What changed in this filing

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Item 1. Financial Statements

2020-11-16 compared with 2020-08-14 · 178 added, 122 removed, 540 unchanged (36% of the section changed)

2 unchanged sentences

BALANCE SHEETS

June 30, 2020

September 30, 2020

December 31, 2019

2 unchanged sentences

Unrealized Gain on Derivative Instruments

Acquisition Deposit Receivable (see Note 4)

Total Current Assets

5 unchanged sentences

Utility and Other Deposits

Acquisition deposit, net of allowance of $725,000 and $-0-, respectively (see Note 4)

LIABILITIES AND STOCKHOLDERS' DEFICIT

23 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Oil and Gas Sales

15 unchanged sentences

$ (3,540,515 )

$ (2,593,562 )

Net Loss per Common Share, Basic & Diluted

4 unchanged sentences

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

the six months ended June 30, 2020 and 2019

the Nine Months Ended September 30, 2020 and 2019

Balances, December 31, 2019

10 unchanged sentences

(25,168,118 )

Shares, Options, Warrants

and Conversion Features Issued

Balances, September 30, 2020

$ (26,809,490 )

$ (6,931,447 )

Balances, December 31, 2018

8 unchanged sentences

(19,721,908 )

Balances, September 30, 2019

$ (20,668,861 )

$ (1,874,568 )

accompanying notes to unaudited consolidated financial statements

1 unchanged sentence

STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows From Operating Activities:

11 unchanged sentences

Accretion of Asset Retirement Obligation

Allowance for loss relating to purchase deposit

Cash paid to Ovintiv (see Note 4)

Loss relating to Ovintiv Purchase Deposit (see Note 4)

Change in Operating Assets and Liabilities:

1 unchanged sentence

Unrealized Gain on Derivative Instruments

Utility and other deposits

Prepaids, Current

Utility Deposits

Accounts Payable

Accrued Expenses

Net Cash Provided by (used in) Operating Activities

Net Cash Used In Operating Activities

Cash Flows from Investing Activities:

2 unchanged sentences

Proceeds From Sale of Oil and Natural Gas Properties

Deposit for Purchase of Oil and Natural Gas Properties

Net Cash Used in Investing Activities

12 unchanged sentences

Common Stock Issued in Exchange for Outstanding Notes Payable

Purchases of oil and natural gas properties in accounts payable

Purchases of oil and natural gas properties and deposits in accounts and notes payable, royalty suspense, and contingent payable to seller

Note payable issued - PIE Agreement (see Note 8)

accompanying notes to unaudited consolidated financial statements

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

27 unchanged sentences

then adjustments might be necessary to adjust the carrying value of assets and liabilities and reported expenses.

Company’s impairment assessment of proved and unproved mineral properties is based on several factors including oil and

gas spot market prices and estimated futures prices that existed at June 30, 2020.

In 2020, crude oil prices in both the spot

market and futures market experienced significant volatility.

For the six months ended June 30, 2020 the Company recorded an impairment

The Company’s impairment assessment

of proved and unproved mineral properties is based on several factors including oil and gas spot market prices and estimated futures

prices that existed at September 30, 2020.

In 2020, crude oil prices in both the spot market

and futures market experienced significant volatility.

For the nine months ended September 30, 2020 the Company recorded an impairment

expense of $800,452 as a result of the decline in oil prices (See Note 3).

1 unchanged sentence

Company’s future financial position or results of operations is not currently determinable due to broader economic and industry

uncertainties, including the impact to the operators and other working interest owners of the properties in which the Company

owns mineral interests.

uncertainties, including the impact to the operators and other working interest owners of the properties in which the Company owns

mineral interests.

In the event crude oil or natural gas prices remain low, there is

9 unchanged sentences

In early March 2020 there was a global outbreak

of COVID-19 that continued into the second quarter and has resulted in changes in global supply and demand of certain mineral and

energy products.

These changes, including the magnitude and length of the economic downturn and any potential resulting direct

and indirect negative impact to the Company cannot be determined, but they could have a prospective material impact to the Company’s

acquisition and project development activities, and cash flows and liquidity.

of COVID-19 that continued into the second and third quarters and has resulted in changes in global supply and demand of certain

mineral and energy products.

These changes, including the magnitude and length of the economic downturn and any potential resulting

direct and indirect negative impact to the Company cannot be determined, but they could have a prospective material impact to the

Company’s acquisition and project development activities, and cash flows and liquidity.

Reclassification of prior

11 unchanged sentences

Company to attain future profitable production.

As of June 30, 2020, the Company had $285,813

As of September 30, 2020, the Company had $134,374

of cash and working capital deficit of $10,140,110, which includes the net balance of the Senior Revolver Loan Agreement of $8,368,000

6 unchanged sentences

Compensation of Officers and Employees

As of June 30, 2020, the Company had three

No independent Board members received compensation from the Company in the first six months of 2020 or 2019.

six months ended June 30, 2020, the Company paid Mr.

As of September 30, 2020, the Company had

twelve employees.

No independent Board members received compensation from the Company in the first nine months of 2020 or

For the nine months ended September 30, 2020, the Company paid its officers, Mr.

Morrisett and Mr.

Pritchard $116,000 each for services rendered.

months ended June 30, 2019, the Company paid Mr.

Pritchard, $249,417

each for services rendered.

For the nine months ended September 30, 2019, the Company paid Mr.

Morrisett $179,950 and Mr.

Pritchard $131,450 for services rendered excluding

the value of options.

In addition, as of June 30, 2020 Mr.

Pritchard $183,950 for services rendered excluding the value of options awarded.

In addition, as of September 30, 2020 Mr.

Pritchard has outstanding advances of $28,828.

34 unchanged sentences

on Form 10-K for the year ended December 31, 2019.

Inventory Inventory

consists of oil in tanks which has not been delivered and is valued at the contract price to the buyer and pipe which has not yet

16 unchanged sentences

under the oil and natural gas marketing contracts is typically received from the purchaser one to two months after production.

At June 30, 2020, the Company had receivables related to contracts with customers of approximately $590,000.

At September 30, 2020, the Company had receivables related to contracts with customers of approximately $610,000.

Fair value measurements.

3 unchanged sentences

value of the convertible debt approximate fair value as of December 31, 2019.

As of June 30, 2020 all of the convertible debt had

been converted to shares of the Company’s common stock.

As of September 30, 2020 all of the convertible debt

had been converted to shares of the Company’s common stock.

Management's estimates are based on the assessment of qualitative

33 unchanged sentences

On February 10, 2020, the Company, through

its wholly owned subsidiary, Empire North Dakota, LLC, sold overriding royalty interests for leases it owned in Montana for $325,000

to a consultant of the Company.

As of June 30, 2020 $200,000 of the sales price had been received with the balance pending completion

of title work.

its wholly owned subsidiary, Empire North Dakota, LLC, sold overriding royalty interests for leases it owned in Montana for up

to $325,000 to a consultant of the Company, $200,000 of which was purchased in the first quarter of 2020 and the final $125,000

was purchased in the third quarter of 2020.

On February 17, 2020 the Company, through its

2 unchanged sentences

owned subsidiary, Empire Texas, LLC, purchased oil and natural gas properties in Texas (see Note 5).

During the six months ended June 30, 2020,

NYMEX strip prices experienced significant volatility, resulting in a significant decrease in value of the Company’s economically

recoverable proved oil and natural gas reserves.

As such, the carrying amount of the Company’s proved oil and natural gas

properties exceeded the expected undiscounted future net cash flows for certain leases, resulting in impairment charges against

earnings of $800,452.

These impairment charges are included in impairments of long-lived assets on the consolidated statement of

operations for the six months ended June 30, 2020.

The Company did not recognize an impairment of proved oil and natural gas properties

during the six months ended June 30, 2019.

During the nine months ended September 30,

2020, NYMEX strip prices experienced significant volatility, resulting in a significant decrease in value of the Company’s

economically recoverable proved oil and natural gas reserves.

As such, the carrying amount of the Company’s proved oil and

natural gas properties exceeded the expected undiscounted future net cash flows for certain leases, resulting in impairment charges

against earnings of $800,452 for the quarter ended March 31, 2020.

These impairment charges are included in impairments of long-lived

assets on the consolidated statement of operations for the nine months ended September 30, 2020.

The Company did not recognize

an impairment of proved oil and natural gas properties during the nine months ended September 30, 2019.

The aggregate capitalized costs

of oil and natural gas properties as of June 30, 2020, are as follows:

of oil and natural gas properties as of September 30, 2020, are as follows:

Proved producing wells

7 unchanged sentences

furniture and equipment.

Oher property and equipment, at cost

Other property and equipment, at cost

accumulated depreciation

Oher property and equipment, net

OF OVINTIV OIL AND NATURAL GAS PROPERTIES

OIL AND NATURAL GAS PROPERTIES

On March 3, 2020 the Company, through its wholly

2 unchanged sentences

26,600 net acres with 94 active wells.

The purchase price is $8,500,000, subject to adjustments with an effective date of January

The purchase price was $8,500,000, subject to adjustments with an effective date of January

1, 2020 and a closing date of April 30, 2020.

The Company has made an $850,000 deposit relating

to the purchase which is recorded as a deposit on its balance sheet.

Due to the COVID pandemic, and governmental state of emergency

orders related thereto, the Company was unable to meet with and obtain financing to complete the purchase from its lenders.

of June 30, 2020 the Agreement has been terminated.

The Company is currently in communication with the Seller for return of the

The Company may not be successful in obtaining return of the entire deposit and has recorded an allowance of $725,000

based on its assessment of the negotiations.

The Company made an $850,000 deposit relating

to the purchase.

Due to the COVID pandemic and governmental state of emergency orders related thereto, the Company was unable to

meet with and obtain financing to complete the purchase from its lenders.

The Agreement has been terminated and the parties have

agreed to settle with Empire receiving a $50,000 return of its deposit.

The Company had estimated a loss on the deposit of $725,000

in the quarter ending June 30, 2020.

The remainder of the loss has been recorded in the quarter ending September 30, 2020.

OF PARDUS OIL AND NATURAL GAS PROPERTIES

58 unchanged sentences

OF WARHORSE OIL AND NATURAL GAS PROPERTIES

On June 10, 2019, the Company received a process verbal and

related sheriff's deed dated as of May 29, 2019 (the "Sheriff's Deed") pertaining to two wells in St.

Landry Parish purchased

from Business First Bancshares, Inc.

On September 10, 2019, the Company received a process verbal

and related sheriff's deed dated as of May 29, 2019 (the "Sheriff's Deed") pertaining to two wells in St.

Landry Parish

purchased from Business First Bancshares, Inc.

d/b/a Business First Bank ("Business First").

58 unchanged sentences

of liabilities primarily related to well activity prior to close.

DEVELOPMENT AGREEMENT

On August 6, 2020 the Company, through its

wholly owned subsidiary, Empire Texas, LLC (“ET”), entered into a joint development agreement (the “Agreement”)

with Petroleum & Independent Exploration, LLC and related entities (“PIE”) dated August 1, 2020.

Under the terms

of the Agreement, PIE will perform recompletion or workover on specified mutually agreed upon wells (“Workover Wells”)

To fund the work, PIE entered into a term loan agreement with ET dated August 1, 2020, whereby PIE will loan up to

$2,000,000, at an interest rate of 6% per annum, maturing August 7, 2024 unless terminated earlier by PIE.

Proceeds of the loan

will be used for recompletion or workover of the Workover Wells.

As of September 30, 2020 approximately $70,000 has been advanced

from the loan.

As part of the Agreement, ET will assign to PIE a combined 85% working and revenue interest in the Workover Wells;

an assignment was completed in October 2020 for the initial three Workover Wells.

Of the assigned interest, 70% working and revenue

interest will be used to repay the obligations under the term loan agreement.

Once the term loan is repaid, PIE will reassign a

35% working and revenue interest to ET in each of the Workover Wells and retain a 50% working and revenue interest (See Note 10).

In addition, PIE and Empire entered into a

Securities Purchase Agreement (“Securities Agreement”) whereby PIE purchased for $525,000 (a) 3,500,000 shares of Empire

common stock, (b) warrants to purchase 2,625,000 shares of Empire common stock at an exercise price of $0.20 per share, (c) warrants

to purchase 1,800,000 shares of Empire common stock at an exercise price of $0.25 per share, (d) warrants to purchase 8,136,518

shares of Empire common stock at an exercise price of $0.10 per share, and (e) warrants to purchase up to 11,066,667 shares of

Empire common stock at an exercise price of $0.141 per share.

PIE is obligated to exercise the $0.20 warrants within 45 days of

when 3 month trailing average production from the Empire Texas properties have increased by 20% over the trailing 3 month trailing

average production as of July 2020.

PIE can only exercise the $0.25 warrants once all existing non-PIE outstanding warrants to

purchase Empire common stock have been exercised or lapsed.

For the $0.141 warrants, PIE may initially acquire 7,533,333 shares

of Empire common stock, however the amount may be increased if any existing non-PIE warrants are exercised prior to December 31,

2020 (See Note 11).

FINANCIAL INSTRUMENTS

4 unchanged sentences

The Company’s derivative financial instruments

consist of oil and natural gas swaps.

consist of oil gas swaps.

The Company does not enter into derivative

7 unchanged sentences

The following table summarizes the net realized

and unrealized amounts reported in earnings related to the commodity derivative instruments for the three and six months ended

June 30, 2020 and 2019:

Three months ended June 30,

Six months ended June 30,

and unrealized amounts reported in earnings related to the commodity derivative instruments for the three and nine months ended

September 30, 2020 and 2019:

Three months ended

September 30,

Nine months ended

September 30,

Gain (loss) on derivatives:

2 unchanged sentences

The following represents the Company’s

net cash receipts from derivatives for the three and six months ended June 30, 2020 and 2019:

Three months ended June 30,

Nine months ended June 30,

net cash receipts from derivatives for the three and nine months ended September 30, 2020 and 2019:

Three months ended

September 30,

Nine months ended

September 30,

Net cash received from payments on derivatives

2 unchanged sentences

The following table sets forth the Company’s

outstanding derivative contracts at June 30, 2020.

outstanding derivative contracts at September 30, 2020.

The Company has no outstanding natural gas derivatives.

15 unchanged sentences

The Agreement was

amended March 27, 2019 (the “Amended Agreement”).

The Amended Agreement commitment amount is $9,000,000 which is reduced

by $150,000 per calendar quarter ($8,400,000 at June 30, 2020) and the maximum amount that can be advanced under the Agreement

is $20,000,000 and includes interest at Wall Street Journal Prime plus 150 basis points (4.75% as of June 30, 2020).

The Agreement

matures on March 27, 2021.

Collateral for the loan is a lien on all of the assets of the Company’s wholly owned subsidiaries,

Empire Louisiana and Empire North Dakota, and a first priority mortgage lien, pledge of and security interest in not less than

80% of Empire Louisiana’s and Empire North Dakota’s producing oil, gas and other leasehold and mineral interests.

Agreement requires Empire Louisiana, beginning December 31, 2018 to maintain certain covenants including an EBITDAX to interest

expense of at least 3:1 and funded debt to EBITDAX of 4:1 on a trailing twelve month basis.

The Company is not in compliance with

the funded debt to EBITDAX covenant of the Agreement at June 30, 2020.

As of June 30, 2020, the Company has an outstanding loan

balance of $8,397,253 under the Agreement.

amended March 27, 2019 and September 30, 2020 (effective as of June 30, 2020) (the “Amended Agreement”).

Agreement commitment amount is $8,700,000 which is reduced by $180,000 per calendar quarter ($8,520,000 at September 30, 2020)

and the maximum amount that can be advanced under the Agreement is $20,000,000 and includes interest at Wall Street Journal Prime

plus 150 basis points (4.75% as of September 30, 2020).

The Agreement matures on March 27, 2021.

Collateral for the loan is a lien

on all of the assets of the Company’s wholly owned subsidiaries, Empire Louisiana and Empire North Dakota, and a first priority

mortgage lien, pledge of and security interest in not less than 80% of Empire Louisiana’s and Empire North Dakota’s

producing oil, gas and other leasehold and mineral interests.

The Agreement requires Empire Louisiana, beginning December 31, 2018

to maintain certain covenants including an EBITDAX to interest expense of at least 3:1 and funded debt to EBITDAX of 4:1 on a trailing

twelve month basis.

The Company is not in compliance with these covenants of the Agreement at September 30, 2020.

As of September

30, 2020, the Company has an outstanding loan balance of $8,397,000 under the Agreement.

In January 2020 three of the Senior Unsecured

6 unchanged sentences

The note is payable in one installment on April 1, 2021 and bears interest at the one-year LIBOR

rate (1% as of June 30, 2020).

rate (1% as of September 30, 2020).

On May 5, 2020, the Company, through its wholly

1 unchanged sentence

The loan matures on May 5, 2022 and has an interest rate of 1%.

There are no payments due until November 5, 2020 at which time

the payment amount will be determined based on the portion of the loan which has not been forgiven under criteria established by

the SBA, using an eighteen-month amortization.

The Company expects that the majority of the loan amount will be forgiven based

on currently published guidelines of the United States Small Business Administration.

There are no payments due until ten months after the covered period

which ended October 20, 2020, at which time the payment amount will be determined based on the portion of the loan which has not

been forgiven under criteria established by the SBA, using an eighteen-month amortization.

The Company expects that the majority

of the loan amount will be forgiven based on currently published guidelines of the United States Small Business Administration.

In August 2020, concurrent with the Joint Development

Agreement with Petroleum and Independent Exploration, LLC (“PIE”), the Company entered into a term loan agreement dated

August 1, 2020, whereby PIE will loan up to $2,000,000, at an interest rate of 6% per annum, maturing August 7, 2024 unless terminated

earlier by PIE.

The loan proceeds will be used for recompletion or workover of certain designated wells.

In addition, the Company

assigned a 70% working and revenue interest to PIE in the designated wells which will be applied to repayment of the loan.

September 30, 2020, approximately $70,000 has been advanced from the loan (See Note 8).

Diluted Earnings per Share ("EPS")

4 unchanged sentences

is a loss from continuing operations, Diluted EPS is computed in the same manner as Basic EPS.

At March 31, 2020 and 2019, the

Company had 5,004,167 and 4,167 respectively, options outstanding that were not included in the calculation of earnings per share

for the periods then ended.

At September 30, 2020 and 2019,

the Company had 5,004,167 and 4,167 respectively, options outstanding that were not included in the calculation of earnings per

share for the periods then ended.

Such financial instruments may become dilutive and would then need to be included in future calculations

of Diluted EPS.

At June 30, 2020 and 2019, the outstanding options were considered anti-dilutive since the strike prices were above

the market price and since the Company has incurred losses year to date.

At September 30, 2020 and 2019, the outstanding options were considered anti-dilutive since the strike prices were

above the market price and since the Company has incurred losses year to date.

In March 2019, 1,446,668 outstanding $0.15

29 unchanged sentences

the fair value of the options which vested in April 2020 of $406,250 was recorded as compensation expense and allocated to Paid

The fair of the remaining unvested options is $406,250 as of June 30, 2020.

The fair of the remaining unvested options is $406,250 as of September 30, 2020.

On April 3, 2019 the Board of Directors of

11 unchanged sentences

the warrants of $620,750 was recorded as compensation expense and allocated to Paid in Capital.

On August 6, 2020 the Company, through its

wholly owned subsidiary, Empire Texas, LLC, entered into a joint development agreement (the “Agreement”) with Petroleum

& Independent Exploration, LLC and related entities (“PIE”) dated August 1, 2020.

Under the terms of the Agreement,

PIE will perform recompletion and workover on specified wells owned by Empire.

To fund the work, PIE entered into a term loan agreement

with Empire dated August 1, 2020, whereby PIE will loan up to $2,000,000, at an interest rate of 6% per annum, maturing August

7, 2024 unless terminated earlier by PIE.

On August 7, 2020, $150,000 was advanced to Empire from the loan.

As part of the Agreement,

Empire will assign to PIE a combined 85% working and revenue interest in the affected wells.

Of the assigned interest, 70% will

be used to repay the obligations under the term loan agreement.

Once the term loan is repaid, PIE will assign a 35% working and

revenue interest to Empire and retain a 50% working and revenue interest.

In addition, PIE and Empire entered into a Securities

Purchase Agreement (“Securities Agreement”) whereby PIE has agreed to purchase for $525,000 (a) 3,500,000 shares of

Empire common stock, (b) warrants to purchase 2,625,000 shares of Empire common stock at an exercise price of $0.20 per share,

(c) warrants to purchase 1,800,000 shares of Empire common stock at an exercise price of $0.25 per share, (d) warrants to purchase

8,136,518 shares of Empire common stock at an exercise price of $0.10 per share, and (e) warrants to purchase up to 11,066,667

On August 7, 2020 concurrently with the Joint

Development Agreement with Petroleum & Independent Exploration, LLC and related entities (“PIE”), the companies

entered into a Securities Purchase Agreement (“Securities Agreement”) whereby PIE purchased for $525,000 (a) 3,500,000

shares of Empire common stock, (b) warrants to purchase 2,625,000 shares of Empire common stock at an exercise price of $0.20 per

share, (c) warrants to purchase 1,800,000 shares of Empire common stock at an exercise price of $0.25 per share, (d) warrants to

purchase 8,136,518 shares of Empire common stock at an exercise price of $0.10 per share, and (e) warrants to purchase up to 11,066,667

shares of Empire common stock at an exercise price of $0.141 per share.

6 unchanged sentences

shares of Empire common stock, however the amount may be increased if any existing non-PIE warrants are exercised prior to December

The value allocated to the warrants was the fair value determined using the Black-Scholes option valuation with

the following assumptions:

no dividend yield, expected annual volatility of 147%, risk free interest rate of .19% and an

expected useful life of 4 years.

The fair value of the warrants of $450,848 was allocated to Paid in Capital (See Note 8).

SUBSEQUENT EVENTS

On October 1, 2020 the Company entered into

a new office lease agreement.

The term of the lease is 63 months commencing October 1, 2020 through December 31, 2025 with lease

rates ranging from $0 per month for the first three months to $13,038 per month for the final year.

The Company is accounting for

the lease as an operating lease.

In October 2020 the Company entered into a

$306,000 Letter of Credit agreement, utilizing the commitment under its Senior Revolver Loan Agreement (see Note 10).

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements