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 March 31, 2011
[ ] 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.)
4444 E. 66th Street, Lower Annex, Tulsa, Oklahoma 74136-4207
(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
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the registrant's common stock, $0.001 par value,
outstanding as of May 13, 2011 was 83,129,235.
EMPIRE PETROLEUM CORPORATION
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheets at March 31, 2011 (Unaudited) and
December 31, 2010 1
Statements of Operations - Three months ended
March 31, 2011 and 2010 (Unaudited) 2
Statements of Cash Flows - Three months ended
March 31, 2011 and 2010 (Unaudited) 3
Notes to Financial Statements 4-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-10
Item 4. Controls and Procedures 10
Part II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 6. Exhibits 11
Signatures 12
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
EMPIRE PETROLEUM CORPORATION
BALANCE SHEETS
March 31, December 31,
2011 2010
(Unaudited)
ASSETS ____________ ____________
Current assets:
Cash $ 41,861 $ 68,689
Accounts receivable
(net of allowance of $3,750
at March 31, 2011 and
December 31, 2010) 61,964 45,915
Prepaid expenses 4,218 7,336
___________ ____________
Total current assets 108,043 121,940
Property & equipment, net of accumulated
depreciation and depletion 255,215 255,215
___________ ____________
Total assets $ 363,258 $ 377,155
___________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 51,079 $ 149,065
Note payable - related party 100,000 0
___________ ___________
Total current liabilities 151,079 149,065
___________ ____________
Total liabilities 151,079 149,065
___________ ____________
Stockholders' equity:
Common stock - $.001 par value,
authorized 100,000,000 shares,
issued and outstanding 83,129,235
and 83,069,235 shares,
respectively 83,129 83,069
Additional paid in capital 13,957,867 13,904,142
Accumulated deficit (13,828,817) (13,759,121)
___________ ___________
Total stockholders' equity 212,179 228,090
___________ ___________
Total liabilities and stockholders'
equity $ 363,258 $ 377,155
___________ ___________
See accompanying notes to unaudited financial statements.
-1-
EMPIRE PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
____________________________
2011 2010
_____________ _____________
Revenue:
Petroleum sales $ 0 $ 0
_____________ _____________
0 0
_____________ _____________
Costs and expenses:
Production & operating (11,279) 9,930
General & administrative 80,732 67,061
_____________ ____________
69,453 76,991
_____________ ____________
Operating loss (69,453) (76,991)
_____________ ____________
Other income and (expense):
Interest income 7 1,641
Interest expense (250) 0
_____________ ____________
Total other income and
(expense) (243) 1,641
_____________ ____________
Net income (loss) $ (69,696) $ (75,350)
_____________ ____________
Net income (loss) per common
share, basic and
diluted $ (.00) $ (.00)
_____________ ____________
Weighted average number of
common shares outstanding,
basic and diluted 83,121,145 77,069,412
_____________ ____________
See accompanying notes to unaudited financial statements.
-2-
EMPIRE PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31, March 31,
2011 2010
_________ __________
Cash flows from operating activities:
Net loss $ (69,696) $ (75,350)
Adjustments to reconcile net loss
to net cash used in operating activities:
Value of services contributed by employee 12,500 12,500
Stock incentive plan expense 11,295 16,380
Change in operating assets and liabilities:
Accounts receivable (16,049) 0
Prepaid expenses 3,118 0
Accounts payable and accrued liabilities (67,996) 991
________ ________
Net cash used in
operating activities (126,828) ( 45,479)
________ ________
Cash flows from investing activities:
Acquisition of lease acres 0 ( 17,500)
________ ________
Net cash provided by (used in)investing
activities 0 ( 17,500)
________ ________
Cash flows from financing activities:
Proceeds from private equity placement 0 285,000
Proceeds from related party, note payable 100,000 0
________ ________
Net increase (decrease) in cash ( 26,828) 222,021
Cash - Beginning of period 68,689 1,171,565
________ ________
Cash - End of period $ 41,861 $1,393,586
________ ________
Supplemental Disclosure for Non Cash Items:
Common Stock issued for accounts payable $ 29,990 0
_________ ________
See accompanying notes to unaudited financial statements.
-3-
EMPIRE PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2011
(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, 2011.
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, 2010 which are contained in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the "SEC") on March 23, 2011.
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.
As of March 31, 2011, the Company had $41,861 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.
Compensation of Officers and Employees
The Company's only executive officer serves without pay or other compensation.
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The fair value of these services is estimated by management and is recognized
as a capital contribution. For the three months ended March 31, 2011, the
Company recorded $12,500 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
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:
GABBS VALLEY PROSPECT
The Company's leasehold acreage at March 31, 2011 consisted of 48,541 acres.
The Company's ownership is now 50%.
As of December 31, 2005, there had been no wells drilled on the Gabbs
Valley Prospect. However, in November 2005, the Company received the
results of a 19-mile 2-D swath seismograph survey conducted on the
prospect and, based on the results of the survey, the Company and its
partners determined that a test well should be drilled on the prospect.
The Company also elected to increase its interest in the prospect by
taking a farm-in from Cortez Exploration LLC (formerly O. F. Duffield).
Empire agreed to pay Cortez $675,000 in lease costs plus 45% of the costs
associated with the drilling of a test well to earn an additional 30%
working interest which made its total working interest 40%. The lease block
of 44,604 acres was increased to 75,521 acres by the acquisition of an
additional 30,917 acres from the Department of the Interior (Bureau of
Land Management) in June 2006. The block was reduced to 75,201 acres due
to the expiration of one 320-acre lease during 2007. In 2008 and 2009, the
Company acquired leases on 17,624 additional acres through federal lease
sales, bringing its total to 92,825 acres.
After reaching 5,195 feet in connection with drilling this first test well,
the Company and its partners elected to suspend operations on the well,
release the drilling rig, and associated equipment and personnel to evaluate
the drilling and logging data. After the study was completed, Empire and its
partners decided to conduct a thorough testing program on the well. The
Company re-entered the well on April 17, 2007 and conducted a series of drill
stem tests and recovered only drilling mud. It was then determined after
considerable study that the formation is likely very sensitive to mud and
water used in drilling which may have caused clays in the formation to swell
preventing any oil that might be present to flow into the well bore. During
2007, the Company increased its interest in the prospect leases to 57% when
one of the joint participants elected to surrender its 30% share of the
prospect. The Company and its joint owners assumed liabilities of
approximately $68,000 to acquire this interest.
In 2008, the Company and its partners engaged W. L. Gore and Associates to
carryout an Amplified Geochemical Imaging Survey which covered approximately
sixteen square miles. The survey was concentrated along the apex of the large
Cobble Cuesta structure which included the areas around the Empire Cobble
Cuesta 1-12 exploratory test and the other test well drilled in the immediate
area. Both of these tests encountered oil shows and the geochemical survey
-5-
indicated potential hydrocarbons beyond the two well bores. A new
Federal drilling unit was formed and approved by the Bureau of Land
Management. This unit was known as the Paradise Drilling Unit and contained
40,073 acres out of our total lease block then containing 92,825 acres.
In July 2010, the Company entered into a farm-in agreement with its joint
lease holders holding a 41% working interest in the 40,073 acre Paradise
Unit. On July 19, 2010, the Company commenced drilling a test well in the
Paradise Unit on the Gabbs Valley Prospect in Nevada. The Company drilled
the Paradise Unit 2-12 test well to a depth of 4,250 feet before
drilling problems caused the Company to cease drilling. The Company tested
the well between 3,700 feet and 3,782 feet where oil shows had been found.
The Company recovered small amounts of oil containing paraffin, which may have
been restricting the oil flow. However, swab tests failed to increase the oil
flow and the Company has suspended operations on the well and reassigned the
lease and the 1-12 and 2-12 wells to the other leasehold owners from which the
Company had taken a farmout. The new owners plan to do further testing on the
2-12 well and assumed the liabilities associated with the lease and both the
1-12 and 2-12 wells. Further testing by the new owners is expected in the
second quarter of 2011 pending financing. The Company will utilize the
results of the testing and other factors to determine its next actions with
respect to the Gabbs Valley leasehold.
Sale of Working Interest
In October 2010, the Company sold 7% of its working interest in the Gabbs
Valley Prospect leases for $700,000. In connection with such sale, the
purchasers were granted a working interest in the Paradise Unit 2-12 well,
unit leases and an option to participate in the farmin of the non-unit
leases, which option has expired.
SOUTH OKIE PROSPECT
On August 4, 2009, the Company purchased, for $25,000 and payment of lease
rentals of $4,680, a nine month option to purchase 2,630 net acres of oil and
gas leases known as the South Okie Prospect in Natrona County, Wyoming.
The option allowed the Company to purchase the leasehold interests for
$35,000. 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. As of December 31, 2009, the
Company acquired 11 miles of seismic data and studies of this data were
completed in early January 2010. An additional geological study was also
completed early January 2010. Based on these studies, the Company exercised
its option in 2010. Further engineering studies have estimated the reserve
potential of this prospect at between 1,000,000 to 4,000,000 barrels of oil.
Subject to securing additional financing and/or engaging an industry partner,
the Company plans to drill or cause to be drilled a test well in 2011.
3. NOTE PAYABLE - RELATED PARTY
On February 1, 2011 the Albert E. Whitehead Living Trust, under the terms of
a convertible note, advanced $100,000 to the Company. The note has a term of
one (1) year and accrues interest at the rate of four (4) percent per annum.
The principal and interest owed under the note may be converted by the holder
into common stock at the strike price of $0.10 per share.
-6-
4. EQUITY
As of March 31, 2011, the Company had outstanding warrants that expire in
June and July 2011. Fair values of the warrants were estimated at the date of
issuance using the Black-Scholes Option Valuation Model with the following
weighted average assumptions: risk free interest rate of .3%, volatility
factor of the expected market price of the Company's common stock of 155%, no
dividend yield, and a weighted average expected life of the warrants of one
year. The outstanding warrants were valued at $101,250, which had no income
statement effect.
On March 17, 2010, John C. Kinard, a member of the Company's Board of
Directors, was issued options to purchase 70,000 shares of the Company's
common stock under the 2006 Stock Incentive Plan at a strike price of $0.25
per share. The options immediately vested and expire after ten years. The
Company recorded an expense of $16,380 for the options. Fair values
were estimated 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 3.65%, volatility factor of the expected market
price of the Company's common stock of 162%, 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 SEC.
On September 9, 2010, Alfred H. Pekarek, a consulting geologist to the Company
was issued options to purchase 50,000 shares of the Company's common stock
under the 2006 Stock Incentive Plan at a strike price of $0.26 per share. The
options immediately vested and expire after ten (10) years. The Company
recorded an expense of $11,700 for the options. Fair values were estimated 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 2.77%, volatility factor of the expected market price of the Company's
common stock of 142%, 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 SEC.
On Februry 28, 2011, Kevin R. Seth, a new member of the Company's Board of
Directors, was issued options to purchase 150,000 shares of the Company's
common stock under the 2006 Stock Incentive Plan at a strike price of $0.10
per share. The options immediately vested and expire after ten years. The
Company recorded an expense of $11,295 for the options. Fair values
were estimated 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 3.42%, volatility factor of the expected market
price of the Company's common stock of 172%, 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 SEC.
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 March 31, 2011,
the Company had 1,245,000 options and 2,222,226 warrants outstanding,
-7-
that were not included in the calculation of earnings per share for the
period then ended. Such financial instruments may become dilutive
and would then need to be included in future calculations of Diluted EPS. At
March 31, 2011, the outstanding options and warrants were considered
anti-dilutive since the strike prices was above the market price and since
the Company has incurred losses year to date.
In January 2010, the Company received stock subscriptions of $285,000 as a
part of its then ongoing private placement offering, which concluded on
January 26, 2010. The subscribers received 4,071,428 shares of stock valued
at $.07 per share. Subsequent to the private placement, the Company
determined that it needed to enter into the farm-in agreement and raise
additional funds in order to drill the 2-12 well on the Gabbs Valley
Prospect.
In July 2010, the Company completed its most recent private placement offering
by issuing 4,444,446 shares of common stock, with an aggregate purchase price of
$400,000 and 2,222,226 warrants to purchase shares of common stock at a price of
$.50, which expire in June and July, 2011, as applicable. Proceeds from the
private placement were utilized for the Company's share of costs to drill the
2-12 well on the Gabbs Valley Prospect (See Note 2).
Proceeds of the June-July 2010 private placement were allocated $101,250 to
common stock warrants and $298,750 to common stock and paid in capital. The
value of the warrants was estimated using the Black-Scholes Valuation Model
with the following weighted average assumptions: risk free interest rate of
.30%, no dividend yield, volatility factor of the expected market price of the
Company's common stock of 157%, and a weighted average expected life of the
warrants of one year.
5. SUBSEQUENT EVENTS
Subject to final documentation, the Company has agreed to issue 435,000 shares
of the Company's common stock to a drilling company to settle an account
payable of $43,500 which was the balance of the 2-12 drilling costs.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL TO ALL PERIODS
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. 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 MARCH 31, 2011, COMPARED TO THREE MONTH PERIOD
ENDED MARCH 31, 2010.
-8-
Production and operating expenses decreased $21,209 to $(11,279) for the three
months ended March 31, 2011, from $9,930 for the same period in 2010.
The decrease was primarily due to costs related to the Gabbs Valley Prospect
in 2010 while 2011 reflects refunds of certain drilling costs which were
expensed in 2010.
General and administrative expenses increased by $13,671 to $80,732 for the
three months ended March 31, 2011, from $67,061 for the same period in
2010. The increase was primarily due to issuance of stock options to the
newest member of the Company's Board of Directors and increased insurance
costs in 2011.
There was no depreciation expense attributable to the three months ended
March 31, 2011 or December 31, 2010 because the depreciable assets were
fully depreciated.
For the reasons discussed above, net loss decreased $5,654 from
$(75,350) for the three months ended March 31, 2010, to $(69,696)
for the three months ended March 31, 2011.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) periodically issues new
accounting standards in a continuing effort to improve standards of financial
accounting and reporting. The Company has reviewed the recently issued
pronouncements and no new accounting standards have been adopted since the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2010 was filed.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
As of March 31, 2011, the Company had $41,861 of cash on hand. The
Company believes that its cash on hand will allow it to finance its operations
for the next six months. In order to sustain the Company's 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 and South Okie Prospects in
2011. The Company will likely look to industry partners to drill the next
wells on these prospects.
OUTLOOK
As stated elsewhere in this Form 10-Q, on May 1, 2007, after further
testing of the Company's 1-12 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 was
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 drilled the Paradise Unit 2-12 well to a depth of 4,250 feet before
drilling problems caused the Company to cease drilling. The Company recovered
-9-
small amounts of oil containing paraffin, which may have been restricting the
oil flow. However, swab tests failed to increase the oil flow and the Company
suspended operations on the well and reassigned the lease and the 1-12 and
2-12 wells to the other leasehold owners from which the Company had taken a
farmout. The new owners plan to do further testing on the 2-12 well and
assumed the liabilities associated with the lease and both the 1-12 and 2-12
wells. Further testing by the new owners is expected in the second quarter
pending financing. The Company will reassess its plans for the
Gabbs Valley leasehold, however, additional studies indicate potential drill
sites exist on the remaining acreage and the Company plans to attempt to get
industry partner(s) to drill another test well this year on this prospect.
Subject to securing additional financing and/or engaging an industry partner,
the Company plans to drill or cause to be drilled a test well on its South
Okie Prospect in 2011.
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, 2010, which was filed on March
23, 2011.
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
are more fully described in reports it files with the SEC, including its Form
10-K for the fiscal year ended December 31, 2010. 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.
-10-
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On February 1, 2011, the Company sold The Albert E. Whitehead Living Trust (the
"Trust") that certain Convertible Note Due February 1, 2012, in the principal
amount of $100,000 (the "Convertible Note"). Albert E. Whitehead, the
Company's Chief Executive Office3r and a member of the Company's board of
directors, is the trustee of the Trust. The Trust paid the Company $100,000
for the Convertible Note. The Convetible Note accrues interest at a rate of
4% per annum. The Convertible Note may be converted at any time prior to
February 1, 2012 into shares of the Company's common stock, at an initial
conversion price of $0.10 per share of common stock.
On or about February 24, 2011, the Company settled an outstanding invoice of a
third party service provider in the net amount of $54,900 by paying $25,000 in
cash and issuing 60,000 shares of Common Stock.
Subject to final documentation and subsequent to the quarter ended March 31,
2011, the Company agreed to issue 435,000 shares of its common stock to Riley
Paige Oilfield Services to settle an account payable of $43,500 which was the
balance of the 2-12 drilling costs.
The offer and sale of the securities 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 SEC thereunder. All of the purchasing
parties are sophisticated investors with the experience and expertise necessary
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.
Item 6. Exhibits
10 Convertible Note Due February 1, 2012 (incorporated herein
by reference to Exhibit 10.1 to the Company's Form 8-K dated
February 1, 2011, which was filed on February 7, 2011).
31 Certification of Chief Executive Officer (and principal financial
officer) pursuant to Rules 13a - 14 (a) and 15(d) - 14(a) promulgated
under the Securities Exchange Act of 1934, as amended, and Item 601(1)
(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).
-11-
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: May 13, 2011 By: /s/ Albert E. Whitehead
___________________
Albert E. Whitehead
Chairman, Chief Executive
Officer and Principal
Financial Officer
EXHIBIT INDEX
NO. DESCRIPTION
10 Convertible Note Due February 1, 2012 (incorporated herein
by reference to Exhibit 10.1 to the Company's Form 8-K dated
February 1, 2011, which was filed on February 7, 2011).
31 Certification of Chief Executive Officer (and principal financial
officer) pursuant to Rules 13a - 14 (a) and 15(d) - 14(a) promulgated
under the Securities Exchange Act of 1934, as amended, and Item 601(1)
(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 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
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;
-12-
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.
May 13, 2011 /s/ Albert E. Whitehead
Albert E. Whitehead,
Chief Executive Officer and
Principal Financial Officer
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 March 31, 2011 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.
May 13, 2011 /s/ Albert E. Whitehead
Albert E. Whitehead
Chief Executive Officer and
Principal Financial Officer
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange
Commission as an exhibit to the Report and shall not be considered filed as
part of the Report.
