $10.00 per Private Placement Unit in a private placement which included a share ofcommon stock and warrant to purchase three quarters of one share of common stock at an exercise price of $11.50 per share, subject to certain adjustments (“Private Placement Warrants” and together, the“Private Placement”) that occurred immediately prior to the Public Offering. Effective November 15, 2023, the Company completed its business combination as described in Note 3. Through its subsidiary EON Resources, LLC, a Texas limited liability Company “(“EON” or“EON Resources”) and its subsidiary LH Operating, LLC, a Texas limited liability company “(“LHO”), the Company is an independent oil and natural gas company focused on the acquisition,development, exploration, and production of oil and natural gas properties in the Permian Basin. The Permian Basin is located in west Texas and southeastern New Mexico and is characterized by high oiland liquids-rich natural gas content, multiple vertical and horizontal target horizons, extensive production histories, long-lived reserves and historically high drilling success rates. The Company’sproperties are in the Grayburg-Jackson Field in Eddy County, New Mexico, which is a sub-area of the Permian Basin. The Company focuses exclusively on vertical development drilling. 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(including redemptions) 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. Theexcise tax is imposed on the repurchasing corporation itself, not its stockholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the sharesrepurchased 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 againstthe 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 givenauthority 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 whatextent 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 ofthe 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 otherequity 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 requiredpayment 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 aBusiness Combination. F-7
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On May 11, 2023, in connection with the stockholder vote for the amendment to the Company’s certificate of incorporation, a total of 4,115,597 Public Shares for an aggregate redemption amount of$43,318,207 were redeemed from the Trust Account by the stockholders of the Company. On November 15, 2023, a total of 3,323,707 Public Shares were redeemed for an aggregate redemption amountof $12,346,791. As a result of these redemptions of common stock, the Company recognized an estimated liability for the excise tax of $474,837, included in Accrued liabilities and other on theCompany’s consolidated balance sheet pursuant to the 1% excise tax under the IR Act partially offset by issuance of common stock subsequent to the redemptions. The liability does not impact theconsolidated statements of operations and is offset against accumulated deficit, and had a balance of $474,837 as of December 31, 2024 and 2023, included in Accrued Liabilities and Other on theCompany’s consolidated balance sheets. Going Concern Considerations At December 31, 2024, the Company had $2,971,558 in cash and a working capital deficit of $31,231,674. These conditions raise substantial doubt about the Company’s ability to continue as a goingconcern within one year after the date that the financial statements are issued. The Company had positive cash flow from operations of $3,700,686 for the year ended December 31, 2024. Additionally,management’s plans to alleviate this substantial doubt include improving profitability through streamlining costs, maintaining active hedge positions for its proven reserve production, and the issuance ofadditional shares of Class A common stock under the Common Stock Purchase Agreement. The Company has a three-year Common Stock Purchase Agreement with a maximum funding limit of$150,000,000 that can fund the Company operations and production growth, and be used to reduce liabilities of the Company, subject to the Company’s Form S-1 Registration Statement, which wasdeclared effective by the Securities and Exchange Commission (“SEC”) on August 9, 2024. Through December 31, 2024, the Company has received $2,628,344 in cash proceeds related to the saleof 2,230,000 shares of common stock under the Common Stock Purchase Agreement. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation On November 15, 2023 (the “Closing Date”), the Company consummated a business combination which resulted in the acquisition of EON Resources, LLC, a Texas limited liability Company “(“EON”or “EON Resources”) and its subsidiary LH Operating, LLC, a Texas limited liability company “(“LHO”, and collectively, the EON Business”) (the “Acquisition”). The Company was deemed theaccounting acquirer in the Acquisition based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805, Business Combinations, and the EON Business was deemed to bethe Predecessor entity. Accordingly, the historical consolidated financial statements of the EON Business became the historical financial statements of the Company’s upon consummation of theAcquisition. As a result, the financial statements included in this report reflect (i) the historical operating results of EON Business prior to the Acquisition (“Predecessor”) and (ii) the combined results ofthe companies, including EON Business following the closing of the Acquisition (“Successor”). The accompanying financial statements include a Predecessor period, which was the period January 1,2023 through November 14, 2023, concurrent with completion of the Acquisition and Successor period from November 15, 2023 through December 31, 2023. As a result of the Acquisition, the results ofoperations, financial position and cash flows of the Predecessor and Successor may not be directly comparable. A black-line between the Successor and Predecessor periods has been placed in theconsolidated financial statements and in the tables to the notes to the consolidated financial statements to highlight the lack of comparability between these two periods as the Acquisition resulted in a newbasis of accounting for the EON Business. See Note 3 for additional information. The accompanying financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rulesand regulations of the SEC. F-8
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Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated inconsolidation. Segments Reporting The Company manages its operations as a single segment for the purpose of assessing performance and making operating decisions. The Company’s Chief Operating Decision Maker (“CODM”) is itsexecutive management committee. The CODM allocates resources and evaluates the performance of the Company using information about combined net income from operations. All significant operatingdecisions are based upon an analysis of the Company as one operating segment, which is the same as its reporting segment. Emerging Growth Company Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that havenot had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934) are required to comply with the new or revisedfinancial 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 growthcompanies but any such an 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 hasdifferent application 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 revisedstandard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth companywhich has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Net Income (Loss) Per Share: Net income (loss) per share of common stock is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstandingduring the period, excluding shares of common stock subject to forfeiture. The Company’s Class B Common shares do not have economic rights to the undistributed earnings of the Companyand are not considered participating securities under ASC 260. As such, they areexcluded from the calculation of net income (loss) per common share. The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement warrants to purchase an aggregate of 6,847,500 shares, warrants to purchase 4,188,000shares issued in connection with Private Notes Payable and warrant to purchase 1,200,000 issued to a vendor in the calculation of diluted income per share, since the effective of those instruments wouldbe anti-dilutive. As a result, diluted income (loss) per share of common stock is the same as basic loss per share of common stock for the period presented. 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 anddisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptionsreflected in the financial statements include: i) estimates of proved reserves of oil and natural gas, which affect the calculation of depletion, depreciation, and amortization (“DD&A”) and impairment ofproved oil and natural gas properties, ii) impairment of undeveloped properties and other assets; and iii) the valuation of commodity and other derivative financial instruments. These estimates are basedon information available as of the date of the financial statements; therefore, actual results could differ materially from management’s estimates using different assumptions or under different conditions.Future production may vary materially from estimated oil and natural gas proved reserves. Actual future prices may vary significantly from price assumptions used for determining proved reserves and forfinancial reporting. F-9
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Cash The Company considers all cash on hand, depository accounts held by banks, money market accounts and investments with an original maturity of three months or less to be cash equivalents. TheCompany’s cash and cash equivalents are held in financial institutions in amounts that exceed the insurance limits of the Federal Deposit Insurance Corporation. The Company believes its counterpartyrisks are minimal based on the reputation and history of the institutions selected. Accounts Receivable Accounts receivable consist of receivables from crude oil and natural gas purchasers and are generally uncollateralized. Accounts receivables are typically due within 30 to 60 days of the production dateand 30 days of the billing date and are stated at amounts due from purchasers and industry partners. Amounts are considered past due if they have been outstanding for 60 days or more. No interest istypically charged on past due amounts. The Company reviews its need for an allowance for doubtful accounts on a periodic basis and determines the allowance, if any, by considering the length of time past due, previous loss history, future netrevenues associated with the debtor’s ownership interest in oil and natural gas properties operated by the Company and the debtor’s ability to pay its obligations, among other things. The Companybelieves its accounts receivable are fully collectible. Accordingly, no allowance for doubtful accounts has been provided. As of December 31, 2024 and 2023, the Company had approximately 99% and 96% of accounts receivable with two customers, respectively. Crude Oil and Natural Gas Properties The Company accounts for its crude oil and natural gas properties under the successful efforts method of accounting. Under this method, costs of proved developed producing properties, successfulexploratory wells and developmental dry hole costs are capitalized. Internal costs that are directly related to acquisition and development activities, including salaries and benefits, are capitalized. Internalcosts related to production and similar activities are expensed as incurred. Capitalized costs are depleted by the unit-of-production method based on estimated proved developed producing reserves. TheCompany calculates quarterly depletion expense by using the estimated prior period-end reserves as the denominator. The process of estimating and evaluating crude oil and natural gas reserves iscomplex, requiring significant decisions in the evaluation of available geological, geophysical, engineering, and economic data. The data for a given property may also change substantially over timebecause of numerous factors, including additional development activity, evolving production history and a continual reassessment of the viability of production under changing economic conditions. As aresult, revisions in existing reserve estimates occur. Capitalized development costs of producing oil and natural gas properties are depleted over proved developed reserves and leasehold costs are depletedover total proved reserves. Upon the sale or retirement of significant portions of or complete fields of depreciable or depletable property, the net book value thereof, less proceeds or salvage value, isrecognized as a gain or loss. Exploration costs, including geological and geophysical expenses, seismic costs on unproved leaseholds and delay rentals are expensed as incurred. Exploratory well drilling costs, including the cost ofstratigraphic test wells, are initially capitalized, but charged to expense if the well is determined to be economically nonproductive. The status of each in-progress well is reviewed quarterly to determinethe proper accounting treatment under the successful efforts method of accounting. Exploratory well costs continue to be capitalized so long as the Company has identified a sufficient quantity of reservesto justify completion as a producing well, is making sufficient progress assessing reserves with economic and operating viability, and the Company remains unable to make a final determination ofproductivity. F-10
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If an in-progress exploratory well is found to be economically unsuccessful prior to the issuance of the financial statements, the costs incurred prior to the end of the reporting period are charged toexploration expense. If the Company is unable to make a final determination about the productive status of a well prior to issuance of the financial statements, the costs associated with the well areclassified as suspended well costs until the Company has had sufficient time to conduct additional completion or testing operations to evaluate the pertinent geological and engineering data obtained. Atthe time the Company can make a final determination of a well’s productive status, the well is removed from suspended well status and the resulting accounting treatment is recorded. The Successor recognized depreciation, depletion, and amortization expense totaling $2,407,098 for the year ended December 31, 2024 and $352,127 for the period from November 15, 2023 to December31, 2023, and the Predecessor recognized $1,497,749 for the period from January 1, 2023 to November 14, 2023. Impairment of Oil and Gas Properties Proved oil and natural gas properties are reviewed for impairment when events and circumstances indicate a possible decline in the recoverability of the carrying amount of such property. The Companyestimates the expected future cash flows of its oil and natural gas properties and compares the undiscounted cash flows to the carrying amount of the oil and natural gas properties, on a field-by-field basis,to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, the Company will write down the carrying amount of the oil and naturalgas properties to estimated fair value. The Company and the Predecessor did not recognize any impairment of oil and natural gas properties in the periods presented. Asset Retirement Obligations The Company recognizes the fair value of an asset retirement obligation (“ARO”) in the period in which it is incurred if a reasonable estimate of fair value can be made. The asset retirement obligation isrecorded as a liability at its estimated present value, with an offsetting increase recognized in oil and natural gas properties on the consolidated balance sheets. Periodic accretion of the discounted value ofthe estimated liability is recorded as an expense in the consolidated statements of operations. Other Property and Equipment, net Other property and equipment are recorded at cost. Other property and equipment are depreciated over its estimated useful life on a straight-line basis. The Company expenses maintenance and repairs inthe period incurred. Upon retirements or dispositions of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheet with the resulting gains or losses, if any,reflected in operations. Materials and supplies are stated at the lower of cost or market and consist of oil and gas drilling or repair items such a tubing, casing, and pumping units. These items are primarily acquired for use infuture drilling or repair operations and are carried at lower of cost or market. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are consideredimpaired, the impairment to be recorded is measured by the amount by which the carrying amount of the asset exceeds its estimated fair value. The estimated fair value is determined using either adiscounted future cash flow model or another appropriate fair value method. F-11
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Derivative Instruments The Company uses derivative financial instruments to mitigate its exposure to commodity price risk associated with oil prices. The Company’s derivative financial instruments are recorded on theconsolidated balance sheets as either an asset or a liability measured at fair value. The Company has elected not to apply hedge accounting for its existing derivative financial instruments, and as a result,the Company recognizes the change in derivative fair value between reporting periods currently in its consolidated statements of operations. The fair value of the Company’s derivative financialinstruments is determined using industry-standard models that consider various inputs including: (i) quoted forward prices for commodities, (ii) time value of money and (iii) current market andcontractual prices for the underlying instruments, as well as other relevant economic measures. Realized gains and losses from the settlement of derivative financial instruments and unrealized gains andunrealized losses from valuation changes in the remaining unsettled derivative financial instruments are reported in a single line item as a component of revenues in the consolidated statements ofoperations. Cash flows from derivative contract settlements are reflected in operating activities in the accompanying consolidated statements of cash flows. See Note 4 for additional information about theCompany’s derivative instruments. The Company’s credit risk related to derivatives is a counterparties’ failure to perform under derivative contracts owed to the Company. The Company uses credit and other financial criteria to evaluatethe credit standing of, and to select, counterparties to its derivative instruments. Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associatedcredit risk is mitigated by the Company’s credit risk policies and procedures. The Company has entered into International Swap Dealers Association Master Agreements (“ISDA Agreements”) with its derivative counterparty. The terms of the ISDA Agreements provide theCompany and the counterparty with rights of set off upon the occurrence of defined acts of default by either the Company or a counterparty to a derivative, whereby the party not in default may set off allderivative liabilities owed to the defaulting party against all derivative asset receivables from the defaulting party. Product Revenues The Company accounts for sales in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Revenue is recognized when the Company satisfies aperformance obligation in an amount reflecting the consideration to which it expects to be entitled. The Company applies a five-step approach in determining the amount and timing of revenue to berecognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to theperformance obligations in the contract; and (5) recognizing revenue when the performance obligation is satisfied. The Company enters into contracts with customers to sell its oil and natural gas production. Revenue from these contracts is recognized when the Company’s performance obligations under thesecontracts are satisfied, which generally occurs with the transfer of control of the oil and natural gas to the purchaser. Control is generally considered transferred when the following criteria are met:(i) transfer of physical custody, (ii) transfer of title, (iii) transfer of risk of loss and (iv) relinquishment of any repurchase rights or other similar rights. Given the nature of the products sold, revenue isrecognized at a point in time based on the amount of consideration the Company expects to receive in accordance with the price specified in the contract. Consideration under oil and natural gas marketingcontracts is typically received from the purchaser one to two months after production. Most of the Company’s oil marketing contracts transfer physical custody and title at or near the wellhead or a central delivery point, which is generally when control of the oil has been transferred to thepurchaser. The majority of the oil produced is sold under contracts using market-based pricing, which price is then adjusted for differentials based upon delivery location and oil quality. To the extent thedifferentials are incurred at or after the transfer of control of the oil, the differentials are included in oil revenues on the statements of operations, as they represent part of the transaction price of thecontract. If other related costs are incurred prior to the transfer of control of the oil, those costs are included in production taxes, transportation and processing expenses on the Company’s consolidatedstatements of operations, as they represent payment for services performed outside of the contract with the customer. The Company’s natural gas is sold at the lease location. Most of the Company’s natural gas is sold under gas purchase agreements. Under the gas purchase agreements, the Company receives a percentageof the net production from the sale of the natural gas and residue gas, less associated expenses incurred by the buyer. The Company does not disclose the value of unsatisfied performance obligations under its contracts with customers as it applies the practical expedient in accordance with ASC 606. The expedient, asdescribed in ASC 606-10-50-14(a), applies to variable consideration that is recognized as control of the product is transferred to the customer. Since each unit of product represents a separate performanceobligation, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. F-12
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Customers The Company sold 100% of its crude oil and natural gas production to two customers for the years ended December 31, 2024, and 2023. Inherent to the industry is the concentration of crude oil, naturalgas and natural gas liquids (“NGLs”) sales to a limited number of customers. This concentration has the potential to impact the Company’s overall exposure to credit risk in that its customers may besimilarly affected by changes in economic and financial conditions, commodity prices or other conditions. Given the liquidity in the market for the sale of hydrocarbons, the Company believes the loss ofany single purchaser, or the aggregate loss of several purchasers, could be managed by selling to alternative purchasers in the operating areas. Warranty Obligations The Company provides an assurance-type warranty that guarantees its products comply with agreed-upon specifications. This warranty is not sold separately and does not convey any additional goods orservices to the customer; therefore, the warranty is not considered a separate performance obligation. As the Company typically incurs minimal claims under the warranties, no liability is estimated at thetime goods are delivered, but rather at the point of a claim. Other Revenue Other revenue is generated from the fees the Company charges a single customer for the disposal of water, saltwater, brine, brackish water, and other water (collectively, “Water”) into the Company’swater injection system. Revenue recognized under the agreement is variable in nature and primarily based on the volume of Water accepted during the period. Warrant Liabilities 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 authoritative guidance in FinancialAccounting Standards Board (“FASB”) Accounting Standards Codification ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). Theassessment 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 therequirements 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 assessmentis conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. In accordance with Accounting Standards Codification ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, the warrants issued in connection with the Private Notes Payable do notmeet the criteria for equity classification due to the redemption right whereby the holder may require the Company to settle the warrant in cash 18 months after the closing of the MIPA, and must berecorded as liabilities. The warrants are measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in thestatements of operations in the period of change. Forward Purchase Agreement Valuation The Company has determined that the FPA Put Option, including the Maturity Consideration, within the Forward Purchase Agreement is (i) a freestanding financial instrument and (ii) a liability (i.e., anin-substance written put option). This liability was recorded as a liability at fair value on the consolidated balance sheet as of the reporting date in accordance with ASC 480. The fair value of the liabilitywas estimated using a Monte-Carlo Simulation in a risk-neutral framework. Specifically, the future stock price is simulated assuming a Geometric Brownian Motion (“GBM”). For each simulated path,the forward purchase value is calculated based on the contractual terms and then discounted back to present. Finally, the value of the forward is calculated as the average present value over all simulatedpaths. The model also considered the likelihood of a dilutive offering of common stock. F-13
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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 InsuranceCoverage (“FDIC”) of $250,000. As of December 31, 2024, the Company’s cash balance did not exceeded the FDIC limit. At December 31, 2024, the Company had not experienced losses on this accountand management believes the Company is not exposed to significant risks on such account. Income Taxes The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future taxconsequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of achange in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to berealized. FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. Forthose benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2024 and2023. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at December31, 2024 and 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 is subject toincome tax examinations by major taxing authorities since inception. Prior the closing of the Acquisition, the Predecessor elected to be treated as a partnership for income tax purposes and was not subject to federal, state, or local income taxes. Any taxable income or losswas recognized by the owners. Accordingly, no federal, state, or local income taxes have been reflected in the accompanying consolidated financial statements of the Predecessor. Significant differencesmay exist between the results of operations reported in these consolidated financial statements and those determined for income tax purposes primarily due to the use of different asset valuation methodsfor tax purposes. Segment Reporting Segment information is prepared on the same basis that our CEO, who is our Chief Operating Decision Maker (“CODM”), manages our segments, evaluates financial results, and makes key operatingdecisions. The Company has one reportable operating segment, its oil and gas operations which derives its revenue from the sale of oil and gas products. The CODM uses net income from operations toevaluate and make key operating decisions. The information regularly provided to the CODM on the segment’s revenues and significant expenses aligns with the categories presented in the ConsolidatedStatements of Operations. Furthermore, the segment’s assets are reported on the Consolidated Balance Sheets as total assets. Recent Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures, which adds new disclosurerequirements related to significant segment expenses regularly provided to the chief operating decision maker (CODM) and included in each reported measure of segment profit or loss, other segmentitems that constitute the difference between segment revenues less significant segment expenses and the measure of profit or loss, disclosure of the CODM’s title and position as well as an explanation ofhow the CODM uses the reported measures and expanded interim disclosures. ASU 2023-07 is effective for financial statements for annual periods beginning after December 15, 2023 and interim periodswithin fiscal years beginning after December 15, 2024. The Company has implemented this ASU during the year ended December 31, 2024, and determined no retrospective changes were necessary. F-14
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In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures. Under this ASU, entities must disclose, on an annual basis, specific categoriesin the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires entities to disclose additional information aboutincome taxes paid. ASU 2023-09 is effective for financial statements for annual periods beginning after December 15, 2024. The Company is currently evaluating the potential impact of adopting thisguidance on the consolidated financial statements and the notes to consolidated financial statements. Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s consolidated financialstatements. NOTE 3 — BUSINESS COMBINATION The Company entered into that certain Amended and Restated Membership Interest Purchase Agreement, dated as of August 28, 2023 (as amended, the “MIPA”), by and among HNRA, HNRA Upstream,LLC, a newly formed Delaware limited liability company which is managed by, and is a subsidiary of, HNRA (“OpCo”), and HNRA Partner, Inc., a newly formed Delaware corporation and whollyowned subsidiary of OpCo (“SPAC Subsidiary”, and together with the Company and OpCo, “Buyer” and each a “Buyer”), CIC EON LP, a Delaware limited partnership (“CIC”), DenCo Resources, LLC,a Texas limited liability company (“DenCo”), EON Resources Management, LLC, a Texas limited liability company (“EON Management”), 4400 Holdings, LLC, a Texas limited liability company(“4400” and, together with CIC, DenCo and EON Management, collectively, “Seller” and each a “Seller”), and, solely with respect to Section 6.20 of the MIPA, the Sponsor. On November 15, 2023 (the “Closing Date”), as contemplated by the MIPA: ● HNRA filed a Second Amended and Restated Certificate of Incorporation (the “Second A&R Charter”) with the Secretary of State of the State of Delaware, pursuant to which the number ofauthorized shares of HNRA’s capital stock, par value $0.0001 per share, was increased to 121,000,000 shares, consisting of (i) 100,000,000 shares of Class A common stock, par value $0.0001per share (the “Class A Common Stock”), (ii) 20,000,000 shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), and (iii) 1,000,000 shares of preferredstock, par value $0.0001 per share; ● The current shares of common stock of HNRA were reclassified as Class A Common Stock, the Class B Common Stock have no economic rights but entitles its holder to one vote on all mattersto be voted on by stockholders generally, holders of shares of Class A Common Stock and shares of Class B Common Stock will vote together as a single class on all matters presented to ourstockholders for their vote or approval, except as otherwise required by applicable law or by the Second A&R Charter; ● (A) HNRA contributed to OpCo (i) all of its assets (excluding its interests in OpCo and the aggregate amount of cash required to satisfy any exercise by HNRA stockholders of their RedemptionRights (as defined below)) and (ii) 2,000,000 newly issued shares of Class B Common Stock (such shares, the “Seller Class B Shares”) and (B) in exchange therefor, OpCo issued to HNRA anumber of Class A common units of OpCo (the “OpCo Class A Units”) equal to the number of total shares of Class A Common Stock issued and outstanding immediately after the closing (the“Closing”) of the transactions (the “Transactions”) contemplated by the HNRA (following the exercise by HNRA stockholders of their Redemption Rights) (such transactions, the “SPACContribution”); ● Immediately following the SPAC Contribution, OpCo contributed $900,000 to SPAC Subsidiary in exchange for 100% of the outstanding common stock of SPAC Subsidiary (the “SPACSubsidiary Contribution”); and ● Immediately following the SPAC Subsidiary Contribution, Seller sold, contributed, assigned, and conveyed to (A) OpCo, and OpCo acquired and accepted from Seller, ninety-nine percent(99.0%) of the outstanding membership interests of EON Resources, LLC, a Texas limited liability company (“EON” or the “Target”), and (B) SPAC Subsidiary, and SPAC Subsidiary purchasedand accepted from Seller, one percent (1.0%) of the outstanding membership interest of Target (together with the ninety-nine (99.0%) interest, the “Target Interests”), in each case, in exchange for(x) $900,000 of the Cash Consideration (as defined below) in the case of SPAC Subsidiary and (y) the remainder of the Aggregate Consideration (as defined below) in the case of OpCo (suchtransactions, together with the SPAC Contribution and SPAC Subsidiary Contribution, the “Acquisition”). F-15
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The “Aggregate Consideration” for the EON Business was (a), cash in the amount of $31,074,127 in immediately available funds (the “Cash Consideration”), (b) 2,000,000 Class B common units ofOpCo (“OpCo Class B Units”) (the “Common Unit Consideration”), which will be equal to and exchangeable into 2,000,000 shares of Class A Common Stock issuable upon exercise of the OpCoExchange Right (as defined below), as reflected in the amended and restated limited liability company agreement of OpCo that became effective at Closing (the “A&R OpCo LLC Agreement”), (c) andthe 2,000,000 Seller Class B Shares, (d) $15,000,000 payable through a promissory note to Seller (the “Seller Promissory Note”), (e) 1,500,000 preferred units of OpCo (the “OpCo Preferred Units” andtogether with the Opco Class A Units and the OpCo Class B Units, the “OpCo Units”) of OpCo (the “Preferred Unit Consideration”, and, together with the Common Unit Consideration, the “UnitConsideration”), and (f) an agreement to, on or before November 21, 2023, Buyer shall settle and pay to Seller $1,925,873 from sales proceeds received from oil and gas production attributable to EON,including pursuant to its third party contract with affiliates of Chevron. At Closing, 500,000 Seller Class B Shares (the “Escrowed Share Consideration”) were placed in escrow for the benefit of Buyerpursuant to an escrow agreement and the indemnity provisions in the MIPA. The Aggregate Consideration is subject to adjustment in accordance with the MIPA. OpCo A&R LLC Agreement In connection with the Closing, HNRA and EON Royalty, LLC, a Texas limited liability company, an affiliate of Seller and Seller’s designated recipient of the Aggregate Consideration (“EON Royalty”),entered into an amended and restated limited liability company agreement of OpCo (the “OpCo A&R LLC Agreement”). Pursuant to the A&R OpCo LLC Agreement, each OpCo unitholder (excludingHNRA) will, subject to certain timing procedures and other conditions set forth therein, have the right(the “OpCo Exchange Right”) to exchange all or a portion of its OpCo Class B Units for, at OpCo’selection,(i) shares of Class A Common Stock at an exchange ratio of one share of Class A Common Stock for each OpCo Class B Unit exchanged, subject to conversion rate adjustments for stock splits,stock dividends and reclassifications and other similar transactions, or (ii) an equivalent amount of cash. Additionally, the holders of OpCo Class B Units will be required to exchange all of their OpCoClass B Units (a “Mandatory Exchange”) upon the occurrence of the following: (i) upon the direction of HNRA with the consent of at least fifty percent (50%) of the holders of OpCo Class B Units; or(ii) upon the one-year anniversary of the Mandatory Conversion Trigger Date. In connection with any exchange of OpCo Class B Units pursuant to the OpCo Exchange Right or acquisition of OpCo ClassB Units pursuant to a Mandatory Exchange, a corresponding number of shares of Class B Common Stock held by the relevant OpCo unitholder will be cancelled. Immediately upon the Closing, EON Royalty exercised the OpCo Exchange Right as it relates to 200,000 OpCo Class B units (and 200,000 shares of Class B Common Stock). The OpCo Preferred Units will be automatically converted into OpCo Class B Units on the two-year anniversary of the issuance date of such OpCo Preferred Units (the “Mandatory Conversion TriggerDate”) at a rate determined by dividing (i) $20.00 per unit (the “Stated Conversion Value”), by (ii) the Market Price of the Class A Common Stock, (the “Conversion Price”). The “Market Price” meansthe simple average of the daily VWAP of the Class A Common Stock during the five (5) trading days prior to the date of conversion. On the Mandatory Conversion Trigger Date, the Company will issue anumber of shares of Class B Common Stock to Seller equivalent to the number of OpCo Class B Units issued to Seller. If not exchanged sooner, such newly issued OpCo Class B Units shall automaticallyexchange into Class A Common Stock on the one-year anniversary of the Mandatory Conversion Trigger Date at a ratio of one OpCo Class B Unit for one share of Class Common Stock. An equivalentnumber of shares of Class B Common Stock must be surrendered with the OpCo Class B Units to the Company in exchange for the Class A Common Stock. As noted above, the OpCo Class B Units mustbe exchanged upon the one-year anniversary of the Mandatory Conversion Trigger Date. F-16
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Option Agreement In connection with the Closing, HNRA Royalties, LLC, a newly formed Delaware limited liability company and wholly-owned subsidiary of HNRA (“HNRA Royalties”) and EON Royalty entered intoan Option Agreement (the “Option Agreement”). EON Royalty owns certain overriding royalty interests in certain oil and gas assets owned by EON Resources, LLC (the “ORR Interest”). Pursuant to theOption Agreement, EON Royalty granted irrevocable and exclusive option to HNRA Royalties to purchase the ORR Interest for the Option Price (as defined below) at any time prior to November 15,2024. The option is not exercisable while the Seller Promissory Note is outstanding. The purchase price for the ORR Interest upon exercise of the option is: (i) (1) $30,000,000 the (“Base Option Price”), plus (2) an additional amount equal to interest on the Base Option Price of twelvepercent (12%), compounded monthly, from the Closing Date through the date of acquisition of the ORR Interest, minus (ii) any amounts received by EON Royalty in respect of the ORR Interest from themonth of production in which the effective date of the Option Agreement occurs through the date of the exercise of the option (such aggregate purchase price, the “Option Price”). The Option Agreement and the option will immediately terminate upon the earlier of (a) EON Royalty’s transfer or assignment of all of the ORR Interest in accordance with the Option Agreement and(b) November 15, 2024. As consideration for the Option Agreement, the Company issued 10,000 shares of Class A common stock to EON Royalty with a fair value of $67,700. EON Royalty obtained theORR Interest effective July 1, 2023, when the Predecessor transferred to EON Royalty an assigned and undivided royalty interest equal in amount to ten percent (10%) of the Predecessors’ interest all oil,gas and minerals in, under and produced from each lease. The Predecessor recognized a loss on sale of assets of $816,011 in connection with this transaction. Backstop Agreement In connection with the Closing, HNRA entered a Backstop Agreement (the “Backstop Agreement”) with EON Royalty and certain of HNRA’s founders listed therein (the “Founders”) whereby the EONRoyalty will have the right (“Put Right”) to cause the Founders to purchase Seller’s OpCo Preferred Units at a purchase price per unit equal to $10.00 per unit plus the product of (i) the number of dayselapsed since the effective date of the Backstop Agreement and (ii) $10.00 divided by 730. Seller’s right to exercise the Put Right will survive for six (6) months following the date the Trust Shares (asdefined below) are not restricted from transfer under the Letter Agreement (as defined in the MIPA) (the “Lockup Expiration Date”). As security that the Founders will be able to purchase the OpCo Preferred Units upon exercise of the Put Right, the Founders agreed to place at least 1,300,000 shares of Class A Common Stock intoescrow (the “Trust Shares”), which the Founders can sell or borrow against to meet their obligations upon exercise of the Put Right, with the prior consent of Seller. HNRA is not obligated to purchase theOpCo Preferred Units from EON Royalty under the Backstop Agreement. Until the Backstop Agreement is terminated, EON Royalty and its affiliates are not permitted to engage in any transaction whichis designed to sell short the Class A Common Stock or any other publicly traded securities of HNRA. Founder Pledge Agreement In connection with the Closing, HNRA entered a Founder Pledge Agreement (the “Founder Pledge Agreement”) with the Founders whereby, in consideration of placing the Trust Shares into escrow andentering into the Backstop Agreement, HNRA agreed: (a) by January 15, 2024, to issue to the Founders an aggregate number of newly issued shares of Class A Common Stock equal to 10% of thenumber of Trust Shares; (b) by January 15, 2024, to issue to the Founders number of warrants to purchase an aggregate number of shares of Class A Common Stock equal to 10% of the number of TrustShares, which such warrants shall be exercisable for five years from issuance at an exercise price of $11.50 per shares; (c) if the Backstop Agreement is not terminated prior to the Lockup Expiration Date,to issue an aggregate number of newly issued shares of Class A Common Stock equal to (i) (A) the number of Trust Shares, divided by (B) the simple average of the daily VWAP of the Class A CommonStock during the five (5) Trading Days prior to the date of the termination of the Backstop Agreement, subject to a minimum of $6.50 per share, multiplied by (C) a price between $10.00-$13.00 per share(as further described in the Founder Pledge Agreement), minus (ii) the number of Trust Shares; and (d) following the purchase of OpCo Preferred Units by a Founder pursuant to the Put Right, to issuea number of newly issued shares of Class A Common Stock equal to the number of Trust Shares sold by such Founder. Until the Founder Pledge Agreement is terminated, the Founders are not permittedto engage in any transaction which is designed to sell short the Class A Common Stock or any other publicly traded securities of HNRA. F-17
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The above description of the Founder Pledge Agreement is a summary only and is qualified in its entirety by the text of the Founder Pledge Agreement. In consideration for entering into the Backstopagreement, the Company issued the Founders an aggregate of 134,500 shares of Class A Common Stock, with a fair value of $910,565 based on the closing price of the Company’s common stock of$6.77 on November 15, 2023. The Acquisition was accounted for as a business combination under ASC 805. The purchase price of the EON Business has been allocated to the assets acquired and liabilities assumed based on theirestimated relative fair values as follows: Purchase Price: Cash $ 31,074,127 Side Letter payable 1,925,873 Promissory note to Sellers of EON Business 15,000,000 10,000 HNRA Class A Common shares for Option Agreement 67,700 200,000 HNRA Class A Common shares 1,354,000 1,800,000 OpCo Class B Units 12,186,000 1,500,000 OpCo Preferred Units 21,220,594 Total purchase consideration $ 82,828,294 Purchase Price Allocation Cash $ 246,323 Accounts receivable 3,986,559 Prepaid expenses 368,371 Oil & gas reserves 93,809,392 Derivative assets 51,907 Accounts payable (2,290,475)Accrued liabilities and other (1,244,633)Revenue and royalties payable (775,154)Revenue and royalties payable, related parties (1,199,420)Short-term derivative liabilities (27,569)Deferred tax liabilities (8,528,772)Asset retirement obligations, net (893,235)Other liabilities (675,000)Net assets acquired $ 82,828,294 The fair value of the Class A common shares is based on the closing price of the Company’s common stock at November 15, 2023, which was $6.77. The fair value of the OpCo Class B Units is based onthe equivalent of 1,800,000 shares of Class A common stock and the same closing price. The fair value of the OpCo Preferred Units was estimated based on the present value of the maximum StatedConversion Value of 1,500,000 units over the two-year period using a weighted average cost of capital. Effective June 20, 2024, the Company and the Seller entered into a settlement agreement and Release (the “Settlement Agreement”). Under the Settlement Agreement, and in settlement of the workingcapital provisions of the Amended MIPA, the Seller agreed to waive all rights and claims to the amount of royalties payable under the ORRI as of December 31, 2023, totaling $1,500,000 and agreed topay certain amounts related to vendor payable claims assumed by the Company at Closing totaling $220,00. During the year ended December 31, 2024, the Company recognized a gain on settlement ofliabilities of $1,720,000 related to the Settlement Agreement, included in other income on the unaudited consolidated statement of operations. As of December 31, 2024, the Company owes $645,873 of the Side Letter payable, included in accrued expenses and other current liabilities on the consolidated balance sheet. F-18
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Unaudited Pro Forma Financial Information The following table sets forth the pro-forma consolidated results of operations of the combined Successor Predecessor companies for the year ended December 31, 2023 as if the Acquisition occurred onJanuary 1, 2023. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisitions hadtaken place on the dates noted above, or of results that may occur in the future. Year endedDecember 31, 2023 Revenue $ 27,214,143 Operating income 4,962,026 Net income 1,486,496 Net income per common share $ 0.28 Weighted Average common shares outstanding 5,235,131 NOTE 4 — DERIVATIVES Derivative Activities The Company is exposed to volatility in market prices and basis differentials for natural gas, oil and NGLs, which impacts the predictability of its cash flows related to the sale of those commodities.These risks are managed by the Company’s use of certain derivative financial instruments. The company has historically used crude diff swaps, fixed price swaps, and costless collars. As of December 31,2023, the Company’s derivative financial instruments consisted of costless collars and crude diff swaps, which are described below: Costless Collars Arrangements that contain a fixed floor price (“purchased put option”) and a fixed ceiling price (“sold call option”) based on an index price which, in aggregate, have no net cost. At the contractsettlement date, (1) if the index price is higher than the ceiling price, the Company pays the counterparty the difference between the index price and ceiling price, (2) if the index price is between the floorand ceiling prices, no payments are due from either party, and (3) if the index price is below the floor price, the Company will receive the difference between the floor price and the index price. Additionally, the Company will occasionally purchase an additional call option at a higher strike price than the aforementioned fixed ceiling price. Often this is accomplished in conjunction with thecostless collar at no additional cost. If an additional call option is utilized, at the contract settlement date, (1) if the index price is higher than the sold call strike price but lower than the purchased optionstrike price, then the Company pays the difference between the index price and the sold call strike price, (2) if the index price is higher than the purchased call price, then the company pays the differencebetween the purchased call option and the sold call option, and the company receives payment of the difference between the index price and the purchased option strike price, (3) if the index price isbetween the purchased put strike price and the sold call strike price, no payments are due from either party, (4) if the index price is below the floor price, the Company will receive the difference betweenthe floor price and the index price. The Company had no agreements in place classified as costless collars as of December 31, 2024 F-19
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The following table sets forth the derivative volumes by period as of December 31, 2023 for the Company: Price collars Period Volume(Bbls/month) Weightedaveragefloor price($/Bbl) Weightedaverageceiling price($/Bbl) Weightedaveragesold call($/Bbl) Q1-Q2 2024 9,000 $ 70.00 $ 91,90 $ 91.90 Q3-Q4 2024 9,000 $ 70.00 $ 85.50 $ 85.50 Crude price differential swaps During the year ended December 31, 2023, the Company has entered into commodity swap contracts that are effective over the next 1 to 24 months and are used to hedge against location price risk of therespective commodity resulting from supply and demand volatility and protect cash flows against price fluctuations. The following table reflects the weighted-average price of open commodity swap contracts as of December 31, 2024: Commodity Swaps Weighted Volume average Period (Bbls/month) price ($/Bbl) Q1-Q4 2024 5,000 $ 70.21 Q1-Q4 2025 5,000 $ 70.21 The following table reflects the weighted-average price of open commodity swap contracts as of December 31, 2023: Commodity Swaps Weighted Volume average Period (Bbls/month) price ($/Bbl) Q1-Q4 2024 3,000 $ 71.30 Q1-Q4 2025 3,000 $ 67.96 Derivative Assets and Liabilities As of December 31, 2024 and 2023, the Company is conducting derivative activities with one counterparty, which is secured by the lender in the Company’s bank credit facility. The Company believesthe counterparty is acceptable credit risk, and the credit worthiness of the counterparty is subject to periodic review. The assets and liabilities are netted given that all positions are held by a singlecounterparty and subject to a master netting arrangement. The combined fair value of derivatives included in the accompanying consolidated balance sheets as of December 31, 2024 and 2023 issummarized below. As of December 31, 2024 (Successor) Gross fair value Amounts netted Net fair value Commodity derivatives: Short-term derivative asset $ 151,303 $ (44,906) $ 106,397 Long-term derivative asset — — — Short-term derivative liability (44,906) (44,906) — Long-term derivative liability — — — Total derivative asset $ 106,397 F-20
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As of December 31, 2023 (Successor) Gross fairvalue Amountsnetted Net fairvalue Commodity derivatives: Short-term derivative asset $ 583,035 $ (191,547) $ 391,488 Long-term derivative asset 76,199 — 76,199 Short-term derivative liability (191,547) (191,547) — Long-term derivative liability — — — Total derivative liability $ 467,687 The effects of the Company’s derivatives on the consolidated statements of operations are summarized below: Successor Predecessor For the Year endedDecember 31,2024 November 15,2023 toDecember 31,2023 January 1,2023 toNovember 14,2023 Total gain on unsettled derivatives $ (361,290) $ 443,349 $ 1,215,693 Total loss on settled derivatives (489,084) (102,541) (1,163,736)Net gain (loss) on derivatives $ (850,374) $ 340,808 $ 51,957 NOTE 5 — LONG-TERM DEBT AND NOTES PAYABLE The Company’s debt instruments are as follows: December 31,2024 December 31,2023 Senior Secured Term Loan $ 23,696,417 $ 27,680,703 Seller Promissory Note 15,000,000 15,000,000 Merchant Cash Advances 948,982 - Convertible Notes Payable at fair value 891,363 - Private loans 3,556,750 3,469,500 Total 44,093,512 46,150,203 Less: unamortized financing cost (834,853) (2,147,346)Less: current portion including amortization (9,080,910) (6,516,651)Long-term debt, net of current portion $ 34,177,749 $ 37,486,206 Senior Secured Term Loan Agreement In connection with the Closing, HNRA (for purposes of the Loan Agreement, the “Borrower”) and First International Bank & Trust (“FIBT” or “Lender”), OpCo, SPAC Subsidiary, EON, and LHOperating, LLC (for purposes of the Loan Agreement, collectively, the “Guarantors” and together with the Borrower, the “Loan Parties”), and FIBT entered into a Senior Secured Term Loan Agreementon November 15, 2023 (the “Loan Agreement”), setting forth the terms of a senior secured term loan facility in an aggregate principal amount of $28,000,000 (the “Term Loan”). Pursuant to the terms of the Term Loan Agreement, the Term Loan was advanced in one tranche on the Closing Date. The proceeds of the Term Loan were used to (a) fund a portion of the purchase price,(b) partially fund a debt service reserve account funded with $2,600,000 at the Closing Date, (c) pay fees and expenses in connection with the purchase and the closing of the Term Loan and (e) othergeneral corporate purposes. The Term Loan accrues interest at a per annum rate equal to the FIBT prime rate plus 6.5% and fully matures on the third anniversary of the Closing Date (“Maturity Date”).Payments of principal and interest will be due on the 15th day of each calendar month, beginning December 15, 2023, each in an amount equal to the Monthly Payment Amount (as defined in the TermLoan Agreement), except that the principal and interest payment due on the Maturity Date will be in the amount of the entire remaining principal amount of the Term Loan and all accrued but unpaidinterest then outstanding. An additional one-time payment of principal is due on the date the annual financial report for the year ending December 31, 2024, is due to be delivered by Borrower to Lenderin an amount that Excess Cash Flow (as defined in the Term Loan Agreement) exceeds the Debt Service Coverage Ratio (as defined in the Term Loan Agreement) of 1.35x as of the end of such quarter;provided that in no event shall the amount of the payment exceed $5,000,000. As of December 31, 2024, the Company had no such Excess Cash Flow and no additional repayment was required. F-21
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The Borrower may elect to prepay all or a portion greater than $1,000,000 of the amounts owed prior to the Maturity Date. In addition to the foregoing, the Borrower is required to prepay the Term Loanwith the net cash proceeds of certain dispositions and upon the decrease in value of collateral. On the Closing Date, Borrower deposited $2,600,000 into a Debt Service Reserve Account (the “Debt Service Reserve Account”) and, within 60 days following the Closing Date, Borrower must depositsuch additional amounts such that the balance of the Debt Service Reserve Account is equal to $5,000,000 at all times. The Debt Service Reserve Account may be used by Lender at any time and fromtime to time, in Lender’s sole discretion, to pay (or to supplement Borrower’s payments of) the obligations due under the Term Loan Agreement. On April 18, 2024, the Company and FIBT entered into a Second Amendment to Term Loan Agreement (the “Amendment”) effective as of March 31, 2024. Pursuant to the Amendment, the Term LoanAgreement was modified to provide that the Company must, on or before December 31, 2024, deposit funds in a Debt Service Reserve Account (as defined in the Loan Agreement) such that the balanceof the account equals $5,000,000 and FIBT waived the provision that such amount had to be deposited within 60 days of the closing date of the Loan Agreement. In addition, the Amendment providesthat, if at any time prior to December 31, 2024, the Company or any of its affiliates enter into a sale leaseback transaction with respect to any of its equipment, the Company will deposit an amount equalto the greater of (A) $500,000 or (B) 10% of the proceeds of such transaction into the Debt Service Reserve Account on the effective date of such sale and leaseback transaction. The Term Loan Agreement contains affirmative and restrictive covenants and representations and warranties. The Loan Parties are bound by certain affirmative covenants setting forth actions that arerequired during the term of the Term Loan Agreement, including, without limitation, certain information delivery requirements, obligations to maintain certain insurance, and certain notice requirements.Additionally, the Loan Parties from time to time will be bound by certain restrictive covenants setting forth actions that are not permitted to be taken during the term of the Term Loan Agreement withoutprior written consent, including, without limitation, incurring certain additional indebtedness, entering into certain hedging contracts, consummating certain mergers, acquisitions or other businesscombination transactions, consummating certain dispositions of assets, making certain payments on subordinated debt, making certain investments, entering into certain transactions with affiliates, andincurring any non-permitted lien or other encumbrance on assets. The Term Loan Agreement also contains other customary provisions, such as confidentiality obligations and indemnification rights forthe benefit of the Lender. The Company was in compliance with covenants of the Term Loan Agreement as of December 31, 2024. For year ended December 31, 2024, the Company amortized $425,837 to interest expense related to deferred finance costs on the Term Loan Agreement. For the period from November 15, 2023 toDecember 31, 2023, the Company amortized $56,422 to interest expense. As of December 31, 2024, the principal balance on the Term Loan was $23,696,417, unamortized financing costs was $611,938and accrued interest was $171,714. As of December 31, 2023, the principal balance on the Term Loan was $27,680,703, unamortized financing costs was $1,036,895 and accrued interest was $173,004. Pledge and Security Agreement In connection with the Term Loan, FIBT and the Loan Parties entered into a Pledge and Security Agreement on November 15, 2023 (the “Security Agreement”), whereby the Loan Parties granted a seniorsecurity interest to FIBT on all assets of the Loan Parties, except certain excluded assets described therein, including, among other things, any interests in the ORR Interest. F-22
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Guaranty Agreement In connection with the Term Loan, FIBT and the Loan Parties entered into a Guaranty Agreement on November 15, 2023 (the “Guaranty Agreement”), whereby the Guarantors guaranteed payment andperformance of all Loan Parties under the Term Loan Agreement. Subordination Agreement In connection with the Term Loan and the Seller Promissory Note, the Lenders, the Sellers and the Company entered into a Subordination Agreement whereby the Sellers cannot require repayment, norcommence any action or proceeding at law or equity against the Company or the Lenders to recover any or all of the unpaid Seller Promissory Note until the Term Loan is repaid in full. Seller Promissory Note In connection with the Closing, OpCo issued the Seller Promissory Note to EON Royalty in the principal amount of $15,000,000. The Seller Promissory Note matured on May 15, 2024, bears an interestrate equal 18% per annum, and contains no penalty for prepayment. The Seller Promissory Note is subordinated to the Term Loan as discussed above. Accrued interest on the Seller Promissory Note was$2,952,123 as of December 31, 2024. As a result of the Subordination Agreement, the Company has classified the Seller Promissory Note as a long-term liability on the consolidated balance sheet. Private Notes Payable Prior to December 31, 2023 the Company entered into various unsecured promissory notes with existing investors of the Company for total principal of $5,434,000 (the “Private Notes Payable”). ThePrivate Notes Payable bear interest at the greater of 15% or the highest rate allowed under law, and have a stated maturity date of the five-year anniversary of the closing of the MIPA. The investors maydemand repayment beginning six months after the closing of the MIPA. The investors also received common stock warrants equal to the principal amount funded. Each warrant entitles the holder topurchase three quarters of one share of common stock at a price of $11.50. Each warrant will become exercisable on the closing date of the MIPA and is exercisable through the five-year anniversary ofthe promissory note agreement date. The warrants also grant the holder a one-time redemption right to require the Company pay the holder in cash equal to $1 per warrant 18 months following the closingof the MIPA, or May 15, 2025. A total of 5,434,000 warrants were issued to these investors. Based on the redemption right present in these warrants, the warrants are accounted for as a liability inaccordance with ASC 480 and ASC 815 and a debt discount on the Private Notes Payable, with the changes in fair value of the warrants recognize in the statement of operations. During the year ended December 31, 2024, the Company received an additional $450,000 in cash proceeds under unsecured promissory notes with investors with the same terms as those described above.The Company issued an additional 450,000 warrants with an exercise price of $11.50 to these investors in connection with the agreements. There are a total of 5,884,000 warrants issued to these investors. On November 13, 2023, the Company entered into exchange agreements (“Exchange Agreements”) with certain holders of Private Notes Payable, The Company issued 451,563 shares of Class Acommon stock to certain holders of the Private Notes Payable to settle aggregate principal of $2,089,500 and aggregate accrued interest of $168,271, and recognized a loss on extinguishment of$2,280,437 based on the fair value of the shares of common stock issued at the date of the Exchange Agreements. During the year ended December 31, 2024, the Company and certain note holders, including White Lion, entered into exchange agreements whereby the holders agreed to exchange their outstandingworking capital notes totaling $300,000 and connected warrants with a fair value of $309,960 at the time of the exchange, for new convertible notes with an aggregate principal amount of $600,000. As aresult of the exchange, which added a substantive conversion feature, the Company determined the exchange qualified for extinguishment accounting and recorded a loss on extinguishment of $88,660. F-23
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The Company is amortizing the debt discount through a period of nine months from the Closing Date. The Company recognized amortization of debt discount of $1,519,786 during the year endedDecember 31, 2024. The Company recognized amortization of debt discount of $1,135,131 during the period from November 15, 2023 to December 31, 2023. Accrued interest on the promissory noteswas $145,761 and $158,801 as of December 31, 2024 and 2023, respectively. Convertible Notes Payable During the year ended December 31, 2024, the Company and certain note holders entered into exchange agreements whereby the holders agreed to exchange their outstanding working capital notestotaling $300,000 and connected warrants with a fair value of $309,960 at the time of the exchange, for new convertible notes. The Convertible notes have a maturity of three years after the issuance date,accrue interest at a rate of 7.5%, and are convertible into Class A common shares at a rate of 90% multiplied by the average of the four lowest VWAP trading prices during the seven day trading periodprior to the conversion date. The Company evaluated the instrument under ASC 480 and determined the instrument should be accounted for at fair value due to the variable share settlement. The Companyestimate the fair value to be $698,620 at issuance of the notes payable, and estimated the fair value to be $891,364 as of December 31, 2024. The Company recognized a loss of $192,744 during the yearended December 31, 2024. Accrued interest on the promissory notes was $11,590 as of December 31, 2024. Predecessor Revolving Credit Facility On June 25, 2019, the Predecessor entered into a credit agreement (the “Credit Agreement”) with a banking institution for a revolving credit facility (the “Predecessor Revolver”) that provided for amaximum facility amount of $50,000,000 and a letter of credit sublimit not to exceed ten percent of the available borrowing base. As of December 31, 2022, the Company had $26,750,000 of outstandingborrowings under the Revolver and $702,600 of letters of credit outstanding As of November 14, 2023, the balance of the Predecessor Revolver was $23,750,000. The Predecessor Revolver was notassumed by the Company in the MIPA, and was settled by the Sellers from its proceeds from the sale of EON to the Company. Future Maturities of Long-term debt The following summarizes the Company’s maturities of all debt instruments described above: Principal Fiscal year ended: December 31, 2025 $ 9,303,826 December 31, 2026 5,072,930 December 31, 2027 29,425,393 December 31, 2028 — Total $ 43,802,149 NOTE 6 — FORWARD PURCHASE AGREMENT Forward Purchase Agreement On November 2, 2023, the Company entered into an agreement with (i) Meteora Capital Partners, LP (“MCP”), (ii) Meteora Select Trading Opportunities Master, LP (“MSTO”), and (iii) MeteoraStrategic Capital, LLC (“MSC” and, collectively with MCP and MSTO, “FPA Seller”) (the “Forward Purchase Agreement”) for OTC Equity Prepaid Forward Transactions. For purposes of the ForwardPurchase Agreement, the Company is referred to as the “Counterparty”. Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Forward PurchaseAgreement. F-24
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The Forward Purchase Agreement provides for a prepayment shortfall in an amount in U.S. dollars equal to 0.50% of the product of the Recycled Shares and the Initial Price (defined below). FPA Sellerin its sole discretion may sell Recycled Shares (i) at any time following November 2, 2023 (the “Trade Date”) at prices greater than the Reset Price or (ii) commencing on the 180th day following theTrade Date at any sales price, in either case without payment by FPA Seller of any Early Termination Obligation until such time as the proceeds from such sales equal 100% of the Prepayment Shortfall(as set forth under the section entitled “Shortfall Sales” in the Forward Purchase Agreement) (such sales, “Shortfall Sales,” and such Shares, “Shortfall Sale Shares”). A sale of Shares is only (a) a“Shortfall Sale,” subject to the terms and conditions herein applicable to Shortfall Sale Shares, when a Shortfall Sale Notice is delivered under the Forward Purchase Agreement, and (b) an Optional EarlyTermination, subject to the terms and conditions of the Forward Purchase Agreement applicable to Terminated Shares, when an OET Notice is delivered under the Forward Purchase Agreement, in eachcase the delivery of such notice in the sole discretion of the FPA Seller (as further described in the “Optional Early Termination” and “Shortfall Sales” sections in the Forward Purchase Agreement). Following the Closing, the reset price (the “Reset Price”) will be $10.00; provided that the Reset Price shall be reduced pursuant to a Dilutive Offering Reset immediately upon the occurrence of suchDilutive Offering. The Purchased Amount subject to the Forward Purchase Agreement shall be increased upon the occurrence of a Dilutive Offering Reset to that number of Shares equal to the quotient of(i) the Purchased Amount divided by (ii) the quotient of (a) the price of such Dilutive Offering divided by (b) $10.00. From time to time and on any date following the Trade Date (any such date, an “OET Date”) and subject to the terms and conditions in the Forward Purchase Agreement, FPA Seller may, in its absolutediscretion, terminate the Transaction in whole or in part by providing written notice to Counterparty (the “OET Notice”), by the later of (a) the fifth Local Business Day following the OET Date and (b) nolater than the next Payment Date following the OET Date, (which shall specify the quantity by which the Number of Shares shall be reduced (such quantity, the “Terminated Shares”)). The effect of anOET Notice shall be to reduce the Number of Shares by the number of Terminated Shares specified in such OET Notice with effect as of the related OET Date. As of each OET Date, Counterparty shallbe entitled to an amount from FPA Seller, and the FPA Seller shall pay to Counterparty an amount, equal to the product of (x) the number of Terminated Shares and (y) the Reset Price in respect of suchOET Date. The payment date may be changed within a quarter at the mutual agreement of the parties. The “Valuation Date” will be the earlier to occur of (a) the date that is three (3) years after the date of the closing of the Purchase & Sale (the date of the closing of the Purchase & Sale, the “ClosingDate”) pursuant to the A&R MIPA, (b) the date specified by FPA Seller in a written notice to be delivered to Counterparty at FPA Seller’s discretion (which Valuation Date shall not be earlier than the daysuch notice is effective) after the occurrence of any of (w) a VWAP Trigger Event, (x) a Delisting Event, (y) a Registration Failure or (z) unless otherwise specified therein, upon any AdditionalTermination Event, and (c) the date specified by FPA Seller in a written notice to be delivered to Counterparty at FPA Seller’s sole discretion (which Valuation Date shall not be earlier than the day suchnotice is effective). The Valuation Date notice will become effective immediately upon its delivery from FPA Seller to Counterparty in accordance with the Forward Share Purchase Agreement. On the “Cash Settlement Payment Date,” which is the tenth Local Business Day immediately following the last day of the Valuation Period, the FPA Seller will remit to the Counterparty an amount equalto the Settlement Amount and will not otherwise be required to return to the Counterparty any of the Prepayment Amount and the Counterparty shall remit to the FPA Seller the Settlement AmountAdjustment; provided, that if the Settlement Amount less the Settlement Amount Adjustment is a negative number and either clause (x) of Settlement Amount Adjustment applies or the Counterparty haselected pursuant to clause (y) of Settlement Amount Adjustment to pay the Settlement Amount Adjustment in cash, then neither the FPA Seller nor the Counterparty shall be liable to the other party forany payment under the Cash Settlement Payment Date section of the Forward Purchase Agreement. The FPA Seller has agreed to waive any redemption rights with respect to any Recycled Shares in connection with the Closing, as well as any redemption rights under the Company’s certificate ofincorporation that would require redemption by the Company. Pursuant to the Forward Purchase Agreement, the FPA Seller obtained 50,070 shares (“Recycled Shares”) and such purchase price of $545,356, or $10.95 per share, was funded by the use of HNRA trustaccount proceeds as a partial prepayment (“Prepayment Amount”), and the FPA Seller may purchase an additional 504,425 additional shares under the Forward Purchase Agreement, for the ForwardPurchase Agreement redemption 3 years from the date of the Acquisition (“Maturity Date”). F-25
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The FPA Seller received an additional $1,004,736 in cash from the Trust Account related to reimbursement for 90,000 shares of Class A Common stock purchased by the FPA Seller in connection with thetransactions at the redemption price of $10.95 per share and transaction fees. The Maturity Date may be accelerated, at the FPA Sellers’ discretion, if the Company share price trades below $3.00 per share for any 10 trading days during a 30-day consecutive trading-day period orthe Company is delisted. The Company’s common stock traded below minimum trading price during the period from November 15, 2023 to December 31, 2023, but no acceleration of the Maturity Datehas been executed by the FPA Seller to date. The fair value of the prepayment was $14,257,648 at inception of the agreement, $6,066,324 as of the Closing date and was $6,067,094 as of December 31, 2023, and is included as a reduction ofadditional paid-in capital on the consolidated statement of stockholders’ equity. The estimated fair value of the Maturity Consideration is $1,704,416. The Company recognized a gain from the change infair value of the Forward Purchase Agreement of $561,099 during the year ended December 31, 2024. The Company recognized a gain from the change in fair value of the Forward Purchase Agreementof $3,268,581 during the period from November 15, 2023 to December 31, 2023. On November 15, 2024, the Company entered into a Confidential Rescission, Settlement, and Release Agreement with the FPA Seller whereby the parties mutually agreed to rescind the Forward PurchaseAgreement and related agreements between the parties, which as a result, any transactions, notices or other obligations thereunder are void ab initio. The parties also agreed to release each other of allclaims related to the Forward Purchase Agreement, and in exchange for such release, the Company agreed to issue to the FPA Seller 450,000 restricted Class A Common shares which had a fair value of$450,000 based on the closing price of the Company’s common stock at the agreement date. The Company recognized a gain on settlement of the FPA liability of $82,998, which is included in Gain onExtinguishment of Liabilities on the Company’s consolidated statement of operations for the year ended December 31, 2024. NOTE 7 — STOCKHOLDERS’ EQUITY As of December 31, 2024, there were 10,323,205 Class A common shares and 500,000 Class B common shares outstanding. On November 15, 2023, as contemplated by the MIPA, HNRA filed the Second A&R Charter with the Secretary of State of the State of Delaware, pursuant to which the number of authorized shares ofHNRA’s capital stock, par value $0.0001 per share, was increased to 121,000,000 shares, consisting of (i) 100,000,000 shares of Class A common stock, par value $0.0001 per share (the “Class ACommon Stock”), (ii) 20,000,000 shares of Class B common stock, par value $0.0001 per share (the “Class B Common Stock”), and (iii) 1,000,000 shares of preferred stock, par value $0.0001 per share. As part of the Closing on November 15, 2023, all previously issued and outstanding shares of HNRA common stock were converted into Class A common shares. Prior to the Closing, there were3,006,250 shares of non-redeemable common stock and 4,509,403 shares of redeemable common stock outstanding. In connection with the Business Combination, holders of 3,323,707 shares of commonstock properly exercised their right to have their public shares redeemed for a pro rata portion of the Trust Account. The holders received $36,383,179 of cash proceeds from the Trust Account. As part of the consideration to effect the Acquisition, the Company issued 2,000,000 Class B common shares to the Sellers. Immediately upon the Closing, EON Royalty exercised the OpCo ExchangeRight as it relates to 200,000 OpCo Class B units (and 200,000 shares of Class B Common Stock) and received 200,000 shares of Class A common stock. During the year ended December 31, 2024, EON Royalty exercised its OpCo Exchange Right related to 1,300,000 shares of Class B units and received 1,300,000 shares of Class A Common stock. As aresult of the exchange, a total of $8,801,000 was reclassified from noncontrolling interest to additional paid in capital. F-26
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Class A Common Stock Issuances In consideration for entering into the Backstop agreement, the Company issues the Founders an aggregate of 134,500 shares of Class A Common Stock, with a fair value of $910,565 based on the closingprice of the Company’s Class A Common Stock on November 15, 2023 of $6.77 per share. Also, in connection with the Closing, the Company issued 20,000 shares of common stock with a fair value of$135,400 to two consultants for due diligence costs. The stock based compensation expense related to these issuances is included in general and administrative expenses on the Successor consolidatedstatement of operations. The Company also issued 89,000 shares of common stock to a company controlled by the Company’s CEO in satisfaction of $900,000 of the finder’s fee. See Note 9. During the year ended December 31, 2024, the Company issued 27,963 shares of Class A common stock to officers and employees for shares pledged as collateral on the Company’s Senior Secured TermLoan, which vest immediately. The Company estimated the fair value of the shares using the closing stock price on the date of the grant of $2.01 and recognized stock-based compensation expense of$56,708. During the year ended December 31, 2024, the Company issued 75,000 shares of Class A common stock to a consultant, which vest annually over three years. The Company estimated the fair value of theshares using the closing stock price on the date of the grant of $2.06 per share. The Company recognized $30,042 of stock-based compensation expense related to this award and expense to recognize anadditional $124,458 over the next 2.5 years. During the year ended December 31, 2024, the Company issued 60,000 shares of Class A common stock to the Company’s former CEO pursuant to his termination agreement, which vested immediately.The Company estimated the fair value of the shares using the closing stock price on the date of the grant of $1.80 per share and recognized stock-based compensation expense of $108,000. During the year ended December 31, 2024, the Company issued 260,000 Class A Common shares to settle outstanding accrued payables of $260,000 and recognized a loss of approximately $76,000 forthe difference in the fair value of the shares issued and the payables balance. The Company also issued 34,000 shares to consultants with a fair value of $32,200 for services rendered to the Company. On October 18, 2024, the Company entered into a consulting agreement with a third party for financing services on a month to month basis. As compensation for services the Company will pay theconsultant a fee of $20,000 per month consisting of $5,000 in cash and $15,000 in Class A common shares based on the average closing price for the last five trading days of the prior calendar month. Theconsultant earned 43,800 shares for services through December 31, 2024, which have not yet been issued, and the Company recognized stock-based compensation expense of $36,200. Restricted Stock Awards On March 4, 2024, the Compensation Committee of the Board of Directors approved awards of restricted stock units (“RSU’s”) to various employees, non-employee directors and consultants. Non-employee directors received an aggregate of 224,500 RSU’s, with 112,000 RSU’s vesting over 3 years beginning November 15, 2024, and 112,500 RSU’s fully vesting at November 15, 2024. Employeesreceived a total of 225,000 RSU’s, including 50,000 RSU’s each to the Company’s CEO, CFO and General Counsel pursuant to their employment agreements. A total of 35,000 RSU’s of the employeeRSU’s vest immediately, with the remainder over 3 years beginning November 15, 2024. The awards also included 60,000 RSU’s pursuant to the agreement with RMH, Ltd., and 30,000 RSU’s to theCompany’s former President. These consultant awards vest on November 15, 2024. The Company estimated the fair value of the RSU’s using the stock price of $1.97 per share on the date of grant. On December 16, 2024, the Compensation Committee of the Board of Directors approved 30,000 awards of restricted stock units (“RSU’s”) to various employees. The Company estimated the fair valueof the RSU’s using the stock price of $0.593 per share on the date of grant. The RSU’s vest over 3 years beginning December 16, 2025. As of December 31, 2024, 213,167 shares of restricted common stock have vested with the remaining 266,333 restricted shares to vest. In connection with the vesting of RSU’s, an aggregate of 13,394shares were withheld and cancelled for withholdings taxes. F-27
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Class A Common Stock Options During the year ended December 31, 2024, the Compensation Committee of the Board of Directors approved common stock options to purchase 235,000 shares of Class A common stock to variousemployees including 75,000 to the Company’s CEO and 50,000 to the CFO. The options have a term of 10 years and an exercise price of $2.02 per share, which options vest in 3 equal annualinstallments. The following table reflects the weighted average assumptions used to estimate the fair value of stock options granted during the year ended December 31, 2024: 2024 Volatility 110.42%Expected life (years) 6.0 Risk-free interest rate 4.26%Dividend rate —% The following table summarizes the stock option activity for the years ended December 31, 2024 and 2023: Options Weighted-AverageExercise PricePer Share Outstanding, December 31, 2023 - $ - Granted 235,000 $ 2.02 Exercised - $ - Forfeited - $ - Expired - $ - Outstanding and expected to vest, December 31, 2024 235,000 $ 2.02 The following table discloses information regarding outstanding and exercisable options at December 31, 2024: Outstanding Exercisable Exercise Price Range Number ofOptionShares WeightedAverageExercise Price Weighted AverageRemainingLife (Years) Number ofOptionShares WeightedAverageExercise Price $ 2.02 235,000 $ 2.02 9.19 - $ - 235,000 $ 2.02 9.19 - $ - Aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option and the fair value of the Company’s common stock for stock options that were in-the-money at period end. As of December 31, 2024, the intrinsic value for the options vested and outstanding was $0. Class A Common Stock Warrants During the year ended December 31, 2024, the Company issued 1,200,000 common stock warrants to a vendor as an incentive to settle outstanding payable amounts owed. The warrant has a term of 2years, an exercise price of $0.75 and is exercisable immediately. Upon exercise, the vendor will reduce the payable amount owed based on the exercised amount in lieu of paying cash to the Company. The following table reflects the weighted average assumptions used to estimate the fair value of stock warrants granted during the year ended December 31, 2024: 2024 Volatility 79.42%Expected life (years) 2 Risk-free interest rate 3.95%Dividend rate —% F-28
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The warrants had an estimated fair value of $981,826 which was recognized as stock-based compensation expense during the year ended December 31, 2024. The following table summarizes the stock warrant activity for the years ended December 31, 2024 and 2023: Warrants Weighted-AverageExercise PricePer Share Outstanding and exercisable, January 1, 2023 - $ - Granted 14,564,000 $ 11.50 Exercised - $ - Forfeited - $ - Expired - $ - Outstanding, December 31, 2023 14,564,000 $ 11.50 Granted 1,650,000 $ 2.82 Exercised $ - Forfeited (300,000) $ 11.50 Expired - $ - Outstanding and expected to vest, December 31, 2024 15,914,000 $ 10.69 The following table discloses information regarding outstanding and exercisable warrants at December 31, 2024: Outstanding Exercisable Exercise Price Range Number ofWarrantShares WeightedAverageExercise Price Weighted AverageRemainingLife (Years) Number ofWarrantShares WeightedAverageExercise Price $ 0.75 1,200,000 $ 0.75 1.80 1,200,000 $ 0.75 $ 11.50 14,714,000 $ 11.50 3.77 14,714,000 $ 11.50 15,914,000 10.69 3.62 15,914,000 3.62 Aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option and the fair value of the Company’s common stock for stock options that were in-the-money at period end. As of December 31, 2024, the intrinsic value for the warrants vested and outstanding was $62,820. The Company recognized total stock-based compensation expense of $2,778,991 relates to class A common shares issued, RSU vesting, common stock option vesting, and warrants issued during the yearended December 31, 2024 and expects to recognize an additional $750,947 through December 31, 2027 assuming all awards vest. Non-Redemption Agreement On November 13, 2023, the Company entered into an agreement with (i) Meteora Capital Partners, LP (“MCP”), (ii) Meteora Select Trading Opportunities Master, LP (“MSTO”), and (iii) MeteoraStrategic Capital, LLC (“MSC” and, collectively with MCP and MSTO, “Backstop Investor”) (the “Non-Redemption Agreement”) pursuant to which Backstop Investor agreed to reverse the redemptionof 600,000 shares of common stock, par value $0.0001 per share, of HNRA (“Common Stock”). Immediately upon consummation of the closing of the transactions contemplated by the MIPA (the“Closing”), HNRA paid the Backstop Investor, in respect of the Backstop Investor Shares, an amount in cash equal to (x) the Backstop Investor Shares, multiplied by (y) the Redemption Price (as definedin HNRA’s amended and restated certificate of incorporation) minus $5.00, or $3,567,960. The Company paid the BackStop Investor a total of $6,017,960 in cash related to the Non-RedemptionAgreement from proceeds of the Trust Account. F-29
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Common Stock Purchase Agreement On October 17, 2022, the Company entered into a common stock purchase agreement (as amended, the “Common Stock Purchase Agreement”) and a related registration rights agreement (the “WhiteLion RRA”) with White Lion Capital, LLC, a Nevada limited liability company (“White Lion”). On March 7, 2024, we entered into an Amendment No. 1 to the Common Stock Purchase Agreement.Pursuant to the Common Stock Purchase Agreement, the Company has the right, but not the obligation to require White Lion to purchase, from time to time, up to $150,000,000 in aggregate grosspurchase price of newly issued shares of the Company’s common stock, par value $0.0001 per share, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement.Capitalized terms used but not otherwise defined herein shall have the meaning given to such terms by the Common Stock Purchase Agreement. Subject to the satisfaction of certain customary conditions including, without limitation, the effectiveness of a registration statement registering the shares issuable pursuant to the Common Stock PurchaseAgreement, the Company’s right to sell shares to White Lion will commence on the effective date of the registration statement and extend until December 31, 2026. During such term, subject to the termsand conditions of the Common Stock Purchase Agreement, the Company may notify White Lion when the Company exercises its right to sell shares (the effective date of such notice, a “Notice Date”).The number of shares sold pursuant to any such notice may not exceed (i) the lower of (a) $2,000,000 and (b) the dollar amount equal to the product of (1) the Effective Daily Trading Volume (2) theclosing price of common stock on the Effective Date (3) 400% and (4) 30%, divided by the closing price of common stock on NYSE American preceding the Notice Date and (ii) a number of shares ofcommon stock equal to the Average Daily Trading Volume multiplied by the Percentage Limit. The purchase price to be paid by White Lion for any such shares will equal 96% of the lowest daily volume-weighted average price of common stock during a period of two consecutive trading daysfollowing the applicable Notice Date. The Company will have the right to terminate the Common Stock Purchase Agreement at any time after Commencement, at no cost or penalty, upon three trading days’ prior written notice. Additionally,White Lion will have the right to terminate the Common Stock Purchase Agreement upon three days’ prior written notice to the Company if (i) there is a Fundamental Transaction, (ii) the Company is inbreach or default in any material respect of the White Lion RRA, (iii) there is a lapse of the effectiveness, or unavailability of, the Registration Statement for a period of 45 consecutive trading days or formore than an aggregate of 90 trading days in any 365-day period, (iv) the suspension of trading of the common stock for a period of five consecutive trading days, (v) the material breach of the CommonStock Purchase Agreement by the Company, which breach is not cured within the applicable cure period or (vi) a Material Adverse Effect has occurred and is continuing. No termination of the CommonStock Purchase Agreement will affect the registration rights provisions contained in the White Lion RRA. In consideration for the commitments of White Lion, as described above, during the period from November 16, 2023 to December 31, 2023 (Successor) the Company issued 138,122 shares of Class Acommon stock to White Lion in satisfaction of a $1,500,000 commitment fee pursuant to the terms of the Common stock Purchase Agreement at a price of $10.86 per share, which is include in generaland administrative expenses on the consolidated statement of operations of the Successor as a result of the uncertainty at the issuance date regarding the ability to utilize the Common Stock PurchaseAgreement until an effective registration statement was in place. On March 7, 2024, the Company entered into an Amendment No. 1 to Common Stock Purchase Agreement (the “Amendment”) with White Lion. Pursuant to the Amendment, the Company and WhiteLion agreed to an aggregate fixed number of Commitment Shares equal to 440,000 shares of common stock to be issued to White Lion in consideration for commitments of White Lion under theCommon Stock Purchase Agreement, which the Company agreed to include all of the Commitment Shares on the Initial Registration Statement filed by the Company. The Company recognized share-based compensation expense of $573,568 related to the Amendment due to uncertainty at the issuance date regarding the ability to utilize the Common Stock Purchase Agreement until an effectiveregistration statement was in place and issued the additional 301,878 shares of Class A Common stock in June 2024. Finally, pursuant to the Amendment, the Company’s right to sell shares of common stock to White Lion will now extend until December 31, 2026. F-30
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On June 17, 2024, the Company entered into an Amendment No. 2 to Common Stock Purchase Agreement (the “2nd Amendment”) with White Lion. Pursuant to the 2nd Amendment, the Company andWhite Lion agreed to amend the process of a Rapid Purchase, whereby the parties will close on the Rapid Purchase on the trading day the notice of the applicable Rapid Purchase is given. The 2ndAmendment, among other things, also removed the maximum number of shares required to be purchased upon notice of a Rapid Purchase, added a limit of 100,000 shares of Common Stock perindividual request, and revised the purchase price of a Rapid Purchase to equal the lowest traded price of Common Stock during the one hour following White Lion’s acceptance of the Rapid Purchase foreach request. In addition, White Lion agreed that, on any single business day, it shall not publicly resell an aggregate amount of Commitment Shares in an amount that exceeds 7% of the daily tradingvolume of the Common Stock for such business day, excluding any trades before or after regular trading hours and any block trades. In addition, the Company may, from time to time while a purchase notice is active, issue a Rapid Purchase Notice to White Lion for the purchase of shares (not to exceed 100,000 shares per individualrequest) at a purchase price equal to the lowest traded price of Common Stock during the one hour following White Lion’s acceptance of the Rapid Purchase for each request, and which the parties willclose on the Rapid Purchase on the trading day the notice of the applicable Rapid Purchase is given within two Business Days of the applicable Rapid Purchase Date. Furthermore, White Lion agreed that,on any single Business Day, it shall not publicly resell an aggregate amount of Commitment Shares in an amount that exceeds 7% of the daily trading volume of our Class A Common Stock for the suchpreceding Business Day, excluding any trades before or after regular trading hours and any block trades. In addition, pursuant to the Amendment, the Company may, from time to time while a Purchase Notice is active, issue a Rapid Purchase Notice to White Lion which the parties will close on the RapidPurchase within two Business Days of the applicable Rapid Purchase Date. Furthermore, White Lion agreed that, on any single Business Day, it shall not publicly resell an aggregate amount ofCommitment Shares in an amount that exceeds 7% of the daily trading volume of the Common Stock for the preceding Business Day. During the year ended December 31, 2024, the Company issued 2,230,000 shares under the Common Stock Purchase Agreement for $2,628,334 in net cash proceeds. Registration Rights Agreement (White Lion) Concurrently with the execution of the Common Stock Purchase Agreement, the Company entered into the White Lion RRA with the White Lion in which the Company has agreed to register the sharesof common stock purchased by White Lion with the SEC for resale within 30 days of the consummation of a business combination. The White Lion RRA also contains usual and customary damagesprovisions for failure to file and failure to have the registration statement declared effective by the SEC within the time periods specified. The Common Stock Purchase Agreement and the White Lion RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warrantiesand covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject tolimitations agreed upon by the contracting parties. NOTE 8 — FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC 820, “Fair Value Measurement”, approximates the carrying amounts represented on thebalance sheet. The Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAPestablishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identicalassets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: ● Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; ● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted pricesfor identical or similar instruments in markets that are not active; and ● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniquesin which one or more significant inputs or significant value drivers are unobservable. F-31
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In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in itsentirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. Recurring Basis Assets and liabilities measured at fair value on a recurring basis are as follows: Derivatives The Company’s commodity price derivatives primarily represent crude oil collar contracts (some with long calls), fixed price swap contracts and differential swap contracts. The asset and liabilitymeasurements for the Company’s commodity price derivative contracts are determined using Level 2 inputs. The asset and liability values attributable to the Company’s commodity price derivatives weredetermined based on inputs that include, but not limited to, the contractual price of the underlying position, current market prices, crude oil forward curves, discount rates, and volatility factors. TheCompany had a net derivative asset of $106,397 and $467,687 as of December 31, 2024 and 2023, respectively. Convertible Note Liability Certain of the Company’s convertible note agreements contain features that contain conversion terms that may require the debt to be settled with a variable number of shares based on discounted pricing tomarket of the Company’s Class A Common Stock. Under ASC 480, the instrument is accounted for at fair value, which are determined using level 3 inputs. The following table represents the weighted average inputs used in calculating the fair value of the conversion features of the convertible notes on the date of issuance and December 31, 2024: December 31,2024 IssuanceDate Term, in years 2.92 3 Expected volatility 83.2% 82.40%Risk-free interest rate 4.27% 4.25%Expected dividend yield —% —% The Company estimated the present value of the convertible notes using an estimated 15% discount rate and the three-year maturity period. The Company estimated the aggregate fair value at issuance tobe $698,620, and estimated the fair value at December 31, 2024 to be $891,364, resulting in a loss on change in fair value of $192,744 for the year ended December 31, 2024. Forward Purchase Agreement The fair value upon issuance of the Forward Purchase Agreement (both the FPA Put Option liability and Fixed Maturity Consideration) and the change in fair value is included in other expense, net in theconsolidated statements of operations and comprehensive loss. The fair value of the FPA was estimated using a Monte-Carlo Simulation in a risk-neutral framework. Specifically, the future stock price issimulated assuming a Geometric Brownian Motion (“GBM”). For each simulated path, the forward purchase value is calculated based on the contractual terms and then discounted back to present.Finally, the value of the forward is calculated as the average present value over all simulated paths. The Maturity Consideration was also valued as part of this model as the timing of the payment of theMaturity Consideration may be accelerated if the Maturity Date is accelerated. The model also considered the likelihood of a dilutive offering of common stock. F-32
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On November 15, 2024, the Company entered into a Confidential Rescission, Settlement, and Release Agreement with the FPA Seller whereby the parties mutually agreed to rescind the Forward PurchaseAgreement and related agreements between the parties, which as a result, any transactions, notices or other obligations thereunder are void ab initio. The parties also agreed to release each other of allclaims related to the Forward Purchase Agreement, and in exchange for such release, the Company agreed to issue to the FPA Seller 450,000 restricted Class A Common shares with a fair value of$450,000 based on the closing price of the Company’s Class A common stock at the agreement date The following table represents the weighted average inputs used in calculating the fair value of the prepaid forward contract and the Maturity Consideration as of November 15, 2024, the date ofsettlement, and December 31, 2023: November 15,2024 December 31,2023 Stock price $ 1.00 $ 2.03 Term (in years) 2.00 2.88 Expected volatility 75.0% 40.7%Risk-free interest rate 4.22% 3.96%Expected dividend yield —% —% The Company estimated the likelihood of a Dilutive Offering at a price of $5.00 per share to be 50% within nine months of December 31, 2023. The FPA estimated fair value is considered a level 3 fairvalue measurement. Warrant Liability Based on the redemption right present in the warrants issued in connection with promissory notes, the warrants are accounted for as a liability in accordance with ASC 480 and ASC 815, with the changesin fair value of the warrants recognize in the statement of operations. The Company valued the warrants using the trading prices of the Public Warrants, which mirror the terms of the note payable warrants. The Company also estimated the fair value of the redemption putusing a present value calculation for the time from the Closing Date of the MIPA through the 18-month redemption date and an estimated discount rate of 15%. The initial fair value of the warrantliabilities for warrants issued during was $409,334 and $4,506,312 for the years ended December 31, 2024 and 2023, respectively and was recognized as debt discount. The estimated fair value of thewarrants and redemption put was $5,681,849 and $4,777,971 as of December 31, 2024 and 2023, respectively, and the Company recognized a change in fair value of the warrant liability of a loss of$804,004 for the year ended December 31, 2024 and a gain of $187,704 during the period from November 15, 2023 to December 31, 2023. The warrant liability estimated fair value is considered a level 3fair value measurement. Nonrecurring Basis The carrying value of the Company’s financial instruments, consisting of cash, accounts receivable, accounts payable and accrued expenses, approximates their fair value due to the short maturity of suchinstruments. Financial instruments also consist of debt for which fair value approximates carrying values as the debt bears interest at fixed or variable rates which are reflective of current rates otherwiseavailable to the Company. The Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. F-33
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NOTE 9 — RELATED PARTY TRANSACTIONS On May 5, 2022, the Company entered into a Referral Fee and Consulting Agreement (the “Consulting Agreement”) with Alexandria VMA Capital, LLC (“Alexandria”), an entity controlled by Mr.Caravaggio, who became the Company’s CEO on December 17, 2023. Pursuant to the Consulting Agreement, Alexandria provided information and contacts with suitable investments and acquisitioncandidates for the Company’s initial business combination. In addition, Alexandria provided due diligence, purchasing and negotiating strategy advice, organizational and operational advice, and suchother services as requested by the Company. In consideration of the services provided by Alexandria, the Company paid to Alexandria Capital a referral fee of $1,800,000 equal to 2% of the total value ofthe Company’s business combination, with half being paid by the issuance of 89,000 shares of the Company’s Class A Common Stock. No gain was recognized on the issuance of these shares for thedifference in the fair value of the shares and the $900,000 payable due to the related party nature of the transaction. The remaining $900,000 was reflected as accounts payable. As of December 31, 2024and 2023, the Company owes $403,000 and $762,000 of the fee, respectively. On January 20, 2023, January 27, 2023, and February 14, 2023, Mr. Caravaggio entered into Private Notes Payable with the Company. Pursuant to the Private Notes Payable, Mr. Caravaggio paid anaggregate amount of $179,000 and received promissory notes in the aggregate principal amount of $179,000, accruing interest at a rate of 15% per annum, and common stock warrants to purchase anaggregate of 179,000 shares of Class A Common Stock of the Company at an exercise price of $11.50 per share. The warrants issued to Mr. Caravaggio are identical to the Public Warrants that arepublicly traded on the NYSE American under the symbol “EONR.WS” in all material respects, except that the warrants were not transferable, assignable or salable until 30 days after the Company’sinitial business combination. The warrants are exercisable on the same basis as the Public Warrants. On November 13, 2023, pursuant to an Exchange Agreement, the Company agreed with Dante Caravaggio to exchange, in consideration of the surrender and forgiveness of an aggregate amount(including principal and interest accrued thereon) of $100,198 due under the Private Notes Payable, for 20,040 shares of Class A Common Stock at a price per share equal to $5.00 per share. TheCompany recognized a loss extinguishment of $101,204 in connection with this transaction. Pursuant to the Founder Pledge Agreement, upon the Closing, the Company issued 30,000 shares of Class A Common Stock to Dante Caravaggio, LLC, an entity controlled by Mr. Caravaggio with a fairvalue of $203,100. On February 14, 2023, the Company entered into a consulting agreement with Donald Orr, the Company’s former President, which became effective upon the closing of the MIPA for a term of threeyears. Under the agreement, the Company will pay Mr. Orr an initial cash amount of $25,000, an initial award of 60,000 shares of common stock, a monthly payment of $8,000 for the first year of theagreement and $12,000 per month for the remaining two years, and two grants, each consisting of restricted stock units (“RSUs”) calculated by dividing $150,000 by the stock price on the one year andtwo year anniversary of the initial Business Combination. Each of the RSU awards will vest upon the one year and two-year anniversary of the grants. In the event of termination of Mr. Orr without cause,Mr. Orr will be entitled to 12 months of the monthly payment in effect at that time, and the RSU awards issued to Mr. Orr shall fully vest. The 60,000 RSU’s were approved by the Board and issued inMarch of 2024. On February 15, 2023, the Company entered into a consulting agreement with Rhône Merchant House, Ltd. (“RMH Ltd”), a company controlled by the Company’s former Chairman and CEO Donald H.Goree, which became effective upon the closing of the MIPA for a term of three years. Under the agreement, the Company paid RMH Ltd an initial cash amount of $50,000, an initial award of 60,000shares of common stock, a monthly payment of $22,000, and two grants, each consisting of RSUs calculated by dividing $250,000 by the stock price on the one year and two-year anniversary of the initialBusiness Combination. Each of the RSU awards will vest upon the one year and two-year anniversary of the grants. In the event of termination of RMH Ltd. without cause, RMH Ltd. would be entitled to$264,000, and the RSU awards issued to RMH Ltd. would fully vest. Effective May 6, 2024, the Company and RMH Ltd. entered into a settlement and mutual release agreement pursuant to which the Company paid $100,000 in cash, with $50,000 paid on or beforeexecution and the remaining $50,000 by July 24, 2024. The Company also agreed to issue 150,000 shares of Class A Common Stock subject to a contractual lockup as final consideration under theConsulting Agreement, which was deemed terminated effective May 6, 2024. RMH Ltd’s 60,000 RSU’s were forfeited as part of the agreement. The Company recognized $360,000 of stock-basedcompensation expense related to the Class A Common Shares. F-34
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NOTE 10 — COMMITMENTS AND CONTINGENCIES Registration Rights Agreement (Founder Shares) The holders of the Founder Shares and the Private Placement Units and warrants that may be issued upon conversion of Private Notes Payable (and any shares of common stock issuable upon the exerciseof the Private Placement Units or warrants issued upon conversion of the working capital loans) will be entitled to registration rights pursuant to a registration rights agreement to be signed on or beforethe date of the prospectus for the Initial Public Offering. The holders of these securities are entitled to make up to three demands in the case of the founder shares, excluding short form registrationdemands, and one demand in the case of the private placement warrants, the working capital loan warrants and, in each case, the underlying shares that the Company register such securities for sale underthe Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. In the case of the private placementwarrants, representative shares issued to EF Hutton, the demand registration rights provided will not be exercisable for longer than five years from the effective date of the registration statement incompliance with FINRA Rule 5110(f)(2)(G)(iv) and the piggyback registration right provided will not be exercisable for longer than seven years from the effective date of the registration statement incompliance with FINRA Rule 5110(f)(2)(G)(v). The Company will bear the expenses incurred in connection with the filing of any such registration statements. Contingencies The Company is a party to various legal actions arising in the ordinary course of its businesses. In accordance with ASC 450, Contingencies, the Company accrues reserves for outstanding lawsuits,claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legalproceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amountsaccrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher,and possibly significantly more, than the amounts accrued. Environmental From time to time, and in the ordinary course of business, the Company may be subject to certain environmental liabilities. Environmental expenditures that relate to an existing condition caused by pastoperations and have no future economic benefits are expensed. Environmental expenditures that extend the life of the related property or mitigate or prevent future environmental contamination arecapitalized. Liabilities for expenditures that will not qualify for capitalization are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated. Suchliabilities are undiscounted unless the timing of cash payments for the liability is fixed or reliably determinable. Environmental liabilities normally involve estimates that are subject to revision untilsettlement or remediation occurs. As of December 31, 2024 and 2023, the Company has an environmental remediation liability of $675,000 recognized on its consolidated balance sheet relating to an oil spill at one of the Predecessor’sproducing sites in fiscal year 2017 which is recorded in other liabilities in the consolidated balance sheets. The producing site was subsequently sold in 2019 and the Predecessor indemnified the purchaserfor the remediation costs. Management based the remediation liability on the undiscounted cost received from third- party quotes to remediate the spill. As of December 31, 2024, the Company does notbelieve it is likely remediation will be required in the next five years. F-35
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NOTE 11 — INCOME TAXES As of December 31, 2024 and 2023, the Company’s net deferred tax assets were as follows: December 31,2024 December 31,2023 Deferred tax assets Federal net operating loss $ 1,913,959 $ 454,225 Transaction costs 1,515,401 1,441,904 Other debt costs - 885,890 Accrued expenses 1,202,259 - Deferred compensation 446,113 - Derivative liability 228,732 - Stock-based compensation 648,697 268,405 Other 45,322 3,611 Total deferred tax assets 6,000,483 3,054,035 Deferred tax liabilities Oil and natural gas properties (8,665,914) (9,097,162)Unrealized gain on derivatives (27,302) (120,013)Total deferred tax assets (8,693,216) (9,217,175)Net deferred tax liabilities (2,692,733) (6,163,140)Valuation allowance for deferred tax assets - - Net Deferred tax liability, net of allowance $ (2,692,733) $ (6,163,140) The income tax provision consists of the following: For theperiod from For the Year EndedDecember 31,2024 November 15,2023 toDecember 31,2023 Current income tax (benefit) expense Federal $ - $ (22,007)State - - Total current income tax benefit - (22,007)Deferred tax (benefit) expense: Federal (2,840,051) (1,467,862)State (630,356) (325,795)Valuation allowance - (571,975)Total deferred income tax (benefit) expense (3,470,407) (2,365,632)Total income tax (benefit) expense $ (3,470,407) $ (2,387,639) As of December 31, 2024, the Company had $7,458,627 of estimated U.S. federal net operating loss carryovers, which do not expire, and no state net operating loss carryovers available to offset futuretaxable income. In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimaterealization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts becomedeductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of theinformation available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. Under the Tax Cuts and Jobs Act, net operating losses incurred after December 31, 2017 can only offset 80% of taxable income. However, these net operating losses may be carried forward indefinitelyinstead of limited to twenty years under previous tax law. Carryback of these losses is no longer permitted. The CARES Act temporarily removed the 80% of taxable income limitation to allow NOLcarryforwards to fully offset income. For tax years beginning after 2021, the Company can take: (1) a 100% deduction of NOLs arising in tax years prior to 2018, and (2) a deduction limited to 80% ofmodified taxable income for NOLs arising in tax years after 2017. F-36
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A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows: For theperiod from For theperiod from November 15,2023 toDecember 31,2023 November 15,2023 toDecember 31,2023 Statutory federal income tax rate 21.00% 21.00%State Taxes (Net of Federal Benefit) 5.02% 2.86%Permanent Differences (1.60)% (8.11)%Exchange of Class B units for Class A common stock 3.24% -%Change in valuation allowance -% 5.02%Other (0.01)% 0.19%Income tax provision 27.65% 20. 97% The effective income tax rate differs from the U.S. statutory rate of 21 percent primarily due to permanent differences between GAAP income and taxable income. Periods prior to November 15, 2023 arenot shown because the Predecessors were treated as partnerships for U.S. federal income tax purposes and therefore do not record a provision for U.S. federal income tax because the partners of thePredecessors report their share of the Predecessors’ income or loss on their respective income tax returns. The Predecessors are required to file tax returns on Form 1065 with the IRS. The 2021 through2024 tax years remain open to examination. The Company files income tax returns in the U.S. federal jurisdiction, Texas and New Mexico, and is subject to examination by the various taxing authorities. The Company’s tax returns since inceptionremain open to examination by the taxing authorities. Significant differences may exist between the results of operations reported in these consolidated financial statements and those determined forincome tax purposes primarily due to the use of different asset valuation methods for tax purposes. NOTE 12 — SUBSEQUENT EVENTS The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. On January 10, 2025, the Company issued a total of 60,500 Class A common shares to a consultant pursuant to the terms of the consulting agreement described in Note 8, including 43,800 owed as ofDecember 31, 2024. On January 13, 2025, the Company entered into a settlement agreement with its former President, Donald Orr, whereby the Company agreed to pay Mr Orr. $75,000 in cash and issue 200,000 class Acommon shares for the termination of his prior consulting agreement. On January 14, 2025, the Company entered into an agreement with a consultant whereby the Company agreed to issue the consultant 45,050 Class A common shares for the settlement of $45,050 inoutstanding services. On February 10, 2025, the Company entered into a Purchase, Sale, Termination and Exchange Agreement (the “Agreement”), by and among the Company, OpCo, SPAC Subsidiary, HNRA Royalties,EON Royalty, CIC, DenCo, EON Management, and 4400. The closing of the transactions contemplated by the Agreement (the “Closing”) is subject to the satisfaction of various conditions, including theCompany obtaining financing. F-37
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Pursuant to the Agreement, the Company agreed to purchase the ORRI from EON Royalty for $14,000,000, payable in cash at the Closing. In addition, at the Closing, EON Royalty agreed to waive alloutstanding interest accrued under the Seller Note, reduce the outstanding principal amount of the Seller Note to $8,000,000 and settle and discharge the Seller Note in exchange for the payment of$8,000,000 in cash. EON Royalty further agreed to assign and transfer the OpCo Preferred Units to OpCo in exchange for the issuance by the Company of 3,000,000 shares of Class A Common Stock atthe Closing. On February 11, 2025, EON Royalty Exchanged the remaining 500,000 OpCo Class B Units for 500,000 shares of Class A Common Stock. As a result, there are no remaining Class BCommon shares outstanding as of this filing. As consideration for entering into the Agreement, the Company agreed to release the Escrow Shares to EON Royalty and to promptly process any exchange notice delivered by EON Royalty to exchangethe Escrow Share for shares of Class A Common Stock, and EON Royalty agreed to deliver such exchange notice within two days of the date of the Agreement. The Agreement contains customaryrepresentations, warranties, indemnification provisions closing conditions, and covenants. The Closing is contingent upon the occurrence of certain conditions, including (i) the availability of financing to the Company, (ii) the receipt by EON Royalty of a consent of First International Bank &Trust to the Agreement and a written termination agreement, executed by the Company and First International Bank & Trust, terminating that certain Subordination Agreement, dated as of November 15,2023, by and among First International Bank & Trust, the Company and EON Royalty, (iii) the receipt by the Company of any required stockholder consents, (iv) the respective representations andwarranties of the parties being true and correct, subject to certain materiality exceptions and (v) the performance by the parties in all material respects of their respective obligations under the Agreement. The Agreement may be terminated at any time by mutual consent of the parties thereto or by any one party if the counterparty is in material breach of the Agreement. If the Closing does not occur prior to1:00 p.m. Central Time on June 3, 2025, the Agreement will automatically terminate. Subsequent to December 31, 2024, the Company and 16 of the Investors (the “Exchange Investors”) entered into exchange agreements (the “Exchange Agreements”) whereby the Exchange Investorsexchanged their Old Notes and Old Warrants for convertible promissory notes (the “Convertible Notes”). The principal amounts of the Convertible Notes were determined by adding the original principalamount of the Old Notes and the number of Old Warrants. In connection with the Exchange Agreements, the Company issued Convertible Notes in the aggregate principal amount of $1,566,500 inexchange for Old Notes in the aggregate principal amount of $682,500 and 1,634,000 Old Warrants. The Convertible Notes mature on January 31, 2028 and accrue interest at a rate of 7.5% per annum. The Convertible Notes may be prepaid by the Company at any time, in whole or in part, without anypremium or penalty. The Convertible Notes may be converted by the holders at any time after issuance into shares of Class A Common Stock at a conversion price equal to the greater of (a) $0.25 pershare or (b) 90% multiplied by the average of the three lowest VWAPs of the Class A Common Stock over the ten trading days prior to conversion (the “Conversion Price”). If, at any time the ConvertibleNotes are outstanding, the Company issues or sells Class A Common Stock for no consideration or at a price lower than the then-current Conversion Price, then the Conversion Price of the ConvertibleNotes will be automatically reduced to the amount of consideration per share received by the Company in such sale or offering. In addition, so long as any Convertible Notes are outstanding, if theCompany issues any security on terms more favorable than the Convertible Notes, then the Company must notify the holder and such more favorable term shall become a part of the Convertible Note, atthe holder’s option Subsequent to year end, the Company issued 1,954,514 shares of class A common stock for the conversion of $1,368,000 in convertible notes principal and $10,888 of accrued interest pursuant to theterms of the convertible notes. Subsequent to December 31, 2024, the Company issued 4,770,000 shares under the Common Stock Purchase Agreement in exchange for cash proceeds of $4,364,572. Subsequent to year end, an additional 9,357 shares were issued to an employee related to vesting of RSU awards, F-38
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NOTE 13 — SUPPLEMENTAL DISCLOSURE OF OIL AND NATURAL GAS OPERATIONS (UNAUDITED) The Company has only one reportable operating segment, which is oil and natural gas development, exploration, and production in the United States. See the Company’s accompanying consolidatedstatements of operations for information about results of operations for oil and gas producing activities. Capitalized Costs Related to Crude Oil and Natural Gas Producing Activities Aggregate capitalized costs related to crude oil and natural gas exploration and production activities with applicable accumulated depreciation, depletion, and amortization are presented below as of thedates indicated: As of December 31, 2024 2023 Oil and natural gas properties Proved $ 100,285,138 $ 94,189,372 Less: accumulated depreciation, depletion, and amortization (2,759,226) (352,127)Net oil and natural gas properties capitalized costs $ 97,525,912 $ 93,837,245 Costs Incurred for Oil and Natural Gas Producing Activities Costs incurred in crude oil and natural gas exploration and development for the periods presented: Successor Predecessor For the YearEndedDecember 31,2024 November 15,2023 toDecember 31,2023 January 1,2023 toNovember 14,2023 Exploration costs $ - $ - $ - Development costs 6,095,765 238,499 6,769,557 Total $ 6,095,765 $ 238,499 $ 6,769,557 Reserve Quantity Information The following information represents estimates of the Company’s proved reserves as of December 31, 2024 and 2023, which have been prepared by an independent third party and they are presented inaccordance with SEC rules. These rules require SEC reporting companies to prepare their reserve estimates using specified reserve definitions and pricing based on a 12-month unweighted average of thefirst-day-of-the-month pricing. The pricing that was used for estimates of the Company’s reserves as of December 31, 2024 and 2023 was based on an unweighted average 12-month average U.S. EnergyInformation Administration WTI posted price per Bbl for oil and Henry Hub prices for natural gas price per Mcf for natural gas, adjusted for transportation, quality and basis differentials. Subject to limited exceptions, proved undeveloped reserves may only be booked if they relate to wells scheduled to be drilled within five years of the date of booking. This requirement has limited andmay continue to limit, the Company’s potential to record additional proved undeveloped reserves as it pursues its drilling program. Moreover, the Company may be required to write down its provedundeveloped reserves if it does not drill on those reserves within the required five-year timeframe. The Company does not have any proved undeveloped reserves which have remained undeveloped forfive years or more. The Company’s proved oil and natural gas reserves are located in the United States in the Permian Basin of southeast New Mexico. Proved reserves were estimated in accordance withthe guidelines established by the SEC and the FASB. Oil and natural gas reserve quantity estimates are subject to numerous uncertainties inherent in the estimation of quantities of proved reserves and inthe projection of future rates of production and the timing of development expenditures. The accuracy of such estimates is a function of the quality of available data and of engineering and geologicalinterpretation and judgment. Results of subsequent drilling, testing and production may cause either upward or downward revision of previous estimates. Further, the volumes considered to becommercially recoverable fluctuate with changes in prices and operating costs. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are moreimprecise than those of currently producing oil and natural gas properties. Accordingly, these estimates are expected to change as additional information becomes available in the future. F-39
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The following table and subsequent narrative disclosure provides a roll forward of the total proved reserves for the years ended December 31, 2024 and 2024 as well as proved developed and provedundeveloped reserves at the beginning and end of each respective year: For the years ended December 31, 2024 2023 Oil(MBbls) NaturalGas(MMcf) Total(MBoe) Oil(MBbls) NaturalGas(MMcf) Total(MBoe) Proved Reserves: Beginning of period 15,414 3,525 16,001 17,577 4,572 18,339 Extensions and discoveries - - - 1,817 495 1,900 Dispositions - - - (1,758) (457) (1,834)Revisions to previous estimates (1,140) (471) (1,219) (1,758) (729) (1,995)Production (256) (213) (291) (349) (356) (409)End of period 14,018 2,840 14,492 15,414 3,525 16,001 Proved Developed Reserves: Beginning of period 11,277 2,674 11,723 13,014 3,572 13,609 End of period 9,803 2,056 10,145 11,277 2,674 11,723 Proved Undeveloped Reserves: Beginning of period 4,137 850 4,279 4,564 1,000 4,730 End of period 4,215 784 4,346 4,137 850 4,279 Extensions and discoveries. For the year ended December 31, 2024 and 2023, extensions and discoveries contributed to the increase of 0 MBoe and 1,900 MBoe, respectively, in the Company’s provedreserves. The increase of extensions and discoveries in 2024 and 2023 is due to the Company’s development of the Seven Rivers waterflood. Dispositions: For the year ended December 31, 2023, dispositions represent the removal of reserves attributed to the sale of an undivided royalty interest equal in amount to ten percent (10%) by thePredecessor to EON Royalty of the Predecessor’s all oil, gas and minerals in, under and produced from each lease. Revisions of previous estimates. For the year ended December 31, 2024, revisions of previous estimates resulted in the decrease of reserves with a negative revision of 1,219 MBoe in the Company’sproved reserves. For the year ended December 31, 2023, revisions of previous estimates resulted in the decrease of reserves with a negative revision of 1,995 MBoe in the Company’s proved reserves. Thenegative revisions in 2024 and 2023 is primarily attributable to the decrease in year-end SEC commodity prices for oil and natural gas. Standardized Measure of Discounted Future Net Cash Flows The standardized measure of discounted future net cash flows does not purport to be, nor should it be interpreted to present, the fair value of the oil and natural gas reserves of a property. An estimate offair value would take into account, among other things, the recovery of reserves not presently classified as proved, the value of unproved properties and consideration of expected future economic andoperating conditions. F-40
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The estimates of future cash flows and future production and development costs as of December 31, 2023 and 2022 are based on the unweighted arithmetic average first-day-of-the-month price for thepreceding 12-month period. Estimated future production of proved reserves and estimated future production and development costs of proved reserves are based on current costs and economic conditions.All wellhead prices are held flat over the forecast period for all reserve categories. The estimated future net cash flows are then discounted at a rate of 10%. The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves is as follows: For the year endedDecember 31, 2024 2023 (in thousands) Future cash inflows $ 1,086,436 $ 1,216,840 Future production costs (453,384) (438,653)Future development costs (94,156) (94,156)Future net cash flows 538,896 684,031 10% annual discount for estimated timing of cash flows (331,634) (403,413)Standardized measure of discounted future net cash flows $ 207,262 $ 280,618 In the foregoing determination of future cash inflows, sales prices used for oil and natural gas for December 31, 2024 and 2023 were estimated using the average price during the 12-month period,determined as the unweighted arithmetic average of the first-day-of-the-month price for each month. Prices were adjusted by lease for quality, transportation fees and regional price differentials. Futurecosts of developing and producing the proved gas and oil reserves reported at the end of each year shown were based on costs determined at each such year-end, assuming the continuation of existingeconomic conditions. Furthermore, future development costs include abandonment costs. It is not intended that the FASB’s standardized measure of discounted future net cash flows represent the fair market value of the Company’s proved reserves. The Company cautions that the disclosuresshown are based on estimates of proved reserve quantities and future production schedules which are inherently imprecise and subject to revision and the 10% discount rate is arbitrary. In addition, costsand prices as of the measurement date are used in the determinations and no value may be assigned to probable or possible reserves. Changes in the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves are as follows: For the year endedDecember 31, 2024 2023 (in thousands) Balance, beginning of period (Successor for 2024, Predecessor for 2023) $ 280,618 $ 519,547 Net change in sales and transfer prices and in production (lifting) costs related to future production (32,505) (95,981)Sales and transfers of oil and natural gas produced during the period (9,504) (22,914)Changes in estimated future development costs 1,550 (2,313)Previously estimated development incurred during the period 5,628 7,008 Net purchases (divestitures) of reserves in place - (138,893)Net change due to revisions in quantity estimates (20,516) (45,534)Net change due to extensions and discoveries, and improved recovery — — Accretion of discount 28,062 51,955 Timing and other differences (46,070) (446)Standardized measure of discounted future net cash flows (Successor for 2024, Predecessor for 2023) $ 207,262 $ 280,618 F-41
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NOTE 14 — RESTATEMENT OF PREVIOUSLY ISSUED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) In connection with the preparation of the Company's Consolidated Financial Statements as of and for the fiscal year ended December 31, 2024, the Company discovered that as of and for the three andnine months ended September 30, 2024 it had not appropriately accounted for the fair value of its forward purchase agreement. The error resulted in an overstatement of the loss on change in fair value ofits forward purchase agreement of $5,190,631 for the three and nine months ended September 30, 2024 and an overstatement of the forward purchase agreement liability by this amount as of September30, 2024. There was no deferred tax impact of the error. The misstatements were material to the previously issued condensed consolidated financial statements of the Company and as a result, the Company has restated its condensed consolidated balance sheet,condensed consolidated statements of operations, condensed consolidated statements of changes in stockholder's equity, and condensed consolidated statements of cash flows as of and for the three andnine months ended September 30, 2024 presented herein. The restatement includes adjustments to forward purchase agreement liability, change in fair value of forward purchase agreement, accumulateddeficit, net loss before income taxes, net loss, net loss attributable to EON Resources, Inc., and net loss per share. The impact of the correction of the error is summarized below: Condensed Consolidated Statement of Operations Three Months Ended September 30, 2024 (Successor) As Reported Adjustment As Restated Change in fair value of FPA liability $ (4,209,294) $ 5,190,631 $ 981,337 Total Other Income (expense) (6,681,902) 5,190,631 (1,491,271)Loss before income taxes (4,697,096) 5,190,631 493,535 Net income (loss) (3,841,171) 5,190,631 1,349,460 Net income (loss) attributable to EON Resources, Inc. (3,841,171) 5,190,631 1,349,460 Net income (loss) per share of common stock – basic and diluted $ (0.67) $ 0.91 $ 0.24 Condensed Consolidated Statement of Operations Nine Months Ended September 30, 2024 (Successor) As Reported Adjustment As Restated Change in fair value of FPA liability $ (4,534,766) $ 5,190,631 $ 655,865 Total Other Income (expense) (10,969,550) 5,190,631 (5,778,919)Loss before income taxes (11,577,447) 5,190,631 (6,386,816)Net income (loss) (9,172,468) 5,190,631 (3,981,837)Net income (loss) attributable to EON Resources, Inc. (9,172,468) 5,190,631 (3,981,837)Net income (loss) per share of common stock – basic and diluted $ (1.67) $ 0.95 $ (0.73) Condensed Consolidated Balance Sheet As of September 30, 2024 (Successor) As Reported Adjustment As Restated Forward purchase agreement liability $ 5,628,863 $ 5,190,631 $ 438,232 Total current liabilities 44,782,226 5,190,631 39,591,595 Total liabilities 79,043,688 5,190,631 73,853,057 Accumulated deficit (28,291,213) 5,190,631 (23,100,582)Total stockholders’ deficit attributable to EON Resources, Inc. (6,425,818) 5,190,631 (1,235,187)Total stockholders’ equity 24,134,996 5,190,631 29,325,627 Total liabilities and stockholders’ equity $ 103,178,684 $ 5,190,631 $ 108,369,315 Condensed Consolidated Statement of Cash Flows Nine Months Ended September 30, 2024 (Successor) As Reported Adjustment As Restated Net income (loss) $ (9,172,468) $ 5,190,631 $ (3,981,837)Change in fair value of FPA liability (4,534,766) 5,190,631 655,865 Net cash provided by operating activities $ 3,346,362 $ - $ 3,346,362 F-42
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Exhibit 19.1 EON RESOURCES INC. INSIDER TRADING POLICY SUMMARY EON Resources Inc. (the “Company”) has adopted formal policies and procedures to prevent insider trading violations by its officers, directors, employees and related individuals. The followingsummary is presented in question-and-answer format. The following information is a summary only. All persons subject to the insider trading policy must read the entire policy. What is the insider trading policy? The insider trading policy contains rules applicable to our officers, directors, employees, consultants and vendors, and related individuals, concerning trading in stock or other securities of theCompany and companies with whom the Company does business. Among other things, the policy prohibits trading in the Company securities while in possession of inside information. What is “inside information?” Inside information is material, non-public information concerning the Company or any other public company with whom the Company does business. The policy contains many examples oftypes of material, non-public information. Who is subject to the insider trading policy? The policy covers the officers, directors, employees, consultants and vendors of the Company and all of its subsidiaries. The policy also covers family members of these persons and others whohave or may have access to inside information, including family members whose investments are controlled or influenced by these persons. Who is the compliance officer and what does he do? David M. Smith, General Counsel, is currently the compliance officer under this insider trading policy. The compliance officer is responsible for ensuring compliance with the policy, and hisduties include pre-approving all trades by persons subject to the pre-approval requirements described below. Who are Section 16 Insiders? Section 16 is part of the Securities Exchange Act of 1934. It requires certain senior officers, directors and large stockholders to file reports with the Securities and Exchange Commission abouttheir shareholdings and trades. The Section 16 Insiders are listed on Exhibit A to the policy. Section 16 Insiders are considered “Access Personnel” under the policy. Exhibit A will be automaticallyamended whenever the Company’s Board of Directors changes the designation of Section 16 insiders. 1
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Who are Access Personnel? Access Personnel include the Section 16 Insiders and other persons who, by virtue of their position, are likely to have access to material non-public information on a more frequent basis thanother Covered Persons. The Access Personnel are listed on Exhibit B to the policy. Exhibit B may be updated from time to time by the compliance officer. Is anyone else considered Access Personnel? Occasionally, the compliance officer may designate additional persons as Access Personnel on a temporary basis if they gain access to inside information. The compliance officer will informpeople in writing if they become Access Personnel and will inform them when they are no longer deemed Access Personnel. What special restrictions apply to Access Personnel? Access Personnel are subject to one or both of the following restrictions: 1. No trading in the Company’s securities during times of the year called blackout periods. 2. Required approval of the compliance officer prior to trading in the Company’s securities, even outside of blackout periods. Exhibit B lists the restrictions applicable to each Access Personnel. Such restrictions may be changed from time to time. What is the blackout period? The blackout period during which certain Access Personnel cannot trade in the Company’s securities begins fifteen (15) calendar days before the last trading day of a fiscal quarter and ends at thecommencement of trading on the third trading day following public release of the Company’s annual or quarterly financial results. The Company may extend the blackout period or implement differentblackout periods at any time by giving written notice to all Access Personnel. In addition, the Company may waive compliance with a blackout period if all material information concerning the Companyhas been publicly disclosed or is known by both parties to the proposed transaction. It is important to remember that even outside of the blackout period, Covered Persons are prohibited from buying,selling or otherwise transferring the Company’s securities if they are aware of material non-public information. What are the pre-clearance requirements? Certain Access Personnel must obtain the written permission of the compliance officer prior to engaging in any trade in the Company’s securities. Approval may take up to two business days, soAccess Personnel subject to this restriction should plan in advance. When Access Personnel request permission to make a trade, the compliance officer will complete a pre-clearance checklist and if thetrade is approved, will give written permission for the trade. The written permission will expire at the end of the second trading day following the date of written permission unless a longer period isgranted in the sole discretion of the compliance officer. Any such permission will automatically expire without advance notice upon the commencement of a blackout period. 2
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What is the restriction on market limit orders? Market limit orders are open orders placed with a broker which are to be executed only if the securities reach a certain price. A market limit order may continue indefinitely, or it may expire at aset time. In order to prevent Access Personnel from accidentally engaging in a trade when trading is not allowed, Access Personnel subject to pre-clearance requirements may not enter any market limitorders with their brokers for the Company’s securities except market limit orders which expire within the time allowed for trading after receiving written permission to trade from the compliance officer. Access Personnel subject to blackout periods may not enter into any market limit orders with their brokers for the Company’s securities other than orders which expire before the commencementof the next blackout period. The above restrictions are not applicable to approved Rule 10b5-1 plans (see below). Does the policy have exceptions for Rule 10b5-1 plans? The Company will in certain cases permit persons subject to this policy to enter into “blind trusts” or advance trading plans, and thereby avoid the prohibitions in the policy on trading while inpossession of inside information. All such plans by Access Personnel will require approval by the compliance officer, which approval must be obtained in advance of any trade that would otherwise besubject to the policy. I am not listed as Access Personnel. Does the policy apply to me? Yes. While people who are not Access Personnel are not subject to the blackout periods or pre-clearance requirements, all employees and consultants of the Company and its subsidiaries areprohibited from trading while in possession of inside information. Can I sell the Company’s shares short? No. Selling shares short is a bet that the price of the Company’s common stock will go down. We cannot have a situation where any of our employees or consultants would benefit financially atthe expense of our existing stockholders. The same policy applies to acquiring any derivative security (such as a put option) whose value would increase if the stock price goes down. Section 16 Insidersare prohibited by law, as well as by the policy, from selling short. What about my options issued pursuant to one of the Company’s stock option or employee stock purchase plans? You may exercise options issued by the Company for cash, and you may complete purchases under a tax-qualified employee stock purchase plan, during blackout periods and even if you possessinside information. The special exceptions for exercise of an option and for employee stock purchase plan purchases do not apply to the sale of the Company’s common stock you receive on exercise orpurchase. All sales of the Company’s common stock are subject to the policy. Unless you have sufficient cash to pay the exercise price and you intend to hold the shares you acquire upon exercise of anoption, you should determine whether you are permitted to sell the shares before you exercise the option. Can I pledge my securities in a margin account or to secure another type of loan? Access Personnel may not hold securities of the Company in a margin account. Access Personnel may not pledge securities to secure other loans without special permission from the complianceofficer. Permission for pledges may be granted only at a time when you are permitted to trade in the Company’s securities. What are the penalties for violation of the policy? Violation of the policy may expose the violator to severe criminal and civil penalties. the Company will consider disciplinary action, up to and including termination, of any person who violatesthe policy. 3
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EON RESOURCES INC. INSIDER TRADING POLICY Dated: August 28, 2024 EON Resources Inc. (the “Company”) has implemented an Insider Trading Policy (the “Policy”) to provide guidelines to officers, directors, employees and related individuals of the Companyand its subsidiaries with respect to transactions in the Company’s securities. The Policy is designed to prevent insider trading or the appearance of impropriety, to satisfy the Company’s obligation toreasonably supervise the activities of Company personnel, and to help Company personnel avoid the severe consequences associated with violations of insider trading laws. Introductory Information Definition of Inside Information “Inside Information” means material, non-public information. Information is material if a reasonable investor would consider it important to the total mix of information available about theCompany. Information is non-public if it has not been explicitly disclosed by the Company in a press release or report filed with the Securities and Exchange Commission, or by another manner involvingbroad disclosure to the investing public. Information remains non-public until it has been so disclosed and the market has had time to absorb and evaluate the information. Examples of types of information that will frequently be material include: ● operating or financial results, ● changes in earnings estimates, ● significant changes in sales volumes, market share, product pricing, mix of sales, strategic plans, or liquidity, ● the gain or loss of a substantial customer or supplier, ● a pending or proposed merger, acquisition or tender offer, ● a significant sale of assets or the disposition of a subsidiary, ● execution of a business contract that is important to the company financially, strategically or otherwise, ● the award or cancellation of significant licenses or sales contracts, ● significant policy changes by the Company’s vendors or third-party service providers, ● major management changes, EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 1
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● public or private financing transactions, ● plans for substantial capital investment, ● significant write-offs or increases in reserves, ● impending bankruptcy or financial liquidity problems, ● a significant cybersecurity breach, ● significant regulatory approvals or challenges, ● a change in state or federal law relating to the Company’s industry, ● a change in federal enforcement practices with respect to participants in the Company’s industry, ● pending or threatened litigation of potential significance to the company, or settlement or other resolution of ongoing litigation, ● significant new platform features or changes to existing platform features, ● delays in product development or problems with quality control, ● a stock split or other recapitalization, ● a change in dividend policy, ● a redemption or purchase by the Company of its securities, and ● any other information which is likely to have a significant impact on the Company. Either positive or negative information may be material. In general, information that is likely to affect the market price of a security is likely to be considered material. If your securities transactions become the subject of scrutiny, they will be viewed after-the-fact with the benefit of hindsight. As a result, Covered Persons should give careful thought to whetherany facts and circumstances exist that could raise suspicions about the propriety of the proposed transaction after the fact; for example, as to whether information that the covered person has becomeaware of may be construed as “material” and “nonpublic.” You should contact the Compliance Officer identified below if you are considering a transaction in Company securities shortly after public disclosures of material information by the Company. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 2
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Other Definitions “Access Personnel” include the Section 16 Insiders, and other persons who, by virtue of their position, are likely to have access to Inside Information on a more frequent basis than other CoveredPersons. Access Personnel are listed on Exhibit B to this Policy. The compliance officer may from time to time designate certain persons not listed on Exhibit B as Access Personnel for purposes of thisPolicy if they gain access to Inside Information even for a limited period of time. The compliance officer will update Exhibit B from time to time as appropriate. All persons who, temporarily orpermanently, become Access Personnel for purposes of this Policy will be given written notice. “Blackout Period” applies to certain Access Personnel designated on Exhibit B, and is described below under the heading “Specific Procedures Applicable to Access Personnel.” “Compliance Officer” is the insider trading compliance officer appointed pursuant to this Policy. The Compliance Officer is currently David M. Smith, General Counsel, but may be changed atany time by the Company with written notice to all Covered Persons. “Covered Persons” are described below under the heading “Applicability of Policy to Covered Persons.” “Section 16 Insiders” are the executive officers and directors of the Company and its subsidiaries who are subject to the reporting and liability provisions of Section 16 of the SecuritiesExchange Act of 1934, as amended. Section 16 Insiders are listed on Exhibit A to this Policy. Exhibit A will be updated automatically whenever the Board changes the designation of Section 16 insiders. Transactions Covered by the Policy This Policy applies to all transactions in the Company’s securities, including common stock, options for common stock and other securities the Company may issue from time to time, such aspreferred stock, warrants and convertible debentures, as well as to derivative securities relating to the Company’s stock, whether or not issued by the Company (such as exchange-traded options). Itapplies to all officers of the Company, all members of the Company’s Board of Directors, and all employees of, and consultants, contractors and vendors to, the Company and its subsidiaries, and willcontinue to apply to such persons for a period of ninety (90) days after their separation from the Company. It also applies to family members of such persons, and to others, to the extent such persons cometo have access to Inside Information. Persons subject to this Policy are referred to as “Covered Persons.” Any person who possesses Inside Information regarding the Company is a Covered Person for so long as the information is non-public. Bona fide gifts are generally not transactions subject to the Policy, unless the person making the gift has reason to believe that the recipient intends to sell Company securities while the CoveredPerson is restricted from trading under the Policy (including outside of a Blackout Period if the Covered Person is aware of material non-public information). EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 3
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Transactions in mutual funds that hold Company securities are generally not transactions subject to the Policy. However, transactions in mutual funds may be prohibited under the Policy if aCovered Person becomes aware of material non-public information which might materially affect the value of the mutual fund as a whole. Covered Persons are expected to use good judgment and contact the Compliance Officer in advance of a transaction if they have any doubt about whether a transaction is covered by the Policy. Application of Policy After Relationship Terminates If you are subject to a Blackout Period imposed by this Policy and your relationship terminates during a Blackout Period (or if you otherwise leave while in possession of Inside Information), youwill continue to be subject to the Policy, and specifically to the ongoing prohibition against trading, until the later of the end of the Blackout Period or the commencement of trading on the second tradingday following public announcement of any Inside Information of which you are aware. If a Blackout Period is extended, or if a Blackout Period does not end on its normal date as the result of the commencement of a subsequent Blackout Period prior to the termination of the priorBlackout Period, the Compliance Officer may in his discretion waive the applicability of the extended or new Blackout Period to a person whose relationship with the Company has terminated during theprior Blackout Period, if the Compliance Officer determines that such person has not had access to any Inside Information relating to the extended or new Blackout Period. The Company may institute stop-transfer instructions to its transfer agent in order to enforce this provision. The Company’s Policy It is the policy of the Company that any Covered Person who possesses Inside Information about the Company may not buy or sell securities of the Company nor engage in any otheraction to take advantage of, or pass on to others, that information. This includes posting of Inside Information in chat-rooms or via other electronic communications. This Policy also applies toinformation relating to any other company, including customers, vendors or suppliers of the Company, obtained in the course of employment by or service to the Company. Illegality of Insider Trading It is illegal for any Covered Person to trade in the securities of the Company using material, non-public information about the Company. It is also illegal for any Covered Person to give InsideInformation to others who may trade on the basis of that information. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 4
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Specific Policies Applicable to All Covered Persons The Company intends to comply with the spirit as well as the letter of the insider trading laws. The Company’s policy is to avoid even the appearance of improper conduct on the part of anyoneemployed by or associated with the Company, whether or not the conduct is literally in violation of the law. 1. Trading on Inside Information. No Covered Person and no member of the immediate family or household of any such person, may trade or otherwise engage in any transaction involving apurchase or sale of the Company’s securities, including but not limited to, any offer to purchase or offer to sell, during any period commencing with the date that he or she possesses Inside Informationconcerning the Company, and ending when all material information known to such person has been available to investors generally for at least two (2) business days. Transactions that may be necessary orjustifiable for independent reasons (such as the need to raise money for an emergency expenditure) are no exception. Even the appearance of an improper transaction must be avoided to preserve ourreputation for adhering to the highest standards of conduct. 2. Tipping. No Covered Person may disclose (“tip”) Inside Information to any other person (including family members) where such information may be used by such person to his or her profit bytrading in the securities of companies to which such information relates. No Covered Person may recommend the purchase or sale of any Company securities, or pass on to any person any material non-public information concerning the Company, whether or not the Covered Person has any information regarding such person’s intention to engage in any transaction involving Company securities. 3. Confidentiality of Non-public Information; Prohibition on Electronic Posting of Confidential Information. Non-public information relating to the Company is the property of the Company andthe unauthorized disclosure of such information is forbidden. Covered Persons are prohibited from posting confidential information relating to the Company, including but not limited to material non-public information, in internet chat rooms, on online message boards, on social media and social networking websites or through the use of any other form of electronic communication. 4. No Short Sales. Because short sales represent a bet that the Company’s stock price will decline, the Company prohibits all Covered Persons from shorting the Company’s stock. The Companyalso prohibits Covered Persons from acquiring any security or position which would increase in value if the Company’s stock price declines, such as a put option. Short sales by Section 16 Insiders areprohibited by law as well as by this Policy. Any questions as to whether a transaction is a prohibited short sale should be raised with the Compliance Officer. 5. Publicly-Traded Options. Given the relatively short term of publicly-traded options, transactions in options may create the appearance that a Covered Person is trading based on material non-public information and focus a Covered Person’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in put options, call options or otherderivative securities, on an exchange or in any other organized market, are prohibited by the Policy. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 5
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6. Hedging Transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including financial instruments such as prepaid variable forwards,equity swaps, collars and exchange funds. Such hedging transactions may permit a Covered Person to continue to own Company securities obtained through employee benefit plans or otherwise, butwithout the full risks and rewards of ownership. When that occurs, the Covered Person may no longer have the same objectives as the Company’s other shareholders. Any person wishing to enter intosuch an arrangement must first submit the proposed transaction, all agreements therefor and a written explanation of the purpose of the proposed transaction to the Compliance Officer for approval. TheCompliance Officer may accept, reject or condition such transaction in his or her sole discretion. 7. Margin Accounts and Pledges. Securities held in a margin account may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securitiespledged as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan or, in many instances, if the value of the collateral declines. Because a margin sale or foreclosure sale mayoccur at a time when the pledgor is aware of material non-public information regarding the Company, Covered Persons are prohibited from holding securities of the Company in a margin account orpledging such securities as collateral for a loan. An exception to this prohibition may be permitted in certain limited circumstances with the advance written approval of the Compliance Officer. TheCompliance Officer may accept, reject or condition such transaction in its sole discretion. 8. Securities of Other Companies. The foregoing provisions also apply to trading in the securities of other companies, including the Company’s customers, vendors and suppliers, if any CoveredPerson becomes aware of material non-public information relating to such companies in the course of performing his or her duties for the Company. Covered Persons are prohibited from disclosing anymaterial non-public information concerning other companies that they gain as part of their employment. 9. Expert Networks. “Expert networks” are firms that connect investment firms and others seeking information about specific industries, companies, products or business situations with outsideexperts who are able to provide information on such topics. Covered Persons may not act as consultants or employees of expert network firms or any similar enterprises unless the engagement has beenapproved in writing by the Compliance Officer. Transactions by Family Members and Others The Policy applies to family members and domestic partners of Covered Persons who reside in the same household with the Covered Person and family members who do not live in the CoveredPerson’s household but whose transactions in Company securities are directed by a Covered Person or are subject to a Covered Person’s influence or control (collectively, “Family Members”). FamilyMembers generally include spouse, domestic partner, children and stepchildren, a child away at college and grandchildren, and may include parents, stepparents, grandparents, siblings and in-laws.Questions as to which persons are subject to the restrictions of the Policy should be directed to the Compliance Officer. Each Covered Person is responsible for the transactions in Company securities ofthese other persons and therefore should make them aware of the need to confer with him or her before trading in Company securities. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 6
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Transactions by Entities Affiliated with a Covered Person The Policy applies to any entities whose transactions in Company securities are influenced or controlled by a Covered Person, including corporations, partnerships or trusts (collectively,“Controlled Entities”). Transactions by these Controlled Entities will be treated for the purposes of the Policy as if they are for the account of the affiliated Covered Person. Potential Criminal and Civil Liability and/or Disciplinary Action Penalties for trading on or communicating material non-public information are severe and may be applied against the individual involved in unlawful conduct, as well as against the Company andcontrolling persons of the Company. A person can be subject to some or all of the penalties noted below even if he or she does not personally benefit from the violation. Penalties include: 1. Liability for Insider Trading. Covered Persons may be subject to penalties of up to $5,000,000 and up to twenty years in jail for engaging in transactions in securities at a time when they haveknowledge of Inside Information regarding the subject company. 2. Liability for Tipping. Covered Persons may also be liable for improper transactions by any person (commonly referred to as a “tippee”) to whom they have disclosed Inside Informationregarding the Company or to whom they have made recommendations or expressed opinions on the basis of such information as to trading in the Company’s securities. The SEC has imposed largepenalties even when the disclosing person did not profit from the trading. The SEC, the stock exchanges and the Financial Industry Regulatory Authority use sophisticated electronic surveillancetechniques to uncover insider trading. 3. Disciplinary Actions. Covered Persons who violate this Policy will be subject to disciplinary action by the Company, which may include, in addition to other sanctions, ineligibility for futureparticipation in the Company’s equity incentive plans or termination of employment. 4. Stop Transfer Order. The Company may in its discretion impose or maintain stop transfer orders on securities held by Covered Persons during a Blackout Period. You should be aware that stock market surveillance techniques have become extremely sophisticated and are being improved all the time. The chance that federal authorities or exchangeregulators will detect even small-level trading is a significant one. Individual Responsibility Every Covered Person has the individual responsibility to comply with this Policy against insider trading, regardless of whether the Company has implemented a Blackout Period applicable tothe Covered Person. Appropriate judgment should be exercised in connection with any trade or other restrictions in the Company’s securities. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 7
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A Covered Person may, from time to time, have to forego a proposed transaction in the Company’s securities even if he or she planned to make the transaction before learning of theInside Information and even though the Covered Person believes he or she may suffer an economic loss or forego an anticipated profit by waiting. Covered Persons who have anticipated needsfor liquidity should strongly consider adopting a Rule 10b5-1 plan. Applicability of Policy to Inside Information Regarding Other Companies This Policy also applies to Inside Information relating to other companies, including the Company’s customers, vendors or suppliers (“business partners”), when that information is obtained inthe course of employment with, or other services performed on behalf of, the Company. Civil and criminal penalties, and termination of employment, may result from trading on inside informationregarding the Company’s business partners. All employees should treat Inside Information about the Company’s business partners with the same care required with respect to information related directlyto the Company. Specific Procedures Applicable to Access Personnel Blackout Period To ensure compliance with this Policy and applicable federal and state securities laws, it is the Company’s policy that certain Access Personnel designated on Exhibit B refrain from conductingany transactions involving the purchase or sale of the Company’s securities during a “Blackout Period.” The Blackout Period begins on the day which is fifteen (15) calendar days before the last tradingday of a fiscal quarter and ends at the commencement of trading on the third trading day following public release of the Company’s annual or quarterly financial results. The Compliance Officer mayextend the Blackout Period, or adopt additional Blackout Periods, in his or her sole discretion. The Compliance Officer may waive compliance with a Blackout Period if, following consultation with theBoard of Directors and the Company’s legal counsel, the Compliance Officer concludes that all material information concerning the Company has been publicly disclosed or, in the case of a proposedprivate transaction in the Company’s securities, that neither party to such transaction is in possession of Inside Information which is not also known by the other party. The safest period for trading in the Company’s securities, assuming the absence of Inside Information, is generally the first ten days after the expiration of the Blackout Period for the priorquarter. It is important to remember that, even if outside the Blackout Period, no Covered Person may trade in Company securities while in possession of Inside Information. Trading in the Company’ssecurities outside of a Blackout Period should not be considered a “safe harbor,” and all Access Personnel and other Covered Persons should use good judgment at all times. You should contact theCompliance Officer in advance of a transaction if you have any questions regarding a particular securities transaction. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 8
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Pre-Clearance of Trades Certain Access Personnel of the Company must comply with the Company’s pre-clearance process prior to engaging in any trade at any time in the Company’s securities. Such Access Personnelmust contact the Compliance Officer at least two (2) business days prior to commencing any trade in the Company’s securities. The Compliance Officer will complete a pre-clearance checklist in the form attached as Exhibit C to this Policy and if the trade is approved, will give written permission for the trade in the formattached as Exhibit D to this Policy. The written permission will expire at the end of the second trading day following the date of written permission or the beginning of the Blackout Period, whichever isearlier. Accordingly, Access Personnel should not request permission to trade unless there is an intention to execute the trade immediately following receipt of written permission. The Compliance Officeris under no obligation to approve a transaction submitted for pre-clearance and may determine not to permit the transaction in his or her sole discretion. Further Restrictions As circumstances dictate, the Company may restrict trading by Access Personnel during otherwise open trading window periods. For example, the Company may restrict trading by AccessPersonnel during an ongoing cybersecurity investigation until the Company determines whether the incident is “material”. In such event, the Compliance Officer will notify particular individuals thatthey should not engage in any transactions involving the Company’s securities until such further restrictions are lifted by further notice. The notice need not state the reason for the further restrictions.Access Personnel who receive such notice should not disclose to others the existence of such further restrictions. Generally, these further restricted periods will end upon the earlier of the circumstances nolonger being material or the open of market on the second trading day following the Company’s public disclosure of such circumstances or their resolution. Restriction on Market Limit Orders In order to prevent Access Personnel from accidentally engaging in a trade when trading is not allowed, Access Personnel subject to Blackout Periods may not enter into any market limit orderswith their brokers for securities of the Company other than orders which expire no later than the commencement of the next Blackout Period. Access Personnel subject to pre-clearance requirements aresubject to the additional restriction that they may not enter any market limit orders for securities of the Company except market limit orders which expire within the time allowed for trading after receivingwritten permission to trade from the Compliance Officer. All other market limit orders by Access Personnel for securities of the Company are prohibited. This paragraph does not however apply toapproved Rule 10b5-1 plans. Margin Accounts and Pledges A pledge of securities may be considered a sale under the securities laws. In addition, securities held in a margin account or pledged as collateral for a loan may be sold by the broker without thecustomer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan.Because the initial pledge may be a sale, and a later margin sale or foreclosure sale may occur at a time when the pledgor is aware of Inside Information or otherwise is not permitted to trade in securitiesof the Company, Access Personnel are prohibited from holding Company securities in a margin account or pledging Company securities for a loan. An exception to this prohibition may be granted wherea person wishes to pledge Company securities as collateral for a loan (not including margin debt), if such person is otherwise permitted to transact in Company securities at the time of the pledge, and ifsuch person clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities. Any person who wishes to pledge Company securities as collateral for a loan must submita request for approval to the Compliance Officer at least two weeks prior to the proposed execution of documents evidencing the proposed pledge. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 9
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Exception for Pre-Arranged Trading Programs(Rule 10b5-1) Rule 10b5-1 of the Exchange Act allows a person to trade while aware of material non-public information if the trade was executed pursuant to a plan satisfying the requirements of Rule 10b5-1(a “trading plan”) that was established at a time when the person was not aware of material non-public information. Rule 10b5-1 is a complicated rule that requires sophisticated planning and should notbe relied upon without the advice of one’s own legal counsel or personal financial adviser. Specific Requirements Trades in Company securities that are executed pursuant to an approved trading plan are not subject to the prohibitions in the Policy, including Blackout Periods or pre-clearance requirements forAccess Personnel. Trading plans must meet the following requirements: 1. Pre-Approval. For a Rule 10b5-1 plan to serve as an adequate defense against an allegation of insider trading, a number of legal requirements must be satisfied. Accordingly,anyone wishing to establish a Rule 10b5-1 plan must first receive approval from the Compliance Officer. 2. Material Non-public Information and Special Blackouts. An individual desiring to enter into a Rule 10b5-1 plan must enter into the plan at a time when he or she is not aware ofany material nonpublic information about the Company or otherwise subject to a special trading blackout 3. Open Trading Window. A Rule 10b5-1 plan may only be adopted during an open trading window (i.e., outside of a Blackout Period). 4. 30-Day Waiting Period. Rapid transaction executions subsequent to plan adoption may create an appearance of impropriety and call into question whether a plan adopter hadmaterial non-public information at the time of plan adoption. To avoid even the appearance of impropriety, the Company requires a waiting period of 30 days between the datethe Rule 10b5-1 plan is adopted and the date of the first possible transaction under the plan. Trading plans may not be instituted, amended or terminated, and deviations from such plans may not be made during a Blackout Period or at a time when a Covered Person is aware of materialnon-public information. Any amendment or termination of an approved trading plan requires the advance approval of the Compliance Officer. The Compliance Officer may circulate from time-to-timecriteria for clearance of trading plans. Section 16 Insiders must provide prompt notice to the Compliance Officer of all transactions under trading plans to facilitate filings required under Section 16(a) ofthe Exchange Act. Such filings are generally due within two (2) business days of a trade. The Company reserves the right to bar any transactions in Company securities, even those pursuant to tradingplans previously approved, if the Compliance Officer or the Board of Directors, in consultation with the Compliance Officer, determines that such a bar is appropriate under the circumstances. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 10
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Exception for Stock Options and Employee Stock Purchase Plans The Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company’s plans, or to the exercise of a tax withholding right pursuant to which a person haselected to have the Company withhold shares subject to an option to satisfy tax withholding requirements. The Policy does apply, however, to any sale of stock as part of a broker-assisted cashlessexercise of an option and to any other market sale for the purpose of generating the cash needed to pay the exercise price of an option. Purchases of Company stock through a 401(k) plan or employee stock purchase plan (“ESPP”) resulting from your periodic contribution of money to the plan pursuant to your payroll deductionelection are also exempt from this Policy, since the other party to those transactions is the Company itself and the price is determined by the terms of the option agreement or the plan. The tradingrestrictions do apply, however, to elections you may make to (a) begin participation or change participation levels in any ESPP or Company stock fund in the 401(k) plan, (b) sell any shares purchasedunder the ESPP, and (c) initiate an intra-plan transfer of an existing account balance into or out of the Company stock fund in the 401(k) plan. Additional Information - Directors and Executive Officers Directors and executive officers of the Company must also comply with the reporting obligations and limitations on short-swing transactions set forth in Section 16 of the Securities ExchangeAct of 1934, as amended. The practical effect of these provisions is that Section 16 Insiders who purchase and sell the Company’s securities within a six-month period must disgorge all profits to theCompany whether or not they had knowledge of any Inside Information. Under these provisions, and so long as certain other criteria are met, in most cases neither the receipt of an option under theCompany’s option plans, nor the exercise of that option is deemed a purchase under Section 16; however, the sale of any such shares is a sale under Section 16. The exercise of options by Section 16Insiders, although not subject to short-swing liability, must be disclosed on a Form 4 filed within two business days after the exercise occurs. The participation by executive officers in a tax-qualifiedemployee stock purchase plan will not generally result in a Section 16 short-swing liability or reporting obligations; however the sale of any shares acquired is subject to Section 16 reporting and short-swing liability. Generally, all other purchases and sales of Company securities by Section 16 Insiders must be disclosed on a Form 4 filed within two business days after the transaction occurs.Moreover, no officer or director may ever make a short sale of the Company’s stock. The Company has provided, or will provide, separate memoranda and other appropriate materials to its officers anddirectors regarding compliance with Section 16 and its related rules. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 11
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Certification Covered Persons will be required to certify their understanding of and compliance with this Policy on an annual basis, in the form attached as Exhibit E to this Policy. Inquiries Please direct your questions as to any of the matters discussed in the Policy to the Compliance Officer. Duties of Compliance Officer The duties of the Compliance Officer include the following: 1. Pre-clearance of all transactions involving the Company’s securities by Access Personnel designated for pre-clearance on Exhibit B in order to determine compliance with the Policy, insidertrading laws, Section 16 of the Exchange Act of 1934, as amended, and Rule 144 promulgated under the Securities Act of 1933, as amended. 2. Assistance in the preparation of Section 16 reports (Forms 3, 4 and 5) for all Section 16 Insiders. 3. Performance of cross-checks of available materials, which may include Forms 3, 4 and 5, Forms 144, officers and directors questionnaires, and reports received from the Company’s stockadministrator and transfer agent, to determine trading activity by officers, directors and others who have, or may have, access to Inside Information. 4. Circulation of the Policy to all Covered Persons on an annual basis, and provision of the Policy and other appropriate materials to any officers, directors or others who have, or may have,access to Inside Information. 5. Reviewing proposed Rule 10b5-1 plans of Covered Persons. 6. Assisting the Company’s Board of Directors in implementation of the Policy. 7. Updating from time to time, as applicable, the list of Access Personnel on Exhibit B of the Policy. EON R ESOURCES I NC . – I NSIDER T RADING P OLICY P AGE 12
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EXHIBIT A SECTION 16 INSIDERS Name Title Joseph V. Salvucci, Sr. Director, Chairman of the BoardJoseph V. Salvucci, Jr. DirectorByron Blount DirectorDante Caravaggio Director, Chief Executive Officer and PresidentMitchell B. Trotter Director, Senior Vice President, and Chief Financial OfficerMark Williams Vice President of Finance and Administration and Corporate ControllerDavid M. Smith Vice President, General Counsel and SecretaryJesse Allen Vice President - Operations A-1
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EXHIBIT B ACCESS PERSONNEL All Section 16 Insiders listed on Exhibit A are Access Personnel, and subject to pre-clearance requirements and Blackout Periods. In addition, the following persons are AccessPersonnel, and are subject to the indicated restrictions: Name Title Blackout Periods Pre-Clearance B-1
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EXHIBIT C INSIDER TRADING COMPLIANCE PROGRAM - PRE-CLEARANCE CHECKLIST Individual Proposing To Trade: Compliance Officer: Proposed Trade: Date: No Blackout. Confirm that the trade will not be made during a “Blackout Period.” ☐ Section 16 Compliance. Confirm, if the individual is an officer or director subject to Section 16, that the proposed trade will not give rise to any potential liability under Section 16 as a result of matchedpast (or intended future) transactions. Also, ensure that a Form 4 has been or will be completed and will be filed within two (2) business days of the trade. ☐ Prohibited Trades. Confirm that the proposed transaction is not a short sale, put, call or other prohibited transaction. ☐ Rule 144 Compliance. To the extent applicable confirm that: The current public information requirement has been met. ☐ Shares to be sold are not restricted or, if restricted, the holding period has been met. ☐ Volume limitations are not exceeded (confirm the individual is not part of an aggregated group). ☐ The manner of sale requirements have been met. ☐ The Notice on Form 144 has been completed and filed. ☐ Rule 10b-5 Concerns. Confirm that: The individual has been reminded that trading is prohibited when in possession of any material information regarding the Company that has not been adequately disclosed to the public. ☐ The Compliance Officer has discussed with the insider any information known to the individual or the Compliance Officer which might be considered material, so that the individual has made aninformed judgment as to the presence of inside information. ☐ Signature of Compliance Officer C-1
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EXHIBIT D PERMISSION TO TRADE ______________________ is hereby permitted to buy / sell [circle one] shares of the common stock of EON Resources Inc. [Include the following if sales to be made by affiliates pursuant to Rule 144. The securities must be sold in a broker’s transaction, and you may not solicit or arrange for the solicitation of an orderto buy the securities you are selling, or make any payment in connection with the offer and sale to any person other than the broker who executes an order to sell the securities.] The permission to sell will expire on the close of trading on _________, 20__. Very truly yours, Signature of Compliance Officer D-1
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EXHIBIT E CERTIFICATE OF COMPLIANCE I represent that I have read, and promise to comply with, the EON Resources Inc. Insider Trading Policy. Printed Name: Date: E-1
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Exhibit 23.1 CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS I hereby consent to the references to William M. Cobb & Associates, Inc., a subsidiary of Hass and Cobb Petroleum Consultants., LLC, in this Annual Report on Form 10-K for EON Resources Inc. andto the use of information from, and the inclusion of, the report dated March 17, 2025 with respect to the estimates of proved reserves, future production and income as of December 31, 2024, attributableto the interest of EON Resources Inc. and subsidiary LH Operating, LLC. in certain oil and gas properties in this Annual Report on Form 10-K. /s/ Thad Toups Thad Toups President, Hass and Cobb Petroleum Consultants., LLC Texas Registered Firm # F-26129 William M. Cobb & Associates, Inc., a subsidiary of Hass and Cobb Petroleum Consultants., LLCTexas Registered Engineering Firm # F-84April 14, 2025
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Exhibit 31.1 CERTIFICATIONPURSUANT TO RULE 13a-14 AND 15d-14UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED I, Dante Caravaggio, certify that: 1. I have reviewed this Annual Report on Form 10-K (this “Report”) for the year ended December 31, 2024 of EON Resources Inc.; 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstancesunder which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this Report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating tothe registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls andprocedures, as of the end of the period covered by this Report based on such evaluation; and d. Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscalquarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee ofthe registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’sability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. Date: April 15, 2025 By: /s/ Dante Caravaggio Dante Caravaggio Chief Executive Officer (Principal Executive Officer)
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Exhibit 31.2 CERTIFICATIONPURSUANT TO RULE 13a-14 AND 15d-14UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED I, Mitchell B. Trotter, certify that: 1. I have reviewed this Annual Report on Form 10-K (this “Report”) for the year ended December 31, 2024 of EON Resources Inc.; 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstancesunder which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this Report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) andinternal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating tothe registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls andprocedures, as of the end of the period covered by this Report based on such evaluation; and d. Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscalquarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee ofthe registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’sability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. Date: April 15, 2025 By: /s/ Mitchell B. Trotter Mitchell B. Trotter Chief Financial Officer (Principal Financial Officer)
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Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. 1350(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) In connection with the Annual Report of EON Resources Inc. (the “Company”) on Form 10-K for the period ended December 31, 2024, as filed with the Securities and Exchange Commission on the datehereof (the “Report”), I, Dante Caravaggio, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that, to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 15, 2025 By: /s/ Dante Caravaggio Dante Caravaggio Chief Executive Officer (Principal Executive Officer) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission orits staff upon request.
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Exhibit 32.2 CERTIFICATION PURSUANT TO18 U.S.C. 1350(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) In connection with the Annual Report of EON Resources Inc. (the “Company”) on Form 10-K for the period ended December 31, 2024, as filed with the Securities and Exchange Commission on the datehereof (the “Report”), I, Mitchell B. Trotter, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that, to the best of my knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 15, 2025 By: /s/ Mitchell B. Trotter Mitchell B. Trotter Chief Financial Officer (Principal Financial Officer) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission orits staff upon request.
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Exhibit 99.1 EVALUATIONOFCERTAIN OIL AND GAS PROPERTIES LOCATED INEDDY COUNTY, NEW MEXICO PREPARED FOREON RESOURCES, INC. AS OF DECEMBER 31, 2024
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12770 Coit Road, Suite 907 ● Dallas, Texas 75251(972) 385-0354 ● info@haasandcobb.comHAASANDCOBB.COM March 17, 2025 Mr. Jesse J. Allen EON Resources, Inc. 3730 Kirby Drive, Suite 1200 Houston, Texas 77098 Subject: Grayburg-Jackson Field, Eddy County, New Mexico Reserve and Cash Flow Projections, SEC Guidelines Dear Mr. Allen: In accordance with your request, Haas and Cobb Petroleum Consultants, LLC (Haas & Cobb) has estimated the Proved Reserves and future income as of December 31, 2024, attributable to the interest ofEON Resources, Inc. (EON) in certain oil and gas properties located in the Grayburg-Jackson Field, Eddy County, New Mexico. The EON properties have historically produced from Seven Rivers,Queen, Grayburg, and San Andres (SR-Q-G-SA) reservoirs in descending depth order. The focus of this report is to capture reserves attributable to both the historical (“legacy”) SR-Q-G-SA completionsand the recent implementation and expansion of the Seven Rivers (SVRV) waterflood. This report was completed on March 17, 2025. Table 1 summarizes our estimate of the proved oil and gas reserves for all planned development and the pre-federal income tax value undiscounted and discounted at ten percent. Values shown aredetermined utilizing the December 31, 2024, SEC Commodity Price Forecast. The discounted present worth of future income values shown below in Table 1 is not intended to necessarily represent anestimate of fair market value. TABLE 1 EON RESOURCES, INC. – NET RESERVES AND VALUE AS OF DECEMBER 31, 2024 Net Reserves Future Net Cash Flow Reserve Category Oil (MBBL) Gas(MMCF) Undisc. (M$) Disc. 10%(M$) Legacy SR-Q-G-SA PDP 285.44 123.54 9,244.91 5,515.59 SVRV Waterflood PDP 3,584.59 807.89 129,623.40 73,239.10 TOTAL PDP 3,870.02 931.43 138,868.31 78,754.70 SVRV Waterflood PNP 5,932.51 1,124.63 222,430.36 75,204.20 SVRV Waterflood PUD 4,215.42 784.14 177,598.01 53,707.04 TOTAL PROVED 14,017.95 2,840.21 538,896.68 207,665.93
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Oil volumes are expressed in thousands of stock tank barrels (MBBL). A stock tank barrel is equivalent to 42 United States gallons. Gas volumes are expressed in millions of standard cubic feet (MMCF). This report, which was prepared for EON’s use in filing with the SEC and will be filed with EON’s Form 10-K for fiscal year ending December 31, 2024 (the “Form 10-K”) and covers 100 percent of thetotal company present value discounted at ten percent (PV10) presented in LH Operating’s Form 10-K. All assumptions, data, methods, and procedures considered necessary and appropriate were used toprepare this report. DISCUSSION EON’s leasehold covers approximately 13,700 acres in the Grayburg-Jackson Field. Historical production has been from Seven Rivers, Queen, Grayburg, and San Andres (SR-Q-G-SA) reservoirs rangingin depth from 1,500 to 4,000 feet. The production forecast for the historical SR-Q-G-SA completions is the basis for the Legacy reserves estimate. Production was generally available through December2024 for all producing properties. Forecasts for Legacy properties were prepared using decline curve analysis. Recent and ongoing focus on the Seven Rivers waterflood implementation by EON is reflected as SVRV Waterflood. Although the Seven Rivers interval is behind-pipe in many future Seven Riversproducers or injectors, a material number of planned producers and injectors will require new drill wellbores. The 170 development patterns have been categorized according to the producer status with127 patterns being Proved Developed Non-Producing (PDNP) and 43 patterns being Proved Undeveloped (PUD). In 2019 an expansion of the existing Seven Rivers waterflood under several sections in the southern portion of the EON properties was initiated with economic success and served as the analogy for thereserves estimated in this report. Evaluation of these economically successful patterns within the EON property yielded a median (P50) expectation of 32,545 barrels (Bbls) of oil for a typical SevenRivers 40-acre well spacing primary recovery completion. Furthermore, the evaluation yielded a median expectation of 85,348 Bbls of oil for a typical Seven Rivers 20-acre well spacing waterfloodrecovery (primary + secondary recovery completion). The difference between these two median recoveries yields a typical secondary oil recovery of 52,803 Bbls. Net Pay and Pore Volume (Net Pay * Porosity) maps were generated for the Seven Rivers intervals included as waterflood reserves in this report: B1, B2, B3, B4, B5, B6, and C. The sum of the PoreVolume from these seven intervals constitutes the Total Pore Volume forming the volumetric basis for the Seven Rivers waterflood reserves. A total of 314 patterns with discretely estimated Pore Volumewere evaluated. Only the 253 patterns under EON leases with less than 43,000 Bbls of cumulative oil production were used to distribute reserves in this report. A pattern simulation model was used to forecast future recovery from the 253 EON Seven Rivers patterns. The simulation model is comprised of seven layers to represent the seven intervals of the SevenRivers Pore Volume maps. Average thickness and porosity values from the seven intervals were used in the simulation models. As of this report date, 83 patterns were producing and 170 remained forfuture development. Of the remaining 170 patterns, 127 are categorized as PNP and 43 are PUD. Primary and secondary recovery cases were run to establish production forecast rates then used todistribute production expectations to each of the 253 Seven Rivers patterns. The individual Pore Volume of each pattern served as the key element for scaling the production forecast for each specificpattern. The oil volumes from this forecast are the basis for the Seven Rivers waterflood PDP reserves. The oil projection for these 253 patterns is the production forecast for the total Proved(PDP+PDNP+PUD) reserves for the Seven Rivers waterflood implementation. EON Resources, Inc. March 17, 2025 Page | 2
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COMMODITY PRICES Projections of future oil and gas reserves contained in this report utilize the December 31, 2024, SEC Commodity Price Forecast. The SEC price is the arithmetic average of the “first-day-of-the-month”WTI Spot pricing for oil prices and Henry Hub prices for natural gas for the preceding 12-month period ending December 31, 2024. These prices were calculated to be $75.48 per barrel of oil and $2.13per MMBTU of gas. After applying appropriate differentials for each lease, the weighted average realized product prices for 2024 were estimated to be $77.10 per barrel of oil and $1.99 per MCF of gas,resulting in average 2024 differentials of positive $1.62 per barrel and negative $0.14 per MCF. Product prices and differentials were not escalated for this report. OPERATING COSTS EON provided historical lease operating expense (LOE) data through December 2024 for each lease. Based upon our analysis of that data, a fixed monthly operating cost was applied for each legacylease. The Seven Rivers PDP waterflood case was assigned a monthly per pattern fixed monthly operating cost of $489,639 based on the provided data. The PNP and PUD cases were assigned a fixedmonthly operating cost of $5,155 per new producer. The costs were held constant for the report. There were no variable costs scheduled. CAPITAL COSTS Capital costs and timing were provided by EON. This prospect will be developed using a combination of recompletions and new drill wells. The development cost to complete the remaining patterns is$94,156,000. RESERVES AND CASH FLOW Reserve and revenue projections for the proved reserves categories are shown in Table 2 after the signature page of this report. Cash flow is defined as revenue after deduction of state severance tax, advalorem tax, operating cost, and capital cost. All economic projections are before federal income taxes. PROPERTY ABANDONMENT As requested, abandonment costs have not been included in our estimates of future net revenue. Although no abandonment costs have been scheduled for the subject properties, it is worth noting theexpected long producing life of the Reserves evaluated in this report. The SVRV Reserves categories are estimated to become uneconomical by approximately September 2048. However, some of thecurrently producing legacy (SR-Q-G-SA) patterns do not become uneconomic until November 2065. Given the long producing life of the properties, the present value of any abandonment costs would beminimal. As abandonment costs have not been included, such costs should appear on the company balance sheet. PROFESSIONAL GUIDELINES Proved oil and gas reserves are the estimated quantities of crude oil, natural gas, and natural gas liquids, which geological and engineering data demonstrate with reasonable certainty to be recoverable infuture years, from known reservoirs under expected economic and operating conditions. Reserves are considered proved if economic productivity is supported by either actual production or conclusiveformation tests. The reserve estimates shown in this report are those estimated to be recoverable in accordance with the reserves definitions of Rules 4-10(a) (1)-(32) of Regulation S-X and the guidelines specified in Item1202 (a)(8) of Regulation S-K of the U.S. Securities and Exchange Commission (SEC), and conforms to the FASB Accounting Standards Codification Topic 932, Extractive Industries - Oil and Gas,except that future income taxes are excluded and, as requested, abandonment costs have not been included in our estimates of future net income. The definitions for oil and gas reserves in accordance withSEC Regulation S-X are set forth in this report. EON Resources, Inc. March 17, 2025 Page | 3
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No current or impending regulations are known to restrict EON’s ability to recover the estimated reserves. No attempt was made to assess the possible effects of unknowable governmental regulations onthe ability of EON to recover the reserves estimated in this report. The reserves included in this report are estimates only and should not be construed as being exact quantities. Governmental policies, uncertainties of supply and demand, the prices actually received forthe reserves, and the costs incurred in recovering such reserves, may vary from the price and cost assumptions in this report. Estimated reserves using price escalations may vary from values obtainedusing constant price scenarios. In any case, estimates of reserves, resources, and revenues may increase or decrease as a result of future operations. Haas & Cobb has not examined titles to the appraised properties nor has the actual degree of interest owned been independently confirmed. The data used in this evaluation were obtained from EONResources, LLC and the non- confidential files of Haas & Cobb and were considered accurate. We have not made a field examination of the EON properties, therefore, operating ability and condition of the production equipment have not been considered. Also, environmental liabilities, if any,caused by EON or any other operator have not been considered, nor has the cost to restore the property to acceptable conditions, as may be required by regulation, been taken into account. In evaluating available information concerning this appraisal, Haas & Cobb has excluded from its consideration all matters as to which legal or accounting interpretation, rather than geological orengineering, may be controlling. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geological data, and conclusions necessarily representonly informed professional judgments. Haas and Cobb Petroleum Consultants, LLC is an independent consulting firm founded in 1983. Its compensation is not contingent on the results obtained or reported. This report was prepared byassociates of the firm who are licensed professional engineers and geologists with over 40 years of experience in the estimation, assessment, and evaluation of oil and gas reserves. [Remainder of page intentionally left blank. Signature page follows.] EON Resources, Inc. March 17, 2025 Page | 4
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Respectfully submitted, Haas and Cobb Petroleum Consultants, LLC F-26129 EON Resources, Inc. March 17, 2025 Page | 5
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EON RESOURCES, INC.RESERVES FORGRAYBURG-JACKSON PROPERTIES TABLE 2E CONOMIC S UMMARY P ROJECTION H AAS AND C OBB P ETROLEUM C ONSULTANTS , LLCAS OFD ECEMBER 31, 2024 EON Resources, Inc. March 17, 2025 Page | 6
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Date : 03/14/2025 1:52:38PM ECONOMIC SUMMARY PROJECTION Total Project Name : LH Operating NM Asof 01/01/2025 As Of Date : 01/01/2025 Partner : EON Discount Rate (%) : 10.00 Case Type : GRAND TOTAL CASE Custom Selection Cum Oil (Mbbl) : 35,231.21 Cum Gas (MMcf) : 23,702.45 Cum NGL (Mgal) : 0.00 Year GrossOil (Mbbl) Gross Gas(MMcf) GrossNGL(Mgal) Net Oil(Mbbl) NetGas(MMcf) NetNGL(Mgal) OilPrice($/bbl) GasPrice($/Mcf) NGLPrice($/gal) TotalRevenue(M$) 2025 434.88 266.79 0.00 322.45 176.51 0.00 77.10 1.99 0.00 25,212.16 2026 522.70 233.21 0.00 388.48 154.46 0.00 77.10 1.99 0.00 30,259.52 2027 589.13 208.84 0.00 438.50 138.45 0.00 77.10 1.99 0.00 34,083.62 2028 825.84 228.21 0.00 615.91 151.58 0.00 77.10 1.99 0.00 47,788.19 2029 1,114.65 265.47 0.00 832.09 176.47 0.00 77.10 1.99 0.00 64,505.24 2030 1,168.23 247.72 0.00 872.31 164.71 0.00 77.10 1.99 0.00 67,582.53 2031 1,171.20 236.03 0.00 874.64 156.98 0.00 77.10 1.99 0.00 67,747.13 2032 1,153.22 232.04 0.00 861.28 154.36 0.00 77.10 1.99 0.00 66,712.14 2033 1,119.52 224.43 0.00 836.17 149.30 0.00 77.10 1.99 0.00 64,766.03 2034 1,076.09 215.56 0.00 803.76 143.42 0.00 77.10 1.99 0.00 62,255.52 2035 1,028.44 205.88 0.00 768.19 137.00 0.00 77.10 1.99 0.00 59,500.36 2036 981.86 196.36 0.00 733.47 130.70 0.00 77.10 1.99 0.00 56,810.82 2037 936.04 186.94 0.00 699.38 124.48 0.00 77.10 1.99 0.00 54,169.75 2038 888.32 177.36 0.00 663.73 118.10 0.00 77.10 1.99 0.00 51,408.44 2039 835.64 166.80 0.00 624.36 111.07 0.00 77.10 1.99 0.00 48,358.88 Rem 4,936.88 980.76 0.00 3,683.23 652.61 0.00 77.10 1.99 0.00 285,275.97 Total 18,782.64 4,272.38 0.00 14,017.95 2,840.21 0.00 77.10 1.99 0.00 1,086,436.31 Ult 54,013.85 27,974.83 0.00 Well Net TaxProduction Net TaxAdValorem NetInvestment Net LeaseCosts Net WellCosts Other Costs Net Profits AnnualCash Flow Cum Disc.Cash Flow Year Count (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) 2025 191.00 2,088.75 0.00 0.00 7,987.60 0.00 0.00 0.00 15,135.81 14,366.91 2026 193.00 2,508.16 0.00 15,685.00 7,926.48 603.14 0.00 0.00 3,536.75 17,546.12 2027 230.00 2,825.91 0.00 46,135.00 7,836.40 1,556.81 0.00 0.00 -24,270.50 -1,586.55 2028 287.00 3,963.10 0.00 32,336.00 6,452.06 5,113.76 0.00 0.00 -76.74 -2,073.88 2029 195.00 5,350.07 0.00 0.00 6,248.86 9,577.99 0.00 0.00 43,328.31 26,128.29 2030 191.00 5,605.74 0.00 0.00 6,183.19 10,516.20 0.00 0.00 45,277.40 52,945.97 2031 191.00 5,619.58 0.00 0.00 6,183.19 10,516.20 0.00 0.00 45,428.16 77,414.02 2032 191.00 5,533.73 0.00 0.00 6,183.19 10,516.20 0.00 0.00 44,479.02 99,192.54 2033 185.00 5,372.31 0.00 0.00 6,059.22 10,516.20 0.00 0.00 42,818.30 118,255.24 2034 180.00 5,164.07 0.00 0.00 6,058.81 10,516.20 0.00 0.00 40,516.44 134,656.45 2035 180.00 4,935.53 0.00 0.00 6,058.81 10,516.20 0.00 0.00 37,989.81 148,638.25 2036 180.00 4,712.44 0.00 0.00 6,027.26 10,516.20 0.00 0.00 35,554.92 160,532.13 2037 176.00 4,493.36 0.00 0.00 5,965.15 10,516.20 0.00 0.00 33,195.04 170,628.11 2038 176.00 4,264.32 0.00 0.00 5,965.15 10,516.20 0.00 0.00 30,662.77 179,107.54 2039 176.00 4,011.36 0.00 0.00 5,965.15 10,516.20 0.00 0.00 27,866.18 186,114.61 Rem. 23,663.62 0.00 0.00 53,083.54 91,073.82 0.00 0.00 117,454.99 21,551.32 Total 90,112.04 0.00 94,156.00 150,184.08 213,087.51 0.00 0.00 538,896.68 207,665.93 Present Worth Profile (M$) PW 5.00%: 323,224.66 Disc. Initial Invest. (M$) : 73,344.053 PW 8.00%: 246,041.88 ROInvestment (disc/undisc) : 3.83 / 6.72 PW 9.00%: 225,777.02 Years to Payout : 4.15 PW 12.00%: 176,859.04 Internal ROR (%) : >1000 PW 15.00%: 141,163.65 PW 20.00%: 100,557.65 TRC Eco DetailedNGL.rpt Page : 1 TABLE 2 - 1
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Date : 03/14/2025 1:52:38PM ECONOMIC SUMMARY PROJECTION Proved Producing Rsv Class & Category Project Name : LH Operating NM As of 01/01/2025 As Of Date : 01/01/2025 Partner : EON Discount Rate (%) : 10.00 Case Type : REPORT BREAK TOTAL CASE Custom Selection Cum Oil (Mbbl) : 35,231.33 Cum Gas (MMcf) : 23,702.54 Cum NGL (Mgal) : 0.00 Year GrossOil (Mbbl) Gross Gas(MMcf) GrossNGL(Mgal) NetOil(Mbbl) Net Gas(MMcf) Net NGL(Mgal) Oil Price($/bbl) GasPrice($/Mcf) NGLPrice($/gal) TotalRevenue(M$) 2025 358.31 221.96 0.00 265.18 146.64 0.00 77.10 1.99 0.00 20,736.91 2026 392.74 180.33 0.00 291.27 119.22 0.00 77.10 1.99 0.00 22,694.39 2027 376.81 141.58 0.00 279.68 93.62 0.00 77.10 1.99 0.00 21,749.74 2028 340.70 98.15 0.00 253.03 64.90 0.00 77.10 1.99 0.00 19,637.45 2029 325.68 79.95 0.00 241.94 52.83 0.00 77.10 1.99 0.00 18,758.84 2030 313.01 67.95 0.00 232.60 44.91 0.00 77.10 1.99 0.00 18,022.95 2031 300.50 61.88 0.00 223.35 40.92 0.00 77.10 1.99 0.00 17,301.98 2032 286.16 58.63 0.00 212.72 38.79 0.00 77.10 1.99 0.00 16,477.81 2033 268.33 54.19 0.00 199.49 35.84 0.00 77.10 1.99 0.00 15,451.90 2034 248.89 50.12 0.00 185.02 33.16 0.00 77.10 1.99 0.00 14,331.22 2035 230.76 46.35 0.00 171.53 30.68 0.00 77.10 1.99 0.00 13,285.70 2036 217.20 43.43 0.00 161.51 28.77 0.00 77.10 1.99 0.00 12,509.55 2037 205.93 40.91 0.00 153.26 27.16 0.00 77.10 1.99 0.00 11,870.06 2038 195.32 38.76 0.00 145.36 25.73 0.00 77.10 1.99 0.00 11,258.53 2039 183.98 36.47 0.00 136.92 24.21 0.00 77.10 1.99 0.00 10,604.33 Rem 971.56 187.70 0.00 717.17 124.06 0.00 77.10 1.99 0.00 55,540.98 Total 5,215.89 1,408.36 0.00 3,870.02 931.43 0.00 77.10 1.99 0.00 300,232.34 Ult 40,447.21 25,110.91 0.00 Net Tax Net Tax Net Net Lease Net Well Other Net Annual Cum Disc. Well Production AdValorem Investment Costs Costs Costs Profits Cash Flow Cash Flow Year Count (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) 2025 191.00 1,717.95 0.00 0.00 7,987.60 0.00 0.00 0.00 11,031.36 10,467.99 2026 182.00 1,881.02 0.00 0.00 7,926.48 0.00 0.00 0.00 12,886.88 21,649.93 2027 182.00 1,803.18 0.00 0.00 7,836.40 0.00 0.00 0.00 12,110.16 31,203.19 2028 172.00 1,628.49 0.00 0.00 6,452.06 0.00 0.00 0.00 11,556.90 39,489.14 2029 26.00 1,555.83 0.00 0.00 6,248.86 0.00 0.00 0.00 10,954.15 46,629.64 2030 22.00 1,494.92 0.00 0.00 6,183.19 0.00 0.00 0.00 10,344.84 52,760.59 2031 22.00 1,435.17 0.00 0.00 6,183.19 0.00 0.00 0.00 9,683.62 57,978.80 2032 22.00 1,366.81 0.00 0.00 6,183.19 0.00 0.00 0.00 8,927.81 62,352.13 2033 16.00 1,281.72 0.00 0.00 6,059.22 0.00 0.00 0.00 8,110.95 65,964.95 2034 11.00 1,188.77 0.00 0.00 6,058.81 0.00 0.00 0.00 7,083.65 68,834.42 2035 11.00 1,102.04 0.00 0.00 6,058.81 0.00 0.00 0.00 6,124.84 71,089.89 2036 11.00 1,037.66 0.00 0.00 6,027.26 0.00 0.00 0.00 5,444.63 72,911.66 2037 7.00 984.62 0.00 0.00 5,965.15 0.00 0.00 0.00 4,920.29 74,408.55 2038 7.00 933.89 0.00 0.00 5,965.15 0.00 0.00 0.00 4,359.48 75,614.52 2039 7.00 879.63 0.00 0.00 5,965.15 0.00 0.00 0.00 3,759.55 76,560.37 Rem. 4,607.19 0.00 0.00 39,364.60 0.00 0.00 0.00 11,569.20 2,194.33 Total 24,898.90 0.00 0.00 136,465.14 0.00 0.00 0.00 138,868.31 78,754.70 Present Worth Profile (M$) PW 5.00%: 101,453.75 Disc. Initial Invest. (M$) : 0.000 PW 8.00%: 86,614.87 ROInvestment (disc/undisc) : 0.00 / 0.00 PW 9.00%: 82,512.95 Years to Payout : 0.00 PW 12.00%: 72,123.18 Internal ROR (%) : 0.00 PW 15.00%: 63,956.07 PW 20.00%: 53,732.08 TRC Eco DetailedNGL.rpt Page : 2 TABLE 2 - 2
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Date : 03/14/2025 1:52:38PM ECONOMIC SUMMARY PROJECTION Proved Producing Rsv Class & Category Project Name : LH Operating NM As of 01/01/2025 As Of Date : 01/01/2025 LEGACY RPT GroupPartner : EON Discount Rate (%) : 10.00 Case Type : REPORT BREAK TOTAL CASE Custom Selection Cum Oil (Mbbl) : 33,960.95 Cum Gas (MMcf) : 22,279.28 Cum NGL (Mgal) : 0.00 Year GrossOil(Mbbl) GrossGas(MMcf) GrossNGL(Mgal) NetOil(Mbbl) NetGas(MMcf) NetNGL(Mgal) OilPrice($/bbl) GasPrice($/Mcf) NGLPrice($/gal) TotalRevenue(M$) 2025 76.31 56.80 0.00 54.24 36.56 0.00 77.10 1.99 0.00 4,254.70 2026 63.09 45.46 0.00 44.70 29.33 0.00 77.10 1.99 0.00 3,504.45 2027 52.54 37.05 0.00 37.13 23.96 0.00 77.10 1.99 0.00 2,910.09 2028 24.49 12.56 0.00 16.50 7.85 0.00 77.10 1.99 0.00 1,287.67 2029 18.97 7.64 0.00 12.52 4.63 0.00 77.10 1.99 0.00 974.83 2030 16.26 5.54 0.00 10.63 3.31 0.00 77.10 1.99 0.00 826.19 2031 14.93 4.77 0.00 9.74 2.85 0.00 77.10 1.99 0.00 757.00 2032 13.82 4.16 0.00 9.01 2.49 0.00 77.10 1.99 0.00 699.57 2033 10.84 2.69 0.00 6.89 1.52 0.00 77.10 1.99 0.00 533.89 2034 10.17 2.37 0.00 6.46 1.34 0.00 77.10 1.99 0.00 500.61 2035 9.58 2.11 0.00 6.08 1.19 0.00 77.10 1.99 0.00 471.34 2036 8.49 1.68 0.00 5.39 0.95 0.00 77.10 1.99 0.00 417.43 2037 6.88 1.10 0.00 4.37 0.62 0.00 77.10 1.99 0.00 337.95 2038 6.53 1.00 0.00 4.15 0.57 0.00 77.10 1.99 0.00 321.01 2039 6.21 0.91 0.00 3.94 0.52 0.00 77.10 1.99 0.00 304.93 Rem 84.56 10.30 0.00 53.69 5.83 0.00 77.10 1.99 0.00 4,151.35 Total 423.66 196.16 0.00 285.44 123.54 0.00 77.10 1.99 0.00 22,253.01 Ult 34,384.61 22,475.44 0.00 Net Tax Net Tax Net Net Lease Net Well Other Net Annual Cum Disc. Well Production AdValorem Investment Costs Costs Costs Profits Cash Flow Cash Flow Year Count (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) 2025 190.00 352.34 0.00 0.00 2,111.94 0.00 0.00 0.00 1,790.43 1,712.63 2026 181.00 290.23 0.00 0.00 2,050.81 0.00 0.00 0.00 1,163.41 2,724.78 2027 181.00 241.01 0.00 0.00 1,960.73 0.00 0.00 0.00 708.35 3,285.24 2028 171.00 106.70 0.00 0.00 576.39 0.00 0.00 0.00 604.58 3,718.64 2029 25.00 80.81 0.00 0.00 373.19 0.00 0.00 0.00 520.83 4,058.34 2030 21.00 68.50 0.00 0.00 307.52 0.00 0.00 0.00 450.17 4,325.24 2031 21.00 62.77 0.00 0.00 307.52 0.00 0.00 0.00 386.71 4,533.68 2032 21.00 58.01 0.00 0.00 307.52 0.00 0.00 0.00 334.03 4,697.35 2033 15.00 44.28 0.00 0.00 183.55 0.00 0.00 0.00 306.05 4,833.62 2034 10.00 41.52 0.00 0.00 183.14 0.00 0.00 0.00 275.95 4,945.33 2035 10.00 39.09 0.00 0.00 183.14 0.00 0.00 0.00 249.10 5,037.00 2036 10.00 34.63 0.00 0.00 151.59 0.00 0.00 0.00 231.21 5,114.31 2037 6.00 28.04 0.00 0.00 89.48 0.00 0.00 0.00 220.43 5,181.33 2038 6.00 26.63 0.00 0.00 89.48 0.00 0.00 0.00 204.89 5,237.97 2039 6.00 25.30 0.00 0.00 89.48 0.00 0.00 0.00 190.14 5,285.75 Rem. 344.43 0.00 0.00 2,198.29 0.00 0.00 0.00 1,608.63 229.84 Total 1,844.30 0.00 0.00 11,163.80 0.00 0.00 0.00 9,244.91 5,515.59 Present Worth Profile (M$) PW 5.00%: 6,806.57 Disc. Initial Invest. (M$) : 0.000 PW 8.00%: 5,949.66 ROInvestment (disc/undisc) : 0.00 / 0.00 PW 9.00%: 5,721.64 Years to Payout : 0.00 PW 12.00%: 5,157.76 Internal ROR (%) : 0.00 PW 15.00%: 4,724.63 PW 20.00%: 4,187.35 TRC Eco DetailedNGL.rpt Page : 3 TABLE 2 - 3
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Date : 03/14/2025 1:52:38PM ECONOMIC SUMMARY PROJECTION Proved Producing Rsv Class & Category Project Name : LH Operating NM As of 01/01/2025 As Of Date : 01/01/2025 SEVEN RIVERS WF RPT GroupPartner : EON Discount Rate (%) : 10.00 Case Type : REPORT BREAK TOTAL CASE Custom Selection Cum Oil (Mbbl) : 1,270.38 Cum Gas (MMcf) : 1,423.27 Cum NGL (Mgal) : 0.00 Year GrossOil(Mbbl) GrossGas(MMcf) GrossNGL(Mgal) NetOil(Mbbl) NetGas(MMcf) NetNGL(Mgal) OilPrice($/bbl) GasPrice($/Mcf) NGLPrice($/gal) TotalRevenue(M$) 2025 282.00 165.16 0.00 210.94 110.07 0.00 77.10 1.99 0.00 16,482.21 2026 329.65 134.87 0.00 246.58 89.89 0.00 77.10 1.99 0.00 19,189.94 2027 324.27 104.52 0.00 242.56 69.66 0.00 77.10 1.99 0.00 18,839.65 2028 316.21 85.59 0.00 236.53 57.05 0.00 77.10 1.99 0.00 18,349.78 2029 306.71 72.31 0.00 229.42 48.19 0.00 77.10 1.99 0.00 17,784.00 2030 296.75 62.41 0.00 221.97 41.60 0.00 77.10 1.99 0.00 17,196.76 2031 285.57 57.12 0.00 213.61 38.07 0.00 77.10 1.99 0.00 16,544.97 2032 272.34 54.47 0.00 203.71 36.30 0.00 77.10 1.99 0.00 15,778.25 2033 257.49 51.50 0.00 192.60 34.32 0.00 77.10 1.99 0.00 14,918.01 2034 238.72 47.75 0.00 178.56 31.82 0.00 77.10 1.99 0.00 13,830.61 2035 221.18 44.24 0.00 165.44 29.48 0.00 77.10 1.99 0.00 12,814.36 2036 208.72 41.74 0.00 156.12 27.82 0.00 77.10 1.99 0.00 12,092.12 2037 199.05 39.81 0.00 148.89 26.53 0.00 77.10 1.99 0.00 11,532.11 2038 188.79 37.76 0.00 141.21 25.16 0.00 77.10 1.99 0.00 10,937.52 2039 177.77 35.55 0.00 132.97 23.70 0.00 77.10 1.99 0.00 10,299.41 Rem 887.01 177.40 0.00 663.48 118.23 0.00 77.10 1.99 0.00 51,389.63 Total 4,792.23 1,212.20 0.00 3,584.59 807.89 0.00 77.10 1.99 0.00 277,979.33 Ult 6,062.60 2,635.47 0.00 Net Tax Net Tax Net Net Lease Net Well Other Net Annual Cum Disc. Well Production AdValorem Investment Costs Costs Costs Profits Cash Flow Cash Flow Year Count (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) 2025 1.00 1,365.61 0.00 0.00 5,875.67 0.00 0.00 0.00 9,240.93 8,755.36 2026 1.00 1,590.80 0.00 0.00 5,875.67 0.00 0.00 0.00 11,723.47 18,925.15 2027 1.00 1,562.17 0.00 0.00 5,875.67 0.00 0.00 0.00 11,401.82 27,917.95 2028 1.00 1,521.78 0.00 0.00 5,875.67 0.00 0.00 0.00 10,952.33 35,770.50 2029 1.00 1,475.02 0.00 0.00 5,875.67 0.00 0.00 0.00 10,433.32 42,571.31 2030 1.00 1,426.42 0.00 0.00 5,875.67 0.00 0.00 0.00 9,894.67 48,435.35 2031 1.00 1,372.40 0.00 0.00 5,875.67 0.00 0.00 0.00 9,296.91 53,445.12 2032 1.00 1,308.80 0.00 0.00 5,875.67 0.00 0.00 0.00 8,593.78 57,654.77 2033 1.00 1,237.44 0.00 0.00 5,875.67 0.00 0.00 0.00 7,804.90 61,131.32 2034 1.00 1,147.24 0.00 0.00 5,875.67 0.00 0.00 0.00 6,807.70 63,889.10 2035 1.00 1,062.95 0.00 0.00 5,875.67 0.00 0.00 0.00 5,875.74 66,052.90 2036 1.00 1,003.04 0.00 0.00 5,875.67 0.00 0.00 0.00 5,213.42 67,797.35 2037 1.00 956.58 0.00 0.00 5,875.67 0.00 0.00 0.00 4,699.86 69,227.23 2038 1.00 907.26 0.00 0.00 5,875.67 0.00 0.00 0.00 4,154.59 70,376.55 2039 1.00 854.33 0.00 0.00 5,875.67 0.00 0.00 0.00 3,569.41 71,274.61 Rem. 4,262.75 0.00 0.00 37,166.31 0.00 0.00 0.00 9,960.57 1,964.49 Total 23,054.60 0.00 0.00 125,301.33 0.00 0.00 0.00 129,623.40 73,239.10 Present Worth Profile (M$) PW 5.00%: 94,647.18 Disc. Initial Invest. (M$) : 0.000 PW 8.00%: 80,665.21 ROInvestment (disc/undisc) : 0.00 / 0.00 PW 9.00%: 76,791.31 Years to Payout : 0.00 PW 12.00%: 66,965.42 Internal ROR (%) : 0.00 PW 15.00%: 59,231.44 PW 20.00%: 49,544.74 TRC Eco DetailedNGL.rpt Page : 4 TABLE 2 - 4
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Date : 03/14/2025 1:52:38PM ECONOMIC SUMMARY PROJECTION Proved Non-Producing Rsv Class & Category Project Name : LH Operating NM As of 01/01/2025 As Of Date : 01/01/2025 Partner : EON Discount Rate (%) : 10.00 Case Type : REPORT BREAK TOTAL CASE Custom Selection Cum Oil (Mbbl) : -0.12 Cum Gas (MMcf) : -0.09 Cum NGL (Mgal) : 0.00 Year GrossOil(Mbbl) GrossGas (MMcf) GrossNGL(Mgal) Net Oil (Mbbl) Net Gas(MMcf) Net NGL(Mgal) Oil Price ($/bbl) GasPrice ($/Mcf) NGLPrice($/gal) TotalRevenue (M$) 2025 51.76 30.28 0.00 38.71 20.18 0.00 77.10 1.99 0.00 3,025.03 2026 93.14 37.87 0.00 69.67 25.24 0.00 77.10 1.99 0.00 5,421.56 2027 158.39 50.23 0.00 118.47 33.48 0.00 77.10 1.99 0.00 9,200.93 2028 324.78 87.30 0.00 242.93 58.18 0.00 77.10 1.99 0.00 18,845.82 2029 458.76 108.00 0.00 343.15 71.98 0.00 77.10 1.99 0.00 26,600.35 2030 481.35 101.18 0.00 360.05 67.43 0.00 77.10 1.99 0.00 27,894.26 2031 489.55 97.91 0.00 366.19 65.25 0.00 77.10 1.99 0.00 28,362.83 2032 488.73 97.75 0.00 365.57 65.14 0.00 77.10 1.99 0.00 28,314.97 2033 482.11 96.42 0.00 360.62 64.26 0.00 77.10 1.99 0.00 27,931.55 2034 471.48 94.30 0.00 352.67 62.85 0.00 77.10 1.99 0.00 27,315.75 2035 458.02 91.60 0.00 342.60 61.05 0.00 77.10 1.99 0.00 26,536.10 2036 443.20 88.64 0.00 331.51 59.08 0.00 77.10 1.99 0.00 25,677.26 2037 427.82 85.57 0.00 320.01 57.03 0.00 77.10 1.99 0.00 24,786.26 2038 410.73 82.15 0.00 307.23 54.75 0.00 77.10 1.99 0.00 23,796.13 2039 390.94 78.19 0.00 292.42 52.11 0.00 77.10 1.99 0.00 22,649.29 Rem 2,300.41 460.08 0.00 1,720.71 306.63 0.00 77.10 1.99 0.00 133,276.79 Total 7,931.17 1,687.45 0.00 5,932.51 1,124.63 0.00 77.10 1.99 0.00 459,634.88 Ult 7,931.05 1,687.36 0.00 Net Tax Net Tax Net Net Lease Net Other Net Annual Cum Disc. Well Production AdValorem Investment Costs Well Costs Costs Profits Cash Flow Cash Flow Year Count (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) 2025 0.00 250.64 0.00 0.00 0.00 0.00 0.00 0.00 2,774.39 2,635.13 2026 11.00 449.44 0.00 14,755.00 0.00 603.14 0.00 0.00 -10,386.01 -6,300.89 2027 48.00 762.94 0.00 18,225.00 0.00 1,556.81 0.00 0.00 -11,343.83 -15,293.15 2028 92.00 1,562.93 0.00 10,105.00 0.00 4,417.84 0.00 0.00 2,760.06 -13,532.12 2029 126.00 2,206.25 0.00 0.00 0.00 7,428.36 0.00 0.00 16,965.74 -2,482.07 2030 126.00 2,313.75 0.00 0.00 0.00 7,856.22 0.00 0.00 17,724.29 8,013.92 2031 126.00 2,352.69 0.00 0.00 0.00 7,856.22 0.00 0.00 18,153.92 17,790.34 2032 126.00 2,348.72 0.00 0.00 0.00 7,856.22 0.00 0.00 18,110.03 26,656.41 2033 126.00 2,316.91 0.00 0.00 0.00 7,856.22 0.00 0.00 17,758.42 34,561.20 2034 126.00 2,265.83 0.00 0.00 0.00 7,856.22 0.00 0.00 17,193.70 41,519.98 2035 126.00 2,201.16 0.00 0.00 0.00 7,856.22 0.00 0.00 16,478.72 47,583.86 2036 126.00 2,129.92 0.00 0.00 0.00 7,856.22 0.00 0.00 15,691.12 52,832.28 2037 126.00 2,056.01 0.00 0.00 0.00 7,856.22 0.00 0.00 14,874.03 57,355.51 2038 126.00 1,973.88 0.00 0.00 0.00 7,856.22 0.00 0.00 13,966.03 61,217.16 2039 126.00 1,878.75 0.00 0.00 0.00 7,856.22 0.00 0.00 12,914.32 64,464.03 Rem. 11,055.26 0.00 0.00 5,875.67 57,550.44 0.00 0.00 58,795.42 10,740.16 Total 38,125.08 0.00 43,085.00 5,875.67 150,118.78 0.00 0.00 222,430.36 75,204.20 Present Worth Profile (M$) PW 5.00%: 125,763.46 Disc. Initial Invest. (M$) : 34,531.107 PW 8.00%: 91,854.12 ROInvestment (disc/undisc) : 3.18 / 6.16 PW 9.00%: 83,041.37 Years to Payout : 4.96 PW 12.00%: 61,970.98 Internal ROR (%) : 56.17 PW 15.00%: 46,827.74 PW 20.00%: 29,946.14 TRC Eco DetailedNGL.rpt Page : 5 TABLE 2 - 5
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Date : 03/14/2025 1:52:38PM ECONOMIC SUMMARY PROJECTION Proved Non-Producing Rsv Class & Category Project Name : LH Operating NM As of 01/01/2025 As Of Date : 01/01/2025 SEVEN RIVERS WF RPT GroupPartner : EON Discount Rate (%) : 10.00 Case Type : REPORT BREAK TOTAL CASE Custom Selection Cum Oil (Mbbl) : -0.12 Cum Gas (MMcf) : -0.09 Cum NGL (Mgal) : 0.00 Year GrossOil(Mbbl) GrossGas(MMcf) GrossNGL(Mgal) NetOil(Mbbl) NetGas(MMcf) Net NGL (Mgal) OilPrice ($/bbl) GasPrice ($/Mcf) NGLPrice ($/gal) TotalRevenue (M$) 2025 51.76 30.28 0.00 38.71 20.18 0.00 77.10 1.99 0.00 3,025.03 2026 93.14 37.87 0.00 69.67 25.24 0.00 77.10 1.99 0.00 5,421.56 2027 158.39 50.23 0.00 118.47 33.48 0.00 77.10 1.99 0.00 9,200.93 2028 324.78 87.30 0.00 242.93 58.18 0.00 77.10 1.99 0.00 18,845.82 2029 458.76 108.00 0.00 343.15 71.98 0.00 77.10 1.99 0.00 26,600.35 2030 481.35 101.18 0.00 360.05 67.43 0.00 77.10 1.99 0.00 27,894.26 2031 489.55 97.91 0.00 366.19 65.25 0.00 77.10 1.99 0.00 28,362.83 2032 488.73 97.75 0.00 365.57 65.14 0.00 77.10 1.99 0.00 28,314.97 2033 482.11 96.42 0.00 360.62 64.26 0.00 77.10 1.99 0.00 27,931.55 2034 471.48 94.30 0.00 352.67 62.85 0.00 77.10 1.99 0.00 27,315.75 2035 458.02 91.60 0.00 342.60 61.05 0.00 77.10 1.99 0.00 26,536.10 2036 443.20 88.64 0.00 331.51 59.08 0.00 77.10 1.99 0.00 25,677.26 2037 427.82 85.57 0.00 320.01 57.03 0.00 77.10 1.99 0.00 24,786.26 2038 410.73 82.15 0.00 307.23 54.75 0.00 77.10 1.99 0.00 23,796.13 2039 390.94 78.19 0.00 292.42 52.11 0.00 77.10 1.99 0.00 22,649.29 Rem 2,300.41 460.08 0.00 1,720.71 306.63 0.00 77.10 1.99 0.00 133,276.79 Total 7,931.17 1,687.45 0.00 5,932.51 1,124.63 0.00 77.10 1.99 0.00 459,634.88 Ult 7,931.05 1,687.36 0.00 Net Tax Net Tax Net Net Lease Net Other Net Annual Cum Disc. Well Production AdValorem Investment Costs Well Costs Costs Profits Cash Flow Cash Flow Year Count (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) 2025 0.00 250.64 0.00 0.00 0.00 0.00 0.00 0.00 2,774.39 2,635.13 2026 11.00 449.44 0.00 14,755.00 0.00 603.14 0.00 0.00 -10,386.01 -6,300.89 2027 48.00 762.94 0.00 18,225.00 0.00 1,556.81 0.00 0.00 -11,343.83 -15,293.15 2028 92.00 1,562.93 0.00 10,105.00 0.00 4,417.84 0.00 0.00 2,760.06 -13,532.12 2029 126.00 2,206.25 0.00 0.00 0.00 7,428.36 0.00 0.00 16,965.74 -2,482.07 2030 126.00 2,313.75 0.00 0.00 0.00 7,856.22 0.00 0.00 17,724.29 8,013.92 2031 126.00 2,352.69 0.00 0.00 0.00 7,856.22 0.00 0.00 18,153.92 17,790.34 2032 126.00 2,348.72 0.00 0.00 0.00 7,856.22 0.00 0.00 18,110.03 26,656.41 2033 126.00 2,316.91 0.00 0.00 0.00 7,856.22 0.00 0.00 17,758.42 34,561.20 2034 126.00 2,265.83 0.00 0.00 0.00 7,856.22 0.00 0.00 17,193.70 41,519.98 2035 126.00 2,201.16 0.00 0.00 0.00 7,856.22 0.00 0.00 16,478.72 47,583.86 2036 126.00 2,129.92 0.00 0.00 0.00 7,856.22 0.00 0.00 15,691.12 52,832.28 2037 126.00 2,056.01 0.00 0.00 0.00 7,856.22 0.00 0.00 14,874.03 57,355.51 2038 126.00 1,973.88 0.00 0.00 0.00 7,856.22 0.00 0.00 13,966.03 61,217.16 2039 126.00 1,878.75 0.00 0.00 0.00 7,856.22 0.00 0.00 12,914.32 64,464.03 Rem. 11,055.26 0.00 0.00 5,875.67 57,550.44 0.00 0.00 58,795.42 10,740.16 Total 38,125.08 0.00 43,085.00 5,875.67 150,118.78 0.00 0.00 222,430.36 75,204.20 Present Worth Profile (M$) PW 5.00%: 125,763.46 Disc. Initial Invest. (M$) : 34,531.107 PW 8.00%: 91,854.12 ROInvestment (disc/undisc) : 3.18 / 6.16 PW 9.00%: 83,041.37 Years to Payout : 4.96 PW 12.00%: 61,970.98 Internal ROR (%) : 56.17 PW 15.00%: 46,827.74 PW 20.00%: 29,946.14 TRC Eco DetailedNGL.rpt Page : 6 TABLE 2 - 6
Page 173
Date : 03/14/2025 1:52:38PM ECONOMIC SUMMARY PROJECTION Proved Undeveloped Rsv Class & Category Project Name : LH Operating NM As of 01/01/2025 As Of Date : 01/01/2025 Partner : EON Discount Rate (%) : 10.00 Case Type : REPORT BREAK TOTAL CASE Custom Selection Cum Oil (Mbbl) : 0.00 Cum Gas (MMcf) : 0.00 Cum NGL (Mgal) : 0.00 Year GrossOil(Mbbl) GrossGas (MMcf) GrossNGL(Mgal) NetOil(Mbbl) NetGas(MMcf) NetNGL(Mgal) OilPrice($/bbl) GasPrice($/Mcf) NGL Price($/gal) TotalRevenue(M$) 2025 24.81 14.55 0.00 18.56 9.70 0.00 77.10 1.99 0.00 1,450.22 2026 36.82 15.01 0.00 27.54 10.00 0.00 77.10 1.99 0.00 2,143.57 2027 53.93 17.03 0.00 40.34 11.35 0.00 77.10 1.99 0.00 3,132.95 2028 160.36 42.76 0.00 119.95 28.50 0.00 77.10 1.99 0.00 9,304.91 2029 330.21 77.52 0.00 246.99 51.66 0.00 77.10 1.99 0.00 19,146.05 2030 373.87 78.59 0.00 279.65 52.37 0.00 77.10 1.99 0.00 21,665.32 2031 381.15 76.23 0.00 285.10 50.81 0.00 77.10 1.99 0.00 22,082.33 2032 378.34 75.67 0.00 283.00 50.43 0.00 77.10 1.99 0.00 21,919.35 2033 369.07 73.82 0.00 276.07 49.20 0.00 77.10 1.99 0.00 21,382.58 2034 355.71 71.14 0.00 266.07 47.41 0.00 77.10 1.99 0.00 20,608.55 2035 339.66 67.93 0.00 254.07 45.28 0.00 77.10 1.99 0.00 19,678.56 2036 321.46 64.29 0.00 240.45 42.85 0.00 77.10 1.99 0.00 18,624.01 2037 302.29 60.46 0.00 226.11 40.29 0.00 77.10 1.99 0.00 17,513.43 2038 282.27 56.45 0.00 211.14 37.62 0.00 77.10 1.99 0.00 16,353.78 2039 260.72 52.14 0.00 195.02 34.75 0.00 77.10 1.99 0.00 15,105.26 Rem 1,664.91 332.98 0.00 1,245.35 221.92 0.00 77.10 1.99 0.00 96,458.20 Total 5,635.58 1,176.57 0.00 4,215.42 784.14 0.00 77.10 1.99 0.00 326,569.09 Ult 5,635.58 1,176.57 0.00 Well Net TaxProduction Net TaxAdValorem NetInvestment NetLease Costs NetWell Costs OtherCosts NetProfits AnnualCash Flow Cum Disc.Cash Flow Year Count (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) 2025 0.00 120.16 0.00 0.00 0.00 0.00 0.00 0.00 1,330.07 1,263.79 2026 0.00 177.70 0.00 930.00 0.00 0.00 0.00 0.00 1,035.87 2,197.08 2027 0.00 259.79 0.00 27,910.00 0.00 0.00 0.00 0.00 -25,036.84 -17,496.59 2028 23.00 771.68 0.00 22,231.00 0.00 695.93 0.00 0.00 -14,393.70 -28,030.90 2029 43.00 1,587.99 0.00 0.00 0.00 2,149.64 0.00 0.00 15,408.43 -18,019.28 2030 43.00 1,797.07 0.00 0.00 0.00 2,659.98 0.00 0.00 17,208.26 -7,828.53 2031 43.00 1,831.72 0.00 0.00 0.00 2,659.98 0.00 0.00 17,590.63 1,644.88 2032 43.00 1,818.20 0.00 0.00 0.00 2,659.98 0.00 0.00 17,441.17 10,184.01 2033 43.00 1,773.68 0.00 0.00 0.00 2,659.98 0.00 0.00 16,948.92 17,729.09 2034 43.00 1,709.47 0.00 0.00 0.00 2,659.98 0.00 0.00 16,239.10 24,302.04 2035 43.00 1,632.33 0.00 0.00 0.00 2,659.98 0.00 0.00 15,386.25 29,964.51 2036 43.00 1,544.85 0.00 0.00 0.00 2,659.98 0.00 0.00 14,419.17 34,788.20 2037 43.00 1,452.73 0.00 0.00 0.00 2,659.98 0.00 0.00 13,400.72 38,864.05 2038 43.00 1,356.54 0.00 0.00 0.00 2,659.98 0.00 0.00 12,337.26 42,275.86 2039 43.00 1,252.98 0.00 0.00 0.00 2,659.98 0.00 0.00 11,192.31 45,090.22 Rem. 8,001.17 0.00 0.00 7,843.27 33,523.38 0.00 0.00 47,090.38 8,616.83 Total 27,088.07 0.00 51,071.00 7,843.27 62,968.74 0.00 0.00 177,598.01 53,707.04 Present Worth Profile (M$) Disc. Initial Invest. (M$) : 38,812.946 PW 5.00%: 96,007.45 ROInvestment (disc/undisc) : 2.38 / 4.48 PW 8.00%: 67,572.89 Years to Payout : 6.25 PW 9.00%: 60,222.70 Internal ROR (%) : 36.48 PW 12.00%: 42,764.88 PW 15.00%: 30,379.84 PW 20.00%: 16,879.42 TRC Eco DetailedNGL.rpt Page : 7 TABLE 2 - 7
Page 174
Date : 03/14/2025 1:52:38PM ECONOMIC SUMMARY PROJECTION Proved Undeveloped Rsv Class & Category Project Name : LH Operating NM As of 01/01/2025 As Of Date : 01/01/2025 SEVEN RIVERS WF RPT GroupPartner : EON Discount Rate (%) : 10.00 Case Type : REPORT BREAK TOTAL CASE Custom Selection Cum Oil (Mbbl) : 0.00 Cum Gas (MMcf) : 0.00 Cum NGL (Mgal) : 0.00 Year Gross Oil(Mbbl) GrossGas (MMcf) Gross NGL(Mgal) NetOil (Mbbl) NetGas (MMcf) Net NGL(Mgal) Oil Price ($/bbl) GasPrice ($/Mcf) NGL Price($/gal) TotalRevenue (M$) 2025 24.81 14.55 0.00 18.56 9.70 0.00 77.10 1.99 0.00 1,450.22 2026 36.82 15.01 0.00 27.54 10.00 0.00 77.10 1.99 0.00 2,143.57 2027 53.93 17.03 0.00 40.34 11.35 0.00 77.10 1.99 0.00 3,132.95 2028 160.36 42.76 0.00 119.95 28.50 0.00 77.10 1.99 0.00 9,304.91 2029 330.21 77.52 0.00 246.99 51.66 0.00 77.10 1.99 0.00 19,146.05 2030 373.87 78.59 0.00 279.65 52.37 0.00 77.10 1.99 0.00 21,665.32 2031 381.15 76.23 0.00 285.10 50.81 0.00 77.10 1.99 0.00 22,082.33 2032 378.34 75.67 0.00 283.00 50.43 0.00 77.10 1.99 0.00 21,919.35 2033 369.07 73.82 0.00 276.07 49.20 0.00 77.10 1.99 0.00 21,382.58 2034 355.71 71.14 0.00 266.07 47.41 0.00 77.10 1.99 0.00 20,608.55 2035 339.66 67.93 0.00 254.07 45.28 0.00 77.10 1.99 0.00 19,678.56 2036 321.46 64.29 0.00 240.45 42.85 0.00 77.10 1.99 0.00 18,624.01 2037 302.29 60.46 0.00 226.11 40.29 0.00 77.10 1.99 0.00 17,513.43 2038 282.27 56.45 0.00 211.14 37.62 0.00 77.10 1.99 0.00 16,353.78 2039 260.72 52.14 0.00 195.02 34.75 0.00 77.10 1.99 0.00 15,105.26 Rem 1,664.91 332.98 0.00 1,245.35 221.92 0.00 77.10 1.99 0.00 96,458.20 Total 5,635.58 1,176.57 0.00 4,215.42 784.14 0.00 77.10 1.99 0.00 326,569.09 Ult 5,635.58 1,176.57 0.00 Well Net TaxProduction Net TaxAdValorem NetInvestment NetLease Costs NetWell Costs OtherCosts NetProfits AnnualCash Flow Cum Disc.Cash Flow Year Count (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) (M$) 2025 0.00 120.16 0.00 0.00 0.00 0.00 0.00 0.00 1,330.07 1,263.79 2026 0.00 177.70 0.00 930.00 0.00 0.00 0.00 0.00 1,035.87 2,197.08 2027 0.00 259.79 0.00 27,910.00 0.00 0.00 0.00 0.00 -25,036.84 -17,496.59 2028 23.00 771.68 0.00 22,231.00 0.00 695.93 0.00 0.00 -14,393.70 -28,030.90 2029 43.00 1,587.99 0.00 0.00 0.00 2,149.64 0.00 0.00 15,408.43 -18,019.28 2030 43.00 1,797.07 0.00 0.00 0.00 2,659.98 0.00 0.00 17,208.26 -7,828.53 2031 43.00 1,831.72 0.00 0.00 0.00 2,659.98 0.00 0.00 17,590.63 1,644.88 2032 43.00 1,818.20 0.00 0.00 0.00 2,659.98 0.00 0.00 17,441.17 10,184.01 2033 43.00 1,773.68 0.00 0.00 0.00 2,659.98 0.00 0.00 16,948.92 17,729.09 2034 43.00 1,709.47 0.00 0.00 0.00 2,659.98 0.00 0.00 16,239.10 24,302.04 2035 43.00 1,632.33 0.00 0.00 0.00 2,659.98 0.00 0.00 15,386.25 29,964.51 2036 43.00 1,544.85 0.00 0.00 0.00 2,659.98 0.00 0.00 14,419.17 34,788.20 2037 43.00 1,452.73 0.00 0.00 0.00 2,659.98 0.00 0.00 13,400.72 38,864.05 2038 43.00 1,356.54 0.00 0.00 0.00 2,659.98 0.00 0.00 12,337.26 42,275.86 2039 43.00 1,252.98 0.00 0.00 0.00 2,659.98 0.00 0.00 11,192.31 45,090.22 Rem. 8,001.17 0.00 0.00 7,843.27 33,523.38 0.00 0.00 47,090.38 8,616.83 Total 27,088.07 0.00 51,071.00 7,843.27 62,968.74 0.00 0.00 177,598.01 53,707.04 Present Worth Profile (M$) Disc. Initial Invest. (M$) : 38,812.946 PW 5.00%: 96,007.45 ROInvestment (disc/undisc) : 2.38 / 4.48 PW 8.00%: 67,572.89 Years to Payout : 6.25 PW 9.00%: 60,222.70 Internal ROR (%) : 36.48 PW 12.00%: 42,764.88 PW 15.00%: 30,379.84 PW 20.00%: 16,879.42 TRC Eco DetailedNGL.rpt Page : 8 TABLE 2 - 8
Page 175
EON RESOURCES, INC2024 SEC PRICE; $75.48/BBL, $2.13/MMBTUby RPT GROUP by Reserve Category by Descending Value As of December 31,2024 Gross Reserve Net Reserve Net Revenue Cash Flow Case Name Operator Field Reservoir RPTGROUP County State ReserveCategory WI RI OIL(Mbbl) GAS(MMcf) OIL(Mbbl) GAS(MMcf) Oil(M$) Gas(M$) Other(M$) Expense(M$) ProdTaxes(M$) Invest(M$) UnDisc(M$) Disc 10%(M$) State B Legacy LeaseGroup LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.63500 233.83 48.91 0.00 148.48 27.67 0.00 11,502.94 3,540.55 954.14 0.00 7,008.26 3,559.01 State A LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.63500 35.86 22.58 0.00 22.77 12.77 0.00 1,781.20 1,092.36 147.56 0.00 541.27 426.88 Skelly Legacy LeaseGroup LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.73142 67.38 63.46 0.00 49.28 41.35 0.00 3,881.95 3,171.90 321.30 0.00 388.76 373.20 Hudson LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.77500 18.07 15.63 0.00 14.00 10.80 0.00 1,101.26 588.29 91.17 0.00 421.81 354.48 Turner B LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.77500 22.67 15.66 0.00 17.57 10.81 0.00 1,375.95 953.03 113.97 0.00 308.95 288.07 CA Russell LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.70000 13.12 0.00 0.00 9.19 0.00 0.00 708.18 407.16 58.78 0.00 242.24 204.09 H E West B LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.76750 15.89 19.43 0.00 12.19 13.29 0.00 966.57 693.26 79.93 0.00 193.37 180.19 State AZ LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.74125 7.92 8.27 0.00 5.87 5.46 0.00 463.64 330.49 38.36 0.00 94.79 85.95 H E West A LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.69378 2.49 1.59 0.00 1.72 0.98 0.00 134.93 92.36 11.18 0.00 31.39 30.02 Superior FosterLegacy LeaseGroup LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.56000 1.19 0.00 0.00 0.66 0.00 0.00 51.25 36.32 4.25 0.00 10.67 9.95 V L Foster LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.70000 4.14 0.41 0.00 2.90 0.26 0.00 223.94 196.96 18.58 0.00 8.40 8.69 Fren Oil LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.77500 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Friess Legacy LeaseGroup LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.77500 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 J L Keel A LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.70043 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 J L Keel B LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.77500 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Lea D Legacy LeaseGroup LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.73725 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Turner A LegacyLease Group LHOperating GRAYBURGJACKSON SR-Q-G-SA LEGACY Eddy NM PDP 1.00000 0.71500 1.11 0.22 0.00 0.79 0.14 0.00 61.20 61.12 5.08 0.00 (5.00) (4.94) LEGACYTotal 423.66 196.16 0.00 285.44 123.54 0.00 22,253.01 11,163.80 1,844.30 0.00 9,244.91 5,515.59 SVRV WF PDPResponse LHOperating GRAYBURGJACKSON SVRV SEVENRIVERSWF Eddy NM PDP 1.00000 0.74800 3,035.67 793.70 0.00 2,270.68 528.98 0.00 176,122.12 102,770.90 14,606.56 0.00 58,744.66 36,189.21 SVRV WF RTP PDPResponse (INCR) LHOperating GRAYBURGJACKSON SVRV SEVENRIVERSWF Eddy NM PDP 1.00000 0.74800 1,756.56 418.50 0.00 1,313.91 278.92 0.00 101,857.21 22,530.43 8,448.04 0.00 70,878.74 37,049.89 SEVEN RIVERS WF Total 4,792.23 1,212.20 0.00 3,584.59 807.89 0.00 277,979.33 125,301.33 23,054.60 0.00 129,623.40 73,239.10 PDP Total 3,459.33 989.86 0.00 2,556.12 652.51 0.00 198,375.13 113,934.70 16,450.85 0.00 67,989.58 41,704.81 SVRV WFPDP+PDNP+PUD(INCR) LHOperating GRAYBURGJACKSON SVRV SEVENRIVERSWF Eddy NM PNP 1.00000 0.74800 7,931.17 1,687.45 0.00 5,932.51 1,124.63 0.00 459,634.88 155,994.44 38,125.08 43,085.00 222,430.36 75,204.20 SEVEN RIVERS WF Total 7,931.17 1,687.45 0.00 5,932.51 1,124.63 0.00 459,634.88 155,994.44 38,125.08 43,085.00 222,430.36 75,204.20 PNP Total 7,931.17 1,687.45 0.00 5,932.51 1,124.63 0.00 459,634.88 155,994.44 38,125.08 43,085.00 222,430.36 75,204.20 SVRV WFPDP+PDNP+PUD(INCR) LHOperating GRAYBURGJACKSON SVRV SEVENRIVERSWF Eddy NM PUD 1.00000 0.74800 5,635.58 1,176.57 0.00 4,215.42 784.14 0.00 326,569.09 70,812.01 27,088.07 51,071.00 177,598.01 53,707.04 SEVEN RIVERSWF Total 5,635.58 1,176.57 0.00 4,215.42 784.14 0.00 326,569.09 70,812.01 27,088.07 51,071.00 177,598.01 53,707.04 PUD Total 5,635.58 1,176.57 0.00 4,215.42 784.14 0.00 326,569.09 70,812.01 27,088.07 51,071.00 177,598.01 53,707.04 Grand Total 18,782.64 4,272.38 0.00 14,017.95 2,840.21 0.00 1,086,436.31 363,271.59 90,112.04 94,156.00 538,896.68 207,665.93 TRC Eco DetailedNGL.rpt Page : 9 TABLE 2 - 9