UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 10-Q

_________________

(Mark One)

☑

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

For the quarterly period ended June 30, 2025

☐

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

For the transition period from: ____________to ____________

_____________________

EMPIRE PETROLEUM CORPORATION

(Exact name of registrant as specified in its charter)

_____________________

delaware

001-16653

73-1238709

(State or Other Jurisdiction of

Incorporation or Organization)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

2200 S. Utica Place, Suite 150, Tulsa, OK 74114
(Address of principal executive offices)(Zip Code)

(539) 444-8002

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

_________________

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock $0.001 par value	EP	NYSE American

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

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

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

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

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

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

The number of shares of the registrant's common stock, $0.001 par value, outstanding as of August 8, 2025 was 33,756,595.

EMPIRE PETROLEUM CORPORATION

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (Unaudited)	2

	Condensed Consolidated Statements of Operations - For the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited)	3

	Condensed Consolidated Statements of Changes in Stockholders' Equity - For the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2025 and 2024 (Unaudited)	5

	Notes to Unaudited Interim Condensed Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults Upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

	Signatures	33

PART I. FINANCIAL INFORMATION

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.

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.

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.

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.

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

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.

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.

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.

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.

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”).

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:

	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.

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

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).

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.

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

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.

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


	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.

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)

SEC Form 10-Q filed by Empire Petroleum Corporation