UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
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(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices)
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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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.
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).
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. (Check one):
| Large accelerated filer o | Accelerated filer o | 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
o
The number of shares outstanding of the registrant’s common stock, par value $0.0001, as of August 11, 2026, was .
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NEXT BRIDGE HYDROCARBONS, INC.
QUARTERLY REPORT
For the Quarter Ended June 30, 2026
INDEX
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements may be identified by their use of terms such as “anticipate,” “assume,” “believe,” “budget,” “can,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “pending,” “plan,” “potential,” “projected,” “will,” and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts included in this report are forward-looking statements. Forward-looking statements appear throughout this report, and include statements about such matters as:
| ● | amount and timing of future production of oil and natural gas; |
| ● | amount, nature and timing of capital expenditures; |
| ● | the number of anticipated wells to be drilled after the date hereof; |
| ● | the availability of exploration and development opportunities; |
| ● | our financial or operating results; |
| ● | our cash flow and anticipated liquidity; |
| ● | operating costs including lease operating expenses, administrative costs and other expenses; |
| ● | finding and development costs; |
| ● | our business strategy; and |
| ● | other plans and objectives for future operations. |
Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason. They can be affected by a number of factors, including, among others:
| ● | the risks described in “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2025; |
| ● | the volatility of prices and supply of, and demand for, oil and natural gas; |
| ● | the timing and success of our drilling activities; |
| ● | the numerous uncertainties inherent in estimating quantities of oil and natural gas reserves and actual future production rates and associated costs; |
| ● | our ability to successfully identify, execute or effectively integrate future acquisitions; |
| ● | the usual hazards associated with the oil and natural gas industry, including fires, well blowouts, pipe failure, spills, explosions and other unforeseen hazards; |
| ● | our ability to effectively market our oil and natural gas; |
| ● | the availability of rigs, equipment, supplies and personnel; |
| ● | our ability to discover or acquire additional reserves; |
| ● | our ability to satisfy future capital requirements; |
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| ● | changes in regulatory requirements; |
| ● | general economic conditions, status of the financial markets and competitive conditions; |
| ● | our ability to retain key members of our senior management and key employees; and |
| ● | our ability to renew oil and gas leases before they expire. |
Moreover, we operate in a rapidly evolving environment. New risk factors and uncertainties emerge from time to time, and it is not possible for our management to predict all the risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this report relate only to events or information available to us as of the date of this report. Except as required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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DEFINITIONS
The following are abbreviations and definitions of terms commonly used in the oil and gas industry and in this report. Natural gas equivalents and crude oil equivalents are determined using the ratio of six Mcf to one barrel. Unless the context otherwise requires, all references to “us,” “our,” “we,” “NBH,” the “Company” or “Next Bridge” mean Next Bridge Hydrocarbons, Inc. and where applicable, its consolidated subsidiaries including Torchlight Hazel, LLC, a Texas limited liability company (“Torchlight Hazel”), Hudspeth Oil Corporation, a Texas corporation (“Hudspeth”), Hudspeth Operating, LLC, a Texas limited liability company (“Hudspeth Operating”), and Torchlight Energy, Inc., a Nevada corporation (“TEI”), Wolfbone Investments LLC, a Texas limited liability company (“Wolfbone”), Wildcat Panther, LLC, a Texas limited liability company (“Panther”), Wildcat Valentine, LLC, a Texas limited liability company (“Valentine”), Wildcat Cowboy, LLC, a Texas limited liability company (“Cowboy”), Wildcat Packer, LLC, a Texas limited liability company (“Packer”).
“Bbl” means a barrel of U.S. 42 gallons of oil.
“Bcf” means one billion cubic feet of natural gas.
“BOE” means one barrel of oil equivalent.
“Completion” means the installation of permanent equipment for the production of oil or gas.
“Condensate” means natural gas in liquid form produced in connection with natural gas wells.
“Exploratory well” means a well drilled to find a new field or to find a new productive reservoir in a field previously found to be productive of oil or natural gas in another reservoir or to extend a known reservoir.
“Gross” when used with respect to acres or wells, production or reserves refers to the total acres or wells in which we or another specified person has a working interest.
“MBbls” means one thousand barrels of oil.
“Mcf” means one thousand cubic feet of natural gas.
“Net” when used with respect to acres or wells, refers to gross acres of wells multiplied, in each case, by the percentage working interest owned by us.
“NGL” refers to natural gas liquids, which is composed exclusively of carbon and hydrogen.
“Oil” means crude oil or condensate.
“Operator” means the individual or company responsible for the exploration, development, and production of an oil or gas well or lease.
“Proved developed non-producing” means reserves (i) expected to be recovered from zones capable of producing but which are shut-in because no market outlet exists at the present time or whose date of connection to a pipeline is uncertain or (ii) currently behind the pipe in existing wells, which are considered proved by virtue of successful testing or production of offsetting wells.
“Proved developed producing” means reserves expected to be recovered from currently producing zones under continuation of present operating methods. This category includes recently completed shut-in gas wells scheduled for connection to a pipeline in the near future.
“Proved developed reserves” means reserves that can be expected to be recovered through existing wells with existing equipment or operating methods.
“Proved reserves” means the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided by contractual arrangements.
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“Proved undeveloped reserves” means reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling locations offsetting productive wells that are reasonably certain of production when drilled or where it can be demonstrated with certainty that there is continuity of production from the existing productive formation.
“Recompletion” means the completion for production of an existing well bore in another formation from which the well has been previously completed.
“Royalty” means an interest in an oil and gas lease that gives the owner of the interest the right to receive a portion of the production from the leased acreage (or of the proceeds of the sale thereof), but generally does not require the owner to pay any portion of the costs of drilling or operating the wells on the leased acreage. Royalties may be either landowner’s royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.
“SEC” means the United States Securities and Exchange Commission.
“Working interest” means an interest in an oil and gas lease that gives the owner of the interest the right to drill for and produce oil and gas on the leased acreage and requires the owner to pay a share of the costs of drilling and production operations. The share of production to which a working interest owner is entitled will always be smaller than the share of costs that the working interest owner is required to bear, with the balance of the production accruing to the owners of royalties. For example, the owner of a 100% working interest in a lease burdened only by a landowner’s royalty of 12.5% would be required to pay 100% of the costs of a well but would be entitled to retain 87.5% of the production.
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
| NEXT BRIDGE HYDROCARBONS, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| Unaudited | Audited | |||||||
| June 30 | December 31 | |||||||
| 2026 | 2025 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Production receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Oil and natural gas properties | ||||||||
| Other assets | ||||||||
| Deposit - RRC | ||||||||
| Other asset - related party | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, MEZZANINE EQUITY, AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Note payable - related party | ||||||||
| Note payable | ||||||||
| Accrued interest payable | ||||||||
| Total current liabilities | ||||||||
| Asset retirement obligations | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Mezzanine equity, Series “A” redeemable, non voting, preferred stock | ||||||||
| Preferred stock, par value $, shares authorized; issued and outstanding at June 30, 2026 and December 31, 2025 | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock, par value $; shares authorized; issued and outstanding at June 30, 2026 issued and outstanding at December 31, 2025; | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, MEZZANINE EQUITY, AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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| NEXT BRIDGE HYDROCARBONS, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Unaudited) |
| Three Months | Three Months | Six Months | Six Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Oil and natural gas sales | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Lease operating expenses | ||||||||||||||||
| Production taxes | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Other expense | ||||||||||||||||
| Total other expense | ||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per common share: | ||||||||||||||||
| Basic and Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and Diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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| NEXT BRIDGE HYDROCARBONS, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AND MEZZANINE EQUITY |
| (Unaudited) |
| Stockholders’ Deficit | Mezzanine Equity | |||||||||||||||||||||||||||||||
| Common | Common | Additional | Shares to | Total | ||||||||||||||||||||||||||||
| Stock | Stock | Paid-in | to be | Accumulated | Stockholders’ | Preferred | ||||||||||||||||||||||||||
| Shares | Amount | Capital | issued | Deficit | Deficit | Shares | Amount | |||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Common shares issued to Johnson Participants | ( | ) | - | |||||||||||||||||||||||||||||
| Common shares issued to directors and officer | - | - | ||||||||||||||||||||||||||||||
| Imputed interest on related party note payable | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | - | ||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Common shares issued to directors and officer | ( | ) | - | |||||||||||||||||||||||||||||
| Imputed interest on related party note payable | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | - | ||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Imputed interest on related party note payable | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | - | ||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Imputed interest on related party note payable | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | - | ||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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| NEXT BRIDGE HYDROCARBONS, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| Six Months Ended | Six Months Ended | |||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Cash Flows provided by (used in) Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash from operations: | ||||||||
| Accretion expense | ||||||||
| Expense related to stock based compensation | ||||||||
| Imputed interest on note payable | ||||||||
| Change in: | ||||||||
| Accounts receivable | ||||||||
| Other asset - related party | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows used in Investing Activities | ||||||||
| Investment in oil and natural gas properties | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows provided by Financing Activities | ||||||||
| Proceeds from notes payable, related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Increase in note payable, related party for settlement of accounts payable | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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| NEXT BRIDGE HYDROCARBONS, INC. AND SUBSIDIARIES |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
| June 30, 2026 |
| (Unaudited) |
| 1. | NATURE OF BUSINESS |
Next Bridge Hydrocarbons, Inc. (the “Company”) was incorporated in Nevada on August 31, 2021, as OilCo Holdings, Inc. and changed its name to Next Bridge Hydrocarbons, Inc. pursuant to its Amended and Restated Articles of Incorporation filed on June 30, 2022.
The Company is an energy company engaged in the acquisition, exploration, exploitation and development of oil and natural gas properties in the United States. The Company has minor interests in the eastern edge of the Midland Basin in Texas (the “Hazel Project”), two minor well interests in the Hunton wells located in Oklahoma (the “Oklahoma Properties”), and undeveloped mineral lease interests in LaFourche Parish and Acadia Parish, Louisiana. As of June 30, 2026, the Company had no proved reserves and no capitalized oil and natural gas properties reflected on its balance sheet and is focused on evaluating acquisition, development and financing opportunities. The Company has no employees. We engage contractors and consultants for various roles as needed including management and high quality exploration and technical partners.
The Company operates its business through nine wholly owned subsidiaries Torchlight Energy, Inc., a Nevada corporation (“TEI”), Hudspeth Oil Corporation, a Texas corporation (“Hudspeth”), Torchlight Hazel, LLC, a Texas limited liability company (“Torchlight Hazel”), Wolfbone Investments, LLC, a Texas limited liability company (“Wolfbone”), Hudspeth Operating, LLC, a Texas limited liability company and wholly owned subsidiary of Hudspeth (“Hudspeth Operating”), Wildcat Panther, LLC, a Texas limited liability company (“Panther”), Wildcat Valentine, LLC, a Texas limited liability company (“Valentine”), Wildcat Cowboy, LLC, a Texas limited liability company (“Cowboy”), Wildcat Packer, LLC, a Texas limited liability company (“Packer”). All intercompany transactions have been eliminated in these condensed consolidated financial statements.
| 2. | GOING CONCERN |
At
June 30, 2026, the Company had not yet achieved profitable operations. The Company had a net loss of $
The Company’s ability to continue as a going concern is dependent on its ability to generate future profitable operations or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management’s plan to address the Company’s ability to continue as a going concern includes: (1) obtaining debt or equity funding from private placement, institutional, or public sources; (2) obtaining loans from financial institutions, where possible, or (3) participating in joint venture transactions with third parties. Although management believes that it will be able to obtain the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful.
These condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and therefore, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.
| 3. | SIGNIFICANT ACCOUNTING POLICIES |
The Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America. Accounting principles followed and the methods of applying those principles, which materially affect the determination of financial position, results of operations and cash flows are summarized below:
Use of estimates—The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and certain assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates.
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Basis of presentation—The financial statements are presented on a consolidated basis and include the accounts of Next Bridge Hydrocarbons, Inc. and its wholly owned subsidiaries, TEI, Hudspeth, Torchlight Hazel, Wolfbone, Hudspeth Operating. and Wildcat Panther, LLC, a Texas limited liability company (“Panther”), Wildcat Valentine, LLC, a Texas limited liability company (“Valentine”), Wildcat Cowboy, LLC, a Texas limited liability company (“Cowboy”), Wildcat Packer, LLC, a Texas limited liability company (“Packer”). All significant intercompany balances and transactions have been eliminated.
In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations for all periods presented. In preparing the accompanying condensed consolidated financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates.
Reclassification—Certain prior year amounts related to Other assets – related party have been reclassified.
Risks and uncertainties—The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating an emerging business, including the potential risk of business failure.
Concentration of risks—At times the Company’s cash balances are in excess of amounts guaranteed by the Federal Deposit Insurance Corporation. The Company’s cash is placed with a highly rated financial institution, and the Company regularly monitors the creditworthiness of the financial institutions with which it does business.
Fair value of financial instruments—Financial instruments consist of cash, receivables, convertible note receivable, payables and promissory notes, if any. The estimated fair values of cash, receivables, and payables approximate the carrying amount due to the relatively short maturity of these instruments. The carrying amounts of any promissory notes approximate their fair value giving affect for the term of the note and the effective interest rates.
For assets and liabilities that require re-measurement to fair value the Company categorizes them in a three-level fair value hierarchy as follows:
| ● | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration. |
| ● | Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. |
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Cash and cash equivalents – Cash and cash equivalents include certain investments in highly liquid instruments with original maturities of nine months or less.
Accounts receivable – Accounts receivable consist of amounts due from Joint Interest Billing to working interest owners, if any, who were participants, in Company owned projects. Balances due, if any, represent their pro rata share of charges for development and operating costs allocable to wells after applying any prepayments from those owners.
Management reviews receivables periodically and reduces the carrying amount by a valuation allowance that reflects management’s best estimate of the amount that may not be collectible. As of June 30, 2026 and December 31, 2025, no valuation allowance was considered necessary.
Oil and natural gas properties – The Company uses the full cost method of accounting for exploration and development activities as defined by the SEC. Under this method of accounting, the costs of unsuccessful, as well as successful, exploration and development activities are capitalized as properties and equipment. This includes any internal costs that are directly related to property acquisition, exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities.
Oil and natural gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs excluded represent investments in unevaluated properties and include non-producing leasehold, geological, and geophysical costs associated with leasehold or drilling interests and exploration drilling costs. The Company allocates a portion of its acquisition costs to unevaluated properties based on relative value. Costs are transferred to the full cost pool as the properties are evaluated over the life of the reservoir. Unevaluated properties are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions.
Impairment
expense of $
12
Gains and losses, if any, on the sale of oil and natural gas properties are not generally reflected in income unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves. Sales of less than 100% of the Company’s interest in the oil and natural gas property are treated as a reduction of the capital cost of the field, with no gain or loss recognized, as long as doing so does not significantly affect the unit-of-production depletion rate. Costs of retired equipment, net of salvage value, are usually charged to accumulated depreciation.
Capitalized
interest – The Company capitalizes interest on unevaluated properties during the periods in which they are excluded from
costs being depleted or amortized. During the six months ended June 30, 2026, the Company capitalized $-
Depreciation, depletion, and amortization – The depreciable base for oil and natural gas properties includes the sum of all capitalized costs net of accumulated depreciation, depletion, and amortization (“DD&A”), estimated future development costs and asset retirement costs not included in oil and natural gas properties, less costs excluded from amortization. The depreciable base of oil and natural gas properties is amortized on a unit-of-production method.
Ceiling test – Future production volumes from oil and natural gas properties are a significant factor in determining the full cost ceiling limitation of capitalized costs. Under the full cost method of accounting, the Company is required to periodically perform a “ceiling test” that determines a limit on the book value of oil and natural gas properties. If the net capitalized cost of proved oil and natural gas properties, net of related deferred income taxes, plus the cost of unproved oil and natural gas properties, exceeds the present value of estimated future net cash flows discounted at 10 percent, net of related realizable tax affects, plus the cost of unproved oil and natural gas properties, the excess is charged to expense and reflected as additional accumulated DD&A.
The ceiling test calculation uses a commodity price assumption which is based on the unweighted arithmetic average of the price on the first day of each month for each month within the prior 12-month period and excludes future cash outflows related to estimated abandonment costs.
The determination of oil and natural gas reserves is a subjective process, and the accuracy of any reserve estimate depends on the quality of available data and the application of engineering and geological interpretation and judgment. Estimates of economically recoverable reserves and future net cash flows depend on a number of variable factors and assumptions that are difficult to predict and may vary considerably from actual results. In particular, reserve estimates for wells with limited or no production history are less reliable than those based on actual production. Subsequent re-evaluation of reserves and cost estimates related to future development of proved oil and natural gas reserves could result in significant revisions to proved reserves. Other issues, such as changes in regulatory requirements, technological advances, and other factors which are difficult to predict could also affect estimates of proved reserves in the future.
Asset retirement obligations – The fair value of a liability for an asset’s retirement obligation (“ARO”) is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, with the corresponding charge capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its then-present value each subsequent period. Abandonment costs incurred are recorded as a reduction of the ARO liability.
Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and natural gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
Series A Preferred Stock – The Company applies the guidance in Accounting Standards Codification (“ASC”) 480 to determine the classification and measurement of preferred stock. Preferred stock that is mandatorily redeemable is classified as a liability and measured in accordance with ASC 480. Preferred stock that is conditionally redeemable, including instruments with redemption features that are either at the option of the holder or contingent upon events outside the Company’s control, is classified as mezzanine equity in accordance with ASC 480-10-S99. All other preferred stocks are classified in stockholders’ equity. Mezzanine equity is initially recorded at its original issuance price. It is subsequently measured at its redemption value when the instrument becomes currently redeemable or when it becomes probable that it will be redeemed. As the Series A Preferred Stock includes a change in control redemption feature that is outside the Company’s control, it is classified as mezzanine equity and is currently recorded at its original issuance price, as the instrument is not currently redeemable and redemption is not considered probable.
The Company accounts for stock option awards using the calculated value method. The Company values warrant and option awards using the Black-Scholes option pricing model.
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The Company accounts for any forfeitures of options when they occur. Previously recognized compensation cost for an award is reversed in the period that the award is forfeited.
The Company also issues equity awards to non-employees. The fair value of these option awards is estimated when the award recipient completes the contracted professional services. The Company recognizes the expense for the estimated total value of the awards during the period from their issuance until performance completion.
Income taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized. Reference Note 9 to the Financial Statements.
Authoritative guidance for uncertainty in income taxes requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an examination. Management has reviewed the Company’s tax positions and determined there were no uncertain tax positions requiring recognition in the condensed consolidated financial statements. Company tax returns remain subject to federal and state tax examinations. Generally, the applicable statutes of limitation are ten years from their respective filings.
Estimated interest and penalties related to potential underpayment on any unrecognized tax benefits are classified as a component of tax expense in the statements of operation. The Company has not recorded any interest or penalties associated with unrecognized tax benefits for the six months ended June 30, 2026, or for the six months ended June 30, 2025.
Revenue recognition – The Company’s revenue is typically generated from contracts to sell natural gas, crude oil or NGLs produced from interests in oil and natural gas properties owned by the Company. Contracts for the sale of natural gas and crude oil are evidenced by (1) base contracts for the sale and purchase of natural gas or crude oil, which document the general terms and conditions for the sale, and (2) transaction confirmations, which document the terms of each specific sale. The transaction confirmations specify a delivery point which represents the point at which control of the product is transferred to the customer. The Company elects to treat contracts to sell oil and natural gas production as normal sales, which are then accounted for as contracts with customers. The Company has determined that these contracts represent multiple performance obligations, which are satisfied when control of the commodity transfers to the customer, typically through the delivery of the specified commodity to a designated delivery point.
Revenue is measured based on consideration specified in the contract with the customer, and excludes any amounts collected on behalf of third parties. The Company recognizes revenue in the amount that reflects the consideration it expects to be entitled to in exchange for transferring control of those goods to the customer. Amounts allocated in the Company’s price contracts are based on the standalone selling price of those products in the context of long-term contracts. Payment is generally received one or two months after the sale has occurred.
Gain or loss on derivative instruments is outside the scope of ASC 606, Revenue Recognition, and is not considered revenue from contracts with customers subject to ASC 606. The Company may in the future use financial or physical contracts accounted for as derivatives as economic hedges to manage price risk associated with normal sales, or in limited cases may use them for contracts the Company intends to physically settle but do not meet all of the criteria to be treated as normal sales.
Producer Gas Imbalances. The Company applies the sales method of accounting for natural gas revenue. Under this method, revenues are recognized based on the actual volume of natural gas sold to purchasers.
Environmental laws and regulations – The Company is subject to extensive federal, state, and local environmental laws and regulations. Environmental expenditures are expensed or capitalized depending on their future economic benefit. The Company believes that it is in compliance with existing laws and regulations. The Company accrued no liability as of June 30, 2026, and December 31, 2025.
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Accounting Pronouncements Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires public entities to disclosure additional information about certain costs and expenses included in relevant expense captions presented on the income statement. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. Management is currently evaluating ASU 2024-03 to determine its impact on the Company’s disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606, Revenue from Contracts with Customers. The practical expedient permits an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the current accounts receivable and current contract assets. ASU 2025-05 is effective for annual and interim periods beginning after December 15, 2025 on a prospective basis, with early adoption permitted. The Company has adopted this standard for our fiscal year 2026 annual financial statements and interim financial statements. The adoption did not have a material impact on our financial statements or results of operations.
Segment Reporting
The Company manages its business activities on a consolidated basis and operates in a single operating and reportable segment. Operating segments are defined as components of a public entity that engages in business activities and for which discrete financial information and operating results are available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and assess performance.
The Company’s Chief Executive Officer (“CEO”) has been determined to be the Chief Operating Decision Maker (CODM) of the Company. The CEO uses net income, as reported on our condensed consolidated income statements, to assess financial performance and allocate resources on a consolidated basis. The CEO manages and evaluates the results of the Company on a consolidated basis, and net income is used to evaluate key operating decisions, such as making strategic acquisitions, determining transaction structures to capitalize on the development of oil and natural gas properties, and allocating resources for general and administrative expenditures. The CEO does not review consolidated balance sheet assets when assessing segment performance and deciding how to allocate resources. The measure of segment assets is reported on the balance sheet as total consolidated assets. Disaggregated operating revenues of the Company’s single segment and all significant segment expenses are presented separately on the Company’s condensed consolidated statement of operations. There are no other significant segment expenses or other segment items that would require disclosure.
| 4. | OIL & NATURAL GAS PROPERTIES |
The following table presents the capitalized costs for oil and natural gas properties of the Company:
| June 30, 2026 | December 31, 2025 | |||||||
| Evaluated costs subject to amortization | $ | $ | ||||||
| Unevaluated costs | ||||||||
| Total capitalized costs | ||||||||
| Less accumulated depreciation, depletion and amortization | ||||||||
| Less accumulated impairment | - | ( | ) | |||||
| Total oil and natural gas properties | $ | $ | ||||||
Impairment
expense of $
The Company periodically adjusts for the separation of evaluated versus unevaluated costs within its full cost pool to recognize the value impairment related to the expiration of, or changes in market value, of unevaluated leases. The impact of reclassifications as they become necessary is to increase the basis for calculation of future period’s depletion, depreciation and amortization which effectively recognizes the impairment on the condensed consolidated statement of operations over future periods. Reclassified costs also become evaluated costs for purposes of ceiling tests, and which may cause recognition of increased impairment expense in future periods.
The Company had no proved reserve value associated with our properties as of June 30, 2026.
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Due to the volatility of commodity prices, should oil and natural gas prices decline in the future, it is possible that a write-down could occur. Proved reserves are estimated quantities of crude oil, natural gas, and NGLs, which geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs under existing economic and operating conditions. The independent engineering estimates include only those amounts considered to be proved reserves and do not include additional amounts which may result from new discoveries in the future, or from application of secondary and tertiary recovery processes where facilities are not in place or for which transportation or marketing contracts are not in place. Estimated reserves to be developed through secondary or tertiary recovery processes are classified as unevaluated properties.
Current Projects
The Company is an energy company engaged in the acquisition, exploration, exploitation and/or development of oil and natural gas properties in the United States. The Company is primarily focused on the acquisition of early-stage projects, the development and delineation of these projects, and then the monetization of those assets once these activities are completed.
As of June 30, 2026, the Company had interests in three oil and natural gas projects: the Hazel Project in Sterling, Tom Green, and Irion Counties, Texas, two wells in Central Oklahoma, and the Wildcat properties that hold mineral leases in Louisiana.
During the fourth quarter of 2025 Magnetar began development on the initial test well on the Valentine mineral acreage in Louisiana held by our subsidiary Wildcat–Valentine LLC. The Company declined to exercise its option to participate in the drilling project. Magnetar had granted the Company a nominal net 0.8% working interest in the initial test well being developed. The Magnetar Valentine development effort resulted in a dry hole.
The Louisiana unevaluated mineral leases were fully impaired as of December 31, 2025.
As of June 30, 2026, the Company had no proved reserves and no capitalized oil and natural gas properties costs reflected on its balance sheet and is focused on evaluating acquisition, development and financing opportunities.
Hazel Project in the Midland Basin in West Texas
Effective April 4, 2016, TEI acquired from McCabe Petroleum Corporation (“MPC”) which is owned by the Company’s Chairman and CEO, Gregory McCabe, a 66.66% working interest in approximately 12,000 acres in the Midland Basin. A back-in after payout of a 25% working interest was retained by MPC and another unrelated working interest owner.
In October 2016, the holders of all of Torchlight’s then-outstanding shares of Series C Preferred Stock (which were issued in July 2016) elected to convert into a total 33.33% working interest in our Hazel Project, reducing TEI’s ownership from 66.66% to a 33.33% working interest.
Acquisition of Additional Interests in Hazel Project
On January 30, 2017, Torchlight entered into and closed an Agreement and Plan of Reorganization and a Plan of Merger with an entity which was wholly owned by Mr. McCabe, which resulted in the acquisition of approximately 40.66% working interest in the 12,000 gross acres, 9,600 net acres, in the Hazel Project.
Also on January 30, 2017, Torchlight entered into and closed a Purchase and Sale Agreement with Wolfbone. Under the agreement, Torchlight acquired certain of Wolfbone’s Hazel Project assets, including its interest in the Flying B Ranch #1 well and the 40-acre unit surrounding the well.
Upon the closing of the transactions, the Torchlight working interest in the Hazel Project increased by 40.66% to a total ownership of 74%.
Effective June 1, 2017, Torchlight acquired an additional 6% working interest from unrelated working interest owners increasing its working interest in the Hazel project to 80%, and an overall net revenue interest of 75%.
Seven test wells have been drilled on the Hazel Project to capture and document the scientific base in support of demonstrating the production potential of the property.
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Option Agreement with Masterson Hazel Partners, LP
On August 13, 2020, the Company’s subsidiaries TEI and Torchlight Hazel (collectively, “Torchlight Subs”) entered into an option agreement (the “Option Agreement”) with Masterson Hazel Partners, LP (“MHP”) and MPC. Under the agreement, MHP was obligated to drill and complete, or cause to be drilled and completed, at its sole cost and expense, a new lateral well (the “Well”) on the Hazel Project, sufficient to satisfy Torchlight Subs’s continuous development obligations on the southern half of the prospect no later than September 30, 2020. MHP has satisfied this drilling obligation. MHP paid to Torchlight Subs $1,000 as an option fee at the time of execution of the Option Agreement. MHP is entitled to receive, as its sole recourse for the recoupment of drilling costs, the revenue from production of the Well attributable to Torchlight Subs’s interest until such time as it has recovered its reasonable costs and expenses for drilling, completing, and operating the well.
In exchange for MHP satisfying the above drilling obligations, Torchlight Subs granted to MHP the exclusive right and option to perform operations, at MHP’s sole cost and expense, on the Hazel Project sufficient to satisfy Torchlight Subs’s continuous development obligations on the northern half of the prospect. MHP declined to exercise its option to purchase the entire Hazel Project.
Full impairment of the historical cost incurred in prior periods for the Hazel Project has been previously recognized.
Hunton Play, Central Oklahoma
As of June 30, 2026, the Company was producing from one well in the Viking Area of Mutual Interest and one well in Prairie Grove.
Full impairment of the historical cost incurred in prior periods for the Oklahoma properties has been previously recognized.
The McCabe Contribution Agreement
On July 25, 2023, the Company entered into a Contribution Agreement among the Company, Mr. McCabe, and MPC, an entity exclusively owned and operated by Mr. McCabe (the “McCabe Contribution Agreement”). MPC has committed to contribute up to one hundred percent (100%) of the interest currently held by MPC in the drilling project located on over 1,150 acres in Vermillion Parish, Louisiana (the “Bronco Prospect”).
In July 2024 the Company agreed to participate in the cost of seismic data for the Bronco project to preserve its option to receive an assignment from MPC on the acreage with the intention of developing it at some time in the future, and with the understanding that discussions were ongoing between MPC and unrelated parties for them to potentially acquire the Bronco. In the event the Bronco was sold to an unrelated party, the Company would receive all cash and/or working interest equity retained in the sale. McCabe would only retain his overriding royalty interest as previously disclosed and will not receive any additional compensation.
The Company has paid $474,103 toward the seismic data collection and other costs related to maintain the Bronco leases through December 31, 2025, which it recorded as a prepayment toward either a future assignment of the Bronco, or as having an interest in the proceeds of a sale of the Bronco by Mr. McCabe to an unrelated party. These costs were reclassified as of December 31, 2025, as “Other asset – related party”.
| 5. | RELATED PARTY BALANCES |
The 2021 Note and Loan Agreement
On October 1, 2021, the Company entered into a note payable with Meta, its former parent, to borrow up to $15 million which bears interest at 8% per annum, computed on the basis of a 360-day year (the “2021 Note”). The 2021 Note was initially to mature on March 31, 2023 (the “2021 Note Maturity Date”). If an event of default has occurred and is continuing, interest on the 2021 Note may accrue at the default rate of 12% per annum. The 2021 Note includes a restrictive covenant that, subject to certain exceptions and qualifications, restricts the Company’s ability to merge or consolidate with another person or entity, or sell or transfer all or substantially all of its assets, unless the Company is the surviving entity, or the successor entity assumes all of obligations under the 2021 Note. The 2021 Note was originally collateralized by certain shares of common stock in Meta held by one of Meta’s stockholders, Mr. McCabe.
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On September 2, 2022, the Company entered into a loan agreement with Meta, as lender (the “Loan Agreement”) that would govern prior loan amounts advanced to the Company from Meta. As of August 11, 2022, and August 29, 2022, the Company borrowed an additional $1.2 million and $1.46 million, respectively, representing the remaining amount available for borrowing under the Loan Agreement and resulting in a total of $5 million principal amount outstanding related to the Loan Agreement, the proceeds of which were used for working capital and general corporate purposes. The term loans under the Loan Agreement bear interest at a per annum rate equal to 8% and were to mature on March 31, 2023 (the “Maturity Date”). The Loan Agreement includes customary representations and covenants that, subject to exceptions and qualifications, restrict our ability to do certain things, such as: engage in mergers, acquisitions, and asset sales; transact with affiliates; undergo a change in control; incur additional indebtedness; incur liens; make loans and investments; declare dividends or redeem or repurchase equity interests; and enter into certain restrictive agreements. In addition, the Loan Agreement contains customary events of default, mandatory prepayment events and affirmative covenants, including, without limitation, covenants regarding the payment of taxes and other obligations, maintenance of insurance, maintenance of our material properties, reporting requirements, compliance with applicable laws and regulations, and formation or acquisition of new subsidiaries.
Under the terms of the Arrangement Agreement that governed the merger transaction between Torchlight and Meta in June 2021, the oil and natural gas assets were to be sold or spun out from Meta and the costs of any sale or spin-off incurred by Meta were to be borne the then-existing shareholders of Torchlight. The amount of the reimbursement payable to Meta in connection with the Spin-Off was $2.59 million which was added to the principal amount of the Loan Agreement for a principal balance outstanding of $7.59 million as of March 31, 2023. Concurrently with the amendment to the Loan Agreement, the Company made a prepayment of $1 million to reduce the principal balance to $6.59 million.
On August 7, 2023, Mr. McCabe and Meta entered into a Loan Sale Agreement whereby Mr. McCabe purchased from Meta (i) the 2021 Note and (ii) all outstanding loans made to the Company by Meta pursuant to the Loan Agreement (the “Loan Purchase”). As a result of the Loan Purchase, Mr. McCabe replaced Meta as the lender and secured party under the 2021 Note and the Loan Agreement. The Company’s obligations and responsibilities under the 2021 Note and the Loan Agreement remain unchanged.
The combined balance on the 2021 Note and the Loan Agreement as of June 30, 2026 was $21.22 million. As of June 30, 2026, the combined total accrued and unpaid interest under the 2021 Note and the Loan Agreement was $7.30 million.
The maturity dates of the 2021 Note and Loan Agreement have been extended several times. An amendment to the 2021 Note and Loan Agreement entered into on June 30, 2025, includes an automatic renewal provision, and the maturity date of both is presently extended to September 30, 2026.
On December 22, 2022, the Company issued an unsecured promissory note in the principal amount of up to $20 million in favor of Mr. McCabe (the “2022 Note”), which bears interest at 5% per annum, computed on the basis of a 365-day year. As of June 30, 2026, the Company had $25.78 million in principal amount outstanding under the 2022 Note. As of June 30, 2026, the Company had $3.52 million in accrued but unpaid interest on the 2022 Note.
The maturity dates of the 2022 Note have been extended several times. An amendment to the 2022 Note entered into on June 30, 2025 includes an automatic renewal provision, and the maturity date is presently extended to September 30, 2026.
MPC has also advanced $97,027 for advance lease payments related to the “Bronco Project” which is pending transfer to the Company as of June 30, 2026. The Company is accounting for the advances as accounts payable and prepaid costs until the transfer of the leases is completed. The prepaid costs were reclassified as of December 31, 2025, as “Other asset – related party”. Reference Note 4.
| 6. | COMMITMENTS AND CONTINGENCIES |
Legal Matters
On March 15, 2024, a securities class action captioned Targgart v. Next Bridge Hydrocarbons, Inc., et al., No. 24-cv-1927, was filed in the U.S. District Court for the Eastern District of New York. The action is brought on behalf of a putative class of persons or entities that acquired the Company’s shares in connection with the Company’s spin-off from Meta Materials, Inc., in December 2022. The complaint names as defendants the Company and certain of its current and former officers and directors. The complaint asserts claims under Sections 11 and 15 of the Securities Act, alleging that the Form S-1 that the Company filed with the SEC on July 14, 2022, which became effective on November 18, 2022, contained untrue statements or omissions. The complaint seeks, among other things, unspecified statutory and compensatory damages. On August 12, 2024, the case was transferred to the Northern District of Texas. On September 9, 2024, plaintiffs filed an amended complaint that added a Section 12(a)(2) claim against the Company. On July 3, 2025, the District Court granted Defendants’ Motion to Dismiss and dismissed the case with prejudice. Final Judgment was entered that same day. On July 29, 2025, the plaintiffs filed a Notice of Appeal to appeal the case to the U.S. Court of Appeals for the Fifth Circuit. On June 26, 2026, the United States Court of Appeals for the Fifth Circuit reversed the dismissal and remanded the matter to the District Court for further proceedings. The Fifth Circuit’s mandate was issued on July 17, 2026. Following remand, the District Court has entered preliminary scheduling procedures, including directing the parties to confer and submit a joint report regarding a scheduling order, and the litigation is currently proceeding before the District Court. The Company believes the claims are without merit and intends to continue to vigorously defend the action.
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On March 20, 2026, a shareholder derivative action captioned Peter Bartok, derivatively and on behalf of Next Bridge Hydrocarbons, Inc. v. Greg McCabe, John Brda, Robert L. Cook, Clifton DuBose, Jr., Joseph DeWoody, Lucas T. Hawkins, Delvina Oelkers, Mia Pitts, Kristin Whitley, and Next Bridge Hydrocarbons, Inc., Case No. 7:26-cv-00096, was filed in the United States District Court for the Western District of Texas, Midland-Odessa Division. The action was filed following the voluntary dismissal without prejudice of a substantially similar shareholder derivative action previously pending in the 17th Judicial District Court of Tarrant County, Texas. The complaint names certain current and former officers and directors of the Company as defendants, with the Company named as a nominal defendant, and asserts derivative claims for, among other things, alleged breaches of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets arising from substantially the same underlying facts alleged in the securities class action captioned Targgart v. Next Bridge Hydrocarbons, Inc., et al. On May 15, 2026, the Court granted the parties’ joint motion to stay the action and administratively closed the case. No motion to reinstate the case has been filed, and no further proceedings are currently scheduled. The Company and the individual defendants intend to vigorously defend against the claims asserted in the action if the case is reinstated.
On December 9, 2024, a pro se plaintiff brought claims against the Company in the United States District Court, Western District, Midland Division under a lawsuit captioned Matthew J. Pease v. Securities & Exchange Commission, Financial Industry Regulatory Authority, Depository Trust & Clearing Corporation, OTC Markets Group, Inc., John Brda, Gregory McCabe, Next Bridge Hydrocarbons, Inc., which claims include: (i) violations of Sarbanes-Oxley Act; (ii) violation of Regulation FD; (iii) negligent and intentional infliction of emotional distress; (iv) conspiracy to commit fraud; and (iv) antitrust violations under the Sherman Act. The Company filed a motion to dismiss, which was granted on February 25, 2026, and all claims against the Company were dismissed with prejudice. Since dismissal, the plaintiff has filed a notice of appeal, which is still pending.
On December 6, 2024, a pro se plaintiff brought claims against the Company in the United States District Court, Western District, Midland Division under a lawsuit captioned Danielle Spears v. Next Bridge Hydrocarbons, Inc., Gregory McCabe, John Brda, Roger N. Wurtele, Kenneth Rice, Joseph DeWoody, Clifton Dubose and Jane Doe 1/20, John Doe 1-20, which claims include allegations of numerous violations of federal securities law, including: (i) violations of the Securities Exchange Act of 1934; (ii) negligence; (iii) failure to resolve the FINRA U3 halt, with reference to Section 10(b); (iv) unjust enrichment; (v) conspiracy to commit fraud; and (vi) emotional distress (negligent or intentional infliction). The Company filed a motion to dismiss, which was granted on February 24, 2026, and all claims against the Company were dismissed with prejudice. Since dismissal, the plaintiff has filed a notice of appeal, which is still pending.
On December 6, 2024, a pro se plaintiff brought claims against the Company in the United States District Court, Western District, Midland Division under a lawsuit captioned Contique Willcot v. Securities & Exchange Commission, GTS Securities, LLC, Ari Rubinstein, Next Bridge Hydrocarbons, Inc., John Brda, Gregory McCabe, Financial Industry Regulatory Authority, which claims include allegations of numerous violations of federal securities law, including: (i) violations of the Securities Exchange Act of 1934; (ii) violation of the Sherman Antitrust Act and the Clayton Act; (iii) negligence; and (iv) unjust enrichment. The Company filed a Motion to Dismiss, which was granted on March 16, 2026, and all claims against the Company were dismissed with prejudice. Since dismissal, the plaintiff has filed a notice of appeal, which is still pending.
Environmental Matters
The Company is subject to contingencies as a result of environmental laws and regulations. Present and future environmental laws and regulations applicable to the Company’s operations could require substantial capital expenditures or could adversely affect its operations in other ways that cannot be predicted at this time. As of June 30, 2026, and December 31, 2025, no amounts had been recorded because no specific liability has been identified that is reasonably probable of requiring the Company to fund any future material amounts.
| 7. | MEZZANINE EQUITY |
Series A Preferred Stock
On August 20, 2025, the Company entered into and closed a transaction with Panther Bridge, LLC, a Texas limited liability company (“Panther Bridge”), under which Panther Bridge loaned $6,000,000 to the Company, see note 10. The transaction was effective through a Subscription Agreement that was entered into between the two parties, under which the Company sold to Panther Bridge an 18% Unsecured Promissory Note in the original principal amount of $6,000,000 (the “Panther Bridge Note”), along with shares of Series A Redeemable Preferred Stock, par value of $0.0001 per share (the “Preferred Stock”) for $0. The Series A Preferred Stock is recorded at the fair value at the time of issuance of $4,843 in the Company’s Condensed Consolidated Financial Statements.
Mezzanine Classification
The Series A Preferred Stock is redeemable in the event of certain change of control events involving the Company. S99-3A(2) of the SEC’s Accounting Series Release No. 268 (“ASR 268”) requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. Preferred securities that are mandatorily redeemable are required to be classified by the issuer as liabilities whereas under ASR 268 guidance an issuer should classify a preferred security whose redemption is contingent on an event not entirely in control of the issuer as mezzanine equity. The Series A Preferred Stock is not mandatorily redeemable. A change in control, however, is not solely in control of the Company, and accordingly, the Company determined that mezzanine treatment is appropriate for the Series A and has presented it as such in our Condensed Consolidated Financial Statements as of and for the year ended December 31, 2025, and for the six months ended June 30, 2026.
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Liquidation Preference
The Series A Preferred Stock will rank senior to the Company’s common stock, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Dividends
Holders of the Series A Preferred Stock are entitled to a dividend at the rate of 18.0% per annum, compounding quarterly, paid in cash, at the Company’s election. For any quarter in which the Company elects not to pay the dividend in cash, such dividend will become part of the redemption price of each share of Series A Preferred Stock as of the applicable dividend payment date. The Preferred Stock begins accruing dividends on the first anniversary of the issuance date, August 20, 2026. During the six months ended June 30, 2026, the Company did not declare or pay dividends on the Preferred Stock.
Voting
The Series A Preferred Stock will not be entitled to vote with the holders of the common stock.
Redemption
At any time, the Company may redeem, ratably, in whole, the shares of Series A Preferred Stock of any holder outstanding at such time at a redemption price per share of Series A Preferred Stock equal to the following: sum of (i) $1.00 plus (ii) all unpaid dividends (whether or not declared) on such share accrued from (and including) the immediately preceding dividend payment date to (but not including) the redemption date.
Change in Control Redemption
In the event of any change in control transaction occurring after the original issuance date, each holder of shares of Series A Preferred Stock outstanding immediately prior to the consummation of such change in control transaction shall be entitled to have all, but not less than all, of the shares of Series A Preferred Stock be redeemed at the redemption price upon the consummation of such change in control transaction.
As of June 30, 2026, the Series A Preferred Stock is not probable of becoming redeemable.
| 8. | STOCKHOLDERS’ EQUITY |
The Company has authorized shares of common stock, par value of $ per share, and authorized shares of preferred stock, par value of $ per share.
Six months ended June 30, 2025
Effective December 30, 2024, the Company issued 8,432,047 shares of common stock to the Participants in the Johnson Project. On October 6, 2023, the Company and certain investor participants (each a “Participant” and collectively the “Participants”) entered into twenty-five separate Participation Agreements (the “Participation Agreements”) to conduct drilling of wells in the Company’s approximately 17,000 acre Johnson Prospect in Hudspeth County, Texas. Within a specified period following drilling of the initial five wells, pursuant to the Participation Agreement, each Participant had the right to elect to transfer and assign all its interests to the Company in exchange for the issuance of shares of common stock. All 25 participants elected to exercise that right effective December 30, 2024, requiring the issuance of common stock. Certificates were issued in first quarter of 2025.
On March 10, 2025, the Company authorized issuance of shares of common stock valued at par value of $ to directors, an officer, and a consultant for services.
Six months ended June 30, 2026
There were no issues of common or preferred stock during the six months ended June 30, 2026.
As of June 30, 2026, the Company had outstanding shares of common stock and shares of preferred stock outstanding.
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Stock Based Compensation
In 2022, the Company’s board of directors adopted, and the stockholders approved, the 2022 Equity Incentive Plan (the “2022 Plan”). The 2022 Plan permits the Company to grant stock options, restricted stock, restricted stock units, performance shares awards and any one or more of the foregoing, for up to a maximum of 58,273,612 shares following an automatic increase to the number of shares reserved under the 2022 Plan on January 1, 2023.
During the year ended December 31, 2023, the Company granted 35,856,521 stock options in the first and second quarters of 2023 as authorized under the 2022 Plan.
Upon the resignations by certain of the Company’s employees in the second quarter, 2023, 6,618,889 of the options granted to those employees in March 2023 were forfeited, canceled, and returned to the option pool available under the 2022 Plan.
As of June 30, 2026, and December 31, 2025, options were outstanding.
Vesting was subject to continued service with the Company for up to one year with provisions for earlier vesting subject to the attainment of events outlined in the Plan.
All options outstanding were fully vested as of December 31, 2023.
| Risk-free interest rate | ||
| Expected volatility of common stock | ||
| Dividend yield | ||
| Discount due to lack of marketability | 0% | |
| Expected life of option/warrant | 5.5 Years |
Option expense for the six months ended June 30, 2026 and the year ended December 31, 2025, net of forfeitures, was $-0- and $-0-, respectively. No options were granted in 2025 or in the six months ended June 30, 2026.
A summary of stock options outstanding as of June 30, 2026, all of which expire in 2033, including the relevant exercise price is presented below:
| Exercise | Expiration | |||||||||
| Price | 2033 | Total | ||||||||
| $ | ||||||||||
| 9. | INCOME TAXES |
The Company recorded no income tax provision at June 30, 2026 and December 31, 2025 because of anticipated losses for the 2026 fiscal year and actual losses incurred in 2025.
The Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which it operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur. The Company recorded no income tax expense for the six months ended June 30, 2026 because the Company expects to incur a tax loss in the current year. Similarly, no income tax expense was recognized for the year ended December 31, 2025.
The
Company had federal net operating loss carryforwards of $
21
| 10. | NOTES PAYABLE |
2021 Note
On October 1, 2021, we issued a secured, revolving promissory note in an original principal amount of up to $15 million, which was subsequently increased to $20 million, in favor of Meta (as amended to date, the “2021 Note”). The 2021 Note was fully drawn with a principal balance outstanding of $20 million, bears interest at 8% per annum, computed on the basis of a 360-day year. If an event of default has occurred and is continuing, interest on the 2021 Note may accrue at the default rate of 12% per annum.
On August 7, 2023, following the Loan Purchase, Mr. McCabe replaced Meta as the lender and secured party under the 2021 Note but the Company’s obligations under the 2021 Note remain unchanged.
On December 31, 2023, the Company and Mr. McCabe as successor in interest to Meta entered into an amendment to the 2021 Note and an amendment to the Loan Agreement extending the 2021 Note maturity date. An amendment to the 2021 Note entered into on June 30, 2025 includes an automatic renewal provision, and the maturity date of the 2021 Note is presently extended to September 30, 2026.
Loan Agreement
Additionally, we have an aggregate principal balance of $6,221,028 outstanding under the Loan Agreement with Mr. McCabe as successor-in-interest to Meta, which bears interest at a fixed rate of 8% per annum if no event of default exists, and at a fixed rate of 12% per annum if an event of default exists.
On December 31, 2023, the Company and Mr. McCabe entered an amendment to the Loan Agreement extending the maturity date. An amendment to the Loan Agreement entered into on June 30, 2025, includes an automatic renewal provision, and the maturity date of the Loan Agreement is presently extended to September 30, 2026.
The combined balance on the 2021 Note ($15.00 million) and the Loan Agreement ($6.22 million) as of June 30, 2026, was $21.22 million. As of June 30, 2026, the total accrued and unpaid interest under the 2021 Note and the Loan Agreement was $7.30 million.
December 2022 Note
In connection with the Merger, on December 22, 2022, the Company entered into an additional Note in the principal amount of up to $20 million in favor of Mr. McCabe. Mr. McCabe is the largest shareholder of the Company’s common stock and the chairman of the board of directors of the Company. As of June 30, 2026, the Company had a principal balance of $25.78 million and accrued and unpaid interest of $3.52 million due under the 2022 Note. An amendment to the 2022 Note entered into on June 30, 2025 includes an automatic renewal provision, and the maturity date of the 2022 Note is presently extended to September 30, 2026.
As of June 30, 2026, Notes Payable – related party includes balances of the 2021 Note and Loan Agreement and the December 2022 Note, as detailed above, totaling $47.00 million Additional borrowing and adjustment to the December 2022 note during the six months ended June 30, 2026 totaled $1,145,000.
A portion of the advances from Mr. McCabe are not interest bearing. Imputed interest of $25,000 has been recorded on the -0-% portion of the note for the six months ended June 30, 2026 and 2025.
Panther Bridge LLC Note August 2025
On August 20, 2025, the Company entered into and closed a transaction with Panther Bridge, LLC, a Texas limited liability company (“Panther Bridge”), under which Panther Bridge loaned $6,000,000 to the Company. The transaction was effected through a Subscription Agreement that was entered into between the two parties, under which the Company sold to Panther Bridge an 18% Unsecured Promissory Note in the original principal amount of $6,000,000 (the “Panther Bridge Note”), along with 3,000,000 shares of Series A Redeemable Preferred Stock, par value of $0.0001 per share (the “Preferred Stock”), and an Assignment of Net Profits Interest and Irrevocable Option to Convert to Working Interest from the ownership in the Panther Prospect of the Company (the “Assignment”). Panther Bridge is managed by Gregory McCabe, Jr., the son of the Company’s Chairman and Chief Executive Officer, Gregory McCabe (“McCabe Sr.”). Neither of the McCabes have any economic interest in Panther Bridge. Panther Bridge has multiple outside investors, none of which are considered related persons to the Company.
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The Panther Bridge Note bears interest at the rate of 18% per annum with one balloon payment of principal and interest being due and payable on the maturity date of August 20, 2026. The proceeds of the $6,000,000 loan were to be used to pay off the 12% Secured Promissory Note held by CAPCO Holding, Inc. in the principal amount of $2,000,000, to pay any obligations of the Company for the Panther Prospect, and for general corporate purposes. None of proceeds will be used for repayment of any debts owed to McCabe Sr. The Panther Prospect includes approximately 618 gross acres and 618 net acres of land situated in Acadia Parish, Louisiana. The Company has elected to participate as a non-operating working interest owner in the next well drilled on the Panther Prospect. As part of the loan transaction, the Company, Panther Bridge, and McCabe Sr. entered into a Subordination Agreement (the “Subordination Agreement”) under which McCabe Sr. agreed to subordinate all of the Company’s indebtedness and obligations owed to him to the indebtedness under the Panther Bridge Note, under the terms and conditions of the Subordination Agreement. The Panther well was declared to be a dry hole in November 2025.
Also, as part of the loan transaction, the Company issued to Panther Bridge 3,000,000 shares of newly designated Series A Redeemable Preferred Stock. The designation, voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions of the Preferred Stock are set forth in a Certificate of Designations filed with the Secretary of State of Nevada. The holders of the Preferred Stock have no voting rights. At the Company’s option, it may redeem the Preferred Stock, in whole or from time to time in part, on any business day after the date of issuance, at a per share redemption price equal to $1.00 plus all accrued and unpaid dividends on such share, if any. The Preferred Stock begins accruing dividends on the first anniversary of the issuance date, August 20, 2026, at the rate of 18% per annum of the per share redemption/liquidation price ($1.00 plus all unpaid dividends on such share). Additionally, there are restrictions on the Company declaring or making any distribution on common stock while there are any accrued and unpaid dividends owed to holders of Preferred Stock. Holders of the Preferred Stock also have certain rights upon liquidation, dissolution or winding up of the Company or upon a change or control of the Company. Specifically, in the event of any liquidation, dissolution or winding up, holders of the Preferred stock will have liquidation preference over holders of common stock.
Also, as part of the loan transaction, the Company granted to Panther Bridge an Assignment of Net Profits Interest and Irrevocable Option to Convert to Working Interest from the ownership in the Panther Prospect of the Company. Under the Assignment, the Company conveyed to Panther Bridge a 1/8th (12.50%) of 8/8ths Net Profits Interest (as defined below) in and to all the Company’s interests in the oil, gas and mineral leases and any future wells drilled thereon as described in “Annex A” to the Assignment (which the Company refers to as the Panther Prospect).
As of June 30, 2026, the Panther Prospect has no value since past development resulted in a dry hole and there are no expectations of future successful development on the lease.
The Company has been notified of additional payments due to Magnetar Exploration related to our participation in the Panther Prospect in Louisiana. The additional amount payable by the Company is $609,945.13. This amount has been recorded as Other Expense for the six months ended June 30, 2026, and is included in accounts payable as of June 30, 2026.
The Assignment defines “Net Profits Interest” as the gross proceeds actually received by the Company from the sale of oil, gas, and other hydrocarbons produced and saved from the subject leases, less certain allowable costs, including actual and reasonable costs, expenses, and charges attributable to the subject leases that fall into certain categories (as further set forth in the Assignment). Panther Bridge also has the irrevocable one-time option, at any time, to convert any portion of the Net Profits Interest conveyed under the Assignment from a net profits interest to an undivided working interest of equal percentage to the amount of the Net Profits Interest converted, in the properties described in the Assignment.
As of June 30, 2026, accrued and unpaid interest on the Panther Bridge note was $939,506.
| 11. | ASSET RETIREMENT OBLIGATIONS |
The following is a reconciliation of the long term asset retirement obligations liability through June 30, 2026:
| Asset retirement obligations – January 1, 2025 | $ | |||
| Accretion expense | ||||
| Estimated liabilities recorded | ||||
| Settlement of ARO obligation | ( | ) | ||
| Asset retirement obligations – December 31, 2025 | $ | |||
| Accretion expense | ||||
| Estimated liabilities recorded | ||||
| Settlement of ARO obligation | ||||
| Asset retirement obligations – June 30, 2026 | $ | |||
| 12. | SUBSEQUENT EVENTS |
The dividend shares will be entitled to the same rights and privileges as the current shares of common stock, regardless of whether shareholders hold them at a brokerage firm registered in street name or registered directly at the Company’s transfer agent Equiniti Trust Co.
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that are included elsewhere in this report and the audited condensed consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report, particularly under the section titled “Cautionary Statement Concerning Forward-Looking Statements.”
Executive Summary
We were incorporated in Nevada on August 31, 2021, as OilCo Holdings, Inc. and changed our name to Next Bridge Hydrocarbons, Inc. pursuant to our Amended and Restated Articles of Incorporation filed on June 30, 2022. We are an energy company engaged in the acquisition, exploration, exploitation and development of oil and natural gas properties in the United States. Our primary focus was previously the development of interests in an oil and natural gas project we held in the Orogrande Basin in West Texas in Hudspeth County, Texas. The mineral leases underlying the Orogrande Project expired on December 31, 2024.
We have minor interests in the eastern edge of the Midland Basin in Sterling, Tom Green and Irion Counties, Texas, two minor well interests located in Oklahoma, and undeveloped mineral lease interests in LaFourche Parish and Acadia Parish, Louisiana. As of June 30, 2026, the Company had no proved reserves and no capitalized oil and natural gas properties costs reflected on its balance sheet and is focused on evaluating acquisition, development and financing opportunities.
We operate our business through nine wholly owned subsidiaries: Torchlight Energy, Inc. (TEI), Hudspeth Oil Corporation, Torchlight Hazel, LLC, Wolfbone Investments LLC, Hudspeth Operating LLC (Hudspeth), Wildcat Panther LLC, Wildcat Valentine LLC, Wildcat Cowboy LLC, and Wildcat Packer LLC.
Market Conditions, Commodity Prices and Interest Rates
U.S. and global markets have experienced heightened volatility following impactful geopolitical events, consistent evidence of widespread inflation, as well as increased fears of an economic recession. The global banking sector has experienced material disruptions which has also contributed to market volatility. Further, the February 2026 military conflict involving the United States, Israel, and Iran has led to significant volatility in the market prices for crude oil and natural gas. Any prolonged disruption to global shipping routes, particularly the Strait of Hormuz, could result in material impacts to global supply and demand balances, potentially leading to sudden price drops if global economic activity slows, or extreme price spikes that could increase our operating and service costs. This and other Middle East conflicts, along with the ongoing war between Ukraine and Russia, could continue to exacerbate supply shortages, leading to disruptions in the credit and capital markets, including significant uncertainty in commodity prices. While we operate primarily in the United States, prices for oil and natural gas are determined primarily by prevailing global market conditions, which have been and could continue to be volatile.
The combination of geopolitical events, inflation and the rising rate environment has led to increasing forecasts of a U.S. or global recession. Any such recession could prolong market volatility or cause a decline in commodity prices, among other potential impacts.
We cannot estimate the length or gravity of the future impact these events will have on our results of operations, financial position, liquidity and the value of oil and natural gas reserves.
Results of Operations
Results for the three- and six-month periods ending June 30, 2026 and 2025
Revenue and Gross Profit
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Product Sales BOE | 81 | 99 | 193 | 230 | ||||||||||||
| Total Revenue | $ | 1,990 | $ | 1,963 | $ | 4,716 | $ | 5,027 | ||||||||
| Cost of revenue | ($ | 8,945 | ) | ($ | 14,087 | ) | ($ | 44,986 | ) | ($ | 23,685 | ) | ||||
| Gross Profit (Loss) | ($ | 6,955 | ) | ($ | 12,124 | ) | ($ | 40,270 | ) | ($ | 18,658 | ) | ||||
| Gross profit percentage | -349.50 | % | -617.63 | % | -853.90 | % | -371.16 | % | ||||||||
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Production Revenues and Cost of Revenue
For the three months ended June 30, 2026, we had production revenue of $1,990 compared to $1,963 of production revenue for the prior year period. The change in revenue was primarily due to revenue from production sold from the Oklahoma wells which are marginal producers with intermittent sales of minerals. Our cost of revenue, consisting of lease operating expenses and production taxes, was $8,945 and $14,087 for the three months ended June 30, 2026, and 2025, respectively.
For the six months ended June 30, 2026, we had production revenue of $4,716 compared to $5,027 of production revenue for the prior year period. The change in revenue was primarily due to revenue from production sold from the Oklahoma wells which are marginal producers with intermittent sales of minerals. Our cost of revenue, consisting of lease operating expenses and production taxes, was $44,986 and $23,685 for the six months ended June 30, 2026, and 2025, respectively.
Refer to the table of production and revenue included below for changes in revenue:
| Oil Production | Gas Production | Oil | Gas | Total | ||||||||||||||||||
| Property | Quarter | {BBLS} | {MCF} | Revenue | Revenue | Revenue | ||||||||||||||||
| Oklahoma | Q1 - 2025 | 30 | 604 | 1,986 | 1,078 | 3,064 | ||||||||||||||||
| Hazel (TX) | Q1 - 2025 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||
| Total Q1-2025 | 30 | 604 | 1,986 | 1,078 | 3,064 | |||||||||||||||||
| Oklahoma | Q2 - 2025 | 14 | 510 | 816 | 1147 | 1963 | ||||||||||||||||
| Hazel (TX) | Q2 - 2025 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||
| Total Q2-2025 | 14 | 510 | 816 | 1147 | 1963 | |||||||||||||||||
| Oklahoma | Q3 - 2025 | 14 | 698 | 937 | 1418 | 2355 | ||||||||||||||||
| Hazel (TX) | Q3 - 2025 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||
| Total Q3-2025 | 14 | 698 | 937 | 1418 | 2355 | |||||||||||||||||
| Oklahoma | Q4- 2025 | 28 | 629 | 1739 | 1222 | 2961 | ||||||||||||||||
| Hazel (TX) | Q4 - 2025 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||
| Total Q4-2025 | 28 | 629 | 1739 | 1222 | 2961 | |||||||||||||||||
| Total 2025 | 86 | 2,441 | 5,478 | 4,865 | 10,343 | |||||||||||||||||
| Average Commodity Price | $ | 63.70 | $ | 1.99 | ||||||||||||||||||
| Oklahoma | Q1 - 2026 | 14 | 589 | 838 | 1,888 | 2,726 | ||||||||||||||||
| Hazel (TX) | Q1 - 2026 | 0 | 0 | - | - | - | ||||||||||||||||
| Total Q1-2026 | 14 | 589 | 838 | 1,888 | 2,726 | |||||||||||||||||
| Oklahoma | Q2 - 2026 | 13 | 405 | 1,200 | 790 | 1,990 | ||||||||||||||||
| Hazel (TX) | Q2 - 2026 | 0 | 0 | - | - | - | ||||||||||||||||
| Total Q2-2026 | 13 | 405 | 1,200 | 790 | 1,990 | |||||||||||||||||
| YTD - 2026 | 27 | 994 | 2,038 | 2,678 | 4,716 | |||||||||||||||||
| Average Commodity Price | $ | 75.48 | $ | 2.69 | ||||||||||||||||||
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Expenses for the three months ended June 30, 2026 and 2025
We did not record any depreciation, depletion and amortization expense for the three months ended June 30, 2026 or 2025.
General and Administrative Expenses
| Three Months ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| General & Administrative Expenses | $ | 1,625,242 | $ | 1,191,142 | $ | 3,008,509 | $ | 2,338,280 | ||||||||
General and Administrative Expenses
Our general and administrative expense for the three-month period ended June 30, 2026, was $1,625,242 compared with $1,191,142 for the same period from the prior year.
Our general and administrative expense for the six-month period ended June 30, 2026, was $3,008,509 compared with $2,338,280 for the same period from the prior year.
Our general and administrative expenses consisted of accounting and administrative costs, legal and other professional consulting fees, and other general corporate expenses. The increase in expenses is principally related to interest expense and legal and professional fees supporting financial report filings.
Other Expense
The Company has been notified of additional payments due to Magnetar Exploration related to our participation in the Panther Prospect in Louisiana. The additional amount payable by the Company is $609,945.13. This amount has been recorded as Other Expense for the six months ended June 30, 2026, and is included in accounts payable as of June 30, 2026.
Liquidity and Capital Resources
Liquidity risk is the risk that we will not meet our financial obligations as they become due after use of currently available cash. We have a planning and budgeting process to monitor operating cash requirements, including amounts projected for capital expenditures, which are adjusted as input variables change. These variables include, but are not limited to, our ability to generate revenue from operations, general and administrative requirements and the availability of equity or debt capital. As these variables change, we may be required to issue equity or obtain debt financing.
See the disclosure in Note 5 and Note 10 of the notes to our financial statements as of and for the six months ended June 30, 2026 included in this report for information about the 2021 Note, Loan Agreement, 2022 Note and other obligations, which information is incorporated herein by reference.
Contractual Obligations
Our most significant contractual obligations relate to the Loan Agreement, the 2021 Note, and the 2022 Note.
Our debt obligations include the $15 million principal balance outstanding under the 2021 Note, which incurs interest at 8% per annum and was to mature on March 31, 2024. On September 2, 2022, we entered into a Loan Agreement that governs the term loans advanced to us from Meta on April 14, 2022, May 4, 2022, May 12, 2022, May 26, 2022, June 1, 2022, June 13, 2022, June 28, 2022, August 11, 2022 and August 29, 2022, for an aggregate principal balance outstanding of $5 million, which is the maximum amount of Meta’s commitment under the Loan Agreement. The term loans incur interest at a per annum rate equal to 8%. An amendment to the 2021 Note entered into on June 30, 2025 includes an automatic renewal provision, and the maturity date of the 2021 Note is presently extended to September 30, 2026.
On December 21, 2022, we issued the 2022 Note that governs the term loans advanced to us from Mr. McCabe on December 22, 2022, for an aggregate principal balance up to $20 million. Draws on the loan through December 31, 2024 total $21.53 million. The term loan incurs interest at a per annum rate equal to 5% and was to mature on June 21, 2023. An amendment to the 2022 Note entered into on June 30, 2025 includes an automatic renewal provision, and the maturity date of the 2022 Note is presently extended to September 30, 2026.
For the year ended December 31, 2025, we incurred aggregate interest on the 2022 Note, the 2021 Note and under the Loan Agreement of $2,776,954. Interest accrued for the six months ended June 30, 2026 was $1,441,767.
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We anticipate that we will continue to incur operating losses and generate negative cash flows from operations for the foreseeable future. As a result, we will need additional capital resources to fund our operations both in the short term and in the long term, prior to achieving break even or positive operating cash flow. While we do not have any committed sources of capital, we expect to continue to opportunistically seek access to additional funds through public or private equity offerings or debt financings, through partnering or other strategic arrangements, including credit application arrangements with our third-party servicers, or a combination of the foregoing. Despite our efforts, we may face obstacles in continuing to attract new financing due to industry conditions and our history and current record of net losses. We can provide no assurance that we will be able to obtain the financing required to meet our stated objectives or even to continue as a going concern.
On August 20, 2025, the Company entered into and closed a transaction with Panther Bridge, LLC, a Texas limited liability company, under which $6,000,000 was loaned to the Company.
As of June 30, 2026, we had $116,254 of liquidity, comprised of cash and cash equivalents on hand. Our short and long-term capital requirements consist primarily of funding our development and drilling activities, payment of contractual obligations and debt service.
At June 30, 2026, we had working capital deficit of $64,874,793 and total assets of $768,638. Stockholders’ deficit was $65,378,230. The negative working capital is principally due to notes payable which were payable within one year.
Management believes that our currently available resources may not provide sufficient funds to enable us to meet our financing and drilling obligations for the 2026 fiscal year. As of June 30, 2026, we had $116,254 in cash and cash equivalents, a working capital deficit of $64.9 million, no capitalized oil and natural gas properties reflected on our balance sheet and no proved reserves associated with our properties. Although we continue to hold interests in certain oil and natural gas projects and may seek to acquire, develop or participate in additional opportunities, our ability to generate meaningful operating cash flow remains dependent upon successfully acquiring or developing economically viable oil and natural gas assets and obtaining sufficient capital to fund those activities. We anticipate that we will continue to incur operating losses and generate negative cash flows from operations for the foreseeable future and will require additional capital resources to fund our operations. While we do not have any committed sources of capital, we expect to continue to opportunistically seek access to additional funds through public or private equity offerings, debt financing, strategic transactions, joint ventures and other partnering arrangements. Despite these efforts, there can be no assurance that we will successfully obtain additional financing, complete strategic transactions, develop commercially viable projects or otherwise improve our liquidity position. If we are unable to do so, we may be required to curtail operations, delay development activities or pursue other alternatives.
We do not expect to pay cash dividends on our common stock in the foreseeable future.
The following table summarizes sources and uses of cash and cash equivalents:
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net (loss) | (3,658,724 | ) | (2,356,938 | ) | ||||
| Net cash (used in) operating activities | (1,192,699 | ) | (1,183,550 | ) | ||||
| Net cash provided by (used in) investing activities | - | (20,966 | ) | |||||
| Net cash provided by financing activities | 1,145,000 | 1,018,000 | ||||||
| Net increase (decrease) in cash | $ | (47,699 | ) | $ | (186,516 | ) | ||
| Cash—beginning of period | $ | 163,953 | $ | 191,117 | ||||
| Cash—end of period | $ | 116,254 | $ | 4,601 | ||||
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Cash Flow Used in Operating Activities
Cash flow (used in) operating activities for the six months ended June 30, 2026 was $(1,192,699) compared to $(1,183,550) for the six months ended June 30, 2025. Cash flows used in operating activities for the six months ended June 30, 2026 can be primarily attributed to the net loss from operations and changes in accrued liabilities. Cash flows used in operating activities for the six months ended June 30, 2025, can be primarily attributed to the net loss from operations and a change in accounts payable. We expect to continue to use cash flow in operating activities until such time as we achieve sufficient commercial oil and gas production to cover all of our cash costs.
Cash Flow Used in Investing Activities
Cash flow used in investing activities for the six months ended June 30, 2026 was $(-0-) compared to $(20,966) for the six months ended June 30, 2025. Cash flow used in investing activities principally consists of investment in oil and natural gas properties in Texas.
Cash Flows from Financing Activities
Cash flows provided by financing activities for the six months ended June 30, 2026 was $1,145,000 compared to $1,018,000 for the six months ended June 30, 2025. Cash flows from financing activities consists of proceeds from additional borrowings from a related party. For the six months ended June 30, 2026, we incurred aggregate interest on the 2022 Note, the 2021 Note and under the Loan Agreement of $1,441,766.
Capital Expenditures
Our capital expenditures are summarized in the following table:
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Acquisitions: | ||||||||
| Proved property | $ | - | $ | - | ||||
| Unproved property working interest | - | - | ||||||
| Exploration and development: | ||||||||
| Developmental leasehold costs | - | - | ||||||
| Exploratory drilling and completion costs | - | - | ||||||
| Development drilling and completion costs | - | 20,966 | ||||||
| Other development costs | - | - | ||||||
| Capitalized interest | - | - | ||||||
| Asset retirement obligations | - | |||||||
| Total exploration and development | - | 20,966 | ||||||
| Other property | - | - | ||||||
| Total capital expenditures | $ | - | $ | 20,966 | ||||
| Change in accrued capital expenditures and other | - | 142,823 | ||||||
| Prepaid drilling costs | - | - | ||||||
| Capitalized interest | - | - | ||||||
| Asset retirement obligations | - | - | ||||||
| Total net cash capital expenditures | $ | - | $ | 163,789 | ||||
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Critical Accounting Estimates
See Note 3—Significant Accounting Policies to the unaudited condensed consolidated financial statements included elsewhere in this report for a description of the material changes to the Company’s critical accounting policies and estimates from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Accounting Pronouncements
Our unaudited financial statements and the accompanying notes thereto found elsewhere in this report contain a description of recent accounting pronouncements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of June 30, 2026, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2026 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by us is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective is based on the material weaknesses in internal control over financial reporting described in our Annual Report on Form 10-K for the year ended December 31, 2025.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended June 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART II — OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
See Note 6. “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included elsewhere in this report for information regarding our legal proceedings, which information is incorporated by reference into this Item 1.
| ITEM 1A. | RISK FACTORS |
A description of the risk factors associated with our business is contained in the “Risk Factors” section of Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes to our risk factors as previously reported.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Not applicable.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
None.
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ITEM 6: EXHIBITS
| Exhibit No. | Description | |
| 31.1* | Certifications (pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act) by the Principal Executive Officer. | |
| 31.2* | Certifications (pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act) by the Principal Financial Officer. | |
| 32.1† | Section 1350 Certification (pursuant to Sarbanes-Oxley Section 906) by Principal Executive Officer and Principal Financial Officer. | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Schema Document | |
| 101.CAL* | Inline XBRL Calculation Linkbase Document | |
| 101.LAB* | Inline XBRL Labels Linkbase Document | |
| 101.PRE* | Inline XBRL Presentation Linkbase Document | |
| 101.DEF* | Inline XBRL Definition Linkbase Document | |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith. |
| † | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NEXT BRIDGE HYDROCARBONS, INC. | |
| Date: August 11, 2026 | /s/ Gregory McCabe |
| Gregory McCabe, Chief Executive Officer and President | |
| (Principal Executive Officer) | |
| Date: August 11, 2026 | /s/ Roger Wurtele |
| Roger Wurtele, Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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