| Restatement of Comparative Financial Statement |
Note 3 – Restatement of Comparative Financial Statements The Company restated its condensed consolidated financial statements for the three months ended March 31, 2024 (the “first quarter 2024 financial statements”) to correct the accounting treatment for debt issuance costs incurred in connection with the Company’s unregistered bond offerings and capitalized interest. Debt issuance costs were previously expensed immediately and interest costs were not capitalized. The Company corrected these errors in the comparative periods of these condensed consolidated financial statements as of and for the three months ended March 31, 2025, such that debt issuance costs associated with the Company unregistered bond offerings are deferred and amortized over the weighted average debt term using the effective interest method. Further, interest incurred on expenditures made in connection with the Company’s exploration and development projects not currently subject to depletion are capitalized and subsequently depleted in the same manner as the underlying assets. The effects of the changes on the first quarter 2024 financial state m ents are summarized below. Description of Misstatements The Company identified the following misstatements in the first quarter 2024 financial statements: . The Company had previously immediately expensed debt issuance costs related to its unregistered bond offerings rather than capitalizing and amortizing them over the weighted-average term of the bonds, which resulted in overstated advertising and marketing expense, selling, general, and administrative expense, and payroll and payroll-related expense, and understated interest expense and loss on debt extinguishment on the condensed consolidated statement of operations for the three months ended March 31, 2024. . The Company had previously expensed all interest costs, rather than capitalizing interest incurred on expenditures made in connection with the Company’s exploration and development projects as permitted under ASC 835-20, Capital ize d Interest. This resulted in overstated interest expense on the condensed consolidated statement of operations for the three months ended March 31, 2024. The following tables present a reconciliation from the figures as previously reported to the restated amounts for the Company’s condensed consolidated statement of operations, statement of cash flows, and statement of changes in deficit for the three months ended March 31, 2024. Corrected Condensed Consolidated Statement of Operations
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Three Months Ended March 31, 2024 |
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Debt Issuance,
Capitalized
Interest and
Other
Corrections |
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|
Depreciation, depletion, amortization, and accretion |
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$ |
13,368 |
|
|
$ |
37 |
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|
$ |
13,405 |
|
Advertising and marketing |
|
|
8,355 |
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|
|
(8,338 |
) |
|
|
17 |
|
Selling, general, and administrative |
|
|
7,014 |
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|
|
(1,764 |
) |
|
|
5,250 |
|
Payroll and payroll-related |
|
|
6,892 |
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|
|
(2,067 |
) |
|
|
4,825 |
|
Total operating expenses |
|
|
44,175 |
|
|
|
(12,132 |
) |
|
|
32,043 |
|
Income (loss) from operations |
|
|
(3,495 |
) |
|
|
12,132 |
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|
|
8,637 |
|
Interest expense, net |
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(15,217 |
) |
|
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(1,704 |
) |
|
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(16,921 |
) |
Loss on debt extinguishment |
|
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— |
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(76 |
) |
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(76 |
) |
Total other expenses |
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(15,262 |
) |
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(1,780 |
) |
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(17,042 |
) |
Net loss |
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(18,757 |
) |
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10,352 |
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(8,405 |
) | Corrected Condensed Consolidated St ate ment of Changes in Deficit
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Three Months Ended March 31, 2024 |
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|
|
Debt Issuance,
Capitalized
Interest and
Other
Corrections |
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|
|
Balance, January 1, 2024 |
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$ |
(41,261 |
) |
|
$ |
36,427 |
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|
$ |
(4,834 |
) |
Contributions |
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|
325 |
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— |
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|
325 |
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Net loss |
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(18,757 |
) |
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10,352 |
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(8,405 |
) |
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Balance, March 31, 2024 |
|
$ |
(59,693 |
) |
|
$ |
46,779 |
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|
$ |
(12,914 |
) |
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| Corrected Condensed Consolidated Statement of Cash Flows
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Three Months Ended March 31, 2024 |
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Debt Issuance,
Capitalized
Interest and
Other
Corrections |
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Net loss |
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$ |
(18,757 |
) |
|
$ |
10,352 |
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$ |
(8,405 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation, depletion, amortization, and accretion |
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13,368 |
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37 |
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13,405 |
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Amortization of debt discount and debt issuance costs |
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133 |
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3,806 |
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3,939 |
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Loss on sale of assets |
|
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— |
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|
564 |
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|
564 |
|
Loss on debt extinguishment |
|
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— |
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|
76 |
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|
|
76 |
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Other |
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(1,510 |
) |
|
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(157 |
) |
|
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(1,667 |
) |
Net cash provided by (used in) operating activities |
|
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(3,430 |
) |
|
|
14,678 |
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|
|
11,248 |
|
Additions to oil and gas properties and leases |
|
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(92,459 |
) |
|
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(2,249 |
) |
|
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(94,708 |
) |
Net cash used in investing activities |
|
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(86,314 |
) |
|
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(2,249 |
) |
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(88,563 |
) |
Payments of debt issuance costs |
|
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— |
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(12,012 |
) |
|
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(12,012 |
) |
Payments of deferred closings |
|
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(1,830 |
) |
|
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(417 |
) |
|
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(2,247 |
) |
Net cash provided by financing activities |
|
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86,780 |
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(12,429 |
) |
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74,351 |
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