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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2025

Organization and Basis of Presentation

Organization and Basis of Presentation

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:

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Empire New Mexico LLC d/b/a Green Tree New Mexico

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Empire EMSU LLC

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Empire EMSU-B LLC

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Empire AGU LLC

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Empire NM Assets LLC

●Empire North Dakota (“Empire North Dakota”), consisting of the following entities:

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Empire North Dakota LLC

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Empire North Dakota Acquisition LLC (“Empire NDA”)

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Empire Northwest Shelf LLC

●Empire Texas (“Empire Texas”), consisting of the following entities:

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Empire Texas LLC

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Empire Texas Operating LLC

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Empire Texas Development LLC

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Empire Texas GP LLC

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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 September 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 $8.6 million as of September 30, 2025. While there was a slight improvement from December 31, 2024, the continued negative working capital is primarily due to costs incurred for the Starbuck Drilling Program in North Dakota, on-going unforeseen operational costs from the Company’s return-to-production program in Texas, and lower oil production in North Dakota due to redrilling activity on certain wells. Additionally, the Company’s debt obligations continue to increase with various related parties discussed below. To meet its obligations, the Company increased its revolver commitment to $20.0 million in November 2024 which had approximately $3.3 million remaining unused commitment as of September 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 and a convertible note with Phil Mulacek in June and September 2025, respectively, for total aggregate available principal of $8.0 million. Of the total $8.0 million available, as of September 30, 2025, $2.0 million is outstanding. The Company may borrow up to an additional $2.0 million of the available principal at the discretion of Mr. Mulacek, per the terms of the respective agreements. (see Note 8). The Company also issued warrants to Mr. Mulacek in connection with the convertible note which the Company expects to be exercised (see Note 8). Finally, a subscription rights offering was completed in August 2025, which raised approximately $2.5 million of gross proceeds (see Note 10). A portion of these proceeds were used to settle $2.0 million of the outstanding balance of the promissory note with Mr. Mulacek, per the terms of the note, during the third quarter. 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 Mr. Mulacek who owns approximately 22.6% of our common stock outstanding as of September 30, 2025, and Energy Evolution Master Fund, Ltd. (“Energy Evolution”), our largest stockholder who owns approximately 31.3% of our common stock outstanding as of September 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.