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 June 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 - 42,830,190 shares outstanding as of
June 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 June 30, 2006 (Unaudited) 1
Statements of Operations for the three months and six months
ended June 30, 2006 and 2005 (Unaudited) 2
Statements of Cash Flows for the six months ended
June 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 4. Submission of Matters to a Vote of Security
Holders 11-12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
EMPIRE PETROLEUM CORPORATION
BALANCE SHEET
June 30,
2006
ASSETS (Unaudited)
___________
Current assets:
Cash $ 600,530
Accounts receivable (net of allowance of $3,750) 97,544
___________
Total current assets 698,074
Property & equipment, net of accumulated
depreciation and depletion 1,043,724
___________
Total Assets $ 1,741,798
___________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 566,875
Accounts payable to related party 274,682
Note payable 102,671
___________
Total current liabilities 944,228
___________
Total liabilities 944,228
___________
Stockholders' equity:
Common stock at par value 42,830
Warrants to purchase common stock 67,875
Additional paid in capital 8,920,260
Common stock and warrants - subscribed 750,000
Accumulated deficit (8,983,395)
___________
Total stockholders' equity 797,570
___________
Total liabilities and stockholders' equity $ 1,741,798
___________
See accompanying notes to financial statements.
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EMPIRE PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
____________________________ ________________________
2006 2005 2006 2005
_____________ _____________ ____________ __________
Revenue:
Petroleum sales $ 21,254 $ 73,178 $ 22,900 $ 74,358
_____________ _____________ ____________ __________
21,254 73,178 22,900 74,358
_____________ _____________ ____________ __________
Costs and expenses:
Production & operating 36,704 (6,097) 96,120 18,929
General & administrative 62,079 39,886 127,970 82,222
Reversal of accrued lease
Obligation 0 (222,561) 0 (222,561)
____________ _____________ ____________ __________
98,783 (188,772) 224,090 (121,410)
____________ _____________ ____________ __________
Operating income (loss) ( 77,529) 261,950 (201,190) 195,768
____________ _____________ ____________ __________
Other (income) and expense:
Miscellaneous ( 43) (2,132) ( 43) (4,401)
Interest income ( 148) 0 ( 148) 0
Interest expense 1,725 1,725 3,450 3,450
____________ _____________ ____________ __________
Total other (income)
expense 1,534 (407) 3,259 (951)
____________ _____________ ____________ _________
Net income (loss) $ ( 79,063) $ 262,357 $ (204,449) $ 196,719
____________ _____________ ____________ __________
Net income (loss)
per common share $ .00 $ .01 $ .00 $ .01
____________ _____________ ____________ __________
Weighted average number of
common shares
outstanding 42,830,190 39,219,079 42,830,190 39,219,079
____________ _____________ ____________ __________
See accompanying notes to financial statements.
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EMPIRE PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30, June 30,
2006 2005
_________ _________
Cash flows from operating activities:
Net income (loss) $(204,449) $ 196,719
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Value of services contributed by employees 25,000 25,000
Reversal of accrued lease obligation 0 (222,561)
(Increase) decrease in assets:
Accounts receivable (58,692) ( 71,778)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (25,499) ( 51,066)
________ ________
Net cash used in operating activities (263,640) (123,686)
________ ________
Cash flows from financing activities:
Advances from related party 0 60,190
Proceeds from private equity placement 750,000 500,000
________ ________
Net cash provided by financing activities 750,000 560,190
________ ________
Cash flows from investing activities:
Lease interest acquisition-Gabbs Valley (225,000) 0
Well equipment ( 30,122) 0
________ ________
Net cash used by investing activities (255,122) 0
________ ________
Net increase in cash 231,238 436,504
Cash - Beginning 369,292 3,406
________ ________
Cash -Ending $600,530 $439,910
________ ________
Non-cash investing and financing activity:
Accounts payable - lease interest
Acquisition $450,000 0
________ ________
See accompanying notes to financial statements.
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EMPIRE PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 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-
11N-34E, Nye County, Nevada. As of June 30, 2006 the Company had paid
$225,000, and the remaining $450,000 was paid in July 2006 and is included
in accounts payable at June 30, 2006. 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%. 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 June 30, 2006, the
Company had subscribed 3,750,000 shares of common stock and warrants to
purchase 937,500 shares of its common stock for an aggregate purchase price
of $750,000. Additionally, subsequent to June 30, 2006, the Company has
received an additional $500,000 of proceeds for common stock and warrants on
the same terms. The remaining stock and related warrants will be issued in
August 2006. The Company believes that its available cash as of June 30, 2006
and its cash proceeds from securities sales described above will be sufficient
to finance its operations and its oil and gas investing plans through 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 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 six months ended June 30, 2006, the
Company recorded $25,000 as a capital contribution by its executive officer.
Recent Accounting Pronouncements
In July 2005, the Financial Accounting Standards Board ("FASB") issued FSP SOP
78-9-1, "Interaction of AICPA Statement of Position 78-9 and EITF Issue No.
04-5." The FASB amended SOP 78-9 so that guidance in determining when a
general partner controls a limited partnership is consistent with guidance
provided in Emerging Issues Task Force Issue No. 04-5. This FSP was effective
after June 29, 2005, for all newly formed partnerships and for the first
reporting period after December 15, 2005, for all other partnerships. This FSP
has no impact on the June 30, 2006, financial statements.
In May 2005, the FASB issued FASB No. 154, "Accounting Changes and Error
Corrections." This statement requires retrospective application to prior
periods' financial statements for changes in accounting principle.
Previously, under Accounting Principles Board Opinion 20, all such changes
were recorded as a line item on the statement of operations only in the period
of change. This statement is effective for fiscal years beginning after
December 15, 2005, and has no impact on the 2006 financial statements.
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In March 2005, the FASB issued Interpretation 47, "Accounting for Conditional
Asset Retirement Obligations - an Interpretation of FASB 143." This
interpretation addresses contingent legal obligations and clarified that
uncertainty of timing regarding resolution of a legal obligation does not
preclude measurement of the liability at the time it is incurred. The
Interpretation is effective for periods ending after December 15, 2005. This
Interpretation has no impact on the June 30, 2006, financial statements.
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, 2006, the Company has accrued a liability of $102,671
in connection with this note.
3. PROPERTY AND EQUIPMENT:
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 begun exploring opportunities
to sell 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
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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 has
contracted a drilling rig which is expected to be available about August 15,
2006, to commence drilling the Empire Cobble Cuesta 1-12-11N-34E, Nye County,
Nevada. 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.
PetroWorld Nevada Corp. (PWC) is a participant in the Gabbs Valley
Prospect with a seismic option under which it has elected to 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
PetroWorld Corporation and owns approximately nine (8.92%) percent of the
parent Company which is traded on the AIM Exchange in London and the Toronto
Venture Exchange in Toronto. Accounts receivable from PWC totals
$82,928 at June 30, 2006.
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.
Additionally, at that meeting, the stockholders approved the 2006 Stock
Incentive Plan ("the Plan").
The Plan permits the issuance of stock options, restricted stock awards
and performance shares to employees, officers, directors and
consultants of the Company. Initially and unless and until such time
as the Board creates a Compensation Committee, the Board of Directors
will administer the Plan. The total number of shares of common stock
that may be issued pursuant to awards under the Plan is 5,000,000.
Under the Plan, no participant may receive awards of stock options that
cover in the aggregate more than 500,000 shares of common stock in any
fiscal year. Unless terminated earlier by the Board or upon the
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granting of awards covering all of the shares subject to the Plan, the
Plan shall terminate on June 5, 2016.
6. SUBSEQUENT EVENT
In July 2006, the Company issued 3,750,000 shares of common stock and
warrants to purchase up to 937,500 shares of common stock at a exercise
price of $.50 per share. The shares and warrants were issued for $750,000
which had been subscribed and received prior to June 30, 2006. The private
placement offering is more fully described in Footnote 1.
Subsequent to June 30, 2006, the Company also received an additional $500,000
cash and a $50,000 subscription in conjunction with the private placement
offering discussed above for the issuance of 2,750,000 shares and warrants to
purchase up to 687,500 shares of common stock. The shares and warrants will
be issued in August 2006 under the same terms as the previous shares issued.
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 JUNE 30, 2006, COMPARED TO THREE MONTH PERIOD ENDED
JUNE 30, 2005.
For the three months ended June 30, 2006, sales revenue decreased $51,924 to
$21,254, compared to $73,178 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 $42,801 to $36,704 for the
three months ended June 30, 2006, from $(6,097) for the same period in 2005.
The increase was primarily attributable to the site preparation and
additional lease rentals related to the Company's Gabbs Valley Prospect.
General and administrative expenses increased by $22,193 to $62,079 for the
three months ended June 30, 2006, from $39,886 for the same period in 2005.
The increase is attributable to an increase in professional fees.
For the three months ended June 30, 2006, interest expense remained at $1,725
which is the same as for the three months ended June 30, 2005. The Company
accrued interest on the Weatherford note in both periods.
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SIX MONTH PERIOD ENDED JUNE 30, 2006, COMPARED TO SIX MONTH PERIOD
ENDED JUNE 30, 2005.
For the six months ended June 30, 2006, sales revenue decreased
$51,458 to $22,900, compared to $74,358 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 $ 77,191 to $ 96,120 for the six
months ended June 30, 2006, from $18,929 for the same period in 2005.
The increase was primarily attributable to the site preparation and
additional lease rentals related to the Company's Gabbs Valley Prospect.
General and administrative expenses increased by $45,748 to $127,970 for
the six months ended June 30, 2006, from $82,222 for the same period in
2005. The increase is attributable to an increase in professional fees.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
As of June 30, 2006, the Company had $600,530 of cash on hand. In June
2005, the Company completed a private placement of 5,000,000 shares along
with warrants to purchase 1,250,000 shares of its common stock for an
aggregate purchase price of $500,000. For more information regarding this
private placement, see the Company's report on Form 8-K, which was
filed with the SEC on June 9, 2005. The cash from this funding enabled
the Company to pay its share of a seismic survey on its Gabbs Valley Prospect,
Nevada, which was approximately $35,000 and, pay a portion of the well
Costs to be drilled on the prospect. 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 and as of the date this
report was filed with the SEC, the Company had raised approximately $1,250,000.
For more information regarding this private placement, see Part II, Item 2 of
this report. The Company believes that its available cash as of June 30, 2006
will be sufficient 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 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
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 June 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.
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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
In the course of the review of this Quarterly Report on Form 10-QSB by
the Company's independent registered public accounting firm, the
Company's management determined that certain adjustments needed to be
made to the Company's financial statements. Due to the number and
amounts of such adjustments, in the opinion of the Company's Chief
Executive Officer (and principal financial officer), the Company's
disclosure controls and procedures are ineffective. The Company
has made changes to its disclosure controls and procedures to improve
their effectiveness in future periods.
During the period covered by this report, there was no change in the
Company's internal controls over financial reporting that has
materially affected, or that is reasonably likely to materially affect,
the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended June 30, 2006, the Company received
subscriptions from 8 accredited investors for 3,750,000 shares of its common
stock, par value $0.001 per share, along with warrants to purchase up to
937,500 shares of the company's common stock at an exercise price of $0.50
for an aggregate purchase price of $750,000. Subsequent to the three months
ended June 30, 2006 but prior to the filing of this Quarterly Report on Form
10-QSB, the Company received subscriptions from 6 accredited investors for
2,750,000 shares of its common stock along with warrants to purchase up to
687,500 shares of the company's common stock at an exercise price of $0.50
for an aggregate purchase price of $550,000. 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.
The material terms and conditions applicable to the purchase and sale
of the securities and the warrants are set forth in the form of the
securities purchase agreement included as an exhibit to this Quarterly
Report on Form 10-QSB.
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This report does not constitute an offer to sell or the solicitation of
an offer to buy any of the shares of common stock, warrants or the
shares of common stock issuable upon the exercise of the warrants, and
shall not constitute an offer, solicitation or sale in any jurisdiction
in which such offer, solicitation or sale is unlawful.
The offers and sales related to the shares described above were not
registered under the Securities Act of 1933, as amended, in reliance
upon the exemption from the registration requirements of that act
provided by Section 4(2) thereof and Regulation D promulgated by the
Securities and Exchange Commission thereunder. Each of the investors
in the private placement is a sophisticated accredited investor with
the experience and expertise to evaluate the merits and risks of an
investment in the Company's stock and the financial means to bear the
risks of such an investment. In addition, each investor was provided
access to all of the material information regarding the Company that
such investor would have received if the offer and sale of the
securities had been registered.
Item 4. Submission of Matters to a Vote of Security Holders
At the 2006 Annual Meeting of Stockholders of the Company, which
occurred on June 5, 2006 (the "2006 Annual Meeting"), the Company's
stockholders elected Albert E. Whitehead and John C. Kinard as members
of the Company's Board of Directors to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualified. The stockholders also considered and approved the adoption
of the Company's 2006 Stock Incentive Plan, the approval of an
amendment to the Company's Certificate of Incorporation and the
appointment of Tullius Taylor Sartain & Sartain LLP as the Company's
independent registered public accounting firm for the fiscal year
ending December 31, 2006. For more information related to the
Company's 2006 Stock Incentive Plan and the amendment to the Company's
Certificate of Incorporation, see the Company's Current Reports on Form
8-K dated June 7, 2006.
There were present at the 2006 Annual Meeting, in person or by proxy,
stockholders holding 32,049,023 shares of the Company's common stock,
or approximately 75 percent of the total stock outstanding and entitled
to vote at the 2006 Annual Meeting. The table below describes the
results of voting at the 2006 Annual Meeting.
Votes
Against or Broker
Votes For Withheld Abstentions Non-Votes
1. Election of Directors
Albert E. Whitehead 32,032,358 16,665 -0- -0-
John C. Kinard 32,045,690 3,333 -0- -0-
2. Approval of the 2006
Stock Incentive Plan 25,193,491 285,159 6,000 6,564,373
3. Approval of Amendment
of the Company's Certificate
of Incorporation 31,769,064 278,959 1,000 -0-
-11-
4. Ratification of Appointment
of Tullius Taylor Sartain &
Sartain 32,030,595 -0- 18,428 -0-
Item 6. Exhibits
a) Exhibits
10.1 Form of Securities Purchase Agreement entered into between
Empire Petroleum Corporation and certain accredited investors
in connection with 2006 private placement.
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: August 23, 2006 By: /s/ Albert E. Whitehead
___________________
Albert E. Whitehead
Chairman/CEO
EXHIBIT INDEX
NO. DESCRIPTION
10.1 Form of Securities Purchase Agreement entered into between
Empire Petroleum Corporation and certain accredited investors
in connection with 2006 private placement.
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).
-12-
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
EMPIRE PETROLEUM CORPORATION
8801 S. Yale, Suite 120
Tulsa, Oklahoma 74137
June , 2006
TO: [Name and address of Investor]
The undersigned, Empire Petroleum Corporation, a Delaware corporation
(the "Company"), hereby agrees with you as follows, effective as of the date
above written:
1. Authorization and Sale of the Securities.
1.1 Authorization. The Company represents that it has authorized the
issuance to you pursuant to the terms and conditions hereof of:
(a) ____________ shares of its common stock, par value $0.001 per share
("Common Stock"); and
(b) a warrant (the "Warrant") to purchase ___________shares of the
Company's Common Stock ("Warrant Shares") in accordance with the terms set
forth in the form of the Common Share Warrant Certificate attached hereto as
Exhibit A.
The shares of Common Stock and Warrant to be purchased pursuant to the terms
of this Agreement are collectively referred to herein as the "Securities."
1.2 Sale. Subject to the terms and conditions hereof, on the Purchase
Date (defined below), the Company shall issue and sell to you and you shall
purchase from the Company, the Securities for an aggregate purchase price of
$ __________________(the "Purchase Price").
2. Payment of Purchase Price; Delivery.
Upon the execution of this Agreement, you shall deliver to the Company
wire funds or a check payable to the Company in the amount of the Purchase
Price. Upon receipt of the Purchase Price from you (the "Purchase Date"),
the Company shall promptly issue and deliver to you the Securities.
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to you as follows:
3.1 Organization and Standing; Articles and Bylaws. The Company is a
corporation duly organized and existing under, and by virtue of, the laws of
the State of Delaware and is in good standing under such laws. The Company is
qualified, licensed or domesticated as a foreign corporation in all
jurisdictions where the nature of its business conducted or the character of
its properties owned or leased makes such qualification, licensing or
domestication necessary at this time except in those jurisdictions where the
failure to be so qualified or licensed and in good standing does not and will
not have a materially adverse effect on the Company, the conduct of its
business or the ownership or operation of its properties. The Company has
furnished you with copies of its Certificate of Incorporation and Bylaws.
Said copies are true, correct and complete and contain all amendments through
the date of this Agreement.
3.2 Corporate Power. The Company has the requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted and as proposed to be conducted. The Company has now, and
will have at the Purchase Date, all requisite legal and corporate power to
enter into this Agreement, to sell the Securities hereunder, and to carry out
and perform its obligations under the terms of this Agreement.
3.3 Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of common stock, par value $0.001 per share.
There are issued and outstanding approximately 42,830,190 shares of common
stock. The issued and outstanding shares of common stock are fully paid and
nonassessable. Except as disclosed in the Disclosure Materials (as defined in
Section 4.1 below), there are no outstanding options, warrants or other rights,
including preemptive rights, entitling the holder thereof to purchase or
acquire shares of common stock of the Company.
3.4 Authorization.
(a) All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the sale and issuance of
the Securities pursuant hereto and the performance of the Company's
obligations hereunder has been taken or will be taken prior to the Purchase
Date. This Agreement is a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting enforcement of creditors' rights, and except as limited by
application of legal principles affecting the availability of equitable
remedies.
(b) The Securities, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that such Securities and the Warrant Shares will be subject to
restrictions on transfer under state and/or federal securities laws, and
as may be required by future changes in such laws.
(c) No shareholder of the Company has any right of first
refusal or any preemptive rights in connection with the issuance of the
Securities or of any other capital stock of the Company.
3.5 Compliance with Instruments. The Company is not in violation of
any terms of its Certificate of Incorporation or Bylaws, or, to the knowledge
of the Company, any judgment, decree or order applicable to it. The execution,
delivery and performance by the Company of this Agreement, and the issuance and
sale of the Securities pursuant hereto, will not result in any such violation
or be in conflict with or constitute a default under any such term, or cause
the acceleration of maturity of any loan or material obligation to which the
Company is a party or by which it is bound or with respect to which it is an
obligor or guarantor, or result in the creation or imposition of any material
lien, claim, charge, restriction, equity or encumbrance of any kind whatsoever
upon, or, to the knowledge of the Company, give to any other person any
interest or right (including any right of termination or cancellation) in or
with respect to any of the material properties, assets, business or agreements
of the Company.
3.6 Litigation, etc. Except as described in the Disclosure Materials,
there are no actions, proceedings or, to the knowledge of the Company,
investigations pending which might result in any material adverse change in the
business, prospects, conditions, affairs or operations of the Company or in any
of its properties or assets, or in any impairment of the right or ability of
the Company to carry on its business as proposed to be conducted, or in any
material liability on the part of the Company, or which question the validity
of this Agreement or any action taken or to be taken in connection herewith.
3.7 Governmental Consent, etc. Except as may be required in connection
with any filings required under the federal securities laws and/or the
securities laws of any state due to the offer and sale of the Securities
pursuant to this Agreement, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental unit is required on
the part of the Company in connection with the valid execution and delivery of
this Agreement, or the offer, sale or issuance of the Securities or the
consummation of any other transaction contemplated hereby.
3.8 Securities Registration and Filings. The outstanding shares of
the Company's Common Stock are registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has filed all reports required by Section 13 or 15(d) of the Exchange Act during
the last two fiscal years. All of such reports were, at the time they were
filed, complete and accurate in all material respects and did not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
4. Representations and Warranties of Purchaser and Restrictions on Transfer
Imposed by the Securities Act.
4.1 Representations and Warranties by Purchaser. You represent and
warrant to the Company as follows:
(a) The Company has provided to you: a copy of the Company's
Annual Report on Form 10-KSB for year ended December 31, 2005, and Company's
Quarterly Report on Form 10-QSB for quarter ended March 31, 2006. The said
materials are referred to herein collectively as the "Disclosure Materials."
(b) You are experienced in evaluating and investing in companies
such as the Company. Further, you understand that the Securities purchased
hereby are of a highly speculative nature and could result in the loss of your
entire investment.
(c) You have been furnished by the Company with all information
requested concerning the proposed operations, affairs and current financial
condition of the Company. Such information and access have been available to
the extent you consider necessary and advisable in making an intelligent
investment decision. In addition, you have received and reviewed copies of
the Disclosure Materials and have had the opportunity to discuss the Company's
business, management and financial affairs with its Chief Executive Officer.
You understand that such discussions, as well as the Disclosure Materials and
any other written information issued by the Company, were intended to describe
certain aspects of the Company's business and prospects which it believes to
be material but were not necessarily a thorough or exhaustive description.
(d) The Securities to be acquired by you will be acquired, solely
for your account, for investment purposes only and not with a view to the
resale or distribution thereof, are not being purchased for subdivision or
fractionalization thereof, and you have no contract, undertaking, agreement or
arrangement with any person to sell or transfer such Securities to any person
and do not intend to enter into such contract or arrangement.
(e) You understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), nor are
they registered or qualified under the blue sky or securities laws of any
state, by reason of their issuance in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act
pursuant to Sections 3(b) or 4(2) of the Securities Act and available
exemptions from the registration requirements of any applicable state
securities laws. You further understand that the Securities must be held by
you indefinitely and you must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from registration.
(f) You have the full right, power and authority to enter into
and perform this Agreement, and this Agreement constitutes a legal, valid and
binding obligation upon you except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application affecting
enforcement of creditors' rights, and except as limited by application of legal
principles affecting the availability of equitable remedies.
(g) You are able to bear the full economic risk of your
investment in the Securities, including the risk of a total loss of your
investment in connection therewith. You are an accredited investor as that
term is defined in Rule 501(a) of Regulation D promulgated by the Securities
and Exchange Commission (the "SEC").
(h) You were not offered the Securities by means of general
solicitations, publicly disseminated advertisements or sales literature.
4.2 Legends. Each instrument representing the Securities and the
Warrant Shares shall be endorsed with the legend set forth below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES ACT.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (I) THEY HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES
ACT, OR (II) THE COMPANY SHALL HAVE BEEN FURNISHED AN OPINION OF COUNSEL,
SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER ANY OF SUCH ACTS.
In addition, each instrument representing the Securities and the Warrant
Shares shall be endorsed with any other legend required by any state
securities laws. The Company need not register a transfer of legended
Securities and the Warrant Shares, and may also instruct its transfer agent
not to register the transfer of the Securities and the Warrant Shares, unless
one of the conditions specified in each of the foregoing legends is satisfied.
5. Indemnification by Purchaser.
You acknowledge and understand that the Company has agreed to offer and
sell the Securities to you based upon the representations and warranties made
by you in this Agreement, and you hereby agree to indemnify the Company and to
hold the Company and its incorporators, officers, directors and professional
advisors harmless against all liability, costs or expenses (including
attorneys' fees) arising by reason of or in connection with any
misrepresentation or any breach of such representations and warranties by you,
or arising as a result of the sale or distribution of any Securities by you in
violation of the Securities Act or other applicable law.
6. Incidental Registration Rights.
6.1 Filing of Registration Statement.
(a) If the Company at any time proposes to register the offer and
sale, for its own account or the account of another person or entity, of any of
its common stock (an "Incidental Registration") under the Securities Act (other
than pursuant to a registration statement on Form S-4 or Form S-8 or any
successor forms thereto), pursuant to an underwritten public offering (a
"Public Offering"), it will at each such time give prompt written notice to you
of its intention to do so, which notice shall be given at least 30 days prior
to the date that a registration statement relating to such registration is
proposed to be filed with the SEC. Upon your written request (which request
shall (i) be made within 15 days after the receipt of any such notice, and (ii)
specify the number of shares of Common Stock and/or Warrant Shares you desire
to be covered by the Incidental Registration (the "Registrable Securities")),
the Company will use its reasonable efforts to effect the registration of all
Registrable Securities that the Company has been so requested to register by
you; provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason to terminate such registration statement and not
to register the offer and sale of such securities, the Company may, at its
election, give written notice of such determination to you and, thereupon,
shall be relieved of its obligation to register any such Registrable Securities
in connection with such registration.
(b) Notice of the Company's intention to register the offer and
sale of such securities shall designate the proposed underwriters of such
Public Offering and shall contain the Company's agreement to use its reasonable
efforts, if requested to do so, to arrange for such underwriters to include in
such underwriting the Registrable Securities that the Company has been so
requested to sell pursuant to Section 6.1(a), it being understood that you
shall have no right to select different underwriters for the disposition of
your Registrable Securities.
(c) If the managing underwriter for the Public Offering
contemplated by this Section 6.1 shall advise the Company that, in such
underwriter's opinion, the number of securities requested to be included in
such Incidental Registration would adversely affect the Public Offering and
sale (including pricing) of such securities, the Company shall include in such
Incidental Registration the number of securities that the Company is so advised
can be sold in such Public Offering, in the following amounts and order of
priority:
(i) first, securities proposed to be sold by the Company for its
own account and/or the account of any other person or entity referred to in
Section 6.1(a); and
(ii) second, the Registrable Securities requested to be
registered by you and any other person or entity to which the Company has
granted incidental registration rights, proportionately reduced to avoid such
adverse result as requested by such managing underwriter.
6.2 Obligations of Company Relating to the Incidental Registration
Statement.
(a) Following the filing of a registration statement in
connection with an Incidental Registration that covers any Registrable Shares
held by you in accordance with Section 6.1 above ("Incidental Registration
Statement"), the Company agrees to notify you as soon as practicable after it
becomes aware that Incidental Registration Statement has become effective or
any supplement to any prospectus forming part of the Incidental Registration
Statement has been filed.
(b) As soon as practicable after the effective date of the
Incidental Registration Statement, the Company shall furnish you with such
numbers of copies of the Incidental Registration Statement and the related
prospectus as you may from time to time reasonably request.
(c) If, during the period when the Incidental Registration
Statement is effective, any event occurs as a result of which the prospectus
included in the Incidental Registration Statement would include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made, not misleading, or it shall be necessary
to amend or supplement such prospectus to comply with applicable law, the
Company will notify you thereof and upon your request: (i) prepare and file
under the Securities Act such amendments and supplements as may be reasonably
necessary to keep available a prospectus covering the Registrable Securities
meeting the requirements of the Securities Act; and (ii) furnish to you such
numbers of copies of the Incidental Registration Statement and prospectus, as
amended or supplemented, as may reasonably be requested from time to time.
(d) The Company agrees to notify you promptly of any request
by the SEC for the amendment or supplementation of the Incidental
Registration Statement or prospectus, or for additional information.
(e) The Company shall use reasonable efforts to prepare and
file with the SEC promptly upon your reasonable request any amendment of, or
supplement to, the Incidental Registration Statement or prospectus relating
to information respecting you that, in the opinion of your counsel, may be
necessary or advisable in connection with the distribution of the Registrable
Securities owned by you and covered by the Incidental Registration Statement.
(f) In the event that the Company receives notice or obtains
knowledge of the issuance of a stop order by the SEC suspending the
effectiveness of the Incidental Registration Statement or of the initiation or
threat of any proceeding for that purpose, the Company shall promptly advise
you of such circumstances and shall use reasonable efforts to prevent the
issuance of any stop order and to obtain the withdrawal of any stop order in
the event that one is issued.
6.3 Obligations of Purchaser Relating to the Incidental Registration
Statement.
(a) You shall furnish to the Company such information as may be
reasonably requested by the Company in connection with the preparation and
filing of the Incidental Registration Statement, any prospectus contained in
the Incidental Registration Statement and any amendment thereof or supplement
thereto.
(b) You will cooperate with the Company as reasonably requested
by the Company in connection with causing the Incidental Registration
Statement to become and remain effective.
(c) You agree that at any time and from time to time the
Company may suspend your use of any prospectus contained in the Incidental
Registration Statement by providing written notice to you that an event has
occurred and is continuing as a result of which the Incidental Registration
Statement would, in the Company's judgment, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
6.4 Indemnification Relating to the Incidental Registration Statement.
(a) The Company agrees that it will: (i) indemnify and hold
harmless you in connection with any losses, claims, damages, expenses or
liabilities to which you become subject, whether under the Securities Act or
otherwise, insofar as such losses, claims, damages, expenses or liabilities
(or actions in respect thereof) are caused by (A) any untrue statement or
alleged untrue statement of any material fact contained in the Incidental
Registration Statement, any prospectus contained therein, any amendment
thereof or supplement thereto or any documents incorporated by reference into
any of the foregoing; or (B) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and (ii) reimburse you for any legal or
other expenses reasonably incurred by you in connection with investigating or
defending any such loss, claim, damage, expense, liability or action arising
under clause (i) of this Section 6.4(a); provided, however, the Company will
not be liable under clauses (i) or (ii) of this Section 6.4(a) to the extent
that any such loss, claim, damage, expense or liability arises out of, or is
based upon, an untrue statement or alleged untrue statement or omission, or
alleged omission, made in reliance upon, and in conformity with, written
information furnished by you specifically for use in the preparation of the
Incidental Registration Statement or prospectus contained therein or amendment
thereof or supplement thereto, or is attributable your failure to carry out
your obligations under this Agreement.
(b) You agree that you will: (i) indemnify and hold harmless
the Company, each of its directors and officers who have signed the Incidental
Registration Statement, and each person, if any, who controls the Company
within the meaning of the Securities Act, against any losses, claims, damages,
expenses or liabilities (or actions in respect thereof) caused by (A) any
untrue statement or alleged untrue statement of any material fact contained
in the Incidental Registration Statement, any prospectus contained in the
Incidental Registration Statement, or any amendment thereof or supplement
thereto; or (B) any omission or alleged omission to state a material fact
required to be stated therein, or necessary to make the statement contained
therein not misleading; in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission, or alleged
omission, was so made in reliance upon, and in conformity with, written
information furnished by you specifically for use in the preparation of the
Incidental Registration Statement or prospectus contained therein or amendment
thereof or supplement thereto, or is attributable your failure to carry out
your obligations under this Agreement; and (ii) reimburse any legal and other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, expense, liability or action.
(c) Any party seeking to be indemnified under the provisions of
this Section 6.4 shall give the indemnifying party prompt written notice of
any loss, claim, damage, expense, liability or action subject to this Section
6.4 and shall, to the extent the indemnified party is not adversely affected,
cooperate fully with the indemnifying party in defense and settlement of said
loss, claim, damage, expense, liability or action. The indemnifying party
shall not have the right to settle any such loss, claim, damage, expense,
liability or action without the written consent of the indemnified party,
which consent shall not be unreasonably withheld. In the event of the
assumption of the defense by an indemnifying party, such indemnifying party
shall not be liable for any further legal or other expenses subsequently
incurred by the indemnified party in connection with such defense unless
otherwise provided herein; provided, however, the indemnified party shall
have the right to participate in such defense, at its own cost. If an
indemnifying party refuses or fails at any time to defend an indemnified party
against any loss, claim, damage, expense, liability or action pursuant to this
Section 6.4, the indemnified party shall have the right to undertake the
defense and to compromise or settle such loss, claim, damage, expense,
liability or action on behalf of, for the account of and at the risk of such
indemnifying party.
7. Miscellaneous.
7.1 Successors and Assigns. All the provisions of this Agreement
by or for the benefit of the parties shall bind and inure to the benefit of
respective successors and permitted assigns of each party.
7.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepaid, addressed (a) if to you, at your address set forth on
the first page hereof, or at such other address as you shall have furnished
to the Company in writing, or (b) if to the Company, at its address set forth
on the first page hereof, or at such other address as the Company shall have
furnished to you in writing in accordance with this Section 7.2.
7.3 Waivers; Amendments. Any provision of this Agreement may be
amended or modified with (but only with) the written consent of the Company
and you. Any amendment, modification or waiver effected in compliance with
this Section 7.3 shall be binding upon the Company and you. No failure or
delay of the Company or you in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereon or the
exercise of any other right or power. The rights and remedies of the Company
and you hereunder are cumulative and not exclusive of any rights or remedies
which each would otherwise have.
7.4 Separability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
7.5 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the state of Oklahoma without regard to principles
of conflicts of law, except as otherwise required by mandatory provisions of
law.
7.6 Section Headings. The section headings used herein are for
convenience of reference only and shall not be construed in any way to affect
the interpretation of any provisions of this Agreement.
7.7 Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties hereto with regard to the subjects hereof and
thereof.
7.8 Finder's Fees. Each of the Company and you (i) represent and
warrant to the other that no finder or broker has been retained by it or you
in connection with the transactions contemplated by this Agreement and (ii)
each hereby agrees to indemnify and to hold the other, and its respective
officers, directors and controlling persons, harmless of and from any
liability for any commission or compensation in the nature of a finder's fee
to any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which it, or any of its
employees or representatives, are responsible.
7.9 Other Documents. The parties to this Agreement shall in good faith
execute such other and further instruments, assignments or documents as may be
necessary or advisable to carry out the transactions contemplated by this
Agreement.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument, and which shall become effective when there
exist copies signed by the Company and by you.
[Signatures on Next Page]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized representatives effective as of the date set
forth on the first page hereof.
EMPIRE PETROLEUM CORPORATION
By:
Albert E. Whitehead, Chief Executive Officer
Accepted and agreed to this ______ day of June, 2006.
BUYER
By:
Name: Title:
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
(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.
August 23, 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, 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.
August 23, 2006 /s/ Albert E. Whitehead
Albert E. Whitehead
Chief Executive Officer and
Principal Financial Officer