Financial Analysis

NOTE 10 COMMITMENTS AND CONTINGENCIES Registration Rights Agreement (Founder Shares) The holders of the Founder Shares and the Private Placement Units and warrants that may be issued upon conversion of Private Notes Payable (and any shares of common stock issuable upon the 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 …

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NOTE 8 FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of the Companys assets and liabilities not recorded at fair value on a recurring basis, 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 driv …

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NOTE 11 INCOME TAXES As of December 31, 2025 and 2024, the Companys net deferred tax assets were as follows: December 31, 2025 December 31, 2024 Deferred tax assets Federal net operating loss $ 1,402,259 $ 1,913,959 Transaction costs 1,408,371 1,515,401 Accrued expenses 670,754 1,202,259 Deferred compensation 1,350,406 446,113 Derivative liability - 228,732 Stock-based compensation 818,497 648,697 Other 73,972 45,322 Total deferred tax assets 5,724,259 6,000,483 Deferred tax liabilities Oil and natural gas properties (8,385,100 ) (8,665,914 ) Prepaid expenses (37,740 ) - Equipment credit (1,244,559 ) - Unrealized gain on derivatives (16,252 ) (27,302 ) Total deferred tax liabilities (9,683,651 ) (8,693,216 ) Net deferred tax liabilities (3,959,392 ) (2,692,733 ) Valuation allowance for deferred tax assets - - Net Deferred tax liability, net of allowance $ (3,959,392 ) $ (2,692,733 ) The income tax provision consists of the following: For the Year Ended December 31, 2025 For the Year Ended December 31, 2024 Current income tax (benefit) expense Federal $ 503,692 $ - State 143,203 - Total current income tax expense 646,895 - Deferred tax (benefit) expense: Federal 1,036,586 (2,840,051 ) State 230,073 (630,356 ) Valuation allowance - - Total deferred income tax (benefit) expense 1,266,659 (3,470,407 ) Total income tax (benefit) expense $ 1,913,554 $ (3,470,407 ) As of December 31, 2025, the Company had $5,464,555 of estimated U.S. federal net operating loss carryovers, which do n …

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NOTE 5LONG-TERM DEBT AND NOTES PAYABLE The Companys debt instruments are as follows: December 31, 2025 December 31, 2024 Senior Secured Term Loan $ - $ 23,696,417 Seller Promissory Note - 15,000,000 Merchant Cash Advances 2,023,177 948,982 Convertible Notes Payable 1,065,000 - Convertible Notes Payable, related parties 1,250,000 - Convertible Notes Payable at fair value - 891,364 Private loans 200,000 3,556,750 Total 4,538,177 44,093,513 Less: unamortized financing cost (659,354 ) (834,854 ) Less: current portion including amortization (1,617,337 ) (9,080,910 ) Long-term debt, net of current portion $ 2,261,486 $ 34,177,749 Senior Secured Term Loan Agreement In connection with the Closing, HNRA (for purposes of the Loan Agreement, the Borrower) and First International Bank & Trust (FIBT or Lender), OpCo, SPAC Subsidiary, EON, and LH Operating, LLC (for purposes of the Loan Agreement, collectively, the Guarantors and together with the Borrower, the Loan Parties), and FIBT entered into a Senior Secured Term Loan Agreement on November 15, 2023 (the Loan Agreement), setting forth the terms of a senior secured term loan facility in an aggregate principal amount of $28,000,000 (the Term Loan). Pursuant to the terms of the Term Loan Agreement, the Term Loan was advanced in one tranche on the Closing Date. The proceeds of the Term Loan were used to (a) fund a portion of the purchase price, (b) partially fund a debt service reserve account funded with $2,600,000 at the Closing Dat …

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Recent Accounting Pronouncements Adopted In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures . Under this ASU, entities must disclose, on an annual basis, specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires entities to disclose additional information about income taxes paid. ASU 2023-09 is effective for financial statements for annual periods beginning after December 15, 2024, and can be applied on a prospective basis with an option to apply the standard retrospectively. The Company adopted the ASU effective January 1, 2025 on a retrospective basis with no material impact to the Companys 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 meth …

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NOTE 9 RELATED PARTY TRANSACTIONS On May 5, 2022, the Company entered into a Referral Fee and Consulting Agreement (the Consulting Agreement) with Alexandria VMA Capital, LLC (Alexandria), an entity controlled by Mr. Caravaggio, who became the Companys CEO on December 17, 2023. Pursuant to the Consulting Agreement, Alexandria provided information and contacts with suitable investments and acquisition candidates for the Companys initial business combination. In addition, Alexandria provided due diligence, purchasing and negotiating strategy advice, organizational and operational advice, and such other services as requested by the Company. In consideration of the services provided by Alexandria, the Company paid to Alexandria Capital a referral fee of $1,800,000 equal to 2% of the total value of the Companys business combination, with half being paid by the issuance of 89,000 shares of the Companys Class A Common Stock. No gain was recognized on the issuance of these shares for the difference in the fair value of the shares and the $900,000 payable due to the related party nature of the transaction. The remaining $900,000 was reflected as accounts payable. As of December 31, 2025 and 2024, the Company owes $0 and $403,000 of the fee, respectively. During the fiscal year ended December 31, 2021, the Company and Dante Caravaggio entered into a side agreement in connection with his purchase of 400,000 shares of Class A Common Stock at $2.00 per share (the Side Agreement). The Side …

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NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the SEC. 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 Companys 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 segments revenues and significant expenses aligns with the categories presented in the Consolidated Statements of Operations. Furthermore, the segments 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. Emerging Growth Company Section 102(b)(1) of the JOBS Act exempts emerging growth com …

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NOTE 7 STOCKHOLDERS EQUITY As of December 31, 2025, there were 52,140,701 shares of Class A Common Stock, of which 400,000 are classified as redeemable common shares and 0 shares of Class B Common Stock outstanding. On November 15, 2023, as contemplated by the MIPA, the Company filed the an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware, pursuant to which the number of authorized shares of the Companys capital stock, par value $0.0001 per share, was increased to 121,000,000 shares, consisting of (i) 100,000,000 shares of Class A Common Stock, par value $0.0001 per share (the Class A Common Stock), (ii) 20,000,000 shares of Class B common stock, par value $0.0001 per share (the Class B Common Stock), and (iii) 1,000,000 shares of preferred stock, par value $0.0001 per share. As part of the consideration to effect the Companys initial business combination, the Company issued 2,000,000 shares of Class B Common Stock to the Pogo Royalty. Immediately upon the Closing, Pogo Royalty exercised an exchange right it held and received 200,000 shares of Class A Common Stock. During the year ended December 31, 2024, Pogo Royalty exercised its right to exchange 1,300,000 shares of Class B units of OpCo for 1,300,000 shares of Class A Common Stock. As a result of the exchange, a total of $8,801,000 was reclassified from noncontrolling interest to additional paid in capital. As discussed in Note 3, on February 10, 2025, the Company ente …

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NOTE 12 SUBSEQUENT EVENTS On February 16, 2026, the board of directors approved RSUs in the aggregate amount of 225,000 to the non-employee directors of the Company, which vest immediately, RSUs in the aggregate amount of 225,000 to the executive officers of the Company, which vest: (i) 1/3 immediately, (ii) 1/3 on November 15, 2027, and (iii) 1/3 on November 15, 2028. In addition, the board of directors approved RSUs in the aggregate amount of 120,000 to various employees of the Company, which vest: (i) 1/3 on each December 16, 2026, 2027 and 2028, respectively. On March 18, 2026, the board of directors approved RSUs in the aggregate amount of 245,902 to two non-employee directors of the Company, an aggregate of 122,951 options to purchase Class A common stock at an exercise price of $0.61 per share for a period of 10 years to one non-employee director of the Company, which all vest on November 15, 2026. The board of directors also approved options to purchase Class A common stock at an exercise price of $0.61 per share for a period of 10 years in the aggregate amount of 743,853 to the executive officers of the Company, which vest: 1/3 on November 15, 2026, 2027, and 2028. In addition, the board of directors approved options with the same terms as those to officers in the aggregate amount of 275,000 to various employees of the Company, which vest: 1/3 on each November 15, 2026, 2027 and 2028, respectively. The board of directors also approved issuance of 100,000 RSUs which h …

SubsequentEventsTextBlock · excerpt; the full note is in the filing