NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

Indonesia Energy Corporation Limited (the “Company,” “IEC,” “we,” “us,” our” and similar terminology), through its subsidiaries in Hong Kong and Indonesia, is an oil and gas exploration and production company focused on the Indonesian market. The Company currently holds two oil and gas assets through its subsidiaries in Indonesia: one producing block (the “Kruh Block”) and one exploration block (the “Citarum Block”). The Company also identified a potential third exploration block known as the “Rangkas Area.” In January 2024, new 3D seismic exploratory operations at the Company’s 63,778 acre Kruh Block commenced, which was completed in June 2024. Interpretation and reservoir study based on the 3D seismic data continued until September 2025. Importantly, the Company anticipates that the results of this seismic work will support the commencement of its continuing drilling program, which includes two back-to-back wells for which field operations are already underway. The first well, K-29, was spudded on July 25, 2026, and drilling operations commenced on the same date. The well reached a total measured depth of approximately 3,378 feet, and drilling operations were completed in August 2026. The actual production operations at K-29 are expected to commence in late September 2026. Following the completion of the K-29 well, the Company plans to commence drilling activities at the WK-5 as part of the drilling program. The second well, WK-5, is expected to be completed by the end of 2026. The Company also plans to conduct a continuous drilling program from 2027 through 2030 in the Kruh, West Kruh and North Kruh fields over the next four years to maximize production, during which it expects to drill 16 new wells, subject to the availability of capital and other financing, regulatory approvals and permits, the availability of drilling equipment and services, market conditions, and other factors beyond the Company’s control. The timing and number of wells ultimately drilled may differ materially from the Company’s current plans.   

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 – GOING CONCERN

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations.

As reflected in the Company’s unaudited condensed consolidated financial statements, the Company has incurred a net loss of $1,882,881 for the six months ended June 30, 2026. During the six months ended June 30, 2026, the Company had a negative cash flow from operating activities of $2,090,111. As of June 30, 2026, the Company had accumulated deficit of $52,909,664. While the Company had a cash and working capital balance of $5,569,600 and $6,604,181, respectively, as of June 30, 2026, it may not be sufficient to fund its planned operations and contractual obligations for the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company has financed the operations primarily through cash flow and proceeds from equity instrument financing (including the at-the-market offering, or ATM), where necessary.

Since March 2024, the Company has progressively registered and amended its securities offerings to facilitate capital raising through its At-the-Market Agreement, dated July 22, 2022, as amended on March 22, 2024 (“ATM Agreement”):

For the six months ended June 30, 2026, the Company has received aggregate gross proceeds of approximately $2.3 million from sales of its securities pursuant to the ATM offering, and approximately $14.1 million of securities remain available for sale under the ATM offering, subject to the terms and conditions of the ATM Agreement and the availability of an effective registration statement.

As of September 22, 2026, the Company had approximately $4.80 million of cash, which is placed with financial institutions and is unrestricted as to withdrawal or use. The Company intends to mitigate the conditions of substantial doubt and meet the cash requirements for the next 12 months from the issuance date of the Company’s unaudited condensed consolidated financial statements by implementing management’s plan, including a combination of improving operational efficiency, cost reductions and debt and equity financing. The Company expects to collect the receivables timely and arrange payment schedule in accordance with the Company’s cash management plan.

If the Company fails to achieve these goals, the Company will likely need additional financing to execute its business plan. If additional financing is required, the Company may seek to raise capital through its ATM program. However, the Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all, as we may elect not to utilize the ATM facility due to unfavorable market prices or find that such funds are otherwise unavailable when needed.

In the event that financing sources are not available from any source, or that the Company is unsuccessful in increasing its gross profit margin and reducing operating losses, the Company may be unable to implement its current plans for expansion, repay debt obligations or respond to competitive pressures, any of which would have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.

The Company has prepared its unaudited condensed consolidated financial statements on a going concern basis. However, there can be no assurance that the measures above can be achieved as planned. Based on management’s evaluation of the conditions existing as of June 30, 2026, together with the financing through ATM program, management has concluded that the Company does not have sufficient liquidity for at least one year from the date of the unaudited condensed consolidated statements to be issued. Therefore, the Company determined that the substantial doubt about the Company’s ability to continue as a going concern has not been alleviated. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. If the Company is unable to continue as a going concern, it may have to liquidate or otherwise dispose of its assets, and the amounts realized upon such liquidation or disposition may be less than the carrying amounts of such assets reflected in the unaudited condensed consolidated financial statements.

NOTE 4 – PREPAYMENT AND OTHER ASSETS

For the year ended December 31, 2023, the Company sold certain rig equipment to a third party, PT Andam Resorsis Nusantara. For the year ended December 31, 2024, the Company recorded $99,604 allowance for the doubtful account related to the uncollected amounts for the equipment sale. The receivables on the rig equipment were supposed to be received in 2025, however, in fiscal year 2025, none of the receivables have been collected. Considering the high potential of default, the Company decided to take full allowance of $609,604 to the rig equipment in fiscal year 2025.

The Value-Added Tax (“VAT”) receivable is the qualified input VAT paid by the Company to Pertamina. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. As the Company’s sales are not subject to any VAT output, the Company will bill Pertamina for reimbursement per tax reimbursement filing. The Company started to record the VAT receivable since 2022 and started to collect the VAT receivable in 2024. In 2025 and 2026, the Company didn’t collect any VAT receivable from Pertamina. As no collections have been received from Pertamina and the timing of collection cannot be reliably estimated, the remaining balance of the VAT receivable has been classified as a non-current asset, with an allowance recorded against the outstanding balance. The Company applied allowance for VAT receivable to $534,189 for non-current VAT receivable as of June 30, 2026.

After evaluating above facts, $1,835,177 VAT receivable was classified as non-current assets.

NOTE 5 – OIL AND GAS PROPERTY, NET

For the six months ended June 30, 2026, the Company incurred aggregated development costs, which were capitalized in the amount of $51,885, mainly for development administration costs and for the purpose of geological and geophysical studies and seismic studies. The asset retirement obligation (ARO) decreased from $724,572 as of December 31, 2025 to $686,435 as of June 30, 2026, reflecting a payment of $38,137 made during the period in respect of abandonment and site restoration (ASR) costs.

The following shows the movement of ARO:

Depletion recorded for production on properties subject to amortization for the six months ended June 30, 2026 and 2025, were $418,621 and $315,657 respectively.

Furthermore, for the six months ended June 30, 2026 and 2025, the Company did not record any impairment of its oil and gas property subject to amortization based on the results of the ceiling tests performed, which indicated that the present value of estimated future net revenues generated by the oil and gas property exceeded the carrying balances. There was no impairment recorded for oil and gas property not subject to amortization.

NOTE 6 – FINANCIAL LIABILITY

On January 21, 2022 (the “Initial Closing Date”), the Company closed an initial $5,000,000 tranche (the “First Tranche”) of a total then anticipated $7,000,000 private placement with L1 Capital Global Opportunities Master Fund (“L1 Capital”) pursuant to the terms of a Securities Purchase Agreement, dated January 21, 2022, between the Company and L1 Capital (the “Purchase Agreement”). In connection with the closing of the First Tranche, the Company issued to the L1 Capital (i) a 6% Original Issuance Discount Senior Convertible Note in a principal amount of up to $7,000,000 (the “Note”) and (ii) a five-year Ordinary Share Purchase Warrant (the “Initial Warrant”) to purchase up to 383,620 Ordinary Shares at an exercise price of $6.00 per share, subject to adjustment. As of the date of the original Purchase Agreement, a second tranche (the “Second Tranche”) of funding under the Note in the amount of $2,000,000 (the “Second Tranche Amount”) was contemplated. The Note was subject to a deduction of a 6.0% original issuance discount. Except as upon an Event of Default (as defined in the Note), the Note did not bear interest.

Beginning 120 days after the Initial Closing Date, the Company was required to commence monthly installment payments of the Note through maturity (or 14 payments) (“Monthly Payments”), which Monthly Payments could be made, at the Company’s election, in cash or Ordinary Shares (or a combination of cash and Ordinary Shares), with such Ordinary Shares being issued at a valuation equal to the lesser of: (i) $6.00 per share or (ii) 90% of the average of the two lowest closing bid prices of the Ordinary Shares for the ten (10) consecutive trading days ending on the trading day immediately prior to the payment date, with a floor price of $1.20 per share. In addition, at any time following the date of effectiveness of a Registration Statement covering the applicable Ordinary Shares underlying the Note (such Registration Statement was declared effective on June 1, 2022), the Note is convertible (in whole or in part), at the option of L1 Capital, into such number of fully paid and non-assessable Ordinary Shares determined by dividing (x) that portion of the outstanding principal amount of the Note that L1 Capital elects to convert by (y) $6.00 per share, which price was subject to adjustment as provided in the Note. Upon the occurrence of any Event of Default that has not been remedied, the Company would be obligated to pay to L1 Capital an amount equal to one hundred twenty percent (120%) of the outstanding principal amount of the Amended Note on the date on which the first Event of Default has occurred.

On March 4, 2022, the Company and L1 Capital entered into a First Amendment to the Purchase Agreement and an Amended and Restated Senior Convertible Promissory Note (the “Amended Note”) pursuant to which, among other items, Second Tranche Amount was increased from $2,000,000 to $5,000,000. Upon the funding of the Second Tranche Amount, L1 Capital was entitled to receive an additional five-year Ordinary Share Purchase Warrant (the “Second Warrant”) to purchase up to 383,620 Ordinary Shares at $6.00 per share (subject to adjustment).

On May 16, 2022, the Company and L1 Capital entered into a Second Amended and Restated Senior Convertible Promissory Note which amends and restates the Amended Note in its entirety (the “Second Amended Note” and collectively with the Note and the Amended Note, the “Notes”). Among other matters, the Second Amended Note provided for an accelerated funding of the Second Tranche Amount, which was funded to the Company on May 23, 2022, at which time the Second Warrant was issued to L1 Capital.

Accounting for warrants

The Warrants were issued in conjunction with the convertible note by a separate contract, and legally detachable and separately transferrable. The Warrants were exercisable via “cashless” exercise if there is not an effective registration statement covering resale of the Ordinary Shares under the Warrants. The exercise price per Ordinary Share under the Warrants was $6.00 and subject to certain adjustments which do not meet the criteria for equity treatment in accordance with the guidance contained in ASC 815-40-15-7E. Accordingly at initial recognition, the Company classifies such warrants as liabilities at their fair value. This warrant liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the consolidated statements of operations.

The Company recognized $915,644 for warrant liabilities upon issuance of the Initial Warrant on January 24, 2022. The Company recognized $4,833,325 for warrant liabilities upon issuance of the Second Warrant on May 23, 2022.

The Company utilizes the Black-Scholes option-pricing model to estimate the fair value of the Warrants at each reporting period since the Warrants are not actively traded. The estimated fair value of the Warrant liabilities is determined using Level 3 inputs in accordance with ASC 820, “Fair Value Measurement”. Inherent in the Black-Scholes model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its Ordinary Shares based on historical volatility of its own stock price during the period that matches the expected remaining life of the Warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the Warrants. The expected life of the Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.

During the year ended December 31, 2022, L1 Capital exercised the Initial Warrant for 325,000 at $6.00 per share with the Company receiving $1,950,000 proceeds from exercise of these warrants. During six months ended June 30, 2026, no warrants were exercised. As of June 30, 2026 and December 31, 2025, there remainn warrants to purchase 442,240 shares issued and outstanding.

NOTE 7 – OPERATING LEASES

The Company accounts for leases in accordance with ASC Topic 842, Leases (“ASC 842”). All contracts are evaluated to determine whether or not they represent a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company has operating leases primarily consisting of facilities with remaining lease terms of one year to three years. The lease term represents the period up to the early termination date unless it is reasonably certain that the Company will not exercise the early termination option.

Leases are classified as finance or operating in accordance with the guidance in ASC 842. The Company did not hold any finance leases as of June 30, 2026 and December 31, 2025.

The Company also has certain short-term leases related to equipment and tools. A short-term lease is a lease with a term of 12 months or less and does not include the option to purchase the underlying asset that the Company would expect to exercise. The Company has elected to adopt the short-term lease exemption in ASC 842 and as such has not recognized a “right of use” asset or lease liability for these short-term leases.

The Company’s lease agreements do not specify an implicit borrowing rate, and generally, the lease discounted rate is set at a collateralized basis for a similar term of incremental borrowing rate as the underlying lease. However, as of June 30, 2026, the Company has not obtained borrowings from financial institutions for a number of years, making the use of a standalone incremental borrowing      rate inappropriate to the new lease agreement. Consequently, the Company uses 3-year Indonesia Government Bond Yield as the applicable lease discount rate of new lease agreements since 2025. The weighted average discount rate is 6.82% for the six months ended June 30, 2026.   

The components of lease expense were as follows for each of the periods presented:

NOTE 8 – TAXES

The current and deferred components of the income tax provision are substantially attributable to the Company’s subsidiaries in Indonesia. Due to the unrecovered expenditure on the Company’s Kruh Block operations, there was no provision for income taxes for the six months ended June 30, 2026 and 2025, respectively.

The effective tax rate is based on expected income and statutory tax rates. For interim financial reporting, the Company estimates the annual tax rate based on projected taxable income for the full year and records an interim income tax provision in accordance with guidance on accounting for income taxes in an interim period. As the year progresses, the Company refines the estimates of the year’s taxable income as new information becomes available. The Company’s effective tax rates for the six months ended June 30, 2026 and 2025 were 0% and 0%, respectively.

The Company did not incur any interest and penalties related to potential underpaid income tax expenses.

NOTE 9 – EQUITY

As of June 30, 2026 and December 31, 2025, there were 15,386,840 and 14,987,474 Ordinary Shares issued and outstanding. The change in outstanding Ordinary Shares was due to the issuance of Ordinary Shares under the ATM offering. For the six months ended June 30, 2026, there were 399,366 Ordinary Shares sold and issued through the ATM offering, and the Company received net proceeds of approximately $2.25 million.

NOTE 10 – SHARE BASED COMPENSATION EXPENSES

On December 29, 2025, pursuant to the fourth amendment to the employment agreement of the Company’s President, Frank Ingriselli, the Company granted Mr. Ingriselli 30,000 Ordinary Shares which vested on July 1, 2026. Such Ordinary Shares were valued at $3.16 per share which is based on the closing price of the shares traded on NYSE American Exchange on December 29, 2025. The Company recorded $94,800 share based compensation expenses as of June 30, 2026.

NOTE 11 – RELATED PARTY TRANSACTIONS

The Company’s related party, PT. Wirannusa Karana Mardika (PT WKM) provides office space for Kerja Sama Operasi/Joint Operation with Pertamina (KSO), PT Cogen Nusantara Energi (CNE), PT Harvel Nusantara Energi (HNE) and PT Hutama Wiranusa Energi (HWE). KSO related expenses are recorded under lease operating expense and rental related to other related parties are recorded under general and administrative expenses. The related party rental expenses for the six months ended June 30, 2026 and 2025 were as follows:

Since January 1, 2023, the Company leased Giesmart Plaza Zone 2 and Zone 1, 3&4 for KSO and combined office space for CNE, HNE and HWE, respectively, from PT WKM. PT WKM is owned by the Company’s CEO, Dr. Wirawan Jusuf, who holds 50% of the ownership. The lease term for Giesmart Plaza Zone 2 was from January 1, 2023 to March 31, 2024, which was extended to March 31, 2025, and further extended to March 31, 2026. The lease agreement of Giesmart Plaza Zone extended again in 2026 to April 1, 2027. The lease term for Giesmart Zone 1, 3&4 was from January 1, 2023 to September 30, 2024, which was extended to September 30, 2027.   During the six months ended June 30, 2025, the Company incurred rent expense of $34,687 for Giesmart Plaza Zone 2, and $43,853 for Zone 1, 3&4. For the six months ended June 30, 2026, the Company incurred rent expense of $34,885 for Giesmart Plaza Zone 2, and $37,766 for Zone 1, 3&4.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may be subject to routine litigation, claims, or disputes in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention. The Company defends itself vigorously in all such matters. In the opinion of management, no pending or known threatened claims, actions or proceedings against the Company are expected to have a material adverse effect on its financial position, results of operations or cash flows. However, the Company cannot predict with certainty the outcome or effect of any such litigation or investigatory matters or any other pending litigation or claims. There can be no assurance as to the ultimate outcome of any such lawsuits and investigations. The Company had no significant pending litigation as of June 30, 2026 and December 31, 2025.

Commitments

As a requirement to acquire and maintain the operatorship of oil and gas blocks in Indonesia, the Company follows a work program and budget that includes firm capital commitments.

Currently, Kruh Block is operated under a KSO until May 2030, which was extended to September, 2035 in August 2023. The Company has material commitments related to its development and exploration activities in the Kruh Block and material commitments in regard to the exploration activity in the Citarum Block under a Production Sharing Contract with the Indonesian Special Task Force for Upstream Oil and Gas Business Activities (known as SKK Migas) (the “PSC”). The following table summarizes future commitments amounts on an undiscounted basis as of June 30, 2026 for all the planned expenditures to be carried out in Kruh Block and Citarum Block (this table takes into account the Company’s updated drilling plans for Kruh Block):

NOTE 13 – SEGMENT REPORTING

The Company uses the “management approach” in determining reportable segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (CODM) for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CODM has been identified as the chief executive officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company.

The Company manages its business as a 1single operating segment engaged in upstream oil and gas industry in Indonesia. Substantially all of its revenues are derived in Indonesia. All long-lived assets are located in Indonesia. Therefore, no geographical segments are presented.

NOTE 14 – SUBSEQUENT EVENTS

The Company evaluated all events up to the date of the issuance of the report and determined that below events that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.

On July 1, 2026, the 30,000 Ordinary Shares granted to the Company's President on December 29, 2025 vested.

On July 25, 2026, the Company spudded the K-29 well at the Kruh Block. The well reached a total measured depth of approximately 3,378 feet, and drilling operations were completed in August 2026. The Company has discovered good quality oil during testing operations