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Item 9A. Controls and Procedures

2023-03-31 compared with 2022-03-31 · 1268 added, 1574 removed, 319 unchanged (90% of the section changed)

AND PROCEDURES.

Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting,

as defined in Exchange Act Rule 13a-15(f).

The Company’s internal control over financial reporting is

designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements

for external purposes in accordance with generally accepted accounting principles.

the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief

Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based

on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal

Control - Integrated Framework.

of Disclosure Controls and Procedures

of the end of the period covered by this report, the Company carried out an evaluation under the supervision and participation of the

Company’s Principal Executive Officer and Principal Financial Officer, along with our management, of the effectiveness of the design

and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).

Based on this

evaluation, the Company’s Principal Executive Officer and 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 a material weakness identified below.

Report on Internal Control Over Financial Reporting

1 unchanged sentence

Act Rule 13a-15(f).

The Company’s internal control over financial reporting is designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with generally accepted accounting principles.

the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief

Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based

on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal

Control - Integrated Framework.

Based on our evaluation under that framework, our management concluded that our internal control

over financial reporting was not effective as of December 31, 2021 due to a material weakness.

material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there

is a possibility that a material misstatement in our interim financial statements will not be prevented or detected on a timely

A material weakness in internal control application was discovered related to the internal controls over financial

reporting, including disclosures around complex and non-routine transactions.

Management believes the Company’s lack of

sufficient accounting personnel with appropriate accounting expertise to appropriately apply GAAP for complex and non-routine

transactions and prepare associated financial statement disclosures amounts to a material weakness in its internal control over

financial reporting.

The Company’s internal control over financial reporting is designed to provide reasonable assurance

regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with

generally accepted accounting principles.

the supervision and with the participation of the Company’s management, including its Principal Executive Officer and Principal

Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on

the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal Control

- Integrated Framework.

Based on our evaluation under that framework, our management concluded that our internal control over financial

reporting was not effective as of December 31, 2022, due to a material weakness.

material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a

possibility that a material misstatement in our financial statements will not be prevented or detected on a timely basis.

prior year, a material weakness in internal control application was discovered related to the internal controls over financial reporting,

including disclosures around complex and non-routine transactions.

Management believes the Company’s lack of sufficient accounting

personnel with appropriate accounting expertise to appropriately apply GAAP for complex and non-routine transactions and prepare associated

financial statement disclosures amounts to a material weakness in its internal control over financial reporting.

a result, at December 31, 2022 and on the date of this Report, its internal control over financial reporting is not effective.

Plant to Remediate the Material Weakness

Plan to Remediate the Material Weak ness

has evaluated the material weakness described above and is in the process of updating its design and implementation of internal

control over financial reporting to remediate the aforementioned material weakness and enhance the Company’s internal control

environment, including the hiring of our Chief Accounting Officer in October 2021 and will continue to increase our accounting

and financial reporting capacity to effectively gather, analyze and review information related to financial reporting in a timely

However, the implemented and enhanced controls have not operated for a sufficient period of time to demonstrate that the

material weakness was remediated as of, or subsequent to, December 31, 2021.

We are committed to continuing to improve our internal

control processes and will continue to diligently and vigorously review our financial reporting controls and procedures.

environment which to date has included the hiring of a Chief Accounting Officer in October 2021.

In the first quarter of 2022, the

Chief Accounting Officer engaged an outside company to undertake an internal controls review.

This review concluded in the third

quarter of 2022.

Controls that would strengthen the Company’s internal control structure that were identified during the

course of the review continue to be designed and will be implemented on an ongoing basis.

In December 2022, we had a

change in the Chief Accounting

although the former Chief Accounting Officer has continued to assist the Company on a part-time basis.

In addition to continuing to

enhance and refine control design, management plans to add the appropriate resources and focus efforts during 2023 to test the

operational effectiveness of the controls that will be established.

We are committed to continuing to improve our internal control processes

and will continue to diligently and vigorously review our financial reporting controls and procedures.

in Internal Controls over Financial Reporting

we continue to implement design enhancements to our internal control procedures, we believe that, other than the changes described

above regarding the ongoing remediation efforts, there were no changes to our internal control over financial reporting which

were identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange

Act during the fourth quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal

control over financial reporting.

we continue to implement design enhancements to our internal control procedures, we believe that, other than the changes described above

regarding the ongoing remediation efforts, there were no changes to our internal control over financial reporting which were identified

in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange Act during

the fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial

Report of Registered Public Accounting Firm

Annual Report does not contain an attestation report of our independent registered public accounting firm related to internal

control over financial reporting because the rules for smaller reporting companies provide an exemption from the attestation requirement.

Annual Report does not contain an attestation report of our independent registered public accounting firm related to internal control

over financial reporting because the rules for smaller reporting companies provide an exemption from the attestation requirement.

OTHER INFORMATION.

REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following lists the directors and executive

officers of the Company:

Chief Executive Officer and Director

President and Director

Chief Operating Officer

Director and Co-Chairman of the Board

Directors hold office until their successors are

elected by the stockholders of the Company and qualified.

Executive officers serve at the pleasure of the Board of Directors.

Recommendation of Nominees to the

Company's Board of Directors

The Company’s Board of Directors

does not have a nominating committee.

On November 19, 2021, the Company’s Board adopted resolutions requiring the independent

directors of the Board (the “Independent Directors”) to participate in the consideration of director nominees and recommend

for the Board’s selection the director nominees.

The Independent Directors will consider director candidates submitted to them

by other directors, employees and stockholders.

The Independent Directors may engage professional search firms to assist them in identifying

and evaluating potential candidates.

Any stockholder recommendations of candidates proposed for consideration by the Independent Directors

should include the candidate’s name and qualifications for director, reasons for the recommendation and the candidate’s written

consent to being considered as a director nominee and should be addressed to:

Independent Directors, c/o Secretary, 2200 S.

Utica Place, Suite 150, Tulsa, Oklahoma 74114.

The Independent Directors may require the stockholder submitting the recommendation or

the recommended candidate to furnish such other information as the Independent Directors may reasonably request.

In addition, the Company’s

Amended and Restated Bylaws provide a process for stockholders to nominate directors for consideration at a meeting of stockholders.

In considering prospective nominees for the Board, the Independent Directors will

to find individuals of high integrity who have a solid record of accomplishment in their chosen fields and who possess the qualifications,

qualities and skills to effectively represent the best interests of all stockholders.

Candidates are selected for their ability to exercise

good judgment and provide practical insights and diverse perspectives.

The Independent Directors consider the following qualifications

at a minimum to be required in recommending to the Board potential new Board members or the continued service of existing members:

attained position of leadership in the candidate’s field of endeavor;

and/or financial expertise;

· objectivity;

· demonstrated

exercise of sound business judgment;

relevant to Empire Petroleum’s lines of business;

governance experience;

to serve the interests of all stockholders;

to devote the time, energy and attention as may be necessary to properly discharge his or

her responsibilities as a director;

· independence;

at least 50% of the Board shall consist of independent directors, as defined in the rules

of the NYSE American.

Other than the foregoing, there are no

stated minimum criteria for director nominees, although the Independent Directors may also consider such other factors as they may deem

are in the best interests of the Company and its stockholders.

When considering potential nominees for the Board, the Independent

Directors will consider the criteria above and each potential nominee’s individual skills and qualifications in context of the

current composition of the Board and needs of the Board at such time.

In connection therewith, the Independent Directors will consider

diversity in professional background, experience, expertise, perspective, age, gender and ethnicity with respect to Board composition

as a whole, although the Board does not have a specific diversity policy.

With respect to diversity, particular emphasis is placed on

identifying candidates whose skills and characteristics complement and augment the make-up of the Board as a whole and the needs of the

Board given the circumstances of the Company.

If the Company is legally required by contract or otherwise to provide third parties with

the ability to nominate and/or appoint directors (e.g., the Company’s Series A Voting Preferred Stock), the selection and nomination

of such directors is not subject to the foregoing process.

Identification of Audit Committee;

Audit Committee Financial Expert

The Company has a separately-designated

standing audit committee established in accordance with section 3(a)(58)(A) of the Exchange Act.

The audit committee’s members

are Anthony Kamin and Mason Matschke, both of whom are independent under the current director independence standards of the NYSE American.

The Board has determined the Company does not have an audit committee financial expert serving on its audit committee.

has determined that both Messrs.

Kamin and Matschke are able to read and understand fundamental financial statements and are financially

sophisticated as contemplated under the rules of the NYSE American.

The Board does not have an audit committee financial expert

because it has not recruited one but will periodically review the need to add an expert.

Code of Ethics

The Company has adopted a Code of Business

Conduct and Ethics that 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.

The Code of Business Conduct

and Ethics is available on the Company’s website at https://empirepetroleumcorp.com under the “Investor Relations –

Corporate Governance” caption.

If the Company amends or waives a provision of the Code of Business Conduct and Ethics that

applies to the principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions,

the Company will post the amendment or waiver at the same location on the Company’s website.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of

1934, as amended, requires the Company's directors, 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.

Based solely on a review of the reports filed

with the SEC and any written representations that no other reports were required during the year ended December 31, 2021, 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, 2021 were complied with on a timely basis, except that the initial report for (a) each of

Marchive and Matschke and Energy Evolution Master Fund, Ltd.

was filed late and (b) Mr.

Pritchard inadvertently omitted a

holding which was later reported on a year-end report on Form 5.

information called for by this Item 10 is incorporated herein by reference to our definitive Proxy Statement for 2023 annual meeting

of stockholders (“2023 Proxy Statement”) to be filed with the SEC no later than 120 days following the fiscal year ended

December 31, 2022.

COMPENSATION.

Executive Compensation

The following table set forth certain

information regarding compensation of the Company's named executive officers.

The persons named below constitute all of the executive

officers of the Company as of December 31, 2021.

On August 18, 2021, each of Messrs.

Pritchard and Morrisett entered into an Employment

Agreement with the Company.

For additional information regarding their employment agreements, see “Employment Agreements”

Name and Principal Position

Option Awards 1

Non-Equity Incentive Plan Compensation ($)

Life Insurance Premiums Paid ($)

All Other Compensation ($)

Chief Executive Officer

_______________________

1 For further 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.

The amounts shown do not represent the amounts paid to the executives.

2 On December 31, 2020, warrant

certificates issued to Messrs.

Pritchard and Morrisett pursuant to which each such named executive officer had the right to acquire 125,000

shares of the Company’s common stock at an exercise price of $1.00 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.

On December 31, 2020, each of Messrs.

Pritchard and Morrisett were issued options

to acquire 500,000 shares of the Company’s common stock at an exercise price of $1.40 per share under the 2019 Stock Plan.

3 All Other Compensation in

2021 consists of vehicle allowances and club dues.

Director Compensation

Annual compensation for non-employee

board members, as established in August 2021, is as follows:

non-employee board members - $80,000 per year, with pro-rata adjustments based on date of

service as necessary

non-employee board members – additional $9,000 per quarter with pro-rata adjustments

based on date of service as necessary

shares of the Company’s common stock granted at December 31, 2021 with pro-rata adjustments

based on date of service

Company reimburses directors for out-of-pocket expenses in connection with attending Board

and committee meetings

Company does not pay its employees who serve on the Board of Directors any additional compensation

for Board membership

The following table shows total compensation

received in 2021 by each of the Company’s non-employee directors.

Fees Earned or Paid in Cash

Stock Awards 1

As of December 31, 2021, Mr.

Kamin had outstanding options to acquire 75,000 shares related to a 2020 grant date.

Outstanding Equity Awards at December

The following table sets forth certain

information regarding outstanding equity awards of the Company's named executive officers.

Option Awards

Number of securities underlying unexercised options (#) exercisable

Number of securities underlying unexercised options (#) unexercisable

Equity incentive plan awards:

Number of securities underlying unexercised unearned options (#)

Option Exercise Price ($)

Option Expiration Date

Thomas Pritchard

Michael Morrisett

Employment Agreements

On August 18, 2021

(the “Effective Date”), the Company entered into an Employment Agreement with Thomas W.

Pritchard, Chief Executive Officer

of the Company.

The initial term of Mr.

Pritchard’s Employment Agreement is three years;

provided, however, that commencing on the third anniversary of the Effective Date

of the Employment Agreement and each subsequent annual anniversary date, the term shall be automatically extended so as to terminate

one year from such anniversary date, unless written notice of non-renewal is delivered by the Company or Mr.

Pritchard within certain

time periods.

Pritchard’s initial

guaranteed minimum base salary is $250,000 per year (“Guaranteed Base Salary”), but to the extent that funds are available

and subject to the discretion of the Board of Directors of the Company (the “Board”), the Company may pay Mr.

Pritchard additional

salary compensation up to the maximum amount of $35,000 per year.

Pritchard is eligible to receive a target annual bonus of 100%

of his Actual Base Salary (as defined in the Employment Agreement) for each calendar year during the term of the Employment Agreement,

with the actual amount of such bonus determined at the discretion of the Board based on performance targets established by the Board.

Pritchard is eligible to participate in the Company’s long-term equity incentive program adopted by the Board;

provided that

he is entitled to an annual award of 25,000 shares of common stock of the Company.

employment with the Company terminates for any reason, including Disability (as defined in the Employment Agreement) or death, Mr.

will be entitled to a lump sum cash payment consisting of his pro rata Actual Base Salary as earned and unpaid, and unreimbursed expenses,

through the date of termination (collectively, the “Accrued Amounts”).

In each case, any unvested equity awards held by Mr.

Pritchard will vest and payout only in accordance with the applicable award agreements for such equity awards.

employment is terminated by the Company for convenience or Mr.

Pritchard resigns for Good Reason (as defined in the Employment Agreement),

then, in addition to the Accrued Amounts, Mr.

Pritchard will be entitled to the following:

monthly payments of his Guaranteed Base Salary for the Severance Period;

monthly payments equivalent to the cost of COBRA for a certain period of time.

Severance Period is defined

Pritchard’s Employment Agreement as 12 months if his employment is terminated on or before the first anniversary of the

Effective Date and such period is increased by three months for each consecutive year that he remains employed by the Company;

that the Severance Period can never be greater than 24 months.

Payment of such amounts are conditioned on Mr.

Pritchard’s execution

and delivery to the Company of a waiver and release and his compliance with the covenants regarding confidentiality, non-competition,

non-solicitation and intellectual property set forth in the Employment Agreement.

On August 18, 2021,

the Company also entered into an Employment Agreement with Michael R.

Morrisett, President of the Company.

The terms and conditions

Morrissett’s Employment Agreement are identical in all material respects to Mr.

Pritchard’s Employment Agreement.

The information

called for by this Item 11 is incorporated herein by reference to our 2023 Proxy Statement to be filed with the SEC no later than 120

days following the fiscal year ended December 31, 2022.

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

Securities Authorized for Issuance under Equity

Compensation Plans

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 total number of shares

of common stock that may be issued pursuant to stock options under the Stock Option Plan is 2,500,000.

Further, on April 3, 2019 the

Company granted Mr.

Pritchard and Mr.

Morrissett each, options to purchase 625,000 shares of common stock of the Company at an exercise

price of $1.32 per share.

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

options to purchase 1,250,000 shares of common stock of the Company at an exercise price of $1.40 per share.

No further grants will be

made under the Stock Option Plan.

On August 27, 2021, the Board of Directors of the Company adopted

the Empire Petroleum Corporation 2021 Stock and Incentive Compensation Plan (the “Incentive Plan”).

The total number of shares

of common stock that may be issued pursuant to the Incentive Plan is 750,000.

As of December 31, 2021, grants were made amounting to

187,500 options.

Number of securities

remaining available

Number of securities

issuance under

to be issued upon

Weighted-average

equity compensation

exercise price of

plans (excluding

outstanding options

securities reflected

Plan Category

in column (a)

Equity compensation plans

not approved by security holders

Equity compensation plans

approved by security holders

Security Ownership of Certain Beneficial

Owners and Management

The following table sets forth information regarding

the beneficial ownership of our Common Stock as of March 15, 2022 for:

* Each person who is known to own beneficially more

than 5% of our outstanding Common Stock;

* Each of our executive officers and directors;

* All executive officers and directors as a group.

The percentage of beneficial ownership for the following

table is based on 19,855,107 shares of Common Stock outstanding as of March 15, 2022.

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.

Security Ownership of Certain Beneficial Owners

Name and address of beneficial owner

Amount and nature of beneficial ownership

Percent of class (1)

Puckett Land Company

Quebec St., Suite 250

Greenwood Village, CO 80111

Energy Evolution Master Fund, LTD

25025 I-45 North, Suite 420

The Woodlands, Texas 77380

_______________________

percentage ownership for each person or entity is calculated in accordance with the rules of the SEC, which provide that any shares a

person or entity is deemed to beneficially 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.

Includes 500,000 of common stock shares issued upon exercise of $5.00 warrants.

Security Ownership of

Name and address of beneficial owner

Amount and nature of beneficial ownership

Percent of class (1)

President and Director