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Item 9A. Controls and Procedures

2021-03-31 compared with 2020-03-30 · 1052 added, 821 removed, 667 unchanged (74% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this

report, the Company carried out an evaluation under the supervision of the Company’s Chief Executive Officer and President (principal

officer and principal financial officer) of the effectiveness of the design and operation of the Company’s disclosure controls

As of the end of the period covered by

this report, the Company carried out an evaluation under the supervision of the Company's Chief Executive Officer and

President (principal financial officer) of the effectiveness of the design and operation of the Company's disclosure controls

and procedures pursuant to Securities Exchange Act Rules 13a - 15(e) and 15d - 15(e).

Based on this evaluation, the Company’s Chief

Executive Officer and President (principal financial officer) concluded that the disclosure controls and procedures as of the end

of the period covered by this report are effective.

Management’s Annual Report on Internal

Control Over Financial Reporting

The Company’s Chief Executive Officer and

President (principal financial officer) are responsible for establishing and maintaining adequate internal control over financial

reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

The Company’s

internal controls were designed to provide reasonable assurance as to the reliability of the Company’s financial reporting and

the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles in

the United States.

Due to inherent limitations, internal control

over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of control effectiveness

to future periods are subject to the risk that the controls may become inadequate because of changes in conditions or that the

degree of compliance with the policies or procedures may deteriorate.

The Company’s Chief Executive Officer and

President (principal financial officer) made an assessment of the effectiveness of the Company’s internal control over financial

reporting as of December 31, 2019.

In making this assessment, the Company’s Chief Executive Officer and President (principal

financial officer) used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission (COSO) in 1992.

Based on this assessment, the Company’s Chief Executive Officer

and President (principal financial officer) concluded that as of December 31, 2019, the Company’s internal control over financial

reporting is effective based on those criteria.

This annual report does not include an attestation

report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

Management’s

report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the SEC,

which only require management’s report in this annual report.

on Internal Control over Financial Reporting

was no change in the Company’s internal control over financial reporting identified in connection with the Company’s evaluation

of disclosure controls and procedures which occurred during the Company’s last fiscal quarter (the fourth fiscal quarter in the

case of an annual report) that has materially affected or that is reasonably likely to materially affect the Company’s internal

Based on this evaluation, the

Company's Chief Executive Officer and President (principal financial officer) concluded that the disclosure controls and

procedures as of the end of the period covered by this report are not effective due to material weakness identified below.

Annual Report on Internal Control Over Financial Reporting

Limitations on Effectiveness of Controls .

designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter

how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

the design of reporting and disclosure controls and procedures must reflect the fact that there are resource constraints and that

management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures .

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in

Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) and for the assessment of the effectiveness of internal

control over financial reporting.

Our management, with the participation of our Chief Executive Officer and President (principal

financial officer), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020.

In making this

assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)

in Internal Control —

Integrated Framework (2013).

The term “disclosure controls and procedures,”

in Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other

procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that

it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified

in the SEC’s rules and forms.

Reporting and disclosure controls and procedures include, without limitation, controls and

procedures designed to ensure that information required to be reported and disclosed by a company in the reports that it files

or submits under the Exchange Act is accumulated and communicated to management, including our principal executive and principal

financial officers, as appropriate to allow timely decisions regarding required reporting figures and disclosures.

Based on our evaluation, our Chief Executive Officer

and President (principal financial officer) concluded that, as of December 31, 2020, our reporting and disclosure controls and

procedures were not effective at a reasonable assurance level as we do not have sufficient resources in our accounting function,

which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in

a timely manner.

In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and

may not be economically feasible.

In the first quarter of 2021, the Company engaged a financial consultant to assist with the evaluation

of its disclosure controls and procedures.

In connection with such engagement, our management had already concluded that the Company’s

accounting resources became taxed during certain acquisition activities and the Company should hire additional knowledgeable accounting

personnel, which the Company believes will assist with properly segregating duties and timely analyzing and reviewing information

related to financial reporting.

Our management will continue to work with this financial consultant and perform additional analysis

and other procedures to help address the material weakness described above.

Notwithstanding the assessment that our internal control

over financial reporting was not effective and that there is a material weakness as identified herein, we believe that our consolidated

financial statements contained in this Annual Report on Form 10-K fairly present our consolidated financial position, results of

operations and cash flows for the periods covered thereby in all material respects.

Changes on Internal Control over Financial

There was no change in the Company's internal

control over financial reporting identified in connection with the Company's evaluation of disclosure controls and procedures which

occurred during the Company's last fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially

affected or that is reasonably likely to materially affect the Company's internal control over financial reporting.

OTHER INFORMATION.

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Thomas Pritchard

and Chief Executive Officer

and President

and Chairman of the Board

Director and Chief Executive Officer

Director and President

Director and Chairman of the Board

_________________

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From 2012 to 2014, Mr.

Pritchard served

as Managing Director of the Energy Investment Banking division of Imperial Capital.

Pritchard served as Managing Director of the

Energy Investment Banking division of Imperial Capital.

Prior to this role, Mr.

Pritchard served as

CEO and Managing Director of Pritchard Capital Partners, which he founded in 2001 and later sold majority ownership in 2011.

a period of ten years, Pritchard Capital Partners participated in raising over $15 billion in capital for firms in the oil and

gas industry and provided trading and research services annually to over 150 energy companies.

Pritchard co-founded

Offshore Tool and Energy, Inc., an oilfield services company that was sold in 2001.

He began his professional career in 1984 with

Drexel Burnham Lambert, and later held key roles at Bear Stearns, Jefferies and Johnson Rice.

Pritchard earned his undergraduate

degree in Geology from Washington and Lee University.

Pritchard served as CEO and Managing Director of

Pritchard Capital Partners, which he founded in 2001 and later sold majority ownership in 2011.

Over a period of ten years, Pritchard

Capital Partners participated in raising over $15 billion in capital for firms in the oil and gas industry and provided trading

and research services annually to over 150 energy companies.

Pritchard co-founded Offshore Tool and Energy, Inc.,

an oilfield services company that was sold in 2001.

He began his professional career in 1984 with Drexel Burnham Lambert, and later

held key roles at Bear Stearns, Jefferies and Johnson Rice.

Pritchard earned his undergraduate degree in Geology from Washington

and Lee University.

Morrisett has served as a director of the Company

and as the Company’s President since January 19, 2015.

and as the Company's President since January 19, 2015.

Morrisett has over 25 years of experience in investment banking

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From April 2014 to May 2017, Mr.

Morrisett has served as the Chief Financial Officer and is currently a Director of a privately held media and technology portfolio

Morrisett served as the Chief Financial Officer and is currently a Director of a privately held media and technology portfolio

company based in San Francisco, California.

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As of December

31, 2019, the entire Board of Directors essentially serve as the Company’s audit committee.

31, 2020, the entire Board of Directors essentially serve as the Company's audit committee.

Code of Ethics

The Company has adopted a Code of Ethics that

applies to all of the Company’s directors and employees, including the Company’s principal executive officer, principal financial

applies to all of the Company's directors and employees, including the Company's principal executive officer, principal financial

officer and principal accounting officer or persons performing similar functions.

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Requests may be directed to Empire Petroleum Corporation, 2200

East 33 rd Street, Suite 250, Tulsa Oklahoma, 74105, or by calling (539) 444-8002.

South Utica Place, Suite 150, Tulsa Oklahoma, 74114, or by calling (539) 444-8002.

Section 16(a) Beneficial Ownership Reporting

Section 16(a) of the Securities Exchange Act

of 1934, as amended, requires the Company’s directors, executive officers, and persons who beneficially own more than 10 percent

of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes

of 1934, as amended, requires the Company's directors, executive officers, and persons who beneficially own more than 10 percent

of a registered class of the Company's equity securities, to file with the SEC initial reports of ownership and reports of changes

in ownership of Common Stock and other equity securities of the Company.

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reports furnished to the Company and any written representations that in other reports were required during the year ended December

31, 2019, to the Company’s knowledge, all Section 16(a) filing requirements applicable to its officers, directors and greater than

31, 2020, to the Company's knowledge, all Section 16(a) filing requirements applicable to its officers, directors and greater than

10% beneficial owners during the year ended December 31, 2020 were complied with on a timely basis.

COMPENSATION.

The Board of Directors does not have a Compensation

EXECUTIVE COMPENSATION.

For the years ended December 31, 2019 and

8, the Company paid Mr.

Morrisett $238,450 and $156,400 respectively, for services rendered.

For the years ended December 31, 2019

and 2018, the Company paid Mr.

Pritchard $242,450 and $156,400 respectively, for services rendered as Chief Executive Officer.

As of December 31, 2019 Mr.

Pritchard has an outstanding receivable of $28,017.

Director Compensation

The Board of Directors does not have a Compensation

Plan and Board members are not paid for their Board service.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS.

Board of Directors does not have a Compensation Committee.

following table set forth certain information regarding compensation of the Company's named executive officers.

Name and Principal Position

Stock Awards ($)

Non-Equity Incentive Plan Compensation ($)

All Other Compensation ($)

Total Compensation ($)

Thomas Pritchard

Chief Executive Officer

Michael Morrisett

_______________________

1 For information on the assumptions used in the valuation of these awards, see Note 11 included in the Notes to Consolidated Financial

Statements included in this Annual Report on Form 10-K.

2 The current

salary of both Mr.

Pritchard and Mr.

Morrisett is $250,000 per year.

of this amount was a bonus for 2019 performance paid in 2020, and $174,000 of this amount was a bonus for 2020 performance, but

will be paid over time in fiscal year 2021 subject to the Company having sufficient funds.

4 This amount is for

the extension of warrants described immediately below this table.

For information on the assumptions used in the valuation of

these extensions, see Note 10 included in the Notes to Consolidated Financial Statements included in this Annual Report on

Smith’s

current salary is $190,000 per year.

This amount represents payment for a partial year.

of December 31, 2020, none of the named executive officers had employment contracts.

December 31, 2020, warrant certificates issued to Mr.

Pritchard and Mr.

Morrisett pursuant to which each such named executive

officer has the right to acquire 500,000 shares of the Company’s common stock at an exercise price of $0.25 per share were

extended so that such warrant certificates can be exercised on or before April 2, 2029 to make such grants consistent with the

2019 Stock Plan.

December 31, 2020, each of Mr.

Pritchard and Mr.

Morrisett were issued options to acquire 2,000,000 shares of the Company’s

common stock at an exercise price of $0.35 per share under the 2019 Stock Plan.

Equity Awards at December 31, 2020

following table set forth certain information regarding outstanding equity awards of the Company's named executive officers.

and warrant awards

of securities underlying unexercised options and warrants (#) exercisable

of securities underlying unexercised options and warrants (#) unexercisable

incentive plan awards:

Number of securities underlying unexercised unearned options and warrants (#)

Option / warrant

expiration date

_______________________

The vest date is April 2, 2021.

of December 31, 2020, the Company did not have any plan that provides for the payment of retirement benefits to named executive

officers or benefits to a named executive officer in connection with the resignation, retirement or other termination of such

named executive officer or a change in control of the registrant.

Board of Directors does not have a Compensation Plan.

From time to time in the past, the Company has compensated Board members

for service through the issuance of warrants or options.

On December 31, 2020, Mr.

Kamin was issued options to acquire 300,000

shares of the Company’s common stock at an exercise price of $0.35 per share under the 2019 Stock Plan.

For further information

on the assumptions used in the valuation of this award, see Note 11 included in the Notes to Consolidated Financial Statements

included in this Annual Report on Form 10-K.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Securities Authorized for Issuance under

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On April 3, 2019, the Board of Directors of

the Company adopted the Empire Petroleum Corporation 2019 Stock Option Plan (the “Stock Option Plan”).

the Company adopted the Empire Petroleum Corporation 2019 Stock Option Plan (the "Stock Option Plan").

The total number

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Company at an exercise price of $0.33 per share.

At the Company’s 2006 Annual Meeting of Stockholders,

the stockholders approved the “2006 Stock Incentive Plan”, which authorizes granting up to 5,000,000 options for up to

5,000,000 shares of the Company’s Common Stock.

The Plan terminated on June 5, 2016 at the end of its contractual life.

On December 31, 2020 the Company granted certain members of management and a member

of the Board of Directors options to purchase 5,000,000 shares of common stock of the Company at an exercise price of $0.35 per

The following table provides certain information

relating to the 2019 Stock Option Plan and the 2006 Stock Incentive Plan as of December 31, 2019, adjusted for the 2013 reverse

relating to the 2019 Stock Option Plan as of December 31, 2020:

Number of securities

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Equity compensation plans

approved by security

Equity compensation plans

not approved by security

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the following table is based on 57,515,919 shares of Common Stock outstanding as of March 31, 2021.

Unless otherwise indicated below, to the Company’s

Unless otherwise indicated below, to the Company's

knowledge, all persons and entities listed below have sole voting and investment power over their shares of Common Stock.

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Percent of class (1)

Morrison, CO 80465

Puckett Land Company

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Greenwood Village, CO 80111

10,000,000 (2)

I-45 North, Suite 420

Woodlands, Texas 77380

(1) The percentage ownership for

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own by virtue of having a right to acquire shares upon the conversion of options or other rights are considered outstanding solely

for purposes of calculating such person’s percentage ownership.

(2) The total

includes 5,000,000 shares of common stock issuable upon the exercise of warrants at $0.15 per share.

for purposes of calculating such person's percentage ownership.

(2) The total includes

548,000 shares of common stock issuable upon the exercise of a warrant at an exercise price of $0.50 per share.

Security Ownership of Management

Amount and nature of

Name and address of beneficial owner

beneficial ownership

Percent of class (1)

and nature of

and address of beneficial owner

6,068,128 (2)

Director and President

33rd Street, Suite 250

2200 South Utica Place, Suite 150

Tulsa, Oklahoma 74114

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5,498,114 (3)

33rd Street, Suite 250

Tulsa, Oklahoma 74105

Thomas Pritchard

Director and Chief Executive Officer

South Utica Place, Suite 150

Oklahoma 74114

and Chief Executive Officer

4,468,333 (4)

33rd Street, Suite 250

Tulsa, Oklahoma 74105

All current directors and executive officers as a group (3 persons)

South Utica Place, Suite 150

Oklahoma 74114

All current directors and executive officers

as a group (3 persons)

16,034,575 (5)

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own by virtue of having a right to acquire shares upon the conversion of options or other rights are considered outstanding solely

for purposes of calculating such person’s percentage ownership.

for purposes of calculating such person's percentage ownership.

(2) The total

includes 500,000 shares of common stock issuable upon the exercise of a warrant at an exercise price of $0.25 per share and options

to purchase 1,250,000 shares of common stock at an exercise price of $0.33 per share.

(3) The total includes

500,000 shares of common stock issuable upon the exercise of a warrant at $0.15 per share and 2,500,000 shares of common stock

issuable upon the exercise of a warrant at an exercise price of $0.25 per share.

to purchase 3,875,000 shares of common stock at an exercise price of $0.33 and $0.35 per share.

(3) The total

includes 500,000 shares of common stock issuable upon the exercise of a warrant at $0.15 per share, 2,500,000 shares of

common stock issuable upon the exercise of a warrant at an exercise price of $0.25 per share and options to purchase 300,000

shares of common stock at an exercise price of $0.35 per share and 428,571 shares of common stock issuable upon the exercise of

a warrant at an exercise price of $0.50 per share.

(4) The total

includes 500,000 shares of common stock issuable upon the exercise of a warrant at $0.25 per share and options to purchase 3,875,000

shares of common stock at an exercise price of $0.33 per share.

shares of common stock at an exercise price of $0.33 and $0.35 per share.

(5) The total includes

6,500,000 shares of common stock issuable upon the exercise of warrants and 400,000 shares issuable upon conversion of a convertible

CERTAIN RELATIONSHIPS

AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

4,000,000 shares of common stock issuable upon the exercise of warrants and 8,050,000 options to purchase common stock .

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Director Independence

Because of the small size of the Company’s

Because of the small size of the Company's

Board of Directors, the Company has not established any committees.

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Morrisett is not considered

“independent”

"independent"

within the meaning of Rule 5605(a)(2) of the NASDAQ listing standards.

PRINCIPAL ACCOUNTING FEES

AND SERVICES.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

The following is a summary of the fees billed

or to be billed to the Company by HoganTaylor LLP, the Company’s independent registered public accounting firm, for professional

or to be billed to the Company by HoganTaylor LLP, the Company's independent registered public accounting firm, for professional

services rendered for the fiscal years ended December 31, 2019 and December 31, 2018:

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(1) Audit Fees consist of aggregate

fees billed for professional services rendered for the audit of the Company’s annual financial statements and review of the interim

fees billed for professional services rendered for the audit of the Company's annual financial statements and review of the interim

financial statements included in quarterly reports or services that are normally provided by the independent registered public

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fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial

statements and are not reported under “Audit Fees.”

statements and are not reported under "Audit Fees."

These include work performed for 8K/A filings.

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above were pre-approved by the entire Board of Directors.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

AND FINANCIAL STATEMENT SCHEDULES.

(a) (1) Financial Statements

financial statements under this item are included in Item 8 of Part II.

The financial statements under this item are

included in Item 8 of Part II.

(2) Schedules

Purchase and Sale Agreement dated as of July

12, 2018, by and between Exodus Energy, Inc.

and Empire Louisiana LLC (incorporated herein by reference to Exhibit 2.1 of the Company’s

Form 8-K dated July 13, 2018 filed on July 19, 2018).

Purchase and Sale Agreement dated as of July

23, 2018, by and between Cardinal Exploration and Production Company and Empire Louisiana LLC (incorporated herein by reference

to Exhibit 2.1 of the Company’s Form 8-K dated July 23, 2018 filed on July 25, 2018).

Assignment, Bill of Sale and Conveyance by

and between Empire Louisiana LLC and Riviera Upstream, LLC dated October 25, 2018 (incorporated herein by reference to Exhibit

2.1 of the Company’s Form 8-K dated October 29, 2018 filed on November 2, 2018).

Articles of Incorporation of the Company, as amended (incorporated herein by reference to Exhibit 3.1 of the Company’s Form 10-QSB for the period ended September 30, 1995, which was filed November 6, 1995).

Certificate of Amendment to Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Form 8-K dated May 31, 2012, which was filed on June 1, 2012).

Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 of the Company’s Form 10-QSB for the period ended March 31, 1998, which was filed May 15, 1998).

Securities Purchase Agreement dated as of

August 28, 2018 by and between Empire Petroleum Corporation and Puckett Land Company (incorporated herein by reference to Exhibit

10.1 of the Company’s Form 8-K dated August 28, 2018 filed on September 4, 2018).

Common Share Warrant Certificate dated as

of August 28, 2018 issued by Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10.2 of the Company’s Form

8-K dated August 28, 2018 filed on September 4, 2018).

Form of Securities Purchase Agreement entered

into between Empire Petroleum Corporation and six accredited investors (incorporated herein by reference to Exhibit 10.2 of the

Company’s Form 8-K dated September 20, 2018 filed on September 25, 2018).

Form of Common Share Warrant Certificate entered

into by and between Empire Petroleum Corporation and six accredited investors (incorporated herein by reference to Exhibit 10.2

of the Company’s Form 8-K dated September 20, 2018 filed on September 25, 2018).

2006 Stock Incentive Plan (incorporated

herein by reference to Exhibit A to the Company’s 2006 Proxy Statement on Schedule 14A dated May 10, 2006).

Form of Non-qualified Stock Option Agreement

(incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated June 5, 2006, which was filed on June 9, 2006).

Form of Non-qualified Stock Option Agreement

for Non-employee Directors (incorporated herein by reference to Exhibit 10.3 to the Company’s Form 8-K dated June 5, 2006, which

was filed on June 9, 2006).

Form of Restricted Stock Award Agreement (incorporated

herein by reference to Exhibit 10.4 to the Company’s Form 8-K dated June 5, 2006, which was filed on June 9, 2006).

Purchase and Sale Agreement dated as

of February 15, 2019, by and between EnergyQuest and Empire North Dakota LLC (incorporated herein by reference to Exhibit 2.1 to

the Company’s Form 8-K dated February 27, 2019, which was filed on March 5, 2019).

Purchase and Sale Agreement dated as of April 6, 2020, by and between Pardus Oil & Gas, LLC and Pardus Oil & Gas Operating GP, LLC and Empire Texas LLC (incorporated herein by reference to Exhibit 2.1 to the Company’s Form 8-K dated April 6, 2020, which was filed on April 10, 2020).

Articles of Incorporation of the Company, as amended (incorporated herein by reference to Exhibit 3.1 of the Company's Form 10-QSB for the period ended September 30, 1995, which was filed November 6, 1995).

Certificate of Amendment to Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company's Form 8-K dated May 31, 2012, which was filed on June 1, 2012).

Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 of the Company's Form 10-QSB for the period ended March 31, 1998, which was filed May 15, 1998).

Description of the Common Stock of Empire Petroleum

Corporation Registered Under Section 12 of the Securities Exchange Act of 1934 (submitted herewith).

Empire Petroleum Corporation 2019 Stock Option

Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated April 3, 2019, which was filed on April

Plan (incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K dated April 3, 2019, which was filed on April

Form of Non-Qualified Stock Option Award Agreement

(incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated April 3, 2019, which was filed on April 9, 2019).

(incorporated herein by reference to Exhibit 10.2 to the Company's Form 8-K dated April 3, 2019, which was filed on April 9, 2019).

Senior Revolver Loan Agreement dated as of

September 20, 2018 by and between Empire Louisiana, LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 of

the Company’s Form 8-K dated September 20, 2018 filed on September 25, 2018).

First Amendment to Senior Revolver Loan Agreement, dated as of March 27, 2019, by and between Empire Louisiana LLC, Empire North Dakota LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated March 27, 2019, which was filed on April 2, 2019).

the Company's Form 8-K dated September 20, 2018 filed on September 25, 2018).

First Amendment to Senior Revolver Loan Agreement,

dated as of March 27, 2019, by and between Empire Louisiana LLC, Empire North Dakota LLC and CrossFirst Bank (incorporated herein

by reference to Exhibit 10.1 to the Company’s Form 8-K dated March 27, 2019, which was filed on April 2, 2019).

Securities Purchase Agreement dated as of August 6, 2020, by and

between Empire Petroleum Corporation and Petroleum Independent & Exploration LLC (incorporated herein by reference to Exhibit

10.1 to the Company’s Form 8-K dated August 6, 2020, which was filed on August 11, 2020).

Common Share Warrant Certificate No.

PIE-1 dated August 6, 2020

(incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated August 6, 2020, which was filed on August

Common Share Warrant Certificate No.

PIE-2 dated August 6, 2020

(incorporated herein by reference to Exhibit 10.3 to the Company’s Form 8-K dated August 6, 2020, which was filed on August

Common Share Warrant Certificate No.

PIE-3 dated August 6, 2020

(incorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K dated August 6, 2020, which was filed on August

Common Share Warrant Certificate No.

PIE-4 dated August 6, 2020

(incorporated herein by reference to Exhibit 10.5 to the Company’s Form 8-K dated August 6, 2020, which was filed on August

Loan Agreement dated as of August 6, 2020, by and between Empire

Texas LLC and Petroleum Independent & Exploration LLC (incorporated herein by reference to Exhibit 10.6 to the Company’s

Form 8-K dated August 6, 2020, which was filed on August 11, 2020).

Second Amendment to Senior Revolver Loan Agreement, dated as of

June 30, 2020, by and between Empire Louisiana LLC, Empire North Dakota LLC and CrossFirst Bank (incorporated herein by reference

to Exhibit 10.1 to the Company’s Form 8-K dated September 30, 2020, which was filed on October 6, 2020).

Third Amendment to Senior Revolver Loan Agreement, dated as of

December 31, 2020, by and between Empire Louisiana LLC, Empire North Dakota LLC and CrossFirst Bank (incorporated herein by reference

to Exhibit 10.1 to the Company’s Form 8-K dated March 10, 2021, which was filed on March 15, 2021).

Letter Agreement dated as of March 11, 2021 by and between Empire Petroleum Corporation and Petroleum Independent & Exploration LLC (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated March 10, 2021, which was filed on March 15, 2021).

Rule 13a –

14(a)/15d –

14(a) Certification

of Thomas Pritchard, Chief Executive Officer (submitted herewith).

14(a) Certification of Thomas Pritchard, Chief Executive Officer (submitted herewith).

Rule 13a –

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EXHIBIT INDEX

and Sale Agreement dated as of July 12, 2018, by and between Exodus Energy, Inc.

and Empire Louisiana LLC (incorporated herein

by reference to Exhibit 2.1 of the Company’s Form 8-K dated July 13, 2018 filed on July 19, 2018).

and Sale Agreement dated as of July 23, 2018, by and between Cardinal Exploration and Production Company and Empire Louisiana

LLC (incorporated herein by reference to Exhibit 2.1 of the Company’s Form 8-K dated July 23, 2018 filed on July 25, 2018).

Bill of Sale and Conveyance by and between Empire Louisiana LLC and Riviera Upstream, LLC dated October 25, 2018 (incorporated

herein by reference to Exhibit 2.1 of the Company’s Form 8-K dated October 29, 2018 filed on November 2, 2018).

and Sale Agreement dated as of February 15, 2019, by and between EnergyQuest and Empire North Dakota LLC (incorporated herein

by reference to Exhibit 2.1 to the Company’s Form 8-K dated February 27, 2019, which was filed on March 5, 2019).

and Sale Agreement dated as of April 6, 2020, by and between Pardus Oil & Gas, LLC and Pardus Oil & Gas Operating

GP, LLC and Empire Texas LLC (incorporated herein by reference to Exhibit 2.1 to the Company’s Form 8-K dated April

6, 2020, which was filed on April 10, 2020).

Articles of Incorporation

of the Company, as amended (incorporated herein by reference to Exhibit 3.1 of the Company’s Form 10-QSB for the period ended

of the Company, as amended (incorporated herein by reference to Exhibit 3.1 of the Company's Form 10-QSB for the period ended

September 30, 1995, which was filed November 6, 1995).

of Amendment to Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Form 8-K dated

of Amendment to Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company's Form 8-K dated

May 31, 2012, which was filed on June 1, 2012).

of the Company (incorporated herein by reference to Exhibit 3.2 of the Company’s Form 10-QSB for the period ended March 31,

1998, which was filed May 15, 1998) .

Purchase Agreement dated as of August 28, 2018 by and between Empire Petroleum Corporation and Puckett Land Company (incorporated

herein by reference to Exhibit 10.1 of the Company’s Form 8-K dated August 28, 2018 filed on September 4, 2018).

Share Warrant Certificate dated as of August 28, 2018 issued by Empire Petroleum Corporation (incorporated herein by reference

to Exhibit 10.2 of the Company’s Form 8-K dated August 28, 2018 filed on September 4, 2018).

of Securities Purchase Agreement entered into between Empire Petroleum Corporation and six accredited investors (incorporated

herein by reference to Exhibit 10.2 of the Company’s Form 8-K dated September 20, 2018 filed on September 25, 2018).

of Common Share Warrant Certificate entered into by and between Empire Petroleum Corporation and six accredited investors

(incorporated herein by reference to Exhibit 10.2 of the Company’s Form 8-K dated September 20, 2018 filed on September

Stock Incentive Plan (incorporated herein by reference to Exhibit A to the Company’s 2006 Proxy Statement on Schedule

14A dated May 10, 2006).

of Non-qualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated

June 5, 2006, which was filed on June 9, 2006).

of Non-qualified Stock Option Agreement for Non-employee Directors (incorporated herein by reference to Exhibit 10.3 to

the Company’s Form 8-K dated June 5, 2006, which was filed on June 9, 2006) .

of Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K dated

June 5, 2006, which was filed on June 9, 2006).

Petroleum Corporation 2019 Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to the

Company’s Form 8-K dated April 3, 2019, which was filed on April 9, 2019).

of Non-Qualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.2 to the Company’s Form

8-K dated April 3, 2019, which was filed on April 9, 2019).

Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 of the Company's Form 10-QSB for the period ended March 31, 1998, which was filed May 15, 1998).

Description of the Common Stock of Empire Petroleum Corporation Registered Under Section 12 of the Securities Exchange Act of 1934 (submitted herewith).

Petroleum Corporation 2019 Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K dated

April 3, 2019, which was filed on April 9, 2019).

of Non-Qualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.2 to the Company's Form 8-K

dated April 3, 2019, which was filed on April 9, 2019).

Revolver Loan Agreement dated as of September 20, 2018 by and between Empire Louisiana, LLC and CrossFirst Bank (incorporated

herein by reference to Exhibit 10.1 of the Company’s Form 8-K dated September 20, 2018 filed on September 25, 2018).

herein by reference to Exhibit 10.1 of the Company's Form 8-K dated September 20, 2018 filed on September 25, 2018) .

Amendment to Senior Revolver Loan Agreement, dated as of March 27, 2019, by and between Empire Louisiana LLC, Empire North

1 unchanged sentence

27, 2019, which was filed on April 2, 2019) .

Purchase Agreement dated as of August 6, 2020, by and between Empire Petroleum Corporation and Petroleum Independent &

Exploration LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated August 6, 2020, which

was filed on August 11, 2020) .

Share Warrant Certificate No.

PIE-1 dated August 6, 2020 (incorporated herein by reference to Exhibit 10.2 to the Company’s

Form 8-K dated August 6, 2020, which was filed on August 11, 2020).

Share Warrant Certificate No.

PIE-2 dated August 6, 2020 (incorporated herein by reference to Exhibit 10.3 to the Company’s

Form 8-K dated August 6, 2020, which was filed on August 11, 2020) .

Share Warrant Certificate No.

PIE-3 dated August 6, 2020 (incorporated herein by reference to Exhibit 10.4 to the Company’s

Form 8-K dated August 6, 2020, which was filed on August 11, 2020).

Share Warrant Certificate No.

PIE-4 dated August 6, 2020 (incorporated herein by reference to Exhibit 10.5 to the Company’s

Form 8-K dated August 6, 2020, which was filed on August 11, 2020) .

Agreement dated as of August 6, 2020, by and between Empire Texas LLC and Petroleum Independent & Exploration LLC (incorporated

herein by reference to Exhibit 10.6 to the Company’s Form 8-K dated August 6, 2020, which was filed on August 11, 2020).

Amendment to Senior Revolver Loan Agreement, dated as of June 30, 2020, by and between Empire Louisiana LLC, Empire North

Dakota LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated September

30, 2020, which was filed on October 6, 2020) .

Amendment to Senior Revolver Loan Agreement, dated as of December 31, 2020, by and between Empire Louisiana LLC, Empire North

Dakota LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated March

10, 2021, which was filed on March 15, 2021).

Agreement dated as of March 11, 2021 by and between Empire Petroleum Corporation and Petroleum Independent & Exploration

LLC (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated March 10, 2021, which was filed

on March 15, 2021).

Rule 13a –

14(a)/15d –

14(a) Certification

of Thomas Pritchard, Chief Executive Officer (submitted herewith).

14(a) Certification of Thomas Pritchard, Chief Executive Officer (submitted herewith).

Rule 13a –

14(a)/15d –

14(a) Certification of Michael R.

Morrisett, principal financial officer (submitted herewith).

Section 1350 Certification

of Thomas Pritchard, Chief Executive Officer (submitted herewith).

Section 1350 Certification

14(a) Certification

of Michael R.

Morrisett, principal financial officer (submitted herewith).

Financial Statements

for XBRL format (submitted herewith).

Section 1350 Certification of Thomas Pritchard,

Chief Executive Officer (submitted herewith).

Section 1350 Certification of Michael R.

principal financial officer (submitted herewith).

Financial Statements for XBRL format (submitted

EMPIRE PETROLEUM CORPORATION

3 unchanged sentences

Consolidated Statements of Operations for the years ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’

Equity (Deficit) for the years ended December 31, 2019 and 2018

Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and the Board of Directors of

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

the Stockholders and the Board of Directors

Empire Petroleum Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Empire Petroleum Corporation and subsidiaries (the Company) as of December 31, 2019 and 2018, and the related

consolidated statements of operations, changes in stockholders’

equity (deficit) and cash flows for the years then ended, and the

related notes to the consolidated financial statements (collectively, the financial statements).

on the Financial Statements

have audited the accompanying consolidated balance sheets of Empire Petroleum Corporation (the Company) as of December 31,

2020 and 2019, the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended,

and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and

the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019,

and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally

accepted in the United States of America.

Going Concern

The accompanying financial statements have

been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the

Company has incurred significant losses since inception.

The Company’s ability to continue as a going concern is dependent upon

the existence, discovery, and development of economically recoverable oil and gas reserves and is dependent upon the Company obtaining

necessary financing to carry out its exploration and development program.

This raises substantial doubt about the Company’s ability

to continue as a going concern.

Management’s plans in regard to these matters also are described in Note 1.

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 1 to the financial statements, the Company has incurred significant losses since inception.

The Company's ability to continue

as a going concern is dependent upon the existence, discovery, and development of economically recoverable oil and gas reserves

and is dependent upon the Company obtaining necessary financing to carry out its exploration and development program.

substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters also

are described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test

basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of

the financial statements.

do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) ( PCAOB ) and are required to be independent with respect to the Company in accordance

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have,

nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

/s/HoganTaylor LLP

We have served as the Company’s auditor since 2003.

Tulsa, Oklahoma

March 30, 2020

We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that was

communicated or required to be communicated to the board of directors and that:

(1) relate to accounts or disclosures that are

material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication

of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not,

by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts

or disclosures to which they relate.

Oil and Natural Gas Properties –

Oil and Natural Gas Reserve Quantities and Future Cash Flows Used to Determine Depletion

and to Assess Impairment

Audit Matter Description

discussed in Note 2 to the financial statements, the Company's proved oil and natural gas properties are depleted using the units-of-production

method based on the Company's oil and natural gas reserves and are evaluated for impairment by comparison to the future net cash

flows of the underlying oil and natural gas reserves.

The Company's oil and natural gas reserve quantities and the related future

net cash flows required management to make significant estimates and assumptions.

As a result of changing market conditions and

commodity prices, assumptions can change from period to period, causing the estimates of proved reserves to change.

utilizes a petroleum engineering firm to estimate oil and natural gas reserves using generally accepted methods, calculation procedures

and engineering data.

Changes in these assumptions or engineering data could have a significant impact on the amount of depletion

and any proved oil and natural gas property impairment.

The proved oil and natural gas properties balance was $7,563,001 as of

December 31, 2020, net of accumulated depreciation, depletion, amortization, and impairment.

Related depreciation, depletion,

and amortization expense was $3,118,019 and impairment expense was $8,671,303 for the year ended December 31, 2020.

the significant judgments made by management, performing audit procedures to evaluate the Company's oil and natural gas reserve

quantities and the related net cash flows including management's estimates and assumptions required a high degree of auditor judgment

and an increased extent of effort.

the Critical Audit Matter Was Addressed in the Audit

audit procedures to address management's significant judgments and assumptions related to oil and natural gas reserve quantities

and estimates of the future net cash flows included the following, among others:

the experience, qualifications and objectivity of management's expert, including the

methodologies and calculation procedures used to estimate oil and natural gas reserves.

forecasted production by comparing to historical production and decline rates.

management's estimated oil and natural gas prices by:

the methodology used by management for development of the oil and natural gas prices

used for assessing impairment and compared the estimated prices to an independently determined

range of prices, including published forward pricing indices and third-party industry

prices used in the determination of reserve quantities and the depletion calculation

to average historical prices.

the historical realized price differentials incorporated in the future oil and natural

future operating and capital costs used to estimate future cash flows by comparing them

to historical cost data.

Concern Assessment

Audit Matter Description

described further in Note 1 to the consolidated financial statements, the Company has incurred net losses each year from inception

through December 31, 2020, and has negative working capital as of December 31, 2020.

The Company determined these, and other factors,

raised substantial doubt as to the Company's ability to continue as a going concern one year from the issuance date of the consolidated

financial statements.

In making this determination, management prepared a short-term cash flow projection.

Management used significant

assumptions in preparing the short-term cash flow projection, which included expected operating costs and financing obligations.

principal considerations for our determination that the evaluation of management's going concern assessment was a critical audit

matter are the significant judgment and subjectivity inherent in the Company's future cash flow and debt compliance projections

and a high degree of auditor judgment in evaluating management's forecasts for at least the next 12 months.

the Critical Audit Matter Was Addressed in the Audit

audit procedures related to the evaluation of management's forecasted future cash flow projections and going concern assessment

included the following, among others:

the overall reasonableness of the Company's future cash flow projections, including significant assumptions utilized by the Company.

January and February 2021 actual operating results to forecasted amounts to determine overall accuracy of future operating cash

flow projections.

debt covenants and management projections of debt covenant compliance during 2021.

the adequacy of the Company's financial statement disclosures.

HoganTaylor LLP

have served as the Company's auditor since 2003.

EMPIRE PETROLEUM CORPORATION

2 unchanged sentences

Current Assets:

Accounts receivable –

oil and natural gas sales and other

Unrealized gain on derivative instruments

Total Current Assets

Oil and natural gas properties, successful efforts

accumulated depreciation and depletion

Other property and equipment, net of $1,830 accumulated depreciation

Total property and equipment

L IABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Property and equipment:

and Natural Gas Properties, Successful Efforts

Accumulated Depreciation, Depletion and Impairment

(15,148,444 )

Property and Equipment, net of $33,159 and $1,830 Accumulated Depreciation in 2020 and 2019, respectively

Property and Equipment, net

and Other Deposits

AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Accounts payable

Accrued expenses

Unrealized loss on derivatives

Current portion of long term notes payable

Loss on Derivative Instruments

Payment (see Note 4)

Portion of Lease Liability

Portion of Long-term Notes Payable

Total Current Liabilities

Long term portion of unrealized loss on derivatives

Long term notes payable

Asset retirement obligations

Term Portion of Unrealized Loss on Derivative Instruments

Notes Payable

Term Lease Liability

Retirement Obligations

Total Liabilities

Stockholders’

equity (deficit):

Common stock - $.001 par value 150,000,000 shares authorized,

Stockholders' Equity

Stock - $.001 Par Value 150,000,000 Shares Authorized,

and 20,367,277 Shares Issued and Outstanding, Respectively

Additional paid in capital

Accumulated deficit

Paid-in Capital

(40,618,381 )

(23,782,948 )

Total stockholders’

equity (deficit)

Total liabilities and stockholders’

equity (deficit)

Stockholders' Equity (Deficit)

(18,441,038 )

Liabilities and Stockholders' Equity (Deficit)

$ 11,014,58 0

See accompanying notes to consolidated

3 unchanged sentences

Years Ended December 31, 2020 and 2019

Oil and gas sales

Unrealized gain on derivatives

and Gas Sales

Realized and Unrealized Gain on Derivatives

Total Revenue

Costs and Expenses:

Taxes –

Depreciation, depletion and amortization

Accretion of asset retirement obligation

General and administrative

Depreciation & Amortization

of Oil and Natural Gas Properties

of Asset Retirement Obligation

and Administrative

Cost and Expenses

Operating Loss

Other expense:

Interest expense

(17,583,006 )

Other Income and (Expense):

on Sale of Assets

$ (16,835,433 )

Net loss per common

share, basic and diluted

Weighted average number of

common shares outstanding

basic and diluted

$ (6,654,602 )

Net Loss per Common Share,

Basic & Diluted

Weighted Average Number

of Common Shares Outstanding,

See accompanying notes to consolidated financial

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'

EQUITY (DEFICIT)

Years ended December 31, 2020 and 2019

Balances December 31, 2017

December 31, 2018

$ (17,128,346 )

Termination of Masterson

options, warrants and conversion features issued

Options, Warrants

Conversion Features Issued

Balances, December

$ (23,782,948 )

options, and warrants issued

$ (4,938,655 )

(16,835,433 )

Options, Warrants

Conversion Features Issued

Balances, December

5 unchanged sentences

Years ended December 31, 2020 and 2019

Cash flows from operating activities:

Cash Flows From Operating

$ (16,835,433 )

$ (6,654,602 )

Adjustments to reconcile net loss to net

cash used in operating activities:

Fair value of options and warrants granted

Depreciation, depletion and amortization

Amortization of warrant value and conversion feature on convertible notes

Amortization of debt issue costs

Accretion of asset retirement obligation

Change in operating assets and liabilities:

Accounts receivable

Accounts payable

Accrued expenses

Adjustments to Reconcile

Net Loss to Net Cash

by (used in) Operating Activities:

on Sale of Assets

of Warrants and Options Granted

of Warrant Value and Conversion Feature on Convertible Notes

of Loan Issue Costs

Depreciation,

Depletion and Amortization

of Oil and Natural Gas Properties

of Asset Retirement Obligation

Gain (Loss) on Derivatives

Net cash used in operating activities

Cash flows from investing activities:

Acquisition of oil and gas properties

Purchase of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from long term debt

Principal payments on long term debt

Proceeds from stock and warrant issuance

Net cash provided by financing activities

Net increase in cash

Cash - Beginning of year

Cash - End of year

Supplemental cash flow information

Cash paid for interest

Noncash investing and financing activities:

Common stock issued for acquisition of property assets

Termination of Masterson West II Transaction

Noncash additions to asset retirement obligations

Purchases of oil and natural

gas properties in accrued expenses

of Operating Lease Liability

paid to Ovintiv (see Note 4)

Relating to Ovintiv Purchase Deposit (see Note 4)

in Operating Assets and Liabilities:

Cash Used In Operating Activities

Cash Flows from Investing

of Oil and Natural Gas Properties

of Other Fixed Assets

from Sale of Oil and Natural Gas Properties

Cash Used in Investing Activities

Cash Flows from Financing

from Debt Issued

Payments of Debt

from Stock and Warrant Issuance

Cash Provided by Financing Activities

Net Change in Cash

- Beginning of Period

- End of Period

Supplemental Cash Flow

Paid for Interest

Non-cash Investing

and Financing Activities:

Additions to Asset Retirement Obligations

Stock Issued in Exchange for Outstanding Notes Payable

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

purchased utilizing note payable

Payable issued - PIE Agreement (see Note 5)

See accompanying notes to consolidated financial

EMPIRE PETROLEUM CORPORATION

EMPIRE PETROLEUM

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9 unchanged sentences

In July 1995, its name was changed to Americomm Resources

Empire Petroleum Corporation has two wholly owned subsidiaries, Empire Louisiana, LLC and Empire North Dakota, LLC.

Empire Petroleum Corporation has four wholly owned subsidiaries, Empire Louisiana, LLC, Empire North Dakota, LLC,

Empire New Mexico, LLC, and Empire Texas, LLC.

Empire Petroleum Corporation and subsidiaries.

(“Empire”

or the “Company”).

consolidates the financial statements

of these entities and material intercompany balances and transactions have been eliminated.

("Empire"

or the "Company").

consolidates the financial statements of these entities and material intercompany balances and transactions have been eliminated.

Continuing operations:

The ultimate recoverability of the Company’s

The ultimate recoverability of the Company's

investment in its oil and gas interests is dependent upon the existence, discovery, and development of economically recoverable

oil and gas reserves, the ability of the Company to obtain necessary financing to further develop the interests, and the ability

oil and gas reserves, the ability of the Company to obtain necessary financing to further develop the interests, and upon the ability

to attain future profitable production.

1 unchanged sentence

is uncertain.

These factors indicate that there is a substantial doubt about the Company’s ability to continue as a going

These factors indicate that there is a substantial doubt about the Company's ability to continue as a going

The continuation of the Company is dependent

13 unchanged sentences

The preparation of financial statements in

conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that

affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ from those estimates.

conformity with United States generally accepted accounting principles (“GAAP”) requires management to make estimates

and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ

from those estimates.

(a) Principles of consolidation

The consolidated financial statements of the Company include the

accounts of the Company and its 100 percent owned subsidiary.

accounts of the Company and its wholly owned subsidiaries.

The Company consolidates the financial statements of these entities.

1 unchanged sentence

(b) Use of estimates in the preparation of financial statements

of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements

and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from these estimates.

Depletion of oil and natural gas properties is determined using estimates of proved oil and natural gas reserves.

There are numerous

uncertainties inherent in the estimation of quantities of proved reserves and in the projection of future rates of production

and the timing of development expenditures.

Similarly, evaluations for impairment of proved and unproved oil and natural gas properties

are subject to numerous uncertainties including, among others, estimates of future recoverable reserves, commodity price outlooks

and prevailing market rates of other sources of income and costs.

Other significant estimates include, but are not limited to,

asset retirement obligations, goodwill, fair value of stock-based compensation, fair value of business combinations, fair value

of nonmonetary transactions, fair value of derivative financial instruments and income taxes.

of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the

reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from

these estimates.

Depletion of oil and natural gas properties is determined using estimates of proved oil and natural gas

There are numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection

of future rates of production and the timing of development expenditures.

Similarly, evaluations for impairment of proved and

unproved oil and natural gas properties are subject to numerous uncertainties including, among others, estimates of future

recoverable reserves, commodity price outlooks and prevailing market rates of other sources of income and costs.

significant estimates include, but are not limited to, asset retirement obligations, goodwill, fair value of stock-based

compensation, fair value of business combinations, fair value of nonmonetary transactions, fair value of derivative financial

instruments and income taxes.

6 unchanged sentences

The Company did not have an allowance for doubtful accounts for the years ended December

31, 2019 and 2018, respectively.

31, 2020 or 2019.

(d) Oil and natural gas properties

7 unchanged sentences

Costs related to impaired prospects or unsuccessful exploratory drilling is charged to expense.

Management’s assessment

Management's assessment

of the results of exploration activities, commodity price outlooks, planned future sales or expiration of all or a portion of such

7 unchanged sentences

proved reserves are discovered after the options are exercised, these costs will be reclassified as proved property.

Depreciation, depletion and amortization of producing properties is computed

on the units-of-production method on a property by property basis.

The units-of-production method is based primarily on estimates

of proved reserve quantities.

Due to uncertainties inherent in this estimation process, it is at least reasonably possible that

reserve quantities will be revised in the near term.

Changes in estimated reserve quantities are applied to depreciation, depletion

and amortization computations prospectively.

Other property and equipment is depreciated on the straight-line method.

(e) Derivative instruments

The Company enters into swap agreements

to manage its exposure to oil and natural gas price fluctuations.

The fair value of derivative contracts are recognized as an

asset or liability on the Company’s balance sheet.

Realized and unrealized gain or loss is recognized as a component of

For contracts which have not matured, an unrealized gain or loss is recorded based on

the value of the outstanding contracts.

The Company enters into swap agreements to

manage its exposure to oil and natural gas price fluctuations.

The fair value of derivative contracts are recognized as an asset

or liability on the Company’s balance sheet.

Realized gain or loss is recognized as a component of revenue when the swap

contracts mature.

For contracts which have not matured, an unrealized gain or loss is recorded based on the value of the outstanding

(f) Asset retirement obligations

9 unchanged sentences

oil and natural gas property asset.

1, 2018, the Company adopted ASC Topic 606, “Revenue from Contracts with Customers,”

(“ASC 606”) using

the modified retrospective approach, which only applies to contracts that were not completed as of the date of initial application.

The adoption did not require an adjustment to opening retained earnings for the cumulative effect adjustment and does not have

a material impact on the Company’s reported net income (loss), cash flows used in operations or statement of stockholders’

equity (deficit).

enters into contracts with customers to sell its oil and natural gas production.

Revenue on these contracts is recognized in accordance

with the five-step revenue recognition model prescribed in ASC 606.

Specifically, revenue is recognized when the Company’s

performance obligations under these contracts are satisfied, which generally occurs with the transfer of control of the oil and

natural gas to the purchaser.

Control is generally considered transferred when the following criteria are met:

(i) transfer of

physical custody, (ii) transfer of title, (iii) transfer of risk of loss and (iv) relinquishment of any repurchase rights or other

similar rights.

Given the nature of the products sold, revenue is recognized at a point in time based on the amount of consideration

the Company expects to receive in accordance with the price specified in the contract.

Consideration under the oil and natural

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

The Company’s oil and

natural gas marketing contracts transfer physical custody and title at or near the wellhead, which is generally when control of

the oil has been transferred to the purchaser.

While the loss of these customers may result in a temporary interruption in sales,

the availability of alternative purchasers mitigates these risks.

of the Company’s natural gas is sold at the lease location, which is generally when control of the natural gas has been

transferred to the purchaser.

The Company follows the sales method of accounting for natural gas sales, recognizing revenue based

on the Company’s actual proceeds from the natural gas sold to purchasers on an accrual basis.

Revenues are reported net of working interest

and royalty amounts due.

(g) Revenue recognition

The Company enters into contracts with customers

to sell its oil and natural gas production.

Revenue on these contracts is recognized in accordance with the five-step revenue recognition

model prescribed in ASC 606.

Specifically, revenue is recognized when the Company’s performance obligations under these contracts

are satisfied, which generally occurs with the transfer of control of the oil and natural gas to the purchaser.

Control is generally

considered transferred when the following criteria are met:

(i) transfer of physical custody, (ii) transfer of title, (iii) transfer

of risk of loss and (iv) relinquishment of any repurchase rights or other similar rights.

Given the nature of the products sold,

revenue is recognized at a point in time based on the amount of consideration the Company expects to receive in accordance with

the price specified in the contract.

Consideration under the oil and natural gas marketing contracts is typically received from

the purchaser one to two months after production.

The Company’s oil and natural gas marketing contracts transfer physical

custody and title at or near the wellhead, which is generally when control of the oil has been transferred to the purchaser.

The Company follows the sales method of accounting

for natural gas sales, recognizing revenue based on the Company’s actual proceeds from the natural gas sold to purchasers

on an accrual basis.

Revenues are reported net to working interest

and after royalty amounts due.

(h) Per share amounts:

The Company calculates and discloses basic

earnings per share (“Basic EPS”) and diluted earnings per share (“Diluted EPS”).

earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS").

The computation of basic earnings

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shares during the period.

Diluted Earnings per Share (“EPS”) gives effect

Diluted Earnings per Share ("EPS") gives effect

to all dilutive potential common shares outstanding during the period.

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(j) Financial instruments:

The carrying value of current assets and

current liabilities approximate their fair value due to the relatively short period to maturity of the instruments.

carrying value of the convertible debt also approximates its fair value as of December 31, 2019.

Management’s estimates,

including reserves and asset retirement obligations, are based on an assessment of qualitativ e

factors that are considered level 3 measurements in the fair value valuation hierarchy required by FASB ASC 820.

Stock option plan:

Company expenses options granted over the vesting period based on the grant date fair value of the award.

subject to service conditions, compensation expense is recognized as the options vest.

Recently issued accounting pronouncements:

periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting.

The Company has reviewed the recently issued pronouncements and concluded that the following new accounting standards are applicable:

February 2016, the FASB issued ASU No.

“Leases (Topic 842)”

which is intended to improve financial reporting

about leasing transactions.

This ASU will require organizations (“lessees”) that lease assets with lease terms

of more than twelve months to recognize on the balance sheet the assets and liabilities for the rights and obligations created

by those leases.

Organizations that own the assets leased by lessees (“lessors”) will remain largely unchanged

from current GAAP.

In addition, this ASU requires disclosures to help investors and other financial statement users better

understand the amount, timing and uncertainty of cash flows arising from leases.

The guidance is effective for annual periods

beginning after December 15, 2020 and early adoption is permitted.

Based on management’s initial assessment, ASU No.

2016-02 will not have a material impact on the Company’s financial statements.

July 2018, the FASB issued ASU No.

The carrying value of current assets and current

liabilities approximate their fair value due to the relatively short period to maturity of the instruments.

Management's estimates,

including reserves and asset retirement obligations, are based on an assessment of qualitative factors that are considered Level

3 measurements in the fair value valuation hierarchy required by FASB ASC 820.

(k) Stock option plan:

The Company expenses options granted over

the vesting period based on the grant date fair value of the award.

(l) Recently issued accounting pronouncements:

FASB periodically issues new accounting standards

in a continuing effort to improve standards of financial accounting and reporting.

The Company has reviewed the recently issued

pronouncements and concluded that the following new accounting standards are applicable:

In July 2018, the FASB issued ASU No.

“Codification Improvements,”

(“ASU 2018-09”) which makes amendments

to multiple codification topics to clarify, correct errors in, or make minor improvements to the accounting standards codification.

The effective date of the

(“ASU 2018-09”) which makes amendments to multiple codification topics to

clarify, correct errors in, or make minor improvements to the accounting standards codification.

The effective date of the standard

is dependent on the facts and circumstances of each amendment.

Some amendments do not require transition guidance and will be

effective upon the issuance of this standard.

Many of the amendments in ASU 2018-09 was effective in annual periods beginning

after December 15, 2018.

Some amendments do not require transition guidance and will be effective

upon the issuance of this standard.

Many of the amendments in ASU 2018-09 was effective in annual periods beginning after December

The Company adopted this standard in the first quarter of fiscal 2019.

November 2018, the FASB issued ASU No.

2018-18, “Collaborative Arrangements (Topic 808):

Clarifying the Interaction between

Topic 808 and Topic 606,”

(“ASU 2018-18”) which, among other things, clarifies that (i) certain transactions

between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement

participant is a customer in the context of a unit of account, (ii) adds unit-of-account guidance in Topic 808 to align with the

guidance in Topic 606 and (iii) requires that in a transaction with a collaborative arrangement participant that is not directly

related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if

the collaborative arrangement participant is not a customer.

ASU 2018-18 is effective for fiscal years beginning after December

15, 2019, and interim periods within those fiscal years and early adoption is permitted.

The amendments in this update should

be applied retrospectively to the date of initial application of Topic 606.

An entity should recognize the cumulative effect of

initially applying the amendments as an adjustment to the opening balance of retained earnings of the later of the earliest annual

period presented and the annual period that includes the date of the entity’s initial application of Topic 606.

has reviewed the new standard in conjunction with its current practices and believes that it will not have a material impact on

the financial statements.

2019, the Company, through its subsidiary Empire North Dakota, LLC, purchased oil and gas properties in Montana and North Dakota

(See Footnote 5).

2018, the Company, through its subsidiary, Empire Louisiana, LLC, purchased oil and natural gas properties in St.

Landry and Beauregard

parishes in Louisiana (see Footnote 5).

aggregate capitalized costs of oil and natural gas properties as of December 31, 2019 and 2018 are as follows:

It did not have a material effect on the Company’s

financial statements.

In 2020, the Company, through its subsidiaries purchased oil

and natural gas properties in Texas, North Dakota and Montana (See Note 4).

In 2019, the Company, through its subsidiary

Empire North Dakota, LLC, purchased oil and gas properties in Montana and North Dakota (See Note 4).

The aggregate capitalized costs

of oil and natural gas properties as of December 31, 2020 and 2019 are as follows:

Proved producing wells

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Gross capitalized costs

Depreciation, Depletion and Amortization

Accumulated Depreciation,

Depletion, Amortization and Impairment

(15,148,444 )

Net capitalized costs

Investment in Masterson West II,

On December 22, 2016, the Company entered into a subscription

and contribution agreement with Masterson West, LLC (“Masterson West”) (the “Contribution Agreement”) relating

to the newly formed Masterson West II, LLC, a Texas limited liability company (“Masterson West II”).

to the Contribution Agreement, among other things, (a) at the initial closing, the Company agreed to contribute 2,000,000 shares

of its common stock, par value $0.001 per share (the “Common Stock”), to Masterson West II, along with an additional

38,000,000 shares of Common Stock and (b) at the final closing, Masterson West had an obligation to contribute certain oil and

gas properties (the “Contributed Properties”) to Masterson West II in exchange for the Company contributing cash of not

less than $9,000,000 and up to $18,000,000 to Masterson West II.

The final closing was scheduled to occur no later than April

Also on December 22, 2016, the Company entered into a limited liability agreement of Masterson West II with Masterson

West (the “LLC Agreement”).

On February 18, 2017, Gary C.

Adams, the majority owner of Masterson West unexpectedly

As a result of this development, the transactions were not consummated.

On December 1, 2018, the Company and Masterson

West agreed to terminate and unwind the Contribution Agreement in a manner as if the parties had never entered into the Contribution

As a result of the Termination Agreement, in 2018 the Company reversed its $300,000 investment in Masterson West II

and the related common stock subscription and paid in capital.

Acquisitions of oil and gas properties:

June 10, 2019, the Company received a sheriff’s deed dated as of May 29, 2019 (the “Sheriff’s Deed”) pertaining to two

Landry Parish purchased from Business First Bancshares, Inc.

d/b/a Business First Bank (“Business First”).

to the Sheriff’s Deed, the Company acquired certain oil and natural gas properties located in St.

Landry Parish, Louisiana, including

operated working interest in two producing wells.

The Company purchased Business First’s position as the superior lienholder and

seizing creditor of such oil and natural gas properties, which were owned by Warhorse Oil & Gas, LLC, for $450,000 plus $16,993

of oil and gas properties:

2020 Acquisitions

Pardus Acquisition

On April 6, 2020 the Company, through

its wholly owned subsidiary, Empire Texas, LLC, entered into a Purchase and Sale Agreement (“the Agreement”) with

Pardus Oil & Gas, LLC and Pardus Oil & Gas Operating GP, LLC (collectively “the Seller”) to purchase

certain oil and natural gas properties in Texas, and all general and limited partner interest in Pardus Oil & Gas Operating,

The purchase price, as amended, included the assumption of certain obligations totaling $1,584,042 and a cash payment of

$40,000 for a total purchase price of $1,624,042.

An asset retirement obligation of $9,508,484 was recorded in conjunction

with the purchase.

The transaction closed on April 7, 2020 and was treated as an asset acquisition.

Ovintiv Acquisition

On March 3, 2020 the Company, through its wholly owned subsidiary,

Empire North Dakota, LLC, entered into a Purchase and Sale Agreement (“the Agreement”) with Ovintiv USA, Inc.

related companies to purchase certain oil and natural gas properties in Montana and North Dakota.

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 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 forfeited deposit is included in general and administrative expenses in the

financial statements.

2019 Acquisitions

Warhorse Acquisition

On June 10, 2019, the Company received a 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").

Pursuant to the Sheriff's Deed, the

Company acquired certain oil and natural gas properties located in St.

Landry Parish, Louisiana, including operated working

interest in two producing wells.

The Company purchased Business First's position as the superior lienholder and seizing

creditor of such oil and natural gas properties, which were owned by Warhorse Oil & Gas, LLC, for $450,000 plus $16,993

sheriff fees.

The payment was paid from loan proceeds.

Company treated the acquisition as an asset purchase.

An amount equal to $73,968 was allocated to lease and well equipment and

$378,110 was allocated to producing properties.

An asset retirement obligation of $19,732 was recorded in conjunction with the

March 28, 2019, the Company purchased 184 oil producing properties from EnergyQuest II, LLC (“EnergyQuest”) for a purchase

price of $5,600,000.

The effective date of the transaction is January 1, 2019.

After certain adjustments related to the effective

date, the total proceeds paid to EnergyQuest were $5,646,126.

Such proceeds were paid from borrowing on notes payable and

sales of unregistered securities of the Company.

August 28, 2018, the Company purchased oil producing properties from Cardinal Exploration and Production Company (“Cardinal”)

for a purchase price of $323,000.

The effective date of the transaction was June 1, 2018.

After certain adjustments

related to the effective date, the total proceeds paid to Cardinal were $293,965.

Such proceeds were paid from sales of

unregistered securities of the Company.

September 20, 2018, the Company purchased oil and natural gas properties from Exodus Energy, Inc.

(“Exodus”) for a

purchase price of $969,042.

Post close adjustments reduced the purchase price to $959,339.

The effective date of the transaction

was August 1, 2018.

Such proceeds were paid from loan proceeds and sales of unregistered securities.

Upstream Acquisition

October 29, 2018, the Company purchased oil and natural gas properties from Riviera Upstream, LLC formerly known as Linn Energy

Holdings, LLC (“Riviera”) for a purchase price of $205,000.

Post close adjustments reduced the total purchase

price to $163,273.

The effective date of the transaction was October 1, 2018.

following table sets forth the Company’s preliminary purchase price allocations:

The Company treated the acquisition as an asset purchase.

An amount equal to $73,968 was allocated to lease and well equipment and $378,110 was allocated to producing properties.

retirement obligation of $19,732 was recorded in conjunction with the purchase.

EnergyQuest Acquisition

On March 28, 2019, the Company purchased oil producing properties

from EnergyQuest II, LLC ("EnergyQuest") for a purchase price of $5,600,000.

The effective date of the transaction was

January 1, 2019.

After certain adjustments related to the effective date, the total proceeds paid to EnergyQuest were $5,646,126.

Such proceeds were paid from borrowing on notes payable and sales of unregistered securities of the Company.

The following table sets forth the Company’s purchase price

allocations to the identifiable assets acquired and the liabilities assumed based on the fair values at the acquisition date, with

any excess of the estimated fair value of the identifiable net assets acquired over the purchase price recorded as a reduction

in value of the oil and natural gas properties.

Fair Value of Assets Acquired

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Inventory of oil in tanks

Oil and natural gas Properties (a)

Equipment & gathering lines

Oil and natural gas properties

Total Assets Acquired

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Accounts payable –

Notes payable –

Royalty suspense

Asset retirement obligations

1 unchanged sentence

Purchase Price

(a) The Cardinal acquisition was of oil producing properties only.

The fair values of assets acquired and liabilities

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Oil and natural gas properties

The fair value of proved oil and natural gas properties

was measured using valuation techniques that convert the future cash flows to a single discounted amount.

Significant inputs to

the valuation of proved oil and natural gas properties include estimates of:

For the EnergyQuest acquisition, the fair value of

proved oil and natural gas properties was measured using valuation techniques that convert the future cash flows to a single discounted

Significant inputs to the valuation of proved oil and natural gas properties include estimates of:

(i) recoverable reserves;

(ii) production rates;

future operating and development costs;

(iii) future operating and development costs;

(iv) future commodity prices;

and (v) a market-based weighted average costs of capital.

The Company utilized a combination of the New York Mercantile Exchange (“NYMEX”) strip pricing and consensus pricing

to value the reserves, then applied various discount rates depending on the classification of reserves and other risk characteristics.

Management utilized the assistance of a third-party valuation expert to estimate the value of the oil and natural gas properties

and (v) a market-based weighted

average costs of capital.

The Company utilized a combination of the New York Mercantile Exchange (“NYMEX”) strip pricing

and consensus pricing to value the reserves, then applied various discount rates depending on the classification of reserves and

other risk characteristics.

Management utilized the assistance of a third-party valuation expert to estimate the value of the oil

and natural gas properties acquired.

For the Pardus acquisition, the value of oil and

gas properties was based on an allocation of the purchase price which included assignment of values to the other identifiable assets

acquired and liabilities assumed.

The fair value of asset retirement obligations are

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trade were equivalent to the carrying value due to their short-term nature.

Inventory acquired as a part of the acquisition was

based on oil in tanks at the date of acquisition multiplied by the day’s spot price.

Deposits were valued based on the actual amount paid

by the seller and held with third parties.

Accounts payable - trade includes liabilities primarily

related to well activity prior to close.

For 2019, the financial statements include EnergyQuest

from the date of acquisition and Exodus, Cardinal, and Riviera for the full year.

The unaudited financial information in the table

below summarizes the combined results of operations of the Company, the Exodus, Cardinal, Riviera, and EnergyQuest assets acquired

for the year ended December 31, 2018 on a pro forma basis, as though the companies had been combined as of January 1, 2018.

unaudited pro forma earnings for the years ending December 31, 2018 were adjusted to include $26,586 of depreciation, depletion,

and amortization.

Incremental interest expense of $29,498 was included for the years ended December 31, 2018 as if the Senior Revolver

Loan Agreement used to help fund the acquisition had been entered into on January 1, 2018.

Earnings per share were adjusted to

include the additional 3,258,811 shares of the Company’s common stock issued to help fund the acquisitions as if those shares

had been issued on January 1, 2018.

The unaudited pro forma information is provided for informational purposes only and does not

purport to be indicative of the Company’s combined results of operations which would actually have been obtained had the

acquisitions taken place on January 1, 2018, nor should it be taken as indicative of the Company’s future consolidated results

of operations.

Oil and gas sales

Earnings per share, basic and diluted

For 2020, the financial statements include Pardus

from the date of acquisition and EnergyQuest for the full year.

Joint 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”) owned by ET.

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 6, 2024 unless terminated earlier by PIE.

Proceeds of the loan will be used for recompletion

or workover of the Workover Wells.

As of December 31, 2020, approximately $315,000 has been advanced from the loan.

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 8).

Activity resulting from

this agreement is being treated as a conveyance.

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

(See Note 10).

On March 11, 2021 the Company amended the Securities Agreement to remove the vesting provisions for the warrants

and PIE exercised all of its warrants for an aggregate exercise price of $3,349,052 (See Note 15).

Asset retirement obligations

The Company’s asset retirement

obligations represent the estimated present value of the estimated cash flows the Company will incur to plug, abandon and

remediate its producing properties at the end of their productive lives, in accordance with applicable state laws.

risk premiums associated with asset retirement obligations are estimated to represent a component of the Company’s

credit-adjusted risk-free rate that is utilized in the calculations of asset retirement obligations.

The fair value was

determined on a discounted cash flow model which included assumptions of the estimated current abandonment costs, discount

rate of 7.4%, inflation rate of 3%, and timing associated with the occurrence of these costs.

The Company’s asset retirement obligations represent the

estimated present value of the estimated cash flows the Company will incur to plug, abandon and remediate its producing properties

at the end of their productive lives, in accordance with applicable state laws.

Market risk premiums associated with asset retirement

obligations are estimated to represent a component of the Company’s credit-adjusted risk-free rate that is utilized in the

calculations of asset retirement obligations.

The Company’s asset retirement obligation transactions

during the years ended December 31, 2020 and 2019 are summarized in the table below.

For the year ended December 31, 2019

For the year ended December 31, 2018

the year ended December 31, 2020

For the year ended

December 31, 2019

Asset retirement obligations, beginning of period

Liabilities assumed in acquisitions

Revision to estimates

Accretion expense

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As of December 31,

Gain (loss) on derivatives:

Gain on derivatives:

Oil derivatives

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As of December 31,

Net cash receipts from (payments on) derivatives:

Net cash receipts from derivatives:

Oil derivatives

Natural gas derivatives

The following table sets forth the Company’s outstanding oil

derivative contracts at December 31, 2019.

The following table sets forth the Company’s

outstanding oil derivative contracts at December 31, 2020.

The Company has no outstanding natural gas derivatives.

All of the Company’s derivatives

are expected to settle by November 30, 2021:

Price per Bbl

Company’s derivatives are expected to settle by July 30, 2021:

Price per Bbl

Notes payable:

In July and August, 2018, the Company entered into two

unsecured note agreements totaling $25,000 with Mr.

Anthony Kamin, who is also a member of the Company’s Board of Directors.

The notes were payable on demand and accrued interest at 8% interest.

In March 2019, Mr.

Kamin used the $50,000 note balances to

exercise some of his outstanding warrants to purchase common stock (See Note 10).

The Company had the following debt outstanding as of December 31,

2020 and 2019.

The expenses of issuing the Senior Revolver Loan Agreement were capitalized and included as a reduction to debt

in the accompanying consolidated balance sheets.

These costs are amortized over the expected life of the debt.

When debt is retired

before maturity, or modifications significantly change the cash flows, the related unamortized costs are expensed.

was capitalized in the three-year period ended December 31, 2020 or 2019.

December 31, 2020

December 31, 2019

Senior Revolver Loan Agreement, 4.75%, due 2022

Unsecured note –

Pardus acquisition, 1%, due 2021

SBA Payroll Protection Plan note, 1%, due 2023

Term Loan –

PIE, 6%, due 2024

Equipment note, 0%, due in 2025

Senior Unsecured Promissory Notes, 6%, due 2020

Unamortized debt issue costs

Total debt, net of debt issue costs

In February 2019, the Company entered into

five unsecured promissory note agreements with accredited investors, including the agreement with Mr.

Kamin discussed above, totaling

The notes were due May 1, 2019, and accrued interest at 8%.

One of the notes, in the amount of $15,000 was issued to

Morrisett, the Company’s President.

These notes and the related interest were paid in May 2019.

In September 20, 2018 the

Company entered into a Senior Revolver Loan Agreement (“the Agreement”) with CrossFirst Bank

(“CrossFirst”).

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

Agreement revolver commitment amount is $9,000,000 which is reduced by $150,000 per calendar quarter ($8,550,000 at December

31, 2019) and the maximum amount that can be advanced under the Agreement is $20,000,000 and includes interest at Wall Street

five unsecured promissory note agreements with accredited investors totaling $90,000.

The notes were due May 1, 2019, and accrued

interest at 8%.

One of the notes, in the amount of $15,000 was issued to Michael R.

Morrisett, the Company's President.

notes and the related interest were paid in May 2019.

In September 20, 2018 the Company

entered into a Senior Revolver Loan Agreement (“the Agreement”) with CrossFirst Bank (“CrossFirst”).

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

Agreement”).

The Amended Agreement revolver commitment amount is $8,700,000 which is reduced by $180,000 per calendar

quarter 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 December 31, 2020).

The Agreement matures on March 27, 2021.

The Agreement matured on March 27, 2021.

Collateral for

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and Empire North Dakota’s producing oil, gas and other leasehold and mineral interests.

The Amended Agreement requires

the Company, 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.

As of December 31, 2019, the Company has

$7,782,253 outstanding under the Amended Agreement and is in compliance with the loan covenants.

The Agreement requires the

Company 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.

As of December 31, 2020, the Company has $8,124,000 outstanding under the Agreement.

addition, the Company has a $306,000 outstanding letter of credit to its insurance carrier as of December 31, 2020.

10, 2021 the Agreement was amended (the “Third Amendment”).

The Third Amendment, among other things, extended the

maturity to March 27, 2022, redetermined the collateral base commitment of $8,520,000, provided for quarterly commitment

reductions of $180,000, waived and suspended the leverage ratio covenant and minimum interest coverage ratio covenant until

the fiscal quarter ending March 31, 2021, and amended the leverage ratio covenant to 6:1 at March 31, 2021 reducing quarterly

to 4:1 as of March 31, 2022 and thereafter.

On April 1, 2020, in conjunction with the purchase of assets

from Pardus Oil & Gas, LLC (see Note 5), the Company entered into an unsecured promissory note agreement with the seller in

the amount of $378,000.

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

as of December 31, 2020).

On May 5, 2020, the Company, through its

wholly owned subsidiary, Pardus Oil & Gas Operating, LP, received an SBA Payroll Protection Plan (“PPP”) loan

for $160,700.

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

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 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 $315,000 has been advanced from the loan (See Note 5).

In December 2020 the Company purchased certain equipment totaling

$66,819 to be used on lease sites.

The equipment was financed through the manufacturer’s financing subsidiary.

note provide for monthly payments of $1,012 for 60 months with a 0% interest rate.

Senior unsecured convertible promissory

In December 2016, the Company entered into

securities purchase agreements (each, a “Securities Purchase Agreement”

and, collectively, the “Securities Purchase

Agreements”) with four accredited investors, pursuant to which it issued senior unsecured convertible promissory notes due

December 31, 2018 (each, a “Convertible Note”

and, collectively, the “Convertible Notes”) in the aggregate

securities purchase agreements (each, a "Securities Purchase Agreement"

and, collectively, the "Securities Purchase

Agreements") with four accredited investors, pursuant to which it issued senior unsecured convertible promissory notes due

December 31, 2018 (each, a "Convertible Note"

and, collectively, the "Convertible Notes") in the aggregate

amount of $132,500 in cash.

Each Convertible Note accrues interest at 6%, was due December 31, 2018 and is convertible at

Each Convertible Note accrued interest at 6%, was due December 31, 2018 and is convertible at

the option of the holder at $0.15 per share.

Each investor was also issued a warrant certificate (each, a “Warrant Certificate”

and, collectively, the “Warrant Certificates”), pursuant to which such investor could acquire one share of Common Stock

Each investor was also issued a warrant certificate (each, a "Warrant Certificate"

and, collectively, the "Warrant Certificates"), pursuant to which such investor could acquire one share of Common Stock

at $0.25 per share for each $0.25 invested in the applicable Convertible Note until December 31, 2018.

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the Warrant Certificates was allocated $38,115 to Paid in Capital and $38,115 as Debt Issue Costs.

The Notes’

features were valued at their intrinsic value in excess of the debt’s allocated value of $38,115 and resulted in additional Paid

The Notes' conversion

features were valued at their intrinsic value in excess of the debt's allocated value of $38,115 and resulted in additional Paid

in Capital and Debt Issue Costs.

2 unchanged sentences

In January 2017, the Company entered into

securities purchase agreements (each, a “Securities Purchase Agreement”

and, collectively, the “Securities Purchase

Agreements”) with two accredited investors, pursuant to which it issued senior unsecured convertible promissory notes due

December 31, 2018 (each, a “Convertible Note”

and, collectively, the “Convertible Notes”) in the aggregate

securities purchase agreements (each, a "Securities Purchase Agreement"

and, collectively, the "Securities Purchase

Agreements") with two accredited investors, pursuant to which it issued senior unsecured convertible promissory notes due

December 31, 2018 (each, a "Convertible Note"

and, collectively, the "Convertible Notes") in the aggregate

amount of $62,500 in cash.

Each Convertible Note accrues interest at 6%, is due December 31, 2018 and is convertible at the

Each Convertible Note accrued interest at 6%, is due December 31, 2018 and is convertible at the

option of the holder at $0.15 per share.

Each investor

also issued a warrant certificate (each, a “Warrant Certificate”

and, collectively, the “Warrant Certificates”),

pursuant to which such investor could acquire one share of Common Stock at $0.25 per share for each $0.25 invested in the applicable

Convertible Note until December 31, 2018.

The full amount of interest under each Convertible Note is accrued and paid upon

the maturity date or earlier conversion.

Each investor was also issued a warrant certificate (each, a "Warrant Certificate"

and, collectively, the "Warrant Certificates"), pursuant to which such investor could acquire one share of Common Stock

at $0.25 per share for each $0.25 invested in the applicable Convertible Note until December 31, 2018.

The full amount of

interest under each Convertible Note is accrued and paid upon the maturity date or earlier conversion.

The value allocated to the Warrant Certificates

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the Warrant Certificates was allocated $16,975 to Paid in Capital.

The Notes’

conversion features were valued at their intrinsic

value in excess of the debt’s allocated value of $16,975 and resulted in additional Paid in Capital.

The Notes' conversion features were valued at their intrinsic

value in excess of the debt's allocated value of $16,975 and resulted in additional Paid in Capital.

The Debt Issue Costs represent

a direct deduction of the face amount the Convertible Notes and was amortized as interest expense over the life of the Notes.

In September and October 2017, the Company

entered into securities purchase agreements (each, a “Securities Purchase Agreement”

and, collectively, the “Securities

Purchase Agreements”) with two accredited investors, pursuant to which it issued senior unsecured convertible promissory notes

due December 31, 2019 (each, a “Convertible Note”

and, collectively, the “Convertible Notes”) in the aggregate

amount of $65,000 in cash.

Each Convertible Note accrues interest at 6%, is due December 31, 2019 and is convertible at the

option of the holder at $0.15 per share.

Each investor was also issued a warrant certificate (each, a “Warrant Certificate”

and, collectively, the “Warrant Certificates”), pursuant to which such investor could acquire one share of Common Stock

at $0.25 per share for each $0.25 invested in the applicable Convertible Note until December 31, 2019.

The full amount of

interest under each Convertible Note is accrued and paid upon the maturity date or earlier conversion.

The value allocated to

the September Warrant Certificates was the fair value determined using the Black-Scholes option valuation with the following assumptions:

no dividend yield, expected annual volatility of 154%, risk free interest rate of 1.35% and an expected useful life of 28 months.

The value allocated to the October Warrant Certificates was the fair value determined using the Black-Scholes option valuation

with the following assumptions:

no dividend yield, expected annual volatility of 180%, risk free interest rate of 1.51% and

an expected useful life of 27 months.

The fair value of the Warrant Certificates of $13,918 was allocated to Paid in Capital.

The Notes’

conversion features were valued at their intrinsic value in excess of the debt’s allocated value of $13,918 and resulted

in additional Paid in Capital.

The Debt Issue Costs represent a direct deduction of the face amount the Convertible Notes and was

amortized as interest expense over the life of the Notes.

In September and October 2017, the

Company entered into securities purchase agreements (each, a "Securities Purchase Agreement"

and, collectively, the

"Securities Purchase Agreements") with two accredited investors, pursuant to which it issued senior unsecured

convertible promissory notes due December 31, 2019 (each, a "Convertible Note"

and, collectively, the

"Convertible Notes") in the aggregate amount of $65,000 in cash.

Each Convertible Note accrued interest at

6%, is due December 31, 2019 and is convertible at the option of the holder at $0.15 per share.

Each investor was also

issued a warrant certificate (each, a "Warrant Certificate"

and, collectively, the "Warrant

Certificates"), pursuant to which such investor could acquire one share of Common Stock at $0.25 per share for each

$0.25 invested in the applicable Convertible Note until December 31, 2019.

The full amount of interest under each

Convertible Note is accrued and paid upon the maturity date or earlier conversion.

The value allocated to the September

Warrant Certificates was the fair value determined using the Black-Scholes option valuation with the following

no dividend yield, expected annual volatility of 154%, risk free interest rate of 1.35% and an expected

useful life of 28 months.

The value allocated to the October Warrant Certificates was the fair value determined using

the Black-Scholes option valuation with the following assumptions:

no dividend yield, expected annual volatility of

180%, risk free interest rate of 1.51% and an expected useful life of 27 months.

The fair value of the Warrant Certificates

of $13,918 was allocated to Paid in Capital.

The Notes' conversion features were valued at their intrinsic value in

excess of the debt's allocated value of $13,918 and resulted in additional Paid in Capital.

The Debt Issue Costs represent a

direct deduction of the face amount the Convertible Notes and was amortized as interest expense over the life of the

On December 31, 2018 the Company and investors

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In 2019, five of the Senior Unsecured Promissory Note investors

exercised the conversion feature and converted their $157,500 notes for 1,575,000 shares of the Company’s common stock.

exercised the conversion feature and converted their $157,500 notes for 1,575,000 shares of the Company's common stock.

31, 2019 the Company and investors for the remaining $102,500 Senior Unsecured Convertible Promissory Notes entered into amended

agreements whereby the maturity dates for the notes maturing December 31, 2019 were extended to January 31, 2020.

The following table reflects the changes in

long term debt during the years ended December 31, 2019 and 2018, respectively:

Convertible Notes Outstanding

Debt Issue Costs –

Warrants and Conversion Feature

Convertible Notes Outstanding, Net

In January 2020

the remaining Senior Unsecured Promissory Note investors exercised the conversion feature and converted their $102,500 notes for

1,025,000 shares of the Company's common stock.

Common stock:

During December 2016, the Company issued $132,500

of senior unsecured convertible promissory notes (“Convertible Notes”) due December 31, 2018 to several accredited investors,

The Convertible Notes, as modified, are convertible at the option of the holder into Common Stock at $0.10 per

Each investor was also issued a warrant certificate, pursuant to which such investor could acquire one share of Common

Stock at $0.15 per share for each $0.15 invested in the applicable Convertible Note until December 31, 2019.

In December, 2019

of senior unsecured convertible promissory notes ("Convertible Notes") due December 31, 2018 to several accredited investors

(See Note 9).

The Convertible Notes, as modified, were convertible at the option of the holder into Common Stock at $0.10

Each investor was also issued a warrant certificate, pursuant to which such investor could acquire one share of

Common Stock at $0.15 per share for each $0.15 invested in the applicable Convertible Note until December 31, 2019.

2019 the Convertible Notes were extended to January 31, 2020.

During January 2017 the Company issued $62,500

of senior unsecured convertible promissory notes (“Convertible Notes”) due December 31, 2018 to several accredited investors,

The Convertible Notes, as modified, are convertible at the option of the holder into Common Stock at $0.10 per

Each investor was also issued a warrant certificate, pursuant to which such investor could acquire one share of Common

Stock at $0.15 per share for each $0.15 invested in the applicable Convertible Note until December 31, 2019.

In December, 2019

of senior unsecured convertible promissory notes ("Convertible Notes") due December 31, 2018 to several accredited investors

(See Note 9).

The Convertible Notes, as modified, were convertible at the option of the holder into Common Stock at $0.10

Each investor was also issued a warrant certificate, pursuant to which such investor could acquire one share of

Common Stock at $0.15 per share for each $0.15 invested in the applicable Convertible Note until December 31, 2019.

2019 the Convertible Notes were extended to January 31, 2020.

During September and October 2017, the Company

issued $65,000 of senior unsecured convertible promissory notes (“Convertible Notes”) due December 31, 2019 to two accredited

issued $65,000 of senior unsecured convertible promissory notes ("Convertible Notes") due December 31, 2019 to two accredited

investors (See Note 9).

The Convertible Notes, as modified, are convertible at the option of the holder into Common Stock

The Convertible Notes, as modified, were convertible at the option of the holder into Common Stock

at $0.10 per share.

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December, 2019 the Convertible Notes were extended to January 31, 2020.

In 2019 and 2020 all of the convertible promissory

notes were converted into shares of the Company’s stock (see Note 9).

During January 2018 the Company issued to

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and allocated to Paid in Capital.

During June 2018 the Company issued to an

accredited investor 100,000 shares of its common stock and warrants to purchase 100,000 shares of its common stock for $.15 per

share which expired on December 31, 2019.

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 197%, risk free interest

rate of 2.43% and an expected useful life of 18 months.

The fair value of the warrants of $9,900 was allocated to Paid in Capital.

During June 2018 the Company issued to

an accredited investor 100,000 shares of its common stock and warrants to purchase 100,000 shares of its common stock for

$.15 per share which expired on December 31, 2019.

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 197%, risk free interest rate of 2.43% and an expected useful life of 18 months.

The fair value of the warrants of $9,900

was allocated to Paid in Capital.

During August and September 2018, the Company

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to Paid in Capital.

Proceeds from the issuance were utilized for a portion of the Cardinal and Exodus acquisitions (See Note 5).

Proceeds from the issuance were utilized for a portion of acquisitions.

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

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stock of the Company.

The original warrants expired on December 31, 2021 and had exercise prices of

and $0.25 for 500,000 and 2,500,000 shares, respectively.

The original warrants expired on December 31, 2021 and had exercise prices of $0.15 and $0.25 for 500,000

and 2,500,000 shares, respectively.

The warrants were extended to expire on April 2, 2029.

The value allocated to

the warrants was the fair value determined using the Black-Scholes option valuation with the following assumptions:

yield, expected annual volatility of 213%, risk free interest rate of 2.32% and an expected useful life of 5 years.

The fair value

of the warrants of $976,000 was recorded as compensation expense and allocated to Paid in Capital.

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 213%, risk free interest rate of 2.32% and an expected useful life of 5 years.

The fair value of

the warrants of $976,000 was recorded as compensation expense and allocated to Paid in Capital.

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.

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.

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

On March 11, 2021 the Company amended the Securities Agreement to remove the vesting provisions for the warrants and PIE

exercised the warrants for an aggregate exercise price of $3,349,052 (See Note 15).

On December 31, 2020 the Board of Directors of the Company

amended certain warrant certificates which had been issued to Mr.

Pritchard and Mr.

Morrisett covering 1,000,000 warrants to purchase

common stock of the Company.

The original warrants expired on December 31, 2021 and had an exercise prices of $0.25.

were extended to expire on April 2, 2029.

The value allocated to the warrant extension was the fair value determined using the

Black-Scholes option valuation with the following assumptions:

no dividend yield, expected annual volatility of 329%, risk free

interest rate of .36% and an expected useful life of 5 years.

The fair value of the warrant extension of $349,800 was recorded

as compensation expense and allocated to Paid in Capital.

Stock options:

At the Company’s 2006 Annual Meeting of Stockholders,

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.

and until such time as the Board creates a Compensation Committee, the Board of Directors will administer the Plan.

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.

Under the terms of the Plan, no additional options could be granted after the tenth anniversary of the Plan, which occurred on

June 5, 2016.

As of December 31, 2019, there are 4,167 options outstanding which expire on September 9, 2020.

At the Company's 2006 Annual Meeting of Stockholders,

the stockholders approved the 2006 Stock Incentive Plan (the "Plan").

The Plan permitted the issuance of stock

options, restricted stock awards, and performance shares to employees, officers, directors, and consultants of the Company.

Initially, 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

Under the terms of the Plan, no additional options could be granted after the tenth anniversary of the Plan,

which occurred on June 5, 2016.

As of December 31, 2019, there were 4,167 options outstanding which expired on September 9, 2020.

On April 3, 2019, the Board of Directors

of the Company adopted the Empire Petroleum Corporation 2019 Stock Option Plan (the “Stock Option Plan”).

total number of shares of common stock that may be issued pursuant to stock options under the Stock Option Plan is

of the Company adopted the Empire Petroleum Corporation 2019 Stock Option Plan (the "Stock Option Plan").

number of shares of common stock that may be issued pursuant to stock options under the Stock Option Plan is 10,000,000.

Further, on April 3, 2019 the Company granted Mr.

Pritchard and Mr.

Morrissett each, options to purchase

2,500,000 shares of common stock of the Company at an exercise price of $0.33 per share.

The options vest in three

installments with 1,250,000 vesting immediately and 625,000 vesting each in April 2020 and April, 2021.

All of the options

expire in April 2029.

The value allocated to the vested options was the fair value determined using the Black-Scholes

option valuation with the following assumptions:

no dividend yield, expected annual volatility of 213%, risk free

interest rate of 2.32% and an expected useful life of 5.375 years.

The fair value of the vested options of $812,500 was

recorded as compensation expense and allocated to Paid in Capital.

The remaining fair value of the unvested options at

December 31, 2019 is $812,500.

Morrissett each, options to purchase 2,500,000 shares of

common stock of the Company at an exercise price of $0.33 per share.

The options vest in three installments with 1,250,000

vesting immediately and 625,000 vesting each in April 2020 and April 2021.

All of the options expire in April 2029.

value allocated to the vested options was the fair value determined using the Black-Scholes option valuation with the

following assumptions:

no dividend yield, expected annual volatility of 213%, risk free interest rate of 2.32% and an

expected useful life of 5.375 years.

The fair value of the options of $812,500 was recorded as compensation expense and

allocated to Paid in Capital in 2019.

In 2020, the fair value of the

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

fair of the remaining unvested options is $406,250 as of December 31, 2020.

On December 31, 2020 the Company granted Mr.

Pritchard and Mr.

Morrissett each, options to purchase 2,500,000 shares of common stock of the Company at an exercise price of

$0.35 per share.

The options vested immediately.

All of the options expire in December 2030.

The value allocated to the vested

options was the fair value determined using the Black-Scholes option valuation with the following assumptions:

yield, expected annual volatility of 344%, risk free interest rate of .36% and an expected useful life of 5 years.

The fair value

of the options of $1,949,500 was recorded as compensation expense in 2020 and allocated to Paid in Capital.

The Company expenses the cost of options granted

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the input of other highly subjective assumptions including stock price volatility.

A summary of the Company’s Incentive Plan

A summary of the Company's Incentive Plan

as of December 31, 2020, and changes during the year is presented below:

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Outstanding at End of Year 2018

Cancelled or Exercised

Outstanding at End of Year 2019

2 unchanged sentences

about stock options outstanding at December 31, 2020:

Options Outstanding

Options Exercisable

$.33 to $3.12

Income taxes:

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Loss carry-forwards

Depreciation, depletion and impairment

Unrecognized losses on derivatives

Total deferred tax assets

Valuation allowance

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net operating loss carryforwards totaling approximately $19.4 million which begin to expire if not utilized starting in 2021.

Utilization of the Company’s loss carryforwards

Utilization of the Company's loss carryforwards

is dependent on realizing taxable income.

Deferred tax assets for these carryforwards have been reduced by a valuation allowance

up to an amount equal to estimated deferred tax liability.

The Company recorded a valuation allowance as of December 31, 2020 and 2019 due to uncertainty

related to its ability to utilize some of its deferred income tax assets, primarily consisting of net operating loss carryforwards

before they expire.

The Company is no longer subject to income

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Operating lease:

Rent expense for the year ended December 31,

2019 was $22,700.

The Company incurred $11,317 of rent expense in 2018.

The Company leases office space in Tulsa, Oklahoma

for $1,667 per month on a month to month basis.

Related Party Transactions:

On November 28, 2017, the Company named

Thomas Pritchard as Chief Executive Officer of the Company.

Pritchard is the co-founder/ partner for Pritchard Griffin

Advisors and the Managing Director of Pritchard Energy Advisors.

Both of the companies have provided services to the Company,

primarily related to raising capital and locating oil & gas investments.

In 2018, the Company paid Pritchard Griffin

Advisors $24,200 for consulting services.

As of December 31, 2019 Mr., Pritchard has an outstanding receivable of

The Company adopted ASU No.

2016-02, Topic 842 (ASC 842) -

Leases, effective January 1, 2020.

This ASU requires lessees to recognize an operating lease or right-of-use

("ROU") asset and liability on the balance sheet for all right-of-use leases with an initial lease term greater

Under the transition option, the Company will continue to

apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented and will

make only annual disclosures for the comparative periods because ASC 840 does not require interim disclosures.

amounts have not been adjusted and continue to be reflected in accordance with the Company’s historical accounting.

adoption of this standard on January 1, 2020, had no impact on the Company's consolidated statements of stockholders' equity

or consolidated statements of operations.

As a lessee, the Company leases its corporate office headquarters

in Tulsa, Oklahoma.

The lease expires on December 31, 2025 and has an option to renew for an additional five-year term.

to renew the lease is generally not considered reasonably certain to be exercised.

Therefore, the period covered by such optional

period is not included in the determination of the term of the lease and the lease payments during these periods are similarly

excluded from the calculation of right-of-use lease asset and lease liability balances.

ROU lease expense consists of rent

expense related to leases that were included in ROU assets under ASC 842.

The Company recognizes right-of use lease expense

on a straight-line basis, except for certain variable expenses that are recognized when the variability is resolved,

typically during the period in which they are paid.

Variable right-of-use lease payments typically include charges for

property taxes, insurance, and variable payments related to non-lease components, including common area maintenance.

As a result of adopting ASC 842, on the effective date, the Company

recognized right-of-use assets and liabilities of $613,901.

Right-of-use leases are included in right-of-use assets (included in

Other Property and Equipment) and current or long-term right-of-use obligations on the consolidated balance sheets.

assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

The Company uses a discount rate that approximates the rate of interest for a collateralized loan over a similar term as the discount

rate for present value of lease payments when the rate implicit in the contract is not readily determinable.

Right of use lease expanse was $34,989 for the year ended December

Cash flows for right of use leases was $-0- for the year as the lease payments did not commence until 2021.

Supplemental balance sheet information related to the right of

use leases as of December 31, 2020:

Right of use lease assets

Right of use lease obligations –

Total right of use lease liabilities

The weighted average remaining term for the Company’s right

of use leases is 5 years.

Maturities of lease liabilities as of December 31, 2020:

Total Lease payments

Less imputed interest

Total lease obligation

Rent expense for the Company’s former

Tulsa office for the year ended December 31, 2020 was $21,117 and $22,700 for the year ended December 31, 2019.

Concentrations:

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The Company sells 96% of its oil and natural gas production to

three customers.

four customers.

The loss of these purchasers could result in a temporary interruption in sales or a lower price for production.

Subsequent events:

On January 27,2020 the Company, through its wholly owned subsidiary,

Empire North Dakota, LLC, entered into a Bill of Sale and Assignment to purchase lease interests in approximately 4,936 acres in

Montana for $500,000.

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.

On February 17, 2020 the Company, through its wholly owned subsidiary,

Empire North Dakota, LLC, sold all of its interest in leases of approximately 337 acres in Montana for $1,010,400.

On March 10, 2021 the Company entered into the Third Amendment

(the “Third Amendment”) of its Senior Revolver Loan Agreement (the “Agreement’) with CrossFirst Bank (see

On March 11, 2021 the Company amended the Securities Agreement

with Petroleum & Independent Exploration, LLC (“PIE) to remove the vesting provisions for the warrants, and PIE exercised

all of its warrants to purchase 23,628,185 shares of the Company’s common stock for an aggregate exercise price of $3,349,052

(See Note 5).

On March 12, 2021 the Company, through

its subsidiary Empire New Mexico, LLC entered into a purchase and sale agreement with XTO Holdings, LLC (a subsidiary of

ExxonMobil) (the “Seller’) to acquire, among other things, certain oil and gas properties in New Mexico.

purchase price is $17,800,000 subject to customary adjustments, is effective as of January 1, 2021, and is scheduled to close

April 26,2021.

The Company has wired a deposit of $1,780,000 to the Seller on March 12, 2021.

As a part of the transaction,

the Company established Empire New Mexico, LLC, a wholly owned subsidiary.

On March 22, 2021 the Company, through its wholly owned subsidiary,

Empire North Dakota, LLC, entered into a Purchase and Sale Agreement (“the Agreement”) with Ovinta USA, Inc.

related companies to purchase certain oil and natural gas properties in Montana and North Dakota comprising 26,600 net acres with

94 active wells.

The purchase price is $8,500,000, subject to adjustments with an effective date of January 1, 2020 and a closing

date of April 30, 2020, subject to certain conditions customary for this type of transaction.

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 December 31, 2019.

In March, 2020, crude oil prices in both the spot market and futures market experienced

significant declines.

The Company’s 2019 financial statements are not required to be, and have not been, adjusted to reflect

any effects on depletion or impairment due to the subsequent declines in crude oil prices.

Further, the effect of lower crude

oil prices on the 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.

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

is the risk that, among other things:

· the Company’s

revenues, cash flows and profitability may decline substantially, which could also indirectly impact expected production by reducing

the amount of funds available to acquire future mineral interests;

· reserves relating

to the Company’s proved properties may become uneconomic to produce resulting in impairment of proved properties;

· operators and other working

interest owners are unable to execute their drilling and exploration programs resulting in lower production or inability to prove

reserves on unproved properties

The occurrence of certain of these events may have a

material adverse effect on the Company’s business, results of operations and financial condition.

In early March 2020, there was a global outbreak of COVID-19 that

has resulted in changes in global supply and demand of certain mineral and energy products.

These changes, including a potential

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.

On January 31, 2020, the Senior Unsecured Convertible Promissory

Note holders converted notes in the amount of $102,500 into 1,025,000 shares of the Company’s common stock.

PETROLEUM CORPORATION

SUPPLEMENTARY DATA

31, 2019 and 2018

following reserve estimates present the Company’s estimate of the proven natural gas and oil reserves and net cash flow of the

Properties, in accordance with the guidelines established by the Securities and Exchange Commission.

The Company emphasizes

that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing

natural gas and oil properties.

Empire ND Acquisitions, LLC, entered into a purchase and sale agreement with 31 Group, LLC to acquire among other things, certain

oil and gas properties in North Dakota.

The purchase price is $900,000 and is reduced by certain expenses which the Company may

incur relating to the properties for up to one year from the April 21, 2021 closing date.

As a part of the transaction, the Company

established Empire ND Acquisition, LLC.

During February

and March 2021, the Company issued to a group of accredited investors 8,993,857 shares of its common stock and warrants to purchase

8,993,857 shares of its common stock for $.50 per share which expires on December 31, 2022.

Proceeds from the sale were $3,147,850.

EMPIRE PETROLEUM CORPORATION

UNAUDITED SUPPLEMENTARY DATA

December 31, 2020 and 2019

The following reserve estimates

present the Company's estimate of the proven natural gas and oil reserves and net cash flow of the Properties, in accordance with

the guidelines established by the Securities and Exchange Commission.

The Company emphasizes that reserve estimates are inherently

imprecise and that estimates of new discoveries are more imprecise than those of producing natural gas and oil properties.

Accordingly, the estimates are expected to change as future information becomes available.

All the oil and natural gas reserves are located in Louisiana.

Quantity Information

oil and natural gas reserves are those quantities of oil and gas, which by analysis of geoscience and engineering data, can be

estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under

existing economic conditions, operating methods, and government regulations.

Proved developed reserves are proved reserves that

can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the

required equipment is relatively minor compared to the cost of a new well.

Proved undeveloped reserves are proved reserves that

are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditures

is required for recompletion.

Below are the net quantities of net proved developed and undeveloped reserves of the Properties:

As of December 31,

Proved reserves:

All the oil and natural gas reserves

are located in Louisiana, North Dakota, Montana and Texas.

Reserve Quantity Information

Proved oil and natural gas reserves

are those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty

to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating

methods, and government regulations.

Proved developed reserves are proved reserves that can be expected to be recovered through

existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor

compared to the cost of a new well.

Proved undeveloped reserves are proved reserves that are expected to be recovered from new

wells on undrilled acreage, or from existing wells where a relatively major expenditures is required for recompletion.

the net quantities of net proved developed and undeveloped reserves of the Properties:

of December 31,

of December, 31

Proved developed reserves:

Beginning of year

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Future Net Cash Flows Relating to Oil and Natural Gas Reserves

standardized measure of discounted future net cash flows relating to oil and natural gas reserves and associated changes in standard

measure amounts were prepared in accordance with the provision of Financial Accounting Standard Board ASC 932-235-555.

cash inflows were computed by applying average prices of oil and natural gas for the last 12 months to estimated future production.

Future production and development costs were computed by estimating the expenditures to be incurred in developing the oil and

natural gas reserves at the end of the year, based on year end costs and assuming continuation of existing economic conditions.

Future net cash flows are discounted at the rate of 10% annually to derive the standardized measure of discounted cash flows.

Actual future cash inflows may vary considerably, and the standardized measure does not necessarily represent the fair value of

the acquired properties’

oil and natural gas reserves.

The standardized measure of discounted

future net cash flows relating to oil and natural gas reserves and associated changes in standard measure amounts were prepared

in accordance with the provision of Financial Accounting Standard Board ASC 932-235-555.

Future cash inflows were computed

by applying average prices of oil and natural gas for the last 12 months to estimated future production.

Future production

and development costs were computed by estimating the expenditures to be incurred in developing the oil and natural gas reserves

at the end of the year, based on year end costs and assuming continuation of existing economic conditions.

Future net cash

flows are discounted at the rate of 10% annually to derive the standardized measure of discounted cash flows.

Actual future

cash inflows may vary considerably, and the standardized measure does not necessarily represent the fair value of the acquired

properties' oil and natural gas reserves.

Standard measure amounts are:

1 unchanged sentence

$ 121,959,450

$ 184,779,880

Future production costs

8 unchanged sentences

Standardized Measure

The 12-month average prices were

adjusted to reflect applicable transportation and quality differentials on a well-by-well basis to arrive at realized sales prices

used to estimate the properties’

The prices for the properties’

reserves were as follows:

Representative NYMEX prices:

The 12-month average prices were adjusted

to reflect applicable transportation and quality differentials on a well-by-well basis to arrive at realized sales prices used

to estimate the properties' reserves.

The prices for the properties' reserves were as follows:

Natural gas (MMBtu)

6 unchanged sentences

Changes in price and production costs

(18,386,232 )

Revisions of quantity estimates

2 unchanged sentences

Changes in estimated timing and other, net

(27,364,345 )

Change in standardized measure

(16,531,840 )

Standardized measure –

8 unchanged sentences

Capitalization of Oil and Gas

Empire has not incurred and capitalized

exploratory well costs for properties pending the determination of proved status, exploratory well costs reclassified to wells

or exploratory well costs that were charged to expense.

The aggregate capitalized costs

of oil and gas properties are as follows:

Empire has not incurred and capitalized exploratory

well costs for properties pending the determination of proved status, exploratory well costs reclassified to wells or exploratory

well costs that were charged to expense.

The aggregate capitalized costs of oil and

gas properties are as follows:

Proved producing wells

1 unchanged sentence

Lease and well equipment

Unproved leasehold

Asset retirement obligation

2 unchanged sentences

Net capitalized costs

Property acquisition cost

Exploration cost

Development cost

Total gross capitalized costs

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-K

Item 9A. Controls and Procedures