EON Resources' Q1 2026 loss widens to $5.77M
At March 31, 2026, EONR had $129,772 in cash and a $22,600,412 working-capital deficit, and substantial doubt remained unalleviated.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
EON Resources Inc. reported $968,193 in total revenue and a $5,772,595 net loss for the three months ended March 31, 2026, versus $4,505,098 in revenue and a $2,056,519 net loss in the restated 2025 quarter. Crude oil revenue was $4,384,267; the net derivative loss was $3,579,475.
Net cash used in operating activities was $305,976, compared with $1,827,355 in the restated 2025 quarter. At March 31, 2026, cash was $129,772 and the working-capital deficit was $22,600,412. Management said substantial doubt about the company’s ability to continue as a going concern had not been alleviated.
Under its Common Stock Purchase Agreement, EONR may require White Lion to purchase newly issued shares for up to $150,000,000 in aggregate gross purchase price, subject to conditions including an effective registration statement. EONR says the facility is currently unavailable until an effective S-1 is on file; it has received $11,130,586 for 17,000,000 shares to date. NYSE American issued a notice of noncompliance on April 16, 2026, because EONR’s 2025 Form 10-K missed its April 15 due date; EONR filed the report on September 28, 2026, within the initial cure period.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointOperating cash used fell to $305,976 from $1,827,355 in the restated 2025 quarter.
Negative
- Major pointGoing-concern doubt remained alongside a $22,600,412 working-capital deficit.
- Moderate pointTotal revenue fell to $968,193 from $4,505,098 in the restated 2025 quarter.
- Moderate pointNet loss widened to $5,772,595 from $2,056,519 in the restated 2025 quarter.
Filing Explained
A new $1,200,000 convertible note brought $1,128,000 cash after quarter-end, with any additional share dilution dependent on conversion.
A Form 10-Q is an unaudited quarterly report. This filing records completed debt conversions into Class A shares, increasing the share count and reducing existing holders’ percentage ownership absent offsetting changes.
During the quarter, EON Resources issued 3,330,826 Class A shares to convert
Separately, on
Key Figures
Key Terms
going concern financial
costless collars financial
Merchant Cash Advances financial
mezzanine equity financial
embedded conversion option financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What did EONR report for the three months ended March 31, 2026?
How does EONR’s Common Stock Purchase Agreement price shares sold to White Lion?
What happened after EONR received the NYSE American notice?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File No.
EON Resources, Inc. |
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of |
| (I.R.S. Employer |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐
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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ | Large accelerated filer |
| ☐ | Accelerated filer |
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| Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of October 12, 2026,
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EON Resources, Inc.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2026
TABLE OF CONTENTS
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Part I. Financial Information |
1 |
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Item 1. |
Financial Statements |
1 |
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Condensed Consolidated Balance Sheets as of March 31, 2026 (Unaudited) and December 31, 2025 |
1 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
2 |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
3 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
4 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
5 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
31 |
Item 3. |
Quantitative and Qualitative Disclosures Regarding Market Risk |
39 |
Item 4. |
Controls and Procedures |
39 |
Part II. Other Information |
41 |
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Item 1. |
Legal Proceedings |
41 |
Item 1A. |
Risk Factors |
41 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
41 |
Item 3. |
Defaults Upon Senior Securities |
41 |
Item 4. |
Mine Safety Disclosures |
41 |
Item 5. |
Other Information |
41 |
Item 6. |
Exhibits |
42 |
Part III. Signatures |
43 |
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Explanatory Note
As previously disclosed, we restated our audited consolidated financial statements as of December 31, 2024 and for the year ended December 31, 2024. The restatement of these periods was effective with the filing of our Annual Report on Form 10-K/A for the year ended December 31, 2024 as filed on April 27, 2026. See Note 14, Restatement of Previously Issued Consolidated Financial Statements, to the consolidated financial statements in our Annual Report on Form 10-K/A for additional information related to the restatement.
Additionally, as previously disclosed in our annual report on Form 10-K as filed on September 28, 2026, we restated the relevant unaudited interim financial information for the quarterly periods ended March 31, 2025, June 30, 2025, and September 30, 2025. The 2025 quarterly restatements are or will become effective with the filing of our 2026 unaudited interim condensed consolidated financial statement filings in Quarterly Reports on Form 10-Q, including the quarterly period ended March 31, 2025, which is effective with the filing of this Quarterly Report on Form 10-Q. See Note 11, Restatement of Previously Issued Condensed Consolidated Financial Statements, in Item 1, Financial Statements, for additional information related to the restatement of our condensed consolidated financial statements for the period ended March 31, 2025.
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Part I. Financial Information
Item 1. Financial Statements
EON RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | March 31, | | | December 31, | | ||
| | (Unaudited) | | | | | | |
ASSETS | | | | | | | | |
Cash and cash equivalents | | $ | | | $ | | ||
Accounts receivable | | | | | | | | |
Crude Oil and natural gas sales | | | | | | | ||
Other | | | | | | | ||
Short-term hedging derivative instrument asset | | | | | | | ||
Prepaid expenses and other current assets | | | | | | | ||
Total current assets | | | | | | | ||
Crude oil and natural gas properties, successful efforts method: | | | | | | | | |
Proved Properties | | | | | | | ||
Accumulated depreciation, depletion, amortization | | | ( | ) | | | ( | ) |
Total oil and natural gas properties, net | | | | | | | ||
Other property, plant and equipment, net | | | | | | | ||
Other noncurrent assets | | | | | | | ||
TOTAL ASSETS | | $ | | | $ | | ||
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
Current liabilities | | | | | | | | |
Accounts payable | | $ | | | $ | | ||
Accounts payable – related parties | | | | | | | ||
Accrued liabilities and other | | |
| | | | ||
Revenue and royalties payable | | | | | | | ||
Short-term hedging derivative instrument liabilities | | | | | | | ||
Current portion of long term debt | | | | | | | ||
Derivative liability, current | | | | | | | ||
Total current liabilities | | | | | | | ||
Long-term debt, net of current portion and discount | | | | | | | ||
Related party notes payable, net of discount | | | | | | | ||
Convertible note liability, net of discount and current portion | | | | | | | ||
Convertible note liability, related party, net of discount and current portion | | | | | | | ||
Derivative liability, net of current | | | | | | | ||
Derivative liability, related party | | | | | | | ||
Long-term hedging derivative instrument liabilities | | | | | | | ||
Deferred tax liability | | | | | | | ||
Asset retirement obligations | | | | | | | ||
Other liabilities | | | | | | | ||
Total for non-current liabilities | | | | | | | ||
Total liabilities | | | | | | | ||
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Redeemable common stock, $0.0001 par value; 400,000 shares outstanding subject to redemption at $15.00 per share as of March 31, 2026 and December 31, 2025, respectively | | | | | | | ||
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Stockholders’ equity | | | | | | | | |
Preferred stock, $0.0001 par value; 1,000,000 authorized shares, 0 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively | | | | | | | ||
Class A Common stock, $0.0001 par value; 100,000,000 authorized shares, 55,424,861 and 51,740,701 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively | | | | | | | ||
Class B Common stock, $0.0001 par value; 20,000,000 authorized shares, 0 and issued and outstanding at March 31, 2026 and December 31, 2025, respectively | | | | | | | ||
Additional paid in capital | | | | | | | ||
Accumulated deficit | | | ( | ) | | | ( | ) |
Total stockholders’ equity | | | | | | | ||
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | | $ | | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EON RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three months | | | Three months | | ||
| | | | | | (As Restated)(1) | | |
Revenues | | | | | | | | |
Crude oil | | $ | | | $ | | ||
Natural gas and natural gas liquids | | | | | | | ||
Gain (loss) on derivative instruments, net | | | ( | ) | | | ( | ) |
Other revenue | | | | | | | ||
Total revenues | | | | | | | ||
Expenses | | | | | | | | |
Production taxes, transportation and processing | | | | | | | ||
Lease operating | | | | | | | ||
Depletion, depreciation and amortization | | | | | | | ||
Accretion of asset retirement obligations | | | | | | | ||
General and administrative | | | | | | | ||
Total expenses | | | | | | | ||
Operating income (loss) | | | ( | ) | | |
| |
Other Income (expenses) | | | | | | | | |
Change in fair value of warrant liability | | | | | | ( | ) | |
Change in fair value of convertible note liability | | | | | | ( | ) | |
Change in fair value of derivative liabilities | | | ( | ) | | | ( | ) |
Change in fair value of derivative liabilities - related party | | | | | | | ||
Gain (loss) on extinguishment of liabilities | | | | | | ( | ) | |
Amortization of debt discount | | | ( | ) | | | ( | ) |
Interest expense | | | ( | ) | | | ( | ) |
Interest income | | | | | | | ||
Other Income (expense) | | | | | | | ||
Total other expenses | | | ( | ) | | | ( | ) |
Loss before income taxes | | | ( | ) | | | ( | ) |
Income tax benefit | | | | | | | ||
Net loss | | | ( | ) | | | ( | ) |
Net loss attributable to noncontrolling interests | | | | | | | ||
Net loss attributable to EON Resources, Inc. | | $ | ( | ) | | $ | ( | ) |
| | | | | | | | |
Weighted average share outstanding, common stock - basic and diluted | | | | | | | ||
Net loss per share of common stock – basic and diluted | | $ | ( | ) | | $ | (0.13 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(1) As restated represents restatements previously disclosed in the Company's Form 10-K for the year ended December 31, 2025. See Note 11.
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EON RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Stockholders’ | | | | | | | | | | |
| | Class A | | | Class B | | | Additional | | | | | | | (Deficit) Equity | | | | | | | Total | | |||||||||||||
| | Common Stock | | | Common Stock | | | Paid-In | | | Accumulated | | | Resources | | | Noncontrolling | | | (Deficit) | | |||||||||||||||
| | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Inc. | | | Interest | | | Equity | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance – December 31, 2025 | | | | | $ | | | | - | | | $ | | | $ | | | $ | ( | ) | | $ | | | $ | | | $ | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Share-based compensation | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued for conversion of note payables | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Derivative liability conversion to common stock | | | - | | | | | | | - | | | | | | | | | | | | | | | | | | | | |||||||
Net loss | | | - | | | | | | | - | | | | | | | | | | ( | ) | | | ( | ) | | | | | | ( | ) | ||||
Balance – March 31, 2026 | | | | | $ | | | | - | | | $ | | | $ | | | $ | ( | ) | | $ | | | $ | | | $ | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance – December 31, 2024 (As Restated) (1) | | | | | $ | | | | | | $ | | | $ | | | $ | ( | ) | | $ | | | $ | | | $ | | ||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Share-based compensation | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued under equity line of credit | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued for conversion of note payables | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued to settle accounts payable | | | | | | | | | - | | | | - | | | | | | | | | | | | | | | | | |||||||
Derivative liability conversion to common stock | | | - | | | | | | | - | | | | | | | | | | | | | | | | | | | | |||||||
Class B exchanged for Class A | | | | | | | | | ( | ) | | | ( | ) | | | | | | | | | | | | ( | ) | | | | ||||||
Net loss | | | - | | | | | | | - | | | | | | | | | | ( | ) | | | ( | ) | | | ( | ) | | | ( | ) | |||
Balance – March 31, 2025 (As Restated) (1) | | | | | $ | | | | - | | | $ | | | $ | | | $ | ( | ) | | $ | | | $ | | | $ | | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(1) As restated represents restatements previously disclosed in the Company's Form 10-K for the year ended December 31, 2025. See Note 11.
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EON RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
| | Three | | | Three (As Restated)(1) | | ||
Operating activities: | | | | | | | | |
Net loss | | $ | ( | ) | | $ | ( | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | |
Depreciation, depletion, and amortization expense | | | | | | | ||
Accretion of asset retirement obligations | | | | | | | ||
Equity-based compensation | | | | | | | ||
Deferred income tax benefit | | | ( | ) | | | ( | ) |
Amortization of debt issuance costs | | | | | | | ||
(Gain) loss on extinguishment of liabilities | | | | | | | ||
Change in fair value of unsettled derivatives | | | | | | ( | ) | |
Change in fair value of convertible note liability | | | - | | | | 129,746 | |
Change in fair value of warrant liability | | | | | | | ||
Change in fair value of derivative liabilities | | | | | | | ||
Change in fair value of derivative liabilities – related parties | | | (71,000 | ) | | | (113,000 | ) |
Changes in operating assets and liabilities: | | | - | | | | | |
Accounts receivable | | | ( | ) | | | ( | ) |
Prepaid expenses and other assets | | | ( | ) | | | ( | ) |
Accounts payable | | | | | | ( | ) | |
Accounts payable, related parties | | | | | | | ||
Accrued liabilities and other | | | | | | | ||
Royalties payable | | | | | | | ||
Royalties payable, related party | | | | | | | ||
Net cash (used in) operating activities | | | ( | ) | | | ( | ) |
Investing activities: | | | | | | | | |
Development of crude oil and gas properties | | | ( | ) | | | ( | ) |
Purchases of other equipment | | | | | | | ||
Net cash used in investing activities | | | ( | ) | | | ( | ) |
Financing activities: | | | | | | | | |
Repayments of long-term debt | | | | | | ( | ) | |
Proceeds from short-term notes payable | | | | | | | ||
Repayment of short-term notes payable | | | ( | ) | | | ( | ) |
Proceeds from issuance of convertible notes payable | | | | | | | ||
Proceeds from related party loans | | | | | | | ||
Proceeds from sale of common stock | | | | | | | ||
Net cash provided by financing activities | | | | | | | ||
| | | | | | | | |
Net change in cash and cash equivalents | | | ( | ) | | | | |
Cash and cash equivalents at beginning of period | | | | | | | ||
Cash and cash equivalents at end of period | | $ | | | $ | | ||
| | | | | | | | |
Cash paid during the period for: | | | | | | | | |
Interest on debt | | $ | | | $ | | ||
Income taxes | | $ | | | $ | | ||
Supplemental disclosure of non-cash investing and financing activities: | | | | | | | | |
| | | | | | | | |
Derivative liability added as debt discount on issuance of new convertible notes payable | | $ | | | $ | | ||
Conversion of deferred wages to notes payable | | $ | | | $ | | ||
Shares issued for conversion of notes payable and accrued interest | | $ | | | $ | | ||
Derivative liability converted to common stock | | $ | | | $ | | ||
Accrued purchases of property and equipment | | $ | | | $ | | ||
Exchange of Class B Units for Class A Common stock | | $ | | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(1) As restated represents restatements previously disclosed in the Company's Form 10-K for the year ended December 31, 2025. See Note 11.
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EON RESOURCES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Organization and General
EON Resources, Inc. (the “Company”) was incorporated in Delaware on December 9, 2020. The Company was a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an “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 “JOBS Act”). On September 16, 2024, the Company filed a Certificate of Amendment (the “Certificate of 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 “EON Resources Inc.”, effective on September 17, 2024.
Effective November 15, 2023, the Company completed its initial business combination. Through its subsidiary Pogo Resources, LLC, a Texas limited liability Company “(“Pogo” or “Pogo 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 oil and 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’s properties are in the Grayburg-Jackson Field in Eddy County, New Mexico, and the South Justis Field (“SJF”) in Lea County, New Mexico, which are both sub-areas of the Permian Basin. The Company focuses exclusively on vertical development drilling.
Going Concern Considerations
At March 31, 2026, the Company had $
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Condensed Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the period presented.
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The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on September 28, 2026. The interim results for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 or for any future periods.
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 in consolidation.
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 its chief executive officer. 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 to evaluate 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 Consolidated Statements of Operations. Furthermore, the segment’s assets are reported on the Consolidated Balance Sheets as total assets. All significant operating decisions are based upon an analysis of the Company as one operating segment, which is the same as its reporting segment.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected 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 of capitalized oil and natural gas properties, ii) depreciation of property and equipment; iii) the valuation of derivative liabilities associated with convertible notes and put options and iv) the valuation of commodity derivative instruments. These estimates are based on 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 for financial reporting.
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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 outstanding during the period, excluding shares of common stock subject to forfeiture.
The Company’s Class B Common Stock does not have economic rights to the undistributed earnings of the Company, and are not considered participating securities under ASC 260. As such, they are excluded from the calculation of net income (loss) per common share.
The Company has not considered the effect of the following instruments in the calculation of diluted income per share for the three months ended March 31, 2026 and 2025 since the effect of those instruments would be anti-dilutive:
| | March 31, | | | March 31, | | ||
| | 2026 | | | 2025 | | ||
Class A Common Stock warrants | | | | | | | ||
Convertible notes payable | | | | | | | ||
Class A Common Stock options | | | | | | | ||
Class A Common Restricted stock units | | | | | | | ||
Total | | | | | | | ||
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.
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Impairment of Oil and Gas Properties
Proved oil and natural gas properties are reviewed for impairment quarterly and when events and circumstances indicate a possible decline in the recoverability of the carrying amount of such property. The Company estimates 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 natural gas properties to estimated fair value. Risk-adjusted probable and possible reserves may be taken into consideration when determining estimated future net cash flows and fair value when such reserves exist and are economically recoverable. Due to the unavailability of relevant comparable market data, a discounted cash flow method is used to determine the fair value of proved properties. Significant unobservable inputs (Level 3) utilized in the determination of discounted future net cash flows include future commodity prices adjusted for differentials, forecasted production based on decline curve analysis, estimated future operating and development costs, property ownership interests, and a 10% discount rate. At December 31, 2025, the Company’s commodity price assumptions were based on forward NYMEX strip prices through year-end 2030 and were then escalated at 3% per year thereafter. Operating cost assumptions were based on current costs escalated at 3% per year beginning in 2027.
Unobservable inputs to the Company’s fair value assessments are reviewed and revised as warranted based on a number of factors, including reservoir performance, new drilling, crude oil and natural gas prices, changes in costs, technological advances, new geological or geophysical data, or other economic factors. Fair value measurements of proved properties are reviewed and approved by certain members of the Company’s management.
As of March 31, 2026, estimated future net cash flows were determined to be in excess of cost basis, and therefore no impairments were recorded for the Company’s proved crude oil and natural gas properties.
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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 or services 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 the time goods are delivered, but rather at the point of a claim.
Convertible Instruments
The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount.
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Put Option Right Valuation
The Company has determined that the Put Option Right is a derivative liability required to be bifurcated from its host instrument. This liability was recorded as a liability at fair value on the consolidated balance sheet as of the reporting date in accordance with FASB ASC 815 Derivatives and Hedging (“ASC 815”). The fair value of the liability was 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 estimated term to exercise and then discounted back to present. Finally, the value of the Put Option Right is calculated as the average present value over all simulated paths.
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage (“FDIC”) of $250,000. As of March 31, 2026, the Company’s cash balance did not exceed the FDIC limit. At March 31, 2026, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
The Company sold
This concentration has the potential to impact the Company's overall exposure to credit risk in that its customers may be similarly 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 of any single purchaser, or the aggregate loss of several purchasers, could be managed by selling to alternative purchasers in the operating areas.
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 tax consequences 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 measured using 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 a change 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 be realized.
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. For those 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 March 31, 2026 and December 31, 2025. 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 March 31, 2026 and December 31, 2025. 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 to income tax examinations by major taxing authorities since inception.
The Company’s effective tax rate was approximately
Recent Accounting Pronouncements
Adopted
In July 2025, the FASB issued Accounting Standards Update 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. The Company adopted the ASU effective January 1, 2026 and elected the practical expedient. There has been no material impact to the Company's condensed consolidated financial statements.
Not Yet Adopted
In November of 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Under this ASU entities must disclose for interim and annual reporting periods, in the notes to financial statements, additional information about specific expense categories. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Entities are permitted to apply either the prospective or retrospective transition methods. The Company is currently evaluating the impact of adopting this guidance on the consolidated financial statements and the notes to consolidated financial statements.
Other than as described above, 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 financial statements.
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NOTE 3 — OIL AND GAS PROPERTIES
Net capitalized costs related to the Company’s oil and gas producing activities at March 31, 2026 and December 31, 2025 are as follows:
| | March 31, | | | December 31, | | ||
| | 2026 | | | 2025 | | ||
Leasehold cost | | $ | | | $ | | ||
Intangibles | | | | | | | ||
Lease and well equipment | | | | | | | ||
Capitalized asset retirement obligation | | | | | | | ||
Total oil and gas properties, successful efforts method | | | | | | | ||
Accumulated depletion | | | ( | ) | | | ( | ) |
Oil and gas properties, net | | $ | | | $ | | ||
The Company recognized depreciation, depletion, and amortization expense totaling $
NOTE 4 — COMMODITIES DERIVATIVES
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 March 31, 2026, 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 contract settlement 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 floor and 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 the costless 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 option strike 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 difference between 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 is between 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 between the floor price and the index price.
The following table reflects the weighted-average price of open costless collar contracts as of March 31, 2026:
| | Price collars | | |||||||||||||
Period | | Volume | | | Weighted | | | Weighted | | | Weighted | | ||||
Q1-Q4 2027 | | | | | $ | | | $ | | | $ | | ||||
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The Company had no agreements in place classified as costless collars as of December 31, 2025.
Crude price differential swaps
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 the respective 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 March 31, 2026:
Commodity Swaps | | |||||||
| | | | | | Weighted | | |
| | Volume | | | Average | | ||
Period | | (Bbls/month) | | | price ($/Bbl) | | ||
Q2 2026 | | | | | $ | | ||
Q3-Q4 2026 | | | | | $ | | ||
Q1-Q4 2027 | | | | | $ | | ||
The following table reflects the weighted-average price of open commodity swap contracts as of December 31, 2025:
Commodity Swaps | | |||||||
| | | | | | Weighted | | |
| | Volume | | | Average | | ||
Period | | (Bbls/month) | | | price ($/Bbl) | | ||
Q1 2026 | | | | | $ | | ||
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Derivative Assets and Liabilities
As of March 31, 2026 and December 31, 2025, the Company is conducting derivative activities with one counterparty, which is secured by the lender in the Company’s bank credit facility. The Company believes the 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 single counterparty and subject to a master netting arrangement. The combined fair value of derivatives included in the accompanying consolidated balance sheets as of March 31, 2026 and December 31, 2025 is summarized below.
| | As of March 31, 2026 | | |||||||||
| | Gross fair | | | Amounts | | | Net fair | | |||
Commodity derivatives: | | | | | | | | | | | | |
Short-term derivative asset | | $ | | | $ | ( | ) | | $ | | ||
Long-term derivative asset | | | | | | ( | ) | | | | ||
Short-term derivative liability | | | ( | ) | | | | | | ( | ) | |
Long-term derivative liability | | | ( | ) | | | | | | ( | ) | |
Total derivative liability | | | | | | | | | | $ | ( | ) |
| | As of December 31, 2025 | | |||||||||
| | Gross fair value | | | Amounts netted | | | Net fair value | | |||
Commodity derivatives: | | | | | | | | | | | | |
Short-term derivative asset | | $ | | | $ | | | $ | | |||
Long-term derivative asset | | | | | | | | | | |||
Short-term derivative liability | | | | | | | | | | |||
Long-term derivative liability | | | | | | | | | | |||
Total derivative asset | | | | | | | | | | $ | | |
The effects of the Company’s derivatives on the consolidated statements of operations are summarized below:
| | Three | | | Three | | ||
Total gain (loss) on unsettled derivatives | | $ | ( | ) | | $ | | |
Total gain (loss) on settled derivatives | | | ( | ) | | | ( | ) |
Net gain (loss) on derivatives | | $ | ( | ) | | $ | ( | ) |
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NOTE 5 — LONG-TERM DEBT AND NOTES PAYABLE
The Company’s debt instruments are as follows:
| | March 31, | | | December 31, | | ||
Merchant Cash Advances | | $ | | | $ | | ||
Convertible Notes Payable | | | | | | | ||
Convertible Notes Payable, related parties | | | | | | | ||
Private Notes Payable, related party | | | | | | | ||
Total | | | | | | | ||
Less: unamortized financing cost | | | ( | ) | | | ( | ) |
Less: current portion including unamortized financing cost | | | ( | ) | | | ( | ) |
Long-term debt, net of current portion | | $ | | | $ | | ||
Private Notes Payable, related party
On December 9, 2025, the Company received proceeds of $
During the three months ended March 31, 2026, officers, directors and other employees agreed to structure an aggregate of $
Accrued interest on the promissory notes was $
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Convertible Notes Payable
In 2025, the Company and its Private Note Payable Investors (the “Exchange Investors”) entered into exchange agreements (the “2025 Exchange Agreements”) whereby the Exchange Investors exchanged their promissory notes and warrants for convertible promissory notes (the “Convertible Notes”). The principal amounts of the Convertible Notes were determined by adding the original principal amount of the promissory notes and warrants.
The Convertible Notes mature on January 31, 2028, and accrue interest at a rate of
As of March 31, 2026 and December 31, 2025, there was an outstanding principal balance of $
On July 11, 2025, the Company entered into a Note Purchase Agreement (the “NPA”) with White Lion Capital, LLC ("White Lion"), as subsequently amended, pursuant to which the Company issued convertible promissory notes (collectively, the “White Lion Notes”). The White Lion Notes bear interest at a rate of
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White Lion is subject to a beneficial ownership limitation of
On January 12, 2026, the Company issued an additional White Lion Note with a principal amount of $
On February 4, 2026, the Company issued an additional White Lion Note with a principal amount of $
On March 6, 2026, the Company issued an additional White Lion Note with a principal amount of $
As of March 31, 2026 and December 31, 2025, the balance on the White Lion Notes was $
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During the three months ended March 31, 2026, the Company issued an aggregate of
Accrued interest on the convertible promissory notes was $
Merchant Cash Advances
On November 18, 2025, the Company entered into a master receivables purchase agreement with a third party. The Company received cash proceeds of $
On December 19, 2025, the Company entered into a master receivables purchase agreement with a third party. The Company received cash proceeds of $
As of March 31, 2026 and December 31, 2025, there was $
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Future Maturities of Long-term debt
The following summarizes the Company’s maturities of all debt instruments described above:
| | Principal | | |
Twelve months ended: | | | | |
March 31, 2027 | | $ | | |
March 31, 2028 | | | | |
March 31, 2029 | | | | |
March 31, 2030 | | | | |
Total | | $ | | |
NOTE 6 — STOCKHOLDERS’ EQUITY
Restricted Stock Units
On February 16, 2026, the board of directors approved restricted stock units (“RSUs”) in the aggregate amount of
On March 18, 2026, the board of directors approved RSUs in the aggregate amount of
The Company recognized total stock-based compensation expense related to RSUs of $
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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 “White Lion RRA”) with White Lion Capital, LLC, a Nevada limited liability company (“White Lion”). 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 $
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 Purchase Agreement, 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 terms and 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) $
The purchase price to be paid by White Lion for any such shares will equal
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 in breach 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 for more 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 Common Stock 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 Common Stock Purchase Agreement will affect the registration rights provisions contained in the White Lion RRA.
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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 and White 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 2nd Amendment, among other things, also removed the maximum number of shares required to be purchased upon notice of a Rapid Purchase, added a limit of
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 Rapid Purchase 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
To date the Company has received $
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 shares of 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 damages provisions 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, warranties and 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 to limitations agreed upon by the contracting parties.
Class A Common Stock Options
During the three months ended March 31, 2026, the Compensation Committee of the Board of Directors approved common stock options to purchase
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The following table reflects the weighted average assumptions used to estimate the fair value of stock options granted during the three months ended March 31, 2026:
| | 2026 | | |
Volatility | | | % | |
Expected life (years) | | | | |
Risk-free interest rate | | | % | |
Dividend rate | | | % | |
The options had an estimated grant date fair value of $
The following table summarizes the stock option activity for the three months ended March 31, 2026:
| | Options | | | Weighted- Average Exercise Price Per Share | | ||
Outstanding, December 31, 2025 | | | | | $ | | ||
Granted | | | | | $ | | ||
Exercised | | | | | $ | | ||
Forfeited | | | | | $ | | ||
Expired | | | | | $ | | ||
Outstanding and expected to vest, March 31, 2026 | | | | | $ | | ||
The following table discloses information regarding outstanding and exercisable options at March 31, 2026:
| | | | Outstanding | | | Exercisable | | ||||||||||||||
Exercise Price Range | | | Number of | | | Weighted | | | Weighted | | | Number of | | | Weighted | | ||||||
$ | 2.02 | | | | | | $ | | | | | | | | | $ | | |||||
$ | 0.61 | | | | | | $ | | | | | | | | | | | |||||
| | | | | | | $ | | | | | | | | | $ | | |||||
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 March 31, 2026, the intrinsic value for the options vested and outstanding was $
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Class A Common Stock Warrants
The following table summarizes the stock warrant activity for the three months ended March 31, 2026 :
| | Warrants | | | Weighted- | | ||
Outstanding, December 31, 2025 | | | | | $ | | ||
Granted | | | | | $ | | ||
Exercised | | | | | $ | | ||
Cancelled | | | | | $ | | ||
Expired | | | | | $ | | ||
Outstanding and expected to vest, March 31, 2026 | | | | | $ | | ||
The following table discloses information regarding outstanding and exercisable warrants at March 31, 2026:
| | | | Outstanding | | | Exercisable | | ||||||||||||||
Exercise Price Range | | | Number of | | | Weighted | | | Weighted | | | Number of | | | Weighted | | ||||||
$ | 0.75 | | | | | | $ | | | | | | | | | $ | | |||||
$ | 11.50 | | | | | | $ | | | | | | | | | $ | | |||||
| | | | | | | | | | | | | | | | | | |||||
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 March 31, 2026, the intrinsic value for the warrants vested and outstanding was $
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NOTE 7 — 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 the balance 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. GAAP establishes 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 identical assets 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 prices for 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 techniques in which one or more significant inputs or significant value drivers are unobservable.
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 its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. |
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Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are as follows:
Commodity 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 liability measurements 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 were determined 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. The Company had a net derivative liability of $
Convertible Note embedded conversion option
During the year ended March 31, 2026, certain of the Company’s convertible note agreements contained conversion terms that may require the debt to be settled with a variable number of shares based on discounted pricing to market of the Company’s Class A Common Stock. Under ASC 815, the instrument is accounted for at fair value, which are determined using level 3 inputs.
The Company estimated the fair value of the derivative liability as of March 31 2026 and each respective issuance date using a Monte-Carlo simulation model, and the following key assumptions:
| March 31, | | | Issuance | ||||
| | | | | | | | |
Term, in years | - | | | - | ||||
Expected volatility | - | 104.1% |
| | - | 123.9% | ||
Risk-free interest rate | - | 3.70% | | | - | 3.49% | ||
Expected dividend yield | - | 0.0% |
| | - | 0.0% | ||
Continuous discount rate | - | 15.42% | | | - | 16.85% | ||
Discount factor | - | | | - | ||||
Upon conversion, the Company estimated the fair value of the derivative liability as the share price on the date of conversion multiplied by the shares issued upon conversion, less the principal amount converted.
The following table represent the activity related to the embedded conversion options during the year ended March 31, 2026:
Derivative liability as of December 31, 2025 | | $ | | |
Value of derivative upon issuance of White Lion Notes | | | | |
Value of derivative settled upon conversion of notes | | | ( | ) |
Change in fair value of derivative liability | | | | |
Derivative liability as of March 31, 2026 | | $ | |
As of March 31, 2026, a total of $
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Put Option Right
The Company has determined that the Put Option Right is a derivative liability required to be bifurcated from its host instrument. This liability was recorded as a liability at fair value on the consolidated balance sheet as of the reporting date in accordance with ASC 815. The fair value of the liability was 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 estimated term to exercise and then discounted back to present. Finally, the value of the Put Option Right is calculated as the average present value over all simulated paths.
The Company estimated the fair value of the Put Option Right to be $
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 such instruments. 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 otherwise available to the Company. The Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
NOTE 8 — RELATED PARTY TRANSACTIONS
During the fiscal year ended December 31, 2021, the Company and Dante Carravagio entered into a side agreement in connection with his purchase of
On December 9, 2025, the Company received proceeds of $
During the three months ended March 31, 2026, officers, directors and other employees agreed to structure an aggregate of $
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NOTE 9 — 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 exercise of 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 before the 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 registration demands, 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 under the 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 placement warrants, 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 in compliance 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 in compliance 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 legal proceedings, 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 amounts accrued 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.
As of March 31, 2026, the Company has accrued approximately $
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 past operations 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 are capitalized. 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. Such liabilities 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 until settlement or remediation occurs.
As of March 31, 2026 and December 31, 2025, the Company had recorded an environmental remediation liability of $
26
Table of Contents
NOTE 10 — SUBSEQUENT EVENTS
On April 1, 2026, the Company issued a convertible promissory note in the aggregate principal amount of $
On April 16, 2026, the Company, received an official notice of noncompliance (the “Notification”) from NYSE Regulation stating that the Company is not in compliance with NYSE American LLC (“NYSE American”) continued listing standards due to the failure to timely file the Company’s Form 10-K for the year ended December 31, 2025 (the “Annual Report”) by the filing due date of April 15, 2026. In accordance with Section 1007 of the NYSE American Company Guide, the Company had until October 15, 2026 (the “Initial Cure Period”), to file the Annual Report with the SEC. The Company filed its Form 10-K on September 28, 2026 within the Initial Cure Period.
NOTE 11 — RESTATEMENT OF PREVIOUSLY ISSUED UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As previously reported in the Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on September 28, 2026, the Company previously restated its financials because of (i) a series of comment letters (“Comment Letters”) from the staff (the “Staff”) of the Division of Corporation Finance of the SEC regarding the income allocation to noncontrolling interests, (ii) a side agreement with the Company’s Chief Executive Officer related to certain founders’ shares which contains a put option recognized as redeemable common stock, (iii) conversion options within the 2025 Convertible Notes and the White Lion Notes should be bifurcated as derivative liabilities and accounted for at fair value, (iv) incorrect recognition of royalties payable at the proper ownership interest and historical differentials, (v) recognition of certain natural gas sales in the wrong period, (vi) recognition of certain lease operating expenses and capital expenditures in the wrong period, (vii) improper recognition and classification of cash received for settlement of commodity derivatives, and (viii) the related estimated tax impacts of the previously mentioned errors in its consolidated financial statements. See Note 14 of our previously filed 10-K for full discussion of the errors.
The impact of the errors on the previously issued unaudited condensed consolidated financial statements is as follows:
Condensed Consolidated Statements of Operations | | Three Months Ended March 31, 2025 | | |||||||||
| | As Reported | | | Adjustments | | | As Restated | | |||
Revenues | | | | | | | | | | | | |
Natural gas and natural gas liquids | | $ | | | $ | ( | ) | | $ | | ||
Total revenues | | | | | | ( | ) | | | | ||
| | | | | | | | | | | | |
Expenses | | | | | | | | | | | | |
Lease operating | | | | | | | | | | |||
Accretion of asset retirement obligations | | | | | | ( | ) | | | | ||
General and administrative | | | | | | ( | ) | | | | ||
Total expenses | | | | | | ( | ) | | | | ||
Operating income (loss) | | | ( | ) | | | | | | | ||
Gain on extinguishment of liabilities | | | | | | ( | ) | | | ( | ) | |
Change in fair value of derivative liabilities | | | | | | ( | ) | | | ( | ) | |
Change in fair value of derivative liabilities - related party | | | | | | | | | | |||
Other income | | | | | | ( | ) | | | | ||
Total other income (expense) | | | ( | ) | | | ( | ) | | | ( | ) |
Income (loss) before income taxes | | | ( | ) | | | ( | ) | | | ( | ) |
Income tax (provision) benefit | | | | | | ( | ) | | | | ||
Net income (loss) | | | ( | ) | | | ( | ) | | | ( | ) |
Net income (loss) attributable to NCI | | | | | | ( | ) | | | ( | ) | |
Net income (loss) attributable to Eon Resources, Inc. | | $ | ( | ) | | $ | ( | ) | | $ | ( | ) |
| | | | | | | | | | | | |
Weighted average share outstanding, common stock - basic and diluted | | | | | | | | | | |||
Net income (loss) per share of common stock – basic and diluted | | $ | ( | ) | | | ( | ) | | $ | ( | ) |
27
Table of Contents
Condensed Consolidated Balance Sheet | | As of March 31, 2025 | | |||||||||
| | As Reported | | | Adjustment | | | As Restated | | |||
| | | | | | | | | | | | |
Crude oil and natural gas properties, successful efforts method: | | | | | | | | | | | | |
Proved Properties | | $ | | | $ | ( | ) | | $ | | ||
Total oil and natural gas properties, net | | | | | | ( | ) | | | | ||
Total Assets | | $ | | | $ | ( | ) | | $ | | ||
| | | | | | | | | | | | |
Accounts payable | | $ | | | $ | ( | ) | | $ | | ||
Accrued liabilities and other | | | | | | ( | ) | | | | ||
Royalties payable | | | | | | | | | | |||
Total current liabilities | | | | | | | | | | |||
Asset retirement obligations | | | | | | ( | ) | | | | ||
Deferred tax liability | | | | | | | | | | |||
Derivative liabilities | | | | | | | | | | |||
Derivative liabilities, related parties | | | | | | | | | | |||
Total for non-current liabilities | | | | | | | | | | |||
Total liabilities | | | | | | | | | | |||
| | | | | | | | | | | | |
Redeemable common stock | | | | | | | | | | |||
| | | | | | | | | | | | |
Class A Common Stock | | | | | | ( | ) | | | | ||
Additional paid in capital | | | | | | ( | ) | | | | ||
Accumulated deficit | | | ( | ) | | | | | | ( | ) | |
Total stockholders’ deficit attributable to EON Resources, Inc. | | | | | | | | | | |||
Noncontrolling Interest | | | | | | ( | ) | | | | ||
Total Stockholders’ Equity | | | | | | ( | ) | | | | ||
Total Liabilities, Mezzanine Equity and Stockholders Equity | | $ | | | $ | ( | ) | | $ | | ||
28
Table of Contents
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY |
| |||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Stockholders’ | | | | | | | | | | |
| | Class A | | | Class B | | | Additional | | | | | | | (Deficit) Equity | | | | | | | Total | | |||||||||||||
| | Common Stock | | | Common Stock | | | Paid-In | | | Accumulated | | | Resources | | | Noncontrolling | | | (Deficit) | | |||||||||||||||
| | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Inc. | | | Interest | | | Equity | | |||||||||
As Previously Reported | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance – December 31, 2024 | | | | | $ | | | | | | $ | | | $ | | | $ | ( | ) | | $ |
| | $ | | | $ | | ||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Share-based compensation | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued under equity line of credit | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued for conversion of note payables | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued to settle accounts payable | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Class B exchanged for Class A | | | | | | | | | ( | ) | | | ( | ) | | | | | | | | | | | | ( | ) | | | | ||||||
Net loss | | | - | | | | | | | - | | | | | | | | | | ( | ) | | | ( | ) | | | | | | ( | ) | ||||
Balance – March 31, 2025 | | | | | $ | | | | - | | | $ | | | $ | | | $ | ( | ) | | $ | | | $ | | | $ | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Restatement Impacts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance – December 31, 2024 (a) | | | ( | ) | | $ | ( | ) | | | - | | | $ | | | $ | ( | ) | | $ | | | $ | | | $ | ( | ) | | $ | ( | ) | |||
Derivative liability conversion to common stock | | | - | | | | | | | - | | | | | | | | | | | | | | | | | | | | |||||||
Net loss | | | - | | | | | | | - | | | | | | | | | | ( | ) | | | ( | ) | | | ( | ) | | | ( | ) | |||
Balance – March 31, 2025 | | | ( | ) | | $ | ( | ) | | | - | | | $ | | | $ | ( | ) | | $ |
| | $ | | | $ | ( | ) | | $ | ( | ) | |||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As Restated | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance – December 31, 2024 | | | | | $ | | | | | | $ | | | $ | | | $ | ( | ) | | $ | | | $ | | | $ | | ||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Share-based compensation | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued under equity line of credit | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued for conversion of note payables | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Shares issued to settle accounts payable | | | | | | | | | - | | | | | | | | | | | | | | | | | | | | ||||||||
Derivative liability conversion to common stock | | | - | | | | | | | - | | | | | | | | | | | | | | | | | | | | |||||||
Class B exchanged for Class A | | | | | | | | | ( | ) | | | ( | ) | | | | | | | | | | | | ( | ) | | | | ||||||
Net loss | | | - | | | | | | | - | | | | | | | | | | ( | ) | | | ( | ) | | | ( | ) | | | ( | ) | |||
Balance – March 31, 2025 | | | | | $ | | | | - | | | $ | | | $ | | | $ | ( | ) | | $ | | | $ | | | $ | | |||||||
(a) These adjustments represent the restatements previously disclosed in the Company’s 2024 Form 10-K/A as previously filed with the SEC on April 24, 2026.
29
Table of Contents
Condensed Consolidated Statement of Cash Flows | | Three Months Ended March 31, 2025 | | |||||||||
| | As Reported | | | Adjustment | | | As Restated | | |||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net Income | | $ | ( | ) | | $ | ( | ) | | $ | ( | ) |
Accretion of asset retirement obligations | | | | | | ( | ) | | | | ||
Deferred income tax benefit | | | ( | ) | | | | | | ( | ) | |
Gain on extinguishment of liabilities | | | ( | ) | | | | | | | ||
Change in fair value of derivative liabilities | | | | | | | | | | |||
Change in fair value of derivative liability, related party | | | | | | ( | ) | | | ( | ) | |
Accounts payable | | | ( | ) | | | ( | ) | | | ( | ) |
Accrued liabilities and other | | | | | | ( | ) | | | | ||
Royalties payable | | | | | | | | | | |||
Net cash used in operating activities | | | ( | ) | | | | | | ( | ) | |
30
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to EON Resources, Inc.. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to HNRAC Sponsors, LLC. References to the Predecessor refer to the business of Pogo Resources, LLC and its subsidiaries prior to the Closing Date. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the SEC. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
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 gas properties 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 and horizontal target horizons, extensive production histories, long-lived reserves and historically high drilling success rates. Our properties are in the Grayburg-Jackson Field (the “GJF”) in Eddy County, New Mexico, and South Justis Field (the “SJF”) in Lea County, New Mexico which are both in the sub-area of the Permian Basin. LHO Operating, LLC, a subsidiary of the Company (“LHO”), focuses primarily on production through waterflooding recovery methods.
Our assets as mentioned above consist of contiguous leasehold positions in the GJF of approximately 13,700 gross (13,700 net) acres with an average working interest of 100%. We operate 100% of the net acreage across the GJF assets, all of which is net operated acreage of vertical wells with average depths of approximately 3,810 feet. In addition, the SJF has contiguous leasehold positions of approximately 5,400 gross (5,400) acres with an average working interest of 94%. We operate 100% of the net acreage across the SJF assets, all of which is net operated acreage of vertical wells with average depths of approximately 6,000 feet.
Our average daily production for the three months ended March 31, 2026 was 759 barrels of oil equivalent (“BOE”) per day. Our average daily production for the year ended December 31, 2025, was 734 BOE per day. The increase in production is due to an increase in operating wells from new well completions and well repairs.
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Table of Contents
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 operating results 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 NYMEX benchmark price during the three months ended March 31, 2026 and 2025, was $(1.65) and $(1.78) per barrel, respectively. Our natural gas price differential during the three months ended March 31, 2026 and 2025, was $(2.54) and $(2.10) 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.
32
Table of Contents
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 more significantly 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, the production 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 the growth 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 three months ended March 31, 2026 and 2025.
|
|
For the three months ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Average NYMEX Prices (1) |
|
|
|
|
|
|
|
|
Oil (per Bbl) |
|
$ |
71.98 |
|
|
$ |
71.84 |
|
Natural gas (per Mcf) |
|
$ |
4.79 |
|
|
$ |
4.94 |
|
(1) |
Based on average NYMEX closing prices. |
For the three months ended March 31, 2026, the average NYMEX oil pricing was $71.98 per barrel of oil or 0.2% higher than the average NYMEX price per barrel for the three months ended March 31, 2025. Our settled derivatives decreased our realized oil price per barrel by $4.91 and $2.28 in the three months ended March 31, 2026, and 2025, respectively. Our average realized oil price per barrel after reflecting settled derivatives and location differentials was $65.42 and $67.78 for the three months ended March 31, 2026 and 2025, respectively.
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Table of Contents
The average NYMEX natural gas pricing for the three months ended March 31, 2026, was $4.79 per Mcf, or 3% lower than the average NYMEX price of $4.94 per Mcf for the three months ended March 31, 2025.
Results of Operations
Three months ended March 31, 2026 Compared to Three months ended March 31, 2025
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.
|
|
Three |
|
|
Three |
|
||
|
|
|
|
|
|
(As Restated)(1) |
|
|
Revenues |
|
|
|
|
|
|
|
|
Crude oil |
|
$ |
4,384,267 |
|
|
$ |
4,392,605 |
|
Natural gas and natural gas liquids |
|
|
80,291 |
|
|
|
80,032 |
|
Gain (loss) on derivative instruments, net |
|
|
(3,579,475 |
) |
|
|
(85,071 |
) |
Other revenue |
|
|
83,110 |
|
|
|
117,532 |
|
Total revenues |
|
$ |
968,193 |
|
|
|
4,505,098 |
|
|
|
|
|
|
|
|
|
|
Average sales prices: |
|
|
|
|
|
|
|
|
Oil (per Bbl) |
|
$ |
70.33 |
|
|
$ |
70.06 |
|
Effect on gain (loss) of settled oil derivatives on average price (per Bbl) |
|
|
(4.91 |
) |
|
|
(2.28 |
) |
Oil net of settled oil derivatives (per Bbl) |
|
|
65.42 |
|
|
|
67.78 |
|
|
|
|
|
|
|
|
|
|
Natural gas (per Mcf) |
|
$ |
4.79 |
|
|
$ |
4.94 |
|
|
|
|
|
|
|
|
|
|
Realized price on a BOE basis excluding settled commodity derivatives |
|
$ |
65.37 |
|
|
$ |
66.35 |
|
Effect of gain (loss) on settled commodity derivatives on average price (per BOE) |
|
|
(4.48 |
) |
|
|
(2.12 |
) |
Realized price on a BOE basis including settled commodity derivatives |
|
$ |
60.89 |
|
|
$ |
64.23 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Production taxes, transportation and processing |
|
|
414,004 |
|
|
|
397,216 |
|
Lease operating |
|
|
2,528,313 |
|
|
|
2,190,767 |
|
Depletion, depreciation and amortization |
|
|
1,790,976 |
|
|
|
97,075 |
|
Accretion of asset retirement obligations |
|
|
31,675 |
|
|
|
6,992 |
|
General and administrative |
|
|
2,406,571 |
|
|
|
1,808,890 |
|
Total expenses |
|
|
7,171,539 |
|
|
|
4,500,940 |
|
|
|
|
|
|
|
|
|
|
Costs and expenses (per BOE): |
|
|
|
|
|
|
|
|
Production taxes, transportation, and processing |
|
$ |
6.06 |
|
|
$ |
5.89 |
|
Lease operating expenses |
|
|
37.02 |
|
|
|
32.50 |
|
Depreciation, depletion, and amortization expense |
|
|
26.22 |
|
|
|
1.44 |
|
Accretion of asset retirement obligations |
|
|
0.46 |
|
|
|
0.10 |
|
General and administrative |
|
|
35.24 |
|
|
|
26.84 |
|
|
|
|
|
|
|
|
|
|
Net producing wells at period-end |
|
|
472 |
|
|
|
342 |
|
|
(1) |
As restated represents restatements previously disclosed in the Company's Form 10-K for the year ended December 31, 2025. See Note 11. |
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Table of Contents
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. Excluding the effect of settled commodity derivatives, our oil and natural gas sales for the three months ended March 31, 2026 were flat compared to the three months ended March 31, 2025, despite a 1% increase in production volumes. Production volumes increased for the three months ended March 31, 2026 from the three months ended March 31, 2025 as a result of increased operating wells from the Company’s South Justis Field acquired in late June of 2025.
Production for the comparable periods is set forth in the following table:
|
|
For the Three Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Production: |
|
|
|
|
|
|
|
|
Oil (MBbl) |
|
|
62 |
|
|
|
63 |
|
Natural gas (MMcf) |
|
|
36 |
|
|
|
28 |
|
Total (MBOE)(1) |
|
|
68 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
Average daily production: |
|
|
|
|
|
|
|
|
Oil (Bbl) |
|
|
693 |
|
|
|
697 |
|
Natural gas (Mcf) |
|
|
397 |
|
|
|
314 |
|
Total (BOE)(1) |
|
|
759 |
|
|
|
749 |
|
(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 the relationship 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 $3,579,475 for the three months ended March 31, 2026, compared to a loss of $85,071 for the three months ended March 31, 2025. Higher commodity prices in the three months ended March 31, 2026, resulted in realized losses of $306,024 compared to realized losses of $142,859 for the three months ended March 31, 2025. For the three months ended March 31, 2026, unrealized losses were $3,273,451 compared to an unrealized gain of $57,788 for the three months ended March 31, 2025.
For the three months ended March 31, 2026, our average realized oil price per barrel of oil equivalent after reflecting settled derivatives was $60.89 compared to $64.23 for the three months ended March 31, 2025. For the three months ended March 31, 2026, our settled derivatives decreased our realized oil price per barrel by $4.48 compared to decreasing the price per barrel by $2.12 for the three months ended March 31, 2025. As of March 31, 2026, we ended the period with a $3,210,117 net derivative liability compared to a net asset of $63,334 as of December 31, 2025.
Other Revenue
Other revenue was $83,110 for the three months ended March 31, 2026, compared to $117,532 for the three months ended March 31, 2025. The revenue is related to providing water services to a third party.
Lease Operating Expenses
Lease operating expenses were $2,528,313 for the three months ended March 31, 2026, compared to $2,190,767 for the three months ended March 31, 2025. On a per unit basis, production expenses increased 14.0% from $32.50 per BOE for the three months ended March 31, 2025, to $37.02 per BOE for the three months ended March 31, 2026. The increase in lease operating expenses in the current period was primarily a result of the additional cost related to the South Justis Field.
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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 $414,004 for the three months ended March 31, 2026, compared to $397,216 for the three months ended March 31, 2025. As a percentage of oil and natural gas sales, these costs were 9% in the three months ended March 31, 2026 and 2025. 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 $1,790,976 for the three months ended March 31, 2026 compared to $97,075 for the three months ended March 31, 2025. DD&A was $26.22 per BOE for the three months ended March 31, 2026, compared to $1.44 per BOE for the three months ended March 31, 2025. 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 the reserves balance due to the net conveyance of the addition 5% overriding royalty interest to Virtus, along with a change in reserve classification from proved to probable in 2025.
Accretion of Asset Retirement Obligations
Accretion expense was $31,675 for the three months ended March 31, 2026, compared to $6,992 for the three months ended March 31, 2025. Accretion expense was $0.46 per BOE for the three months ended March 31, 2026, compared to $0.10 per BOE for the three months ended March 31, 2025. The aggregate increase in accretion expense for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was driven by changes in certain assumptions.
General and Administrative
General and administrative expenses were $2,406,571 for the three months ended March 31, 2026, compared to $1,808,890 for the three months ended March 31, 2025. The increase in general and administrative expenses is primarily due to increased professional fees during the current period, partially offset by decreased stock-based compensation in the current period of $271,941 compared to $368,093 in the comparative period.
Interest Expense and amortization of financing costs
Interest expense was $260,381 for the three months ended March 31, 2026, compared to $1,744,246 for the three months ended March 31, 2025. The decrease in interest expense is driven by the decreases in the Private Notes Payable and the Senior Secured Term Loan, along with the eventual settlement of the Senior Term Loan.
During the three months ended March 31, 2026, the Company recorded $486,268 related to the amortization of financing costs compared to $337,370 for the three months ended March 31, 2025. These costs are attributable to debt discount associated with the Company’s recent convertible notes payable.
Change in fair value of derivative liabilities and convertible note liabilities
The Company recognized a loss from the change in fair value of derivative liabilities of $438,637 and $129,721 during the three months ended March 31, 2026 and 2025, respectively, related to changes in the fair value of the conversion features on convertible notes payable entered into in 2025 and 2026, primarily driven by fluctuations in the Company’s stock price. The Company also recognized a gain from the change in fair value of the Put Option Right of $71,000 and $113,000 during the three months ended March 31, 2026 and 2025, respectively.
The change in fair value of warrant liabilities consisted of a loss of $162,520 for the three months ended March 31, 2025, related to fluctuations in the trading price of our warrants, a portion of which are accounted for as liabilities due to the redemption provisions in those issued to Private Note holders. All such warrants were settled during the year ended December 31, 2025.
The change in fair value of convertible note liabilities consisted of a loss of $129,746 for the three months ended March 31, 2025 related to a prior convertible note accounted for at fair value.
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Gain on extinguishment of liabilities
The Company recognized a loss on extinguishment of liabilities of $391,819 during the three months ended March 31, 2025 related to the exchange of certain notes payable and warrant liabilities for convertible note agreements.
Liquidity, Capital Resources and Going Concern
Our main sources of liquidity have been internally generated cash flows from operations and credit facility borrowings. Our primary use of capital has been for the development of oil and gas properties and the return of initial invested capital to our owners. We continually monitor potential capital sources for opportunities to enhance liquidity or otherwise improve our financial position.
As of March 31, 2026, we had outstanding debt of $3,746,454 in private notes payable with related parties, $3,050,000 of convertible notes payable and $1,380,679 from merchant cash advances. A total of $1,980,679 of this is due within one year. As of March 31, 2026, we had $129,772 of cash and cash equivalents on hand, and a working capital deficit of $22,600,412.
We had negative cash flow from operations of $305,976 for the three months ended March 31, 2026 and negative cash flow from operations of $7,645,418 for the year ended December 31, 2025. 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 of additional shares of Class A Common Stock.
We have a three-year equity line Common Stock Purchase Agreement with a maximum funding limit of $150,000,000 that can fund our operations and production growth, and can be used to reduce liabilities. Through the date of this filing, we have received $11,130,586 in cash proceeds related to the sale of 17,000,000 shares of common stock under the Common Stock Purchase Agreement and expect to continue to utilize it to fund 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 flows decline from expected levels. Until we have an effective registration statement on file with the Securities and Exchange commission, we are unable to utilize the Common Stock Purchase Agreement. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
Cash Flows
Sources and uses of cash for the three months ended March 31, 2026 and 2025 are as follows:
|
|
Three Ended |
|
|
Three Ended |
|
||
|
|
|
|
|
|
(As Restated)(1) |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) operating activities |
|
$ |
(305,976 |
) |
|
$ |
(1,827,355 |
) |
Net cash (used in) investing activities |
|
|
(1,088,790 |
) |
|
|
(1,117,540 |
) |
Net cash provided by financing activities |
|
|
1,149,502 |
|
|
|
3,047,431 |
|
Net change in cash and cash equivalents |
|
$ |
(245,264 |
) |
|
$ |
102,536 |
|
|
(1) |
As restated represents restatements previously disclosed in the Company's Form 10-K for the year ended December 31, 2025. See Note 11. |
Operating Activities
The change in net cash flow used operating activities for the three months ended March 31, 2026, as compared to 2025 is primarily due to higher realized market prices for crude oil, offset by decreases in production volumes and higher operating expenses.
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Investing Activities
Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was exclusively related to $1,088,790 and $1,117,540, respectively in development costs for our reserves.
Financing Activities
Net cash provided by financing activities during the three months ended March 31, 2026 were primarily related to the issuance of new convertible notes payable resulting in proceeds of $1,692,000, $100,000 in proceeds from related party notes payable, partially offset by repayments of merchant cash advances of $642,498. Cash flows used in financing activities for the three months ended March 31, 2025 were primarily related to the sale of common stock under the Common Stock Purchase agreement of $4,341,532 and proceeds of $617,500 from short term notes payable offset by repayments of the Senior Secured Term Loan of $1,133,324 and Private Notes Payable of $778,277.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2026.
Contractual obligations
We have contractual commitments under our Convertible Notes Private Notes Payable and Merchant Cash Advances which include periodic interest payments. See Note 5 to our interim condensed 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 4 to 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 the ultimate settlement amounts nor their timings can be precisely determined in advance.
Critical Accounting Estimates
For information on critical accounting policies, see “Critical Accounting Estimates” in the MD&A included in Item 7 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the SEC on September 28, 2026.
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Item 3. 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 4. 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 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“Principal Executive Officer”) and our Chief Financial Officer (“Principal Financial Officer”), as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Principal Executive Officer and our Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2026. Based upon their evaluation, our Principal Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective related to lack of sufficient accounting personnel to manage the Company’s financial accounting process including lack of proper preparation and review of account reconciliations, lack of segregation of duties, proper accounting for complex financial instruments and lack of design and implementation of controls related to oil and gas activities which constituted material weaknesses in our internal control over financial reporting. As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
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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’s annual or interim financial statements will not be prevented or detected on a timely basis.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Plan to Remediate the Material Weakness
Our plans at this time include hiring additional accounting staff and 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 these initiatives will ultimately have the intended effects.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our annual report on Form 10-K filed with the SEC on September 28, 2026.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
During the three months ended March 31, 2026, 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 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
|
Description of Exhibit |
2.1 |
|
Purchase, Sale, Termination and Exchange Agreement by and among Company, OpCo, SPAC Subsidiary, HNRA Royalties, Pogo Royalty, CIC, DenCo, Pogo Management, and 4400dated February 10, 2025 (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 13, 2025 and incorporated herein by reference). |
3.1 |
|
Form of Second Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company’s Current Report on form 8-K filed on August 30, 2023 and incorporated herein by reference). |
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 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 18, 2024 and incorporated herein by reference). |
3.3 |
|
Amended and Restated Bylaws, effective September 17, 2024 (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on September 18, 2024 and incorporated herein by reference). |
3.4 |
|
Amendment 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). |
10.1 |
|
Form of Exchange Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 24, 2025) |
10.2 |
|
Form of Convertible Promissory Note (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on January 24, 2025) |
31.1* |
|
Certification of the Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of the Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1** |
|
Certifications of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2** |
|
Certifications of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |
|
Inline XBRL Instance Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Labels 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. |
** |
Furnished herewith. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
EON Resources, Inc. |
|
|
|
|
Date: October 13, 2026 |
By: |
/s/ Dante Caravaggio |
|
Name: |
Dante Caravaggio |
|
Title: |
Chief Executive Officer |
|
|
|
Date: October 13, 2026 |
By: |
/s/ Mitchell B. Trotter |
|
Name: |
Mitchell B. Trotter |
|
Title: |
Chief Financial Officer |
43