What changed in this filing

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Item 1. Financial Statements

2026-08-14 compared with 2026-05-14 · 136 added, 86 removed, 624 unchanged (26% of the section changed)

5 unchanged sentences

Accounts Receivable

Commodity Derivative Instruments

Total Current Assets

9 unchanged sentences

Accounts Payable

Accounts Payable - Related Party (Note 13)

Accrued Expenses

Commodity Derivative Instruments

Current Portion of Lease Liability

19 unchanged sentences

(in thousands, except share and per share data)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Natural Gas Liquids Sales

33 unchanged sentences

Balances, March 31, 2026

Shares Issued for Louisiana Development Project (Note 3)

Stock-Based Compensation

Balances, June 30, 2026

Preferred Stock

3 unchanged sentences

Balances, March 31, 2025

Stock-Based Compensation

Balances, June 30, 2025

See accompanying notes to unaudited interim condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash Flows From Operating Activities:

Adjustments to Reconcile Net Loss to Net Cash (Used In) Provided By Operating Activities:

Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:

Stock-Based Compensation

3 unchanged sentences

Loss on Commodity Derivatives

Net Settlements on Derivative Instruments

Net Settlements on Commodity Derivative Instruments

Gain on Financial Derivative (Note 8)

1 unchanged sentence

Loss on Extinguishment of Debt

Gain on Sale of Other Fixed Assets

Gain on Sale of Oil and Natural Gas Properties

Gain on Write Off or Sale of Other Fixed Assets

Change in Operating Assets and Liabilities:

3 unchanged sentences

Accounts Payable

Accounts Payable - Related Party (Note 13)

Accrued Expenses

Other Long-Term Assets and Liabilities

Net Cash (Used In) Provided By Operating Activities

Net Cash Used In Operating Activities

Cash Flows From Investing Activities:

Disposal of Oil and Natural Gas Properties

Capital Expenditures - Oil and Natural Gas Properties (1)

4 unchanged sentences

Cash Flows From Financing Activities:

Borrowings on Credit Facility

Payments on Credit Facility

9 unchanged sentences

Cash Paid for Interest

Non-cash addition to oil and natural gas properties related to issuance of shares

(1) Incurred capital expenditures were approximately $ 4.0 million and $ 3.3 million for the respective periods.

23 unchanged sentences

The Company has a revolving line of credit agreement with Equity Bank which requires the Company to maintain compliance with certain financial covenants computed on a quarterly and annual basis.

As of March 31, 2026, 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 $ 12.0 million as of March 31, 2026 from previous and unforeseen operational costs resulting in lower production volumes.

Commodity prices for the majority of the first quarter 2026 were lower than the current pricing environment, further reducing operational cash flows.

To meet its obligations, the Company has a credit facility with remaining commitments of $ 16.0 million as of March 31, 2026, however, only approximately $ 2.7 million is unused as of March 31, 2026.

As of June 30, 2026, the Company was in compliance with all required covenants.

However, the Company carried negative working capital of approximately $ 16.3 million as of June 30, 2026, from previous and unforeseen operational costs resulting in lower production volumes.

A portion of the decline in operating cash flows from lower production volumes were offset during the second quarter of 2026 through commodity derivatives in place, but only a small fraction of our anticipated future production is currently hedged.

To meet its obligations, the Company has a credit facility with remaining commitments of approximately $ 15.3 million as of June 30, 2026, however, only approximately $ 2.0 million is unused.

Additionally, the commitment is reduced monthly by $ 0.25 million.

The Company entered into a convertible note in September 2025 for total aggregate available principal of $ 4.0 million with $ 2.0 million of the total available to be borrowed but at the discretion of Mr.

Mulacek per the terms of the agreement.

The Company also issued warrants to Mr.

Mulacek in connection with the convertible note.

In March 2026 the Company raised approximately $ 10.0 million of gross proceeds from a subscription rights offering and subsequent to the quarter entered into a sales agreement to sell up to an aggregate gross sales price of $ 7.5 million of shares of common stock through an at-the-market offering (see Note 10 – Equity).

The Company issued warrants to Phil Mulacek, a related party, in connection with a convertible note issued in September 2025.

In March 2026 the Company raised approximately $ 10.0 million of gross proceeds from a subscription rights offering and in May 2026 entered into a sales agreement to sell up to an aggregate gross sales price of $ 7.5 million of shares of common stock through an at-the-market offering.

While these transactions provide additional funding towards the Company’s obligations, the Company expects to have negative working capital for the remainder of 2026 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 Mr.

Mulacek who owns approximately 29.1 % of our common stock outstanding as of March 31, 2026, and Energy Evolution Master Fund, Ltd.

(“Energy Evolution”), our largest stockholder who owns approximately 33.1 % of our common stock outstanding as of March 31, 2026.

Empire has committed financial support from Energy Evolution Master Fund, Ltd.

(“Energy Evolution”), our largest stockholder who owns approximately 33.1 % of our common stock as of June 30, 2026, and Petroleum Independent & Exploration, LLC, which is majority owned by Mr.

Mulacek, and owns approximately 2.3 % of our common stock outstanding as of June 30, 2026.

Both are related parties of the Company.

Mulacek and Energy Evolution are willing and able to provide these additional funds for Empire to continue to meet its obligations over the next 12 months.

Energy Evolution and Petroleum Independent & Exploration, LLC are willing and able to provide these additional funds 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.

29 unchanged sentences

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 March 31, 2026.

The Company did not have an allowance for credit losses as of June 30, 2026.

Inventory primarily consists of oil in tanks which has not been delivered and is valued at the lower of cost or net realizable value.

9 unchanged sentences

Convertible Debt and Embedded Derivative Instruments

In connection with Empire’s issuance of a promissory note in the third quarter of 2025 and first quarter of 2026, Empire bifurcated the respective embedded conversion options and recorded the embedded conversion options as long-term and short-term, respectively, derivative liabilities in Empire’s unaudited condensed consolidated balance sheets in accordance with FASB ASC 815, Derivatives and Hedging.

The derivative liability for the promissory note issued in the third quarter of 2025 was remeasured at each respective reporting period using a binomial lattice model with changes in fair value recorded in other income (expense) of the applicable period’s unaudited condensed consolidated statements of operations.

In connection with Empire’s issuance of a promissory note in the third quarter of 2025 and first quarter of 2026, Empire bifurcated the respective embedded conversion options and recorded the embedded conversion options as long-term and short-term, respectively, derivative liabilities in Empire’s unaudited interim condensed consolidated balance sheets in accordance with FASB ASC 815, Derivatives and Hedging.

The convertible debt for the promissory notes issued were carried at amortized cost.

The convertible debt and the derivative liability associated with the promissory note issued in the third quarter of 2025 is separately presented as long-term note payable – related party and long-term derivative instruments on the unaudited condensed consolidated financial statements.

The promissory note issued in first quarter of 2026 was fully converted into common shares of the Company in the same period.

The Company issued warrants with the promissory note in the third quarter of 2025 and determined they shall be classified as equity in accordance with FASB ASC 815, Derivatives and Hedging.

The warrants were recorded as a discount to the long-term note payable – related party and presented as net on the unaudited condensed consolidated balance sheets.

The warrants were recorded as a discount to the long-term note payable – related party and presented as net on the unaudited interim condensed consolidated balance sheets.

The value of the discount was determined by using a Black-Scholes model and recorded at its estimated relative fair value on the date the warrants were issued.

It will be amortized over the life of the corresponding promissory note within interest expense in the unaudited condensed consolidated statements of operations.

It will be amortized over the life of the corresponding promissory note within interest expense in the unaudited interim condensed consolidated statements of operations.

Commodity Derivative Instruments

2 unchanged sentences

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 as a component of revenue in the unaudited condensed consolidated statements of operations.

We report the fair value of commodity derivatives in our unaudited interim condensed consolidated balance sheets in commodity derivative assets and commodity derivative liabilities as either current or non-current based on the timing of the settlement of individual trades.

Trades that are scheduled to settle in the next twelve months are reported as current.

The Company nets derivative assets and liabilities in our unaudited interim condensed consolidated balance sheets whenever it has a legally enforceable master netting agreement with the counterparty to a derivative contract.

Oil and Natural Gas and Other Properties

51 unchanged sentences

Any identified differences between the Company’s revenue estimates and actual revenue received have historically been insignificant.

For the three months ended March 31, 2026 and 2025, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.

For the six months ended June 30, 2026 and 2025, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.

Segment Reporting

26 unchanged sentences

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 three months ended March 31, 2026.

There were no transfers between fair value hierarchy levels for the six months ended June 30, 2026.

Recently Issued Accounting Standards

19 unchanged sentences

Total Oil and gas properties, net

Depletion and amortization expense related to oil and gas properties for the three months ended March 31, 2026 and 2025, was approximately $ 1.3 million and $ 2.1 million, respectively.

Depletion and amortization expense related to oil and gas properties for the three months ended June 30, 2026 and 2025, was approximately $ 1.3 million and $ 2.5 million, respectively.

Depletion and amortization expense related to oil and gas properties for the six months ended June 30, 2026 and 2025, was approximately $ 2.6 million and $ 4.6 million, respectively.

Proved oil and natural gas properties are reviewed for impairment at least annually, or as indicators of impairment arise.

There were no indicators of impairment identified during the three months ended March 31, 2026.

On May 1, 2025, the Company extended its option to purchase certain New Mexico interests from Energy Evolution to allow for payment for such extension to be made in cash in lieu the issuance of common shares, due and payable on or before September 30, 2025.

There were no indicators of impairment identified during the six months ended June 30, 2026.

On May 1, 2025, the Company extended its option to purchase certain New Mexico interests from Energy Evolution which also allowed for payment for such extension to be made in cash in lieu the issuance of common shares, due and payable on or before September 30, 2025.

The Company made a cash payment to Energy Evolution on September 30, 2025 to extend the purchase option for an additional year .

2 unchanged sentences

In January 2026, Empire paid approximately $ 0.1 million for certain interests in undeveloped properties in North Dakota.

The transaction is subject to customary regulatory procedures and will not be finalized until all proceedings are completed.

On March 18, 2026, Empire elected to participate in a three-well oil and natural gas development program in Louisiana for a 25 % working interest with various related parties.

Participation will be funded by issuance of up to approximately 1.8 million shares of Empire common stock at a price of $ 3.00 per share.

The transaction was subject to customary regulatory procedures and finalized in the second quarter of 2026.

On March 18, 2026, Empire elected to participate in a three-well oil and natural gas development program with various related parties in Louisiana for a 25 % working interest.

Participation was funded by issuance of approximately 1.8 million shares of Empire common stock at a price of $ 3.00 per share issued in the second quarter of 2026.

As of June 30, 2026, we have accrued approximately $ 1.0 million of additional costs incurred related to the gas development program reflected within accounts payable – related party on the unaudited interim condensed consolidated balance sheets.

Other property and equipment consists of operating lease assets, vehicles, office furniture, and equipment with lives ranging from three to five years .

3 unchanged sentences

Total Other property and equipment, net

Depreciation expense related to other property and equipment for the three months ended March 31, 2026 and 2025, was approximately $ 0.1 million for both periods.

Depreciation expense related to other property and equipment for the three months ended June 30, 2026 and 2025, was approximately $ 0.1 million for both periods.

Depreciation expense related to other property and equipment for the six months ended June 30, 2026 and 2025, was approximately $ 0.2 million for both periods.

Note 4 – Asset Retirement Obligations

2 unchanged sentences

The Company’s ARO activities are summarized in the following table:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Asset retirement obligations, beginning of period

7 unchanged sentences

Note 5 – Commodity Derivative Financial Instruments

The Company uses derivative financial instruments to manage its exposure to commodity price fluctuations in the past.

The Company uses derivative financial instruments to manage its exposure to commodity price fluctuations from time to time.

Commodity derivative instruments are used to reduce the effect of volatility of price changes on the oil and natural gas the Company produces and sells.

4 unchanged sentences

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.

During the three months ended March 31, 2026, we entered into certain oil commodity derivative positions for the remaining three quarters of 2026 at a blended price of $ 73.83 .

The fair value is generally determined using established index prices and other sources which are based upon, among other things, futures prices and time to maturity.

These fair values are recorded by netting asset and liability positions, including any deferred premiums, that are with the same counterparty and are subject to contractual terms which provide for net settlement.

Cash receipts or payments upon settlement of swaps and put options are reflected in the operating activities section of its unaudited interim condensed consolidated statements of cash flows.

During the first quarter of 2026, we entered into certain oil commodity derivative positions for the remaining three quarters of 2026 with reputable counterparties of acceptable credit risk and creditworthiness.

As of June 30, 2026, the blended price for the remaining positions is $ 69.89 .

We did not have any open derivative positions during 2025.

The following table presents the recognized commodity derivative assets and liabilities on our unaudited interim condensed consolidated balance sheets as of the date indicated:

June 30, 2026

Balance Sheet Classification

Current assets

Long-term assets

Current liabilities

Long-term liabilities

Total liabilities

The following table summarizes the net realized and unrealized amounts reported in earnings related to the oil derivative instruments:

For the Three Months Ended March 31,

Settlements received (paid) for matured derivatives, net

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Settlements received (paid) for derivatives, net (1)

Non-cash gain (loss) on derivatives, net

Loss on derivatives, net

The following table sets forth the Company’s outstanding commodity derivative contracts as of March 31, 2026:

(1) For the three and six months ended June 30, 2026, includes amounts early settled by the counterparty on behalf of Empire of approximately $ 2.1 million.

Refer to Note 13 – Related Party Transactions for additional information.

The following table sets forth the Company’s outstanding commodity derivative contracts as of June 30, 2026:

Weighted-Average

1 unchanged sentence

Fixed Price (Bbl)

Second Quarter

Third Quarter

Fourth Quarter

During the second quarter of 2026, a portion of our outstanding derivative positions were early settled by the counterparty, as it was contractually permitted to do, for a net realized loss of approximately $ 1.9 million.

Cash settlement of the total $ 2.1 million net realized loss on derivative positions with this counterparty has not occurred and remains payable to a related party, further discussed in Note 13 – Related Party Transactions.

Note 6 – Accounts Receivable

20 unchanged sentences

Long-Term Debt

(1) Interest rate of 7.98 % and 8.25 % as of March 31, 2026 and December 31, 2025, respectively.

Respective notes have monthly payments of principal and interest of $ 57,301 and $ 58,103 and matures in January 2027 and January 2026.

(2) Weighted-average interest rate of 9.26 % and 9.41 % as of March 31, 2026 and December 31, 2025, respectively.

(1) Interest rate of 7.98 % and 8.25 % as of June 30, 2026 and December 31, 2025, respectively.

Respective notes have monthly payments of principal and interest of $ 57,301 and $ 58,103 and mature in January 2027 and January 2026.

(2) Weighted-average interest rate of 9.07 % and 9.41 % as of June 30, 2026 and December 31, 2025, respectively.

The following table represents Empire’s outstanding related-party debt as of the dates presented:

2 unchanged sentences

Long-Term Note Payable - Related Party, net

On December 29, 2023, Empire North Dakota and Empire NDA (“Original Borrowers”), entered into a revolver loan agreement with Equity Bank (the “Credit Facility”).

On December 29, 2023, Empire North Dakota and Empire ND Acquisition LLC (“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;

9 unchanged sentences

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”).

On November 18, 2024, the Original Borrowers 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”).

On June 18, 2025, the Original Borrowers and Empire Texas Development LLC 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.

On December 29, 2025, the Company entered into the Third Amendment to the Credit Facility (the “Third Amendment”).

On December 29, 2025, the Borrowers entered into the Third Amendment to the Credit Facility (the “Third Amendment”).

Pursuant to the Third Amendment, among other things, (a) the final maturity date was extended to December 29, 2028, (b) Borrowers delivered a replacement promissory note, (c) Empire Texas Development LLC executed and delivered an amended and restated security agreement, (d) Borrowers paid a fully earned and non-refundable loan extension fee of $ 0.05 million, and (e) the Company executed and delivered guarantor acknowledgment and ratification.

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 March 31, 2026, the Borrowers were in compliance with all required covenants under the Credit Facility.

At June 30, 2026, the Borrowers were in compliance with all required covenants under the Credit Facility.

Promissory Note – Related Party

67 unchanged sentences

The Company leases vehicles primarily used in our field operations, which typically have a three-year life.

We also entered into an equipment lease during the first three months of 2026 and another one subsequent to March 31, 2026.

We also entered into two equipment leases during the six months ended June 30, 2026, which are included within oil and natural gas properties, net within the unaudited interim condensed consolidated balance sheets.

Each equipment lease has a two-year life with an option to purchase at the end of the respective lease.

2 unchanged sentences

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 March 31, 2026 and 2025, and cash paid for right-of-use lease was approximately $ 0.1 million for the same respective periods.

Right-of-use lease expense was approximately $ 0.2 million and $ 0.1 million for the three months ended June 30, 2026 and 2025, respectively.

Cash paid for right-of-use lease was approximately $ 0.2 million and $ 0.1 million for the same respective periods.

Supplemental balance sheet information related to the right-of-use leases is as follows:

3 unchanged sentences

Total right-of-use lease liabilities

The weighted-average remaining term for Empire’s right-of-use leases is 1.29 years, and the weighted-average discount rate is 6.11 % as of the first quarter of 2026.

The weighted-average remaining term for Empire’s right-of-use leases is 1.58 years, and the weighted-average discount rate is 5.26 % as of the second quarter of 2026.

Maturities of lease liabilities are as follows as of the date presented:

43 unchanged sentences

The 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.

No fractional shares of common stock were issued in the rights offering.

The subscription rights were set to expire if they were not exercised or extended at the discretion of the Company by February 27, 2026.

On February 25, 2026, the subscription rights offering was modified to entitle each holder to purchase 0.095 shares of common stock at a subscription price of $ 2.99 per one whole share of common stock for gross proceeds of up to approximately $ 10.0 million.

The expiration date was also extended to and completed on March 18, 2026.

The expiration date was also extended to, and the subscription rights offering was completed on March 18, 2026.

In March 2026, Mr.

4 unchanged sentences

All proceeds are subject to customary agency fees.

At this time no shares have been issued.

On April 22, 2026, the Company issued approximately 1.8 million shares at $ 3.00 per share of Empire common stock for a 25 % working interest in three oil and natural gas wells in Louisiana.

Loss per Common Share

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Basic Weighted-Average Shares

3 unchanged sentences

Loss per Common Share

(1) For the three months ended March 31, 2026, the Company had approximately 0.3 million of stock options, warrants, and outstanding restricted stock units excluded from the diluted shares calculation as their inclusion would be antidilutive due to a net loss for the period.

For the three months ended March 31, 2025, 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 period.

(1) For both the three and six months ended June 30, 2026, the Company had approximately 0.1 million of stock options, warrants, outstanding restricted stock units, and convertible debt 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, 2025, the Company had approximately 1.0 million of stock options and outstanding restricted stock units excluded from the diluted shares calculation as their effect would have been anti-dilutive due to a net loss for the respective periods.

Note 11 – Stock-Based Compensation

8 unchanged sentences

Outstanding, December 31, 2025

Outstanding, March 31, 2026

Outstanding, June 30, 2026

(1) Shares are valued at the grant-date market price.

3 unchanged sentences

Outstanding, December 31, 2025

Outstanding, March 31, 2026 (1)

Exercisable, March 31, 2026 (1)

Outstanding, June 30, 2026 (1)

Exercisable, June 30, 2026 (1)

(1) Stock options outstanding and exercisable had an aggregate intrinsic value of ($ 2.9 ) million and ($ 2.3 ) million, respectively.

(2) Stock options outstanding at March 31, 2026, had a weighted-average remaining contract term of 3.16 years.

(3) Stock options outstanding at March 31, 2026, had an exercise price range of $ 1.32 to $ 12.36 .

(2) Stock options outstanding at June 30, 2026, had a weighted-average remaining contract term of 3.32 years.

(3) Stock options outstanding at June 30, 2026, had an exercise price range of $ 1.32 to $ 12.36 .

Note 12 – Income Taxes

1 unchanged sentence

federal and various state income tax.

Any impacts of state income taxes is primarily attributable to New Mexico and North Dakota, which together represent more than 50% of the total state tax effect for the three months ended March 31, 2026 and 2025.

The Company did no t have any current or deferred tax expense for the three months ended March 31, 2026 and 2025.

Any impacts of state income taxes is primarily attributable to New Mexico and North Dakota, which together represent more than 50% of the total state tax effect for the three and six months ended June 30, 2026 and 2025.

The Company did no t have any current or deferred tax expense for the three and six months ended June 30, 2026 and 2025.

Additionally, as a result of the continued net operating losses, we have made no cash payments of U.S.

8 unchanged sentences

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.

The impacts of these changes are reflected within income tax provision (benefit) on the unaudited interim condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025.

The impacts of these changes are reflected within income tax provision (benefit) on the unaudited interim condensed consolidated statements of operations for the three and six months ended June 30, 2026 and 2025.

We continue to monitor further legislative developments and administrative guidance.

Note 13 – Related Party Transactions

Energy Evolution is a related party of the Company as it beneficially owns approximately 33.1 % of the Company’s outstanding shares of common stock as of March 31, 2026.

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 29.1 % of the Company’s outstanding shares of common stock as of March 31, 2026, and is also a majority owner of Petroleum & Independent Exploration, LLC and related entities (“PIE”).

The Company has a shared services agreement with PIE that includes access to administrative, engineering and support-services as well as building and insurance services.

The agreement provides that the Company will reimburse PIE for the out-of-pocket costs incurred by PIE in providing such services to the Company.

Phil Mulacek beneficially owns approximately 29.3 % of the Company’s outstanding shares of common stock as of June 30, 2026 and is a board member of Energy Evolution and a majority owner of Petroleum Independent & Exploration, LLC and related entities (collectively “PIE”).

Energy Evolution independently beneficially owns approximately 33.1 % of the Company’s outstanding shares of common stock as of June 30, 2026.

The Company has a shared services agreement with PIE that includes access to administrative, engineering and support-services as well as building and insurance services and provides that the Company will reimburse PIE for the out-of-pocket costs incurred by PIE in providing such services to the Company.

On June 17, 2025, the Company issued the June Note to Mr.

12 unchanged sentences

Mulacek fully converted the outstanding balance at a contractual conversion price of $ 2.99 per common share of Empire’s stock for total shares of 1,003,344 .

On March 18, 2026, Empire elected to participate in a three-well oil and natural gas development program in Louisiana for a 25 % working interest with various related parties.

Participation will be funded by issuance of up to approximately 1.8 million shares of Empire common stock at a price of $ 3.00 per share.

On March 8, 2026, the Company entered into a letter agreement with Mr.

Mulacek (the “EPC Hedging Letter Agreement”), pursuant to which Mr.

Mulacek opened an account at UBS Financial Services Inc.

(“UBS”) for the sole purpose of effecting commodity risk mitigating hedges on behalf of the Company (“EPC Hedging”).

The parties entered into the EPC Hedging Letter Agreement because at such time, Mr.

Mulacek was able to secure better commercial terms than the Company.

The EPC Hedging Letter Agreement provided that all EPC Hedging would be conducted either (a) at the direction of the Company’s management and/or the Company’s Audit Committee or (b) after consultation with and approval from the Company’s management and/or the Company’s Audit Committee.

The EPC Hedging Letter Agreement further provided that (i) any profits or losses arising in connection with EPC Hedging would be for the Company’s account, (ii) the parties would promptly make settlement payments as necessary after the monetization of any such EPC Hedging, and (iii) the Company would promptly reimburse Mr.

Mulacek for any out-of-pocket costs and expenses incurred by him in connection with EPC Hedging.

In the second quarter of 2026, due to circumstances outside of the Company’s control, all outstanding derivative positions related to the EPC Hedging were early settled by UBS, as UBS was contractually permitted to do, for a net realized loss of approximately $ 1.9 million.

As of June 30, 2026, cash settlement of the $ 2.1 million total net realized loss on derivative positions with UBS remains payable to Mr.

Mulacek has indicated a willingness to allow the Company to pay such amount to him with a reasonable rate of interest in 24 equal monthly installments.

The net realized loss on derivative positions are reflected within loss on derivatives on the Company’s unaudited interim condensed consolidated statements of operations and the payable to Mr.

Mulacek is reflected within accounts payable – related party on the unaudited interim condensed consolidated balance sheets.

The Company expects that it will issue a promissory note to Mr.

Mulacek in the third quarter of 2026 to memorialize such arrangement.

On March 18, 2026, Empire elected to participate in a three-well oil and natural gas development program with various related parties in Louisiana for a 25 % working interest.

Participation was funded by issuance of approximately 1.8 million shares of Empire common stock at a price of $ 3.00 per share.

As of June 30, 2026, we have accrued approximately $ 1.0 million for additional costs incurred related to the gas development program.

Note 14 – Commitments and Contingencies

16 unchanged sentences

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.

Certain of these matters implicate regulatory rulings and actions from either the NMOCD or the New Mexico Oil Conservation Commission.

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.

In December 2023, the Company initiated litigation in the Fifth Judicial District Court, Lea County, New Mexico, against a saltwater disposal operator asserting claims related to alleged trespass and unauthorized wastewater disposal within one of the Company's New Mexico water flood units.

Certain rulings issued in July 2026 in the litigation were adverse to the Company's position;

however, the litigation remains ongoing.

Management continues to evaluate the potential outcomes of this matter.

At this time, the Company cannot reasonably predict the ultimate outcome of the proceedings, and no amount has been recognized due to the uncertainty surrounding their resolution.

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 March 31, 2026, and December 31, 2025, as applicable, and generally represent Level 2 fair values due to their short-term nature.

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, 2026, and December 31, 2025, 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:

March 31, 2026 liabilities

June 30, 2026 assets (liabilities)

Debt - Credit Facility

2 unchanged sentences

Derivative Instrument - Embedded Derivative

December 31, 2025 liabilities

December 31, 2025 assets (liabilities)

Debt - Credit Facility

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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 three months ended March 31, 2026 and 2025.

No triggering events that require assessment of such items were observed during the six months ended June 30, 2026 and 2025.

Warrants – The fair value of the warrants issued in connection with the September Note further described in Note 8 – Debt Including Debt with Related Parties was measured using a Black-Scholes option pricing model.

9 unchanged sentences

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 March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Production costs

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements