Financial Analysis

NOTE 3 BUSINESS COMBINATION The Company entered into that certain Amended and Restated Membership Interest Purchase Agreement, dated as of August 28, 2023 (as amended, the MIPA), by and among HNRA, HNRA Upstream, LLC, a newly formed Delaware limited liability company which is managed by, and is a subsidiary of, HNRA (OpCo), and HNRA Partner, Inc., a newly formed Delaware corporation and wholly owned subsidiary of OpCo (SPAC Subsidiary, and together with the Company and OpCo, Buyer and each a Buyer), CIC EON LP, a Delaware limited partnership (CIC), DenCo Resources, LLC, a Texas limited liability company (DenCo), EON Resources Management, LLC, a Texas limited liability company (EON Management), 4400 Holdings, LLC, a Texas limited liability company (4400 and, together with CIC, DenCo and EON Management, collectively, Seller and each a Seller), and, solely with respect to Section 6.20 of the MIPA, the Sponsor. On November 15, 2023 (the Closing Date), as contemplated by the MIPA: HNRA filed a Second Amended and Restated Certificate of Incorporation (the Second A&R Charter) with the Secretary of State of the State of Delaware, pursuant to which the number of authorized shares of HNRAs 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 St …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

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 …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 8 FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of the Companys 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 …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

NOTE 11 INCOME TAXES As of December 31, 2024 and 2023, the Companys net deferred tax assets were as follows: December 31, 2024 December 31, 2023 Deferred tax assets Federal net operating loss $ 1,913,959 $ 454,225 Transaction costs 1,515,401 1,441,904 Other debt costs - 885,890 Accrued expenses 1,202,259 - Deferred compensation 446,113 - Derivative liability 228,732 - Stock-based compensation 648,697 268,405 Other 45,322 3,611 Total deferred tax assets 6,000,483 3,054,035 Deferred tax liabilities Oil and natural gas properties (8,665,914 ) (9,097,162 ) Unrealized gain on derivatives (27,302 ) (120,013 ) Total deferred tax assets (8,693,216 ) (9,217,175 ) Net deferred tax liabilities (2,692,733 ) (6,163,140 ) Valuation allowance for deferred tax assets - - Net Deferred tax liability, net of allowance $ (2,692,733 ) $ (6,163,140 ) The income tax provision consists of the following: For the period from For the Year Ended December 31, 2024 November 15, 2023 to December 31, 2023 Current income tax (benefit) expense Federal $ - $ (22,007 ) State - - Total current income tax benefit - (22,007 ) Deferred tax (benefit) expense: Federal (2,840,051 ) (1,467,862 ) State (630,356 ) (325,795 ) Valuation allowance - (571,975 ) Total deferred income tax (benefit) expense (3,470,407 ) (2,365,632 ) Total income tax (benefit) expense $ (3,470,407 ) $ (2,387,639 ) As of December 31, 2024, the Company had $7,458,627 of estimated U.S. federal net operating loss carryovers, which do not expire, and …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 5LONG-TERM DEBT AND NOTES PAYABLE The Companys debt instruments are as follows: December 31, 2024 December 31, 2023 Senior Secured Term Loan $ 23,696,417 $ 27,680,703 Seller Promissory Note 15,000,000 15,000,000 Merchant Cash Advances 948,982 - Convertible Notes Payable at fair value 891,364 - Private loans 3,556,750 3,469,500 Total 44,093,513 46,150,203 Less: unamortized financing cost (834,854 ) (2,147,346 ) Less: current portion including amortization (9,080,910 ) (6,516,651 ) Long-term debt, net of current portion $ 34,177,749 $ 37,486,206 Senior Secured Term Loan Agreement In connection with the Closing, HNRA (for purposes of the Loan Agreement, the Borrower) and First International Bank & Trust (FIBT or Lender), OpCo, SPAC Subsidiary, EON, and 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 Date, (c) pay fees and expenses in connection with the purchase and the closing …

LongTermDebtTextBlock · excerpt; the full note is in the filing

Recent Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures , which adds new disclosure requirements related to significant segment expenses regularly provided to the chief operating decision maker (CODM) and included in each reported measure of segment profit or loss, other segment items that constitute the difference between segment revenues less significant segment expenses and the measure of profit or loss, disclosure of the CODMs title and position as well as an explanation of how the CODM uses the reported measures and expanded interim disclosures. ASU 2023-07 is effective for financial statements for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company has implemented this ASU during the year ended December 31, 2024, and determined no retrospective changes were necessary. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures . Under this ASU, entities must disclose, on an annual basis, specific 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 …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

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, 2024 and 2023, the Company owes $403,000 and $762,000 of the fee, respectively. During the fiscal year ended December 31, 2021, the Company and Dante Carravagio 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). Th …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation On November 15, 2023 (the Closing Date), the Company consummated a business combination which resulted in the acquisition of Pogo Resources, LLC, a Texas limited liability Company (Pogo or Pogo Resources) and its subsidiary LH Operating, LLC, a Texas limited liability company (LHO, and collectively, the EON Business) (the Acquisition). The Company was deemed the accounting acquirer in the Acquisition based on an analysis of the criteria outlined in Accounting Standards Codification (ASC) 805, Business Combinations, and the EON Business was deemed to be the Predecessor entity. Accordingly, the historical consolidated financial statements of the EON Business became the historical financial statements of the Companys upon consummation of the Acquisition. As a result, the financial statements included in this report reflect (i) the historical operating results of EON Business prior to the Acquisition (Predecessor) and (ii) the combined results of the companies, including EON Business following the closing of the Acquisition (Successor). The accompanying financial statements include a Predecessor period, which was the period January 1, 2023 through November 14, 2023, concurrent with completion of the Acquisition and Successor period from November 15, 2023 through December 31, 2023. As a result of the Acquisition, the results of operations, financial position and cash flows of the Predecessor and Successor may …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

NOTE 7 STOCKHOLDERS EQUITY As of December 31, 2024, there were 10,323,205 Class A common shares and 500,000 Class B common shares outstanding. On November 15, 2023, as contemplated by the MIPA, HNRA filed the Second A&R Charter with the Secretary of State of the State of Delaware, pursuant to which the number of authorized shares of HNRAs 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 Closing on November 15, 2023, all previously issued and outstanding shares of HNRA common stock were converted into Class A common shares. Prior to the Closing, there were 3,006,250 shares of non-redeemable common stock and 4,509,403 shares of redeemable common stock outstanding. In connection with the Business Combination, holders of 3,323,707 shares of common stock properly exercised their right to have their public shares redeemed for a pro rata portion of the Trust Account. The holders received $36,383,179 of cash proceeds from the Trust Account. As part of the consideration to effect the Acquisition, the Company issued 2,000,000 Class B common shares to the Sellers. Immediately upon the Closing, Pogo Royalty exercised the OpCo Exchange Right as i …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 12 SUBSEQUENT EVENTS The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated financial statements were issued. On January 10, 2025, the Company issued a total of 60,500 Class A common shares to a consultant pursuant to the terms of the consulting agreement described in Note 8, including 43,800 owed as of December 31, 2024. On January 13, 2025, the Company entered into a settlement agreement with its former President, Donald Orr, whereby the Company agreed to pay Mr Orr. $75,000 in cash and issue 200,000 class A common shares for the termination of his prior consulting agreement. On January 14, 2025, the Company entered into an agreement with a consultant whereby the Company agreed to issue the consultant 45,050 Class A common shares for the settlement of $45,050 in outstanding services. On February 10, 2025, the Company entered into a Purchase, Sale, Termination and Exchange Agreement (the Agreement), by and among the Company, OpCo, SPAC Subsidiary, HNRA Royalties, Pogo Royalty, CIC, DenCo, EON Management, and 4400. The closing of the transactions contemplated by the Agreement (the Closing) is subject to the satisfaction of various conditions, including the Company obtaining financing. Pursuant to the Agreement, the Company agreed to purchase the ORRI from Pogo Royalty for $14,000,000, payable in cash at the Closing. In addition, at the Closing, Pogo Royalty agreed to waive all outstanding i …

SubsequentEventsTextBlock · excerpt; the full note is in the filing