9. SHAREHOLDERS’ EQUITY

As of June 30, 2026, and December 31, 2025, the Company had 245,000,000 common stock shares authorized.  In addition, as of June 30, 2026, and December 31, 2025, the Company had 5,000,000 authorized but unissued shares of preferred stock.

Equity Issuances

On March 10, 2026, the Company closed on an underwritten offering of 8,800,000 shares of common stock, at a price to the public of $1.00 per share generating $8.1 million net of underwriting discounts and offering expenses.

On January 22, 2025, the Company entered into an underwriting agreement for the offering of 4,871,400 shares of common stock, at a price to the public of $2.65 per share (such offering, the “Offering”).

The sale of 4,871,400 shares of common stock (including the full 635,400 over-allotment option) in connection with the Offering, closed on January 23, 2025. The Company generated approximately $11.9 million of net proceeds from the Offering, after deducting the underwriting discounts and commissions and offering costs payable by us, and plans to use such proceeds for the development of its acquisition in Montana, general corporate purposes, and working capital, or for other purposes that our board of directors, in their good faith, deems to be in the best interest of the Company. Additionally, management used $1.574 million from the over-allotment option exercise to purchase shares of common stock from Sage Road Capital, LLC (whose co-manager, Joshua L. Batchelor, was a then member of the Board of Directors of the Company) and its affiliates at a price equal to the public offering price of the Offering, less underwriting discounts, which sale took place in January 2025, as discussed below.

Related Party Share Repurchase

On January 27, 2025, the Company entered into a Share Repurchase Agreement with Banner Oil & Gas, LLC (“Banner”), Woodford Petroleum, LLC (“Woodford”), and Sage Road Energy II, LP, (“Sage Road”, and together with Banner and Woodford, the “Selling Stockholders”). In his capacity as co-Managing Partner of Sage Road Capital, LLC, which indirectly controls and manages certain funds which own a majority interest in Banner, Woodford and Sage Road, Joshua L. Batchelor, a then member of the Board of Directors of the Company, may be deemed to beneficially own the shares of common stock held by the Selling Stockholders.

Pursuant to the Share Repurchase Agreement, the Company, in a private transaction, outside of, and separate from the Company’s previously disclosed share repurchase program, on January 27, 2025, repurchased (a) 534,020 shares of common stock held by Banner, (b) 41,229 shares of common stock held by Woodford, and (c) 60,151 shares of common stock held by Sage Road, for an aggregate of $1.574 million or approximately $2.48 per share, which was the net price per share of the 4,871,400 shares of common stock sold in our underwritten public offering which closed on January 23, 2025, less underwriting discounts and commissions, and which represented an 8.2% premium to the closing sales price of the Company's common stock on January 27, 2025.

Committed Equity Facility

On October 9, 2025, the Company entered into a Common Stock Purchase Agreement and related Registration Rights Agreement with Roth Principal Investments, LLC ("Roth Principal"), providing a discretionary equity facility of up to $25.0 million. Beginning December 1, 2025, the Company may, at its option over 24 months from the date the resale registration  was declared effective and certain other conditions  were met, sell shares of common stock to Roth Principal at a price based on the Nasdaq volume weighted average prices during a specific pricing period, less a 2.5% discount, subject to pricing and ownership limits. Sales under the facility were initially limited to 7,123,382 shares, or 19.99% of the shares of common stock outstanding immediately prior to the Company's entry into the Common Stock Purchase Agreement (the "Exchange Cap"), absent shareholder approval or satisfaction of the Nasdaq pricing exemption. On May 8, 2026, the Company's stockholders approved the issuance of shares of common stock under the Common Stock Purchase Agreement in excess of the Exchange Cap for purposes of Nasdaq Listing Rule 5635(d), and the Exchange Cap no longer limits issuances under the facility. The facility remains subject to a 4.99% beneficial ownership limitation applicable to Roth Principal. As consideration, the Company paid a $25 thousand structuring fee, issued 223,141 shares of common stock as a partial commitment fee (valued at $270,000) (the "Stock Commitment Fee"), agreed to a $180 thousand cash commitment fee, and to reimburse legal fees. Proceeds, if any, are expected to be used for working capital and general corporate purposes.

During the six months ended June 30, 2026, the Company sold 8,548,382 shares under the Committed Equity Facility and generated $9.1 million in proceeds net of financing costs. As of June 30, 2026, the availability under the Committed Equity Facility is the lesser of $15.9 million or the issuance of 15,328,477 shares.

Stock Option Plans

The Company may grant stock options under its incentive plans covering shares of common stock to employees and directors of the Company. Stock options, when exercised, are settled through the payment of the exercise price in exchange for new shares of stock underlying the option. These awards typically expire ten years from the grant date. Compensation cost is recognized on a straight-line basis over the requisite service period of each award and is included in general and administrative expense. Forfeitures are recognized as they occur.

Option activity for the six months ended June 30, 2026 was as follows:

Options granted prior to 2026. The 16,500 options outstanding at  December 31, 2025 were granted in 2017 under the Company's 2012 Equity Plan and were fully vested as of that date. These options have a weighted-average exercise price of $10.00 and expire between August 2027 and November 2027, with a weighted-average remaining contractual term of 1.3 years at June 30, 2026. No options in this group were granted, exercised, forfeited or expired during the six months ended June 30, 2026 or 2025.  These options were outstanding and vested as of June 30, 2026 and June 30, 2025. No stock-based compensation expense was recognized related to these options during the three or six months ended June 30, 2026 or 2025, and no unrecognized compensation cost remains.

March 4, 2026 grant. On March 4, 2026, the Company granted stock options to employees and directors to purchase 3,517,500 shares of common stock at an exercise price of $1.11 per share, expiring March 4, 2036. Of these options, approximately 1.38 million vest over ten months inclusive of March 2026, 1.50 million vest ratably over four years, beginning January 2, 2027, and 637,500 vest ratably over two years, beginning January 2, 2027.

The weighted-average grant-date fair value of these options was approximately $0.77 per option, or $2.7 million in the aggregate, as determined using the Black-Scholes option pricing model utilizing the following weighted-average assumptions.

Expected term ranged from 5.4 years to 6.9 years across the vesting groups described above.

Expected volatility was estimated based on the historical volatility of the Company's common stock over a lookback period deemed representative of the expected life of the options, taking into consideration the Company's historical trading data and significant corporate developments. The Company evaluated historical volatility using daily stock price data and considered the impact of changes in its business strategy and market conditions over the look-back period. Due to limited historical exercise data and changes in the Company's operations, management applied judgment in selecting an appropriate volatility assumption reflective of the expected term of the awards.

Activity for unvested options during the six months ended June 30, 2026 was as follows:

For the three and six months ended June 30, 2026, the Company recognized stock-based compensation of approximately $501 thousand and $696 thousand, respectively, related to the March 4, 2026 grants. No stock-based compensation expense related to stock options was recognized during the three or six months ended June 30, 2025. As of June 30, 2026, total unrecognized compensation cost related to these awards was approximately $2.0 million, which is expected to be recognized over a weighted-average period of 2.3 years.

Restricted Stock

The Company grants restricted stock under its incentive plans covering shares of common stock to employees and directors of the Company. All of the restricted stock awards are time-based awards and are amortized ratably from grant date over a requisite service period. Forfeitures of restricted stock awards are recognized as they occur. Restricted stock granted to employees is reduced by shares forfeited to pay withholding tax. Non-vested shares of restricted stock are not included in common shares outstanding until vesting has occurred.

The following table presents the changes in non-vested restricted stock awards to all employees and directors for the six months ended June 30, 2026:

For the three and six months ended June 30, 2026 and 2025, the Company recognized $0.4 million and $1.0 million, respectively of stock compensation expense related to restricted stock grants. Unrecognized compensation cost related to non-vested awards not yet recorded in the Company’s Condensed Consolidated Statements of Operations as of  June 30, 2026 was $0.7 million. This cost is expected to be recognized over a weighted average period of 1.1 years.

Share Repurchase Program

On January 29, 2025, the Board of Directors of the Company authorized and approved an extension of the ongoing share repurchase program for up to $5.0 million of the outstanding shares of the Company’s common stock originally approved by the Board of Directors on April 26, 2023, and subsequently extended. The share repurchase program expired on June 30, 2026, but may be reauthorized at the discretion of the Board of Directors.

Under the stock repurchase program, shares are repurchased from time to time in the open market or through negotiated transactions at prevailing market prices, or by other means in accordance with federal securities laws. Repurchases are made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. The repurchase program is funded using the Company’s working capital. The repurchased shares are cancelled and therefore will not be held in treasury or reissued.

The following table presents the activity in the share repurchase program for the three and six months ended June 30, 2026 and 2025: