UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
Amendment No. 1
(Mark One)
[X] Quarterly Report Under Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2004
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________to________________
Commission file number 001-16653
EMPIRE PETROLEUM CORPORATION
(Exact name of small business issuer 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
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.001 Par Value - 37,830,190 shares outstanding as of June 30,
2004.
Transitional Small Business Disclosure Format: [ ] Yes [X] No
EMPIRE PETROLEUM CORPORATION
INDEX TO FORM 10-QSB/A
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheet at June 30, 2004 (Unaudited) 1
Statements of Operations for the three months and six months
ended June 30, 2004 and 2003 (Unaudited) 2
Statements of Cash Flows for the six months ended
June 30, 2004 and 2003 (Unaudited) 3
Notes to Financial Statements 4-8
Item 2. Plan of Operation 8-12
Item 3. Controls and Procedures 12
Part II. OTHER INFORMATION
Item 6. Exhibits 12
Signatures 13
Explanatory Note
This Form 10-QSB/A is being filed by Empire Petroleum Corporation (the
"Company"), as Amendment No. 1 (this "Amendment" or "Form 10-QSB/A"),
to the Company's Quarterly Report on Form 10-QSB for the quarterly
period ended June 30, 2004 (the "Prior Form 10-QSB").
As previously reported in the Company's Current Report on Form 8-K
filed on November 21, 2005, the Board of Directors of the Company
concluded on November 16, 2005 that its previously issued annual and
quarterly financial statements for fiscal years 2003 and 2004 and
quarterly financial statements for the first two quarters of 2005
should not be relied upon because of errors in those financial
statements and that the Company would restate its previously issued
annual financial statements for fiscal year 2003, annual and quarterly
financial statements for fiscal year 2004 and quarterly financial
statements for the first two quarters of 2005 to make the necessary
accounting adjustments. The restatement pertains to the Company's
accounting for exit activities in connection with its office space in
Canada, which was leased by the former management of the Company,
abandoned upon the resignation of such management and subleased by a
third party for a period of time thereafter.
This Amendment is being filed in connection with the restatement
described above. Although this Amendment amends and restates the Prior
Form 10-QSB in its entirety, the information contained herein has not
been updated to reflect events or developments that may have occurred
subsequent to June 30, 2004, except to the limited extent as
specifically described in Items 2 and 3 of Part I below.
Item 1. FINANCIAL STATEMENTS
EMPIRE PETROLEUM CORPORATION
BALANCE SHEET
June 30,
2004
Restated
ASSETS (Unaudited)
___________
Current assets:
Cash $ 1,532
Accounts receivable 17,498
___________
Total current assets 19,030
Property & equipment, net of accumulated
depreciation and depletion 527,109
___________
Total Assets $ 546,139
___________
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued
liabilities $ 358,146
Accounts payable to related party 175,524
Note payable 88,871
___________
Total current liabilities 622,541
___________
Total liabilities 622,541
___________
Stockholders' deficiency:
Common stock at par value 37,830
Additional paid in capital 8,393,135
Accumulated deficit (8,507,367)
___________
Total stockholders' deficiency (76,402)
___________
Total Liabilities and Deficiency $ 546,139
___________
See accompanying notes to financial statements.
-1-
EMPIRE PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
____________________________ ________________________
2004 2003 2004 2003
Restated Restated Restated Restated
_____________ _____________ ____________ __________
Revenue:
Petroleum sales $ 1,497 $ 33,888 $ 36,104 $ 33,888
_____________ _____________ ____________ __________
1,497 33,888 36,104 33,888
_____________ _____________ ____________ __________
Costs and expenses:
Production & operating 17,652 21,882 39,772 39,117
General & administrative 35,172 72,727 79,182 279,761
Depreciation expense 0 30,000 0 31,028
Leasehold impairment 0 0 0 190,066
____________ _____________ ____________ __________
52,824 124,609 118,954 539,972
____________ _____________ ____________ __________
Operating loss (51,327) (90,721) (82,850) (506,084)
____________ _____________ ____________ __________
Other (income) and expense:
Miscellaneous (5,814) 17,202 (7,998) 22,066
Interest expense 1,725 0 3,450 0
Gain on sale of assets 0 (2,201) 0 (2,201)
____________ _____________ ____________ __________
Total other(income) and
expense (4,089) 15,001 (4,548) 19,865
____________ _____________ ____________ __________
Net loss $ (47,238) $ (105,722) $ (78,302) (525,949)
____________ _____________ ____________ __________
Net loss per common share $ .00 $ .00 $ .00 $ (.02)
____________ _____________ ____________ __________
Weighted average number of
common shares
outstanding 37,830,190 35,830,190 37,830,190 31,205,630
____________ _____________ ____________ __________
See accompanying notes to financial statements.
-2-
EMPIRE PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30, June 30,
2004 2003
Restated Restated
_________ _________
Cash flows from operating activities:
Net loss $ (78,302) $(525,949)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 0 31,028
Leasehold impairment 0 190,066
Gain on sale of assets 0 (2,201)
Value of services contributed by employees 25,000 25,000
(Increase) decrease in assets:
Accounts receivable 3,564 182
Prepaid expenses 2,651 3,920
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (18,347) 268,932
________ ________
Net cash used in operating activities (65,434) (9,022)
________ ________
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 0 7,311
________ ________
Net cash provided by investing activities 0 7,311
________ ________
Cash flows from financing activities:
Advances from related party 45,344 0
________ ________
Net cash provided by financing activities 45,344 0
________ ________
Net decrease in cash (20,090) ( 1,711)
Cash - Beginning 21,622 5,454
________ ________
Cash -Ending $ 1,532 $ 3,743
________ ________
Non-cash investing and financing activities:
Common stock issued for accounts payable
and accrued liabilities $ 0 $278,441
Common Stock issued for notes and
debentures payable $ 0 $220,000
See accompanying notes to financial statements.
-3-
EMPIRE PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2004
(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-QSB. 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 (consisting of only normal
recurring 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. Operating results for the interim period are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2004.
The information contained in this Form 10-QSB should be read in conjunction
with the audited financial statements and related notes for the year ended
December 31, 2003 which are contained in the Company's Annual Report on Form
10-KSB filed with the Securities and Exchange Commission (the SEC) on March 30,
2004.
The continuation of the Company 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 upon the ability to attain future profitable
production. The Company has been incurring significant losses in recent years
and has a significant working capital deficiency as of June 30, 2004. The
Company also recognized an impairment charge of $6,496,614 on its oil and gas
property in 2002 and an additional impairment charge of $190,066 in the first
quarter of 2003.
The Company believes it is the intention of the Company's Chief Executive
Officer, or a trust controlled by him, to continue funding the Company's basic
expenses through December 31, 2004, or until such time as the Company secures
other sources of financing. However, there can be no assurance that such funds
will be provided by Mr. Whitehead or an affiliate of Mr. Whitehead. In 2003,
the Company engaged a partner to explore its Cheyenne
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River Prospect, and signed an agreement to acquire a 10% interest in a block of
acreage in the Gabbs Valley Prospect of western Nevada. 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.
Compensation of Officers and Employees
The Company's executive officer serves without pay or other non-equity
compensation. The fair value of these services is estimated by management and
is recognized as a capital contribution. For the six months ended June 30,
2004, the Company recorded $25,000 as a capital contribution by its executive
officer.
2. NOTES PAYABLE:
In December 2001, the Company executed a note with Weatherford U.S., L.P. to
satisfy an outstanding indebtedness for service in the drilling of the Timber
Draw #1-AH well. The principal amount of this note was $108,334 with interest
payments at 10% per annum commencing on May 27, 2001, until all interest and
principal amounts are paid in full. Timely payments were made in accordance
with the terms of this note through March 2002. In April 2002, the "payee" of
this note agreed to a revised payment schedule extending final payment of
$66,997 from April 10, 2002, until June 10, 2002. In connection with this
payment schedule, an initial payment of $10,000 was made in April 2002,
however, since that time, no further payments have been made. At June 30,
2004, $88,871 was due under this note.
In addition, on March 17, 2003, the Company issued 2,842,243 shares of Company
common stock as payment for notes payable to related parties of $220,000 plus
accrued interest of $22,601. Also, on March 17, 2003, the Company issued
7,653,970 shares of Company common stock as payment for accounts payable
totaling $255,840. Of this amount, $238,986 was payable to the Company's
executive officer.
3. PROPERTY AND EQUIPMENT:
At December 31, 2002, the Company's management determined that an impairment
allowance of $6,496,614 was necessary to properly value the Company's oil and
gas properties bringing the net book value of the oil and gas properties to
$594,915. The basis for the impairment was the determination by the United
States Bureau of Land Management (BLM) that it does not consider the Timber
Draw #1-AH well economic. In other words, under the BLM's criteria for economic
determination, the well will not pay out the cost incurred to drill and
complete the well. The BLM also advised the Company that since it did not
commence another test well prior to August 12, 2002, the Timber Draw Unit was
terminated. Furthermore, a bottom hole pressure survey conducted in April 2002
indicated a limited reservoir for the well. The value was calculated using an
estimated $10 per acre market price for the leases multiplied by the Company's
working interest.
In the first quarter 2003, the Company recorded an additional leasehold
impairment charge of $190,066 as a result of the assignment of the leases on
42,237 acres in the Cheyenne River Prospect (See Note 5).
On May 8, 2003, the Company entered into an agreement with O.F. Duffield
(Duffield Agreement) to acquire a ten percent (10%) 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
-5-
were issued in July 2003. This block of acreage in the Gabbs Valley Prospect
consists of federal leases covering approximately 45,000 acres in Nye and
Mineral Counties, Nevada in which Mr. Duffield has a 100% working interest.
Pursuant to the Duffield Agreement, the Company is also entitled to acquire
up to a 10% interest in a block of 26,080 acres also located in the Gabbs
Valley Prospect should Duffield acquire an interest in this block. The shares
were valued at $.10 per share based on the closing price of the Company's
common stock on the date of issuance.
4. CONTINGENCIES:
The Company's former management (Messrs. McGrain and Jacobsen) entered into a
lease agreement for office space in Canada. This office was closed after
Messrs. McGrain and Jacobsen resigned as officers of the Company. This lease
agreement calls for monthly lease and tax payments of approximately $6,834
(Canadian) through April of 2006. No lease payment was made subsequent to
December of 2002 and, in January of 2003, the Company was notified that the
lease had been terminated without prejudice to the landlord's right to hold
the Company liable for future damages related to lost rent. The Company has
recorded a liability of $203,371 in the June 30, 2004, financial statements
for payments due under the lease. The foreign currency exchange gain of
$7,845 associated with the lease obligation is reported in miscellaneous
income.
5. PAYMENT OF LEASE RENTALS:
On March 28, 2003, a third party paid approximately $84,485 of the Company's
lease rentals on 42,237 acres in the Cheyenne River Prospect in return for
an assignment of such leases. In connection with this transaction, the
Company retained an overriding royalty of 1.5% on 33,597 of the acres and a
2% overriding royalty on 8,640 of the acres.
On March 31, 2003, a third party paid approximately $52,128 of the Company's
lease rentals on 32,643 acres in the Cheyenne River Prospect in exchange for
an option to drill a test well in order to earn an interest in the farmout
block, which option was subject to the third party first completing a seismic
survey covering 16 square miles in the Cheyenne River Prospect. This survey
was completed in September of 2003. The processing and interpreting of the
data from such survey was completed September 30, 2003, and earned the third
party a 25% interest in the #1-AH well and prospect acreage. This third party
has advised Empire it elects to drill a test well and a new Federal Drilling
Unit has been formed on which to test (utilize) the seismic data.
Preparations are being made to drill a test well in the third quarter of 2004.
6. RESTATEMENT:
On November 11, 2005, the Company filed a Form 8-K with the SEC disclosing
that it would restate its previously issued financial statements for the year
ended December 31, 2003, annual and quarterly financial statements for 2004,
and quarterly financial statements for the first two quarters of 2005 after
determining that it had erroneously accounted for its exit activities in
connection with its former office space in Canada.
In the third quarter of 2003, the Company recorded an expense for its
obligation under the lease for the period up to the balance sheet date. It
continued to record an expense of $13,200 per quarter through March 31, 2005
related to the lease (see Note 4). After further review, the Company's
management determined that it should have accrued an obligation for the lease
equal to total amounts owed from the "cease use date" (the date in January
-6-
2003 on which the Company's subtenant moved out of the office space) through
the end of the lease term. Additionally, since the lease obligation was in
Canadian dollars, the Company should have recorded a currency exchange gain or
loss on its obligation in each quarter. Based on this analysis, the Company
and its Board of Directors concluded that its previously issued financial
statements for the year ended December 31, 2003, annual and quarterly
financial statements for 2004 and quarterly financial statements for the
first two quarters of 2005 required adjustments of the amounts previously
reported for accounts payable and accrued liabilities, and general and
administrative expenses. The following table summarizes the adjustments
required to previously reported amounts included in these financial statements.
3 Months Ended 6 Months Ended
June 30, 2004 June 30, 2004
Previously As Previously As
Reported Restated Reported Restated
Petroleum sales 1,497 1,497 36,104 36,104
Cost & Expenses:
Production & Operation 17,652 17,652 39,772 39,772
General & Administrative 48,372 35,172 105,582 79,182
_________ ________ __________ ________
66,024 52,824 145,354 118,954
_________ ________ __________ ________
Operating income (loss) (64,527) (51,327) (109,250) (82,850)
_________ ________ __________ ________
Other (income) expense:
Miscellaneous (128) (5,814) (153) (7,998)
Interest Expense 1,725 1,725 3,450 3,450
________ _________ __________ ________
1,597 (4,089) 3,297 (4,548)
________ _________ __________ ________
Net income (loss) (66,124) (47,238) (112,547) (78,302)
________ _________ __________ ________
Net income (loss) per
share .00 .00 .00 .00
________ _________ __________ ________
3 Months Ended 6 Months Ended
June 30, 2003 June 30, 2003
Previously As Previously As
Reported Restated Reported Restated
Petroleum sales 33,888 33,888 33,888 33,888
Cost & Expenses:
Production & Operation 21,882 21,882 39,117 39,117
General & Administrative 72,727 72,727 100,854 279,761
Depreciation Expense 30,000 30,000 31,028 31,028
Leasehold Impairment - - 190,066 190,066
_________ ________ __________ ________
124,609 124,609 361,065 539,972
_________ ________ __________ ________
Operating income (loss) (90,721) (90,721) (327,177) (506,084)
_________ ________ __________ ________
Other (income) expense:
-7-
Miscellaneous (19) 17,202 (2,043) 22,066
Gain on Sale of Assets (2,201) (2,201) (2,201) (2,201)
Interest Expense - - - -
________ _________ __________ ________
(2,220) 15,001 (4,244) 19,865
________ _________ __________ ________
Net income (loss) (88,501) (105,722) (322,933) (525,949)
________ _________ __________ ________
Net income (loss) per
share .00 .00 (.01) (.02)
June 30, 2004
Previously As
Reported Restated
ASSETS
Current Assets:
Cash 1,532 1,532
Accounts Receivable 17,498 17,498
________ ________
Total Current Assets 19,030 19,030
Property, Plant &
Equipment (net) 527,109 527,109
________ ________
Total Assets 546,139 546,139
________ ________
LIABILITIES & STOCKHOLDERS EQUITY
Current Liabilities:
Accounts payable & accrued
expenses 273,575 358,146
Accounts payable -
related party 175,524 175,524
Note payable 88,871 88,871
_______ _________
Total current liabilities 537,970 622,541
_______ _________
Total liabilities 537,970 622,541
_______ _________
Stockholders' equity:
Common stock 37,830 37,830
Additional paid in capital 8,393,135 8,393,135
Accumulated deficit (8,422,796) (8,507,367)
_________ _________
Total stockholder's equity 8,169 (76,402)
_________ _________
Total liabilities and
stockholders' equity 546,139 546,139
_________ _________
Item 2. PLAN OF OPERATION
The Company has no significant on-going income producing oil and gas
properties at June 30, 2004. To date, the Company's operations have been
primarily financed through sales of its Common Stock and loans from related
parties. The Company's limited revenues have been generated by its Timber
Draw #1-AH well, which is further described below.
-8-
Pursuant to that certain Americomm Cheyenne River Prospect Agreement dated
March 4, 1998, as amended (the "Prospect Agreement"), the Company paid
$234,500 in March 1998 to cover the initial expenses of acquiring leases in an
oil and gas prospect in the Eastern Powder River Basin in the State of Wyoming
(the "Cheyenne River Prospect"). Also in accordance with the Prospect
Agreement, the Company issued an aggregate of 566,000 shares of Common Stock
and agreed to grant overriding royalty interests to five individuals as
consideration for services performed and to be performed in connection with
the acquisition and exploration of the Cheyenne River Prospect.
Prior to the Company acquiring Empire Petroleum Corporation, the Company
entered into that certain farmout agreement dated November 15, 2000 by and
among the Company, Empire Petroleum Corporation and certain other partners.
Pursuant to such Farmout Agreement, drilling of the Timber Draw #1-AH well
commenced during December of 2000 within the 25,000 acre Timber Draw Federal
Drilling Unit included in the Cheyenne River Prospect. The following parties
participated with Empire Petroleum Corporation in the drilling of the Timber
Draw #1-AH well at the following participation levels: Maxy Resources, LLC
(25%), Enterra Energy Corp. (formerly Big Horn Resources Ltd.) (15%) and 74305
Alberta Ltd. (10%). The drilling of the Timber Draw #1-AH well was completed at
a total measured depth of 10,578 feet, of which the last 2,030 feet were
drilled horizontally through the Newcastle "B" formation. The Timber Draw
1-AH encountered flows of oil and gas during the horizontal drilling.
Thereafter, the Company conducted a series of production methods on its Timber
Draw Unit #1-AH well during the period from February 13, 2001 to June 22,
2001. During the test period, the well flowed 8,139 barrels of 44 degree light
gravity sweet crude and 29,072,000 cubic feet of natural gas with a BTU
content of 1,493 and rich in natural gas liquids. The well was shut-in on June
22, 2001 to conserve the natural gas, which was flared during the test period.
A bottom hole pressure survey of the Timber Draw #1-AH well conducted in April
of 2002 indicated a limited reservoir for this well.
The Bureau of Land Management ("BLM") advised the Company that it did not
consider the Timber Draw Unit #1-AH well economic. In other words, under the
BLM's criteria for economic determination, the well would not pay out the cost
incurred to drill and complete the well. The Company planned on initiating
additional drilling during the second half of 2002; however, due to poor
financial market conditions, the Company was unable to raise the funds
necessary to complete such drilling. The BLM also advised the Company that
since it did not commence another test well prior to August 12, 2002, the
Timber Draw Unit had been terminated.
Beginning in April of 2003, the Company initiated testing of the well for 10
days per month for an extended period by authority of the BLM. During the test
periods indicated below, the #1-AH well produced the following number of
barrels in 2003 and 2004:
Days in Number
Month Test Period Of Barrels
April (2003) 7 1,335
June 10 1,421
July 10 1,321
August 10 1,029
October 10 954
November 10 693
January (2004) 13 585
February 11 479
March 17 389
-9-
All of the Company's limited revenues in 2003 and 2004 were attributable to
the above described production from its #1-AH well. The well was not tested
in the second quarter of 2004, but is expected to be tested at least 10 days
in July of 2004. The test results will be evaluated to determine what future
production practice might be utilized.
Through the period ended June 30, 2004, the Company has been actively engaged
in seeking viable sources of financing to support continued operations and to
continue its drilling plan. However, the Company has not been able to raise
the funds necessary to conduct its drilling program. As a result, in 2003, the
Company entered into arrangements with certain third parties in an attempt to
commercially exploit its properties. On March 19, 2003, another company agreed
to pay the lease rentals totaling $84,485 on 42,237 acres in the Cheyenne
River Prospect in return for an assignment of the leases. The Company retained
an overriding royalty of 1.5% on 33,597 acres and a 2% overriding royalty on
approximately 8,640 acres. The third party paid the lease rentals on March 28,
2003.
As of June 30, 2004, the Company owns a thirty three and one-third percent
(33.33%) working interest in the Timber Draw #1-AH well. The Company's working
interest in the #1-AH well, was reduced from 50% by virtue of the terms of a
Farmout Agreement dated May 7, 2004, by and among the Company, Maxy Gold Corp.
and Enterra Eneregy Corp., as Farmors, JED Oil (USA) Inc., as the Farmee, and
74305 Alberta, Ltd. as a Participant, pursuant to which Enterra Energy Corp.
completed a 16 square mile seismic program and earned a 25% interest in the
1-AH well effective October 1, 2003. Enterra Energy Corp. earned the right to
drill a new test well on the farmout lands for which it will earn an additional
interest in the #1-AH. Upon the completion of this new test well, the Company's
interest in the #1-AH well will be reduced to 17.5% and its working interest in
the balance of the 36,410 gross acres of leases currently held by the Company
will be reduced to 26.8%. The Company will have no cost obligation associated
with the new test well. In order to drill the test well, a new Federal Unit has
been formed and is known as the Hooligan Draw Unit. The new test well will be
drilled by JMG Exploration, Inc., as an assignee of JED Oil (USA) Inc., and
the Company anticipates that drilling operations will commence on or about
August 4, 2004.
On May 8, 2003, the Company entered into an agreement with O.F. Duffield (the
"Duffield Agreement") to acquire a ten percent (10%) 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
consists of federal leases covering approximately 45,000 acres in Nye and
Mineral Counties, Nevada in which Mr. Duffield has a 100% working interest.
Pursuant to the Duffield Agreement, the Company is also entitled to acquire up
to a 10% interest in a block of 26,080 acres also located in the Gabbs Valley
Prospect should Duffield acquire an interest in this block. The shares were
valued at $.10 per share based on the closing price of the Company's common
stock on the date of issuance. The Company has made an application for a new
federal drilling unit covering 28,783 acres on the Gabbs Valley Prospect and
is seeking one or more industry partners to drill a test well on this
prospect or carry out a seismic survey with an option to drill.
As of June 30, 2004, the Company had $1,532 of cash on hand. The Company
expects that its cash on hand will not be sufficient to fund its operations
for any material length of time. During the next twelve months, the Company's
material commitments include payments to be made and obligations that could
arise as further described below. In addition, the Company expects to incur
costs of approximately $10,000 per month relating to administrative, office
and other expenses.
-10-
The Company's former management (Messrs. McGrain and Jacobsen) entered into a
lease agreement for office space in Canada. This office was closed after
Messrs. McGrain and Jacobsen resigned as officers of the Company. This lease
agreement calls for monthly lease and tax payments of approximately $6,834
(Canadian) through April of 2006. No lease payment was made subsequent to
December of 2002 and, in January of 2003, the Company was notified that the
lease had been terminated without prejudice to the landlord's right to hold
the Company liable for future damages related to lost rent. The Company has
recorded a liability of $203,372 in the financial statements relating to the
lease including foreign exchange losses at June 30, 2004.
In Tulsa, Oklahoma, the Company leases office space under a sub-lease
agreement with an unrelated party which will expire in December 2004. The
lease calls for monthly lease payments of $1,039.
As of June 30, 2004, the Company owes approximately $88,871 including accrued
interest to Weatherford U.S., L.P. for services rendered by Weatherford.
Through June 30, 2004, the Company financed its operations primarily through
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. The Company believes it is the intention of the Whitehead Trust
to continue funding the Company's basic expenses through December 31, 2004, or
until such time as the Company secures other sources of financing. However,
there can be no assurance the Whitehead Trust will continue to fund such
expenses. In order to sustain the Company's operations on a long term basis,
management intends to continue to look for merger opportunities and consider
public or private financings. Through the six months ended June 30, 2004, the
Whitehead Trust has advanced $45,344 to the Company.
The Company employs one secretary in its Tulsa office and does not at this
time expect any significant change in the number of its employees during the
next twelve months. If the Company is successful in raising additional
capital, it will employ part-time or temporary persons and consultants in
situations where special expertise is required. Mr. Whitehead serves as an
executive officer of the Company without compensation.
Material Risks
The Company has incurred significant losses from operations and there is no
assurance that it will achieve profitability or obtain funds necessary to
finance continued operations. For other material risks, see the Company's
form 10-KSB for the period ended December 31, 2003, which was filed March 30,
2004.
RESTATEMENT
On November 11, 2005, the Company filed a Form 8-K with the SEC disclosing that
it would restate its previously issued financial statements for the year ended
December 31, 2003, annual and quarterly financial statements for 2004, and
quarterly financial statements for the first two quarters of 2005 after
determining that it had erroneously accounted for its exit activities in
connection with its former office space in Canada.
In the third quarter of 2003, the Company recorded an expense for its
obligation under the lease for the period up to the balance sheet date. It
continued to record an expense of $13,200 per quarter through March 31, 2005
related to the lease (see Note 4 to the financial statements). After further
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review, the Company's management determined that it should have accrued an
obligation for the lease equal to total amounts owed from the "cease use date"
(the date in January 2003 on which the Company's subtenant moved out of the
office space) through the end of the lease term. Additionally, since the lease
obligation was in Canadian dollars, the Company should have recorded a currency
exchange gain or loss on its obligation in each quarter. Based on this analysis,
the Company and its Board of Directors concluded that its previously issued
financial statements for the year ended December 31, 2003, annual and
quarterly financial statements for 2004 and quarterly financial statements for
the first two quarters of 2005 required adjustments of the amounts previously
reported for accounts payable and accrued liabilities, and general and
administrative expenses. The effect of the restatement was to decrease the
previously reported net loss by $18,886 for the three months ended June 30,
2004 and to decrease the net loss reported by $34,245 for the six months ended
June 30, 2004. The restatement did not affect the per share amounts reported
for either period.
Item 3. CONTROLS AND PROCEDURES
As of June 30, 2004, 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 the
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) concluded that the Company's disclosure controls and
procedures were effective at such time. However, prior to the date of
the filing of this Form 10-QSB/A and as a result of the Company's
decision to restate its financial statements as described under the
"Explanatory Note" in this Form 10-QSB/A above, the Company completed a
second 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 as of June 30, 2004. In connection with this
second evaluation and based upon the Company's decision to restate its
financial statements for the quarterly period ended June 30, 2004, the
Company's Chief Executive Officer (and principal financial officer)
concluded that the Company's disclosure controls and procedures were
not effective as of June 30, 2004.
PART II. OTHER INFORMATION
Item 6. Exhibits
10 Farmout Agreement dated May 7, 2004 by and among the Company and the
other parties named therein (incorporated herein by reference in
Exhibit 10 of the Company's Form 10-QSB for the period ended June
30, 2004, which was filed August 2, 2004).
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-B, 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).
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EMPIRE PETROLEUM CORPORATION
SIGNATURES
In accordance with the requirements of the Exchange Act, the small business
issuer caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EMPIRE PETROLEUM CORPORATION
Date: February 8, 2006 By: /s/ Albert E. Whitehead
___________________
Albert E. Whitehead
Chairman/CEO
EXHIBIT INDEX
NO. DESCRIPTION
10 Farmout Agreement dated May 7, 2004 by and among the
Company and the other parties named therein (incorporated
herein by reference in Exhibit 10 of the Company's Form 10-QSB
for the period ended June 30, 2004, which was filed August 2,
2004).
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-B, 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, Chief Executive Officer (and principal financial
Officer) of Empire Petroleum Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-QSB 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 small
business issuer as of, and for, the periods presented in this report;
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4. The small business issuer'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)) for
the small business issuer 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 small business issuer,
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) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the small business issuer's
internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of small business issuer'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 small business issuer'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 small business issuer's internal
control over financial reporting.
February 8, 2006 /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-QSB for the period ending June 30, 2004 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:
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(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.
February 8, 2006 /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.
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