UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2006
[ ] 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
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] 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 50,080,190 shares outstanding as of
September 30, 2006.
Transitional Small Business Disclosure Format: [ ] Yes [X] No
EMPIRE PETROLEUM CORPORATION
INDEX TO FORM 10-QSB
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheet at September 30, 2006 (Unaudited) 1
Statements of Operations for the three months and nine months
ended September 30, 2006 and 2005 (Unaudited) 2
Statements of Cash Flows for the nine months ended
September 30, 2006 and 2005 (Unaudited) 3
Notes to Financial Statements 4-8
Item 2. Management's Discussion and Analysis 8-10
Item 3. Controls and Procedures 10
Part II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds 10-11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
EMPIRE PETROLEUM CORPORATION
BALANCE SHEET
September 30,
2006
ASSETS (Unaudited)
___________
Current assets:
Cash $ 156,465
Accounts receivable (net of allowance of $3,750) 458,895
___________
Total current assets 615,360
Property & equipment, net of accumulated
depreciation and depletion 1,405,636
___________
Total Assets $ 2,020,996
___________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 218,234
Accounts payable to related party 274,682
Note payable 104,396
___________
Total current liabilities 597,312
___________
Total liabilities 597,312
___________
Stockholders' equity:
Common stock at par value 50,080
Warrants to purchase common stock 223,300
Additional paid in capital 10,220,085
Accumulated deficit (9,096,705)
___________
Total stockholders' equity 1,423,685
___________
Total liabilities and stockholders' equity $ 2,020,996
___________
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,
____________________________ ________________________
2006 2005 2006 2005
_____________ _____________ ____________ __________
Revenue:
Petroleum sales $ 6,575 $ 41,757 $ 29,476 $ 116,115
_____________ _____________ ____________ __________
6,575 41,757 29,476 116,115
_____________ _____________ ____________ __________
Costs and expenses:
Production & operating 31,403 49,353 127,524 68,282
General & administrative 86,757 32,759 214,728 114,981
Reversal of accrued lease
Obligation 0 0 0 (222,561)
____________ _____________ ____________ __________
118,160 82,112 342,252 (39,298)
____________ _____________ ____________ __________
Operating income (loss) (111,585) (40,355) (312,776) 155,413
____________ _____________ ____________ __________
Other (income) and expense:
Miscellaneous 0 0 ( 43) (4,401)
Interest income 0 0 ( 148) 0
Interest expense 1,725 1,725 5,175 5,175
____________ _____________ ____________ __________
Total other (income)
expense 1,725 1,725 4,984 774
____________ _____________ ____________ _________
Net income (loss) $ (113,310) $ (42,080) $ (317,760) $ 154,639
____________ _____________ ____________ __________
Net income (loss)
per common share $ .00 $ .00 $ .01 $ .00
____________ _____________ ____________ __________
Weighted average number of
common shares
outstanding 47,420,849 41,044,476 44,366,036 39,980,925
____________ _____________ ____________ __________
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,
2006 2005
_________ _________
Cash flows from operating activities:
Net income (loss) $(317,760) $ 154,639
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Value of services contributed by employees 37,500 37,500
Stock option plan expense 26,925 0
Reversal of accrued lease obligation 0 (222,561)
(Increase) decrease in assets:
Accounts receivable (420,043) ( 95,932)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 77,585 ( 30,577)
________ ________
Net cash used in operating activities (595,793) (156,931)
________ ________
Cash flows from financing activities:
Advances from related party 0 60,190
Proceeds from private equity placement 1,450,000 500,000
________ ________
Net cash provided by financing activities 1,450,000 560,190
________ ________
Cash flows from investing activities:
Lease interest acquisition-Gabbs Valley (675,000) 0
Well equipment and drilling costs (392,034) 0
_________ ________
Net cash used by investing activities (1,067,034) 0
________ ________
Net increase (decrease) in cash (212,827) 403,235
Cash - Beginning 369,292 3,406
________ ________
Cash -Ending $156,465 $406,665
________ ________
See accompanying notes to financial statements.
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EMPIRE PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(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
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, 2006.
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, 2005 which are contained in the Company's
Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission (the SEC) on March 31, 2006.
The Company has been incurring 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 upon the ability to attain
future profitable production.
In 2003, the Company engaged a partner to explore its Cheyenne
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 June 2005,
the Company completed 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 for
an aggregate purchase price of $500,000. Subject to certain restrictions, the
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warrants may be exercised until November 2006 (extended from the previous date
of June 2006) 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 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 agreed to pay 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 75,721 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 will be 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 and as
of September 30, 2006, the Company had issued 7,250,000 shares of common stock
and warrants to purchase 1,812,500 shares of its common stock for an aggregate
purchase price of $1,450,000 (See Note 5). The Company believes that its
available cash as of September 30, 2006 will be sufficient to finance its
operations and its oil and gas investing plans through the next six months
depending on the Company's decision as to the completion of the Cobble Cuesta
1-12 test well. Should the Company elect to test or attempt to complete the
well it will require additional funds to pay for its share of the cost. The
Company would likely finance its cost through either a public or private
financing. 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 anticipates that its Chief
Executive Officer will advance the Company the funds necessary to continue its
operations through the next twelve months, if necessary. However, there is no
assurance that he will do so.
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, 2006, the
Company recorded $37,500 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 September 30, 2006, the Company has accrued a liability of $104,396
in connection with this note.
3. PROPERTY AND EQUIPMENT:
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The Company owns a working interest in approximately 33,485 acres of oil and
gas leases located in Niobrara County, Wyoming (the "Cheyenne River Prospect")
and an overriding royalty interest of between 1.5% and 2% in 40,758 acres of
oil and gas leases located in or near the Cheyenne River Prospect. On March
31, 2004, 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 Timber Draw #1-AH well and prospect acreage. This third
party commenced a test well in the NW/4NE/4 Section 15, Twp 39N, Rge 66W,
Niobrara County, Wyoming, known as the Empire Hooligan Draw Unit #1-AH, on
August 6, 2004. The well was drilled horizontally to a measured drilling
depth of 9,332 feet. As a result of this earning well being drilled the
Company's working interest in the Hooligan Draw #1-AH well and prospect
acreage was reduced to 26.785% and to 17.5% of the Timber Draw #1-AH well.
The Company and the operator are currently considering alternative means
of developing this prospect, including entering into a farmout pursuant to
which a third party could earn an interest in this prospect for a drilling
commitment. Additionally, the Company has also continued to explore
opportunities to sell or farmout its interest in the Cheyenne River Prospect.
As a result of the reduction in the Company's working interest as described
above, the Company recorded an impairment charge of $188,507 in 2005.
On May 8, 2003, the Company entered into an agreement with O.F. Duffield
(Duffield Agreement) 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 consists of federal leases covering 44,604 acres
in Nye and Mineral Counties, Nevada in which Mr. Duffield had 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.
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 continuing as of September 30, 2006. The total gross acres of this
prospect was increased to 75,721 acres by the acquisition of 30,917 acres from
the U. S. Department of the Interior on June 14, 2006 (See Note 6).
PetroWorld Nevada Corp. (PWC) is a participant in the Gabbs Valley
Prospect with a seismic option under which it has elected to drill a well
and earn a 30% interest from Cortez Exploration, Inc. The Company's Chief
Executive Officer is a member of the Board of Directors of both PWC and its
parent company Coastal Energy Company (formerly PetroWorld Corporation) and
owns approximately 1.63 (%) percent of the parent Company which is traded
on the AIM Exchange in London and the Toronto Venture Exchange in Toronto.
Accounts receivable from Coastal totaled $314,853 at September 30, 2006. Such
amount was paid as of October 18, 2006. The Company also had $93,868 of
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accrued receivables from Coastal at September 30, 2006 which were invoiced in
October.
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 called for monthly lease and tax payments of
approximately $6,834 (Canadian) through April of 2006. A subtenant
continued to pay the rentals under the lease until December 2002 and
moved out of the office space in January 2003. The Company accrued its
obligation under the lease as of the "cease use date" of January 2003.
During the second quarter of 2005, the Company determined that the statute
of limitations had expired with respect to its obligation under the lease.
Accordingly, the Company reversed expenses of $222,561 (U.S.) including
foreign exchange losses accrued in connection with the lease.
5. STOCKHOLDER'S EQUITY
At the Company's 2006 Annual Meeting of Stockholders, the stockholders
approved increasing the authorized number of shares of common stock to
100,000,000 (one hundred million) from 50,000,000 (fifty million) shares.
As of September 30, 2006 the Company had completed a private placement of
its common stock with total shares having been issued of 7,250,000 with an
aggregate purchase price of $1,450,400. Total warrants issued were
1,812,500 at a exercise price of $.50 per share. Proceeds of the private
placement were allocated $143,675 to common stock warrants and
$1,306,325 to common stock and paid in capital. The funds will be used
for general corporate purposes and to pay for costs associated with the
exploratory well the Company is drilling in the Gabb's Valley Prospect
in Nevada. The private placement offering is more fully described in
Footnote 1.
6. STOCK INCENTIVE PLAN
At the Company's 2006 Annual Meeting of Stockholders, the stockholders
approved the 2006 Stock Incentive Plan ("the Plan"). The Plan approves
granting incentive options to purchase up to 5,000,000 (five million) shares
of the Company's common stock to employees, directors, and consultants. The
Plan is administered by the Compensation Committee, as appointed by the Board
of Directors, and has a term of ten years. Options granted under the Plan
vest depending upon the award, but no later than 10 years from date of grant.
The Plan limits the aggregate awards to any individual participant to 200,000
shares.
New Director, Montague H. Hackett,Jr., was awarded a 150,000 share option at
$0.25 per share, the current market price on the date of the grant. Mr.
Hackett was appointed to the Board of Directors to fill an existing vacancy on
June 27, 2006.
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 5.2%, volatility factor of the expected
market price of the Company's common stock of 146%, no dividend yield on the
Company's common stock, and a weighted average expected life of the options of
5 years. The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
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and are fully transferable. For purposes 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.
In addition, options valuation models require the input of highly subjective
assumptions including stock price volatility.
In connection with the approval of the Plan, the Company adopted SFAS No. 123
(R) "Share-Based Payments" and expenses the cost of options granted over the
vesting period of the option based on the grant-date fair value of the award.
For the three months ended September 30, 2006, the Company recognized an
expense of $26,925 related to options granted under the Plan.
7. SUBSEQUENT EVENT
Subsequent to September 30, 2006, the Company ceased drilling operations on
the Empire Cobble Cuesta 1-12-12N-34E, Nye County, Nevada at a depth of
5,198 feet. Electric logs were ran, a wellhead was installed and the hole
conditioned so that it might be re-entered and deepened or tested at a later
date. The results of a complete review of the data obtained from the drilling
and logging operation together with previously obtained geological and
geophysical data will determine whether or not the well merits deepening or
testing. The Company expects this review to be completed in the fourth
quarter.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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 funds
necessary to finance its operations. Sales revenue for all periods presented
is 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.
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, 2006, COMPARED TO THREE MONTH PERIOD
ENDED SEPTEMBER 30, 2005.
For the three months ended September 30, 2006, sales revenue decreased $35,182
to $6,575, compared to $41,757 for the same period during 2005. The decrease
in sales revenue was the result of lower production from the Timber Draw #1-AH
and the Hooligan Draw #1-AH wells.
Production and operating expenses decreased $17,950 to $31,403 for the
three months ended September 30, 2006, from $49,353 for the same period in
2005. During the period 2005, the Company conducted the seismic evaluation
of its Gabbs Valley Prospect. No seismic expenses were incurred in the 2006
quarter.
-8-
General and administrative expenses increased by $53,998 to $86,757 for the
three months ended September 30, 2006, from $32,759 for the same period in
2005. The increase is attributable to an increase in professional fees
and options granted.
There was no depreciation or depletion expense attributable to the three
months ended September 30, 2006 and 2005, because the depreciable assets were
fully depreciated.
For the three months ended September 30, 2006, interest expense remained at
$1,725 which is the same as for the three months ended September 30, 2005.
The Company accrued interest on the Weatherford note in both periods.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2006, COMPARED TO NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2005.
For the nine months ended September 30, 2006, sales revenue decreased
$86,639 to $29,476, compared to $116,115 for the same period during 2005.
The decrease in sales revenue was the result of lower production from the
Timber Draw #1-AH and the Hooligan Draw #1-AH wells.
Production and operating expenses increased $59,242 to $127,524 for the nine
months ended September 30, 2006, from $68,282 for the same period in 2005.
The increase was primarily attributable to the additional lease rentals
related to the Company's Gabbs Valley Prospect.
General and administrative expenses increased by $99,747 to $214,728 for
the nine months ended September 30, 2006, from $114,981 for the same period
in 2005. The increase is attributable to an increase in professional fees.
There was no depreciation or depletion expense attributable to the nine
months ended September 30, 2006 and 2005, because the depreciable assets were
fully depreciated.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
As of September 30, 2006, the Company had $156,465 of cash on hand. In June
2006, the Company initiated a private placement of common stock along with
warrants to purchase common stock. In connection with this private placement
the Company had raised approximately $1,450,000. For more information
regarding this private placement, see Part II, Item 2 of this report. The
Company believes that its available cash as of September 30, 2006 will be
sufficient to finance its operations for the next six months depending on the
Company's decision as to the completion of the Cobble Cuesta 1-12 test well.
Should the Company elect to test or attempt to complete the well it will
require additional funds to pay for its share of the cost. The Company would
likely finance its cost through either a public or private financing. 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 anticipates that its Chief Executive Officer
will advance the Company the funds necessary to continue its operations
through the next twelve months, if necessary. However, there is no assurance
that he will do so.
ADVANCES FROM RELATED PARTY
Through March 31, 2005, the Company financed its operations primarily through
-9-
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 September 30, 2006 the Company is indebted to the Albert E.
Whitehead Living Trust in the amount of $274,682.
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, 2005, which was filed March 31,
2006.
FORWARD-LOOKING INFORMATION
This quarterly report on Form 10-QSB, 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 Securities and Exchange
Commission, including its Form 10-KSB for the fiscal year ended December 31,
2005. 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-QSB.
Item 3. 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 nine months ended September 30, 2006, the Company received
subscriptions from 15 accredited investors for 7,250,000 shares of its
common stock, par value $0.001 per share, along with warrants to purchase
up to 1,812,500 shares of the company's common stock at an exercise price
of $0.50 for an aggregate purchase price of $1,450,000. Subject to certain
provisions regarding early termination, the warrants may be exercised at
any time from the date of issuance until one year after the date of issuance.
-10-
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.
Item 6. Exhibits
a) Exhibits
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).
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: November 13, 2006 By: /s/ Albert E. Whitehead
___________________
Albert E. Whitehead
Chairman/CEO
EXHIBIT INDEX
NO. DESCRIPTION
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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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;
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
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(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.
November 13, 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 September 30, 2006 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 13, 2006 /s/ Albert E. Whitehead
Albert E. Whitehead
Chief Executive Officer and
Principal Financial Officer
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