EMPIRE PETROLEUM CORP 10-Q

Item 1. Financial Statements EMPIRE PETROLEUM CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (Unaudited) June 30, December 31, 2025 2024 ASSETS Current Assets: Cash $ 2,293 $ 2,251 Accounts Receivable 10,167 8,155 Inventory 1,303 1,305 Prepaids 756 640 Total Current Assets 14,519 12,351 Property and Equipment: Oil and Natural Gas Properties, Successful Efforts 144,008 140,675 Less: Accumulated Depletion, Amortization and Impairment ( 36,583 ) ( 31,974 ) Total Oil and Gas Properties, Net 107,425 108,701 Other Property and Equipment, Net 1,484 1,391 Total Property and Equipment, Net 108,909 110,092 Other Noncurrent Assets 1,231 1,425 Total Assets $ 124,659 $ 123,868 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 11,935 $ 10,452 Accrued Expenses 11,402 10,348 Current Portion of Lease Liability 300 400 Current Portion of Note Payable - Related Party (Note 8) 2,000 — Current Portion of Long-Term Debt 530 70 Total Current Liabilities 26,167 21,270 Long-Term Debt 14,627 11,266 Long-Term Lease Liability 39 144 Asset Retirement Obligations 29,321 28,423 Total Liabilities 70,154 61,103 Commitments and Contingencies (Note 14) Stockholders' Equity: Series A Preferred Stock - $ 0.001 Par Value, 10,000,000 Shares Authorized, 6 and 6 Shares Issued and Outstanding, Respectively — — Common Stock - $ 0.001 Par Value 190,000,000 Shares Authorized, 33,756,595 and 33,667,132 Shares Issued and Outstanding, Respectively 93 93 Additional Paid-in-Capital 144,506 143,489 Accumulated Deficit ( 90,094 ) ( 80,817 ) Total Stockholders' Equity 54,505 62,765 Total Liabilities and Stockholders' Equity $ 124,659 $ 123,868 See accompanying notes to unaudited interim condensed consolidated financial statements. 2 EMPIRE PETROLEUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except shares data) (Unaudited) For the Three Months Ended June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 Revenue: Oil Sales $ 8,005 $ 12,287 $ 16,054 $ 21,729 Gas Sales 221 ( 116 ) 769 261 Natural Gas Liquid ("NGL") Sales 521 617 916 1,033 Total Product Revenues 8,747 12,788 17,739 23,023 Other 7 11 17 21 Loss on Derivatives — ( 1 ) — ( 859 ) Total Revenue 8,754 12,798 17,756 22,185 Costs and Expenses: Lease Operating Expense 6,387 7,543 12,153 14,930 Production and Ad Valorem Taxes 768 1,066 1,480 1,899 Depreciation, Depletion & Amortization 2,576 2,677 4,802 4,167 Accretion of Asset Retirement Obligation 534 492 1,060 977 General and Administrative: General and Administrative 2,906 2,354 6,103 5,233 Stock-Based Compensation 486 592 1,017 1,302 Total General and Administrative 3,392 2,946 7,120 6,535 Total Costs and Expenses 13,657 14,724 26,615 28,508 Operating Loss ( 4,903 ) ( 1,926 ) ( 8,859 ) ( 6,323 ) Other Income and (Expense): Interest Expense ( 334 ) ( 735 ) ( 630 ) ( 1,050 ) Other Income (Expense) 181 ( 1,729 ) 212 ( 991 ) Loss Before Taxes ( 5,056 ) ( 4,390 ) ( 9,277 ) ( 8,364 ) Income Tax Benefit (Provision) — — — — Net Loss $ ( 5,056 ) $ ( 4,390 ) $ ( 9,277 ) $ ( 8,364 ) Net Loss per Common Share: Basic $ ( 0.15 ) $ ( 0.15 ) $ ( 0.27 ) $ ( 0.30 ) Diluted $ ( 0.15 ) $ ( 0.15 ) $ ( 0.27 ) $ ( 0.30 ) Weighted-Average Number of Common Shares Outstanding: Basic 33,853,310 29,839,853 33,837,377 27,752,816 Diluted 33,853,310 29,839,853 33,837,377 27,752,816 See accompanying notes to unaudited interim condensed consolidated financial statements. 3 EMPIRE PETROLEUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands) (Unaudited) Common Stock Preferred Stock Shares Par Value Shares Par Value Additional Paid-in-Capital Accumulated Deficit Total Balances, December 31, 2024 33,667 $ 93 6 $ — $ 143,489 $ ( 80,817 ) $ 62,765 Net Loss — — — — — ( 4,221 ) ( 4,221 ) Stock-Based Compensation 44 — — — 531 — 531 Balances, March 31, 2025 33,711 $ 93 6 $ — $ 144,020 $ ( 85,038 ) $ 59,075 Net Loss — — — — — ( 5,056 ) ( 5,056 ) Stock-Based Compensation 46 — — — 486 — 486 Balances, June 30, 2025 33,757 $ 93 6 $ — $ 144,506 $ ( 90,094 ) $ 54,505 Common Stock Preferred Stock Shares Par Value Shares Par Value Additional Paid-in-Capital Accumulated Deficit Total Balances, December 31, 2023 25,504 $ 85 6 $ — $ 99,490 $ ( 64,619 ) $ 34,956 Net Loss — — — — — ( 3,974 ) ( 3,974 ) Stock-Based Compensation 120 — — — 710 — 710 Balances, March 31, 2024 25,624 $ 85 6 $ — $ 100,200 $ ( 68,593 ) $ 31,692 Net Loss — — — — — ( 4,390 ) ( 4,390 ) Rights Offering (Note 10) 4,132 4 — — 20,507 — 20,511 Conversion of Related-Party Note (Note 8) 800 1 — — 6,160 — 6,161 Partial Conversion of Option to Purchase (Note 8) 600 1 — — 3,155 — 3,156 Warrants Exercised (Note 10) 129 — — — 950 — 950 Stock-Based Compensation 91 — — — 592 — 592 Balances, June 30, 2024 31,376 $ 91 6 $ — $ 131,564 $ ( 72,983 ) $ 58,672 See accompanying notes to unaudited interim condensed consolidated financial statements. 4 EMPIRE PETROLEUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) For the Six Months Ended June 30, 2025 2024 Cash Flows From Operating Activities: Net Loss $ ( 9,277 ) $ ( 8,364 ) Adjustments to Reconcile Net Loss to Net Cash (Used In) Provided By Operating Activities: Stock-Based Compensation 1,017 1,302 Amortization of Right-of-Use Assets 241 271 Depreciation, Depletion & Amortization 4,802 4,167 Accretion of Asset Retirement Obligations 1,060 977 Loss on Commodity Derivatives — 859 Settlement on or Purchases of Derivative Instruments — ( 263 ) Loss on Financial Derivatives (Note 8) — 998 Amortization of Debt Discount on Convertible Notes — 500 Gain on Extinguishment of Debt — ( 17 ) Gain on Sale of Oil and Natural Gas Properties ( 175 ) — Gain on Sale of Other Fixed Assets ( 32 ) — Change in Operating Assets and Liabilities: Accounts Receivable ( 2,012 ) ( 630 ) Inventory, Oil in Tanks 1 ( 18 ) Prepaids, Current 425 460 Accounts Payable 1,321 1,855 Accrued Expenses 1,054 1,030 Other Long-Term Assets and Liabilities 50 ( 1,021 ) Net Cash (Used In) Provided By Operating Activities ( 1,525 ) 2,106 Cash Flows From Investing Activities: Disposal of Oil and Natural Gas Properties 175 — Capital Expenditures - Oil and Natural Gas Properties (1) ( 3,171 ) ( 30,143 ) Disposal of Other Fixed Assets 49 — Purchase of Other Fixed Assets ( 41 ) ( 120 ) Cash Paid for Right-of-Use Assets ( 224 ) ( 251 ) Net Cash Used In Investing Activities ( 3,212 ) ( 30,514 ) Cash Flows From Financing Activities: Borrowings on Credit Facility 3,000 3,950 Proceeds from Promissory Note - Related Party (Note 8) 2,000 5,000 Proceeds from Rights Offering, net of transaction costs (Note 10) — 20,512 Principal Payments of Debt ( 221 ) ( 218 ) Net Proceeds from Warrant Exercise (Note 10) — 629 Net Cash Provided By Financing Activities 4,779 29,873 Net Change in Cash 42 1,465 Cash - Beginning of Period 2,251 7,793 Cash - End of Period $ 2,293 $ 9,258 Supplemental Cash Flow Information: Cash Paid for Interest $ 592 $ 437 _____________________ (1) Incurred capital expenditures were approximately $3.3 million and $25.5 million for the respective periods. The differences between incurred and cash capital expenditures is due to changes in related accounts payable. See accompanying notes to unaudited interim condensed consolidated financial statements. 5 EMPIRE PETROLEUM CORPORATION NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share data) Note 1 - Organization and Basis of Presentation Empire Petroleum Corporation (“Empire,” collectively with its subsidiaries) is an independent energy company operator engaged in optimizing developed production by employing field management methods to maximize reserve recovery while minimizing costs. Empire operates the following wholly-owned subsidiaries in its areas of operations: ● Empire New Mexico LLC (“Empire New Mexico”), consisting of the following entities: o Empire New Mexico LLC d/b/a Green Tree New Mexico o Empire EMSU LLC o Empire EMSU-B LLC o Empire AGU LLC o Empire NM Assets LLC ● Empire North Dakota (“Empire North Dakota”), consisting of the following entities: o Empire North Dakota LLC o Empire North Dakota Acquisition LLC (“Empire NDA”) o Empire Northwest Shelf LLC ● Empire Texas (“Empire Texas”), consisting of the following entities: o Empire Texas LLC o Empire Texas Operating LLC o Empire Texas Development LLC o Empire Texas GP LLC o Pardus Oil & Gas Operating, LP (owned 1% by Empire Texas GP LLC and 99% by Empire Texas LLC) ● Empire Louisiana LLC (“Empire Louisiana”) Empire was incorporated in the State of Delaware in 1985. The unaudited interim condensed consolidated financial statements include the accounts of Empire and its wholly-owned subsidiaries. The terms “Company,” “we,” “us,” “our,” and similar terms refer to Empire Petroleum Corporation and its subsidiaries. The accompanying unaudited interim condensed consolidated financial statements of Empire have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of Empire's financial position, the results of operations, and the cash flows for the interim period are included. All intercompany accounts and transactions have been eliminated in consolidation. All adjustments are of a normal, recurring nature. Operating results for the interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. The information contained in this Form 10-Q should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2024, which are contained in Empire's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2025. Liquidity and Going Concern The Company has a revolving line of credit agreement (Note 8) with Equity Bank which requires the Company to maintain compliance with certain financial covenants computed on a quarterly and annual basis. As of June 30, 2025, the Company was in compliance with all required covenants and projected to be in compliance with all debt covenants over the next 12 months. However, the Company carried a negative working capital of approximately $11.6 million as of June 30, 2025, an overall decrease of approximately $2.7 million from the end of 2024. The decrease in working capital is primarily driven by the Starbuck Drilling Program in North Dakota, continued unforeseen operational costs from the Company’s return-to-production program in Texas which started in the fourth quarter of 2024, a related party note that will be repaid when the subscription rights offering described in Note 10 is completed, which is expected to occur in August 2025, and lower oil production in North Dakota due to redrilling activity on certain wells. To meet its obligations, the Company increased its revolver commitment to $20.0 million in November 2024 which had approximately $4.0 million remaining unused 6 commitment as of June 30, 2025, which can be used for future obligations; however, the revolver commitment is reduced monthly by $0.25 million commencing on December 31, 2024 (see Note 8), limiting future access to capital. Further, the Company entered into a promissory note with Phil Mulacek in June 2025 for total aggregate available principal amount of $4.0 million, of which $2.0 million was advanced to the Company during the second quarter of 2025 (see Note 8). Finally, a subscription rights offering is scheduled to be completed in August 2025, which is expected to raise approximately $5.0 million of gross proceeds (see Note 10); however, a portion of these proceeds will be used to settle the outstanding balance of the promissory note with Phil Mulacek per the terms of the note. While these transactions provide additional funding towards the Company’s obligations, the Company expects to have negative working capital for the remainder of 2025 and future expected operating cash flows do not sufficiently meet the Company’s obligations for the next 12 months. Given the negative working capital and insufficient expected operating cash flow there is substantial doubt about the Company’s ability to continue as a going concern. Empire has committed financial support from Phil Mulacek who owns approximately 21.4% of our common stock outstanding as of June 30, 2025, and Energy Evolution Master Fund, Ltd. (“Energy Evolution”), our largest stockholder who owns approximately 31.8% of our common stock outstanding as of June 30, 2025. Both are related parties of the Company (see Note 13). Mr. Mulacek and Energy Evolution are willing and able to provide these additional funds, if required, for Empire to continue to meet its obligations over the next 12 months. These additional funds may be raised through related party warrants, or a related party note payable that may or may not have conversion rights into shares of common stock of Empire. Management has considered these plans, including if they are within the control of Empire, in evaluating Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements - Going Concern . Management believes the above actions are sufficient to allow Empire to meet its obligations as they become due for a period of at least 12 months from the issuance of these financial statements. Management believes that its plans, and support from the existing related-party stockholders discussed above, is probable and has alleviated the substantial doubt regarding Empire’s ability to continue as a going concern. Note 2 – Summary of Significant Accounting Policies Significant Accounting Policies There have been no material changes to significant accounting policies and estimates from the information provided in the Form 10-K for the year ended December 31, 2024. Principles of Consolidation The unaudited interim condensed consolidated financial statements include the accounts and balances of the Company and have been prepared in accordance with US GAAP. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Estimated quantities of crude oil, natural gas and natural gas liquids (“NGLs”) reserves are the most significant of the Company’s estimates. All reserve data used in the preparation of the unaudited interim condensed consolidated financial statements, including depletion, are based on estimates. Reservoir engineering is a subjective process of estimating underground accumulations of crude oil, natural gas and NGLs. There are numerous uncertainties inherent in estimating quantities of proved crude oil, natural gas and NGLs reserves. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, reserve estimates may be different from the quantities of crude oil, natural gas and NGLs that are ultimately recovered. Other items subject to estimates and assumptions include, but are not limited to, the carrying amounts of property, plant and equipment, asset retirement obligations, valuation allowances for deferred income tax assets, and valuation of derivative instruments. Management evaluates estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment. The volatility of commodity prices results in increased uncertainty inherent in such estimates and assumptions. Although management believes these estimates are reasonable, actual results may differ from estimates and assumptions of future events and these revisions could be material. Future production may vary materially from estimated oil and natural gas proved reserves. Actual future prices may vary significantly from price assumptions used for determining proved reserves and for financial reporting. 7 Accounts Receivable Accounts receivable include estimated amounts due from crude oil, natural gas, and NGLs purchasers and from non-operating working interest owners. Accrued revenue related to product sales from purchasers and operators are due under normal trade terms, generally requiring payment within 60 days of production. For receivables from joint interest owners, the Company generally has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Receivables are stated at amounts due, net of an allowance for credit losses, if necessary, and are considered past due if full payment is not received by the contractual due date. The Company estimates uncollectible amounts based on the length of time that the accounts receivable has been outstanding, historical collection experience and current and future economic and market conditions, if failure to collect is expected to occur. Past due accounts are generally written off against the allowance for credit losses account only after all collection attempts have been exhausted. The Company did not have an allowance for credit losses as of June 30, 2025. Inventory Inventory primarily consists of oil in tanks which has not been delivered and is valued at the lower of cost or net realizable value. Concentrations of Credit Risk Empire’s accounts receivable are primarily receivables from oil and natural gas purchasers and joint interest owners. The oil and natural gas purchasers consist primarily of independent marketers, major oil and natural gas companies and gas pipeline companies. Historically, the Company has not experienced any significant losses from uncollectible accounts from its oil and natural gas purchasers. The Company operates a substantial portion of its oil and natural gas properties. As the operator of a property, we make full payments for costs associated with the property and seek reimbursement from the other working interest owners in the property for their share of those costs. Joint operating agreements govern the operations of an oil or natural gas well and, in most instances, provide for the offsetting of amounts payable or receivable between the Company and its joint interest owners. Our joint interest partners consist primarily of independent oil and natural gas producers. If the oil and natural gas exploration and production industry in general were adversely affected, the ability of the joint interest partners to reimburse Empire could be adversely affected. Convertible Debt and Derivative Liability In connection with Empire’s issuance of a promissory note in the first quarter of 2024, Empire bifurcated the embedded conversion option and recorded the embedded conversion option as a long-term derivative liability in Empire’s unaudited interim condensed consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging . The convertible debt and the derivative liability associated with the promissory note were separately presented as long-term note payable – related party and long-term derivative instruments on the consolidated financial statements for the applicable periods. The convertible debt was carried at amortized cost. The derivative liability was remeasured at each reporting period using a binomial lattice model with changes in fair value recorded in other income (expense) of the applicable period’s unaudited interim condensed consolidated statements of operations. The conversion option related to the promissory note was exercised in the second quarter of 2024. See Note 8 for further details. The Company enters into hedge agreements from time to time to manage its exposure to oil and natural gas price fluctuations. The fair value of derivative contracts is recognized as an asset or liability on the Company’s unaudited interim condensed consolidated balance sheets. Realized gain or loss is recognized as a component of revenue when the derivative contracts mature. For contracts which have not matured, an unrealized gain or loss is recorded based on the change in the fair value of the outstanding contracts. Oil and Natural Gas and Other Properties The Company uses the successful efforts method of accounting for its oil and gas activities. Costs incurred are deferred until exploration and completion results are evaluated. At such time, costs of activities with economically recoverable reserves are capitalized as proven properties, and costs of unsuccessful or uneconomical activities are expensed. Exploration drilling costs are expensed if recoverable reserves are not found. Costs incurred to maintain wells and related equipment and lease and well operating costs are charged to expense as incurred. Upon sale or retirement of oil and natural gas properties, the costs and related accumulated depletion and amortization are eliminated from the accounts and the resulting gain or loss is recognized. Capitalized drilling costs are reviewed periodically for impairment. Costs related to impaired prospects or unsuccessful exploratory drilling are charged to expense. Management's assessment of the results of exploration activities, commodity price outlooks, planned future sales or expiration of all or a portion of such leaseholds impact the amount and timing of impairment provisions. An impairment expense could result if oil and gas prices decline in the future as it may not be economical to develop some of these unproved properties. 8 Lease options are capitalized as unproved property acquisition costs and are reviewed for impairment if indicators exist that the carrying value of the lease option may not be recoverable. If the lease options become impaired, expire or are abandoned, the options will be expensed. If proved reserves are discovered after the options are exercised, these costs will be reclassified as proved property. Depletion and amortization of producing properties is computed on the units-of-production method on a property-by-property basis. The units-of-production method is based primarily on estimates of proved reserve quantities. Due to uncertainties inherent in this estimation process, it is at least reasonably possible that reserve quantities will be revised in the near term. Changes in estimated reserve quantities are applied to depletion and amortization computations prospectively. Other property and equipment is depreciated on the straight-line method. Revenue Recognition The Company’s revenues are comprised solely of revenues from customers and include the sale of oil, natural gas and NGLs. The Company believes that the disaggregation of revenue into these three major product types, as presented in the consolidated statements of operations, appropriately depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors based on its single geographic region, the continental United States. Revenues are recognized at a point in time when production is sold to a purchaser at a determinable price, delivery has occurred, control has transferred and it is probable substantially all of the consideration will be collected. The Company fulfills its performance obligations under its customer contracts through delivery of oil, natural gas and NGLs and revenues are recorded on a monthly basis. The Company receives payment from one to three months after delivery. Generally, each unit of product represents a separate performance obligation. The prices received for oil, natural gas and NGLs sales under the Company’s contracts are generally derived from stated market prices which are then adjusted to reflect deductions including transportation, fractionation and processing. As a result, revenues from the sale of oil, natural gas and NGLs will decrease if market prices decline. The sales of oil, natural gas and NGLs, as presented on the unaudited interim condensed consolidated statements of operations, represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others. When selling oil, natural gas and NGLs on behalf of royalty or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis. To the extent actual volumes and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information not received from third parties, the expected sales volumes and prices for those properties are estimated and recorded. Variances between the Company’s estimated revenue and actual payment are recorded in the month the payment is received. Historically, these differences have been insignificant. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are recorded in accounts receivable on the consolidated balance sheets. Taxes assessed by governmental authorities on oil, natural gas and NGLs sales are presented separately from such revenues in the unaudited interim condensed consolidated statements of operations. Oil Sales Oil production is transported from the wellhead to tank batteries or delivery points through flow-lines or gathering systems. Purchasers of the oil take delivery at the tank batteries and transport the oil by truck or at a pipeline delivery point and the Company collects a market price, net of pricing differentials. Revenue is recognized when control transfers to the purchaser at the net price received by the Company. Natural Gas and NGLs Sales Under the Company’s natural gas sales arrangements, the purchaser takes control of wet gas at a delivery point near the wellhead or at the inlet of the purchaser’s processing facility. The purchaser gathers and processes the wet gas and remits proceeds to the Company for the resulting natural gas and NGLs sales. Based on the nature of these arrangements, the purchaser is the Company’s processor, thus, the Company recognizes natural gas and NGLs sales based on the net amount of proceeds received from the purchaser. Transaction Price Allocated to Remaining Performance Obligations Substantially all of the Company’s product sales are short-term in nature with a contract term of one year or less. For these contracts, the Company has utilized the practical expedient in Accounting Standards Update (“ASU”) 2024, Revenue from Contracts with Customers ("Topic 606”) which exempts the Company from the requirements to disclose the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. 9 For the Company’s product sales that have a contract term greater than one year, the Company has utilized the practical expedient in Topic 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. Prior-Period Performance Obligations The Company records revenue in the month that product is delivered to the purchaser. Settlement statements for certain natural gas and NGLs sales, however, may not be received for 30 to 90 days after the date the product is delivered, and as a result the Company is required to estimate the amount of product delivered to the purchaser and the price that will be received for the sale of the product. In these situations, the Company records the differences between its estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. Any identified differences between the Company’s revenue estimates and actual revenue received have historically been insignificant. For the six months ended June 30, 2025 and 2024, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material. Segment Reporting The Company operates as one operating segment and one reportable segment which is engaged in the exploration, development, and production of oil, gas, and NGLs in New Mexico, North Dakota, Montana, Texas, and Louisiana, from which all of its revenues are derived and expenses incurred. All financial results are reviewed by the Chief Executive Officer ("CEO”), the Company’s Chief Operating Decision Maker ("CODM”), on a consolidated basis to evaluate performance of the Company. The single segment constitutes all of the consolidated entity and the accompanying unaudited interim condensed consolidated financial statements and the notes to the accompanying unaudited interim condensed consolidated financial statements are representative of such amounts. Fair Value Measurements The FASB ASC 820, Fair Value Measurement (“Topic 820”) standards define fair value, establish a consistent framework for measuring fair value and establish a fair value hierarchy based on the observability of inputs used to measure fair value. The three-level fair value hierarchy for disclosure of fair value measurements defined by Topic 820 is as follows: Level 1 – Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Inputs, other than quoted prices within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Level 3 – Prices or valuations that require unobservable inputs that are both significant to the fair value measurement and unobservable. Valuation under Level 3 generally involves a significant degree of judgment from management. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve a degree of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instrument’s complexity. Empire reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no longer justifies classification in the original level. There were no transfers between fair value hierarchy levels for the six months ended June 30, 2025. See Note 15. Related Party Transactions Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. FASB ASC 850, Related Party Disclosures (“Topic 850”) requires that transactions with related parties that would have influence in decision making shall be disclosed so that users of the financial statements can evaluate their significance. Related party transactions typically occur within the context of the following relationships: affiliates of the entity; entities for which investments in their equity securities is typically accounted for under the equity method by the investing entity; trusts for the benefit of employees; principal owners of the entity and members of their immediate families; management of the entity and members of their immediate families; and other parties that can significantly influence the management or operating policies of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. See Note 13 for a listing of related party transactions. 10 Recently Issued Accounting Standards The FASB periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. Empire has reviewed the recently issued pronouncements and concluded that the following new accounting standards updates (“ASU”) are applicable: In December 2023, FASB, issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures (“Topic 740”). The guidance in Topic 740 improves the transparency of income tax disclosures by greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard is effective for public companies for fiscal years beginning after December 15, 2024, with early adoption permitted and should be applied prospectively but can be adopted retrospectively. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. In November 2024, FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (“Subtopic 220-40”), which expands disclosures around a public entity’s costs and expenses of specific items (i.e. employee compensation and depreciation, depletion and amortization (“DD&A”)), requires the inclusion of amounts that are required to be disclosed under US GAAP in the same disclosure as other disaggregation requirements, requires qualitative descriptions of amounts remaining in expense captions that are not separately disaggregated quantitatively, and requires disclosure of total selling expenses, and in annual periods, the definition of selling expenses. The amendment does not change or remove existing disclosure requirements. The amendment is effective for fiscal years beginning after December 15, 2026, and interim periods with fiscal years beginning after December 15, 2027. Early adoption is permitted, and the amendment can be adopted prospectively or retrospectively to any or all periods presented in the financial statements. Empire is currently assessing the impact of adopting this standard which is expected to only affect financial statement disclosures. In November 2024, FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Option: Induced Conversions of Convertible Debt Instruments , to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20. ASU 2024-04 is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of the annual reporting period for all entities that have adopted ASU 2020-06 and may be adopted either on a prospective or retrospective basis. The Company early adopted this ASU on January 1, 2025, on a prospective basis and determined it did not have a material impact on the period’s consolidated financial statements. Note 3 – Property The aggregate capitalized costs of oil and natural gas properties are as follows: June 30, December 31, 2025 2024 Proved properties $ 138,315 $ 134,239 Unproved properties 3,913 3,858 Work in process 1,780 2,578 Gross capitalized costs 144,008 140,675 Accumulated depletion, amortization and impairment ( 36,583 ) ( 31,974 ) Total Oil and gas properties, net $ 107,425 $ 108,701 Depletion and amortization expense related to oil and gas properties for the three months ended June 30, 2025 and 2024, was approximately $ 2.5 million and $ 2.6 million, respectively. Depletion and amortization expense related to oil and gas properties for the six months ended June 30, 2025 and 2024, was approximately $ 4.6 million and $ 4.0 million, respectively. Proved oil and natural gas properties are reviewed for impairment at least annually, or as indicators of impairment arise. There have been no indicators of impairment during the six months ended June 30, 2025. On April 9, 2024, Empire acquired 60% of certain New Mexico interests from Energy Evolution. As consideration, Empire issued Energy Evolution 600,000 shares of common stock of Empire based on an agreed upon price of $ 5.00 per share for an aggregate agreed upon value of $ 3.0 million. On August 8, 2024, Empire successfully extended its option to purchase the remaining interest with the issuance of 16,800 shares of common stock (the “Option Shares”) to Energy Evolution, and as such, Empire has the right to acquire the remaining interest for an exercise price of $2.0 million (the “Purchase Option”). 11 On May 1, 2025, the Company amended its ability to further extend the Purchase Option to allow for payment for such extension to be made in cash in lieu of the Option Shares, due and payable on or before September 30, 2025. In April 2025, Empire disposed of certain non-core undeveloped leasehold rights held from a previous acquisition in Montana resulting in a gain on sale of approximately $ 0.2 million which is reflected within other income (expense) on the unaudited interim condensed consolidated statements of operations. Other property and equipment consists of operating lease assets, vehicles, office furniture, and equipment with lives ranging from three to five years. The capitalized costs of other property and equipment are as follows: Schedule of other property plant and equipment June 30, December 31, 2025 2024 Other property and equipment, at cost $ 3,770 $ 3,304 Less: accumulated depreciation ( 2,286 ) ( 1,913 ) Other property and equipment, net $ 1,484 $ 1,391 Depreciation expense related to other property and equipment for the three months ended June 30, 2025 and 2024, was approximately $ 0.1 million for both periods. Depreciation expense related to other property and equipment for the six months ended June 30, 2025 and 2024, was approximately $ 0.2 million and $ 0.1 million, respectively. Note 4 - Asset Retirement Obligations The Company’s asset retirement obligations (“ARO”) represent the estimated present value of the estimated cash flows the Company will incur to plug, abandon and remediate its producing properties at the end of their productive lives, in accordance with applicable state laws. Market risk premiums associated with asset retirement obligations are estimated to represent a component of the Company’s credit-adjusted risk-free rate that is utilized in the calculations of AROs. The Company’s ARO activities are summarized in the following table: For the Six Months Ended June 30, 2025 2024 Asset retirement obligations, beginning of period $ 30,188 $ 28,168 Liabilities incurred from drilling activity and assumed in acquisitions — 788 Revisions — — Liabilities settled ( 162 ) ( 585 ) Accretion expense 1,060 977 Asset retirement obligations, end of period $ 31,086 $ 29,348 Less: current portion included in Accrued expenses 1,765 700 Asset retirement obligations, long-term $ 29,321 $ 28,648 The liabilities incurred from drilling activity in 2024 primarily relate to the completion of new wells as part of Empire’s North Dakota Starbuck Drilling Program. The liabilities assumed in acquisitions in 2024 relate to additional working interest acquired in New Mexico. (see Note 3). Note 5 – Commodity Derivative Financial Instruments The Company has used derivative financial instruments to manage its exposure to commodity price fluctuations in the past. Commodity derivative instruments have been used to reduce the effect of volatility of price changes on the oil and natural gas the Company produces and sells. The Company does not enter into derivative financial instruments for speculative or trading purposes. The Company’s derivative financial instrument activity has consisted of swaps and put options. 12 The Company does not designate its derivative instruments to qualify for hedge accounting. Accordingly, the Company reflects changes in the fair value of its derivative instruments in its unaudited interim condensed consolidated statements of operations as they occur. These contracts are recognized and recorded at fair value as an asset or liability on the Company’s unaudited interim condensed consolidated balance sheets. Cash receipts or payments upon settlement of swaps and put options are reflected in the operating activities section of its unaudited interim condensed consolidated statement of cash flows. The following table summarizes the net realized and unrealized amounts reported in earnings related to the oil derivative instruments: For the Three Months Ended June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 Loss on derivatives, realized $ — $ ( 253 ) $ — $ ( 263 ) Gain (loss) on derivatives, unrealized — 252 — ( 596 ) Loss on derivatives, net $ — $ ( 1 ) $ — $ ( 859 ) The following table represents the Company’s net cash payments on derivatives: For the Three Months Ended June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 Cash payments on oil derivatives, net $ — $ ( 253 ) $ — $ ( 263 ) The Company did not have any open derivative positions as of June 30, 2025. Note 6 – Accounts Receivable The following table represents Empire’s accounts receivable as of the dates presented: June 30, December 31, 2025 2024 Oil, Gas and NGLs receivables $ 2,446 $ 2,628 Joint interest billings 6,718 5,072 Joint interest billings - related party 693 394 Other 310 61 Total Accounts receivable $ 10,167 $ 8,155 Note 7 – Accrued Expenses The following table represents Empire’s accrued expenses as of the dates presented: June 30, December 31, 2025 2024 Accrued and suspended third-party revenue $ 7,248 $ 5,987 Accrued salaries and payroll taxes 1,236 1,091 Accrued production taxes 699 837 Asset retirement obligations - current 1,765 1,765 Other 454 668 $ 11,402 $ 10,348 13 Note 8 – Debt Including Debt with Related Parties The following table represents Empire’s outstanding debt as of the dates presented: June 30, December 31, 2025 2024 Equity Bank Credit Facility $ 14,089 $ 11,089 Promissory Note - Related Party 2,000 — Note Payable to insurance provider, bears 8.25% interest, matures January 2026, monthly payments of principal and interest of $58,103 373 — Equipment and vehicle notes, 0.00% to 9.59% interest rates, due in 2025 to 2030 with monthly payments ranging from $900 to $1,400 per month (1) 695 247 Total Debt 17,157 11,336 Less: Current Maturities ( 530 ) ( 70 ) Less: Current Promissory Note - Related Party ( 2,000 ) — Long-Term Debt $ 14,627 $ 11,266 (1) Weighted-average interest rate of 9.29% and 8.32% as of June 30, 2025 and December 31, 2024, respectively. (1) Weighted-average interest rate of 9.29% and 8.32% as of June 30, 2025 and December 31, 2024, respectively. On December 29, 2023, Empire North Dakota and Empire NDA ("Original Borrowers”), entered into a revolver loan agreement with Equity Bank (the "Credit Facility”). Pursuant to the Credit Facility (a) the initial revolver commitment amount is $10.0 million; (b) the maximum revolver commitment amount is $15.0 million; (c) commencing on January 31, 2024, and occurring on the last day of each calendar month thereafter, the revolver commitment amount is reduced by $150,000; (d) commencing on March 31, 2024, there are scheduled semiannual collateral borrowing base redeterminations each year on March 31 and September 30; (e) the final maturity date is December 29, 2026; (f) outstanding borrowings bear interest at a rate equal to the prime rate of interest plus 1.50%, and in no event lower than 8.50%; (g) a quarterly commitment fee is based on the unused portion of the commitments; and (h) Original Borrowers have the right to prepay loans under the Credit Facility at any time without a prepayment penalty. The Credit Facility is guaranteed by the Company. Original Borrowers entered into a security agreement, pursuant to which the obligations under the Credit Facility are secured by liens on substantially all of the assets of Original Borrowers. Furthermore, the obligations under the Credit Facility are secured by a continuing, first priority mortgage lien, pledge of and security interest in not less than 80% of Original Borrowers’ producing oil, gas and other leasehold and mineral interests, including without limitation, those situated in the States of North Dakota and Montana. On November 18, 2024, the Company entered into the First Amendment to the Credit Facility (the “First Amendment”). Pursuant to the First Amendment (a) the maximum revolver commitment amount is $20.0 million; and (b) commencing on December 31, 2024, and occurring on the last day of each calendar month thereafter, the revolver commitment amount is reduced by $250,000. On June 18, 2025, the Company entered into the Second Amendment to the Credit Facility (the “Second Amendment”). The Second Amendment added Empire Texas Development LLC as a third borrower to the Original Borrowers (collectively “Borrowers”) to the original Credit Facility and extends the obligation security by liens on substantially all of the assets of Empire Texas Development LLC. The Credit Facility requires Borrowers to maintain (a) a current ratio of 1.0 to 1.0 or more and (b) a ratio of funded debt to EBITDAX (as defined in the revolver loan agreement), calculated quarterly and annually based on a trailing twelve-month basis, of no more than 3.50 to 1.00. At June 30, 2025, the Borrowers were in compliance with all required covenants under the Credit Facility. Promissory Note – Related Party On February 16, 2024, Empire issued a promissory note (the "February Note”) in the aggregate principal amount of $ 5.0 million to Energy Evolution with a maturity date of February 15, 2026, (the “February Maturity Date”) and accrues interest at the rate of 7 % per annum beginning March 31, 2024, and on each subsequent quarter end date until the February Maturity Date paid in the form of cash or shares of common stock at the option of Energy Evolution. Any unpaid balance after the February Maturity Date accrues interest at the rate of 9 % per annum. The February Note carries no penalties for prepayment without the consent of Energy Evolution if Empire provides written notification within at least five business days. At the discretion of Energy Evolution all or any portion of the outstanding principal amount of the February Note may be converted into shares of common stock at a conversion price of $6.25 per share, subject to customary adjustments, up to a maximum conversion shares amount of 800,000 (without giving effect to any interest that may be converted). 14 Empire determined that an embedded conversion feature included in the February Note required bifurcation from the host contract that is recognized as a separate derivative liability carried at fair value. The estimated fair value of the derivative liability, which represents a Level 3 valuation, was approximately $1.3 million as of March 31, 2024, and was determined using a binomial lattice model using certain assumptions and inputs discussed in Note 15. Accordingly, Empire recognized a gain on the fair value adjustment of the derivative liability in the amount of approximately $0.7 million. The conversion option was exercised by Energy Evolution on May 24, 2024, in exchange for 800,000 shares of common stock of the Company under the terms of the February Note and the fair value of the derivative was revalued as of that date resulting in a loss of $1.7 million in 2024. All of the other embedded features of the February Note were clearly and closely related to the debt host and did not require bifurcation as a derivative liability. On June 17, 2025 (the “Original Issue Date”), the Company issued a promissory note (the “June Note”) in the aggregate principal amount of $ 4.0 million to Phil E. Mulacek. As of June 17, 2025, Mr. Mulacek has advanced the Company $2.0 million under the Note (the "Original Issue Date Advance”). From time to time, during the period beginning 45 days after the Original Issue Date and ending 90 days after the Original Issue Date, the Company may request in writing that Mr. Mulacek advance up to another $2.0 million to the Company, provided that no Event of Default (as defined in the June Note) has occurred or is continuing. Within five business days of receipt of such notice, Mr. Mulacek shall either advance the funds requested (an "Additional Advance”) or decline to make such additional advance. The Note may be prepaid at any time or from time to time without the consent of Mr. Mulacek and without penalty or premium. The Note matures on June 17, 2027 (the "June Maturity Date”) and accrues interest at the rate of 5.5% per annum. After the Maturity Date, any principal balance of the June Note remaining unpaid accrues interest at the rate of 9% per annum. All accrued but unpaid interest is payable in cash on the June Maturity Date, except upon the occurrence of an Event of Default, in which case all accrued and unpaid interest shall immediately be due and payable. In the event that after the Original Issue Date, the Company closes a sale of its equity (an "Equity Raise”), the Company shall promptly, but in no event later than five business days after receipt of the proceeds from such Equity Raise, repay the lesser of (a) the Original Issue Date Advance (including any interest or fees thereon) or (b) the amount of the Equity Raise to Mr. Mulacek (an "Equity Raise Repayment”). In the event the Company receives proceeds from the sale of any of its equity after an Equity Raise Repayment and an Additional Advance, the Company shall use such proceeds to promptly repay such Additional Advance, and all accrued and unpaid interest thereon, to Mr. Mulacek. In August 2025, Empire expects to complete an Equity Raise further described in Note 10. Note Payable – Related Party In August 2020, Empire, through its wholly-owned subsidiary, Empire Texas, entered into a joint development agreement (“JDA”) with Petroleum & Independent Exploration, LLC and related entities ("PIE”), a related party (see Note 13), dated August 1, 2020. Under the terms of the JDA, PIE performed recompletion or workover on specified mutually agreed upon wells owned by Empire Texas. Concurrent with the JDA with PIE, Empire entered into a term loan agreement dated August 1, 2020, whereby PIE will loan up to $ 2.0 million, at an interest rate of 6 % per annum, maturing August 6, 2024, unless terminated earlier by PIE. The loan proceeds were used for recompletion or workover of certain designated wells. In addition, Empire assigned 85% working and revenue interest to PIE in the designated wells which will be applied to repayment of the loan. On July 31, 2024, PIE, Empire Texas, and Empire entered into a note repayment and loan termination agreement providing for the payment in full of the remaining outstanding amount of the approximate $ 1.1 million PIE loan and extending the loan maturity date to December 31, 2024, unless terminated earlier by PIE. As payment in full, Empire issued PIE 205,427 shares of common stock of Empire following the approval of a supplemental listing application by the NYSE American stock exchange in the third quarter of 2024. Note 9 - Leases As a lessee, the Company leases its corporate office headquarters in Tulsa, Oklahoma, and one field office. The leases expire between 2025 and 2027. The corporate office has an option to renew for an additional five -year term. The option to renew the lease is generally not considered reasonably certain to be exercised. Therefore, the period covered by such optional period is not included in the determination of the term of the lease and the lease payments during these periods are similarly excluded from the calculation of right-of-use lease asset and lease liability balances. The Company also leases vehicles primarily used in our field operations. These vehicle leases typically have a three -year life. 15 The Company recognizes right-of-use lease expense on a straight-line basis, except for certain variable expenses that are recognized when the variability is resolved, typically during the period in which they are paid. Variable right-of-use lease payments typically include charges for property taxes, insurance, and variable payments related to non-lease components, including common area maintenance. Right-of-use lease expense was approximately $ 0.1 million for both the three months ended June 30, 2025 and 2024, and cash paid for right-of-use lease was approximately $ 0.1 million for the same periods. Right-of-use lease expense was approximately $ 0.2 million and $ 0.3 million for the six months ended June 30, 2025 and 2024, respectively, and cash paid for right-of-use lease was approximately $ 0.2 million and $ 0.3 million for the same periods. Supplemental balance sheet information related to the right-of-use leases is as follows: Schedule of right of use leases June 30, December 31, 2025 2024 Net operating lease asset (included in Other property and equipment, net) $ 383 $ 604 Current portion of lease liability $ 300 $ 400 Long-term lease liability 39 144 Total right-of-use lease liabilities $ 339 $ 544 The weighted-average remaining term for Empire’s right-of-use leases is 1.02 years, and the weighted-average discount rate is 8.43 % as of the second quarter of 2025. Maturities of lease liabilities are as follows as of the date presented: June 30, 2025 Year 1 $ 315 Year 2 40 Year 3 — Year 4 — Year 5 — Total lease payments 355 Less: imputed interest ( 16 ) Total lease obligation $ 339 Note 10 – Equity Pursuant to the Company’s Amended and Restated Certificate of Incorporation (“Charter”), effective as of March 4, 2022, the total number of shares of all classes of stock that the Company has the authority to issue is 200,000,000 , consisting of 190,000,000 shares of common stock, par value $ 0.001 per share, and 10,000,000 shares of preferred stock, par value $ 0.001 per share. Preferred Stock Preferred stock may be issued from time to time in one or more series at the direction of the Company’s Board of Directors and the directors also have the ability to fix dividend rates and rights, liquidation preferences, voting rights, conversion rights, rights and terms of redemption and other rights, preferences, privileges and restrictions as determined by the Company’s Board of Directors, subject to certain limitations set forth in the Charter. Series A Voting Preferred Stock On March 8, 2022, the Company formalized the issuance of preferred stock as was required under the terms of the Company's May 2021 financing agreements with Energy Evolution and issued six shares of Series A Voting Preferred Stock. The Series A Voting Preferred Stock was issued in connection with the strategic investment in the Company by Energy Evolution. For so long as the Series A Voting Preferred Stock is outstanding, the Company’s Board of Directors will consist of six directors. Three of the directors are designated as the Series A Directors and the three other directors (each, a “common director”) are elected by the holders of common stock and/or any preferred stock (other than the Series A Voting Preferred Stock) granted the right to vote on the common directors. Any Series A Director may be removed with or without cause but only by the affirmative vote of the holders of a majority of the Series 16 A Voting Preferred Stock voting separately and as a single class. The holders of the Series A Voting Preferred Stock have the exclusive right, voting separately and as a single class, to vote on the election, removal and/or replacement of the Series A Directors. Holders of common stock or other preferred stock do not have the right to vote on the Series A Directors. The approval of the holders of the Series A Voting Preferred Stock, voting separately and as a single class, is required to authorize any resolution or other action to issue or modify the number, voting rights or any other rights, privileges, benefits, or characteristics of the Series A Voting Preferred Stock, including without limitation, any action to modify the number, structure and/or composition of the Company’s current Board of Directors. The Series A Voting Preferred Stock is held by Phil Mulacek, Chairman of the Board of Directors of the Company and one of the principals of Energy Evolution, as Energy Evolution’s designee (the “Initial Holder”). The Series A Voting Preferred Stock may be transferred only to certain controlled affiliates of the Initial Holder (“Permitted Transferees”), and the voting rights of the Series A Voting Preferred Stock are contingent upon the Initial Holder and Permitted Transferees (collectively, the “Series A Holders”) holding together at least 3,000,000 shares of the Company’s outstanding common stock. The Series A Voting Preferred Stock is not entitled to receive any dividends or distributions of cash or other property except in the event of any liquidation, dissolution or winding up of the Company’s affairs. In such event, before any amount is paid to the holders of the Company’s common stock but after any amount is paid to the holders of the Company’s senior securities, the holders of the Series A Voting Preferred Stock will be entitled to receive an amount per share equal to $1.00. Except as discussed above or as otherwise set forth in the certificate of designation of the Series A Voting Preferred Stock, the holders of the Series A Voting Preferred Stock have no voting rights. The Series A Voting Preferred Stock is not redeemable at the Company’s election or the election of any holder, except the Company may elect to redeem the Series A Voting Preferred Stock for $1.00 per share following satisfaction of its notice and cure requirements in the event that: • any or all shares of Series A Voting Preferred Stock are held by anyone other than the Initial Holder or a Permitted Transferee; or • the Series A Holders together hold less than 3,000,000 shares of the Company’s outstanding common stock. The Series A Voting Preferred Stock is not convertible into common stock or any other security. Common Stock On August 27, 2021, the Company’s Board of Directors approved a one-for-four reverse stock split such that every holder of the Company’s common stock would receive one share of common stock for every four shares owned. The reverse stock split was effective as of 6:00 p.m. Eastern Time on March 7, 2022, immediately prior to the Company’s listing of its common stock on the NYSE American. All share amounts have retrospectively been stated at post-reverse split amounts and pricing. The holders of shares of common stock are entitled to one vote per share for all matters on which common stockholders are authorized to vote on. Examples of matters that common stockholders are entitled to vote on include, but are not limited to, the election of three of the six directors and other common voting situations afforded to common stockholders. In April 2024, Empire completed a subscription rights offering (the "April Rights Offering”) which raised gross proceeds of $20.7 million. Empire distributed at no charge to holders of its common stock, as of the close of business on March 7, 2024 (the record date for the April Rights Offering), one subscription right for each share of common stock held. Each subscription right entitled the holder to purchase 0.161 shares of common stock at a subscription price of $5.00 per share per one whole share of common stock. The subscription rights were non-transferable and not listed for trading on any stock exchange or market. On May 31, 2024, Empire issued Energy Evolution a warrant certificate granting them the right to purchase 128,800 shares of common stock of Empire at $ 5.00 per share. On June 28, 2024, Energy Evolution exercised the warrants and received 128,800 shares in exchange for approximately $ 0.6 million. In November 2024, Empire completed a subscription rights offering (the "November Rights Offering”) which raised gross proceeds of $10.0 million. Empire distributed at no charge to holders of its common stock, as of the close of business on September 30, 2024 (the record date for the November Rights Offering), one subscription right for each share of common stock held. Each subscription right entitled the holder to purchase 0.063 shares of common stock at a subscription price of $5.05 per share per one whole share of common stock. The subscription rights were non-transferable and not listed for trading on any stock exchange or market. 17 In August 2025, Empire is scheduled to complete a subscription rights offering (the "August Rights Offering”) which is expected to raise gross proceeds of $5.0 million, including $2.5 million to be received upon the future exercise of warrants. Empire distributed at no charge to holders of its common stock, as of the close of business on July 10, 2025 (the record date for the August Rights Offering), one non-transferable subscription right for each whole share of common stock owned by that stockholder on the record date. Each subscription right will entitle a rights holder to purchase one unit at a subscription price equal to $0.07367 per unit, each unit consisting of 0.0139 shares of the Company’s common stock and one rights warrant to purchase 0.0136 shares of the Company’s common stock equal to $5.46 per whole share. The August Rights Offering includes an oversubscription privilege, which entitles stockholders who fully exercise their subscription rights the right to purchase at the same exercise price additional units in the rights offering that other stockholders do not purchase, subject to availability and pro-rata allocation of units among rights holders exercising such oversubscription privilege. No fractional shares of common stock will be issued in the rights offering, including upon exercise of the warrants. The subscription rights were initially set to expire if they were not exercised or extended at the discretion of the Company by July 25, 2025 (the “Expiration Date”). The expiration date was subsequently extended to August 18, 2025 (the “Extension Date”). The warrants will expire 90 days after the extension date of the rights offering. Loss per Common Share Schedule of Earnings Per Share, Basic and Diluted For the Three Months Ended June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 Net Loss $ ( 5,056 ) $ ( 4,390 ) $ ( 9,277 ) $ ( 8,364 ) Basic Weighted-Average Shares 33,853 29,840 33,837 27,753 Dilutive effect of potential common shares issuable (1) — — — — Diluted Weighted-Average Shares 33,853 29,840 33,837 27,753 Loss per Common Share Basic $ ( 0.15 ) $ ( 0.15 ) $ ( 0.27 ) $ ( 0.30 ) Diluted $ ( 0.15 ) $ ( 0.15 ) $ ( 0.27 ) $ ( 0.30 ) (1) For both the three and six months ended June 30, 2025, the Company had approximately 1.0 million of stock options and outstanding restricted stock units excluded from the diluted shares calculation as their inclusion would be antidilutive due to a net loss for the respective periods. For both the three and six months ended June 30, 2024, the Company had approximately 1.1 million of stock options, warrants, outstanding restricted stock units, and convertible debt as their effect would have been anti-dilutive due to a net loss for the respective periods. (1) For the three and six months ended June 30, 2025, the Company had approximately 1. 0 million and 1.0 million, respectively, of stock options and outstanding restricted stock units excluded from the diluted shares calculation as their inclusion would be antidilutive due to a net loss for the respective periods. For the three and six months ended June 30, 2024, the Company had approximately 1.1 million and 1.1 million, respectively, of stock options, warrants, outstanding restricted stock units, and convertible debt as their effect would have been anti-dilutive due to a net loss for the respective periods Note 11 – Stock-Based Compensation Empire recognizes stock-based compensation expense associated with granted stock options and restricted stock units (“RSUs”). Empire accounts for forfeitures of equity-based incentive awards as they occur. Stock-based compensation expense related to time-based restricted stock units is based on the price of the common stock on the grant date and recognized as vesting occurs. For options, the fair value is determined using the Black-Scholes option valuation assumptions on dividend yield, expected annual volatility, risk-free interest rate and an expected useful life. Stock-based compensation is recorded with a corresponding increase in additional paid-in capital within the unaudited interim condensed consolidated balance sheets. The following summary reflects nonvested restricted stock unit activity and related information: Weighted-Average RSUs Fair Value (1) Outstanding, December 31, 2024 126,543 $ 7.11 Granted 109,074 5.94 Vested ( 93,463 ) 6.84 Forfeited ( 21,000 ) 5.26 Outstanding, June 30, 2025 121,154 $ 6.58 (1) Shares are valued at the grant-date market price. (1) Shares are valued at the grant-date market price. 18 The following summary reflects stock option activity and related information: Weighted-Average Options (2) Exercise Price Outstanding, December 31, 2024 1,885,850 $ 4.75 Granted — — Exercised — — Cancelled ( 6,000 ) 5.00 Outstanding, June 30, 2025 (1) 1,879,850 $ 4.75 Exercisable, June 30, 2025 (1) 1,590,516 $ 4.34 (1) Stock options outstanding and exercisable had an aggregate intrinsic value of $1.0 million and $1.5 million, respectively. (1) Stock options outstanding and exercisable had an aggregate intrinsic value of $1.0 million and $1.5 million, respectively. (2) Stock options outstanding at June 30, 2025 had a weighted-average remaining contract term of 3.67 years and an exercise price range of $1.32 to $12.36. (2) Stock options outstanding at June 30, 2025 had a weighted-average remaining contract term of 3.67 years and an exercise price range of $1.32 to $12.36. Note 12 – Income Taxes For all periods presented in the unaudited interim condensed consolidated statements of operations, Empire’s effective tax rate is 0 %. Other than the full year of 2022, Empire has generated net operating losses since inception, which would normally reflect a tax benefit in the unaudited interim condensed consolidated statements of operations and a deferred tax asset on the unaudited interim condensed consolidated balance sheets. However, because of the current uncertainty as to Empire’s ability to achieve sustained profitability, a full valuation reserve has been established that offsets the amount of any tax benefit available for each period presented in the unaudited interim condensed consolidated statements of operations. Tax Legislation On July 4, 2025, the U.S. enacted H.R. 1, informally referred to as the One Big Beautiful Bill Act (“OBBBA”) and contains a broad range of changes to the U.S. federal income tax laws and makes permanent or modifies certain provisions of the Tax Cuts and Jobs Act. Among other provisions, the OBBBA includes permanently restoring an EBITDA-based business interest deduction limitation, 100% bonus depreciation for certain property and immediate expensing for certain domestic research and experimental expenditures. All effects of changes in tax laws are recognized in the unaudited condensed consolidated financial statements during the period of enactment and as such any effects of changes in tax laws are not reflected in the Company’s income tax provision (benefit) as of and for the three and six months ended June 30, 2025. While we continue to monitor further legislative developments and administrative guidance, we do not expect the OBBBA to have a material impact on our consolidated financial statements for the year ending December 31, 2025. Note 13 – Related Party Transactions Energy Evolution is a related party of the Company as it beneficially owns approximately 31.8 % of the Company’s outstanding shares of common stock as of June 30, 2025. In October 2021, a member of Energy Evolution and a board member of Energy Evolution were appointed to the Company’s Board of Directors. The board member of Energy Evolution separately beneficially owns approximately 21.4 % of the Company’s outstanding shares of common stock as of June 30, 2025, and is also a majority owner of PIE. The Company had a JDA with PIE to perform recompletion or workover on specified mutually agreed upon wells. In the third quarter of 2024, Empire issued PIE 205,427 shares of common stock of Empire as payment in full for this outstanding note balance of $ 1.1 million (see Note 8). On February 16, 2024, Empire issued the February Note to Energy Evolution. Energy Evolution advanced Empire $ 5.0 million under the February Note in the first quarter of 2024. On May 24, 2024, Energy Evolution elected to convert the February Note to shares of common stock of Empire and received 800,000 shares under the terms of the February Note (see Note 8). On April 9, 2024, Empire acquired 60 % of certain New Mexico interests from Energy Evolution. As consideration, Empire issued Energy Evolution 600,000 shares of common stock of Empire based on an agreed upon price of $ 5.00 per share for an aggregate agreed upon value of $ 3.0 million. On August 8, 2024, Empire successfully extended its option to purchase the remaining interest with the issuance of 16,800 shares of common stock (the “Option Shares”) to Energy Evolution, and as such, Empire has the right to acquire the remaining interest for an exercise price of $2.0 million (the “Purchase Option”). On May 1, 2025, the Company amended its ability to further extend the Purchase Option to allow for payment for such extension to be made in cash in lieu of the Option Shares due and payable on or before September 30, 2025. 19 On June 28, 2024, Energy Evolution exercised its warrants of Empire and received 128,800 shares in exchange for approximately $0.6 million (see Note 10). On June 17, 2025, the Company issued the June Note to Phil Mulacek. Mr. Mulacek advanced Empire $2.0 million under the June Note in the second quarter of 2025 (see Note 8). Accounts receivable on the unaudited interim condensed consolidated balance sheet includes approximately $ 0.7 million receivables from Energy Evolution. Accrued expenses on the unaudited interim condensed consolidated balance sheet include approximately $ 0.1 million of revenue payable to Energy Evolution. Note 14 – Commitments and Contingencies From time to time, Empire is subject to various legal proceedings arising in the ordinary course of business, including proceedings for which Empire may not have insurance coverage. While many of these matters involve inherent uncertainty, as of the date hereof, Empire does not currently believe that any such legal proceedings will have a material adverse effect on Empire’s business, financial position, results of operations or liquidity. Empire is subject to extensive federal, state, and local environmental laws and regulations. These laws, among other things, regulate the discharge of materials into the environment and may require Empire to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Management believes no materially significant liabilities of this nature existed as of the balance sheet date. Agreed Compliance Order In January 2024, the Company deposited $ 1.0 million into an escrow account in accordance with an Agreed Compliance Order ("ACO”) with the New Mexico Oil Conservation Division (“NMOCD”) for compliance work on certain inactive wells in New Mexico. Under the terms of the ACO, the escrow funds will be returned to the Company at a rate of $ 0.01 million for each well as the compliance work is completed. As of June 30, 2024, all work had been completed, and the Company expects to receive the remaining outstanding escrow amount of $ 0.2 million in 2025. New Mexico Trespass In December 2023, the Company initiated a legal action in the Fifth Judicial District Court, Lea County, New Mexico, against a saltwater company for trespassing and illegal wastewater dumping within one of the New Mexico water flood units. Empire is close to a resolution with the NMOCD to revoke the existing four permits granted and deny the five new applications made by the third-party saltwater company. Management continues to evaluate the potential outcomes; however, it cannot be determined at this time, and no amount has been recognized due to the uncertainty of any conclusions that may arise as a result of such action. 20 Note 15 – Fair Value Measurements The following table provides the carrying value and fair value measurement information for certain financial assets and liabilities. The carrying values of cash, accounts receivable, inventory, accounts payable, accrued expenses, lease liabilities, notes payables and equipment and vehicle notes included in the accompanying unaudited interim consolidated balance sheets approximated fair value at June 30, 2025, and December 31, 2024, as applicable, and generally represent Level 2 fair values due to their short-term nature. Therefore, such financial assets and liabilities are not presented in the following table: Fair Value Measurements Using: Carrying Total Fair Level 1 Level 2 Level 3 Amount Value Inputs Inputs Inputs June 30, 2025 liabilities Debt - Promissory Note, Related Party $ ( 2,000 ) $ ( 1,993 ) $ — $ ( 1,993 ) $ — Debt - Credit Facility ( 14,089 ) ( 14,089 ) — ( 14,089 ) — December 31, 2024 liabilities Debt - Promissory Note, Related Party $ — $ — $ — $ — $ — Debt - Credit Facility ( 11,089 ) ( 11,089 ) — ( 11,089 ) — The following methods and assumptions were used to estimate the fair values in the table above and other fair value measurements. Level 2 Derivatives - Derivative financial instruments are carried at fair value and measured on a recurring basis. The Company’s commodity price hedges are valued based on discounted future cash flow models that are primarily based on published forward commodity price curves. The fair values of derivative instruments in asset positions include measures of counterparty nonperformance risk, and the fair values of derivative instruments in liability positions include measures of the Company’s nonperformance risk. Debt – The fair value of the related party promissory note was determined using a discounted cash flow model. The fair value of our Credit Facility variable rate debt approximates the carrying value as the underlying prime rate changes based on prevailing market rates. Level 3 Impairment of oil and natural gas properties – The fair value of proved and unproved oil and natural gas properties was measured using valuation techniques that convert the future cash flows to a single discounted amount. Significant inputs to the valuation of proved and unproved oil and natural gas properties include estimates of: (i) recoverable reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices; and (v) a market-based weighted-average costs of capital. The Company utilized a combination of the New York Mercantile Exchange ("NYMEX") strip pricing and consensus pricing to value the reserves, then applied various discount rates depending on the classification of reserves and other risk characteristics. For significant acquisitions, management utilized the assistance of a third-party valuation expert to estimate the value of the oil and natural gas properties acquired. Asset Retirement Obligation – The fair value of AROs is included in proved oil and natural gas properties with a corresponding liability. The fair value was determined based on a discounted cash flow model, which included assumptions of the estimated current abandonment costs, discount rate, inflation rate and timing associated with the incurrence of these costs. The inputs used to value oil and natural gas properties for impairments and asset retirement obligations require significant judgment and estimates made by management and represent Level 3 inputs. Empire applies the provisions of fair value measurement on a non-recurring basis to its non-financial assets and liabilities, including oil and gas properties and asset retirement obligations. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments if events or changes in certain circumstances indicate that adjustments may be necessary. No triggering events that require assessment of such items were observed during the six months ended June 30, 2025 and 2024. Assets and Liabilities Measured at Fair Value on a Recurring Basis – In the determination of the fair value of the February Note discussed further in Note 8 including the embedded conversion feature, Empire used a binomial lattice valuation model to value Level 3 derivative liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as Empire’s stock price, contractual terms of the February Note, and unobservable inputs classified as Level 3 including risk-free rate and expected volatility. Due to the subjective nature of these inputs, the fair value measurement could differ materially under alternative assumptions. As of the conversion option exercise date of May 24, 2024, these unobservable inputs were 5.0% and 46.9%, respectively. 21 Note 16 – Segment Reporting The Company’s operations are managed and reported to its CEO, the Company’s CODM, on a consolidated basis. The CEO uses consolidated net loss in assessing performance of capital spend projects to allocate the appropriate resources to drive efficiencies and develop growth strategies. Under the organizational and reporting structure, the Company has one operating segment and one reportable segment. The CODM is provided with the following significant segment expenses within lease operating expense on the unaudited interim condensed consolidated statements of operations: For the Three Months Ended June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 Production costs $ 5,911 $ 5,989 $ 11,292 $ 11,369 Workover activity 417 975 802 2,952 Plugging and abandonment activity 59 579 59 609 Lease operating expense $ 6,387 $ 7,543 $ 12,153 $ 14,930 Other segment items within consolidated net loss are all separately disclosed on the unaudited interim condensed consolidated statements of operations. Segment asset information is not presented to and used by the CODM to allocate resources, assess performance or make strategic decisions. 22