Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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	%

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

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.

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

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

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.