New Era Helium Inc.
08/14/2025 | Press release | Distributed by Public on 08/14/2025 13:53
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, particularly in the sections titled "Risk Factors" and "Special Note Regarding Forward-Looking Statements."
Unless the context otherwise requires, references in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" to "ECD," "we", "us", "our", and the "Company" are intended to refer to (i) following the Business Combination (as defined below), the business and operations of New Era Energy & Digital, Inc. and its consolidated subsidiaries, and (ii) prior to the Business Combination, New Era Energy & Digital, Inc. (the predecessor entity in existence prior to the consummation of the Business Combination) and its consolidated subsidiary.
Business Overview and Strategy
NEW ERA is a corporation formed in Nevada on February 2, 2023. It is an exploration and production company whose primary operations include the exploration, development, and production of helium, natural gas, oil, and natural gas liquids. The Company sources helium produced in association with natural gas reserves located in Chaves County, New Mexico. To date, we have not generated any revenue from the production of helium. Although hydrocarbons are currently the Company's primary source of revenues, our business model is moving from a hydrocarbon focus to a helium-focused model and centers on providing helium to various parties in the supply chain, namely helium refiners, non- refiners, Tier 1 multinational distributors, and smaller Tier 2 gas companies. We currently own and operate 137,000 acres in Southeast New Mexico and have 85,498 MMcfe of proved hydrocarbon reserves and 166,430 MMcfe of probable hydrocarbon reserves. In addition, the Company has approximately 422 MMcf of net proved undeveloped helium reserves and 788 MMcf of net probable undeveloped helium reserves.
On February 6, 2023, the Company entered into the Agreement with Solis Partners. Immediately prior to February 6, 2023, the Company was authorized to issue 190 million shares of common stock with par value of $0.001 per share and 10 million shares of preferred stock with par value of $0.001 per share. Subject to the terms of the Agreement, all issued and outstanding member interests in Solis Partners was automatically converted and exchanged for 5 million shares of the Company's common stock. Presently, we operate through two subsidiaries, (i) Solis Partners, LLC, a Texas limited liability company ("Solis Partners"), wholly owned by the Company and engaged in the oil and gas producing business, and (ii) NEH Midstream LLC, a Texas limited liability company ("NEH Midstream") wholly owned by the Company which will own and operate the Pecos Slope Plant and gathering system located in Chaves County, New Mexico.
Merger with Roth CH Acquisition V Co.
On December 6, 2024, the Company completed the business combination (the "Business Combination) contemplated by the Business Combination and Plan of Organization dated January 3, 2024 (the "Business Combination Agreement") (as amended on June 5, 2024, August 8, 2024, September 11, 2024 and September 30, 2024, the "BCA"), by and among Roth CH Acquisition V Co. ("ROCL"), Roth CH V Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of ROCL ("Merger Sub"), and NEW ERA.
At the Closing, pursuant to the Business Combination Agreement and after giving effect to the redemption of shares of ROCL common stock:
| 1. | The total consideration paid at the Closing (the "Merger Consideration") by ROCL to New Era Helium Corp. security holders was 8,916,625 shares of common stock of Holdings. |
| 2. | Each share of Merger Sub common stock, par value $0.0001 per share ("Merger Sub Common Stock"), issued and outstanding immediately prior to the Effective Time (as defined in the Business Combination Agreement) was converted into one newly issued share of the Company's common stock. |
Following the filing of the Articles of Merger with the Secretary of State of the State of Nevada, ROCL merged with and into Holdings, with Holdings as the surviving company of the Initial Merger. Following the filing of the Articles of Merger with the Secretary of State of the State of Nevada, Merger Sub merged with and into with New Era Helium Corp. as the surviving corporation of the Business Combination, effective December 6, 2024. Thus, New Era Helium Corp. became a wholly owned subsidiary of ROCL. In connection with the Business Combination, Holdings changed its name to "New Era Helium Inc.". The Company name was subsequently changed to "New Era Energy & Digital, Inc.".
Recent Developments
Senior Secured Convertible Promissory Note
On January 16, 2025 (the "Issuance Date"), following the effectiveness of the Company's Registration Statement on Form S-1, as amended, initially filed with the U.S. Securities and Exchange Commission (the "SEC") on December 30, 2024, and pursuant to the terms of the EPFA, we issued another Senior Secured Convertible Promissory Note (the "Subsequent Note") to the Investor in an aggregate principal amount of $3.0 million for an aggregate purchase price of $2.79 million after giving effect to a 7% original issue discount. The Subsequent Note is for a term of 15 months from the Issuance Date. Commencing on the ninetieth (90th) day following the Issuance Date and continuing on the same day of each successive calendar month until the entire outstanding principal amount has been repaid, we are required to make monthly payments to the holder of the Subsequent Note (the "Holder"). Each monthly payment will be in an amount equal to the sum of (i) one twelfth (1/12) of the initial aggregate principal of the Subsequent Note and all other notes issued pursuant to the EPFA, plus (ii) accrued and unpaid under the Subsequent Note as of each payment date. Interest accrues on the outstanding principal balance hereof at an initial annual rate equal to 10% ("Interest Rate"), which Interest Rate will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Subsequent Note).
Conversion Rights
Conversion at Option of Holder. The Subsequent Note is convertible into shares of the Company's common stock, par value $0.0001 per share (the "Common Stock") at the option of the Investor at an initial conversion price of $10.00 per share (the "Conversion Price"). Subject to certain exceptions outlined in the Subsequent Note, including, but not limited to, equity issuances in connection with its equity incentive plan and certain strategic acquisitions, if the Company sells, enters into an agreement to sell, or grants any option to purchase, or sells, enters into an agreement to sell, or otherwise disposes of or issues (or announces any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or any other securities that are at any time convertible into, or exercisable or exchangeable for, or otherwise entitle the holder thereof to receive, Common Stock, at an effective price per share less than the Conversion Price of the Subsequent Note then in effect, the Conversion Price will be reduced to equal the effective price per share in such dilutive issuance. The Conversion Price is also subject to a downward adjustment if an Event of Default occurs. The Conversion Price is subject to an initial floor price (the "Floor Price") of $0.7176 per share of Common Stock; however, beginning on July 15, 2025 and on the same day of every six (6) months thereafter (each, a "Floor Price Reset Date"), the Floor Price will be reduced to 20% of the average volume weighted average price of the Common Stock for such trading day on the primary market of the Common Stock during regular trading hours as reported by Bloomberg L.P. (the "VWAP") during the five (5) trading days immediately prior to such Floor Price Reset Date. Additionally, the Company may reduce the Floor Price to any amount set forth in a written notice to the Holder, provided that any such reduction will be irrevocable and will not be subject to increase thereafter. The Company may prepay the Subsequent Note at its option, upon thirty (30) business days written notice, by paying a 10% redemption premium.
Redemption Rights
At any time, we may redeem in cash all, or any portion, of the Subsequent Note, in an amount equal to the outstanding principal balance being redeemed, plus a 10% premium in respect of such principal amount, plus all accrued and unpaid interest, if any, on such principal amount.
Event of Default Conversion. From and after the occurrence of an Event of Default, the Holder may elect to convert the Subsequent Note into shares of the Common Stock at the "Event of Default Conversion Price," which is equal to the lower of:
| ● | The Conversion Price then in effect; and |
| ● | 90% of the lowest VWAP of the Common Stock during the ten (10) consecutive trading days immediately prior to the date on which we received written notice of such conversion from such holder, subject to the Floor Price. |
Limitations on Conversion. A Holder shall not have the right to convert any portion of the Subsequent Note to the extent that, after giving effect to such conversion, the Holder (together with its related parties) would beneficially own in excess of 4.99% (the "Maximum Percentage") of shares of our Common Stock outstanding immediately after giving effect to such conversion. The Maximum Percentage may be raised or lowered to any other percentage not in excess of 9.99%, at the option of the Holder, except that any increase will only be effective upon 61 days' prior written notice to the Company.
Amended and Restated Equity Purchase Facility Agreement
On August 12, 2025, we entered into the Fourth Amended and Restated Equity Purchase Facility Agreement with an investor (the "Investor"). Pursuant to the EPFA, we have the right, and not the obligation, to sell to the Investor up to $1.0 billion of Common Stock, at our request during the commitment period commencing on December 6, 2025 and terminating on the first day of the month following the 36 month anniversary of December 6, 2025. Each issuance and sale by us to the Investor is subject to a maximum limit equal to the greater of (i) 400% of the aggregate volume traded of the Common Stock for the five trading days immediately preceding an advance notice and (ii) the quotient of $1,000,000 (or $2,000,000 if it is an Accelerated Purchase) divided by the opening price of the Common Stock on the trading day prior to the advance notice. The shares of Common Stock will be issued and sold to the Investor at a per share price equal to 95% of the lower of (i) the lowest trading price during the three consecutive trading days commencing on the advance notice date if a Regular Purchase (or the same trading day if an Accelerated Purchase) and (ii) the VWAP of the Common Stock during the applicable pricing period if a Regular Purchase (or the lowest daily VWAP if an Accelerated Purchase). "VWAP" means for any trading day, the daily volume weighted average price of the Common Stock for such trading day on the principal market during regular trading hours as reported by Bloomberg L.P through its "AQR" function.
The advances are subject to certain limitations, including that the Investor cannot purchase any shares that would result in it beneficially owning more than 4.99% of the Common Stock at the time of an advance (the "Ownership Limitation") or acquiring Common Stock in excess of the Exchange Cap. The Ownership Limitation may be raised or lowered to any other percentage not in excess of 9.99%, at the option of the Investor, except that any increase will only be effective upon 61 days' prior written notice to the Company. The Exchange Cap will not apply under certain circumstances, including, where the Company has obtained stockholder approval to issue in excess of the Exchange Cap in accordance with the rules of Nasdaq or such issuances do not require stockholder approval under Nasdaq's "minimum price rule." Additionally, if the total number of Common Stock traded on Nasdaq during the applicable pricing period is less than the Volume Threshold (as defined below), then the number of Common Stock issued and sold pursuant to such advance notice will be reduced to the greater of (i) (A) 30% of the trading volume of the Common Stock on Nasdaq during the relevant pricing period as reported by Bloomberg L.P. for the Regular Purchase Pricing Period (as defined in the EPFA) and (B) 10% for the Accelerated Purchase Pricing Period (as defined in the EPFA); and (ii) the number of Common Stock sold by the Investor during such pricing period, but in each case not to exceed the amount requested in the advance notice. "Volume Threshold" is defined as a number of Common Stock equal to the quotient of (i) the number of shares in the advance notice requested by the Company divided by (ii) (x) 0.30 for the Regular Purchase Pricing Period or (y) 0.10 for the Accelerated Purchase Pricing Period.
The EPFA provides, among other things, that for so long as any amount remains outstanding under the Promissory Notes, if the Company submits an Advance Notice (as defined in the EPFA), then the aggregate purchase price owed to the Company from such Advance Notice (the "Advance Proceeds") shall be paid by the Investor to the Company and used by the Company in accordance with Section 7.15 of the EPFA; provided, however, that any such Advance Notice that is submitted during any thirty (30) calendar day period preceding the date on which the Company is required to make a monthly payment pursuant to Sections 1(b) and 1(d) of the Promissory Notes (each such payment, a "Note Payment"), then without the prior written consent of the Investor, the Company may only submit such Advance Notice, if the Advance Proceeds are paid by the Investor by offsetting the amount of the Advance Proceeds against the full amount of the applicable Note Payment (first towards accrued and unpaid interest, then towards Payment Premiums (as defined in the Promissory Notes) (if applicable), and then towards outstanding principal), with any remaining Advance Proceeds to be paid by the Investor in cash to the Company and used by the Company in accordance with Section 7.15 of the EPFA. Furthermore, if there is any default under the Promissory Notes, the Company may only submit an Advance Notice with the prior consent of the Investor.
Each trading day during a Pricing Period (as defined in the EPFA) that is an Excluded Day (as defined in the EPFA), shall result in an automatic reduction to the number of Advance Shares set forth in such Advance Notice by (i) in the event of a Regular Purchase Pricing Period, one-third for each such Excluded Day, or (ii) in the event of an Accelerated Purchase Pricing Period or Extended Purchase Pricing Period, 100%. The EPFA also provides that the Company may not submit an Advance Notice, without the consent of the Investor, if the market price of the Company's common stock immediately prior to submission is lower than 120% of the Floor Price then in effect.
Pursuant to the terms of the EPFA, the Floor Price is currently set at $0.7176 per Common Share, which is equal to 20% of the average five-day VWAP of the Common Shares on January 15, 2025, which is the date the Company's resale registration statement on Form S-1 was declared effective. The EPFA further provides that, beginning on July 15, 2025 and on the same day of every six (6) months thereafter (each, a "Floor Price Reset Date"), the Floor Price shall be adjusted (downwards only) to 20% of the average VWAP of the common stock during the five (5) trading days immediately prior to such Floor Price Reset Date. Notwithstanding the foregoing and subject to the rules and regulations of the Nasdaq Stock Market LLC, the Company may reduce the Floor Price then in effect to any amount set forth in a written notice to the Investor; provided that such reduction shall be irrevocable and shall not be subject to increase thereafter.
The EPFA, among other things, permits the Company to select an Extended Purchase Pricing Period (as defined in the EPFA) which permits the Investor to effect sales of Shares pursuant to an Advance Notice during pre-market trading hours, amends the definition of Excluded Securities and includes other conforming and administrative changes.
Amendments to Promissory Notes
On May 5, 2024, the Company and the Investor entered into amendments to the Promissory Notes (the "Amended Notes") which, among other things, provides that the Company may elect to defer the principal portion of the monthly payments that are due to the Investor in May 2025 June 2025 or July 2025 until on or before the Maturity Date of the respective Promissory Note in exchange for the payment of a deferral fee (the "Deferral Fee") equal to 2.0% of the outstanding Principal on each of the Promissory Notes payable monthly until the deferred principal payments are paid in full. The Deferral Fee is payable 50% in cash and 50% as an addition to the outstanding Principal amount on the applicable payment date. If the Company elects to defer the principal portion of the monthly payments that are due to the Investor in May 2025 June 2025 or July 2025, it is still required to make a cash payment for all accrued and unpaid interest outstanding on the principal of the respective Promissory Notes on the applicable due date. The Amended Notes also provide that, if the Company elects to to defer the principal portion of the monthly payments that are due to the Holder in May 2025 June 2025 or July 2025, the Company's failure to make the required interest payments for such months or to pay the Deferral Fee when due will constitute an Event of Default under the Promissory Notes.
Limited Liability Company Agreement
On January 21, 2025, we entered into a Limited Liability Company Agreement (the "LLC Agreement") with SharonAI for the creation of Texas Critical Data Centers LLC, a Delaware limited liability company and joint venture of the Company and SharonAI (the "Joint Venture"). Pursuant to the terms of the LLC Agreement, the purpose of the Joint Venture is to engage in (i) the purchase, building, and development of a site in Texas with an initial 250 MW gas-fired power plant and corresponding data center, and (ii) the operation of this site and (iii) any and all lawful activities necessary or incidental thereto.
Each of the Company and SharonAI will contribute $75,000 to the Joint Venture and have a 50% membership interest in the Joint Venture, constituting the initial members of the Joint Venture. So long as a Member holds a membership interest in the Joint Venture, such Member may not withdraw or resign as a member prior to the dissolution and winding up of the Joint Venture, and any such withdrawal or resignation or attempted withdrawal or resignation will be null and void. Members are required to make additional capital contributions (each, an "Additional Capital Contribution") as set forth in the LLC Agreement, and failure to make Additional Capital Contributions in accordance with the terms of the LLC Agreement entitle the non-defaulting Member to institute proceedings against the non-contributing Member ("Non-Contributing Member"), purchase such Non-Contributing Member's membership interest, or force a sale of such Non-Contributing Member's membership interest. No Member may transfer all or any portion of its membership interest without the written consent of the other Member unless such transfer is made pursuant to a Non-Contributing Member's failure to make Additional Capital Contributions as set forth in the LLC Agreement. New Members of the Joint Venture may be admitted from time to time pursuant to the terms of the LLC Agreement. No real or personal property of the Joint Venture will be deemed to be owned by any of its Members individually and will be owned by, and title will be vested solely in, the Joint Venture. Each fiscal year, net income and net loss will be allocated amongst the Members pro rata in accordance with their membership interests in the Joint Venture. Distributions of the Joint Venture, following allowance for payment of Joint Venture obligations then due and payable, will be made to the members on at least a quarterly basis (unless the Board and members unanimously agree otherwise), pro rata in accordance with the Members' percentage interests in the Joint Venture.
The Company made a $75,000 contribution to the Joint Venture on April 16, 2025. On July 16, 2025, the Company made an additional contribution of $750,000.
Letter of Intent
On February 27, 2025, we issued a press release announcing its intention, along with its joint venture partner, Sharon AI, Inc., to acquire a 200-Acre Site for 250MW Net-Zero AI Data Center in the Permian Basin.
Notice of Delisting
On March 4, 2025, we received a letter from Nasdaq (the "Notice") which notified the Company that, for 30 consecutive business days, the Company's market value of listed securities ("MVLS") closed below the $50,000,000 MVLS threshold required for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(A) (the "MVLS Rule").
In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company has 180 calendar days, or until September 2, 2025 (the "MVLS Compliance Period"), to regain compliance with the MVLS Rule. The Notice notes that, to regain compliance, the Company's MVLS must close at or above $50,000,000 for a minimum of ten consecutive business days during the MVLS Compliance Period. The Notice further notes that if the Company is unable to satisfy the MVLS requirement prior to such date, the Company may be eligible to transfer the listing of its securities to The Nasdaq Capital Market (provided that the Company then satisfies the requirements for continued listing on that market). If the Company does not regain compliance by the end of the MVLS Compliance Period, Nasdaq staff will provide written notice to the Company that its securities are subject to delisting. At that time, the Company may appeal any such delisting determination to a hearings panel.
Departure of Chief Financial Officer
On April 22, 2025, Michael J. Rugen resigned as the Chief Financial Officer of the Company with an effective date of May 31, 2025 (the "Effective Date"). Mr. Rugen's resignation was not the result of any disagreement between him and the Company, the Board of Directors, or any committee of the Board of Directors of the Company on any matter.
Departure of Directors
On May 30, 2025, William H. Flores resigned as a member of the Board of the Company with an effective date of May 30, 2025. Mr. Flores' resignation was not the result of any disagreement between him and the Company, the Board of Directors, or any committee of the Board of Directors on any matter.
On May 28, 2025, Phil Kornbluth resigned as a member of the Board of Directors of the Company with an effective date of May 28, 2025. Mr. Kornbluth's resignation was not the result of any disagreement between him and the Company, the Board of Directors, or any committee of the Board of Directors on any matter. Mr. Kornbluth indicated that he would make himself available after the Effective Date to provide consulting services, as requested by the Company.
Also on May 28, 2025, Stan Boroweic resigned as a member of the Board of Directors of the Company with an effective date of May 28, 2025. Mr. Boroweic's resignation was not the result of any disagreement between him and the Company, the Board of Directors, or any committee of the Board of Directors on any matter. The Company will be seeking a suitable replacement for Mr. Boroweic in due course.
Appointment of Directors
The Company has announced the appointment of three new members of its board of directors to fill vacancies left by recent resignations. Effective June 25, 2025, the new board members include Trent Yang, Peter "P.J." Lee, and Ondrej Sestak. Mr. Yang will serve as the Audit Committee Chairman and as a Compensation Committee Member, Mr. Lee will serve as an Audit Committee Member and Mr. Sestak will serve as a Compensation Committee Member.
Key Factors Affecting Results of Operations
We have set out below a discussion of the key factors that have affected our financial performance and that are expected to impact our performance going forward. These factors present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Report titled "Risk Factors".
Principal Components of Results of Operations
We operate our business within a single reportable segment, which is consistent with how our management reviews our business, makes investment and resource allocation decisions, and assesses operating performance. Management primarily reviews total assets and income (loss) from operations of the single reportable segment.
Revenues, net
The Company sells its oil to a single purchaser on a monthly basis, pursuant to a purchase agreement (the "Oil Purchase Agreement"), at a price based on an index price from the purchaser. The Oil Purchase Agreement with continue on a month-to-month basis thereafter unless and until terminated by the Company or the purchaser with a 30-day advance notice. Oil that is produced from the Company's wells is stored in tank batteries located on the Company's lease. When the purchaser's truck connects to the storage tank and oil enters the truck, control of the oil is transferred to the purchaser, the Company's obligations are satisfied, and revenue is recognized.
We currently sell our natural gas and natural gas liquids to IACX Energy, Inc. ("IACX"), a processor, pursuant to that certain Marketing Agreement, at a price based on an index price from the purchaser, which expired on May 31, 2024. This agreement currently continues on a month-to-month basis unless and until terminated by the Company or the purchaser with a 30-day advance notice. IACX processes our gas for natural gas liquids and other usable components in its facilities. We receive value for our natural gas and any associated natural gas liquids as further defined as hydrocarbons pursuant to the Marketing Agreement. Although the company produces helium alongside its natural gas, IACX does not compensate us for our helium produced under our existing contract. To date, we have not generated any revenue from the production of helium.
Under our natural gas and natural gas liquid contracts with processors, when the unprocessed natural gas is delivered at the sales meter, control of the gas is transferred to the purchaser, the Company's obligations are satisfied, and revenue is recognized. In the cases where the Company sells to a processor, management has determined that the processors are customers. The Company recognizes the revenue in these contracts based on the net proceeds received from the processor.
The Company will sell its helium to two purchasers, each purchasing 50% of the helium production under a 10-year contract. One of the contracts will commence upon delivery of gaseous helium production at the tailgate of the processing plant. The other contract will commence upon delivery of liquid helium from the Keyes Helium Company liquefaction plant located in Keyes, OK. For the gaseous helium sales contract, when the gaseous helium is loaded into the gaseous helium trailer, control of the helium is transferred to the purchaser. For the liquid helium sales contract, once the helium has been liquified and loaded into the liquid helium trailer, control of the helium is transferred to the purchaser, the Company's obligations are satisfied, and revenue is recognized.
The Company has no unsatisfied performance obligations at the end of each reporting period.
Lease operating expenses
Lease operating expenses represent costs incurred in operations of producing properties and workover costs. The majority of these costs are comprised of labor costs, production taxes, compression, workover, and repair costs.
Depletion, depreciation, amortization, and accretion
The Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells, administrative costs directly attributable to those activities and asset retirement costs. The Company records depletion expense for oil and natural gas properties on a units of production basis over the life of the full cost pool's reserves. The Company records depreciation expense for computer equipment and furniture and fixtures over a useful life of five years. The Company records depreciation expense for leasehold improvement over a useful life of five to fifteen years. The Company will record depreciation expense for the processing plant over its estimated useful life. Depreciation on the processing plant will commence once the procession plant is put into service.
General and administrative costs
General and administrative costs primarily include costs incurred for overhead, consisting of payroll and benefits for the Company's corporate staff, contractor and consulting costs, stock compensation expenses, accounting and legal costs, and office rent.
Gain on sale of assets
Gain on sale of assets consists of gains recorded on significant sales of oil and natural gas properties. As a full cost company, disposition of oil and natural gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to operations.
Other income and expense
Other income and expenses primarily include income and expenses associated with interest, gains or losses recorded on certain transactions, and fees charged by the Company to operate properties on behalf of a third party on a short term. Our interest income relates to interest earned on certificate of deposit associated with operating bonds. Our interest expenses are primarily associated with interest due on notes outstanding. Our other income and expense primarily consists of gains and losses recorded on certain transactions as well as operating fees charged by the Company.
Income taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts for income tax purposes and net operating loss and tax credit carryforwards. The amount of deferred taxes on these temporary differences is determined using the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, as applicable, based on tax rates and laws in the respective tax jurisdiction enacted as of the balance sheet date.
The Company reviews its deferred tax assets for recoverability and establishes a valuation allowance based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences. A valuation allowance is provided when it is more likely than not (likelihood of greater than 50 percent) that some portion or all the deferred tax assets will not be realized. The Company recorded a valuation allowance as of $4,248,911 and $2,487,466 for the six months ended June 30, 2025 and the year ended December 31, 2024, respectively.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. If all or a portion of the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company's deferred tax liability and will affect the Company's effective tax rate in the period it is recognized.
The Company records any tax-related interest charges as interest expense and any tax-related penalties as other expense in the consolidated statements of operations of which there have been none to date. The Company is also subject to Texas Margin Tax. The Company realized no Texas Margin Tax in the accompanying consolidated financial statements as we do not anticipate owing any Texas Margin Tax for the periods presented.
Stock-based compensation
The Company accounts for its stock-based compensation awards in accordance with Accounting Standards Codification ("ASC") Topic 718, Compensation-Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees and non-employees including grants of stock options, to be recognized as expense in the statements of operations based on their grant date fair values. The Company periodically issues common stock and common stock options to consultants for various services. Costs of these transactions are measured at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.
Results of Operations
To provide readers with meaningful comparisons, the following analysis provides comparisons of the financial results for the three months and six months ended June 30, 2025 and 2024. We analyze and explain the differences between periods in the specific line items of the Consolidated Statements of Operations and Comprehensive (Loss) Income.
The Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024
The following table sets forth our results of operations for the periods presented:
| For the three months ended | ||||||||||||||||
| June 30, | Variance | Variance | ||||||||||||||
| 2025 | 2024 | ($) | (%) | |||||||||||||
| Revenue, net: | ||||||||||||||||
| Oil, natural gas, and product sales, net | $ | 209,114 | $ | 20,377 | $ | 188,737 | 926.2 | % | ||||||||
| Total revenues, net | 209,114 | 20,377 | 188,737 | 926.2 | % | |||||||||||
| Costs and expenses: | ||||||||||||||||
| Lease operating expenses | 308,385 | 225,368 | 83,017 | 36.8 | % | |||||||||||
| Depletion, depreciation, amortization, and accretion | 232,018 | 255,149 | (23,131 | ) | (9.1 | )% | ||||||||||
| General and administrative expenses | 1,532,520 | 1,043,122 | 489,398 | 46.9 | % | |||||||||||
| Total costs and expenses | 2,072,923 | 1,523,639 | 549,284 | 36.1 | % | |||||||||||
| Loss from operations | (1,863,809 | ) | (1,503,262 | ) | (360,547 | ) | 24.0 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 10,948 | 8,074 | 2,874 | 35.6 | % | |||||||||||
| Interest expense | (1,515,986 | ) | (79,484 | ) | (1,436,502 | ) | 1,807.3 | % | ||||||||
| Change in fair value of derivative asset | 156,659 | - | 156,659 | 100.0 | % | |||||||||||
| Change in fair value of derivative liability | (99,274 | ) | - | (99,274 | ) | 100.0 | % | |||||||||
| Other, net | (294,542 | ) | 66,799 | (361,341 | ) | (540.9 | )% | |||||||||
| Total other income (loss) | (1,742,195 | ) | (4,611 | ) | (1,737,584 | ) | 37,683.5 | % | ||||||||
| Loss before income taxes | (3,606,004 | ) | (1,507,873 | ) | (2,098,131 | ) | 139.1 | % | ||||||||
| Benefit for income taxes | - | 418,114 | (418,114 | ) | (100.0 | )% | ||||||||||
| Net loss | $ | (3,606,004 | ) | $ | (1,089,759 | ) | $ | (2,516,245 | ) | 230.9 | % | |||||
Net Revenue by Product Category
The following table summarizes the Company's net audited consolidated revenues disaggregated by product category:
| Three Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2025 | 2024 | Change | Change % | |||||||||||||
| Natural Gas, net | $ | 145,539 | $ | (22,291 | ) | $ | 167,830 | (752.9 | )% | |||||||
| NGL | 63,575 | 73,630 | (10,055 | ) | (13.7 | )% | ||||||||||
| Oil | - | (30,962 | ) | 30,962 | (100.0 | )% | ||||||||||
| Total revenues, net | $ | 209,114 | $ | 20,377 | $ | 188,737 | 926.2 | % | ||||||||
Natural Gas represented 69.6% of the revenue for the three months ended June 30, 2025, compared to (109.4) % for the three months ended June 30, 2024, and increased $167,830 for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The primary drivers of the revenue increase for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was a $165,000 increase related to a $0.71 per mcf increase in gas prices net of processing and transportation.
NGLs represented 30.4% of the revenue for the three months ended June 30, 2025, compared to 361.3% for the three months ended June 30, 2024, and decreased $10,055 for the three months ended June 30, 2025, as compared to three months ended June 30, 2024. The primary driver of the revenue decrease for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was a $22,000 decrease related to a $17.58 per Bbl decrease in NGL prices, partially offset by a $12,000 increase related to a 180 Bbl increase in NGL volumes.
No revenue was generated from Oil for the three months ended June 30, 2025, compared to (151.9) % for the three months ended June 30, 2024, and increased $30,962 for the three months ended June 30, 2025, as compared to three months ended June 30, 2024. The primary driver of the revenue increase for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was the sale of the Company's oil properties during 2024.
Operating Expenses
| Three Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2025 | 2024 | Change | Change % | |||||||||||||
| Costs and expenses: | ||||||||||||||||
| Lease operating expenses | $ | 308,385 | $ | 225,368 | $ | 83,017 | 36.8 | % | ||||||||
| Depletion, depreciation, amortization and accretion | 232,018 | 255,149 | (23,131 | ) | (9.1 | )% | ||||||||||
| General and administrative expenses | 1,532,520 | 1,043,122 | 489,398 | 46.9 | % | |||||||||||
| Total costs and expenses | $ | 2,072,923 | $ | 1,523,639 | $ | 549,284 | 36.1 | % | ||||||||
The Company experienced an overall increase in operating expenses of $549,284 for the three months ended June 30, 2025, compared to the three months ended June 30, 2024.
For the three months ended June 30, 2025, lease operating expenses increased $83,017, as compared to the three months ended June 30, 2024. This increase was primarily attributable to a $60,000 increase related to amortization during 2025 of a standby retainer, consulting, and services agreement and a $59,000 increase related to an increase in field location work.
General and administrative expenses increased $489,398 during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. The primary drivers for the increase was a $242,000 increase in Directors and Officers Insurance Costs, a $141,500 increase in public company related filing costs, a $102,500 increase in employee compensation and benefit costs, a $97,000 increase in board member compensation, and a $72,000 increase in advertising and marketing costs, partially offset by $166,000 decrease related to an assignment of certain properties located in Chaves County, New Mexico as compensation expense.
For the three months ended June 30, 2025, depletion, depreciation, amortization and accretion expense decreased $23,131, as compared to the three months ended June 30, 2024. This decrease was primarily due to a $39,000 decrease in depletion expense related to lower sales volumes and a decrease in the depletion rates, partially offset by a $14,000 increase in accretion expense associated with Asset Retirement Obligations.
Other (Expense)Income
| Three Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2025 | 2024 | Change | Change % | |||||||||||||
| Interest income | 10,948 | 8,074 | 2,874 | 35.6 | % | |||||||||||
| Interest expense | (1,515,986 | ) | (79,484 | ) | (1,436,502 | ) | 1,807.3 | % | ||||||||
| Change in fair value of derivative asset | 156,659 | - | 156,659 | 100.0 | % | |||||||||||
| Change in fair value of derivative liability | (99,274 | ) | - | (99,274 | ) | 100.0 | % | |||||||||
| Other, net | (294,542 | ) | 66,799 | (361,341 | ) | (540.9 | )% | |||||||||
| Total other income (loss) | $ | (1,742,195 | ) | (4,611 | ) | (1,737,584 | ) | 37,683.5 | % | |||||||
For the three months ended June 30, 2025, interest income increased $2,874, as compared to the three months ended June 30, 2024, primarily due to an increase on interest earned on certificates of deposit.
For the three months ended June 30, 2025, interest expense increased $1,515,986, as compared to the three months ended June 30, 2024, primarily due to $1,436,502 increase related to amortization of the debt discount and debt issuance costs, and a $78,000 increase in interest expense related to excise and withholding taxes, partially offset by a $14,000 decrease in interest expense related to the Beaufort Acquisitions note and a $21,000 decrease related to interest expense associated with the Bridge Financing Debentures. Both the Beaufort Acquisition note and the Bridge Financing Debentures were paid off in December 2024.
For the three months ended June 30, 2025, change in the fair value of the derivative asset increased $156,659, as compared to the three months ended June 30, 2024, and change in fair value of derivative liabilities increased $99,274 as compared to the three months ended June 30, 2024.
For the three months ended June 30, 2025, other income (expense) decreased $361,341 as compared to the three months ended June 30, 2024, primarily due to a $294,000 increase in penalties associated with late payment on excise and withholding tax, and a $67,000 decrease in fees to operate properties charged to the purchaser of certain properties, previously owned by the Company, located in Chaves County, NM that were sold effective July 2023.
The Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024
The following table sets forth our results of operations for the periods presented:
| For the six months ended | ||||||||||||||||
| June 30, | Variance | Variance | ||||||||||||||
| 2025 | 2024 | ($) | (%) | |||||||||||||
| Revenue, net: | ||||||||||||||||
| Oil, natural gas, and product sales, net | $ | 535,569 | $ | 349,588 | $ | 185,981 | 53.2 | % | ||||||||
| Total revenues, net | 535,569 | 349,588 | 185,981 | 53.2 | % | |||||||||||
| Costs and expenses: | ||||||||||||||||
| Lease operating expenses | 568,865 | 728,927 | (160,062 | ) | (22.0 | )% | ||||||||||
| Depletion, depreciation, amortization, and accretion | 430,427 | 499,193 | (68,766 | ) | (13.8 | )% | ||||||||||
| General and administrative expenses | 3,469,174 | 1,788,186 | 1,680,988 | 94.0 | % | |||||||||||
| Total costs and expenses | 4,468,466 | 3,016,306 | 1,452,160 | 48.1 | % | |||||||||||
| Loss from operations | (3,932,897 | ) | (2,666,718 | ) | (1,266,179 | ) | 47.5 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 26,328 | 24,668 | 1,660 | 6.7 | % | |||||||||||
| Interest expense | (2,958,108 | ) | (139,822 | ) | (2,818,286 | ) | 2,015.6 | % | ||||||||
| Change in fair value of derivative asset | 141,256 | - | 141,256 | 100.0 | % | |||||||||||
| Change in fair value of derivative liability | 91,703 | - | 91,703 | 100.0 | % | |||||||||||
| Other, net | (294,542 | ) | 133,597 | (428,139 | ) | (320.5 | )% | |||||||||
| Total other income (loss) | (2,993,363 | ) | 18,443 | (3,011,806 | ) | (16,330.3 | )% | |||||||||
| Loss before income taxes | (6,926,260 | ) | (2,648,275 | ) | (4,277,985 | ) | 161.5 | % | ||||||||
| Benefit for income taxes | - | 699,484 | (699,484 | ) | (100.0 | )% | ||||||||||
| Net loss | $ | (6,926,260 | ) | $ | (1,948,791 | ) | $ | (4,977,469 | ) | 255.4 | % | |||||
Net Revenue by Product Category
The following table summarizes the Company's net audited consolidated revenues disaggregated by product category:
| Six Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2025 | 2024 | Change | Change % | |||||||||||||
| Natural Gas, net | $ | 425,603 | $ | 185,309 | $ | 240,294 | 129.7 | % | ||||||||
| NGL | 109,966 | 139,679 | (29,713 | ) | (21.3 | )% | ||||||||||
| Oil | - | 24,600 | (24,600 | ) | (100.0 | )% | ||||||||||
| Total revenues, net | $ | 535,569 | $ | 349,588 | $ | 185,981 | 53.2 | % | ||||||||
Natural Gas represented 79.5 % of the revenue for the six months ended June 30, 2025, compared to 53.0% for the six months ended June 30, 2024, and increased $240,294 for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The primary drivers of the revenue increase for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was a $266,000 increase related to a $0.62 per mcf increase in gas prices net of processing and transportation, partially offset by a $26,000 decrease related to a 68 MMcf decrease in gas volumes.
NGLs represented 20.5% of the revenue for the six months ended June 30, 2025, compared to 40% for the six months ended June 30, 2024, and decreased $29,713 for the six months ended June 30, 2025, as compared to six months ended June 30, 2024. The primary driver of the revenue decrease for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was a $25,000 decrease related to a $12.31 per Bbl decrease in NGL prices, and a $5,000 decrease related to a 68 Bbl decrease in NGL volumes.
No revenue was generated from Oil for the six months ended June 30, 2025, compared to 7.0% for the six months ended June 30, 2024, and decreased $24,600 for the six months ended June 30, 2025, as compared to six months ended June 30, 2024. The primary driver of the revenue decrease for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was the sale of the Company's oil properties during 2024.
Operating Expenses
| Six Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2025 | 2024 | Change | Change % | |||||||||||||
| Costs and expenses: | ||||||||||||||||
| Lease operating expenses | $ | 568,865 | $ | 728,927 | $ | (160,062 | ) | (22.0 | )% | |||||||
| Depletion, depreciation, amortization and accretion | 430,427 | 499,193 | (68,766 | ) | (13.8 | )% | ||||||||||
| General and administrative expenses | 3,469,174 | 1,788,186 | 1,680,988 | 94.0 | % | |||||||||||
| Total costs and expenses | $ | 4,468,466 | $ | 3,016,306 | $ | 1,452,160 | 48.1 | % | ||||||||
The Company experienced an overall increase in operating expenses of $1,452,160 for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.
For the six months ended June 30, 2025, lease operating expenses decreased $160,062, as compared to the six months ended June 30, 2024. This decrease was primarily attributable to a $213,000 decrease in location, workover and repair costs, partially offset by a $120,000 increase related to amortization during 2025 of a standby retainer, consulting, and services agreement.
General and administrative expenses increased $1,680,988 during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The primary drivers for the increase was $595,000 increase in public relations and marketing cost, a $483,000 increase in Directors and Officers Insurance Costs, a $246,000 increase in employee compensation and benefit costs, a $176,500 increase in public company related filing costs and exchange fee, a $160,000 increase related to board member compensation, and $151,000 increase in audit related costs, partially offset by $166,000 decrease related to an assignment of certain properties located in Chaves County, New Mexico as compensation expense.
For the six months ended June 30, 2025, depletion, depreciation, amortization and accretion expense decreased $68,766, as compared to the six months ended June 30, 2024. This decrease was primarily due to a $95,999 decrease in depletion expense related to lower sales volumes and a decrease in the depletion rates, partially offset by a $19,347 increase in accretion expense associated with Asset Retirement Obligations.
Other (Expense) Income
| Six Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2025 | 2024 | Change | Change % | |||||||||||||
| Interest income | $ | 26,328 | 24,668 | 1,660 | 6.7 | % | ||||||||||
| Interest expense | (2,958,108 | ) | (139,822 | ) | (2,818,286 | ) | 2,015.6 | % | ||||||||
| Change in fair value of derivative asset | 141,256 | - | 141,256 | 100.0 | % | |||||||||||
| Change in fair value of derivative liability | 91,703 | - | 91,703 | 100.0 | % | |||||||||||
| Other, net | (294,542 | ) | 133,597 | (428,139 | ) | (320.5 | )% | |||||||||
| Total other income (loss) | $ | (2,993,363 | ) | 18,443 | (3,011,806 | ) | (16,330.3 | )% | ||||||||
For the six months ended June 30, 2025, interest income increased $1,660, as compared to the six months ended June 30, 2024, primarily due to interest earned on certificates of deposit.
For the six months ended June 30, 2025, interest expense increased $2,818,286 as compared to the six months ended June 30, 2024, primarily due to $2,344,697 increase related to amortization of the debt discount and debt issuance costs and interest associated with note, and a $78,000 increase in interest expense related to excise and withholding taxes, partially offset by a $29,000 decrease in interest expense related to the Beaufort Acquisitions note and a $27,000 decrease related to interest expense associated with the Bridge Financing Debentures. Both the Beaufort Acquisition note and the Bridge Financing Debentures were paid off in December 2024.
For the six months ended June 30, 2025, change in the fair value of the derivative asset increased $141,256, as compared to the six months ended June 30, 2024, and change in fair value of derivative liabilities increased $91,703 as compared to the six months ended June 30, 2024.
For the six months ended June 30, 2025, other expense increased $428,139 to an expense of $294,542 from other income of $133,597 as compared to the six months ended June 30, 2024, primarily due to penalties for withholding and excise tax of $295,000 recorded for the six month ended June 30, 2025, and a $134,000 decrease in fees to operate properties charged to the purchaser of certain properties, previously owned by the Company, located in Chaves County, NM that were sold effective July 2023.
Liquidity and Capital Resources
Uses and Availability of Funds
We measure our liquidity in a number of ways, including cash balances on hand, working capital, and operating cash flows.
We had a cash balance of $5,199,825 as of June 30, 2025. We also had a working capital deficit of $3,384,529 as of June 30, 2025.
Since our inception, the Company's primary sources of liquidity have been cash flow from operations, contributions from members, and borrowings. The Company is in the process of securing a project financing arrangement to fund construction of a processing plant, the construction or acquisition of a gather system, and a production enhancement program that will consist of workovers, recompletions, new drilling, or acquisition of properties. In connection with the closing of the Business Combination on December 6, 2024, the Company and the EPFA Investor entered into the EPFA. Pursuant to the EPFA, the Company has the right to issue and sell to the EPFA Investor, and the EPFA Investor must purchase from the Company, up to an aggregate of $1.0 billion (the "Commitment Amount") in newly issued shares (the "Advance Shares") of the Company's common stock, par value $0.0001 per share (the "Common Stock"), subject to the satisfaction or waiver of certain conditions. The EFPA also provides for the issuance of two pre-paid advances in the aggregate amount of $10 million, the first pre-paid advance in the amount of $7 million, which was drawn by the Company on December 6, 2024, and the second pre-paid advance in the amount of $3 million, which was drawn by the Company on January 16, 2025, each of which is evidenced by a senior secured convertible promissory note (each, a "Convertible Note"), which is convertible into shares of common stock.
The Company is making payments of principal and interest on the Convertible Notes and the Company's general and administrative expenses through funds received from shares sold under the EFPA. The Company's share price has significantly declined and as a result, management has concern about the Company's ability to sell sufficient shares under the EFPA at high enough prices to produce cash flow to meet its obligations within the assessment period as necessary. The Company may need to raise additional financing thorough loans. The Company cannot provide any assurance that the new financing will be available to it on commercially acceptable terms, if at all. If the Company is unable to raise additional capital, The Company's business, results of operations and financial condition would be materially and adversely affected. As a result, in connection with the Company's assessment of going concern considerations in accordance with FASB Accounting Standards Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern", Management has determined management that the Company's liquidity condition raises substantial doubt about the Company's ability to continue as a going concern through the twelve months following the issuance date of the June 30, 2025, financial statements. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Our primary operations include the exploration, development, and production of helium, natural gas, oil, and natural gas liquids ("NGLs"). The Company's producing oil and gas assets and non-producing acreage are primarily located in Chaves County, New Mexico. The Company also owns overriding royalty interests located in Howard County, Texas.
Cash Flows
Cash flows for the six months ended June 30, 2025 and 2024
The following table summarizes our cash flow activity for the periods presented:
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash Provided By (Used In) | ||||||||
| Operating Activities | $ | (4,679,487 | ) | $ | (1,070,183 | ) | ||
| Investing Activities | (877,546 | ) | (200,000 | ) | ||||
| Financing Activities | 9,703,114 | 1,179,028 | ||||||
| Net increase in cash and cash equivalents | $ | 4,146,081 | $ | (91,155 | ) | |||
Net cash used in operating activities
Operating activities used cash of $4,679,487 for the six months ended June 30, 2025. Net loss of $6,926,260 was affected by depletion, depreciation, amortization, and accretion of $430,427, amortization of debt discount of $2,344,697 and accrued interest on note payable and other liabilities of $86,330, offset by change in fair value of derivative asset of $141,256, change in fair value of derivative liability of $91,703 and interest income on investments and notes receivable of $26,328. Changes in operating assets and liabilities used $355,394 of cash for operating activities.
Operating activities used cash of $1,070,183 for the six months ended June 30, 2024. Net loss of $1,948,791 was affected by depletion, depreciation, amortization, and accretion of $499,194, accrued interest on note payable and other current liabilities of $101,953, offset by deferred tax benefit of $699,484, and interest income on investments and notes receivable of $24,669. Changes in operating assets and liabilities used $835,165 of cash for operating activities.
Net cash used in investing activities
Investing activities used cash of $877,546 for the six months ended June 30, 2025, related to the purchase of property, plant and equipment of $802,546 and investment in joint venture of $75,000.
Investing activities used cash of $200,000 for the six months ended June 30, 2024, related to the purchasing of property, plant and equipment and the purchase of oil and natural gas properties.
Net cash provided by financing activities
Financing activities provided cash of $9,703,114 for the six months ended June 30, 2025, related to proceeds from the convertible note of $2,790,000 and issuance of common stock of $8,413,964 offset by repayment on the convertible notes of $1,416,667 and debt issuance costs of $84,183.
Financing activities provided cash of $1,179,028 for the six months ended June 30, 2024, related to the proceeds from note payable of $1,089,528, proceeds from related party of $77,500 and the issuance of common stock of $12,000.
Indebtedness
As of June 30, 2025, the Company had $10,583,333 in outstanding loans and financing, excluding accounts payable and accrued interest. The following is a description of our material indebtedness.
These descriptions are only summaries and do not purport to describe all of the terms of the financing arrangements that may be important.
The table below reflects the Company indebtedness as of June 30, 2025:
|
Principal Amount |
Maturity Date |
Interest Rate |
||||||||||
| Airlife Gases | $ | 2,000,000 | (1) | 8.0 | % | |||||||
| Convertible Note (2) | $ | 5,950,583 | March 6, 2026 | 10.0 | % | |||||||
| Subsequent Note (3) | $ | 2,805,275 | April 15, 2026 | 10.0 | % | |||||||
| Total | $ | 10,755,858 | ||||||||||
| (1) | The earlier of May 30, 2027 or 18 months after commencement date as defined the Purchase and Sale Agreement between NEH Midstream and AirLife dated August 25, 2024. As of June 30, 2025, the Company has accrued $ 304,153 of interest on this note. If the Commencement Date has not occurred by November 30, 2025, for any reason, the Buyer has the right to terminate the Purchase Agreement. The Company does not anticipate the Commencement Date to occur by November 30, 2025 and expects the Buyer to terminate the agreement at that time. The company would be obligated to pay the outstanding balance within five days, therefore has recorded this note and associated interest as a current liability. |
| (2) | The amounts noted in the above table for the Convertible Note reflect principal payments made in February 2025 in the amount $1,166,667. |
| (3) | The amounts noted in the above table for the Subsequent Note reflect principal payments made in February 2025 in the amount $250,000. |
Tabular Disclosure of Contractual Obligations
The following is a summary of our contractual obligations as of June 30, 2025:
|
Less than 1 Year |
1-3 Years | 3 - 5 Years | Total | |||||||||||||
| Note Payable - Air Life (1) | $ | 2,000,000 | $ | - | $ | - | $ | 2,000,000 | ||||||||
| Convertible and Subsequent Notes | $ | 8,755,858 | $ | - | $ | - | $ | 8,755,858 | ||||||||
| (1) | This note carries an annual interest rate of 8%. As of June 30, 2025, the Company has accrued $304,153 of interest on this note. If the Commencement Date has not occurred by November 30, 2025, for any reason, the Buyer has the right to terminate the Purchase Agreement. The Company does not anticipate the Commencement Date to occur by November 30, 2025 and expects the Buyer to terminate the agreement at that time. The company would be obliged to pay the outstanding balance within five days, therefore has recorded this note and associated interest as a current liability. |
Seasonality
We typically do not experience seasonality in our operations.
Related Party Transactions
The Company has related party transactions consisting of accounts payable as of June 30, 2025. These balances were related to reimbursement due for business-related travel expenses for the CEO and CFO.
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public business entities to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to the financial statements. The amendments in the ASU are effective for public entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is still evaluating the effect of the adoption of this guidance.
Critical Accounting Estimates
The Company prepares its consolidated financial statements for inclusion in this Report in accordance with GAAP. See Note 2 of Notes to Consolidated Financial Statements. The following is a discussion of the Company's most critical accounting estimates, judgments and uncertainties that are inherent in the Company's application of GAAP.
Reserves.
The Company's proved reserve information as of June 30, 2025 and 2024 was prepared by the Company's independent petroleum engineers. Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, proved reserve estimates will be different from the quantities of oil and natural gas that are ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may justify material revisions, positively or negatively, to the estimate of proved reserves. The Company's estimates of proved reserves materially impact DD&A expense. If the estimates of proved reserves decline, the rate at which the Company records DD&A expense will increase, reducing future net income. Such a decline may result from lower commodity prices, which may make it uneconomical to drill for and produce higher cost fields. In addition, a decline in proved reserve estimates may impact the outcome of the Company's ceiling test calculations of its proved properties for impairment.
Asset Retirement Obligations.
The Company has significant obligations to remove tangible equipment and facilities and to restore the land at the end of oil and natural gas production operations. The Company's removal and restoration obligations are primarily associated with plugging and abandoning wells. Estimating the future restoration and removal costs is difficult and requires management to make estimates and judgments because most of the removal obligations are many years in the future and in some cases have vague descriptions of what constitutes removal. Asset removal technologies and costs are constantly changing, as are regulatory, political, environmental, safety and public relations considerations. Inherent in the present value calculation are numerous assumptions and judgments including the ultimate settlement amounts, credit-adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the present value of the existing asset retirement obligations, a corresponding adjustment is generally made to the crude oil and natural gas property balance.
Deferred Tax Asset Valuation Allowance.
The Company continually assesses both positive and negative evidence for recoverability of its deferred tax assets and based on projected future taxable income, applicable tax strategies and the expected timing of the reversals of existing temporary differences, the Company has established a valuation allowance of $3,384,508 for the six months ended June 30, 2025. There can be no assurance that facts and circumstances will not materially change and require the Company to revise this valuation allowance in a future period.
Stock-based Compensation.
The Company calculates the fair value of stock-based compensation using various valuation methods. The Company determination on the appropriate valuation method requires the use of estimates to derive the inputs necessary to determine fair value. Costs of these transactions are measured at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable.
Warrants
The Company determines the accounting classification of warrants it issues as either liability or equity classified by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity ("ASC 480"), then in accordance with ASC 815-40 ("ASC 815"), Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing a variable number of shares. If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its Common Stock and whether the warrants are classified as equity under ASC 815 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.
Related parties
Management approves all material related-party transactions. Management considers the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction, and the benefits to the Company and the relevant related party. In determining whether to approve a related party transaction, the following factors are considered: (1) if the terms are fair to the Company, (2) if there are business reasons to enter into the transaction, or (3) if the transaction would present an improper conflict of interest for any officer.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. The hierarchy is broken down into three levels based on the observability of inputs as follows:
| ● | Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment; |
| ● | Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly; and |
| ● | Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
Commitments and Contingencies
Environmental Matters
The Company, as a lessee of oil and gas properties, is subject to various federal, provincial, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. There can be no assurance, however, that current regulatory requirements will not change, or past noncompliance with environmental laws will not be discovered on the Company's properties.
Irrevocable Standby Letter of Credit and Promissory Note
On September 24, 2020, the Company entered into an irrevocable standby letter of credit ("LOC") and a promissory note with West Texas National Bank in the amount of $25,000 with variable interest initially of 4.25% per annum and maturing on December 24, 2021. No amount was drawn down under this LOC up to the date it was amended on October 29, 2021.
On October 29, 2021, the Company entered into an amendment of the LOC a new promissory note, increasing the amount to $425,000 with variable interest initially of 4.25% per annum and maturing on September 29, 2025. On January 1, 2022, and March 29, 2022, the LOC was amended, and new promissory notes were executed increasing the amount to $650,000 and $920,000, respectively. As of June 30, 2025, and December 31, 2024, no amount was drawn down under the LOC.
Limited Liability Company Agreement
On January 21, 2025, we entered into a Limited Liability Company Agreement (the "LLC Agreement") with SharonAI for the creation of Texas Critical Data Centers LLC, a Delaware limited liability company and joint venture of the Company and SharonAI (the "Joint Venture"). Pursuant to the terms of the LLC Agreement, the purpose of the Joint Venture is to engage in (i) the purchase, building, and development of a site in Texas with an initial 250 MW gas-fired power plant and corresponding data center, and (ii) the operation of this site and (iii) any and all lawful activities necessary or incidental thereto.
Each of the Company and SharonAI will contribute $75,000 to the Joint Venture and have a 50% membership interest in the Joint Venture, constituting the initial members of the Joint Venture. So long as a Member holds a membership interest in the Joint Venture, such Member may not withdraw or resign as a member prior to the dissolution and winding up of the Joint Venture, and any such withdrawal or resignation or attempted withdrawal or resignation will be null and void. Members are required to make additional capital contributions (each, an "Additional Capital Contribution") as set forth in the LLC Agreement, and failure to make Additional Capital Contributions in accordance with the terms of the LLC Agreement entitle the non-defaulting Member to institute proceedings against the non-contributing Member ("Non-Contributing Member"), purchase such Non-Contributing Member's membership interest, or force a sale of such Non-Contributing Member's membership interest. No Member may transfer all or any portion of its membership interest without the written consent of the other Member unless such transfer is made pursuant to a Non-Contributing Member's failure to make Additional Capital Contributions as set forth in the LLC Agreement. New Members of the Joint Venture may be admitted from time to time pursuant to the terms of the LLC Agreement. No real or personal property of the Joint Venture will be deemed to be owned by any of its Members individually and will be owned by, and title will be vested solely in, the Joint Venture. Each fiscal year, net income and net loss will be allocated amongst the Members pro rata in accordance with their membership interests in the Joint Venture. Distributions of the Joint Venture, following allowance for payment of Joint Venture obligations then due and payable, will be made to the members on at least a quarterly basis (unless the Board and members unanimously agree otherwise), pro rata in accordance with the Members' percentage interests in the Joint Venture.
We paid the $75,000 contribution to the Joint Venture on April 16, 2025. On July 16, 2025, the Company made an additional contribution of $750,000.
Subsequent Events
Entry into a Material Definitive Agreement Amendment to Employment Agreement
As previously reported, New Era Energy & Digital, Inc., a Nevada corporation ("NEW ERA" or the "Officer" (the "Company"), and E. Will Gray, II, its Chief Executive Executive"), are parties to that certain Employment Agreement dated as of April 15, 2024 (the "Agreement"). On July 16, 2025, NEW ERA and the Executive entered into an amendment to the Agreement (the "Amendment") to provide for, among other things, the reimbursement of certain relocation expenses and housing expenses for the Executive.
On July 2, 2025, Matheson Tri-Gas, Inc. terminated its Gaseous Helium Agreement with the Company. This termination was a result of the Pecos Slope Plant not commencing operation as of July 1, 2025.
On July 2, 2025, the Company's Board of Directors approved the issuance of 1,213,643 share of common stock and options to purchase 765,000 shares of common stock.
As previously reported, New Era Energy & Digital, Inc., a Nevada corporation ("NEW ERA" or the "Company"), and an institutional investor (the "Investor"), entered into that certain Equity Purchase Facility Agreement, dated as of December 6, 2024, as amended and restated by that certain Amended and Restated Equity Purchase Facility Agreement dated as of February 21, 2025 and the Second Amended and Restated Equity Purchase Facility Agreement dated as of May 5, 2025 (the "Existing EPFA").
On July 17, 2025, Texas Critical Data Centers LLC ("TCDC"), a joint venture between New Era Energy & Digital, Inc. ("NEW ERA" or the "Company"), and Sharon AI, Inc., executed a purchase agreement (the "Agreement") with Odessa Industrial Development Corporation d/b/a Grow Odessa, a Texas nonprofit corporation, with respect to the purchase by TCDC of approximately 235 acres in Ector County, Texas for a 250MW AI and HPC data center campus planned by TCDC. The closing of the transaction occurred on July 25, 2025. On August 13, 2025, the Company changed its name from New Era Helium, Inc. to New Era Energy & Digital, Inc. In addition, the Company also changed its trading symbol for common stock from NEHC to NUAI and for warrants from NHECW to NUAIW.
New Era Helium Inc. published this content on August 14, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on August 14, 2025 at 19:54 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]