UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2009
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________to________________
Commission file number 001-16653
EMPIRE PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 73-1238709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8801 S. Yale, Suite 120, Tulsa, Oklahoma 74137-3575
(Address of principal executive offices)
(918) 488-8068
(Registrant's telephone number, including area code)
Not Applicable
__________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check 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.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Date File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405
of this chapter)during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
[ ] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
Plan confirmed by a court.
[ ] Yes [ ] No
The number of shares of the registrant's common stock, $0.001 par value,
outstanding as of September 30, 2009 was 57,193,128.
EMPIRE PETROLEUM CORPORATION
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheets at September 30, 2009 (Unaudited) and
December 31, 2008 1
Statements of Operations - Three months and nine months
ended September 30, 2009 and 2008 (Unaudited) 2
Statements of Cash Flows - Nine months ended
September 30, 2009 and 2008 (Unaudited) 3
Notes to Financial Statements 4-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-15
Item 4. Controls and Procedures 15
Part II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 6. Exhibits 16
Signatures 16
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
EMPIRE PETROLEUM CORPORATION
BALANCE SHEETS
September 30, December 31,
2009 2008
(Unaudited)
ASSETS ____________ ____________
Current assets:
Cash $ 617,580 $ 124,122
Accounts receivable
(net of allowance of $3,750
at September 30, 2009 and
December 31, 2008) 39,650 12,158
Prepaid expenses 0 9,075
___________ ____________
Total current assets 657,230 145,355
Property & equipment, net of accumulated
depreciation and depletion 920,215 969,842
___________ ____________
Total Assets $ 1,577,445 $ 1,115,197
___________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Account payable and accrued
liabilities $ 7,521 $ 19,392
___________ ___________
Total current liabilities 7,521 19,392
Long-term liabilities:
Asset retirement obligation 34,200 52,200
___________ ____________
Total liabilities 41,721 71,592
___________ ____________
Stockholders' equity:
Common stock - $.001 par value,
authorized 100,000,000 shares,
issued and outstanding, 65,764,560
shares at September 30, 2009,
57,193,128 shares at
December 31, 2008 57,279 57,193
Additional paid in capital 12,539,136 11,901,722
Accumulated deficit (11,060,691) (10,915,310)
___________ ___________
Total stockholders' equity 1,535,724 1,043,605
___________ ___________
Total liabilities and stockholders'
equity $ 1,577,445 $ 1,115,197
___________ ____________
See accompanying notes to financial statements.
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EMPIRE PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
____________________________ ________________________
2009 2008 2009 2008
_____________ _____________ ____________ __________
Revenue:
Petroleum sales $ 0 $ 5,350 $ 9,794 $ 14,993
_____________ _____________ ____________ __________
0 5,350 9,794 14,993
_____________ _____________ ____________ __________
Costs and expenses:
Production & operating 57,008 50,249 98,395 146,298
General & administrative 41,153 45,397 159,750 229,529
____________ _____________ ____________ __________
98,161 95,646 258,145 375,827
____________ _____________ ____________ __________
Operating loss (98,161) ( 90,296) (248,351) (360,834)
____________ _____________ ____________ __________
Other income:
Gain on sale of Cheyenne
River Prospect 0 0 102,708 0
Miscellaneous income 0 4,409 0 4,409
Interest income 262 0 262 0
____________ _____________ ____________ __________
Total other income 262 4,409 102,970 4,409
____________ _____________ ____________ __________
Net loss $ (97,899) $ ( 85,887) $ (145,381)$ (356,425)
____________ _____________ ____________ __________
Net loss per common
share, basic and
diluted $ (.00) $ (.00) $ (.00) $ (.01)
____________ _____________ ____________ __________
Weighted average number of
common shares outstanding,
basic and diluted 57,193,128 57,193,128 57,193,128 56,813,883
____________ _____________ ____________ ___________
See accompanying notes to financial statements.
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EMPIRE PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30, September 30,
2009 2008
_________ __________
Cash flows from operating activities:
Net loss $ (145,381) $ (356,425)
Adjustments to reconcile net loss
to net cash used in operating activities:
Value of services contributed by employee 37,500 37,500
Stock option plan expense 0 41,124
Gain on sale of Cheyenne River Prospect (102,708) 0
(Increase) decrease in assets:
Accounts receivable (27,492) 90,757
Prepaid expenses 9,075 11,058
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (11,871) (23,447)
________ ________
Net cash used in
operating activities (240,877) (199,433)
________ ________
Cash flows from investing activities:
Acquisition of lease acres ( 7,190) ( 13,025)
Purchase of option on South Okie Prospect ( 25,000) 0
Sale of Cheyenne River interests 166,525 0
Sale of royalty interest 0 16,500
________ __________
Net cash provided by
investing activities 134,335 3,475
________ __________
Cash flows from financing activities:
Proceeds from private equity placement 600,000 0
________ __________
Net increase (decrease) in cash 493,458 (195,958)
Cash - Beginning 124,122 384,630
________ __________
Cash - Ending $617,580 $ 188,672
________ __________
Conversion of debt to common stock 0 274,682
________ __________
See accompanying notes to financial statements.
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EMPIRE PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 2009
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
The accompanying unaudited financial statements of Empire Petroleum
Corporation (Empire, or the Company) have been prepared in accordance
with United States generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by
United States generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation of the Company's financial
position, the results of operations, and the cash flows for the interim
period are included. All adjustments are of a normal, recurring nature.
Operating results for the interim period are not necessarily indicative of
the results that may be expected for the year ending December 31, 2009.
The information contained in this Form 10-Q should be read in
conjunction with the audited financial statements and related notes for
the year ended December 31, 2008 which are contained in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the SEC) on March 31, 2009.
The Company has incurred significant losses in recent years. The
continuation of the Company as a going concern is dependent upon the
ability of the Company to attain future profitable operations. These
financial statements have been prepared on the basis of United States
generally accepted accounting principles applicable to a company with
continuing operations, which assume that the Company will continue in
operation for the foreseeable future and will be able to realize its assets
and discharge its obligations in the normal course of operations. Management
believes the going concern assumption to be appropriate for these financial
statements. If the going concern assumption were not appropriate for these
financial statements, then adjustments might be necessary to adjust the
carrying value of assets and liabilities and reported expenses.
The Company continues to explore and develop its oil and gas interests.
The ultimate recoverability of the Company's investment in its oil and gas
interests is dependent upon the existence and discovery of economically
recoverable oil and gas reserves, confirmation of the Company's interest in
the oil and gas interests, the ability of the Company to obtain necessary
financing to further develop the interests, and the ability of the Company
to attain future profitable production.
In 2003, the Company engaged a partner to explore its Cheyenne River Prospect,
Wyoming, and signed an agreement to acquire a 10% interest in a block of
acreage in the Gabbs Valley Prospect of western Nevada. The Cheyenne River
prospect which included oil wells and leasehold interests was sold during the
prior reporting period. In June 2005, the Company completed a private
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placement of 5,000,000 shares of its common stock along with warrants to
purchase 1,250,000 shares of its common stock for an aggregate purchase price
of $500,000. Subject to certain restrictions, the warrants may be exercised
until March 15, 2010 (extended from the previous date of December 15, 2009) at
an exercise price of $0.25 per share. Proceeds of the private placement were
allocated $67,875 to common stock warrants and $432,125 to common stock and
paid-in capital. These funds were used for general corporate purposes and to
pay the Company's share of the costs associated with its then 10% interest in
the Gabbs Valley Oil Prospect in Nevada. By subsequent agreement with Cortez
Exploration, LLC (formerly O. F. Duffield) dated May 8, 2006, Empire acquired
an additional 30% interest by agreeing to pay $675,000 in land and related
costs to Cortez and 45% of the drilling and completion costs on a test well to
be known as the Empire Cobble Cuesta 1-12-12-34E, Nye County, Nevada. When
combined with the original 10% working interest in the well and lease block
which was expanded to 75,201 gross acres by the acquisition of an additional
30,917 acres from the U. S. Department of the Interior on June 14, 2006, the
Company's working interest increased to 40%, after paying 55% of the drilling
and completion costs of the Empire Cobble Cuesta 1-12-12N-34E test well. To
fund this increased interest, the Company initiated a private placement of
common stock along with warrants to purchase common stock in June 2006. In
connection with this private placement, the Company issued 7,250,000 shares
of common stock and warrants to purchase 1,812,500 shares of its common stock
at an exercise price of $0.50 per share for an aggregate purchase price of
$1,450,000. In April 2007, the Company raised $1,000,000 through a private
placement of 5,000,000 shares of its common stock along with warrants to
purchase 1,250,000 shares of its common stock which have an exercise price of
$0.50 per share which expires March 15, 2010. On August 2, 2007, the
Company acquired an additional 17% interest, which increased its interest in
the Gabbs Valley Prospect and leases to 57% (See Note 3). The Company
acquired an additional 9,943.91 acres of leases at a September 2008 lease
sale and 7,680 acres at a September 2009 lease sale bringing the total
acreage in which it has a 57% interest to 92,825 acres. The Company was
encouraged by the data it acquired in connection with the drilling, logging
and testing of the well. Such data, additional studies of such data, the
assistance of geological and engineering consultants and an Advanced
Geochemical Imaging Survey conducted in December 2008 led the Company
to determine that further drilling is warranted.
As of September 30, 2009, the Company had $617,580 of cash on hand. In order
to sustain the Company's operations on a long-term basis, the Company
continues to look for merger opportunities and consider public or private
financings. The Company anticipates that it has the funds necessary to
continue its operations through the next twelve months.
Compensation of Officers and Employees
The Company's only executive officer serves without pay or other compensation.
The fair value of these services is estimated by management and is recognized
as a capital contribution. For the nine months ended September 30, 2009, the
Company recorded $37,500 as a capital contribution by its executive officer.
Fair Value Measurements
The Financial Accounting Standards Board (FASB) fair value measurement
Standards defines fair value, establishes a consistent framework for
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measuring fair value and establishes a fair value hierarchy based on the
observability of inputs used to measure fair value. The Company's primary
marketable asset is cash, and it owns no marketable securities.
2. PROPERTY AND EQUIPMENT:
CHEYENNE RIVER PROSPECT
The Company owned a working interest in approximately 20,764 acres of oil
and gas leases located in Niobrara County, Wyoming (the "Cheyenne River
Prospect"). The Company originally acquired leases on this prospect in 1998
and during the period from the original acquisition to 2008, it has caused a
seismic program and the drilling of two wells which resulted in small oil
producers. In 2005, the Company recorded an impairment charge of $188,507 on
its investment in the Cheyenne River Prospect as a result of a third party
earning an interest by conducting a seismic survey and drilling the Hooligan
Draw well.
On April 4, 2008 the Company sold a portion of its ORR interest in the
Cheyenne River Prospect. The Company's portion of the proceeds were $16,500.
The Company accepted a cash offer for all of its remaining interest in this
prospect and the sale was completed in April 2009. The Company received
approximately $170,000 for its interest in the oil wells and leases. The
Company's book value of its Cheyenne River interests was $81,817.
GABBS VALLEY PROSPECT
On May 8, 2003, the Company entered into an agreement (Duffield Agreement)
with O.F. Duffield (now Cortez Exploration, LLC) to acquire a ten percent
(10%) working interest in a block of acreage in the Gabbs Valley Prospect by
agreeing to issue 2,000,000 shares of the Company's Common Stock to Mr.
Duffield for such 10% interest. The shares were issued in July 2003. This
block of acreage in the Gabbs Valley Prospect consisted of federal leases
covering 44,604 acres in Nye and Mineral Counties, Nevada in which Mr.
Duffield had a 100% working interest. The shares were valued at $.10 per
share based on the closing price of the Company's common stock on the date of
issuance.
During September 2005, surveyors laid out a 19.5 mile seismic program on the
Gabbs Valley Prospect, and a seismic survey was commenced in October 2005.
Field work was carried out and final interpretation of the data was completed
in November 2005. Based on the results of the seismic survey, the Company
increased its working interest in the prospect to 40% (See Note 1) and
contracted a drilling rig which commenced drilling the Empire Cobble Cuesta
1-12-12N-34E, Nye County, Nevada on September 14, 2006. Drilling operations
were suspended on October 23, 2006 in order to give the Company time to
evaluate the drilling results. The total gross acres in this prospect were
increased to 75,201 acres by the acquisition of 30,917 acres from the U.S.
Department of the Interior on June 14, 2006. Additional leases of 9,943.91
acres were acquired from the BLM at a September 2008 lease sale and 7,680
acres at a September 2009 lease sale bringing the lease total to 92,825
acres.
Coastal Energy Company Nevada (CECN)(formerly PetroWorld Nevada Corp.) was a
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participant in the Gabbs Valley Prospect with a seismic option under which it
elected to drill a well and earn a 30% interest from Cortez Exploration, Inc.
At such time, the Company's Chief Executive Officer was a member of the Board
of Directors of both CECN and its parent company Coastal Energy Company
(formerly PetroWorld Corporation) and he currently owns less than 1.00%
of the parent company (CEN), which is traded on the AIM Exchange in London and
the Toronto Venture Exchange in Toronto. The Coastal interest was acquired on
August 2, 2007 by Empire (17%) and Cortez (13%), resulting in Empire's interest
being increased to 57%. To acquire the interest, Empire and Cortez agreed to
pay Coastal's share of the remaining costs related to abandonment of the
Cobble Cuesta test well. Empire's share of these costs is estimated to be
approximately $34,200. Mr. Whitehead retired from his position as
Chairman/Director of Coastal Energy Company on February 6, 2008.
On May 1, 2007, the Company announced it had re-entered and completed testing
on the Empire Cobble Cuesta 1-12-12N-34E, Nye County, Nevada well. As no
hydrocarbons were recovered, the Company has taken steps to partially plug and
abandon the well. The Company and its consultants have analyzed the data
obtained from the Cobble Cuesta 1-12 and have concluded another well should be
drilled on the prospect.
The Company is attempting to raise the necessary funds to pay its 57% share
of a new well's cost which likely would be located in close proximity to the
Cobble Cuesta 1-12 well. Subject to appropriate documentation being executed,
an industry partner has committed to a 25% participating interest which is to
be earned by taking a farmin from the Company's 43% partners. The Company
has raised $600,000 as of September 30, 2009 and will continue its efforts to
raise a total of $1,500,000.
SOUTH OKIE PROSPECT
On August 4, 2009, the Company purchased, for $25,000 and payment of lease
rentals of $4,680,a six month option to purchase 2,630 net acres of oil and
gas leases known as the South Okie Prospect in Natrona County, Wyoming. The
Tensleep Sand at depths from 3,300 feet to 4,500 feet is the primary target.
The Tensleep is an excellent oil reservoir with the potential of 700 barrels
of oil per acre foot recovery. The Company plans to supplement current
studies of the prospect with a seismograph evaluation to verify the potential
of the prospect. As of September 30, 2009, the Company had acquired 11 miles
of seismic and expected studies of this data to be completed in approximately
45 days. The option allows the Company to purchase the leasehold interests
for $35,000.
3. EQUITY
On February 19, 2008, the Company's Board of Directors approved the conversion
to stock for the Company's liability to its Chief Executive Officer, A. E.
Whitehead. The liability of $274,682 was converted to 2,112,938 shares of
common stock at a price of $0.13 per share.
On February 19, 2008, the Company's Board of Directors approved granting
options to purchase 350,000 shares of the Company's common stock to its
directors and its employee at $0.13 per share. The options immediately
vested and expire after ten years. The Company recorded an expense of
$41,124 for the fair market value of the options. Fair values were estimated
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at the date of grant of the options, using the Black-Scholes Option Valuation
Model with the following weighted average assumptions: risk free interest
rate of 3.76%, volatility factor of the expected market price of the
Company's common stock of 147%, no dividend yield, and a weighted average
expected life of the options of 5 years. For the purpose of determining the
expected life of the options, the Company utilizes the Simplified Method as
defined in Staff Accounting Bulletin No. 107 issued by the Securities and
Exchange Commission.
Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period. The computation of Diluted EPS does not assume conversion,
exercise or contingent exercise of securities that would have an anti-dilutive
effect on losses. As a result, if there is a loss from continuing operations,
Diluted EPS is computed in the same manner as Basic EPS. At September 30,
2009, the Company had 1,070,000 and 4,312,500 options and warrants outstanding,
respectively, that were not included in the calculation of earnings per share
for the periods then ended. Such financial instruments may become dilutive
and would then need to be included in future calculations of diluted EPS. At
September 30, 2009, the outstanding options and warrants were considered
anti-dilutive since the strike prices were below the market price and since
the Company has incurred losses year to date.
On September 25, 2009 the Company extended all of its outstanding warrants to
March 15, 2010. Fair values of the extended warrants were estimated at
the date of extension using the Black-Scholes Option Valuation Model with
the following weighted average assumptions: risk free interest rate of
.20%, volatility factor of the expected market price of the Company's
common stock of 210%, no dividend yield, and a weighted average expected
life of the warrants of 9 months. As a result of the extension, the
outstanding warrants were revalued at $36,119, which had no income statement
effect.
At September 30, 2009 the Company had received stock subscriptions of $600,000
as a part of its private placement offering. The subscribers will receive
8,571,432 shares of stock valued at $.07 per share. The certificated shares
were issued on October 1, 2009. Proceeds will be utilized for the Company's
share of costs to drill a new well on the Gabbs Valley Prospect (See Note 2).
4. SUBSEQUENT EVENTS
On October 1, 2009 the Company issued 8,571,432 shares of its common stock
which had been subscribed at September 30, 2009 (See Note 3).
After September 30, 2009 the Company has received additional common stock
subscriptions of $330,216 for which the subscribers will receive common stock
valued at $0.07 per share. The stock subscriptions are part of the Company's
efforts to raise capital (See Note 2).
The Company has evaluated events subsequent to September 30, 2009, the
balance sheet date, through November 16, 2009, the date financial statements
were issued.
5. RECENTLY ISSUED ACCOUNTING STANDARDS
Subsequent Events - In May 2009, the FASB issued new standards which establish
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the accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued. In particular, the new
standards set forth:
* the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur
for potential recognition or disclosure in the financial statements
(through the date that the financial statements are issued or are
available to be issued);
* the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial
statements; and
* the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date.
We adopted the new standards as of June 30, 2009. We have evaluated subsequent
events after the balance sheet date of September 30, 2009 through the time of
filing with the Securities and Exchange Commission (SEC). See Note 4 -
Subsequent Events.
Fair Value Measurements - The FASB's fair value measurement standards
establish a single authoritative definition of fair value based upon the
assumptions market participants would use when pricing an asset or liability
and create a fair value hierarchy that prioritizes the information used to
develop those assumptions. The standards require additional disclosures,
including disclosures of fair value measurements by level within the fair
value hierarchy. As of January 1, 2008, we adopted the new standards as they
related to our financial assets and liabilities. As of January 1, 2009, we
adopted the new standards as they related to our nonfinancial assets and
liabilities, including nonfinancial assets and liabilities measured at fair
value in impaired property, plant and equipment and initial recognition of
asset retirement obligations. Adoption did not have a significant impact on
our consolidated financial statements.
Accounting Standards Codification - In June 2009, the FASB established the
FASB Accounting Standards Codification (Codification), which officially
commenced on July 1, 2009, to become the source of authoritative US GAAP
recognized by the FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the SEC under authority of federal securities laws
are also sources of authoritative US GAAP for SEC registrants. Generally, the
Codification is not expected to change US GAAP. All other accounting
literature excluded from the Codification will be considered nonauthoritative.
The Codification is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. We adopted the new standards
for our quarter ending September 30, 2009. All references to authoritative
accounting literature are now referenced in accordance with the Codification.
Recent SEC Rule-Making Activity - In December 2008, the SEC announced that it
had approved revisions designed to modernize the oil and gas company reserve
reporting requirements. The most significant amendments to the requirements
include the following:
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* Commodity Prices - Economic producibility of reserves and discounted
cash flows will be based on a 12-month average commodity price unless
contractual arrangements designate the price to be used.
* Disclosure of Unproved Reserves - Probable and possible reserves may
be disclosed separately on a voluntary basis.
* Proved Undeveloped Reserve Guidelines - Reserves may be classified as
proved undeveloped if there is a high degree of confidence that the
quantities will be recovered.
* Reserve Estimation Using New Technologies - Reserves may be estimated
through the use of reliable technology in addition to flow tests and
production history.
* Reserve Personnel and Estimation Process - Additional disclosure is
required regarding the qualifications of the chief technical person
who oversees our reserves estimation process. We will also be
required to provide a general discussion of our internal controls used
to assure the objectivity of the reserves estimate.
* Disclosure by Geographic Area - Reserves in foreign countries or
continents must be presented separately if they represent more than
15% of our total oil and gas proved reserves.
* Non-Traditional Resources - The definition of oil and gas producing
activities will expand and focus on the marketable product rather
than the method of extraction.
The rules are effective for fiscal years ending on or after December 31, 2009,
and early adoption is not permitted.
The SEC is coordinating with the FASB to obtain the revisions necessary to US
GAAP concerning financial accounting and reporting by oil and gas producing
companies and disclosures about oil and gas producing activities to provide
consistency with the new rules. During September 2009, the FASB issued an
exposure draft of a proposed Accounting Standards Update, "Oil and Gas
Reserves Estimation and Disclosures". The proposed Update would amend existing
standards to align the reserves calculation and disclosure requirements under
US GAAP with the requirements in the SEC rules. As proposed, the Update would
be effective for annual reporting periods ending on or after December 31,
2009, and would be applied prospectively as a change in estimate.
We are currently evaluating the new SEC rules and proposed FASB Accounting
Standards Update and assessing the impact they will have on our reported oil
and gas reserves. Since the Company does not presently have any reserves,
the new rules would only affect the Company at such time as it has reserves.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL TO ALL PERIODS
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The Company's primary business is the exploration and development of oil and
gas interests. The Company has incurred significant losses from operations,
and there is no assurance that it will achieve profitability or obtain the
funds necessary to finance its operations. Sales revenue was attributable to
the production of oil from the Company's Timber Draw #1-AH and the Hooligan
Draw #1-AH wells located in the Eastern Powder River Basin in the State of
Wyoming, otherwise known as the Cheyenne River Prospect. However, these
Properties have been sold for approximately $170,000. For all periods
presented, the Company's effective tax rate is 0%. The Company has generated
net operating losses since inception, which would normally reflect a tax
benefit in the statement of operations and a deferred asset on the balance
sheet. However, because of the current uncertainty as to the Company's
ability to achieve profitability, a valuation reserve has been established
that offsets the amount of any tax benefit available for each period
presented in the statements of operations.
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2009, COMPARED TO THREE MONTH PERIOD
ENDED SEPTEMBER 30, 2008.
For the three months ended September 30, 2009, sales revenue decreased $5,350
to $0 compared to $5,350 for the same period during 2008. The decrease in
sales revenue was the result of the Timber Draw #1-AH and the Hooligan Draw
#1-AH wells being sold.
Production and operating expenses increased $6,759 to $57,008 for the three
months ended September 30, 2009, from $50,249 for the same period in 2008.
The increase was primarily due to purchase of seismic analysis of the South
Okie Prospect in 2009.
General and administrative expenses decreased by $4,244 to $41,153 for the
three months ended September 30, 2009, from $45,397 for the same period in
2008. The decrease was primarily due to lower insurance and office costs
in 2009.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2009, COMPARED TO NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2008.
For the nine months ended September 30, 2009, sales revenue decreased $5,199 to
$9,794 compared to $14,993 for the same period during 2008. As of June 30, 2009
the Timber Draw #1-AH and the Hooligan Draw #1-AH wells were sold.
Production and operating expenses decreased $47,903 to $98,395 for the
nine months ended September 30, 2009, from $146,298 for the same period in
2008. The decrease was primarily due to re-entry costs associated with the
Gaskill well in 2008, which did not recur in 2009.
General and administrative expenses decreased by $69,779 to $159,750 for the
nine months ended September 30, 2009, from $229,529 for the same period in
2008. The decrease was primarily due to lower expenses associated with
administration of leases in 2009 and stock options which were issued in 2008.
The Company recognized a gain on sale of the Cheyenne River Prospect of
$102,708 for the nine months ended September 30, 2009. No comparable sale
was made for the same period in 2008.
RECENTLY ISSUED ACCOUNTING STANDARDS
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Subsequent Events - In May 2009, the FASB issued new standards which establish
the accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued. In particular, the new
standards set forth:
* the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur
for potential recognition or disclosure in the financial statements
(through the date that the financial statements are issued or are
available to be issued);
* the circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial
statements; and
* the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date.
We adopted the new standards as of June 30, 2009. We have evaluated subsequent
events after the balance sheet date of September 30, 2009 through the time of
filing with the Securities and Exchange Commission (SEC). See Note 4 -
Subsequent Events.
Fair Value Measurements - The FASB's fair value measurement standards
establish a single authoritative definition of fair value based upon the
assumptions market participants would use when pricing an asset or liability
and create a fair value hierarchy that prioritizes the information used to
develop those assumptions. The standards require additional disclosures,
including disclosures of fair value measurements by level within the fair
value hierarchy. As of January 1, 2008, we adopted the new standards as they
related to our financial assets and liabilities. As of January 1, 2009, we
adopted the new standards as they related to our nonfinancial assets and
liabilities, including nonfinancial assets and liabilities measured at fair
value in impaired property, plant and equipment and initial recognition of
asset retirement obligations. Adoption did not have a significant impact on
our consolidated financial statements.
Accounting Standards Codification - In June 2009, the FASB established the
FASB Accounting Standards Codification (Codification), which officially
commenced on July 1, 2009, to become the source of authoritative US GAAP
recognized by the FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the SEC under authority of federal securities laws
are also sources of authoritative US GAAP for SEC registrants. Generally, the
Codification is not expected to change US GAAP. All other accounting
literature excluded from the Codification will be considered nonauthoritative.
The Codification is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. We adopted the new standards
for our quarter ending September 30, 2009. All references to authoritative
accounting literature are now referenced in accordance with the Codification.
Recent SEC Rule-Making Activity - In December 2008, the SEC announced that it
had approved revisions designed to modernize the oil and gas company reserve
reporting requirements. The most significant amendments to the requirements
include the following:
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* Commodity Prices - Economic producibility of reserves and discounted
cash flows will be based on a 12-month average commodity price unless
contractual arrangements designate the price to be used.
* Disclosure of Unproved Reserves - Probable and possible reserves may
be disclosed separately on a voluntary basis.
* Proved Undeveloped Reserve Guidelines - Reserves may be classified as
proved undeveloped if there is a high degree of confidence that the
quantities will be recovered.
* Reserve Estimation Using New Technologies - Reserves may be estimated
through the use of reliable technology in addition to flow tests and
production history.
* Reserve Personnel and Estimation Process - Additional disclosure is
required regarding the qualifications of the chief technical person
who oversees our reserves estimation process. We will also be
required to provide a general discussion of our internal controls used
to assure the objectivity of the reserves estimate.
* Disclosure by Geographic Area - Reserves in foreign countries or
continents must be presented separately if they represent more than
15% of our total oil and gas proved reserves.
* Non-Traditional Resources - The definition of oil and gas producing
activities will expand and focus on the marketable product rather
than the method of extraction.
The rules are effective for fiscal years ending on or after December 31, 2009,
and early adoption is not permitted.
The SEC is coordinating with the FASB to obtain the revisions necessary to US
GAAP concerning financial accounting and reporting by oil and gas producing
companies and disclosures about oil and gas producing activities to provide
consistency with the new rules. During September 2009, the FASB issued an
exposure draft of a proposed Accounting Standards Update, "Oil and Gas
Reserves Estimation and Disclosures". The proposed Update would amend existing
standards to align the reserves calculation and disclosure requirements under
US GAAP with the requirements in the SEC rules. As proposed, the Update would
be effective for annual reporting periods ending on or after December 31,
2009, and would be applied prospectively as a change in estimate.
We are currently evaluating the new SEC rules and proposed FASB Accounting
Standards Update and assessing the impact they will have on our reported oil
and gas reserves. Since the Company does not presently have any reserves,
the new rules would only affect the Company at such time as it has reserves.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
As of September 30, 2009, the Company had $617,580 of cash on hand. The
Company believes that its cash on hand will allow it to finance its
operations for the next twelve months. In order to sustain the Company's
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operations on a long-term basis, the Company intends to continue to look for
merger opportunities and consider public or private financings. The Company
plans to undertake further exploration of the Gabbs Valley Prospect due to
an additional equity placement.
OUTLOOK
As stated elsewhere in this Form 10-Q, on May 1, 2007, after further
testing of the Company's only well in the Gabbs Valley Prospect, the
Company decided to partially plug and abandon the well since no hydrocarbons
were recovered. However, the Company was encouraged by the data it acquired
in connection with the drilling, logging and testing of the well. Such data,
additional studies of such data, the assistance of geological and
engineering consultants and an Advanced Geochemical Imaging Survey conducted
in December 2008 led the Company to determine that further drilling is
warranted. It is possible that excessive mud exposure in the hole for over
five months seriously impeded the process of recovering hydrocarbons. It was
determined that a new test well should be drilled using a different
method of drilling. The Company is attempting to secure the necessary funds
to pay its 57% interest in a new test well which will be located in close
proximity to the Cobble Cuesta 1-12.
ADVANCES FROM RELATED PARTY
Through March 31, 2005, the Company financed its operations primarily from
advances made to the Company by the Albert E. Whitehead Living Trust, of which
the Company's Chairman of the Board and Chief Executive Officer, Mr. Whitehead,
is the trustee. At the end of 2007, the Company was indebted to the Albert E.
Whitehead Living Trust in the amount of $274,682. This loan was converted, on
February 19, 2008, into 2,112,938 shares of the Company's common stock at
$0.13 per share.
MATERIAL RISKS
The Company has incurred significant losses from operations and there is no
assurance that it will achieve profitability or obtain the funds necessary to
finance continued operations. For other material risks, see the Company's
Form 10-K for the period ended December 31, 2008, which was filed on March
31, 2009.
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q, including this section, includes certain
statements that may be deemed "forward-looking statements" within the meaning
of federal securities laws. All statements, other than statements of
historical facts, that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the future,
including future sources of financing and other possible business
developments, are forward-looking statements. Such statements are subject
to a number of assumptions, risks and uncertainties and could be affected by
a number of different factors, including the Company's failure to secure short
and long-term financing necessary to sustain and grow its operations, increased
competition, changes in the markets in which the Company participates and the
technology utilized by the Company and new legislation regarding environmental
matters. These risks and other risks that could affect the Company's business
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are more fully described in reports it files with the Securities and Exchange
Commission, including its Form 10-K for the fiscal year ended December 31,
2008. Actual results may vary materially from the forward-looking statements.
The Company undertakes no duty to update any of the forward-looking statements
in this Form 10-Q.
Item 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried out an
evaluation under the supervision of the Company's Chief Executive Officer (and
principal financial officer) of the effectiveness of the design and operation
of the Company's disclosure controls and procedures pursuant to Securities
Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, the
Company's Chief Executive Officer (and principal financial officer) has
concluded that the disclosure controls and procedures as of the end of the
period covered by this report are effective. During the period covered by this
report, there was no change in the Company's internal controls over financial
reporting that has materially affected or that is reasonably likely to
materially affect the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, 2009, the Company received
subscriptions from 7 accredited investors for 8,571,432 shares of its
common stock, par value $0.001 per share. The aggregate offering price for
such shares was $600,000. Subsequent to the three months ended September 30,
2009 but prior to the filing of this Quarterly Report on Form 10-Q, the
Company received subscriptions from 7 additional accredited investors for
4,574,515 shares of its common stock, par value $0.001 per share. The
aggregate offering price for such shares was $330,216. The material terms
and conditions applicable to the purchase and sale of the securities are set
forth in the form of the securities purchase agreement included as an exhibit
to this Quarterly Report on Form 10-Q. Proceeds of this private placement
will be utilized for the Company's share of costs to drill a new well on the
Gabbs Valley Prospect.
This report does not constitute an offer to sell or the solicitation of
an offer to buy any of the shares of common stock, and shall not constitute
an offer, solicitation or sale in any jurisdiction in which such offer,
solicitation or sale is unlawful.
The offers and sales related to the shares described above were not
registered under the Securities Act of 1933, as amended, in reliance
upon the exemption from the registration requirements of that act
provided by Section 4(2) thereof and Regulation D promulgated by the
Securities and Exchange Commission thereunder. Each of the investors
in the private placement is a sophisticated accredited investor with
the experience and expertise to evaluate the merits and risks of an
investment in the Company's stock and the financial means to bear the
risks of such an investment. In addition, each investor was provided
access to all of the material information regarding the Company that
such investor would have received if the offer and sale of the
securities had been registered.
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Item 6. Exhibits
a) Exhibits
10.1 Form of Securities purchase agreement entered into
between Empire Petroleum Corporation and certain accredited
investors in connection with the 2009 private placement
(submitted herewith).
31 Certification of Chief Executive Officer (and principal
financial officer) pursuant to Rules 13a-14(a) and 15d-14(a)
promulgated under the Securities Exchange Act of 1934, as
amended, and Item 601(b)(31) of Regulation S-K, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(submitted herewith).
32 Certification of Chief Executive Officer (and principal
financial officer) pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (submitted herewith).
EMPIRE PETROLEUM CORPORATION
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.
EMPIRE PETROLEUM CORPORATION
Date: November 16, 2009 By: /s/ Albert E. Whitehead
___________________
Albert E. Whitehead
Chairman, Chief Executive
Officer and Principal
Financial Officer
EXHIBIT INDEX
NO. DESCRIPTION
10.1 Form of Securities purchase agreement entered into
between Empire Petroleum Corporation and certain accredited
investors in connection with the 2009 private placement
(submitted herewith).
31 Certification of Chief Executive Officer (and principal
financial officer) pursuant to Rules 13a-14(a) and 15d-14(a)
promulgated under the Securities Exchange Act of 1934, as
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amended, and Item 601(b)(31) of Regulation S-K, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(submitted herewith).
32 Certification of Chief Executive Officer (and principal
financial officer) pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (submitted herewith).
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
EMPIRE PETROLEUM CORPORATION
8801 S. Yale, Suite 120
Tulsa, Oklahoma 74137-3575
November , 2009
TO:
The undersigned, Empire Petroleum Corporation, a Delaware corporation
(the "Company"), hereby agrees with you as follows, effective as of the date
above written:
1. Authorization and Sale of the Securities.
1.1 Authorization. The Company represents that it has authorized the
issuance to you pursuant to the terms and conditions hereof of ___________
shares of its common stock, par value $0.001 per share (the "Common Stock").
1.2 Sale. Subject to the terms and conditions hereof, on the Purchase
Date (as defined Section 2 below), the Company shall issue and sell to you and
you shall purchase from the Company, the Common Stock for an aggregate
purchase price of $ (the "Purchase Price").
2. Payment of Purchase Price; Delivery.
Upon the execution of this Agreement, you shall deliver to the Company
wire funds or a check payable to the Company in the amount of the Purchase
Price. Upon receipt of the Purchase Price from you (the "Purchase Date"),
the Company shall promptly issue and deliver to you the Common Stock.
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to you as follows:
3.1 Organization and Standing; Articles and Bylaws. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of
the State of Delaware and is in good standing under such laws. The Company is
qualified, licensed or domesticated as a foreign corporation in all
jurisdictions where the nature of its business conducted or the character of
its properties owned or leased makes such qualification, licensing or
-17-
domestication necessary at this time except in those jurisdictions where the
failure to be so qualified or licensed and in good standing does not and will
not have a materially adverse effect on the Company, the conduct of its
business or the ownership or operation of its properties. The Company's
Certificate of Incorporation, as amended, and Bylaws, which have been filed
as attachments to the Company reports it files with Securities and Exchange
Commission, are true, correct and complete, and contain all amendments through
the date of this Agreement (the "SEC").
3.2 Corporate Power. The Company has the requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company has now, and
will have at the Purchase Date, all requisite legal and corporate power to
enter into this Agreement, to sell the Common Stock hereunder, and to carry
out and perform its obligations under the terms of this Agreement.
3.3 Capitalization. The authorized capital stock of the Company consists
of 100,000,000 shares of common stock, par value $0.001 per share. There are
issued and outstanding approximately 57,193,128 shares of common stock. The
issued and outstanding shares of common stock are fully paid and
nonassessable. Except as disclosed in the Disclosure Materials (as defined in
Section 4.1 below), there are no outstanding options, warrants or other rights,
including preemptive rights, entitling the holder thereof to purchase or
acquire shares of common stock of the Company.
3.4 Authorization.
(a) All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the sale and issuance of
the Common Stock pursuant hereto and the performance of the Company's
obligations hereunder has been taken or will be taken prior to the Purchase
Date. This Agreement is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
of general application affecting enforcement of creditors' rights, and except
as limited by application of legal principles affecting the availability of
equitable remedies.
(b) The Common Stock, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that such Common Stock will be subject to restrictions on transfer
under state and/or Federal securities laws, and as may be required by future
changes in such laws.
(c) No shareholder of the Company has any right of first refusal
or any preemptive rights in connection with the issuance of the Common Stock
or of any other capital stock of the Company.
3.5 Compliance with Instruments. The Company is not in violation of any
terms of its Certificate of Incorporation, as amended, or Bylaws, or, to the
knowledge of the Company, any judgment, decree or order applicable to it. The
execution, delivery and performance by the Company of this Agreement, and the
issuance and sale of the Common Stock pursuant hereto, will not result in any
such violation or be in conflict with or constitute a default under any such
-18-
term, or cause the acceleration of maturity of any loan or material obligation
to which the Company is a party or by which it is bound or with respect to
which it is an obligor or guarantor, or result in the creation or imposition
of any material lien, claim, charge, restriction, equity or encumbrance of
any kind whatsoever upon, or, to the knowledge of the Company, give to any
other person any interest or right (including any right of termination or
cancellation) in or with respect to any of the material properties, assets,
business or agreements of the Company.
3.6 Litigation, etc. There are no actions, proceedings or, to the
knowledge of the Company, investigations pending which might result in any
material adverse change in the business, prospects, conditions, affairs or
operations of the Company or in any of its properties or assets, or in any
impairment of the right or ability of the Company to carry on its business as
proposed to be conducted, or in any material liability on the part of the
Company, or which question the validity of this Agreement or any action taken
or to be taken in connection herewith.
3.7 Governmental Consent, etc. Except as may be required in connection
with any filings required under the Federal securities laws and/or the
securities laws of any state due to the offer and sale of the Common Stock
pursuant to this Agreement, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental unit is required on
the part of the Company in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the Common Stock or the
consummation of any other transaction contemplated hereby.
3.8 Securities Registration and Filings. The outstanding shares of the
Company's Common Stock are registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has filed all reports required by Section 13 or 15(d) of the Exchange Act
during the last two fiscal years. All of such reports were, at the time they
were filed, complete and accurate in all material respects and did not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
4. Representations and Warranties of Purchaser and Restrictions on Transfer
Imposed by the Securities Act.
4.1 Representations and Warranties by Purchaser. You represent and
warrant to the Company as follows:
(a) You have reviewed the following copies of the Company's (all
of which is collectively referred to as the "Disclosure Materials"):
(i) Annual Report on Form 10-K for year ended December 31, 2008
located at http://www.sec.gov/Archives/edgar/data/887396/000088739609000005/
r10-k2008.txt;
(ii) Quarterly Report on Form 10-Q for quarter ended March 31, 2009
located at http://www.sec.gov/Archives/edgar/data/887396/000088739609000006/
r10q-032009.txt;
-19-
(iii) Quarterly Report on Form 10-Q for quarter ended June 30, 2009
located at ttp://www.sec.gov/Archives/edgar/data/887396/000088739609000010/
r10q-062009.txt;
(iv) Current Report on Form 8-K filed June 18, 2009 located at
http://www.sec.gov/Archives/edgar/data/887396/000088739609000007/r8k-192009
.txt;
(v) Current Report on Form 8-K filed August 11, 2009 located at
http://www.sec.gov/Archives/edgar/data/887396/000088739609000009/r8k-
8112009.txt; and
(vi) Supplement to Disclosure Materials dated November __, 2009,
which was provided to you via a separate letter.
You have also reviewed the Company's Certificate of Incorporation, as amended,
and Bylaws.
(b) You are experienced in evaluating and investing in companies
such as the Company. Further, you understand that the Common Stock purchased
hereby is of a highly speculative nature and could result in the loss of your
entire investment.
(c) You have been furnished by the Company with all information
requested concerning the proposed operations, affairs and current financial
condition of the Company. Such information and access have been available to
the extent you consider necessary and advisable in making an intelligent
investment decision. In addition, you have received and reviewed copies of
the Disclosure Materials and have had the opportunity to discuss the Company's
business, management and financial affairs with its Chief Executive Officer.
You understand that such discussions, as well as the Disclosure Materials and
any other written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects which it believes to
be material but were not necessarily a thorough or exhaustive description.
(d) The Common Stock to be acquired by you will be acquired, solely
for your account, for investment purposes only and not with a view to the
resale or distribution thereof, are not being purchased for subdivision or
fractionalization thereof, and you have no contract, undertaking, agreement
or arrangement with any person to sell or transfer such Common Stock to any
person and do not intend to enter into such contract or arrangement.
(e) You understand that the Common Stock have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), nor are
they registered or qualified under the blue sky or securities laws of any
state, by reason of their issuance in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act
pursuant to Sections 3(b) or 4(2) of the Securities Act and available
exemptions from the registration requirements of any applicable state
securities laws. You further understand that the Securities must be held by
you indefinitely and you must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from registration.
(f) You have the full right, power and authority to enter into and
-20-
perform this Agreement, and this Agreement constitutes a legal, valid and
binding obligation upon you, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting enforcement of creditors' rights, and except as limited by
application of legal principles affecting the availability of equitable
remedies.
(g) You are able to bear the full economic risk of your investment
in the Common Stock, including the risk of a total loss of your investment in
connection therewith. You are an accredited investor as that term is defined
in Rule 501(a) of Regulation D promulgated by the SEC.
(h) You were not offered the Common Stock by means of general
solicitations, publicly disseminated advertisements or sales literature.
4.2 Legends. The instrument representing the Common Stock shall be
endorsed with the legend set forth below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES ACT.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (I) THEY HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES ACT, OR (II) THE COMPANY SHALL HAVE BEEN FURNISHED AN OPINION OF
COUNSEL, SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT REGISTRATION IS NOT
REQUIRED UNDER ANY OF SUCH ACTS.
In addition, the instrument representing the Common Stock shall be endorsed
with any other legend required by any state securities laws. The Company need
not register a transfer of legended Common Stock, and may also instruct its
transfer agent not to register the transfer of the Common Stock, unless one of
the conditions specified in each of the foregoing legends is satisfied.
5. Indemnification by Purchaser.
You acknowledge and understand that the Company has agreed to offer and
sell the Common Stock to you based upon the representations and warranties made
by you in this Agreement, and you hereby agree to indemnify the Company and to
hold the Company and its incorporators, officers, directors and professional
advisors harmless against all liability, costs or expenses (including
attorneys' fees) arising by reason of or in connection with any
misrepresentation or any breach of such representations and warranties by you,
or arising as a result of the sale or distribution of any Common Stock by you
in violation of the Securities Act or other applicable law.
6. Miscellaneous.
6.1 Successors and Assigns. All the provisions of this Agreement by or
for the benefit of the parties shall bind and inure to the benefit of
respective successors and permitted assigns of each party.
6.2 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class mail, postage
prepaid, addressed (a) if to you, at your address set forth on the first page
hereof, or at such other address as you shall have furnished to the Company in
-21-
writing, or (b) if to the Company, at its address set forth on the first page
hereof, or
at such other address as the Company shall have furnished to you in writing in
accordance with this Section 6.2.
6.3 Waivers; Amendments. Any provision of this Agreement may be amended
or modified with (but only with) the written consent of the Company and you.
Any amendment, modification or waiver effected in compliance with this
Section 6.3 shall be binding upon the Company and you. No failure or delay of
the Company or you in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce such a right
or power, preclude any other or further exercise thereon or the exercise of any
other right or power. The rights and remedies of the Company and you hereunder
are cumulative and not exclusive of any rights or remedies which each would
otherwise have.
6.4 Separability. In case any one or more of the provisions contained
in this Agreement shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
6.5 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the state of Oklahoma without regard to principles
of conflicts of law, except as otherwise required by mandatory provisions of
law.
6.6 Section Headings. The section headings used herein are for
convenience of reference only and shall not be construed in any way to affect
the interpretation of any provisions of this Agreement.
6.7 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties hereto with regard to the subjects hereof and thereof.
6.8 Finder's Fees. You represent and warrant to the Company that no
finder or broker has been retained by you in connection with the transactions
contemplated by this Agreement and you hereby agree to indemnify and to hold
the Company and its respective officers, directors and controlling persons,
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which you, or any of your employees or representatives, are responsible. The
Company hereby agrees to indemnify and to hold you, and your respective
officers, directors and controlling persons, harmless of and from any
liability for any commission or compensation in the nature of a finder's fee
to any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which it, or any of its
employees or representatives, are responsible.
-22-
6.9 Other Documents. The parties to this Agreement shall in good faith
execute such other and further instruments, assignments or documents as may be
necessary or advisable to carry out the transactions contemplated by this
Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument, and which shall become effective when there
exist copies signed by the Company and by you.
[Signatures on Next Page]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized representatives effective as of the date set
forth on the first page hereof.
EMPIRE PETROLEUM CORPORATION
By:_________________________________________
Albert E. Whitehead, Chief Executive Officer
Accepted and agreed to this ______ day of _____________, 2009.
BUYER
By:________________________________________
Name:______________________________________
Title:_____________________________________
EXHIBIT 31
CERTIFICATION
I, Albert E. Whitehead, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Empire
Petroleum Corporation;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
-23-
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b. Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
November 16, 2009 /s/ Albert E. Whitehead
Albert E. Whitehead,
Chief Executive Officer and
Principal Financial Officer
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EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Empire Petroleum Corporation
(the "Company") on Form 10-Q for the period ending September 30, 2009 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Albert E. Whitehead, Chief Executive Officer (and principal
financial officer) of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
November 16, 2009 /s/ Albert E. Whitehead
Albert E. Whitehead
Chief Executive Officer and
Principal Financial Officer
-25
