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Cyber App Corp.

11/19/2024 | Press release | Distributed by Public on 11/19/2024 15:37

Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

10-Q

ROC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 333-254676

CYBER APP SOLUTIONS CORP.

(Exact Name of Registrant as Specified in its Charter)


Nevada	98-1585090
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2000 Bering Drive Suite 875 Houston, Texas	77057
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (725) 231-1001

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

CYRB

OTC Pink Open Markets

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of November 15, 2024, the registrant had 95,819,047 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Changes in Stockholders' Deficit	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION	30

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures	34

PART I-FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

Cyber App Solutions Corp.

Condensed Consolidated Balance Sheets

(Unaudited)


	September 30, 2024			December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	1,819,650			$	1,248,191
Related party note receivable		25,000				25,000
Prepaid expenses and other current assets		522,775				502,330
Total current assets		2,367,425				1,775,521
Property, plant and equipment
Helium and CO2 properties, net (full cost method)		12,409,719				12,348,505
Other property, plant and equipment, net		1,790,761				1,854,496
Total property, plant and equipment, net		14,200,480				14,203,001
Other non-current assets
Right-of-use assets - operating leases		905,739				1,023,497
Other long-term assets		8,984				192,103
Total assets	$	17,482,628			$	17,194,122
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable	$	2,021,420			$	1,698,364
Notes payable, fair value option		18,981,437				20,082,880
Interest expense payable		113,072				146,667
Derivative liabilities		2,998,255				2,882,692
Short-term loan		335,000				-
Accrued expenses and other current liabilities		959,700				542,623
Operating lease liabilities - current		194,560				161,524
Total current liabilities		25,603,444				25,514,750
Long-term liabilities
Asset retirement obligations		793,190				758,373
Operating lease liabilities		714,011				865,113
Total long-term liabilities		1,507,201				1,623,486
Total liabilities		27,110,645				27,138,236
Commitments and contingencies (Note 17)
Mezzanine equity
Series A convertible preferred stock, $0.001 par value, 80,000 and 0 shares designated at September 30, 2024 and December 31, 2023, respectively; 8,000 and 0 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		7,465,826				-
Stockholders' deficit
Common Stock, $0.001 par value, 200,000,000 and 250,000,000 shares authorized as of September 30, 2024 and December 31, 2023, respectively; 84,119,047 shares and 80,744,354 shares issued and outstanding as of September 30,2024 and December 31, 2023, respectively		84,116				80,744
Additional paid-in capital		44,266,920				34,238,016
Accumulated deficit		(61,444,879	)			(44,262,874	)
Total stockholders' deficit		(17,093,843	)			(9,944,114	)
Total liabilities, convertible preferred stock and stockholders' deficit	$	17,482,628			$	17,194,122

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cyber App Solutions Corp.

Condensed Consolidated Statements of Operations

(Unaudited)


	For the Three Months Ended			For the Nine Months Ended
	September 30,			September 30,
	2024			2023			2024		2023
Helium revenue	$	-			$	121,958		$	418,042		$	121,958

Operating expenses
Depreciation, depletion, amortization and accretion		33,025				56,832			184,119			83,742
Lease and well operating expenses		42,422				45,333			145,862			98,210
Shut-in expenses		51,684				10,880			155,049			145,513
Gathering and processing expenses		150,000				250,712			666,685			400,712
Production taxes		-				5,240			14,368			5,240
General and administrative expenses		1,318,454				927,311			4,018,329			2,238,060
General and administrative expenses - related parties		110,000				-			140,000			37,500
Total operating expenses		1,705,585				1,296,308			5,324,412			3,008,977
Net loss from operations		(1,705,585	)			(1,174,350	)		(4,906,370	)		(2,887,019	)
Other income (expense)
Interest expense		(723,299	)			(850,867	)		(2,255,081	)		(1,929,501	)
Event of default fees		(767,680	)			(1,987,387	)		(2,301,440	)		(5,875,111	)
Other income (expense), net		-				(24,755	)		6,363			(24,747	)
Notes payable modification costs		(9,157,801	)			-			(9,157,801	)		-
Unrealized gain (loss) on fair value of notes payable		(1,171,298	)			-			897,549			-
Unrealized gain on derivatives mark-to-market		427,001				-			534,775			185,011
Total other expense		(11,393,077	)			(2,863,009	)		(12,275,635	)		(7,644,348	)
Net loss before taxes		(13,098,662	)			(4,037,359	)		(17,182,005	)		(10,531,367	)
Income tax expense		-				-			-			-
Net loss		(13,098,662	)			(4,037,359	)		(17,182,005	)		(10,531,367	)
Series A Preferred Stock dividends paid-in-kind		116,164				-			116,164			-
Net loss attributable to shareholders	$	(13,214,826	)		$	(4,037,359	)	$	(17,298,169	)	$	(10,531,367	)

Loss per common share
Basic and Diluted	$	(0.16	)		$	(0.05	)	$	(0.21	)	$	(0.15	)

Weighted Average Number of Common Shares Outstanding:
Basic and Diluted		81,577,661				74,222,435			81,114,579			69,630,617

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cyber App Solutions Corp.

Condensed Consolidated Statements of Changes in Stockholders' Deficit

(Unaudited)



	Common Stock			Additional			Accumulated		Total
	Shares			Amount			Paid-In Capital		Deficit		Stockholders' Deficit

December 31, 2022		65,828,862			$	65,829		$	21,885,539		$	(32,515,471	)	$	(10,564,103	)
Capital contributions		1,949,226				1,949			648,051			-			650,000
Equity financing costs		(77,969	)			(78	)		(25,922	)		-			(26,000	)
Net loss		-				-			-			(3,336,924	)		(3,336,924	)
March 31, 2023		67,700,119			$	67,700		$	22,507,668		$	(35,852,395	)	$	(13,277,027	)
Capital contributions		299,881				300			99,700			-			100,000
Net loss		-				-			-			(3,157,084	)		(3,157,084	)
June 30, 2023		68,000,000			$	68,000		$	22,607,368		$	(39,009,479	)	$	(16,334,111	)
Issuance of common stock		3,844,800				3,845			4,802,155			-			4,806,000
Reverse asset acquisition, net of transaction costs		4,010,000				4,010			(71,560	)				(67,550	)
Net loss		-				-			-			(4,037,359	)		(4,037,359	)
September 30, 2023		75,854,800			$	75,855		$	27,337,963		$	(43,046,838	)	$	(15,633,020	)



	Common Stock		Additional			Accumulated		Total
	Shares		Amount			Paid-In Capital		Deficit		Stockholders' Deficit

December 31, 2023		80,744,354		$	80,744		$	34,238,016		$	(44,262,874	)	$	(9,944,114	)
Stock compensation expense		2,424			-			3,030			-			3,030
Issuance of common stock for cash		150,087			150			187,459			-			187,609
Net loss		-			-			-			(2,311,761	)		(2,311,761	)
March 31, 2024		80,896,865		$	80,894		$	34,428,505		$	(46,574,635	)	$	(12,065,236	)
Issuance of common stock for cash		177,977			178			549,822			-			550,000
Net loss		-			-			-			(1,771,582	)		(1,771,582	)
June 30, 2024		81,074,842		$	81,072		$	34,978,327		$	(48,346,217	)	$	(13,286,818	)
Issuance of common stock for cash		80,899			81			249,919			-			250,000
Issuance of common stock for Notes payable modification		2,963,306			2,963			9,154,838					9,157,801
Net loss		-			-			-			(13,098,662	)		(13,098,662	)
Series A convertible preferred stock dividends paid-in-kind		-			-			(116,164	)		-			(116,164	)
September 30, 2024		84,119,047		$	84,116		$	44,266,920		$	(61,444,879	)	$	(17,093,843	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cyber App Solutions Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the Nine Months Ended
	September 30,
	2024			2023
Cash Flows From Operating Activities
Net loss	$	(17,182,005	)		$	(10,531,367	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion, amortization and accretion		184,119				83,742
Amortization of debt discount		-				92,502
Stock compensation expense		3,030				-
Non-cash interest expense		-				1,837,000
Event of default fees		-				5,875,111
Amortization of lease costs		304,823				141,981
Amortization of intangible costs		22,471				22,471
Write-off acquired assets and liabilities		-				918
Notes payable modification costs		9,157,801				-
Unrealized gain on fair value of notes payable		(897,549	)			-
Unrealized gain on derivatives mark-to-market		(534,775	)			(185,011	)
Changes in operating assets and liabilities:
Prepaids and other current assets		(37,922	)			(25,158	)
Other long-term assets		178,125				(178,126	)
Accounts payable		356,570				560,433
Accrued expenses and other liabilities		531,419				(20,491	)
Lease liabilities		(305,132	)			(145,823	)
Interest expense payable		(33,595	)			-
Net cash used in operating activities		(8,252,620	)			(2,471,818	)

Cash Flows From Investing Activities
Additions to helium properties		(145,607	)			-
Additions to other property, plant and equipment		(64,029	)			(727,719	)
Cash acquired from reverse asset acquisition		-				23,837
Net cash used in investing activities		(209,636	)			(703,882	)

Cash Flows From Financing Activities
Proceeds from notes payable and short-term loans		-				730,000
Payments on notes payable		(203,894	)			(3,000,000	)
Proceeds from capital contributions		-				750,000
Proceeds from short-term loans		250,000				-
Equity issuance costs		-				(26,000	)
Debt issuance costs		-				(97,000	)
Common stock issuance proceeds		987,609				4,806,000
Series A convertible preferred stock issuance proceeds		8,000,000				-
Net cash provided by financing activities		9,033,715				3,163,000
Net increase (decrease) in cash and cash equivalents		571,459				(12,700	)

Cash and cash equivalents, beginning of period		1,248,191				124,489
Cash and cash equivalents, end of period	$	1,819,650			$	111,789

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cyber App Solutions Corp.

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)


	For the Nine Months Ended
	September 30,
	2024			2023
Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$	2,206,175			$	-
Cash paid for taxes	$	-			$	-

Non-cash Investing and Financing Activities
Issued short-term loan to paydown on Alpha Carta notes	$	-			$	2,000,000
Change in capital accruals	$	(62,854	)		$	1,172,433
Lease liability obtained through right-of-use asset	$	-			$	960,201
Accrued Series A convertible preferred stock dividends paid-in-kind	$	116,164			$	-
Fair value of Series A convertible preferred stock conversion options	$	650,338			$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cyber App Solutions Corp.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 - Organization and General Business Information

CYBER APP SOLUTIONS CORP. (the "Company" or "CYRB") is a corporation established under the corporation laws in the State of Nevada on February 19, 2021. The Company's corporate office is in Houston, Texas.

The Company is focused on the acquisition, exploration, development and production of helium and beverage grade carbon dioxide ("CO2") and we have CO2reservoirs that are capable of storing captured CO2. The Company's assets are concentrated in the St. Johns Field located in Apache County, Arizona of the United States (the "St. Johns Field").

Note 2 - Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented. Certain information in footnote disclosures normally included in financial statements prepared in accordance with GAAP has been condensed or omitted pursuant to the rules of the SEC and the accounting standards for interim financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 2023, filed on April 2, 2024.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

Principles of Consolidation

The accompanying financial statements are consolidated and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Segment Information

The Company has onereportable operating segment. The Company has identified its Chief Executive Officer as its chief operating decision maker, who evaluates the operations of the Company using consolidated information for purposes of allocating resources and assessing performance.

Recently Issued Accounting Pronouncements

In March 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-02, "Codification Improvements." The ASU removes references to various FASB Concepts Statements in a variety of Topics in the Accounting Standards Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance. ASU 2024-02 will be effective for annual periods beginning after December 15, 2024, and although permitted, the Company does not intend to early adopt.

In March 2024, the SEC adopted final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rules will require public entities to provide certain climate-related information in their annual reports and registration statements. The rules will be effective for non-accelerated filers commencing with the fiscal period beginning January 1, 2027. In April 2024, the SEC voluntarily issued an administrative stay of the implementation of the rules, pending judicial review. The Company will evaluate the impact of the final rules on its consolidated financial statements and disclosures.

In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 820)," which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendment prescribes interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. The ASU is effective for public companies with annual periods beginning after December 15, 2023, and interim periods within fiscals years beginning after December 15, 2024. CYRB is currently evaluating the impact of the standard on its segment reporting disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" (ASU 2023-09). ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning after December 15, 2024, and although permitted, the Company does not intend to early adopt. CYRB is continuing to evaluate the provisions of ASU 2023-09 and does not anticipate a material impact on its consolidated financial statements and related disclosures upon adoption.

Note 3 - Liquidity

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company's development activities require it to make significant operating and capital expenditures. Its primary sources of liquidity have been through the issuance of debt and equity. The primary uses of cash have been for the St. Johns Field Acquisition, development of the St. Johns Field, commencing production, helium processing plant installation, general and administrative expenses, debt service costs, and paydown of debt.

The Company's helium processing plant in the St. Johns Field has not reached "steady state" production. CYRB has encountered significant difficulties to date at the helium processing plant because of mechanical issues and design limitations, resulting in inefficient operations and lower helium recovery rates, which has limited its revenues generated and led to recurring losses incurred. The Company has idled its helium processing plant.

The Company has a history of recurring losses from operations and had a working capital deficit as of September 30, 2024 and December 31, 2023. We have no committed capital to address our material liquidity needs over the next twelve months from the date of these condensed consolidated financial statements being issued and there is no assurance that the Company will raise the capital required. Additionally, the Company has no assurance of future profitability. These matters raise substantial doubt about our ability to continue as a going concern for a period of one year after the date that these condensed consolidated financial statements are issued. The condensed consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.

Note 4 - Revenue Recognition

Revenues from Contracts with Customers

Helium and CO2sales are recognized at the point title and control of the product is transferred to the customer, which will differ depending on the terms of each contract. Transfer of title and control drives the presentation of gathering, processing and other post-production expenses within the Company's Condensed Consolidated Statement of Operations.

For those contracts where the Company has concluded that control of the product transfers at the tailgate of the plant, the Company recognizes revenue on a gross basis, with gathering, processing and other post-production expenses presented within the Gathering and processing expenses line item on the Company's Condensed Consolidated Statements of Operations. Expenses and fees incurred after title and control transfers are netted against revenues. Alternatively, for those contracts where the Company has concluded that title and control of the product transfers at or near the wellhead or inlet of the plant, the Company recognizes helium and CO2revenues net of gathering, processing and other post-production expenses.

Performance Obligations

The Company's contractual performance obligations arise upon the production of gas from wells in which the Company has an ownership interest. The performance obligations are considered satisfied upon control of helium being transferred to the customer(s) at the dedicated delivery point, which in the Company's current contract is the tailgate of the plant. The Company records revenue in the month production is delivered to the customer. Payment is unconditional once the performance obligations have been satisfied. At this time, the volume and price can be reasonably estimated and amounts due from customers are accrued in Accounts receivable, net in the Condensed Consolidated Balance Sheets. As of September 30, 2024 and December 31, 2023, there was no receivable accrued.

Disaggregated Revenue Information

For the three and nine months ended September 30, 2024, all of the Company's revenue was from helium sales at the St. Johns Field.

Note 5 - Property, Plant and Equipment, Net

Property and equipment, net is comprised of the following:


	September 30, 2024			December 31, 2023
Land	$	259,793			$	259,793
Unproved helium and CO2 properties		10,184,112				10,055,182
Proved helium and CO2 properties		2,117,359				2,099,508
Less: accumulated depletion		(151,545	)			(65,978	)
Total helium and CO2 properties, net		12,409,719				12,348,505

Plant		1,863,901				1,863,900
Other property and equipment		51,908				51,908
Less: accumulated depreciation		(125,048	)			(61,312	)
Total other property, plant and equipment, net		1,790,761				1,854,496

Total property, plant and equipment, net	$	14,200,480			$	14,203,001

Helium and CO2Properties

As the Company's development work progresses and the reserves on the Company's properties are proven, capitalized costs attributed to the properties and mineral interest are subject to depletion. Depletion of capitalized costs is provided using the units-of-production method based on proved helium and CO2reserves. Depletion expense for the three months ended September 30, 2024 and 2023 was $0and $24,576, respectively, and for the nine months ended September 30, 2024 and 2023was $85,566and $24,576, respectively.

These capitalized costs are subject to a ceiling test that limits such pooled costs, net of applicable deferred taxes, to the aggregate of the present value of future net revenues attributable to proved helium and CO2reserves discounted at 10%. Any costs in excess of the ceiling are written off as a non-cash expense.The Company did not record an impairment to proved helium and CO2properties during the three and nine months ended September 30, 2024 and 2023.

Costs associated with unproved properties are excluded from the amortization base until the properties are evaluated or impairment is indicated. The costs associated with unproved leasehold acreage and related seismic data, are initially excluded from the amortization base. Leasehold costs are either transferred to the amortization base with the costs of drilling and/or completing a well on the lease or are assessed at least annually for possible impairment or reduction in value. The Company's decision to withhold costs from amortization and the timing of the transfer of those costs into the amortization base involves judgment and may be subject to changes over time based on several factors, including drilling plans, availability of capital, project economics and drilling results from adjacent acreage. The Company did not record an impairment to unproved helium and CO2properties during the three or nine months ended September 30, 2024 or 2023.

Other Property, Plant and Equipment

The Company's other property, plant and equipment include a vehicle and its helium processing plant costs. The vehicle is depreciated using the straight-line method over an estimated useful life of 5years and the helium processing plant is depreciated using the straight-line method over an estimated useful life of 25years. The Company recorded depreciation expense on vehicles during the three months ended September 30, 2024 and 2023, of $2,605, and during the nine months ended September 30, 2024 and 2023of $7,816. The Company recorded depreciation expense on the helium plant during thethree months ended September 30, 2024 and 2023of $18,640and $18,555, respectively, and during the nine months ended September 30, 2024 and 2023of $55,920and $18,555, respectively.

Note 6 - Fair Value Measurements

Financial Instruments

The Company's financial instruments measured at fair value on a recurring basis consist of notes payable where the fair value option was elected, freestanding warrants and embedded conversion options that required to be bifurcated and accounted for separately as

derivative financial instruments. The table below sets forth the financial instruments measured at fair value on a recurring basis, by level within the fair value hierarchy, as of September 30, 2024 and December 31, 2023.


	September 30, 2024
	Level 1		Level 2			Level 3		Total
Notes Payable, Fair Value Option
Convertible notes issued to Kips Bay Select, LP and Cyber One, Ltd. in November 2023	$	-		$	-		$	18,981,437	$	18,981,437
Total Notes Payable, Fair Value Option	$	-		$	-		$	18,981,437	$	18,981,437

Derivative Liabilities
Warrants	$	-		$	-		$	2,490,562	$	2,490,562
Series A convertible preferred stock conversion options		-			-			507,693		507,693
Total Derivative Liabilities	$	-		$	-		$	2,998,255	$	2,998,255


	December 31, 2023
	Level 1		Level 2			Level 3		Total
Notes Payable, Fair Value Option
Convertible notes issued to Kips Bay Select, LP and Cyber One, Ltd. in November 2023	$	-		$	-		$	20,082,880	$	20,082,880
Total Notes Payable, Fair Value Option	$	-		$	-		$	20,082,880	$	20,082,880

Derivative Liabilities
Warrants	$	-		$	-		$	2,882,692	$	2,882,692
Total Derivative Liabilities	$	-		$	-		$	2,882,692	$	2,882,692

As of September 30, 2024, the carrying value of the convertible notes issued to Kips Bay Select, LP and Cyber One, Ltd. in November 2023 was approximately $21,000,000.

As of September 30, 2024 and December 31, 2023, the Company used the Monte Carlo simulation to estimate the fair value of the notes payable and the Series A convertible preferred stock and the Black-Scholes-Merton model to estimate the fair value of the warrants, which both included assumptions such as risk-free rate, volatility, and expected term. After determining the fair value of the notes payable and warrants, the Company implemented the probability-weighted expected return method ("PWERM"), which considered the probability of success and failure of the Company. Changes in any of the assumptions used in the valuation models may result in significantly higher or lower fair value measurements. The following assumptions were used to fair value the notes payable and warrants:


	September 30, 2024	December 31, 2023
	Notes Payable	Warrants	Series A Preferred Stock conversion options	Notes Payable	Warrants
Expected volatility	36.00%	59.00%	30.00%	34.00%	77.00%
Risk-free interest rate	4.72%	3.55%	3.67%	5.14%	3.81%
Dividend yield	-	-	-	-	-
Term (years)	0.21	4.14	1.85	0.55	4.89
Success probability	15.00%	15.00%	n/a	15.00%	15.00%

A reconciliation of the Company's Level 3 balance is as follows:


Level 3 Balance at December 31, 2023	$	22,965,572
Add: Series A convertible preferred stock conversion options		650,338
Unrealized gain recognized in earnings		(1,432,324	)
Settlements		(203,894	)
Level 3 Balance at September 30, 2024	$	21,979,692

For the three months ended September 30, 2024 and 2023, there was an unrealized loss of $744,297and $0, respectively, and for the nine months ended September 30, 2024 and 2023, there was an unrealized gain of $1,432,324and an unrealized gain of $185,011,

respectively, on the aggregate effect of the mark-to-market of the derivatives and change in fair value of the notes payable. These effects are recorded in the accompanying Condensed Consolidated Statement of Operations.

The Company separates interest expense from the full change in fair value of the notes payable and presents that amount in "Interest expense" in the accompanying Condensed Consolidated Statement of Operations. The remainder of the change in fair value of the notes payable are presented in "Unrealized gain (loss) on fair value of notes payable" in the accompanying Condensed Consolidated Statement of Operations.

The carrying amounts of the Company's cash, related party note receivable, accounts payable, and accrued expenses approximate their fair values because of the short-term maturities or liquid nature of these assets and liabilities.

Fair Value of Non-Financial Assets and Liabilities

Non-financial assets and liabilities that are initially measured at fair value are comprised of asset retirement obligations and stock-based compensation.

The Company did not add any asset retirement obligations during three and nine months ended September 30, 2024 and 2023.

The Company measures stock-based compensation based on the fair value of the award on the date of grant. During the nine months ended September 30, 2024, a member of the Company's Board of Directors elected to receive their first quarter 2024 compensation in the form of common stock of the Company The Company measured the total fair value of the award at $3,030based on the price per share the Company received when it sold common stock in private placements near the time of the compensation award. The expense was recorded to "General and administrative expenses" on the Company's Condensed Consolidated Statements of Operations.

On September 16, 2024, the Company issued 1,708,320shares of common stock to Kips Bay Select LP and 1,254,986shares of common stock to Cyber One LTD in connection with the forbearance and settlement agreement, as further detailed in Note 7 - Debt. The Company measured the total fair value of the award at $9,157,801based on the price per share the Company received when it sold common stock in private placements near the time of the issuance. The fair value of the these issuances were recorded to "Notes payable modification costs" in the Condensed Consolidated Statements of Operations.

Note 7 - Debt

Securities Purchase Agreement with Kips Bay Select LP and Cyber One LTD

On November 21, 2023, the Company entered into a Securities Purchase Agreement ("SPA") with Kips Bay Select LP and Cyber One, LTD, pursuant to which the Company agreed to issue and sell to each of Kips Bay Select LP and Cyber One, LTD, i) a convertible promissory note which will be convertible into shares of common stock (the "Conversion Shares") and (ii) a common stock purchase warrant (each a "Warrant" and collectively, the "Warrants") which will be exercisable to purchase shares of common stock (the "Warrant Shares).

Convertible Promissory Notes

On November 21, 2023, pursuant to the SPA, the Company issued a convertible promissory note to each of Kips Bay Select LP ("Kips Bay 2023 Note") and Cyber One, LTD ("Cyber One 2023 Note"), collectively referred to as the Holders, in the principal amount of $8,000,000to each for an aggregate principal amount of $16,000,000. The Kips Bay 2023 Note and the Cyber One 2023 Note are collectively referred to as the "2023 Convertible Notes". The 2023 Convertible Notes were issued with an original issue discount of 50% and bear simple interest accruing as of November 21, 2023, at the rate of 5% per annum or 18% per annum following any Event of Default (as defined in the SPA and 2023 Convertible Notes agreements). The interest shall be computed on the basis of a 360-day year and twelve 30-day months and shall not compound. The 2023 Convertible Notes had a maturity date of July 21, 2024 (the "Maturity Date").

The 2023 Convertible Notes were convertible (in whole or in part), at the option of the Holders, into such number of fully paid and non-assessable shares of common stock at a conversion price equal to the lower of(i) 70% of the lowest trading price of the common stock in the 15 trading days ending on the date of the delivery of the applicable conversion notice, and (ii) the Valuation Cap Price (defined as $250,000,000subject to reduction of 10% upon each occurrence of an event of default divided by the number of shares of Common Stock on a fully diluted basis). Notwithstanding the foregoing, at any time prior to the occurrence of an Event of Default, the conversion price shall not be less than a Floor Price (defined as $100,000,000 divided by the number of shares of common stock on a fully diluted basis immediately prior to giving effect to the applicable conversion).

Pursuant to the terms and conditions of the 2023 Convertible Notes, the Company was to repay the $16,000,000commencing on January

21, 2024 with $1,500,000due monthly and any remaining outstanding principal due on July 21, 2024. As of September 30, 2024, the Company had made no payments on the outstanding principal and interest amounts of the 2023 Convertible Notes.

The 2023 Convertible Notes limit the Company's ability to issue any debt, equity or equity-linked securities (including options or warrants) that are convertible into, exchangeable or exercisable for, or include the right to receive shares of the Company's common stock and to issue any securities in a capital or debt raising transactions or series of related transactions with more favorable terms than the 2023 Convertible Notes without the consent of the Holders.

The following events constituted an Event of Default under the 2023 Convertible Notes: (i) any default in the payment of any portion of the principal or interest; (ii) failure to observe or perform material covenants; (iii) inability to convert the 2023 Convertible Notes into its common stock; (iv) failure to timely deliver shares of common stock or make payment of any fees or liquidated damages under the 2023 Convertible Notes; (v) failure to have required minimum shares of common stock authorized, reserved and available for issuance; (vi) default on any other indebtedness; (vii) apply for or consent to the appointment of or the commencement of any type of receivership or any voluntary or involuntary bankruptcy, (viii) any judgment or settlements exceeding $250,000, (ix) failure to instruct transfer agent to remove any legends from the shares of common stock; (x) the Company's common stock no longer publicly traded or cease to be listed on the trading market; (xi) any SEC or judicial stop trade order or any restrictions on transactions in the shares of the common stock; (xii) failure to comply with reporting requirements of the 1934 Act; (xiii) failure to file timely with the SEC; (xiv) a Fundamental Transaction, as defined in the SPA, and (xv) any inaccurate representations or warranties made by the Company in any transaction documents or public filings. The 2023 Convertible Notes did not contain any financial covenants. The Company has triggered multiple Events of Default under the SPA and 2023 Convertible Notes.

The Events of Default had the following significant impacts: (i) the interest rate per annum on outstanding principal amounts increased from 5.0% to 18.0%; (ii) a Mandatory Premium Amount became due, which consists of the $16,000,000outstanding principal amount, accrued interest, and $250,000for every Event of Default that has occurred and reoccurred, up to the sum of the 130% of the $16,000,000outstanding principal and accrued interest; and (iii) the conversion price of the notes were no longer subjected to a Floor Price.

On September 16, 2024, the Company entered into a Forbearance and Settlement Agreement (the "Forbearance Agreement") with the Holders. Pursuant to the Forbearance Agreement, the Holders have agreed to forbear from exercising certain of its rights and remedies available as a result of existing defaults and events of defaults, against the Company under the 2023 Convertible Notes in exchange for (i) 1,708,320shares of common stock to Kips Bay Select LP (the "Kips Bay Shares"), (ii) 1,254,986shares of common stock to Cyber One LTD (the "Cyber One Shares") and (iii) up to $13,700,000in cash to the Holders, with $700,000due on or before September 17, 2024; $4,000,000due on or before October 15, 2024; $4,000,000due on or before November 15, 2024; and $5,000,000due on or before December 15, 2024. If the $5,000,000due on or before December 15, 2024 is paid on or before November 15, 2024, such amount shall be reduced to $4,000,000. The Company issued the Kips Bay Shares and Cyber One Shares and issued the first payment of $700,000on September 17, 2024, which reduced Interest expense payable by $496,107and Notes payable, fair value option by $203,893.

As of September 30, 2024, notwithstanding the Forbearance Agreement, the carrying amount of the 2023 Convertible Notes was approximately $21,000,000.

On October 15, 2024, the Company entered into an amendment to the Forbearance Agreement (the "Amended Forbearance Agreement") with the Holders. Pursuant to the Amended Forbearance Agreement, the Holders agreed to continue to forbear from exercising certain of its rights and remedies available as a result of existing defaults and events of defaults, against the Company under the 2023 Convertible Notes in exchange for (i) 850,000shares of common stock to each Kips Bay Select LP and Cyber One LTD (the "Amendment Shares") and (ii) $13,000,000in cash to the Holders, with $1,000,000due on October 15, 2024; $1,000,000due on or before October 21, 2024; $4,000,000due on or before November 15, 2024; and $7,000,000due on or before December 15, 2024. The Company issued the Amendment Shares and issued the first payment of $1,000,000on October 15, 2024.

On November 6, 2024, the Company entered into a second amendment to the Forbearance Agreement (the "Second Amended Forbearance Agreement") wit the Holders. Pursuant to the Second Amended Forbearance Agreement, the Holders agreed to continue to forbear from exercising certain of its rights and remedies available as a result of existing defaults and events of defaults, against the Company under the 2023 Convertible Notes in exchange for (i) 5,000,000shares of common stock to each Kips Bay Select LP and Cyber One LTD (the "Second Amendment Shares") and (ii) $14,600,000in cash to the Holders, with $2,600,000due on November 21, 2024 and $12,000,000due on or before January 31,2025. The Company issued the Second Amendment Shares on November 7, 2024. The Company has the ability to clawback up to 2,000,000shares of common stock from each Kips Bay Select LP and Cyber One LTD by making timely payments under the terms of the Second Amended Forbearance Agreement.

Due to the 2023 Convertible Notes having numerous embedded derivatives, the Company elected the fair value option to account for it. See fair value disclosures in Note 6 - Fair Value Measurement. The Company separates interest expense from the full change in fair value of the 2023 Convertible Notes and presents that amount in "Interest expense" in the accompanying Condensed Consolidated Statement of Operations. The remainder of the change in fair value of the 2023 Convertible Notes are presented in "Unrealized gain

(loss) on fair value of notes payable" in the accompanying Condensed Consolidated Statement of Operations.

Registration Payment Arrangements

In connection with the SPA, on November 21, 2023, the Company entered into a registration rights agreement ("Registration Rights Agreement") with Kips Bay Select LP and Cyber One, LTD, pursuant to which the Company agreed to file with the SEC by January 5, 2024 an initial Registration Statement on Form S-1 covering the resale of all of the Conversion Shares, Warrant Shares, and any common stock of the Company issued or issuable with respect to the Conversion Shares, the Warrant Shares, or the 2023 Convertible Notes (the "Registrable Securities"). The initial Registration Statement on Form S-1 was to register for resale at least the number of shares of common stock equal to 200% of the sum of (i) the maximum number of Conversion Shares issuable upon conversion of the 2023 Convertible Notes and related interest and (ii) the maximum number of Warrant Shares issuable upon exercise of the warrants, as of the date such Registration Statement on Form S-1 was initially filed with the SEC.

If (i) a Registration Statement of Form S-1 covering the resale of all of the Registrable Securities required to be covered thereby and required to be file by the Company pursuant to this Registration Rights Agreement is (A) not filed with the SEC on or before January 5, 2024 (a "Filing Failure") or (B) not declared effective by the SEC on or before (a) with respect to the initial Registration Statement on Form S-1, the earlier of the (A) February 19, 2024 and (B) 2nd business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement on Form S-1 will not be reviewed or will not be subject to further review and (b) with respect to any additional Registration Statements on Form S-1 that may be required to be filed by the Company pursuant to this Registration Rights Agreement, the earlier of the (A) 60th calendar day following the date on which the Company was required to file such additional Registration Statement on Form S-1 and (B) 2nd business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement on Form S-1 will not be reviewed or will not be subject to further review, for such Registration Statement on Form S-1 (an "Effectiveness Failure"), (ii) on any day after the Registration Statement on Form S-1 has been declared effective by the SEC (the "Effective Date") sales of all of the Registrable Securities required to be included on such Registration Statement on Form S-1 or the prospectus contained therein is not available for use for any reason (a "Maintenance Failure"), or (iii) if a Registration Statement on Form S-1 is not effective for any reason or the prospectus contained therein is not available for use for any reason (a "Current Public Information Failure"), the Company shall pay an amount in cash equal to one and half percent (1.5%) of the $16,000,000principal amount (the "Registration Delay Payments").

The Registration Delay Payments are due (1) on the date of such Filing Failure, Effectiveness Failure, Maintenance Failure or Current Public Information Failure, as applicable, and (2) on every thirty (30) day anniversary of (I) a Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure until such Effectiveness Failure is cured; (III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a Current Public Information Failure until the earlier of (i) the date such Current Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144 (in each case, pro rated for periods totaling less than thirty (30) days). In the event the Company fails to make Registration Delay Payments in a timely manner in accordance with the foregoing, such Registration Delay Payments shall bear interest at the rate of two percent (2%) per month (prorated for partial months) until paid in full. Notwithstanding the foregoing, no Registration Delay Payments shall be owed (other than with respect to a Maintenance Failure resulting from a suspension or delisting of (or a failure to timely list) the shares of common stock on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB, OTCQX or the OTC Pink) with respect to any period during which all Registrable Securities may be sold without restriction under Rule 144 (including, without limitation, volume restrictions) and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable).

A Filing Failure occurred on January 5, 2024 and was still not cured as of September 30, 2024. The Company paid $2,301,440for Registration Delay Payments due to Kips Bay Select, LP and Cyber One, Ltd. in the accompanying Condensed Consolidated Statement of Operations in Event of default fees.

Short-term Borrowings

On April 12, 2024, the Company issued a short-term loan in the principal amount of $325,000, which resulted in net cash proceeds of $250,000. The loan had a maturity date of June 21, 2024. The Company used the net proceeds towards working capital. The principal amount of the loan and the $10,000referral fee incurred to raise the capital was due and outstanding at September 30, 2024.

Interest Expense

Interest expense for the periods were as follows:


	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2024		2023			2024		2023
2023 Convertible Notes interest expense	$	718,573		$	-		$	2,158,573	$	-
Interest on convertible notes extinguished in November 2023		-			548,256			-		1,626,890
Interest on short-term borrowings		-			302,611			85,000		302,611
Other		4,726			-			11,508		-
Total interest expense	$	723,299		$	850,867		$	2,255,081	$	1,929,501

Note 8 - Derivatives

Because the fair value option was elected for the 2023 Convertible Notes, the initial fair value of the warrants were not presented as a discount to the face value of the 2023 Convertible Notes.

On August 8, 2024, the Company entered into Securities Purchase Agreements (the "Series A Convertible Preferred Stock Purchase Agreements"), pursuant to which the Company agreed to issue and sell 8,000shares of the Company's 10.0% Series A Convertible Preferred Stock, par value $0.001per share (the "Series A Convertible Preferred Stock") for an aggregate purchase price of $8,000,000(such offering, the "Series A Convertible Preferred Stock Offering"). The shares of Series A Convertible Preferred Stock are convertible into common stock of the Company ( as described in Note 12 - Series A Convertible Preferred Stock). The conversion features require bifurcation and will be measured on a recurring basis at fair value.

The following table summarizes the Company's derivative liabilities:


	September 30, 2024		December 31, 2023
Kips Bay 2023 Note - warrants	$	1,245,281		$	1,441,346
Cyber One 2023 Note - warrants		1,245,281			1,441,346
Series A convertible preferred stock conversion options		507,693			-
Total derivative liabilities	$	2,998,255		$	2,882,692

The gains and losses resulting from the mark-to-market of the bifurcated conversion options and warrants are included within "Unrealized gain on derivatives mark-to-market" in the Condensed Consolidated Statements of Operations. For the three months ended September 30, 2024 and 2023, there was a gain of$427,001and $0, respectively, and for the nine months ended September 30, 2024 and 2023there was a gain of $534,775and $185,011, respectively, on mark-to-market of the bifurcated conversion options and warrants.

Note 9 - Asset Retirement Obligations

The following table summarizes the changes in the Company's asset retirement obligation for period below:


Asset retirement obligations - December 31, 2023	$	758,373
Accretion expense		34,817
Asset retirement obligations- September 30, 2024	$	793,190

Note 10 - Leases

As of September 30, 2024 and December 31, 2023, the Company had operating leases recorded on the Condensed Consolidated Balance Sheets for equipment leased at the helium plant in the St. Johns Field, office space in Houston, Texas (the "Houston Office") and a site lease agreement in Arizona (the "Site Lease Agreement") for storage of equipment. The helium plant equipment lease expires in March

2028, the Houston Office lease was amended in October 2023 and included an extension of the expiration date from October 2025 to January 2027 and the Site Lease Agreement expired in February 2024. All the leases had renewal options, but the Company did not recognize any of the renewal options. The Company excluded variable lease payments for operating expenses in the Houston Office and the service component of the equipment lease.

The accompanying balance sheets include leases with terms greater than 12 months at commencement. The present value of future lease payments was determined based upon the Company's incremental borrowing rate. The table below summarizes the Company's discount rate and remaining lease term.


	September 30, 2024			September 30, 2023
Weighted-average discount rate
Operating leases		26.86	%		26.57	%

Weighted-average remaining lease term (years)
Operating leases		3.38			4.22

The following table presents the components of the Company's lease expenses for the following periods.


		Three Months Ended		Nine Months Ended
		September 30, 2024		September 30, 2023			September 30, 2024		September 30, 2023
Lease costs	Classification on our Statement of Operations
Operating lease costs	General and administrative expenses	$	11,286		$	15,875		$	33,856	$	47,626
Operating lease costs	Lease operating expenses	$	-		$	1,452		$	968	$	4,355
Operating lease costs	Gathering and processing expenses	$	90,000		$	90,000		$	270,000	$	90,000
Short-term lease costs	General and administrative expenses	$	-		$	2,209		$	-	$	6,626
Variable lease costs	Gathering and processing expenses	$	60,000		$	60,000		$	180,000	$	60,000
Variable lease costs	General and administrative expenses	$	7,172		$	10,769		$	22,699	$	32,308

Supplemental cash flow information related to leases were as follows:


	Nine Months Ended
	September 30, 2024		September 30, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating lease - operating cash flows	$	305,132		$	145,823

Maturities of the Company's operating lease liabilities included on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2024 were as follows:



	Operating Leases
2024 (remaining)		101,154
2025		405,855
2026		407,207
2027		363,943
2028		90,000
Total minimum lease payments		1,368,159
Less: imputed interest		(459,588	)
Present value of future minimum lease payments		908,571
Less current obligation under leases		(194,560	)
Non-current lease obligations	$	714,011

Note 11 - Warrants

On November 21, 2023, pursuant to the SPA (as described in Note 7 - Debt), the Company issued to each Kips Bay Select LP and Cyber One, LTD warrants to subscribe for and purchase from the Company up to 3,846,154shares of common stock, collectively 7,692,308shares of common stock, at an exercise price equal to the lower of: (i) $3.12per share and (ii) the Valuation Cap Price. The warrants are exercisable from November 21, 2023 and expire on November 21, 2028. In case of a registration (as defined in the Registration Rights Agreement), the warrants may be exercised, in whole or in part, at such time by means of a "cashless exercise" on terms and conditions provided in the warrants. The Valuation Cap Price means the price per share of common stock calculated by dividing $250,000,000by the number of shares of Common Stock on a fully diluted basis immediately prior to giving effect to the applicable exercise under this Warrant, subject to adjustment as provided therein. As of September 30, 2024 and December 31, 2023, 7,692,308warrants were outstanding and exercisable.

All warrants noted above were separated from their respective debt instruments and fair valued at each reporting period. See fair value disclosures in Note 6 - Fair Value Measurements.

Note 12 - Series A Convertible Preferred Stock

On August 8, 2024, the Company entered into the Series A Convertible Preferred Stock Purchase Agreements, pursuant to which the Company agreed to issue and sell 8,000shares of the Company's 10.0% Series A Convertible Preferred Stock, par value $0.001per share (the "Series A Convertible Preferred Stock") for an aggregate purchase price of $8,000,000(such offering, the "Series A Convertible Preferred Stock Offering").

Holders of the Series A Convertible Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors (the "Board") of the Company, cumulative dividends in-kind, at a rate of 10.000% per annum on the $1,000liquidation preference per share of Series A Convertible Preferred Stock, payable annually in arrears, commencing on August 8, 2025. The Company accrued dividends in the amount of $116,164to the Series A Convertible Preferred Stock as of September 30, 2024.

The shares of Series A Convertible Preferred Stock are convertible into common stock of the Company: (a) in whole or in part, on any date at the option of the holders, (b) in full, automatically in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act, resulting in gross proceeds to the Corporation of at least $40.0million or (c) in full, automatically at the close of the first Trading Day ("Common Stock Uplisting Conversion Date") upon a Common Stock Uplisting. Trading Day means any day on which the Trading Market of our common stock is open for trading. Common Stock Uplisting means the listing for and commencement of trading of the common stock on a Trading Market. Trading Market means any of the following markets or exchanges on which our common stock is listed or quoted for trading on the date in question: the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange, NYSE Amex or any other National Securities Exchange (as defined in the Exchange Act) (or any successors to any of the foregoing).

The conversion features required bifurcation and will be measured on a recurring basis at fair value. The initial fair value of the bifurcated conversion options in the amount of $650,338was allocated to "Derivative liabilities" and the remaining fair value of $7,349,662was allocated to "Series A convertible preferred stock" on the Condensed Consolidated Balance Sheets. The changes in fair value of the bifurcated conversion features will be reported to "Unrealized gain on derivatives mark-to-market" on the Condensed Consolidated Statements of Operations. See fair value disclosures in Note 6 - Fair Value Measurements.

The shares of Series A Convertible Preferred Stock are convertible into common stock of the Company at a conversion price of $4.84(the "Conversion Price"). In the event the closing price of our common stock closes on the Common Stock Uplisting Conversion Date at a price below the Conversion Price, the Conversion Price shall be reduced to equal the closing price of the Common Stock on the Common Stock Uplisting Conversion Date. Notwithstanding the forgoing or any other provision of the Certificate of Designation, the Conversion Price shall be no less than $3.02per share.

If the Series A Convertible Preferred Stock does not convert into the Company's common stock based on the conversion features within two(2) years from the effective date of the Series A Convertible Preferred Stock Purchase Agreement, the Company is required to redeem the Series A Convertible Preferred Stock, which shall include accumulated in-kind dividends, at the $1,000liquidation preference per share of Series A Convertible Preferred Stock.The Series A Convertible Preferred Stock is redeemable for cash by the holders at a determinable price on a fixed date, and as such the Company presented the Series A Convertible Preferred Stock in temporary equity.

Note 13 - Stockholders' Deficit

Common Stock

As of September 30, 2024 and December 31, 2023, the Company's authorized capital consists of 200,000,000and 250,000,000, respectively, shares of common stock with a par value of $0.001per share. The Company has one class of common stock.

During the nine months ended September 30, 2024, the Company issued 408,963shares of common stock in private placements for proceeds of $987,609.

During the nine months ended September 30, 2024, the Company issued 1,708,320shares of common stock to Kips Bay Select LP and 1,254,986shares of common stock to Cyber One LTD in exchange for entering into the Forbearance Agreement. The Company estimated the total fair value of the award at $9,157,801using a fair value of $3.0904per share. The fair value per share was based on the price per share the Company received when it sold common stock in private placements near the time of the issuance.

Preferred Stock

As of September 30, 2024 and December 31, 2023, the Company's authorized capital consists of 50,000,000and zero, respectively, shares of preferred stock with a par value of $0.001per share. As of September 30, 2024, 80,000shares of preferred stock had been designated to the Series A Convertible Preferred Stock, leaving 49,920,000shares of authorized non-designated preferred stock. See terms of the Series A Convertible Preferred Stock in Note 12 - Series A Convertible Preferred Stock.

Long-Term Incentive Plan

In May 2024, the Board and majority shareholders of the Company approved the Company's Long-Term Incentive Plan (the "2024 LTIP") and reserved 10,000,000shares of common stock for the 2024 LTIP.

Stock Based Compensation

During the six months ended September 30, 2024, the Company issued 2,424shares of common stock to a member of the Board of Directors at their election for their first quarter of 2024 compensation as opposed to their cash retainer. The compensation expense for the award totaled $3,030and was estimated using a fair value of $1.25per share. The fair value per share was based on the price the Company received when it sold common stock in private placements.

Conversion Features

The Holders of the 2023 Convertible Notes acknowledged that by entering into the Forbearance Agreement, they were not waiving any rights or remedies it may have under the 2023 Convertible Notes and the SPA, or any defaults or Events of Default arising thereunder. If the Company fails to comply with the terms of the Forbearance Agreement, the Forbearance Agreement shall terminate, and the Holders of the 2023 Convertible Notes shall have the right to pursue and obtain all existing rights they have under the 2023 Convertible Notes and SPA, which includes having the right to convert all or part of their outstanding principal amount to shares of common stock. See Note 7 - Debtfor the conversion price and adjustments.

Common Stock Reserved

As of September 30, 2024, the Company reserved 41,191,116shares of common stock for issuance upon conversion of the 2023 Convertible Notes and exercise of Warrants, 10,842,453shares of common stock for certain indemnified transfers of common stock at the stock transfer agent, 10,000,000shares of common stock for the Company's 2024 LTIP, and 3,305,788shares of common stock for the conversion of the Series A Preferred Stock.

Note 14 - Net Loss Per Share

Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net loss attributable to common

stockholders by the weighted average number of common shares outstanding during the period, giving effect to all potential dilutive securities outstanding for the period. Basic and diluted loss per share is computed using the treasury stock method.

For the three and nine months ended September 30, 2023, the numerator of basic net loss per share is the net loss of the accounting acquirer attributable to common stockholders for the comparative reporting periods. The denominator of basic net loss per share is weighted average number of common shares of the accounting acquirer outstanding pre-acquisition, multiplied by the exchange ratio.

The following table sets forth the computation of basic and diluted net loss per share:


	For the Three Months Ended			For the Nine Months Ended
	September 30,			September 30,
	2024			2023			2024		2023
Numerator:
Net loss attributable to shareholders	$	(13,214,826	)		$	(4,037,359	)	$	(17,298,169	)	$	(10,531,367	)
Denominator:
Weighted average common stock outstanding - Basic and Diluted		81,577,661				74,222,435			81,114,579			69,630,617
Net loss per share of common stock outstanding - Basic and Diluted	$	(0.16	)		$	(0.05	)	$	(0.21	)	$	(0.15	)

As the Company was in a net loss position for all periods presented, the Company has determined all potentially dilutive shares would be anti-dilutive in these periods and therefore are excluded from the calculation of diluted weighted average shares outstanding. This results in the calculation of weighted average shares outstanding to be the same for basic and diluted earnings per share.

For the three and nine months ended September 30, 2024 and 2023, the Company had outstanding warrants to purchase shares of common stock, debt instruments and preferred stock convertible into common stock. There would be approximately 17,000,000and 7,000,000shares of additional common stock at September 30, 2024 and 2023, respectively, related to the possible exercise of outstanding warrants and conversion of the debt instruments. The Holders of the 2023 Convertible Notes are subject to a beneficial ownership limitation.

Note 15 - Income Taxes

The Company is a C corporation and is subject to U.S. federal income tax and state and local income taxes.

The Company's effective tax rate for the three and nine months ended September 30, 2024 and 2023was 0%. As of September 30, 2024, the Company has U.S. net operating loss ("NOLs") carryforwards of approximately $18,000,000to offset taxable income, if any, in future years. Federal NOLs generated in 2023 and 2024 may be carried forward indefinitely. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized. Tax periods for all fiscal years after 2021 remain open to examination by the federal and state taxing jurisdictions to which the Company is subject.

As of September 30, 2024, the Company has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company's financial statements.

Note 16 - Transactions with Related Parties

Consulting Arrangements

The Company had advisory consulting agreements with TPG Commercial Finance, an entity in which Jim Culver, a principal owner of either directly or indirectly more than 10% of the Company's common stock, is the President/Owner. For the three months ended September 30, 2024 and 2023, the Company did not incur any costs and for the nine months ended September 30, 2024 and 2023the Company incurred costs of $0and $20,000, respectively. The costs were recorded in the Consolidated Statements of Operations to "General and administrative expenses - related parties".

The Company received human resource services from an immediate family member of a named executive officer. For the three months ended September 30, 2024 and 2023, the Company incurred $15,000and $0, respectively, and for the nine months ended September 30, 2024 and 2023, the Company incurred costs of $45,000and $17,500, respectively, in fees related to Human Resource services. These costs were recorded in the Condensed Consolidated Statements of Operations to "General and administrative expenses - related parties".

The Company engaged Integrated Cryogenic Solutions, LLC for Front-end engineering design studies for its initial beverage grade CO2 plant. Integrated Cryogenic Solutions, LLC is an innovative specialty engineering, procurement & manufacturing unit of Nikkiso Cryogenics Industries, an entity in which our board of director Peter J. Wagner served as CEO from June 2018 to July 2024 and currently as the Executive Chairman of their Board. The Company incurred $95,000and $0, respectively, for the three and nine months ended September 30, 2024 and 2023, respectively. The costs were recorded in the Condensed Consolidated Statements of Operations to "General and administrative expenses - related parties".

Related Party Note Receivable

In September 2022, the Company loaned $25,000to VVC Resources, an entity in which Jim Culver, a principal owner of either directly or indirectly more than 10% of the Company's common stock, is the President and CEO. The loan bore interest at zeropercent. There was no stated maturity date for the loan. As of September 30, 2024 and December 31, 2023, the related party note receivable had a balance of $25,000.

Co-Tenancy Arrangement

In October 2023, the Board approved a co-tenancy arrangement whereby we expanded the leased space in our Houston office and share the expanded space with Pantheon Resources, PLC, an entity where our Chairman of the Board of Directors, David Hobbs, serves as Executive Chairman. We share equally the costs of the lease and office supplies.

Note 17 - Commitments and Contingencies

Commitments

As of September 30, 2024, all of the assets of the Company have been pledged as collateral for the 2023 Convertible Notes.

Contingencies

Legal

In the ordinary course of business, the Company is party to various legal actions. In management's opinion, the outcome of any such currently pending legal actions will not have a material adverse effect on the Company's financial position or results of operations.

On March 1, 2022, a potential lender filed a motion for a default judgment against the Company's wholly owned subsidiary, Proton Green, LLC ("Proton Green") seeking a $1,000,000break-up fee related to a commitment letter for a proposed senior secured term loan facility. The parties unsuccessfully attempted to mediate the case on October 23, 2023. Discovery is complete and the parties have filed cross-motions for summary judgment. On September 6, 2024, the court granted the potential lender's motion for summary judgment and denied Proton Green's cross-motion. The Company intends to appeal the ruling. No accrual has been recorded to the condensed consolidated financial statements because the Company is unable to conclude that an unfavorable outcome is probable. Legal fees incurred associated with loss contingencies are expensed.

The Company was served a lawsuit on May 2, 2024, in which it was named as one of several defendants in a complaint filed in the Federal District Court of the Northern District of Illinois, Eastern Division by Alpha Carta, Ltd. et al (the "Alpha Carta Litigation"). Alpha Carta, Ltd. ("Alpha Carta") alleges that Proton Green breached three promissory notes (the "Notes"), a Forbearance Agreement, and a proposed unexecuted revised Forbearance Agreement with respect to payments due on the Notes and that Proton Green owes, with an aggregate balance of principal and interest, in excess of $30,000,000(the "AC Debt"). Other claims against the defendants include conspiracy to commit fraud, rescission, and declaratory judgment, all related to the AC Debt. Proton Green asserts, in contrast, that it reached a loan settlement agreement ("Loan Settlement Agreement") with Alpha Carta to settle the AC Debt for$8,000,000, which has been paid. Alpha Carta denies the existence of such Loan Settlement Agreement and alleges that if such Loan Settlement Agreement does exist, it was executed fraudulently.

The Company believes that the claims asserted in the Alpha Carta Litigation have no merit and intends to vigorously defend them. The Company has challenged the personal and subject matter jurisdiction, and the court has permitted the plaintiff to conduct limited jurisdictional discovery. The Company is unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, and accordingly, it has not accrued any liability associated with the Alpha Carta Litigation.

There are no other material litigation, arbitration or governmental proceeding currently pending against the Company or any members of its management team in their capacity as such requiring a contingent liability to be recognized as of the date of the consolidated financial statements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Exchange Act. All statements, other than statements of historical fact included in this report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words "could," "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management's current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 (our "Annual Report on Form 10-K"), and the other risk factors and other cautionary statements contained in our other filings with the SEC. These forward-looking statements are based on management's current beliefs as of the date of this Quarterly Report on Form 10-Q, based on currently available information, as to the outcome and timing of future events.

You should not place undue reliance on these forward-looking statements. Forward-looking statements may included statements about:

•

our ability to achieve steady state operations at our first helium plant in the St. Johns Field;

•

the adequacy and availability of capital resources, credit and liquidity, including, but not limited to, debt refinancing, exchanges or repurchases of debt, issuances of debt or equity securities, and our ability to generate sufficient cash flow from operations to fund our capital expenditures and meeting working capital needs;

•

our future financial performance;

•

potential actions of our stakeholders and lenders;

•

our ability to continue as a going concern;

•

our ability to cure defaults under our debt agreements;

•

our ability to fulfill our obligations under the Amended Forbearance Agreement (as defined below);

•

our business strategy;

•

our helium and CO2reserves and contingent resources;

•

our liquidity and capital resources;

•

the future of our operations;

•

our drilling prospects, inventories, projects and programs;

•

our ability to replace the reserves we produce through drilling and property acquisitions;

•

our realized helium and CO2prices;

•

the timing and amount of our future production of helium and CO2;

•

our competition and government regulations;

•

our ability to obtain permits and governmental approvals; and

•

our pending legal matters.

Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report on Form 10-Q are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

General

Overview

Cyber App Solutions Corp. (the "Company", "CYRB", "we", "us", or "ours") is a corporation established under the corporation laws in the State of Nevada on February 19, 2021. Our corporate office is in Houston, Texas.

We are focused on the acquisition, exploration, development and production of helium and beverage grade CO2and we have CO2reservoirs that are capable of storing captured CO2. Our assets are concentrated in the St. Johns Field located in Apache County, Arizona of the United States (the "St. Johns Field").

Market Conditions

Helium

Helium is a unique element in that it is the second most abundant in the universe, the most stable, yet rare and difficult to capture and store on the Earth, found in only a few locations spanning about twenty production fields globally. Its unique qualities make it a non-renewable and limited natural resource, highly demanded in many growing industries such as medical technology, high-tech, space exploration and national defense. Specific uses for helium include: semiconductor and fiber-optics manufacturing, cooling superconducting magnets in MRI machines, leak detection, as a purge gas and pressurizing agent in spacecraft, leak detection, airbags, deep sea diving oxygen tanks, and more.

Production of helium goes back to 1900s. Since that time, the industry has experienced four notable periods of shortage between 2006 and today, with helium production currently experiencing a shortage started in 2022 driven by the increased demand from growing industries and technologies and decreased production. Decreased production is partially attributable to the US government, one of the world's largest and most dependable suppliers of helium, selling off its national helium reserve located near the Hugoton-Panhandle field that spans across Texas, Oklahoma, and Kansas and sanctions imposed on Russian exports. The demand for helium was estimated at 5.9 billion cubic feet (Bcf) for 2023 and expected to increase to about 8 Bcf by 20301. The United States has been a leading producer of helium2and currently holds roughly 40% of the global production market share, which is expected to decrease to about 30% by year 2030. The next leading producers of helium have been Russia, Algeria and Qatar.

We believe that demand for helium will continue to grow as applications in the manufacturing, medical device and aerospace industries expands. The pricing of helium is normally set through direct negotiations with either distributors or end-users and generally are not disclosed. We have opportunities to enter into long-term agreements with a fixed price which we will consider based upon alternative options available to us.

CO2

The U.S. carbon dioxide market size was valued at $3.2 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 8.4% from 2022 to 2030. The food & beverages segment led with a revenue share of 34.52% in the year 20213. In the U.S. beverage industry, CO2is commonly utilized for carbonating soft drinks and beer. Additional uses for CO2are enhanced oil recovery, dry ice production, wastewater treatment, welding, fire suppression, plant growth, food preservation, food refrigeration and freezing, and more. Characteristics of its use include creating carbonation for desired fizziness, diverse sources (industrial processes, fermentation), adherence to food-grade standards, reliance on a stable supply chain, and transportation/storage in liquid or compressed gas forms. Industry-specific details are recommended for the latest information.

CO2for beverages can come from various sources: fermentation processes (alcoholic beverage production), industrial processes (chemical manufacturing), natural sources (natural springs), dry ice production, biogas production (anaerobic digestion), and upstream oil and gas operations (natural gas processing). Regardless of the source, CO2must meet strict quality standards to ensure safety and taste in the final beverage product, often involving purification processes by manufacturers.

The largest single food and beverage grade CO2supplier in the U.S. is located at Jackson Dome, Mississippi (the "Jackson Dome"). Supply was disrupted recently due to geologic contamination of the reservoir, although it has begun to come back online. Additionally, ExxonMobil announced in a November 2, 2023 press release that it had completed the acquisition of Denbury, Inc., who was the primary operator at the Jackson Dome. Based on ExxonMobil's July 13, 2023 press release, the acquisition allows them to serve a range of hard-to-decarbonize industries with a comprehensive carbon capture and sequestration offering, which we believe means they are focused on

carbon capture and sequestration in the Jackson Dome rather than CO2production. The curtailment of CO2plants here and elsewhere in the country, we believe, has led and will lead to a shortage of CO2supply to the food and beverage industry.

Pricing for CO2is often negotiated between the producer, and wholesalers or end buyers. We believe that the food and beverage grade market will continue to need to secure supply of CO2providing us with multiple potential customer relationships. Furthermore, we will work with distribution companies to negotiate direct-to-customer sales and delivery agreements. We anticipate that we will sell a portion of our produced CO2on fixed price, fixed delivery sales contractions and a portion will be sold month to month at prevailing prices.


1	https://www.gasworld.com/feature/the-2023-worldwide-helium-market/2128890.article/; https://www.sciencedirect.com/science/article/abs/pii/B9780128233771501531
2	https://www.usgs.gov/news/national-news-release/usgs-seeks-public-comment-helium-supply-risk
3	https://www.grandviewresearch.com/industry-analysis/us-carbon-dioxide-market-report

U.S. Department of Energy Program

In August 2023, we received notice regarding a potential financial award from the U.S. Department of Energy ("DoE") that we, as a member of a consortium of companies, which includes us, Black & Veatch, Carbon Collect, CarbonCapture, Carbon Solutions, Arizona State University, University of New Mexico, University of Utah, Tallgrass, and the Arizona Geological Survey, had been selected to receive an approximately $11,600,000 grant for plans to develop the Southwest Regional Direct Air Capture ("DAC") Hub to advance the design of a regional DAC hub. The program aims to expedite the deployment of a nationwide network of large-scale DAC CO2removal sites to address legacy CO2pollution and complement rapid emission reduction in the region. We will work alongside our consortium partners to develop a storage field development plan to securely sequester CO2captured from the atmosphere into our St. Johns Field basin. Under the program, we expect that we will receive reimbursement for certain personnel time. The DoE award officially received funding for the DAC Hub proposal in October 2024 and a project kickoff meeting is expected for late November 2024.

Segment Information

We manage our business globally within one reportable segment, which is consistent with how our management reviews the business, prioritizes investment and resource allocation decisions and assesses operating performance.

Fair Value Measurement

Our financial instruments measured at fair value on a recurring basis consist of convertible promissory notes issued on November 21, 2023 (the "2023 Convertible Notes"), the freestanding warrants issued along with the 2023 Convertible Notes, and the Series A Preferred Stock conversion options. We use significant unobservable inputs (Level 3) to measure the fair value of the instruments. For the three months ended September 30, 2024 and 2023, there was an unrealized loss of $744,297 and $0, respectively, and for the nine months ended September 30, 2024 and 2023, there was an unrealized gain of $1,432,324 and and an unrealized gain of $185,011, respectively, on mark-to-market of the warrants and change in fair value of the notes payable recorded in the accompanying Condensed Consolidated Statement of Operations.

Results of Operations and Financial Condition

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023


	For the Three Months Ended
	September 30,			Change
	2024			2023			$		%
Helium revenue	$	-			$	121,958		$	(121,958	)	-100	%

Operating expenses
Depreciation, depletion, amortization and accretion		33,025				56,832			(23,807	)	-42	%
Lease and well operating expenses		42,422				45,333			(2,911	)	-6	%
Shut-in expenses		51,684				10,880			40,804		375	%
Gathering and processing expenses		150,000				250,712			(100,712	)	-40	%
Production taxes		-				5,240			(5,240	)	-100	%
General and administrative expenses		1,318,454				927,311			391,143		42	%
General and administrative expenses - related parties		110,000				-			110,000		100	%
Total operating expenses		1,705,585				1,296,308			409,277		32	%
Net loss from operations		(1,705,585	)			(1,174,350	)		(531,235	)	45	%
Other income (expense)
Interest expense		(723,299	)			(850,867	)		127,568		-15	%
Event of default fees		(767,680	)			(1,987,387	)		1,219,707		-61	%
Other income (expense), net		-				(24,755	)		24,755		-100	%
Notes payable modification costs		(9,157,801	)			-			(9,157,801	)	100	%
Unrealized gain (loss) on fair value of notes payable		(1,171,298	)			-			(1,171,298	)	100	%
Unrealized gain on derivatives mark-to-market		427,001				-			427,001		100	%
Total other expense		(11,393,077	)			(2,863,009	)		(8,530,068	)	298	%
Net loss	$	(13,098,662	)		$	(4,037,359	)	$	(9,061,303	)	224	%

Revenue

Helium revenue. For the three months ended September 30, 2024 and 2023, helium revenue was $0 and $121,958, respectively. The 100% decrease in helium revenues was due to the Company idling our helium processing plant in the St. Johns Field during June 2024, resulting in no production and sales during the three months ended September 30, 2024. We sold approximately 250 thousand cubic feet of helium during the three months ended September 30, 2023.

Operating Expenses

Depreciation, depletion, amortization and accretion. For the three months ended September 30, 2024 and 2023, depreciation, depletion, amortization and accretion was $33,025 and $56,832, respectively. The 42% decrease in depreciation, depletion, amortization and accretion primarily relates to the Company recording no depletion expense on our helium and CO2property costs, which is calculated using units of production, during the three months ended September 30, 2024 because we had no production and sales. We recorded depletion expense in the amount of approximately $25,000 during three months ended September 30, 2023 when we had production and sales.

Lease and well operating expenses. For the three months ended September 30, 2024 and 2023, lease and well operating expenses were $42,422 and $45,333, respectively. The 6% decrease is primarily due to operator fees of approximately $6,000 incurred during the three months ended September 30, 2023 compared to $0 incurred during the same period in 2024 due to the well being shut-in while our helium processing plant is idled. The decrease was partially offset by approximately $3,000 of repair fees incurred during the three months ended September 30, 2023 compared to $0 incurred during the same period in 2024.

Shut-in expenses. For the three months ended September 30, 2024 and 2023, shut-in expenses were $51,684 and $10,880, respectively. The 375% increase in shut-in expenses was due to a shut-in royalty reimbursement of approximately $41,000 received during the three months ended September 30, 2023, which reduced the expense during such period.

Gathering and processing expenses. For the three months ended September 30, 2024 and 2023, gathering and processing expenses were $150,000 and $250,712, respectively. Gathering and processing expenses are the cost incurred to operate the helium processing plant. The 40% decrease is primarily related to a decrease in electricity costs incurred during the three months ended September 30, 2024 compared to the same period in 2023 because our helium processing plant was idled during the three months ended September 30, 2024. Although the helium processing plant is idled, we will continue to incur costs for leased equipment.

Production taxes. For the three months ended September 30, 2024 and 2023, production taxes were $0 and $5,240, respectively. The 100% decrease is due to the decrease in helium revenues. We expect production taxes to be approximately 3.437% of helium revenues.

General and administrative expenses. For the three months ended September 30, 2024 and 2023, general and administrative expenses were $1,318,454 and $927,311, respectively. The 42% increase in general and administrative expenses for the three months ended September 30, 2024 compared to the same period in 2023 is primarily due to an increase in professional fees such as legal and accounting, an increase in headcount to operate as a public company, and other costs required to operate as a public company. The increase was primarily due to increases of approximately $201,000 in payroll and payroll related costs due to an increase in full-time employees, approximately $90,000 for Board of Director fees, and approximately $70,000 in insurance primarily for adding a Directors & Officers policy. The remaining increase was for office supplies and equipment, travel, filing fees, and other overhead costs.

General and administrative expenses - related parties. For the three months ended September 30, 2024 and 2023, general and administrative expenses - related parties were $110,000 and $0, respectively. The 100% increase, as detailed in Note 16 - Transactions with Related Parties, was primarily dueto $95,000 incurred during the three months ended September 30, 2024 for Front-end engineering design studies for our next planned helium and CO2processing plantwith an entity that is affiliated with one of our Board members. The remaining increase of $15,000 is due to an increase in fees incurred for human resource consulting services provided by an immediate family member of one of our name executive officers.

Other income (expense)

Interest expense. For the three months ended September 30, 2024 and 2023, interest expense was $723,299 and $850,867, respectively. The 15% decrease in interest expense for three months ended September 30, 2024 compared to the same period in 2023 is primarily due to a decrease of approximately $303,000 of interest incurred on short-term borrowing during the three months ended September 30, 2023 that did not occur in the same period during 2024. The Company issued the short-term borrowings at significant discounts. Such decrease is partially offset by an increase of approximately $60,000 on our outstanding convertible notes, primarily related to an increase in principal balance outstanding during the three months ended September 30, 2024 compared to the same period in 2023, and approximately $5,000 of interest on our financed insurance premium.

Event of default fees. For the three months ended September 30, 2024 and 2023, event of default fees were $767,680 and $1,987,387, respectively. We had outstanding convertible notes in default during both periods. The 61% decrease is due to the Company's convertible notes outstanding during the three months ended September 30, 2024 having lower default fees compared to the default fees incurred on the convertible notes outstanding during the three months ended September 30, 2023.

Notes payable modification costs. On September 16, 2024, the Company issued 1,708,320 shares of common stock to Kips Bay Select LP and 1,254,986 shares of common stock to Cyber One LTD in connection with the forbearance and settlement agreement, as further detailed in Note 7 - Debt. The Company measured the total fair value of the award at $9,157,801 based on the price per share the Company received when it sold common stock in private placements near the time of the issuance.

Unrealized gain on fair value of notes payable. For the three months ended September 30, 2024 and 2023, unrealized loss on fair value of notes payable was $1,171,298 and $0, respectively. The Company elected the fair value option on the 2023 Convertible Notes and such notes were still outstanding during the three months ended September 30, 2024. There were no notes outstanding during the three months ended September 30, 2023 with the fair value option elected.

Unrealized gain on derivatives mark-to-market. For the three months ended September 30, 2024 and 2023, unrealized gain on derivatives mark-to-market was $427,001 and $0, respectively. Our notes payable contained conversion features and warrants that were embedded derivatives that required bifurcation. This balance represents the change in fair value of the conversion features and warrants.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023


	For the Nine Months Ended
	September 30,			Change
	2024			2023			$		%
Helium revenue	$	418,042			$	121,958		$	296,084		243	%

Operating expenses
Depreciation, depletion, amortization and accretion		184,119				83,742			100,377		120	%
Lease and well operating expenses		145,862				98,210			47,652		49	%
Shut-in expenses		155,049				145,513			9,536		7	%
Gathering and processing expenses		666,685				400,712			265,973		66	%
Production taxes		14,368				5,240			9,128		174	%
General and administrative expenses		4,018,329				2,238,060			1,780,269		80	%
General and administrative expenses - related parties		140,000				37,500			102,500		273	%
Total operating expenses		5,324,412				3,008,977			2,315,435		77	%
Net loss from operations		(4,906,370	)			(2,887,019	)		(2,019,351	)	70	%
Other income (expense)
Interest expense		(2,255,081	)			(1,929,501	)		(325,580	)	17	%
Event of default fees		(2,301,440	)			(5,875,111	)		3,573,671		-61	%
Other income (expense), net		6,363				(24,747	)		31,110		-126	%
Notes payable modification costs		(9,157,801	)			-			(9,157,801	)	100	%
Unrealized gain (loss) on fair value of notes payable		897,549				-			897,549		100	%
Unrealized gain on derivatives mark-to-market		534,775				185,011			349,764		189	%
Total other expense		(12,275,635	)			(7,644,348	)		(4,631,287	)	61	%
Net loss	$	(17,182,005	)		$	(10,531,367	)	$	(6,650,638	)	63	%

Revenue

Helium revenue. For the nine months ended September 30, 2024 and 2023, helium revenue was $418,042 and $121,958, respectively. The 243% increase in helium revenues was due to the completion and startup of our helium processing plant in the St. Johns Field during the third quarter of 2023. We sold approximately 861 thousand cubic feet of helium during the nine months ended September 30, 2024 compared to approximately 250 thousand cubic feet of helium during the nine months ended September 30, 2023. Realized helium prices in both periods were consistent.

Operating Expenses

Depreciation, depletion, amortization and accretion. For the nine months ended September 30, 2024 and 2023, depreciation, depletion, amortization and accretion was $184,119 and $83,742, respectively. The 120% increase in depreciation, depletion, amortization and accretion primarily relates to an increase of approximately $61,000 in depletion of our helium and CO2property costs, which is calculated using units of production, due to the Company having helium production of approximately 861 thousand cubic feet during the nine months ended September 30, 2024 compared to approximately 250 thousand cubic feet during the nine months ended September 30, 2023. The depletion rate in both periods were consistent. There was also an increase of approximately $37,000 in depreciation on our helium processing plant costs due to our helium processing plant commencing during the third quarter of 2023 and had only three months of depreciation during the nine months ended September 30, 2023 compared to nine months of depreciation during the nine months ended September 30, 2024.

Lease and well operating expenses. For the nine months ended September 30, 2024 and 2023, lease and well operating expenses were $145,862 and $98,210, respectively. The 49% increase is primarily due an increase of approximately $27,000 for compression costs, $11,000 for lease operator fees, and approximately $10,000 for gas testing and repairs and maintenance, all due to more months of operations during the nine months ending September 30, 2024 compared to the same period in 2023. As noted above, the completion and startup of our helium processing plant in the St. Johns Field occurred during the third quarter of 2023.

Shut-in expenses. For the nine months ended September 30, 2024 and 2023, shut-in expenses were $155,049 and $145,513, respectively. The 7% increase in shut-in expenses was due to a shut-in royalty reimbursement of approximately $41,000 received during the three months ended September 30, 2023, which reduced the expense during such period, and it was partially offset by an expense of approximately $31,000 during the same period in 2023 related to the same royalty owner.

Gathering and processing expenses. For the nine months ended September 30, 2024 and 2023, gathering and processing expenses were $666,685 and $400,712, respectively. Gathering and processing expenses are the cost incurred to operate the helium processing plant. As noted above, the completion and startup of our helium processing plant in the St. Johns Field occurred during the third quarter of 2023. The 66% increase was primarily due to an increase of approximately $117,000 for electricity to power the equipment, $90,000 related to the amortization of leased equipment recorded in right-of-use assets and $60,000 related to labor and maintenance. Although the helium processing plant is idled, we will continue to incur costs for leased equipment.

Production taxes. For the nine months ended September 30, 2024 and 2023, production taxes were $14,368 and $5,240, respectively. The 174% increase is due to the increase in helium revenues. We expect production taxes to be approximately 3.437% of helium revenues.

General and administrative expenses. For the nine months ended September 30, 2024 and 2023, general and administrative expenses were $4,018,329 and $2,238,060, respectively. The 80% increase in general and administrative expenses for the six months ended September 30, 2024 compared to the same period in 2023 is primarily due to an increase in professional fees such as legal and accounting, an increase in headcount to operate as a public company, and other costs required to operate as a public company. Note that our wholly owned subsidiary, Proton Green, LLC, was considered the accounting acquirer in our reverse asset acquisition in July 2023 resulting in Proton Green, LLC's historical financial statements being presented for the nine months ended September 30 2023, which did not include increased professional fees for compliance as a public company. The increase was primarily due to an increase of approximately $651,000 related to audit fees and accounting and legal professionals to prepare and/or review our SEC filings, approximately $443,000 in payroll and payroll related costs due to an increase in full-time employees, approximately $251,000 for Board of Director fees, and approximately $199,000 in insurance primarily for adding a Directors & Officers policy. We also recorded a one-time payment of $122,500 during the nine months ended September 30, 2024 for software. The remaining increase was for office supplies and equipment, travel, filing fees, and other general and administrative costs.

General and administrative expenses - related parties. For the nine months ended September 30, 2024 and 2023, general and administrative expenses - related parties were $140,000 and $37,500, respectively. The 273% increase, as detailed in Note 16 - Transactions with Related Parties, was primarily dueto $95,000 incurred during the nine months ended September 30, 2024 for Front-end engineering design studies for our next planned helium and CO2processing plantwith an entity that is affiliated with one of our Board members and an increase of $27,500 due to an increase in fees incurred for human resource consulting services provided by an immediate family member of one of our name executive officers. This increase was partially offset by a decrease of $20,000 in advisory consulting fees with an entity in which a principal owner of either directly or indirectly more than 10% of the Company's common stock, is the President/Owner.

Other income (expense)

Interest expense. For the nine months ended September 30, 2024 and 2023, interest expense was $2,255,081 and $1,929,501, respectively. The 17% increase in interest expense for three months ended March 31, 2024 compared to the same period in 2023 is due to an increase of approximately $421,000 of interest on our outstanding convertible notes, primarily related to an increase in principal balance outstanding during the nine months ended September 30, 2024 compared to the same period in 2023 and an increase of approximately $22,000 of interest on our financed insurance premium. The increase is partially offset by a decrease of approximately $218,000 of interest incurred on short-term borrowing during the three months ended September 30, 2023 that did not occur in the same period during 2024. The Company issued the short-term borrowings at significant discounts.

Event of default fees. For the nine months ended September 30, 2024 and 2023, event of default fees were $2,301,440 and $5,875,111, respectively. We had outstanding convertible notes in default during both periods. The 61% decrease is due to the Company's convertible notes outstanding during the nine months ended September 30, 2024 having lower default fees compared to the default fees incurred on the convertible notes outstanding during the nine months ended September 30, 2023.

Unrealized gain on fair value of notes payable. For the nine months ended September 30, 2024 and 2023, unrealized gain on fair value of notes payable was $897,549 and $0, respectively. The Company elected the fair value option on the 2023 Convertible Notes and such notes were still outstanding during the nine months ended September 30, 2024. There were no notes outstanding during the nine months ended September 30, 2023 with the fair value option elected.

Unrealized gain on derivatives mark-to-market. For the nine months ended September 30, 2024 and 2023, unrealized gain on derivatives mark-to-market was $534,775 and $185,011, respectively. Our notes payable contained conversion features and warrants that were embedded derivatives that required bifurcation. This balance represents the change in fair value of the conversion features and warrants.

Income Taxes

Income taxes have been accounted for in accordance with ASC 740, "Accounting for Income Taxes". We are subject to income taxes in the United States and the State of Arizona. At September 30, 2024 and December 31, 2023, we had a full valuation allowance against all of our deferred tax assets, including our NOLs. The factors assumed to make the full valuation allowance includes that we have disclosed in Note 3 - Liquiditythat we have significant doubt about our ability to continue as a going concern and we have a history of pretax operating losses.

Contractual Obligations, Commitments, and Contingencies

Helium Recovery Unit. On January 3, 2022, we entered into a Master Services Agreement (the "MSA") with a contractor for the contractor to provide certain helium removal equipment and purification services at the helium processing plant in the St. Johns Field. The service consist of processing our feed gas using the contractor's pressure swing absorption process and equipment. It is a five-year lease that commenced on April 1, 2023. The fee is $50,000 per month for the service. We attributed $30,000 per month to the rental of equipment and accounted for it as an operating lease under ASC 842 and recorded it to the balance sheet.

Houston Office Lease. On September 30, 2022, we amended the lease for our corporate office in Houston, Texas. The commencement date of the amendment was October 15, 2022 and the lease expiration date was October 31, 2025. On October 25, 2023, we entered into a second amendment on the lease for our corporate office in Houston, Texas to expand the amount of square feet leased. The commencement date for the expansion is January 1, 2024 and the expiration date will be extended to January 31, 2027. We accounted for this lease under ASC 842 as an operating lease that's been recorded to the balance sheet. The lease payments escalate annually. We have co-tenants with the expansion. This amended lease will result in a straight-line amortization of approximately $3,762 per month in "General and administrative expenses" over the life of the contract.

Legal. On March 1, 2022, a potential lender filed a motion for a default judgment against our wholly owned subsidiary, Proton Green, LLC ("Proton Green") seeking a $1,000,000 break-up fee related to a commitment letter for a proposed senior secured term loan facility. The parties unsuccessfully attempted to mediate the case on October 23, 2023. Discovery is complete and the parties have filed cross-motions for summary judgment. On September 6, 2024, the court granted the potential lender's motion for summary judgment and denied Proton Green's cross-motion. We intend to appeal the ruling. No accrual has been recorded to the condensed consolidated financial statements because we are unable to conclude that an unfavorable outcome is probable.

We were served a lawsuit on May 2, 2024, in which we were named as one of several defendants in a complaint filed in the Federal District Court of the Northern District of Illinois, Eastern Division by Alpha Carta, Ltd. et al (the "Alpha Carta Litigation"). Alpha Carta, Ltd. ("Alpha Carta") alleges that Proton Green breached three promissory notes (the "Notes"), a Forbearance Agreement, and a proposed unexecuted revised Forbearance Agreement with respect to payments due on the Notes and that Proton Green owes, with an aggregate balance of principal and interest, in excess of $30,000,000 (the "AC Debt"). Other claims against the defendants include conspiracy to commit fraud, rescission, and declaratory judgment, all related to the AC Debt. We assert, in contrast, that we reached a loan settlement agreement ("Loan Settlement Agreement") with Alpha Carta to settle the AC Debt for $8,000,000, which has been paid. Alpha Carta denies the existence of such Loan Settlement Agreement and alleges that if such Loan Settlement Agreement does exist, it was executed fraudulently.

We believe that the claims asserted in the Alpha Carta Litigation have no merit and intends to vigorously defend them. We have challenged the personal and subject matter jurisdiction, and the court has permitted the plaintiff to conduct limited jurisdictional discovery. We are unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, and accordingly, we have not accrued any liability associated with the Alpha Carta Litigation.

Company assets. As of September 30, 2024, all of the assets of the Company have been pledged as collateral for the 2023 Convertible Notes.

Liquidity and Capital Resources

Since inception, we have generated significant losses. As of September 30, 2024, we had an accumulated deficit of $61,444,879. We have only generated limited revenue to date. Our primary sources of capital have been proceeds from the issuance of debt and equity. The primary uses of capital to date has been for the acquisition of our mineral leases in the St. Johns Field, which gave us operating control over approximately 170,500 acres in Apache County, Arizona, development of the St. Johns Field, paying debt service costs, start-up and operating costs in the St. Johns Field, helium plant installation and funding corporate overhead.

We define working capital as current assets less current liabilities. At September 30, 2024 and December 31, 2023, we had a working capital deficit of $23,236,019 and $23,739,229, respectively. The deficits were primarily due to the amounts outstanding under our notes, as they are classified as current liabilities, and the fair value of outstanding warrants.

As of November 15, 2024, we had cash on hand of approximately $230,000. Our material liquidity needs over the next twelve months consist of the following:

•

On November 21, 2023, we issued a convertible promissory note to each of Kips Bay Select LP ("Kips Bay 2023 Note") and Cyber One, LTD ("Cyber One 2023 Note"), collectively referred to as the Holders, in the principal amount of $8,000,000 to each for an aggregate principal amount of $16,000,000. The Kips Bay 2023 Note and the Cyber One 2023 Note are collectively referred to as the "2023 Convertible Notes". The 2023 Convertible Notes bore interest at a rate of 5% per annum due monthly and monthly repayments of $1,500,000 starting from January 21, 2024 and remaining outstanding balance due on July 21, 2024. See Note 7 - Debt, for more details. We are in default on the 2023 Convertible Notes.

On September 16, 2024, we entered into a Forbearance and Settlement Agreement (the "Forbearance Agreement") with the Holders. Pursuant to the Forbearance Agreement, the Holders have agreed to forbear from exercising certain of its rights and remedies available as a result of existing defaults and events of defaults, against us under the 2023 Convertible Notes in exchange for (i) 1,708,320 shares of common stock to Kips Bay Select LP (the "Kips Bay Shares"), (ii) 1,254,986 shares of common stock to Cyber One LTD (the "Cyber One Shares") and (iii) up to $13,700,000 in cash to the Holders, with $700,000 due on or before September 17, 2024; $4,000,000 due on or before October 15, 2024; $4,000,000 due on or before November 15, 2024; and $5,000,000 due on or before December 15, 2024. If the $5,000,000 due on or before December 15, 2024 is paid on or before November 15, 2024, such amount shall be reduced to $4,000,000. The Company issued the Kips Bay Shares and Cyber One Shares and issued the first payment of $700,000 on September 17, 2024.

On October 15, 2024, we entered into an amendment to the Forbearance Agreement (the "Amended Forbearance Agreement") with the Holders. Pursuant to the Amended Forbearance Agreement , the Holders agreed to continue to forbear from exercising certain of its rights and remedies available as a result of existing defaults and events of defaults, against us under the 2023 Convertible Notes in exchange for (i) 850,000 shares of common stock to each Kips Bay Select LP and Cyber One LTD (the "Amendment Shares") and (ii) $13,000,000 in cash to the Holders, with $1,00,000 due on October 15, 2024; $1,000,000 due on or before October 21, 2024; $4,000,000 due on or before November 15, 2024; and $7,000,000 due on or before December 15, 2024. The Company issued the Amendment Shares and issued the first payment of $1,000,000 on October 15, 2024.

On November 6, 2024, the Company entered into a second amendment to the Forbearance Agreement (the "Second Amended Forbearance Agreement") with the Holders. Pursuant to the Second Amended Forbearance Agreement, the Holders agreed to continue to forbear from exercising certain of its rights and remedies available as a result of existing defaults and events of defaults, against the Company under the 2023 Convertible Notes in exchange for (i) 5,000,000 shares of common stock to each Kips Bay Select LP and Cyber One LTD (the "Second Amendment Shares") and (ii) $14,600,000 in cash to the Holders, with $2,600,000 due on November 21, 2024 and $12,000,000 due on or before January 31, 2025. The Company issued the Second Amendment Shares on November 7, 2024.

•

Funding outstanding accounts payable balances and corporate overhead, which we expect to be approximately $5.5 million to $6.5 million.

•

Our sole helium processing plant in the St. Johns Field has not reached "steady state" production. We have encountered significant difficulties to date at the helium processing plant because of mechanical issues and design limitations, resulting in inefficient operations and lower helium recovery rates, which has limited our revenues generated and led to recurring losses incurred. In June 2024, we idled the helium processing plant. Way may continue to incur costs of $50,000 per month through April 2028 for leased equipment. More details on the leased equipment are above in the Helium Recovery Unit section of Contractual Obligations, Commitments and Contingencies. In addition, we anticipate shut-in royalties would be approximately $250,000.

We may issue additional shares of our Series A Preferred Stock under the Series A Preferred Stock Purchase Agreement. We have no committed capital to address our material liquidity needs over the next twelve months from the date of these consolidated financial statements being issued. These matters raise substantial doubt about our ability to continue as a going concern for a period of one year after the date that these consolidated financial statements are issued. The condensed consolidated financial statements included in this quarterly report have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not include adjustments that might result from the outcome of these uncertainties.

We are focused on plant designs that will allow us to continue developing our helium reserves while also developing our CO2resources. We have front-end engineering design studies underway for our next planned helium and CO2processing plant. We expect that our next significant capital outlay will be to construct a processing plant at the St. Johns Field that is capable of producing approximately 50,000 cubic feet per day of helium and approximately 500 tons per day of beverage grade CO2. Our estimate of the cost for the plant design, equipment, construction and drilling wells is approximately $25,000,000 to $30,000,000. Thereafter, we plan to continue adding plants of similar design and drilling new wells as needed to meet the plants' processing capacity.

We are currently evaluating debt and equity financing strategies that we believe will provide sufficient capital to fund our next planned helium and CO2processing plant and drill new wells as needed. We believe our next planned helium and CO2processing plant will generate positive cash flows from operations and provide sufficient capital to address any debt service costs we would incur from debt financing strategies. Helium and CO2production levels that we believe we are capable of achieving as a result of these capital expenditures will position us as a top tier producer of helium and CO2, thereby giving us considerable bargaining power when negotiating off-take and transportation agreements. If we are unable to execute any of our debt and financing strategies or one on acceptable terms, we may not be able to finance the capital expenditures necessary to develop our helium and CO2 resources. Because we are the operator of all of our acreage, the timing and level of our capital spending is largely discretionary and within our control.

Cash Flows from Operating, Investing and Financing Activities

The following table summarizes our cash flows for the period indicated:


	For the Nine Months Ended September 30,
	2024			2023
Net cash provided by (used in):	(unaudited)
Operating activities		(8,252,620	)		(2,471,818	)
Investing activities		(209,636	)		(703,882	)
Financing activities		9,033,715			3,163,000

Operating activities. There was an increase in cash used in operating activities of $5,780,802 for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily due to payment of interest and default fees to Holders of the 2023 Convertible Notes and an increase in general and administrative expenses.

Investing activities. Net cash used in investing activities for the nine months ended September 30, 2024 and 2023 related to capital expenditures at the St. Johns Field for delay rental payments and equipment at the helium processing plant and wellhead.

Financing activities. Net cash provided by financing activities for the nine months ended September 30, 2024 consisted of cash proceeds of $8,000,000 from the issuance of the Series A Preferred Stock, approximately $988,000 from the issuance of our common stock and $250,000 from short-term borrowings, partially offset by paydown of approximately $204,000 on our outstanding convertible notes. Net cash provided by financing activities for the nine months ended September 30, 2023 consisted of proceeds of $5,433,000, net of issuance costs, from the issuance of equity and proceeds of $730,000 from short-term notes issued by the company. This increase was partially offset by the paydown on debt of $3,000,000.

Off-Balance Sheet Arrangements

As of September 30, 2024, we had no off-balance arrangements or other such unrecorded obligations and we have not guaranteed any debt of any unrelated party.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ significantly from those estimates.

Our Annual Report on Form 10-K contains a discussion, which is incorporated herein by reference, of the accounting estimates that we believe are critical to the reporting of our financial position and operating results and that require management's judgment. Our more significant policies and estimates include:

•

Full cost method of accounting for helium and CO2properties

•

Impairment of helium and CO2properties

•

Depreciation, depletion and amortization for helium and CO2properties

•

Helium reserve quantities

•

Asset retirement obligations

•

Derivative financial instruments

•

Fair value option

Recently Issued Accounting Pronouncements

The information contained in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies to the condensed consolidated financial statements under the heading "Recently Issued Accounting Pronouncements" is hereby incorporated by reference into this Part I, Item 2.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Control and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. As of September 30, 2024, our disclosure controls and procedures were not effective as a result of a material weaknesses identified during the year ended December 31, 2023 that we are in the process of remediating. The material weaknesses related to the lack of completeness over the population of leases for ASC 842 booking and disclosures, lack of communication and retention of legal documents and lack of review and management oversight, which led to the incorrect application of generally accepted accounting principles and ineffective controls over the financial statement close and reporting processes.

We are recruiting additional finance and accounting personnel and we will continue to evaluate our personnel in all key finance and accounting positions to see if additional finance and accounting personnel are required.

We are not required to comply with the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act while we qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

On March 1, 2022, a potential lender filed a motion for a default judgment against our wholly owned subsidiary, Proton Green, LLC ("Proton Green") seeking a $1,000,000 break-up fee related to a commitment letter for a proposed senior secured term loan facility. The parties unsuccessfully attempted to mediate the case on October 23, 2023. Discovery is complete and the parties have filed cross-motions

for summary judgment. On September 6, 2024, the court granted the potential lender's motion for summary judgment and denied Proton Green's cross-motion. We intend to appeal the ruling. No accrual has been recorded to the condensed consolidated financial statements because we are unable to conclude that an unfavorable outcome is probable.

We believe that the claims asserted in the Alpha Carta Litigation have no merit and intends to vigorously defend them. The Company has challenged the personal and subject matter jurisdiction, and the court has permitted the plaintiff to conduct limited jurisdictional discovery. We are unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, and accordingly, we have not accrued any liability associated with the Alpha Carta Litigation.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None that have not been previously reported in a SEC filing.

Item 3. Defaults Upon Senior Securities.

On September 16, 2024, the Company entered into a Forbearance and Settlement Agreement (the "Forbearance Agreement") with the Holders. Pursuant to the Forbearance Agreement, the Holders have agreed to forbear from exercising certain of its rights and remedies available as a result of existing defaults and events of defaults, against us under the 2023 Convertible Notes in exchange for (i) 1,708,320 shares of common stock to Kips Bay Select LP (the "Kips Bay Shares"), (ii) 1,254,986 shares of common stock to Cyber One LTD (the "Cyber One Shares") and (iii) up to $13,700,000 in cash to the Holders, with $700,000 due on or before September 17, 2024; $4,000,000 due on or before October 15, 2024; $4,000,000 due on or before November 15, 2024; and $5,000,000 due on or before December 15, 2024. If the $5,000,000 due on or before December 15, 2024 is paid on or before November 15, 2024, such amount shall be reduced to $4,000,000. The Company issued the Kips Bay Shares and Cyber One Shares and issued the first payment of $700,000 on September 17, 2024.

in exchange for (i) 850,000 shares of common stock to each Kips Bay Select LP and Cyber One LTD (the "Amendment Shares") and (ii) $13,000,000 in cash to the Holders, with $1,00,000 due on October 15, 2024; $1,000,000 due on or before October 21, 2024; $4,000,000 due on or before November 15, 2024; and $7,000,000 due on or before December 15, 2024. The Company issued the Amendment Shares and issued the first payment of $1,000,000 on October 15, 2024.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Trading Plans/Arrangements.During the quarter ended September 30, 2024, no director or Section 16 officer of Cyber App Solutions Corp. adoptedor terminatedany Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K).

Material Changes to Board Nomination Procedures. On November 7, 2024, the shareholders of the Company approved the proposed amended and restated bylaws of the Company (the "Amended and Restated Bylaws") to, among other things, adequately address the needs of the Company and update the existing bylaws so that they are in line with current industry standards for public companies. Among other matters, the amendments contained in the Amended and Restated Bylaws:

clarify the procedures for holding annual meetings and special meetings;

change the time required for giving notice to shareholders for meetings from not less than 10 days or more than 50 days before the date of the meeting to not less than 10 days nor more than 60 days before the date of each meeting;

change the period of time that the Board (as defined below) may fix a record date from not less than 10 days nor more than 50 days prior to any meeting to not more than 60 nor less than 10 days before the date of such meeting, and clarify the procedures and requirements for when a record date is not fixed;

extend the period of time that proxies are valid for;

clarify the procedures and requirements for shareholders to bring forth Board nominations and shareholder proposals for shareholder meetings;

provide the Board with the ability to increase the number of directors above 5;

revise the percentage required to remove a director from a majority of the shares outstanding to not less than 2/3rds of the voting power of the issued and outstanding shares; and

update the procedures and requirements for indemnification and include the option for the Board to include employees and other persons pursuant to an action by the Board.

The Amended and Restated Bylaws were previously adopted by the Board. The foregoing description of the Amended and Restated Bylaws is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, which is filed as Exhibit 3.1 to our Current Report on Form 8-K filed on November 13, 2024.

Item 6. Exhibits.

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).


Exhibit Number		Description
3.1		Articles of Incorporation of the Company, as currently in effect (Incorporated by reference as Exhibit 3.1 to the Registrant's Registration Statement on Form S-1 (No. 333-254676) filed with the Securities and Exchange Commission on March 25, 2021)
3.2		Certificate of Designations of Rights, Powers, Preferences, Privileges and Restrictions of Series A Convertible Preferred Stock of Cyber App Solutions Corp. (Incorporated by reference as Exhibit 3.2 to the Registrant's Current Report on Form 8-K (File No. 001-41946) filed with the SEC on August 14, 2024)
3.3		Certificate of Amendment to the Articles of Incorporation (Incorporated by reference as Exhibit 3.2 to the Registrant's Form 10-Q (File No. 001-41946) filed with the SEC on August 19, 2024)
3.4		Certificate of Amendment to the Articles of Incorporation (Incorporated by reference as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 333-254676) filed with the SEC on July 17, 2023)
3.5		Amended and Restated Bylaws of the Company, effective as of November 7, 2024 (incorporated by reference from the current report on Form 8K filed with the U.S Securities and Exchange Commission on November 13, 2024.)
10.1		Securities Purchase Agreement, dated as of August 8, 2024, by and among Cyber App Solutions Corp. and each purchaser identified thereto (Incorporated by reference as Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No. 001-41946) filed with the SEC on August 14, 2024)
10.2		Registration Rights Agreement, dated August 8, 2024, between Cyber App Solutions Corp. and each of the several purchasers signatory thereto (Incorporated by reference as Exhibit 10.2 to the Registrant's Current Report on Form 8-K (File No. 001-41946) filed with the SEC on August 14, 2024)
10.3		Forbearance and Settlement Agreement, dated September 16, 2024, by and between Cyber App Solutions Corp., Kips Bay Select LP, and Cyber One, Ltd. (Incorporated by reference as Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No. 001-41946) filed with the SEC on September 20, 2024)
10.4		Amendment to Forbearance and Settlement Agreement, dated October 15, 2024, by and between Cyber App Solutions Corp., Kips Bay Select LP, and Cyber One, Ltd. (Incorporated by reference as Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No. 001-41946) filed with the SEC on October 22, 2024)
10.5		Amendment to Forbearance and Settlement Agreement, dated November 6, 2024, by and between Cyber App Solutions Corp., Kips Bay Select LP, and Cyber One, Ltd.
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Company Name

Date: November 19, 2024	By:	/s/ Steven Looper
		Steven Looper
		Chief Executive Officer
		(Principal Executive Officer)

Date: November 19, 2024	By:	/s/ Kenneth Winters
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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