EON Resources Inc. quarterly report, Q2 FY2023

EON Resources Inc. — Filing identity and reporting period

Important filing-identity mismatch: The supplied Form 10-Q is for HNR Acquisition Corp. (NYSE American: HNRA; warrants: HNRAW), not EON Resources Inc. It covers the quarter and six months ended June 30, 2023, and was signed August 18, 2023. The company describes itself as a pre-business-combination SPAC, not an operating energy company.

Financial results and liquidity

HNR had no operating revenue and had not commenced operations; its activity was primarily seeking a business combination. It earned non-operating income from investments held in its trust account.

At June 30, 2023, cash was $813,177 and trust-account marketable securities were $48.1 million, versus $75,612 and $89.2 million, respectively, at December 31, 2022. The trust balance fell principally following redemptions. The filing reports a working-capital deficit of $1,699,274, excluding franchise and income taxes payable that it says may be paid from trust interest. Current liabilities were $3.17 million; total liabilities were $7.22 million. These included $925,654 of related-party notes payable, net of discount, $1.46 million of warrant liabilities, and a $2.59 million deferred underwriting fee payable. Redeemable shares of $47.45 million are presented as temporary equity, not conventional debt.

Six-month investing cash inflow was $42.93 million, primarily reflecting $43.32 million withdrawn from the trust for redemptions, partly offset by extension deposits. Financing cash outflow was $41.47 million, including the $43.32 million redemption payment and $1.85 million of note proceeds. The filing provides no conventional operating margin or operating-revenue trend because the SPAC had no operating business.

Material changes and transaction developments

• On May 11, 2023, 4,115,597 public shares were redeemed for $43.32 million. Public shares subject to redemption declined to 4,509,403 from 8,625,000 at year-end 2022.
• HNR entered into a December 2022 agreement to acquire 100% of Pogo Resources, LLC for $100 million in cash, potentially with up to $15 million payable by seller note, plus 2 million HNR shares; the price is subject to adjustment. The filing describes this as a proposed transaction, not a completed acquisition.
• During the first half, HNR received $1.85 million under unsecured investor notes and issued warrants. The notes bear interest at the greater of 15% or the legal maximum, and include repayment and warrant-redemption provisions. After June 30, it received another $285,000 on similar terms.
• HNR also had a conditional stock-purchase arrangement with White Lion for up to $150 million of shares through December 2025, subject to conditions including an effective registration statement. The purchase price is 96% of the lowest daily VWAP over a specified two-day period; HNR agreed to issue commitment shares valued at $1.5 million.

Outlook, risks and unusual items

• Going concern: Management stated that limited cash, the working-capital deficit, continuing costs, financing uncertainty, and the risk of failing to complete a business combination raise substantial doubt about HNR’s ability to continue as a going concern within one year after issuance. The financial statements include no adjustments for that uncertainty.
• Combination deadline: Sponsor deposits extended the deadline to September 15, 2023 as of the filing’s subsequent-events discussion. The filing describes available further extensions inconsistently: one passage says up to two additional months, another says three, while the charter amendment discussion refers to extensions through November 15. Failure to complete a combination would require redemption of public shares.
• Excise tax: HNR recorded a $436,665 estimated liability associated with the May redemptions under the 1% stock-repurchase excise tax. The filing says it may be offset by qualifying same-year stock issuance and would not be due if HNR liquidates before December 31, 2023.
• Accounting and controls: The company reported ineffective disclosure controls and a material weakness involving insufficient accounting personnel, inaccurate redemption-value remeasurement, complex financial-instrument accounting, and untimely accruals. It plans to add accounting staff and improve processes, but gives no assurance remediation will succeed.
• Other: The filing reports no legal proceedings and no material changes to previously disclosed risk factors. It provides no operating-business guidance; completion of the proposed transaction and availability of financing remain uncertain.

Investor facts to verify

1. Confirm the intended issuer: this filing is for HNR Acquisition Corp., not EON Resources Inc.
2. Check the status, terms, financing, required approvals, and closing conditions of the proposed Pogo Resources acquisition.
3. Verify the operative combination deadline and any subsequent extensions, deposits, redemptions, or liquidation developments.
4. Review HNR’s cash needs, related-party financing terms, warrant liabilities, and the conditions and potential dilution associated with the White Lion arrangement.
5. Track remediation of the disclosed material weakness and whether later filings revise financial measures or redemption-related estimates.