UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
Amendment No. 1
(Mark One)
[X] Quarterly Report Under Section 13 OR 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2004
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________to________________
Commission file number 001-16653
EMPIRE PETROLEUM CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 73-1238709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8801 S. Yale, Suite 120, Tulsa, Oklahoma 74137-3575
(Address of principal executive offices)
(918) 488-8068
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.001 Par Value - 37,830,190 shares outstanding as of
September 30, 2004.
Transitional Small Business Disclosure Format: [ ] Yes [X] No
EMPIRE PETROLEUM CORPORATION
INDEX TO FORM 10-QSB/A
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheet at September 30, 2004 (Unaudited) 1
Statements of Operations for the three months and nine months
ended September 30, 2004 and 2003 (Unaudited) 2
Statements of Cash Flows for the nine months ended
September 30, 2004 and 2003 (Unaudited) 3
Notes to Financial Statements 4-8
Item 2. Management's Discussion and Analysis 8-12
Item 3. Controls and Procedures 12
Part II. OTHER INFORMATION
Item 6. Exhibits 12
Signatures 13
Explanatory Note
This Form 10-QSB/A is being filed by Empire Petroleum Corporation (the
"Company"), as Amendment No. 1 (this "Amendment" or "Form 10-QSB/A"),
to the Company's Quarterly Report on Form 10-QSB for the quarterly
period ended September 30, 2004 (the "Prior Form 10-QSB").
As previously reported in the Company's Current Report on Form 8-K
filed on November 21, 2005, the Board of Directors of the Company
concluded on November 16, 2005 that its previously issued annual and
quarterly financial statements for fiscal years 2003 and 2004 and
quarterly financial statements for the first two quarters of 2005
should not be relied upon because of errors in those financial
statements and that the Company would restate its previously issued
annual financial statements for fiscal year 2003, annual and quarterly
financial statements for fiscal year 2004 and quarterly financial
statements for the first two quarters of 2005 to make the necessary
accounting adjustments. The restatement pertains to the Company's
accounting for exit activities in connection with its office space in
Canada, which was leased by the former management of the Company,
abandoned upon the resignation of such management and subleased by a
third party for a period of time thereafter.
This Amendment is being filed in connection with the restatement
described above. Although this Amendment amends and restates the Prior
Form 10-QSB in its entirety, the information contained herein has not
been updated to reflect events or developments that may have occurred
subsequent to September 30, 2004, except to the limited extent as
specifically described in Items 2 and 3 of Part I below.
Item 1. FINANCIAL STATEMENTS
EMPIRE PETROLEUM CORPORATION
BALANCE SHEET
September 30,
2004
Restated
ASSETS (Unaudited)
___________
Current assets:
Cash $ 51
Accounts receivable 5,917
___________
Total current assets 5,968
Property & equipment, net of accumulated
depreciation and depletion 527,109
___________
Total Assets $ 533,077
___________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable and accrued
liabilities $ 377,035
Accounts payable to related party 194,167
Note payable 90,596
___________
Total current liabilities 661,798
___________
Total liabilities 661,798
___________
Stockholders' equity (deficiency):
Common stock at par value 37,830
Additional paid in capital 8,405,635
Accumulated deficit (8,572,186)
___________
Total stockholders' equity (deficiency) (128,721)
___________
Total Liabilities and Equity (Deficiency) $ 533,077
___________
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,
____________________________ ________________________
2004 2003 2004 2003
Restated Restated Restated Restated
_____________ _____________ ____________ __________
Revenue:
Petroleum sales $ 19,674 $ 74,149 $ 55,778 $ 108,037
_____________ _____________ ____________ __________
19,674 74,149 55,778 108,037
_____________ _____________ ____________ __________
Costs and expenses:
Production & operating 32,898 44,186 72,679 85,235
General & administrative 37,919 19,822 117,124 299,583
Depreciation expense 0 65,000 0 96,028
Leasehold impairment 0 0 0 190,066
____________ _____________ ____________ __________
70,817 129,008 189,803 670,912
____________ _____________ ____________ __________
Operating loss (51,143) (54,859) (134,025) (562,875)
____________ _____________ ____________ __________
Other (income) and expense:
Miscellaneus 11,918 (1,068) 3,920 20,997
Interest expense 1,725 8,623 5,175 8,623
Gain on sale of assets 0 0 0 (2,201)
____________ _____________ ____________ __________
Total other(income) and
expense 13,643 7,555 9,095 27,419
____________ _____________ ____________ __________
Net loss $ (64,786) $ (62,414) $ (143,120) (590,294)
____________ _____________ ____________ __________
Net loss per common share $ .00 $ .00 $ .00 $ .02
____________ _____________ ____________ __________
Weighted average number of
common shares
outstanding 37,830,190 37,541,301 37,830,190 33,328,192
____________ _____________ ____________ __________
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,
2004 2003
_________ _________
Cash flows from operating activities:
Net loss $ (143,120) $ (590,294)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 0 96,028
Leasehold impairment 0 190,066
Gain on sale of assets 0 (2,201)
Value of services contributed by employees 37,500 37,500
(Increase) decrease in assets:
Accounts receivable 15,145 (517)
Prepaid expenses 2,651 3,920
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 2,266 254,732
________ ________
Net cash used in operating activities (85,558) (10,766)
________ ________
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 0 7,311
________ ________
Net cash provided by investing activities 0 7,311
________ ________
Cash flows from financing activities:
Advances from related party 63,987 0
________ ________
Net cash provided by financing activities 63,987 0
________ ________
Net decrease in cash (21,571) ( 3,455)
Cash - Beginning 21,622 5,454
________ ________
Cash -Ending $ 51 $ 1,999
________ ________
Non-cash investing and financing activities:
Common stock issued for accounts payable
and accrued liabilities $ 0 $278,441
Common Stock issued for notes and
debentures payable $ 0 $220,000
Common Stock issued for leasehold interest $ 0 $200,000
See accompanying notes to financial statements.
-3-
EMPIRE PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
The accompanying unaudited financial statements of Empire Petroleum
Corporation (Empire, or the Company) have been prepared in accordance with
United States generally accepted accounting principles for interim financial
information and the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by United States
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation of the
Company's financial position, the results of operations, and the cash flows
for the interim period are included. Operating results for the interim period
are not necessarily indicative of the results that may be expected for the
year ending December 31, 2004.
The information contained in this Form 10-QSB should be read in conjunction
with the audited financial statements and related notes for the year ended
December 31, 2003 which are contained in the Company's Annual Report on Form
10-KSB filed with the Securities and Exchange Commission (the SEC) on March
30, 2004.
The continuation of the Company is dependent upon the ability of the Company
to attain future profitable operations. These financial statements have been
prepared on the basis of United States generally accepted accounting
principles applicable to a company with continuing operations, which assume
that the Company will continue in operation for the foreseeable future and
will be able to realize its assets and discharge its obligations in the normal
course of operations. Management believes the going concern assumption to be
appropriate for these financial statements. If the going concern assumption
were not appropriate for these financial statements, then adjustments might be
necessary to adjust the carrying value of assets and liabilities and reported
expenses.
The Company continues to explore and develop its oil and gas interests. The
ultimate recoverability of the Company's investment in its oil and gas
interests is dependent upon the existence and discovery of economically
recoverable oil and gas reserves, confirmation of the Company's interest in
the oil and gas interests, the ability of the Company to obtain necessary
financing to further develop the interests, and upon the ability to attain
future profitable production. The Company has been incurring significant
losses in recent years and has a significant working capital deficiency as
of September 30, 2004. The Company also recognized an impairment charge of
$6,496,614 on its oil and gas property in 2002 and an additional impairment
charge of $190,066 in the first quarter of 2003.
The Company believes it is the intention of the Company's Chief Executive
Officer, or a trust controlled by him, to continue funding the Company's basic
expenses through December 31, 2004, or until such time as the Company secures
other sources of financing. However, there can be no assurance that such funds
will be provided by Mr. Whitehead or an affiliate of Mr. Whitehead. In 2003,
the Company engaged a partner to explore its Cheyenne River Prospect, and
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signed an agreement to acquire a 10% interest in a block of acreage in the
Gabbs Valley Prospect of western Nevada. In order to sustain the Company's
operations on a long term basis, the Company intends to continue to look for
merger opportunities and consider public or private financings.
Compensation of Officers and Employees
The Company's executive officer serves without pay or other non-equity
compensation. The fair value of these services is estimated by management and
is recognized as a capital contribution. For the nine months ended September
30, 2004, 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, 2004, $90,596 was due under this note.
In addition, on March 17, 2003, the Company issued 2,842,243 shares of
Company common stock as payment for notes payable to related parties of
$220,000 plus accrued interest of $22,601. Also, on March 17, 2003, the
Company issued 7,653,970 shares of Company common stock as payment for
accounts payable totaling $255,840. Of this amount, $238,986 was payable
to the Company's executive officer.
3. PROPERTY AND EQUIPMENT:
At December 31, 2002, the Company's management determined that an impairment
allowance of $6,496,614 was necessary to properly value the Company's oil and
gas properties bringing the net book value of the oil and gas properties to
$594,915. The basis for the impairment was the determination by the United
States Bureau of Land Management (BLM) that it does not consider the Timber
Draw #1-AH well economic. In other words, under the BLM's criteria for
economic determination, the well will not pay out the cost incurred to drill
and complete the well. The BLM also advised the Company that since it did not
commence another test well prior to August 12, 2002, the Timber Draw Unit was
terminated. Furthermore, a bottom hole pressure survey conducted in April 2002
indicated a limited reservoir for the well. The value was calculated using an
estimated $10 per acre market price for the leases multiplied by the Company's
working interest.
In the first quarter 2003, the Company recorded an additional leasehold
impairment charge of $190,066 as a result of the assignment of the leases on
42,237 acres in the Cheyenne River Prospect (See Note 5).
On May 8, 2003, the Company entered into an agreement with O.F. Duffield
(Duffield Agreement) to acquire a ten percent (10%) interest in a block of
acreage in the Gabbs Valley Prospect by agreeing to issue 2,000,000 shares of
the Company's Common Stock to Mr. Duffield for such 10% interest. The shares
-5-
were issued in July 2003. This block of acreage in the Gabbs Valley Prospect
consists of federal leases covering approximately 45,000 acres in Nye and
Mineral Counties, Nevada in which Mr. Duffield has a 100% working interest.
Pursuant to the Duffield Agreement, the Company is also entitled to acquire up
to a 10% interest in a block of 26,080 acres also located in the Gabbs Valley
Prospect should Duffield acquire an interest in this block. The shares were
valued at $.10 per share based on the closing price of the Company's common
stock on the date of issuance.
4. CONTINGENCIES:
The Company's former management (Messrs. McGrain and Jacobsen) entered into a
lease agreement for office space in Canada. This office was closed after
Messrs. McGrain and Jacobsen resigned as officers of the Company. This lease
agreement calls for monthly lease and tax payments of approximately $6,834
(Canadian) through April of 2006. No lease payment was made subsequent to
December of 2002 and, in January of 2003, the Company was notified that the
lease had been terminated without prejudice to the landlord's right to hold
the Company liable for future damages related to lost rent. The Company has
recorded a liability of $215,290 (U.S.) as of September 30, 2004 in
connection with the lease. The foreign exchange loss of $4,073 associated
with the lease obligation has been recorded in miscellaneous expense.
5. PAYMENT OF LEASE RENTALS:
On March 28, 2003, a third party paid approximately $84,485 of the Company's
lease rentals on 42,237 acres in the Cheyenne River Prospect in return for an
assignment of such leases. In connection with this transaction, the Company
retained an overriding royalty of 1.5% on 33,597 of the acres and a 2%
overriding royalty on 8,640 of the acres.
On March 31, 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 #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. The third party is in the process of completing and testing the well.
6. SUBSEQUENT EVENT:
Subsequent to September 30, 2004, the Company's Chief Executive Officer
relinquished 170,000 options to acquire Company common stock.
7. RESTATEMENT:
On November 11, 2005, the Company filed a Form 8-K with the SEC disclosing that
it would restate its previously issued financial statements for the year ended
December 31, 2003, annual and quarterly financial statements for 2004, and
quarterly financial statements for the first two quarters of 2005 after
determining that it had erroneously accounted for its exit activities in
connection with its former office space in Canada.
In the third quarter of 2003, the Company recorded an expense for its
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obligation under the lease for the period up to the balance sheet date. It
continued to record an expense of $13,200 per quarter through March 31, 2005
related to the lease (see Note 4). After further review, the Company's
management determined that it should have accrued an obligation for the lease
equal to total amounts owed from the "cease use date" (the date in January
2003 on which the Company's subtenant moved out of the office space) through
the end of the lease term. Additionally, since the lease obligation was in
Canadian dollars, the Company should have recorded a currency exchange gain or
loss on its obligation in each quarter. Based on this analysis, the Company
and its Board of Directors concluded that its previously issued financial
statements for the year ended December 31, 2003, annual and quarterly
financial statements for 2004 and quarterly financial statements for the
first two quarters of 2005 required adjustments of the amounts previously
reported for accounts payable and accrued liabilities, and general and
administrative expenses. The following table summarizes the adjustments
required to previously reported amounts included in these financial statements.
3 Months Ended 9 Months Ended
September 30, 2004 September 30, 2004
Previously As Previously As
Reported Restated Reported Restated
Petroleum sales 19,674 19,674 55,778 55,778
Cost & Expenses:
Production & Operation 32,898 32,898 72,679 72,679
General & Administrative 51,119 37,919 156,724 117,124
__________ ________ __________ ________
84,017 70,817 229,403 189,803
__________ ________ __________ ________
Operating income (loss) (64,343) (51,143) (173,625) (134,025)
__________ ________ __________ ________
Other (income) expense:
Miscellaneous - 11,918 (153) 3,920
Interest Expense 1,725 1,725 5,175 5,175
__________ ________ __________ ________
1,725 13,643 5,022 9,095
__________ ________ __________ ________
Net loss (66,068) (64,786) (178,647) (143,120)
__________ ________ __________ ________
Net loss per Share .00 .00 .00 .00
__________ ________ __________ ________
3 Months Ended 9 Months Ended
September 30, 2003 September 30, 2003
Previously As Previously As
Reported Restated Reported Restated
Petroleum sales 74,149 74,149 108,037 108,037
Cost & Expenses:
Production & Operation 44,186 44,186 85,235 85,235
General & Administrative 112,222 19,822 213,076 299,583
Depreciation Expense 65,000 65,000 96,028 96,028
Leasehold Impairment - - 190,066 190,066
__________ ________ __________ _________
-7-
221,408 129,008 584,405 670,912
__________ ________ __________ _________
Operating income (loss) (147,259) (54,859) (476,368) (562,875)
__________ ________ __________ _________
Other (income) expense:
Miscellaneous (84) (1,068) (2,128) 20,997
Gain on Sale of Assets - - (2,201) (2,201)
Interest Expense 8,623 8,623 8,623 8,623
__________ ________ __________ _________
8,539 7,555 4,294 27,419
__________ ________ __________ _________
Net loss (155,798) (62,414) (480,662) (590,294)
__________ ________ __________ _________
Net loss per share .00 .00 (.01) (.02)
__________ ________ __________ _________
September 30, 2004
Previously As
Reported Restated
ASSETS
Current Assets:
Cash 51 51
Accounts Receivable 5,917 5,917
__________ ________
Total Current Assets 5,968 5,968
Property, Plant & Equipment (net) 527,109 527,109
__________ ________
Total Assets 533,077 533,077
LIABILITIES & STOCKHOLDERS EQUITY
Current Liabilities:
Accounts payable & accrued expenses 293,745 377,035
Accounts payable - related party 194,167 194,167
Note payable 90,596 90,596
_________ ________
Total current liabilities 578,508 671,798
_________ ________
Total liabilities 578,508 661,798
_________ ________
Stockholders' equity:
Common stock 37,830 37,830
Additional paid in capital 8,405,635 8,405,635
Accumulated deficit (8,488,896) (8,572,186)
_________ _________
Total stockholder's equity (45,431) (128,721)
_________ _________
Total liabilities and stockholders' equity 533,077 533,077
_________ _________
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
GENERAL TO ALL PERIODS
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The Company's primary business is the exploration and development of oil and
gas interests. The Company has incurred significant losses from operations,
and there is no assurance that it will achieve profitability or obtain 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
well 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.
RESTATEMENT
On November 11, 2005, the Company filed a Form 8-K with the SEC disclosing
that it would restate its previously issued financial statements for the year
ended December 31, 2003, annual and quarterly financial statements for 2004,
and quarterly financial statements for the first two quarters of 2005 after
determining that it had erroneously accounted for its exit activities in
connection with its former office space in Canada.
In the third quarter of 2003, the Company recorded an expense for its
obligation under the lease for the period up to the balance sheet date. It
continued to record an expense of $13,200 per quarter through March 31, 2005
related to the lease (see Note 4 to the financial statements). After further
review, the Company's management determined that it should have accrued an
obligation for the lease equal to total amounts owed from the "cease use date"
(the date in January 2003 on which the Company's subtenant moved out of the
office space) through the end of the lease term. Additionally, since the lease
obligation was in Canadian dollars, the Company should have recorded a
currency exchange gain or loss on its obligation in each quarter. Based on
this analysis, the Company and its Board of Directors concluded that its
previously issued financial statements for the year ended December 31, 2003,
annual and quarterly financial statements for 2004 and quarterly financial
statements for the first two quarters of 2005 required adjustments of the
amounts previously reported for accounts payable and accrued liabilities, and
general and administrative expenses. The effect of the restatement was to
decrease the previously reported net loss by $1,282 for the three months ended
September 30, 2004 and to decrease the net loss reported by $35,527 for the
nine months ended September 30, 2004. The restatement did not affect the loss
per share at September 30, 2004 for either the three or nine month period.
THREE MONTH PERIOD ENDED SEPTEMBER 30, 2004, COMPARED TO THREE MONTH PERIOD
ENDED SEPTEMBER 30, 2003
For the three months ended September 30, 2004, sales revenue decreased $54,475
to $19,674, compared to $74,149 for the same period during 2003. The decrease
in sales revenue was the result of a decrease in production for the Timber Draw
#1-AH, which is attributable to a limited reservoir. For the three months ended
September 30, 2004, sales volume decreased 1,392 barrels to 948 barrels,
compared to 2,340 barrels for the same period in 2003. The average realized per
barrel oil price increased 35% from $22.57 for the three months ended September
30, 2003 to $30.58 for the three months ended September 30, 2004.
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Production and operating expenses decreased $11,288 to $32,898 for the three
months ended September 30, 2004, from $44,186 for the same period in 2003.
This decrease was primarily attributable to lower production on the Company's
test well.
General and administrative expenses increased by $18,097 to $37,919 for the
three months ended September 30, 2004, from $19,822 for the same period in
2003. The increase was primarily related to the increase of operational
expenses.
Depreciation expense decreased by $65,000 to $0 for the three months ended
September 30, 2004, compared to the same period in 2003. There was no
depreciation expense attributable to the three months ended September 30,
2004, because the depreciable assets were fully depreciated.
For the three months ended September 30, 2004, interest expense decreased to
$1,725 from $8,623 when compared to the same period in 2003. The decrease was
due to the accrual of prior interest expense on the Weatherford note in 2003.
The Company began accruing interest on the note in the third quarter of 2003,
and accrued 18 months of interest at September 30, 2003 compared to three
months in 2004.
For the reasons discussed above, net loss increased $2,372 from $(62,414) for
the three months ended September 30, 2003, to $(64,786) for the three months
ended September 30, 2004.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 2004, COMPARED TO NINE MONTH PERIOD
ENDED SEPTEMBER 30, 2003
For the nine months ended September 30, 2004, sales revenue decreased $52,259
to $55,778, compared to $108,037 for the same period during 2003. The decrease
in sales revenue was the result of a decrease in production for the Timber
Draw #1-AH, which is attributable to a limited reservoir. For the nine months
ended September 30, 2004, sales volume decreased 2,976 barrels to 2,426
barrels, compared to 5,402 barrels for the same period in 2003. The average
realized per barrel oil price increased 21% from $22.30 for the nine months
ended September 30, 2003 to $27.04 for the nine months ended September 30,
2004.
Production and operating expenses decreased $12,556 to $72,679 for the nine
months ended September 30, 2004, from $85,235 for the same period in 2003.
This decrease was primarily attributable to lower production on the Company's
test well.
General and administrative expenses decreased by $182,459 to $117,124 for the
nine months ended September 30, 2004, from $299,583 for the same period in
2003. The decrease was primarily related to the Company's accrual for the
Canadian office rent in 2003. The Company began accruing for potential
liability related to the Canadian office lease in the first quarter of 2003.
Depreciation expense decreased by $96,028 to $0 for the nine months ended
September 30, 2004, compared to the same period in 2003. There was no
depreciation expense attributable to the nine months ended September 30, 2004,
because the depreciable assets were fully depreciated.
During the nine months ended September 30, 2003, the Company recorded a
leasehold impairment charge of $190,066 as a result of the assignment of the
leases on 42,237 acres in the Cheyenne River Prospect. There was no comparable
charge during the comparable period in 2004.
-10-
For the nine months ended September 30, 2004, interest expense decreased
$3,448 $5,175 when compared to the same period in 2003. The decrease was due
to the accrual of prior interest expense on the Weatherford note in 2003. The
Company began accruing interest on the note in the third quarter of 2003, and
accrued 18 months of interest at September 30, 2003 compared to nine months in
2004.
For the reasons discussed above, net loss decreased $447,174 from $(590,294)
for the nine months ended September 30, 2003, to $(143,120) for the nine
months ended September 30, 2004.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
As of September 30, 2004, the Company had $51 of cash on hand. The Company's
cash on hand will not be sufficient to fund its operations for any length of
time. During the next twelve months, the Company expects to incur costs of
approximately $10,000 per month relating to administrative, office and other
expenses. In addition, the Company's other material commitments in the next
twelve months could include payments to be made and obligations that could
arise as further described below.
The Company's former management (Messrs. McGrain and Jacobsen) entered into
a lease agreement for office space in Canada. This office was closed after
Messrs. McGrain and Jacobsen resigned as officers of the Company. This lease
agreement calls for monthly lease and tax payments of approximately $6,834
(Canadian) through April of 2006. No lease payment has been made subsequent
to December of 2002 and, in January of 2003, the Company was notified that
the lease had been terminated without prejudice to the landlord's right to
hold the Company liable for future damages related to lost rent. The Company
has recorded a liability of $215,290 in its financial statements including
foreign exchange losses accrued at September 30, 2004.
As of September 30, 2004, the Company owes approximately $90,596 including
accrued interest to Weatherford U.S., L.P. for services rendered by
Weatherford.
ADVANCES FROM RELATED PARTY
The Company has had difficulty in obtaining financing from traditional
financing sources. Through September 30, 2004, the Company financed its
operations primarily through advances made to the Company by the Albert E.
Whitehead Living Trust, of which the Company's Chairman of the Board and Chief
Executive Officer, Mr. Whitehead, is the trustee. The Company believes it is
the intention of the Whitehead Trust to continue funding the Company's basic
expenses through December 31, 2004, or until such time as the Company secures
other sources of financing. However, there can be no assurance the Whitehead
Trust will continue to fund such expenses. In order to sustain the Company's
operations on a long term basis, management intends to continue to look for
merger opportunities and consider public or private financings. Through the
nine months ended September 30, 2004, the Whitehead Trust has advanced
$63,987 to the Company.
MATERIAL RISKS
The Company has incurred significant losses from operations and there is no
assurance that it will achieve profitability or obtain funds necessary to
finance continued operations. For other material risks, see the Company's form
10-KSB for the period ended December 31, 2003, which was filed March 30, 2004.
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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,
2004. 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 September 30, 2004, the Company carried out an evaluation under
the supervision of the Company's Chief Executive Officer (and principal
financial officer) of the effectiveness of the design and operation of
the Company's disclosure controls and procedures pursuant to the
Securities Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this
evaluation, the Company's Chief Executive Officer (and principal
financial officer) concluded that the Company's disclosure controls and
procedures were effective at such time. However, prior to the date of
the filing of this Form 10-QSB/A and as a result of the Company's
decision to restate its financial statements as described under the
"Explanatory Note" in this Form 10-QSB/A above, the Company completed a
second evaluation under the supervision of the Company's Chief
Executive Officer (and principal financial officer) of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures as of September 30, 2004. In connection with
this second evaluation and based upon the Company's decision to restate
its financial statements for the quarterly period ended September 30,
2004, the Company's Chief Executive Officer (and principal financial
officer) concluded that the Company's disclosure controls and
procedures were not effective as of September 30, 2004.
PART II. OTHER INFORMATION
Item 6. 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).
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EMPIRE PETROLEUM CORPORATION
SIGNATURES
In accordance with the requirements of the Exchange Act, the small business
issuer caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EMPIRE PETROLEUM CORPORATION
Date: February 8, 2006 By: /s/ Albert E. Whitehead
___________________
Albert E. Whitehead
Chairman/CEO
EXHIBIT INDEX
NO. DESCRIPTION
31 Certification of Chief Executive Officer (and principal
financial officer) pursuant to Rules 13a-14(a) and 15d-14(a)
promulgated under the Securities Exchange Act of 1934, as
amended, and Item 601(b)(31) of Regulation S-B, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(submitted herewith).
32 Certification of Chief Executive Officer (and principal
financial officer) pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (submitted herewith).
EXHIBIT 31
CERTIFICATION
I, Albert E. Whitehead, Chief Executive Officer (and principal financial
Officer) of Empire Petroleum Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Empire Petroleum
Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the small
business issuer as of, and for, the periods presented in this report;
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;
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(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about
the effectiveness of the controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the small business issuer's
internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's internal
control over financial reporting.
February 8, 2006 /s/ Albert E. Whitehead
Albert E. Whitehead,
Chief Executive Officer and
Principal Financial Officer
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Empire Petroleum Corporation (the
"Company") on Form 10-QSB for the period ending September 30, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Albert E. Whitehead, Chief Executive Officer (and principal financial
officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(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.
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February 8, 2006 /s/ Albert E. Whitehead
Albert E. Whitehead
Chief Executive Officer and
principal financial officer
A signed original of this written statement required by Section 906 has
been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon
request.
The foregoing certification is being furnished to the Securities and
Exchange Commission as an exhibit to the Report and shall not be
considered filed as part of the Report.
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