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Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-31 · 1301 added, 1287 removed, 300 unchanged (90% of the section changed)

AND PROCEDURES.

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

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 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.

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 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.

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 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 were effective, as of the end of the period covered

by this report, in ensuring the information required to be disclosed by the Company in the reports 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, and that such

information is accumulated and communicated to management, including the Company’s Chief Executive Officer (principal executive

officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure.

Remediation of Material Weakness in Internal Control

over Financial Reporting

A 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.

In 2021, 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.

At December 31, 2022 and 2021, management believed 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

amounted to a material weakness in its internal control over financial reporting.

As of December 31, 2023, management has evaluated

the material weakness described above and believes that its design and implementation of internal control over financial reporting to

remediate the aforementioned material weakness and enhance the Company’s internal control environment has been achieved through

the strengthening of its accounting resources which to date has included the hiring of a Chief Accounting Officer in October 2021.

the first quarter of 2022, the Chief Accounting Officer engaged an outside company to undertake an internal controls 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 were implemented in 2023.

The Company has continued to use the services of the outside company to assist

in its assessment of internal controls.

Additionally, in December 2022, we had a change in the Chief Accounting Officer although the former

Chief Accounting Officer continued to assist the Company on a part-time basis in the first half of 2023.

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 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.

enhance and refine control design, management added additional resources and focused efforts during 2023 to test the operational effectiveness

of the controls that were established.

In May 2023, we hired an additional accounting resource who serves as Controller.

Based on the foregoing remediation activities

and testing of controls, management concluded that the material weakness has been fully remediated.

Inherent Limitations on Effectiveness

The Company’s

discl osure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of

achieving their desired objectives.

Management recognizes that a control system, no matter how well designed and operated, can provide

only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must

reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

of their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect

all errors or misstatements.

Therefore, even those systems determined to be effective can provide only reasonable assurance with respect

to financial statement preparation and presentation .

Management's Report on Internal Control Over Financial

Our 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.

Under 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 is effective as of December 31, 2023.

Changes in Internal Control over Financial Reporting

While 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 2023 that have materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of Registered Public Accounting

This 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.

The Company was not informed by any of its directors

or Section 16 officers of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading

arrangement,” as those terms are defined in Item 408 of Regulation S-K, during the fourth quarter of 2023.

REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

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.

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.

The information

called for by this Item 12 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.

Not applicable.

DIRECTORS, EXECUTIVE

OFFICERS AND CORPORATE GOVERNANCE.

The information called for by this Item 10 is incorporated

herein by reference to our definitive Proxy Statement for 2024 annual meeting of stockholders (“2024 Proxy Statement”) to

be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

EXECUTIVE COMPENSATION.

The information called for by this Item 11 is incorporated herein by reference

to our 2024 Proxy Statement to be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

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

The information called for by this Item 12 is incorporated herein by reference

to our 2024 Proxy Statement to be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The information

called for by this Item 13 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.

ACCOUNTANT FEES AND SERVICES.

The information

called for by this Item 14 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.

The information called for by this Item 13 is incorporated herein by reference

to our 2024 Proxy Statement to be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information called for by this Item 14 is incorporated herein by reference

to our 2024 Proxy Statement to be filed with the SEC no later than 120 days following the fiscal year ended December 31, 2023.

AND FINANCIAL STATEMENT SCHEDULES.

(1) Financial

financial statements under this item are included in Item 8 of Part II of this Annual Report on Form 10-K.

(1) Financial Statements

The financial statements under this item are included

in Item 8 of Part II of this Annual Report on Form 10-K.

(2) Schedules

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).

Purchase and Sale Agreement dated as of March 12, 2021, by and between Empire New Mexico LLC and XTO Holdings, LLC (incorporated herein by reference to Exhibit 2.1 to the Company’s Form 8-K dated May 14, 2021, which was filed on May 17, 2021).

6 unchanged sentences

Energy Evolution-1 dated May 14, 2021 (incorporated herein by reference to Exhibit 4.2 to the Company’s Form 8-K dated May 14, 2021, which was filed on May 20, 2021).

Form of Unsecured Convertible Note due May 9, 2022 (incorporated herein by reference to Exhibit 4.3 to the Company’s Form 8-K dated May 14, 2021, which was filed on May 20, 2021).

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 9, 2019).

1 unchanged sentence

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).

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).

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

of Securities Purchase Agreement entered into by and between Empire Petroleum Corporation and investors

(incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated March 30,

2021, which was filed on April 1, 2021).

of Common Share Warrant Certificate issued by Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10.2 to the

Company’s Form 8-K dated March 30, 2021, which was filed on April 1, 2021).

Amendment to Senior Revolver Loan Agreement, dated as of July 7, 2021, 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 July 30, 2021, which

was filed on August 4, 2021).

Agreement dated as of August 18, 2021, by and between Empire Petroleum Corporation and Thomas W.

Pritchard (incorporated herein by

reference to Exhibit 10.1 to the Company’s Form 8-K dated August 18, 2021, which was filed on August 24, 2021).

Agreement dated as of August 18, 2021, by and between Empire Petroleum Corporation and Michael R.

Morrisett (incorporated herein

by reference to Exhibit 10.2 to the Company’s Form 8-K dated August 18, 2021, which was filed on August 24, 2021).

Modification Agreement dated as of September 29, 2021, by and among Empire New Mexico LLC d/b/a Green Tree New Mexico, Empire Petroleum

Corporation and Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10.1 to the Company’s Form

8-K dated September 29, 2021, which was filed on October 5, 2021).

and Security Agreement dated as of September 29, 2021, made by Empire Petroleum Corporation in favor of Energy Evolution Master Fund,

(incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated September 29, 2021, which was filed

on October 5, 2021).

Share Warrant Certificate dated as of September 30, 2021 issued by Empire Petroleum Corporation in favor of Energy Evolution Master

(incorporated herein by reference to Exhibit 10.3 to the Company’s Form 8-K dated September 29, 2021, which was

filed on October 5, 2021).

Petroleum Corporation 2021 Stock and Incentive Compensation Plan (incorporated herein by reference to the Company’s Information

Statement on Schedule 14C filed August 31, 2021).

Notice and Note Amendment dated as December 30, 2021 (incorporated herein by reference to Exhibit 10.1 to the Company’s Form

8-K dated December 30, 2021, which was filed on January 6, 2022).

of Non-Qualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.24 to the Company’s Form 10-K

for the fiscal year ended December 31, 2021, which was filed on March 31, 2022).

of Restricted Stock Units Award Agreement (Non-Employee Directors) (incorporated herein by reference to Exhibit 10.25 to the Company’s

Form 10-K for the fiscal year ended December 31, 2021, which was filed on March 31, 2022).

of Restricted Stock Units Award Agreement (Executive Officers) (incorporated herein by reference to Exhibit 10.26 to the Company’s

Form 10-K for the fiscal year ended December 31, 2021, which was filed on March 31, 2022).

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).

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).

Form of Securities Purchase Agreement entered into by and between Empire Petroleum Corporation and investors (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated March 30, 2021, which was filed on April 1, 2021).

Form of Common Share Warrant Certificate issued by Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated March 30, 2021, which was filed on April 1, 2021).

Fourth Amendment to Senior Revolver Loan Agreement, dated as of July 7, 2021, 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 July 30, 2021, which was filed on August 4, 2021).

Employment Agreement dated as of August 18, 2021, by and between Empire Petroleum Corporation and Thomas W.

Pritchard (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated August 18, 2021, which was filed on August 24, 2021).

Employment Agreement dated as of August 18, 2021, by and between Empire Petroleum Corporation and Michael R.

Morrisett (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated August 18, 2021, which was filed on August 24, 2021).

Loan Modification Agreement dated as of September 29, 2021, by and among Empire New Mexico LLC d/b/a Green Tree New Mexico, Empire Petroleum Corporation and Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated September 29, 2021, which was filed on October 5, 2021).

Pledge and Security Agreement dated as of September 29, 2021, made by Empire Petroleum Corporation in favor of Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated September 29, 2021, which was filed on October 5, 2021).

Common Share Warrant Certificate dated as of September 30, 2021 issued by Empire Petroleum Corporation in favor of Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10.3 to the Company’s Form 8-K dated September 29, 2021, which was filed on October 5, 2021).

Empire Petroleum Corporation 2021 Stock and Incentive Compensation Plan (incorporated herein by reference to the Company’s Information Statement on Schedule 14C filed August 31, 2021).

Conversion Notice and Note Amendment dated as December 30, 2021 (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated December 30, 2021, which was filed on January 6, 2022).

Form of Non-Qualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.24 to the Company’s Form 10-K for the fiscal year ended December 31, 2021, which was filed on March 31, 2022).

Form of Restricted Stock Units Award Agreement (Non-Employee Directors) (incorporated herein by reference to Exhibit 10.25 to the Company’s Form 10-K for the fiscal year ended December 31, 2021, which was filed on March 31, 2022).

Form of Restricted Stock Units Award Agreement (Executive Officers) (incorporated herein by reference to Exhibit 10.26 to the Company’s Form 10-K for the fiscal year ended December 31, 2021, which was filed on March 31, 2022).

Empire Petroleum Corporation 2022 Stock and Incentive Compensation Plan (incorporated herein by reference to Annex A to the Company’s Proxy Statement on Schedule 14A filed on July 27, 2022).

Agreement dated as of September 13, 2022, by and between Empire Petroleum Corporation and Eugene J.

Sweeney (incorporated herein

by reference to Exhibit 10 to the Company’s Form 8-K dated September 13, 2022, which was filed on September 19, 2022).

Employment Agreement dated as of September 13, 2022, by and between Empire Petroleum Corporation and Eugene J.

Sweeney (incorporated herein by reference to Exhibit 10 to the Company’s Form 8-K dated September 13, 2022, which was filed on September 19, 2022).

Empire Petroleum Corporation 2023 Stock and Incentive Compensation Plan (incorporated herein by reference to Annex A to the Company’s Proxy Statement on Schedule 14A filed on May 1, 2023).

Shared Services Agreement, dated as of August 1, 2023, by and between PIE Operating, LLC and Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10.8 to the Company’s Form 10-Q for the quarter ended September 30, 2023, which was filed on November 13, 2023).

Empire North Dakota LLC Promissory Note Due October 31, 2023 in the original aggregate principal amount of $5.0 million in favor of Phil Mulacek (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated September 19, 2023, which was filed on September 25, 2023).

Empire North Dakota LLC Promissory Note Due October 31, 2023 in the original aggregate principal amount of $5.0 million in favor of Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated September 19, 2023, which was filed on September 25, 2023).

Commercial Guaranty Agreement, dated as of September 19, 2023, issued by Empire Petroleum Corporation in favor of Phil Mulacek (incorporated herein by reference to Exhibit 10.3 to the Company’s Form 8-K dated September 19, 2023, which was filed on September 25, 2023).

Commercial Guaranty Agreement, dated as of September 19, 2023, issued by Empire Petroleum Corporation in favor of Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K dated September 19, 2023, which was filed on September 25, 2023).

Letter Agreement amending Senior Revolver Loan Agreement, dated as of September 19, 2023, by and among Empire Louisiana LLC and Empire North Dakota LLC, as borrowers, Empire Petroleum Corporation, as guarantor, and CrossFirst Bank, as lender (incorporated herein by reference to Exhibit 10.5 to the Company’s Form 8-K dated September 19, 2023, which was filed on September 25, 2023).

Subordination Agreement, dated as of September 19, 2023, by and among Phil Mulacek, Energy Evolution Master Fund, Ltd.

and Empire North Dakota LLC in favor of CrossFirst Bank (incorporated herein by reference to Exhibit 10.6 to the Company’s Form 8-K dated September 19, 2023, which was filed on September 25, 2023).

Letter Amendment amending the Empire North Dakota LLC Promissory Notes Due October 31, 2023, dated as of October 31, 2023, by and among Phil Mulacek and Energy Evolution Master Fund, Ltd., as investors, Empire North Dakota LLC, as borrower, and Empire Petroleum Corporation, as guarantor (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated October 31, 2023, which was filed on November 1, 2023).

Empire North Dakota LLC Amended and Restated Promissory Note Due December 31, 2024 in the original aggregate principal amount of $5.0 million in favor of Phil Mulacek (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated November 9, 2023, which was filed on November 13, 2023).

Empire North Dakota LLC Amended and Restated Promissory Note Due December 31, 2024 in the original aggregate principal amount of $5.0 million in favor of Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated November 9, 2023, which was filed on November 13, 2023).

Securities Purchase Agreement, dated as of November 29, 2023, by and between Phil Mulacek and Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated November 29, 2023, which was filed on November 29, 2023).

Letter Amendment to Securities Purchase Agreement, dated as of December 1, 2023, by and between Phil Mulacek and Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10 to the Company’s Form 8-K dated December 1, 2023, which was filed on December 1, 2023).

Securities Purchase Agreement, dated as of November 29, 2023, by and between Energy Evolution Master Fund, Ltd.

and Empire Petroleum Corporation (incorporated herein by reference to Exhibit 10.2 to the Company’s Form 8-K dated November 29, 2023, which was filed on November 29, 2023).

Revolver Loan Agreement, dated as of December 29, 2023, by and between Empire North Dakota LLC and Empire ND Acquisition LLC, as borrowers, and Equity Bank, as lender (incorporated herein by reference to Exhibit 10 to the Company’s Form 8-K dated December 29, 2023, which was filed on January 5, 2024).

Empire Petroleum Corporation Promissory Note Due February 15, 2026 in the aggregate principal amount of $5.0 million in favor of Energy Evolution Master Fund, Ltd.

(incorporated herein by reference to Exhibit 10 to the Company’s Form 8-K dated February 16, 2024, which was filed on February 21, 2024).

of Empire Petroleum Corporation (submitted herewith).

of Grant Thornton LLP (submitted herewith).

of Moss Adams LLP (submitted herewith).

of Cawley, Gillespie & Associates, Inc.

Consent of Grant Thornton LLP (submitted herewith).

Consent of Cawley, Gillespie & Associates, Inc.

(submitted herewith).

1 unchanged sentence

Morrisett, Chief Executive Officer (submitted herewith).

Rule 13a – 14(a)/15d – 14(a) Certification of Michael R.

Morrisett, Principal Financial Officer (submitted herewith).

Rule 13a – 14(a)/15d – 14(a) Certification of Stephen L.

Faulkner, Jr., Chief Financial Officer (submitted herewith).

Section 1350 Certification of Michael R.

Morrisett, Chief Executive Officer (submitted herewith).

Section 1350 Certification of Michael R.

Morrisett, Principal Financial Officer (submitted herewith).

Gillespie & Associates, Inc.

Section 1350 Certification of Stephen L.

Faulkner, Jr., Chief Financial Officer (submitted herewith).

Empire Petroleum Corporation Policy for the Recovery of Erroneously Awarded Compensation (submitted herewith).

Cawley, Gillespie & Associates, Inc.

Summary Report (submitted herewith).

Financial Statements for

Inline XBRL format (submitted herewith).

Cover Page Interactive

Data File (embedded within Inline XBRL document).

a management contract or compensatory plan or arrangement identified under the requirements of Item 15 of Form 10-K.

10-K SUMMARY.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed

on its behalf by the undersigned, thereunto duly authorized.

Petroleum Corporation

Statements for Inline XBRL format (submitted herewith).

Interactive Data File (embedded within Inline XBRL document).

*Indicates a management contract or compensatory plan or arrangement identified

under the requirements of Item 15 of Form 10-K.

FORM 10-K SUMMARY.

Pursuant to the requirements of Section 13 or 15(d)

of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto

duly authorized.

Empire Petroleum Corporation

March 28, 2024

/s/ Michael R.

President and Chief Executive Officer

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

Director, President

and Chief Executive Officer

(Principal Executive Officer and Principal Financial

Stephen L Faulkner

Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange

Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates

/s/ Michael R.

Director, President and Chief Executive Officer

March 28, 2024

(Principal Accounting Officer)

(Principal Executive Officer)

/s/ Stephen L.

Faulkner, Jr.

Chief Financial Officer and Chief Accounting Officer

March 28, 2024

FAULKNER, JR.

(Principal Financial Officer and Principal Accounting Officer)

Director and Chairman of the Board

March 28, 2024

/s/ Andrew Lewis

/s/ Andrew L.

March 28, 2024

/s/ Benjamin J.

March 28, 2024

PETROLEUM CORPORATION

FINANCIAL STATEMENTS

March 28, 2024

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm – Grant Thornton LLP (PCAOB ID Number 248 )

of Independent Registered Public Accounting Firm – Moss Adams LLP (PCAOB ID Number 659 )

Balance Sheets as of December 31, 2023 and 2022

3 unchanged sentences

to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

and Shareholders

Empire Petroleum

the financial statements

We have audited

the accompanying consolidated balance sheet of Empire Petroleum Corporation (a Delaware corporation) and subsidiaries (the “Company”)

as of December 31, 2022, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for

the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

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

2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles

generally accepted in the United States of America.

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 audit.

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 the U.S.

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

our audit 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 audit 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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

Board of Directors and Shareholders

Empire Petroleum Corporation

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets

of Empire Petroleum Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023

and 2022, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of

the two years in the period ended December 31, 2023, and the related notes (collectively referred to as 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, 2023 and 2022, and the results of its operations and its cash flows for each

of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the

United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s

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 the U.S.

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.

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 audit 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 audit 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 audit provides a reasonable basis for

Critical audit

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee 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.

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.

Critical audit matters

Critical audit matters are matters arising

from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

We determined there are no critical audit matters .

GRANT THORNTON LLP

served as the Company’s auditor since 2022.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2022.

Tulsa, Oklahoma

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and the Board of Directors of

Petroleum Corporation

on the Financial Statements

have audited the accompanying consolidated balance sheet of Empire Petroleum Corporation and subsidiaries (the “Company”)

as of December 31, 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for the year

then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion,

the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as

of December 31, 2021, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with

accounting principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audit.

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 the U.S.

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

and the PCAOB.

conducted our audit 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 consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

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

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Moss Adams LLP

served as the Company’s auditor from 2021 to 2022.

PETROLEUM CORPORATION

BALANCE SHEETS

March 28, 2024

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS

As of December 31,

2 unchanged sentences

Derivative Instruments

Inventory - Oil in Tanks

Total Current Assets

7 unchanged sentences

Total Property and Equipment, Net

Derivative Instruments - Long Term

Utility and Other Deposits

Other Noncurrent Assets

LIABILITIES AND STOCKHOLDERS' EQUITY

3 unchanged sentences

Current Portion of Lease Liability

Current Portion of Note Payable - Related Party (Note 4 and 7)

Current Portion of Long-Term Debt

7 unchanged sentences

Stockholders' Equity:

Series A Preferred Stock - $ .001 Par Value, 10,000,000 Shares Authorized,

6 and 0 Shares Issued and Outstanding, Respectively

Series A Preferred Stock - $ .001 Par

Value, 10,000,000 Shares

Authorized, 6 and 6 Shares

Issued and Outstanding, Respectively

Common Stock - $ .001 Par Value 190,000,000 Shares Authorized,

6 unchanged sentences

Total Liabilities and Stockholders' Equity

accompanying notes to consolidated financial statements.

PETROLEUM CORPORATION

STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,

10 unchanged sentences

Operating Income (Loss)

( 11,625,091 )

Other Income and (Expense):

Other Income (Expense)

Interest Expense

( 1,000,427 )

Convertible Debt Modification Inducement Expense

( 2,276,813 )

Loss on Convertible Debt Redemption Option

( 3,169,201 )

Loss on Embedded Conversion Option

( 4,504,104 )

Other Income (Expense)

Income (Loss) Before Taxes

( 12,601,797 )

Income Tax Provision

Income Tax (Provision) Benefit

Net Income (Loss)

2 unchanged sentences

Weighted Average Number of Common Shares Outstanding:

accompanying notes to consolidated financial statements.

PETROLEUM CORPORATION

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

ended December 31, 2022 and 2021

See accompanying notes to consolidated financial statements.

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'

Years Ended December 31, 2023 and 2022

Preferred Stock

3 unchanged sentences

$ ( 59,233,343 )

Issuance of Preferred Stock

Stock-Based Compensation

Warrants Exercised

Balances, December 31, 2022

( 52,149,213 )

1 unchanged sentence

( 12,469,605 )

Stock Compensation Expense

Stock Options Exercised

Warrants Exercised

Issuance of Common Stock and Warrants

Shares and Warrants Issued for Secured Convertible Note

Warrants Issued with Unsecured Convertible Notes

Right to Buy Issued with Secured Convertible Notes

Unsecured Convertible Note Conversion

Shares Issued for Secured Convertible Note Conversion, Including Payment of Accrued Interest

Balances, December 31, 2021

Impact of Former CEO Settlement

( 2,126,131 )

Issuance of Preferred Stock

Stock Compensation Expense

Options and Warrants Exercised

( 2,126,131 )

Stock Issued for Purchase Option (See Note 3)

Warrants Exercised

Issuance of Shares for Redemption of Notes

Issuance of Shares in Private Transaction

Stock-Based Compensation

Balances, December 31, 2023

( 64,618,818 )

accompanying notes to consolidated financial statements.

PETROLEUM CORPORATION

STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated financial statements.

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

4 unchanged sentences

Provided By Operating Activities:

Stock Compensation and Issuances

Stock-Based Compensation

Amortization of Right of Use Assets

1 unchanged sentence

Accretion of Asset Retirement Obligation

Loss on Settlement of Asset Retirement Obligation

Loss on XTO Final Settlement (See Note 4)

Loss on Derivatives

Settlement on or Purchases of Derivative Instruments

Loss on XTO Final Settlement

PIE-Related Expense (See Note 4)

Amortization of Loan Issue Costs

Right to Buy Issuance Costs

Loss on Embedded Conversion Option

Amortization of Discount on Convertible Notes

Loss on Extinguishment of Debt

Convertible Debt Modification Inducement Expense

Stock Issued for Interest Expense Payment

Forgiveness of Payroll Protection Plan Loan

Change in Operating Assets and Liabilities:

2 unchanged sentences

( 1,812,230 )

Derivative Instruments

Inventory, Oil in Tanks

Prepaids, Current

Other Long Term Assets and Liabilities

Accounts Payable

Accrued Expenses

Net Cash Provided By Operating Activities

( 3,082,928 )

Other Long Term Assets and Liabilities

( 1,103,607 )

Net Cash Provided By (Used In) Operating Activities

( 9,887,500 )

Cash Flows from Investing Activities:

2 unchanged sentences

( 2,702,613 )

Additions to Oil and Natural Gas Properties

Capital Expenditures - Oil and Natural Gas Properties (a)

( 14,546,873 )

( 10,161,711 )

Purchase of Other Fixed Assets

1 unchanged sentence

Sinking Fund Deposit

( 4,810,000 )

Net Cash Used In Investing Activities

6 unchanged sentences

( 1,699,840 )

Proceeds from Stock and Warrant Issuances

Proceeds from Option and Warrant Exercise

Paycheck Protection Program Loan Proceeds

Proceeds from Stock Issuance and Warrant Exercises

Net Cash Provided By Financing Activities

Net Change in Cash

( 4,151,934 )

Cash - Beginning of Period

2 unchanged sentences

Cash Paid for Interest

Non-Cash Investing and Financing Activities:

Non-Cash Additions and Revisions

to Asset Retirement Obligations

Right-of-use assets purchased

with lease liability

Note Payable Activity - PIE

Agreement (see Note 5)

Purchases of Oil and Natural

Gas Properties in Accounts Payable

Property Additions in Notes

Common Stock Issued in Exchange

for Outstanding Notes Payable

Equipment Purchased Utilizing

accompanying notes to consolidated financial statements.

PETROLEUM CORPORATION

TO CONSOLIDATED FINANCIAL STATEMENTS

1 - Organization and Basis of Presentation

Petroleum Corporation (the “Company”, collectively with its subsidiaries) is an independent energy company operator engaged

in optimizing developed production by employing field management methods to maximize reserve recovery while minimizing costs.

operates the following wholly-owned subsidiaries in its areas of operations:

Empire New Mexico, LLC

(“Empire New Mexico”)

Empire Rockies Region

Dakota LLC (“Empire North Dakota”)

Empire North Dakota A cquisition

LLC (“Empire NDA”)

Empire Texas (“Empire

Texas”), consisting of the following entities:

Empire Texas LLC

Empire Texas Operating

Empire Texas GP LLC

Pardus Oil & Gas Operating,

LP (owned 1% by Empire Texas GP LLC and 99% by Empire Texas LLC)

Empire Louisiana LLC (“Empire

was incorporated in the State of Delaware in 1985.

The consolidated financial statements of Empire Petroleum Corporation and subsidiaries

include the accounts of the Company and its wholly-owned subsidiaries.

August 27, 2021, the Company’s Board of Directors, in conjunction with the majority of the common stockholders, approved a one

for four reverse stock split such that every holder of the Company’s common stock shall receive one share of Common Stock for every

four shares owned.

In addition, the Board authorized the Company to issue ten million shares of $0.001 par value Preferred Stock.

reverse stock split was made effective on March 7, 2022, simultaneous with the Company’s listing to the NYSE American.

amounts have retrospectively been stated at post-reverse split amounts and pricing.

2 – Summary of Significant Accounting Policies

of Consolidation

consolidated financial statements include the accounts and balances of the Company and have been prepared in accordance with accounting

principles generally accepted in the United States (“GAAP”).

All intercompany accounts and transactions have been eliminated

in consolidation.

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

reported in the financial statements and accompanying notes.

(a) Incurred capital expenditures were $25,053,107 and $11,206,207 for the respective periods.

The differences

between incurred and cash capital expenditures is due to changes in related accounts payable.

See accompanying notes to consolidated financial statements.

EMPIRE PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and Basis of Presentation

Empire Petroleum Corporation (the “Company”,

collectively with its subsidiaries) is an independent energy company operator engaged in optimizing developed production by employing

field management methods to maximize reserve recovery while minimizing costs.

Empire operates the following wholly-owned subsidiaries

in its areas of operations:

New Mexico LLC (“Empire New Mexico”)

New Mexico LLC d/b/a Green Tree New Mexico

○ Empire EMSU LLC

○ Empire EMSU-B LLC

○ Empire AGU LLC

○ Empire NM Assets LLC

Rockies Region

North Dakota LLC (“Empire North Dakota”)

ND Acquisition LLC (“Empire NDA”)

Texas (“Empire Texas”), consisting of the following entities:

Texas Operating LLC

Oil & Gas Operating, LP (owned 1% by Empire Texas GP LLC and 99% by Empire Texas LLC)

Louisiana LLC (“Empire Louisiana”)

Empire was incorporated in the State of Delaware in

The consolidated financial statements of Empire Petroleum Corporation and subsidiaries include the accounts of the Company and its

wholly-owned subsidiaries.

Liquidity and Going Concern

Company determined that it was not in compliance with the current ratio covenant contained in its revolving line of credit agreement

as of December 31, 2023 (see Note 7).

Upon discovering this issue, we notified the lender to request a waiver.

The noncompliance

is due to a higher level of payables related to the capital spending program in North Dakota.

On March 27, 2024, the Company obtained

a compliance waiver from the lender for December 31, 2023.

The Company will require funds to satisfy these payables related to

the capital spending program which are greater than estimated cash flows from operations over the next 12 months.

Company intends and has announced a subscription rights offering (“Rights Offering”) to raise additional funds for the

payables discussed above as well as the additional capital spending in 2024.

In March 2024, the Company commenced a Rights Offering

pursuant to which it intends to raise gross proceeds of up to approximately $25.0 million (see Note 18).

As a result of a subsequent

reduction in the subscription price per share, gross proceeds are now expected to be up to approximately $20.66 million.

Mulacek and Energy Evolution Master Fund, Ltd (“Energy Evolution”), both related parties of the Company (see Note 15)

and our largest stockholders collectively holding 46% of the common shares outstanding, have indicated that they intend to

participate in the Rights Offering and fully subscribe to the shares of Common Stock corresponding to their subscription rights.

They have each also indicated that they intend to exercise their over-subscription rights to purchase their pro rata share of the

underlying securities related to the Rights Offering that remain unsubscribed at the expiration date of the Rights Offering.

Rights Offering will not close until April 2024.

As such, it is likely that the Company would not be in technical compliance with

this same covenant as of March 31, 2024;

however, in the opinion of the Company this would be cured within the allowable period

under the Credit Facility at the close of the Rights Offering.

has initiated plans that will allow the Company to remain in compliance with this covenant.

The Company as stated above, has indications

from existing stockholders for a majority portion of the Rights Offering.

Management has considered these plans, including if

they are within the control of the Company, in evaluating ASC 205-40, Presentation of Financial Statements-Going Concern .

Management believes the above actions are sufficient to allow the Company to meet its obligations as they become due for a period

of at least 12 months from the issuance of these financial statements.

Management believes that the Rights Offering is probable

and this has alleviated the substantial doubt regarding the Company’s ability to continue as a going concern.

Note 2 – Summary of Significant Accounting

Principles of Consolidation

The consolidated financial statements include the

accounts and balances of the Company and have been prepared in accordance with accounting principles generally accepted in the United

States (“GAAP”).

All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity

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

Actual results could differ from those estimates.

quantities of crude oil, natural gas and natural gas liquids (“NGL”) reserves are the most significant of the Company’s

All reserve data used in the preparation of the Consolidated Financial Statements, as well as included in Supplemental

Information of Oil and Natural Gas Producing Activities (Unaudited) ,

are based on estimates.

Reservoir engineering is a subjective

process of estimating underground accumulations of crude oil, natural gas and NGL.

There are numerous uncertainties inherent in estimating

quantities of proved crude oil, natural gas and NGL reserves.

The accuracy of any reserve estimate is a function of the quality of available

data and of engineering and geological interpretation and judgment.

As a result, reserve estimates may be different from the quantities

of crude oil, natural gas and NGLs that are ultimately recovered.

items subject to estimates and assumptions include, but are not limited to, the carrying amounts of property, plant and equipment, asset

retirement obligations, valuation allowances for deferred income tax assets, and valuation of derivative instruments.

Management evaluates

estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic and commodity

price environment.

The volatility of commodity prices results in increased uncertainty inherent in such estimates and assumptions.

management believes these estimates are reasonable, actual results may differ from estimates and assumptions of future events and these

revisions could be material.

Future production may vary materially from estimated oil and natural gas proved reserves.

Actual future

prices may vary significantly from price assumptions used for determining proved reserves and for financial reporting.

Out of Period

Adjustments and Reclassifications

the third quarter of 2022, the Company identified and recorded an out-of-period adjustment related to the Joint Development Agreement

discussed in Note 5.

The impact of recording this adjustment reduced Utility and Other Deposits and increased Lease Operating Expense

by approximately $ 1.3 million of which $ 797,000 related to prior periods.

The impact of this adjustment was immaterial to the prior period

financial statements and thus corrected in the current period.

Gas and NGL sales in 2021 reflect an immaterial

reclassification of approximately $ 800,000

for gathering and processing costs previously reported within Lease Operating Expense in 2021 and did not impact operating loss or

cash flows from operations.

This reclassification reflects the terms of the contracts that transferred to Empire as part of the XTO

acquisition related to certain gas purchase contracts and conforms to the 2022 presentation.

Estimated quantities of crude oil, natural gas and

natural gas liquids (“NGL”) reserves are the most significant of the Company’s estimates.

All reserve data used in the

preparation of the consolidated financial statements, as well as included in Supplemental Information of Oil and Natural Gas Producing

Activities (Unaudited) , are based on estimates.

Reservoir engineering is a subjective process of estimating underground accumulations

of crude oil, natural gas and NGL.

There are numerous uncertainties inherent in estimating quantities of proved crude oil, natural gas

and NGL reserves.

The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological

interpretation and judgment.

As a result, reserve estimates may be different from the quantities of crude oil, natural gas and NGLs that

are ultimately recovered.

Other items subject to estimates and assumptions

include, but are not limited to, the carrying amounts of property, plant and equipment, asset retirement obligations, valuation allowances

for deferred income tax assets, and valuation of derivative instruments.

Management evaluates estimates and assumptions on an ongoing

basis using historical experience and other factors, including the current economic and commodity price environment.

The volatility of

commodity prices results in increased uncertainty inherent in such estimates and assumptions.

Although management believes these estimates

are reasonable, actual results may differ from estimates and assumptions of future events and these revisions could be material.

production may vary materially from estimated oil and natural gas proved reserves.

Actual future prices may vary significantly from price

assumptions used for determining proved reserves and for financial reporting.

Out of Period Adjustments

In the third quarter of 2022, the Company identified

and recorded an out-of-period adjustment related to the Joint Development Agreement discussed in Note 4.

The impact of recording this

adjustment reduced Utility and Other Deposits and increased Lease Operating Expense by approximately $ 1.3 million of which $ 797,000 related

to prior periods.

The impact of this adjustment was immaterial to the prior period financial statements and thus corrected in the current

Accounts Receivable

Accounts receivable include estimated amounts due from crude oil, natural

gas, and NGL purchasers and from non-operating working interest owners.

Accrued revenue related to product sales from purchasers and

operators are due under normal trade terms, generally requiring payment within 60 days of production.

For receivables from joint interest

owners, the Company generally has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings.

Accounts receivable include estimated amounts

due from crude oil, natural gas, and NGL purchasers and from non-operating working interest owners.

Accrued revenue related to product

sales from purchasers and operators are due under normal trade terms, generally requiring payment within 60 days of production.

For receivables

from joint interest owners, the Company generally has the ability to withhold future revenue disbursements to recover any non-payment

of joint interest billings.

Receivables are considered past due if full payment is not received by the contractual due date.

Past due accounts are generally written

off against the allowance for doubtful accounts only after all collection attempts have been exhausted.

The Company did not have an allowance

for doubtful accounts at either December 31, 2022 or 2021.

The Company’s accounts receivable as of December 31, 2022 and 2021 are

of account receivable

Oil and Gas Receivables

accounts are generally written off against the allowance for credit losses account only after all collection attempts have been exhausted.

The Company did not have an allowance for credit losses at either December 31, 2023 or 2022.

The Company’s accounts receivable as

of December 31, 2023 and 2022 are as follows:

Schedule of account receivable

Oil, Gas and NGL Receivables

Joint Interest Billings

1 unchanged sentence

Total Accounts Receivable

Company enters into hedge agreements to manage its exposure to oil and natural gas price fluctuations.

The fair value of derivative contracts

is recognized as an asset or liability on the Company’s consolidated balance sheets.

Realized gain or loss is recognized as a component

of revenue when the derivative contracts mature.

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

the change in the fair value of the outstanding contracts.

consists of oil in tanks which has not been delivered and is valued at the lower of cost or net realizable value.

and Natural Gas and Other Properties

Company uses the successful efforts method of accounting for its oil and gas activities.

Costs incurred are deferred until exploration

and completion results are evaluated.

At such time, costs of activities with economically recoverable reserves are capitalized as proven

properties, and costs of unsuccessful or uneconomical activities are expensed.

drilling costs are reviewed periodically for impairment.

Costs related to impaired prospects or unsuccessful exploratory drilling is

charged to expense.

Management's assessment of the results of exploration activities, commodity price outlooks, planned future sales

or expiration of all or a portion of such leaseholds impact the amount and timing of impairment provisions.

An impairment expense could

result if oil and gas prices decline in the future as it may not be economical to develop some of these unproved properties.

options are capitalized as unproved property acquisition costs and are reviewed for impairment if indicators exist that the carrying

value of the lease option may not be recoverable.

If the lease options become impaired, expire or are abandoned, the options will

If 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.

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.

Derivative Instruments

The Company enters into hedge agreements to manage

its exposure to oil and natural gas price fluctuations.

The fair value of derivative contracts is recognized as an asset or liability

on the Company’s consolidated balance sheets.

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

contracts mature.

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

the outstanding contracts.

Inventory primarily consists of oil in tanks which

has not been delivered and is valued at the lower of cost or net realizable value.

Oil and Natural Gas and Other Properties

The Company uses the successful efforts method of

accounting for its oil and gas activities.

Costs incurred are deferred until exploration and completion results are evaluated.

time, costs of activities with economically recoverable reserves are capitalized as proven properties, and costs of unsuccessful or uneconomical

activities are expensed.

Capitalized drilling costs are reviewed periodically

for impairment.

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

Management's assessment

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

impact the amount and timing of impairment provisions.

An impairment expense could result if oil and gas prices decline in the future

as it may not be economical to develop some of these unproved properties.

Lease options are capitalized as unproved property

acquisition costs and are reviewed for impairment if indicators exist that the carrying value of the lease option may not be recoverable.

If the lease options become impaired, expire or are abandoned, the options will be expensed.

If 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.

Segment Reporting

segments are components of an enterprise that engage in activities from which it may earn revenues and incur expenses and for which separate

operational financial information is available and is regularly evaluated by management.

Based on the Company’s organization and

management, it has only one reportable operating segment, which is oil and natural gas exploration and production.

Retirement Obligations

Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding

increase in the carrying amount of the related oil and natural gas property asset.

Subsequently, the asset retirement cost included in

the carrying amount of the related asset is allocated to expense through depletion of the asset.

Changes in the liability due to passage

of time are recognized as an increase in the carrying amount of the liability through accretion expense.

Based on certain factors, including

commodity prices and costs, the Company may revise its previous estimates of the liability, which would also increase or decrease the

related oil and natural gas property asset.

Operating segments are components of an enterprise

that engage in activities from which it may earn revenues and incur expenses and for which separate operational financial information

is available and is regularly evaluated by management.

Based on the Company’s organization and management, it has only one reportable

operating segment, which is oil and natural gas exploration and production.

Debt Issuance Costs

Debt issuance fees, which are recorded at cost, net

of amortization, are amortized over the life of the respective debt agreements utilizing the straight-line method.

Unamortized debt issuance

costs related to the Company’s credit facility are recorded in other noncurrent assets on the Company’s Consolidated Balance

Asset Retirement Obligations

The Company records the fair value of a liability

for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related

oil and natural gas property asset.

Subsequently, the asset retirement cost included in the carrying amount of the related asset is allocated

to expense through depletion of the asset.

Changes in the liability due to passage of time are recognized as an increase in the carrying

amount of the liability through accretion expense.

Based on certain factors, including commodity prices and costs, the Company may revise

its previous estimates of the liability, which would also increase or decrease the related oil and natural gas property asset.

Revenue Recognition

Company’s revenues are comprised solely of revenues from customers and include the sale of oil, natural gas and NGL.

believes that the disaggregation of revenue into these three major product types, as presented in the Consolidated Statements of Operations,

appropriately depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors based

on its single geographic region, the continental United States.

Revenues are recognized at a point in time when production is sold to

a purchaser at a determinable price, delivery has occurred, control has transferred and it is probable substantially all of the consideration

will be collected.

The Company fulfills its performance obligations under its customer contracts through delivery of oil, natural gas

and NGL and revenues are recorded on a monthly basis.

The Company’s revenues are comprised solely

of revenues from customers and include the sale of oil, natural gas and NGL.

The Company believes that the disaggregation of revenue

into these three major product types, as presented in the Consolidated Statements of Operations, appropriately depicts how the nature,

amount, timing and uncertainty of revenue and cash flows are affected by economic factors based on its single geographic region, the

continental United States.

Revenues are recognized at a point in time when production is sold to a purchaser at a determinable price,

delivery has occurred, control has transferred and it is probable substantially all of the consideration will be collected.

fulfills its performance obligations under its customer contracts through delivery of oil, natural gas and NGL and revenues are recorded

on a monthly basis.

The Company receives payment from one to three months after delivery.

each unit of product represents a separate performance obligation.

The prices received for oil, natural gas and NGL sales under the Company’s

contracts are generally derived from stated market prices which are then adjusted to reflect deductions including transportation, fractionation

and processing.

As a result, revenues from the sale of oil, natural gas and NGL will decrease if market prices decline.

oil, natural gas and NGL, as presented on the Consolidated Statements of Operations, represent the Company’s share of revenues

net of royalties and excluding revenue interests owned by others.

When selling oil, natural gas and NGL on behalf of royalty or working

interest owners, the Company is acting as an agent and thus reports the revenue on a net basis.

To the extent actual volumes and prices

of oil and natural gas sales are unavailable for a given reporting period because of timing or information not received from third parties,

the expected sales volumes and prices for those properties are estimated and recorded.

Variances between the Company’s estimated

revenue and actual payment are recorded in the month the payment is received.

Historically, these differences have been insignificant.

Generally, each unit of product represents

a separate performance obligation.

The prices received for oil, natural gas and NGL sales under the Company’s contracts are generally

derived from stated market prices which are then adjusted to reflect deductions including transportation, fractionation and processing.

As a result, r evenues from the sale of oil, natural gas and

NGL will decrease if market prices decline.

The sales of oil, natural gas and NGL, as presented on the Consolidated Statements of Operations,

represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others.

When selling oil, natural

gas and NGL on behalf of royalty or working interest owners, the Company is acting as an agent and thus reports the revenue on a net

actual volumes and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information

not received from third parties, the expected sales volumes and prices for those properties are estimated and recorded.

Variances between

the Company’s estimated revenue and actual payment are recorded in the month the payment is received.

Historically, these differences

have been insignificant.

the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts

2 unchanged sentences

on oil, natural gas and NGL sales are presented separately from such revenues in the Consolidated Statements of Operations.

production is transported from the wellhead to tank batteries or delivery points through flow-lines or gathering systems.

of the oil take delivery at the tank batteries and transport the oil by truck or at a pipeline delivery point and the Company collects

a market price, net of pricing differentials.

Revenue is recognized when control transfers to the purchaser at the net price received

by the Company.

Gas and NGL Sales

the Company’s natural gas sales arrangements, the purchaser takes control of wet gas at a delivery point near the wellhead or at

the inlet of the purchaser’s processing facility.

The purchaser gathers and processes the wet gas and remits proceeds to the Company

for the resulting natural gas and NGL sales.

Based on the nature of these arrangements, the processor is the agent and the purchaser

is the Company’s customer, thus, the Company recognizes natural gas and NGL sales based on the net amount of proceeds received

from the purchaser.

Price Allocated to Remaining Performance Obligations

Substantially

all of the Company’s product sales are short-term in nature with

a contract term of one year or less.

For these contracts, the Company has utilized the practical expedient in ASC 606 which exempts the

Company from the requirements to disclose the transaction price allocated to remaining performance obligations if the performance obligation

is part of a contract that has an original expected duration of one year or less.

the Company’s product sales that have a contract term greater than one year, the Company has utilized the practical expedient in

ASC 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if

the variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

Under these contracts, each unit of

product generally represents a separate performance obligation;

therefore, future volumes are wholly unsatisfied, and disclosure of the

transaction price allocated to remaining performance obligations is not required.

Performance Obligations

Company records revenue in the month that product is delivered to the purchaser.

Settlement statements for certain natural gas and NGL

sales, however, may not be received for 30 to 90 days after the date the product is delivered, and as a result the Company is required

to estimate the amount of product delivered to the purchaser and the price that will be received for the sale of the product.

situations, the Company records the differences between its estimates and the actual amounts received for product sales in the month

that payment is received from the purchaser.

Any identified differences between the Company’s revenue estimates and actual revenue

received have historically been insignificant.

For the years ended December 31, 2022 and 2021, revenue recognized in the reporting period

related to performance obligations satisfied in prior reporting periods was not material.

Company recognized stock-based compensation expense associated with granted stock options.

The Company accounts for forfeitures of equity-based

incentive awards as they occur.

Stock-based compensation expense related to time-based restricted stock units is based on the price of

the common stock on the grant date and recognized as vesting occurs.

Company accounts for income taxes in accordance with the asset and liability method of accounting for income taxes.

Under the asset

and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences

between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss

and tax credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the

taxable income in the years in which those temporary differences are expected to be recovered or settled.

A valuation allowance is established

if management determines it is more likely than not that some portion of a deferred tax asset will not be realized.

Share Amounts

Company calculates and discloses basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS").

The computation of basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average

number of outstanding common shares during the period.

EPS gives effect to all dilutive potential common shares outstanding during the period.

The computation of Diluted EPS does not assume

conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on losses.

As a result, if there

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

Value Measurements

Financial Accounting Standards Board ("FASB") fair value measurement standards define fair value, establish a consistent framework

for measuring fair value and establish a fair value hierarchy based on the observability of inputs used to measure fair value.

three-level fair value hierarchy for disclosure of fair value measurements defined by ASC Topic 820 is as follows:

1 – Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets

or liabilities.

An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency

and volume to provide pricing information on an ongoing basis.

2 – Inputs, other than quoted prices within Level 1, that are either directly or indirectly observable for the asset or liability

through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

3 – Prices or valuations that require unobservable inputs that are both significant to the fair value measurement and unobservable.

Valuation under Level 3 generally involves a significant degree of judgment from management.

financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to

the fair value measurement.

Where available, fair value is based on observable market prices or parameters or derived from such

prices or parameters.

Where observable prices or inputs are not available, valuation models are applied.

These valuation techniques

involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the

instruments or market and the instrument’s complexity.

The Company reflects transfers between the three levels at the

beginning of the reporting period in which the availability of observable inputs no longer justifies classification in the original

There were no transfers between fair value hierarchy levels for the years ended December 31, 2022 and 2021.

of oil and natural gas properties - The fair value of proved and unproved 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 and unproved

oil and natural gas properties include estimates of:

Oil production is transported from the wellhead to

tank batteries or delivery points through flow-lines or gathering systems.

Purchasers of the oil take delivery at the tank batteries and

transport the oil by truck or at a pipeline delivery point and the Company collects a market price, net of pricing differentials.

is recognized when control transfers to the purchaser at the net price received by the Company.

Natural Gas and NGL Sales

Under the Company’s natural gas sales arrangements,

the purchaser takes control of wet gas at a delivery point near the wellhead or at the inlet of the purchaser’s processing facility.

The purchaser gathers and processes the wet gas and remits proceeds to the Company for the resulting natural gas and NGL sales.

on the nature of these arrangements, the processor is the agent and the purchaser is the Company’s customer, thus, the Company recognizes

natural gas and NGL sales based on the net amount of proceeds received from the purchaser.

Transaction Price Allocated to Remaining Performance

Substantially all

of the Company’s product sales are short-term in nature with a contract term of one year or less.

For these contracts, the Company

has utilized the practical expedient in ASC 606 which exempts the Company from the requirements to disclose the transaction price allocated

to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one

year or less.

For the Company’s product sales that have a

contract term greater than one year, the Company has utilized the practical expedient in ASC 606 which states the Company is not required

to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to

a wholly unsatisfied performance obligation.

Under these contracts, each unit of product generally represents a separate performance obligation;

therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations

is not required.

Prior-Period Performance Obligations

The Company records revenue in the month that product

is delivered to the purchaser.

Settlement statements for certain natural gas and NGL sales, however, may not be received for 30 to 90

days after the date the product is delivered, and as a result the Company is required to estimate the amount of product delivered to the

purchaser and the price that will be received for the sale of the product.

In these situations, the Company records the differences between

its estimates and the actual amounts received for product sales in the month that payment is received from the purchaser.

Any identified

differences between the Company’s revenue estimates and actual revenue received have historically been insignificant.

For the years

ended December 31, 2023 and 2022, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting

periods was not material.

Stock-Based Compensation

The Company recognizes stock-based compensation

expense associated with equity-based incentive awards consisting of stock options and restricted stock units.

The Company accounts for

forfeitures of equity-based incentive awards as they occur.

Stock-based compensation expense related to equity-based awards is generally

recognized as vesting occurs.

See Note 10 for further discussion.

The Company accounts for income taxes in accordance

with the asset and liability method of accounting for income taxes.

Under the asset and liability method, deferred tax assets and

liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts

of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.

assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those temporary

differences are expected to be recovered or settled.

A valuation allowance is established if management determines it is more likely than

not that some portion of a deferred tax asset will not be realized.

Per Share Amounts

The Company calculates and discloses basic earnings

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

The computation of basic earnings per share

is computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares during the

Diluted EPS gives effect to all dilutive potential

common shares outstanding during the period.

The computation of Diluted EPS does not assume conversion, exercise or contingent exercise

of securities that would have an anti-dilutive effect on losses.

As a result, if there is a loss from continuing operations, Diluted

EPS is computed in the same manner as Basic EPS.

Fair Value Measurements

The Financial Accounting Standards Board ("FASB")

fair value measurement standards define fair value, establish a consistent framework for measuring fair value and establish a fair value

hierarchy based on the observability of inputs used to measure fair value.

The three-level fair value hierarchy for

disclosure of fair value measurements defined by ASC Topic 820 is as follows:

Level 1 – Unadjusted, quoted

prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

An active market

is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information

on an ongoing basis.

Level 2 – Inputs, other than

quoted prices within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market

data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 – Prices or valuations

that require unobservable inputs that are both significant to the fair value measurement and unobservable.

Valuation under Level 3 generally

involves a significant degree of judgment from management.

A financial instrument’s level within

the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Where available,

fair value is based on observable market prices or parameters or derived from such prices or parameters.

Where observable prices or inputs

are not available, valuation models are applied.

These valuation techniques involve some level of management estimation and judgment,

the degree of which is dependent on the price transparency for the instruments or market and the instrument’s complexity.

reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no

longer justifies classification in the original level.

There were no transfers between fair value hierarchy levels for the years ended

December 31, 2023 and 2022.

Impairment of oil and natural gas properties -

The fair value of proved and unproved 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 and unproved oil and natural gas properties include

estimates of:

(i) recoverable reserves;

(ii) production rates;

(iii) future operating and development

(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.

For significant acquisitions, management utilized

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

fair value of asset retirement obligations is included in proved oil and natural gas properties with a corresponding liability.

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

rate, inflation rate and timing associated with the incurrence of these costs.

inputs used to value oil and natural gas properties for impairments and asset retirement obligations require significant judgment and

estimates made by management and represent Level 3 inputs.

instruments and other- The fair values determined for accounts receivable, accrued expenses and other current liabilities were equivalent

to the carrying value due to their short-term nature.

– Derivative financial instruments are carried at fair value and measured on a recurring basis.

The Company’s commodity

price hedges are valued based on discounted future cash flow models that are primarily based on published forward commodity price curves;

thus, these inputs are designated as Level 2 within the valuation hierarchy.

fair values of derivative instruments in asset positions include measures of counterparty nonperformance risk, and the fair values of

derivative instruments in liability positions include measures of the Company’s nonperformance risk.

These measurements were not

material to the Consolidated Financial Statements.

Party Transactions

between related parties are considered to be related party transactions even though they may not be given accounting recognition.

ASC 850, Related Party Disclosures (“FASB ASC 850”) requires that transactions with related parties that

would have influence in decision making shall be disclosed so that users of the financial statements can evaluate their significance.

Related party transactions typically occur within the context of the following relationships:

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.

For significant acquisitions, management utilized the assistance of a third-party valuation expert to

estimate the value of the oil and natural gas properties acquired.

The fair value of asset retirement obligations

is included in proved oil and natural gas properties with a corresponding liability.

The fair value was determined based on a discounted

cash flow model, which included assumptions of the estimated current abandonment costs, discount rate, inflation rate and timing associated

with the incurrence of these costs.

The inputs used to value oil and natural gas

properties for impairments and asset retirement obligations require significant judgment and estimates made by management and represent

Level 3 inputs.

Financial instruments and other- The

fair values determined for accounts receivable, accrued expenses and other current liabilities were equivalent to the carrying value due

to their short-term nature and generally represent Level 2 fair values.

Derivatives – Derivative financial

instruments are carried at fair value and measured on a recurring basis.

The Company’s commodity price hedges are valued based on

discounted future cash flow models that are primarily based on published forward commodity price curves;

thus, these inputs are designated

as Level 2 within the valuation hierarchy.

The fair values of derivative instruments in

asset positions include measures of counterparty nonperformance risk, and the fair values of derivative instruments in liability positions

include measures of the Company’s nonperformance risk.

These measurements were not material to the Consolidated Financial Statements.

The fair value of the amount outstanding on

our credit facility is equivalent to the carrying value due to the variable interest rate on such facility.

Related Party Transactions

Transactions between related parties are considered

to be related party transactions even though they may not be given accounting recognition.

FASB ASC 850, Related Party Disclosures (“FASB

ASC 850”) requires that transactions with related parties that would have influence in decision making shall be disclosed so that

users of the financial statements can evaluate their significance.

Related party transactions typically occur within the context of the

following relationships:

affiliates of the entity;

which investments in their equity securities is typically accounted for under the equity method by the investing entity;

trusts for the

benefit of employees;

principal owners of the entity and members of their immediate families;

management of the entity and members of

their immediate families;

and other parties that can significantly influence the management or operating policies of the transacting

parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully

pursuing its own separate interests.

Issued Accounting Pronouncements

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

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

August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and

Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an

Entity’s Own Equity.

The amendments in this ASU affect entities that issue convertible instruments and/or contracts in an

entity’s own equity.

The amendments in this ASU primarily affect convertible instruments issued with beneficial conversion

features or cash conversion features because the accounting models for those specific features are removed.

However, all entities

that issue convertible instruments are affected by the amendments to the disclosure requirements of this ASU.

For contracts in an

entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features that are accounted

for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives scope

exception related to certain requirements of the settlement assessment.

Also affected is the assessment of whether an embedded

conversion feature in a convertible instrument qualifies for the derivatives scope exception.

Additionally, the amendments in this

ASU affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments.

amendments in this ASU are effective for public business entities, excluding entities eligible to be smaller reporting companies,

for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

For all other entities, the

amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year.

The Board decided to

allow entities to adopt the guidance through either a modified retrospective method of transition or a fully retrospective method of

The Company is analyzing the effect that adoption will have but does not expect a material impact as a result of

adopting these standards.

June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses.

This ASU, as further amended, affects trade receivables,

financial assets and certain other instruments that are not measured through net income.

This ASU will replace the currently required

incurred loss approach with an expected loss model for instruments measured at amortized cost and is effective for financial statements

issued for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company does not

believe the adoption of this ASU will have a material impact on the Company's consolidated financial statements since the Company does

not have a history of material credit losses.

capitalized costs of oil and natural gas properties as of December 31, 2022 and 2021 are as follows:

entities for which investments in their equity securities is typically accounted for

under the equity method by the investing entity;

trusts for the benefit of employees;

principal owners of the entity and members of their

immediate families;

management of the entity and members of their immediate families;

and other parties that can significantly influence

the management or operating policies of the transacting parties and can significantly influence the other to an extent that one or more

of the transacting parties might be prevented from fully pursuing its own separate interests.

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 June 2016, the FASB issued Accounting Standards

Update ("ASU”) 2016-13, Financial Instruments – Credit Losses .

This ASU, as further amended, affects trade

receivables, financial assets and certain other instruments that are not measured through net income.

This ASU will replace the currently

required incurred loss approach with an expected loss model for instruments measured at amortized cost and is effective for financial

statements issued for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

of this ASU on January 1, 2023 by the Company did not have a material impact on the Company’s consolidated financial statements

since the Company does not have a history of material credit losses.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt

with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

The amendments in this ASU affect entities

that issue convertible instruments and/or contracts in an entity’s own equity.

The amendments in this ASU primarily affect convertible

instruments issued with beneficial conversion features or cash conversion features because the accounting models for those specific features

However, all entities that issue convertible instruments are affected by the amendments to the disclosure requirements of

For contracts in an entity’s own equity, the contracts primarily affected are freestanding instruments and embedded features

that are accounted for as derivatives under the current guidance because of failure to meet the settlement conditions of the derivatives

scope exception related to certain requirements of the settlement assessment.

Also affected is the assessment of whether an embedded conversion

feature in a convertible instrument qualifies for the derivatives scope exception.

Additionally, the amendments in this ASU affect the

diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments.

The amendments in this

ASU are effective for public business entities, excluding entities eligible to be smaller reporting companies, for fiscal years beginning

after December 15, 2021, including interim periods within those fiscal years.

For all other entities, the amendments are effective for

fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

The Board specified that an entity

should adopt the guidance as of the beginning of its annual fiscal year.

The Board decided to allow entities to adopt the guidance through

either a modified retrospective method of transition or a fully retrospective method of transition.

The Company is analyzing the effect

that adoption will have but does not currently expect a material impact as a result of adopting these standards.

Note 3 – Property

The capitalized costs of oil and natural gas properties

as of December 31, 2023 and 2022 are as follows:

Proved Properties

6 unchanged sentences

Total Oil and Gas Properties, Net

Company assesses its oil and gas properties for impairment when circumstances indicate the carrying value may be greater than its

estimated future net cash flows.

In 2022, estimated future cash flows from the Company’s properties in Louisiana were less

than the net book value.

August 9, 2023, the Company and a subsidiary of Energy Evolution Master Fund, Ltd.

(“Energy Evolution”), a related

party, collectively acquired additional working interests in certain of the Company’s New Mexico properties.

The Company paid

$ 2.1 million in cash and acquired 10% of the total acquired working interests in the transaction.

The subsidiary of Energy Evolution

acquired the other 90% of the acquired working interest ("EEF Interest”).

The Company has a one-year option to acquire

the EEF Interest for $ 5 million, subject to adjustments ("Purchase Option”).

In exchange for the Purchase Option, the

Company issued 67,000 shares of common stock valued at approximately $ 601,000 and reflected in Other Noncurrent Assets.

has the right to extend the initial one-year Purchase Option period for two successive one-year periods by agreeing to issue an

additional 42,000 shares of common stock prior to the end of the one-year period then in effect.

The Purchase Option may be

exercised by the Company at any time during the one-year period then in effect by sending written notice to Energy Evolution prior

to the expiration of such one-year period.

Company assesses its oil and gas properties for impairment when circumstances indicate the carrying value may be greater than its estimated

future net cash flows.

The Company did not identify any impairments in 2023.

In 2022, estimated future cash flows from the Company’s

properties in Louisiana were less than the net book value.

As a result, the Company recorded a $ 936,000 impairment expense in 2022.

April 2022, the Company purchased working interests of oil and natural gas properties primarily located in the Landa field in North Dakota

and assumed the role of operator.

The Company paid approximately $ 1.4 million for eight producing properties, two properties with behind-pipe

reserves, and related lease and well equipment.

The Company allocated 80 % of the acquisition cost to leasehold costs and the remaining

20 % to related lease and well equipment.

Non-cash asset retirement obligations were assumed of $ 233,659 .

The acquisition was accounted

for as an asset acquisition.

The Company purchased additional oil and gas properties in 2022 totaling $ 1.3 million .

In May 2021 the Company

purchased oil and natural gas properties in New Mexico (see Note 4).

property and equipment consists of operating lease assets, vehicles, office furniture, and equipment with lives ranging from three to

The capitalized costs of other property and equipment as of December 31, 2022 and 2021 are as follows:

In April 2022, the Company purchased working interests

of oil and natural gas properties primarily located in the Landa field in North Dakota and assumed the role of operator.

The Company paid

approximately $ 1.4 million for eight producing properties, two properties with behind-pipe reserves, and related lease and well equipment.

The Company allocated 80 % of the acquisition cost to leasehold costs and the remaining 20 % to related lease and well equipment.

asset retirement obligations were assumed of $ 233,659 .

The acquisition was accounted for as an asset acquisition.

The Company purchased

additional oil and gas properties in 2022 totaling $ 1.3 million .

Other property and equipment consists of operating

lease assets, vehicles, office furniture, and equipment with lives ranging from three to five years.

The capitalized costs of other property

and equipment as of December 31, 2023 and 2022 are as follows:

Other property and equipment, at cost

accumulated depreciation

( 1,114,807 )

Oher property and equipment, net

4 – Acquisition of XTO Properties

March 12, 2021 the Company, through its wholly owned subsidiary Empire New Mexico, 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 natural gas properties

in New Mexico.

The purchase price was $ 17,800,000 subject to customary adjustments.

The transaction closed on May 14, 2021 with an effective

date of January 1, 2021.

XTO acquisition has been assessed under the screen test for business combinations under FASB ASC 805, Business Combinations (“ASC

The XTO acquisition met the screen test and has been accounted for as an asset acquisition using the acquisition method

of accounting.

Under the accounting for asset acquisitions, the acquisition is recorded using a cost accumulation and allocation model

under which the cost of the acquisition is allocated on a relative fair value basis to the assets acquired and liabilities assumed.

Acquisition-related

transaction costs are capitalized as a component of the cost of the assets acquired.

a condition of the sale, the Company purchased a $ 5,000,000 performance bond for the benefit of the seller for proper plugging,

abandonment and restoration of the purchased properties.

The performance bond is collateralized with a letter of credit in the

amount of $ 3,750,000 .

To effect the letter of credit, the Company entered into a Promissory Note Agreement with Bank of Oklahoma, NA

in the amount of $ 3,750,000 which is due on demand with an interest rate established by the Bank, currently at 4 %.

The Promissory

Note, and associated letter of credit, is collateralized with a bank certificate of deposit in a corresponding amount.

the Company is required to deposit $ 100,000 per month, up to $ 1,250,000 , into a sinking fund to be held by the surety.

amendments increased the monthly payment amounts to $ 160,000 in response to additional bonding requested by the State of New Mexico that

increased the letter of credit requirement to $ 5.45 million .

Payments on the sinking fund were made through April 2022 and no

additional collateral deposits were required as of June 2022.

At the end of 2022, the collateral requirement was removed and the

Company received $ 2 million back from the sinking fund.

following table sets forth the Company's purchase price allocation:

Fair Value of Assets Acquired

Oil and natural gas properties

Inventory of oil in tanks

Asset retirement obligations

Total assets acquired

Fair Value of Liabilities Assumed

Royalty suspense

Asset retirement obligations

Total liabilities assumed

Purchase Price

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 value of inventory, vehicles, and royalty suspense was based on their relative fair values

as described above.

fair value of asset retirement obligations is included in proved oil and natural gas properties with a corresponding liability in the

The fair value was determined based on a discounted cash flow model, which included assumptions of the estimated current

abandonment costs, discount rate, inflation rate and timing associated with the incurrence of these costs.

October 7, 2022, the Company entered into a final settlement agreement with XTO.

The provisions of this settlement allowed the Company

to substitute the performance bond and letter of credit that were put into place with the transaction for a new performance bond that

does not require the Company to have collateral invested in the performance bond.

Due to the nature and timing of the settlement, the

result of the final settlement was a non-cash expense of approximately $1.4 million to Other Income (Expense) on the Consolidated Statements

of Operations in 2022.

Joint Development Agreement

August 6, 2020 the Company, through its wholly owned subsidiary, Empire Texas, entered into a joint development agreement (the “JDA”)

with Petroleum & Independent Exploration, LLC and related entities (“PIE”), a related party (See Note 12), dated August

Under the terms of the JDA, PIE will perform recompletion or workover on specified mutually agreed upon wells (“Workover

Wells”) owned by Empire Texas.

To fund the work, PIE entered into a term loan agreement with Empire Texas dated August 1, 2020,

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

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

As of December 31, 2022 and 2021 approximately

$ 1,100,000 and $ 800,000 , respectively was outstanding on this loan and is included in Long Term Notes Payable on the Consolidated Balance

Note 4 – Joint Development and Shared Services Agreements

On August 6, 2020 the Company, through its wholly

owned subsidiary, Empire Texas, entered into a joint development agreement (the “JDA”) with Petroleum & Independent Exploration,

LLC and related entities (“PIE”), a related party, dated August 1, 2020.

Under the terms of the JDA, PIE will perform recompletion

or workover on specified mutually agreed upon wells (“Workover Wells”) owned by Empire Texas.

To fund the work, PIE entered

into a term loan agreement with Empire Texas dated August 1, 2020, whereby PIE will loan up to $ 2,000,000 , at an interest rate of 6 % per

annum, maturing August 7, 2024 unless terminated earlier by PIE.

Proceeds of the loan will be used for recompletion or workover of the

Workover Wells.

As of December 31, 2023 and 2022 approximately $ 1,100,000 was outstanding on this loan and is included in Current Portion

of Note Payable – Related Party and Long-Term Note Payable – Related Party on the Consolidated Balance Sheet, respectively.

As part of the JDA, Empire Texas 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 Empire Texas in each of the Workover Wells and retain a 50% working and revenue interest (See Note 8) .

To the extent the

cash flows from the revenue interest are insufficient to repay the obligations under the term loan, the Company remains required to repay

the obligation.

In the third quarter of 2022, a $ 1.4 million long-term asset that had previously

been recorded as an offset to the note payable was expensed to workovers within Lease Operating Expense on the Consolidated Statements

of Operations.

addition, PIE and Empire entered into a Securities Purchase Agreement (“Securities Agreement”) whereby PIE purchased for

$525,000 (a) 875,000 shares of Empire common stock, (b) warrants to purchase 656,250 shares of Empire common stock at an exercise

price of $0.80 per share, (c) warrants to purchase 450,000 shares of Empire common stock at an exercise price of $1.00 per share,

(d) warrants to purchase 2,034,129 shares of Empire common stock at an exercise price of $0.40 per share, and (e) warrants to

purchase up to 2,766,666 shares of Empire common stock at an exercise price of $0.564 per share, pursuant to various vesting

provisions as detailed in the Securities Agreement .

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 .

Note 6 - Asset

Retirement Obligations

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, 2022 and 2021 are summarized in the table below.

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 Empire Texas in each of the Workover Wells and retain a 50% working and revenue interest (See Note 7).

To the extent the cash flows

from the revenue interest are insufficient to repay the obligations under the term loan, the Company remains required to repay the obligation.

In the third quarter of 2022, a $ 1.4 million long-term asset that had previously been recorded as

an offset to the note payable was expensed to workovers within Lease Operating Expense on the Consolidated Statements of Operations.

The Company has also entered into a Shared Services

Agreement with PIE effective August 1, 2023 that includes access to administrative, engineering and support services as well as building

and insurance services.

The agreement provides that the Company will reimburse PIE for the out-of-pocket or actual costs incurred by

PIE in providing such services to the Company.

Note 5 – 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.

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, 2023 and 2022 are summarized in the table below.

For the Year Ended December 31,

1 unchanged sentence

Liabilities assumed in acquisitions

( 2,055,806 )

Liabilities settled

1 unchanged sentence

Asset retirement obligation, end of period

Less current portion included in Accrued Expenses

Asset retirement obligation, long-term

The revisions in 2023 primarily reflect cost revision

estimates to wells in New Mexico based on 2023 plugging activity.

The revisions in 2022 primarily relate to the identification of nonproducing

wells, including injection wells and temporarily abandoned wells in New Mexico.

Commodity Derivative Financial Instruments

Company uses derivative financial instruments to manage its exposure to commodity price fluctuations.

Commodity derivative instruments

are used to reduce the effect of volatility of price changes on the oil and natural gas the Company produces and sells.

The Company does

not enter into derivative financial instruments for speculative or trading purposes.

The Company’s derivative financial instruments

consist of put options.

Company does not designate its derivative instruments to qualify for hedge accounting.

Accordingly, the Company reflects changes in the

fair value of its derivative instruments in its consolidated statements of operations as they occur.

Unrealized gains and losses related

to the contracts are recognized and recorded as an asset or liability on the Company’s consolidated balance sheets.

following table summarizes the net realized and unrealized amounts reported in earnings related to the commodity derivative instruments

for the years ended December 31, 2022 and 2021:

Note 6 – Commodity Derivative Financial Instruments

The Company uses derivative financial instruments

to manage its exposure to commodity price fluctuations.

Commodity derivative instruments are used to reduce the effect of volatility of

price changes on the oil and natural gas the Company produces and sells.

The Company does not enter into derivative financial instruments

for speculative or trading purposes.

The Company’s derivative financial instruments consist of swaps and put options.

The Company does not designate its derivative instruments

to qualify for hedge accounting.

Accordingly, the Company reflects changes in the fair value of its derivative instruments in its Consolidated

Statements of Operations as they occur.

These contracts are recognized and recorded at fair value as an asset or liability on the Company’s

Consolidated Balance Sheets.

The following table summarizes the net realized and

unrealized amounts reported in earnings related to the commodity derivative instruments for the years ended December 31, 2023 and 2022:

For the Year Ended December 31,

2 unchanged sentences

$ ( 387,930 )

$ ( 586,181 )

The following

represents the Company’s net cash receipts from (payments on) derivatives for the years ended December, 2022 and 2021:

The following represents the Company’s net cash receipts from (payments

on) derivatives for the years ended December, 2023 and 2022:

For the Year Ended December 31,

2 unchanged sentences

$ ( 260,266 )

Natural gas derivatives

$ ( 259,696 )

$ ( 835,441 )

The following

table sets forth the Company’s outstanding derivative contracts at December 31, 2022:

WTI Index Put Options:

Quarterly volume (Bbl)

Floor Price (Bbl)

$ 40.00 -$ 65.00

$ 40.00 -$ 55.00

$ 55.00 -$ 60.00

8 – Debt and Long Term Note Payable - Related Party

following table represents the Company’s outstanding debt.

The following table sets forth the Company’s outstanding derivative

contracts at December 31, 2023:

1st Quarter 2024

2nd Quarter 2024

3rd Quarter 2024

4th Quarter 2024

WTI Fixed-Price Swaps:

Quarterly volume (MBbls)

Weighted-average fixed price (Bbl)

7 – Debt and Note Payable - Related Party

The following table represents the Company’s

outstanding debt.

As of December 31,

Senior Revolver Loan Agreement

Long Term Note Payable – Related Party

Equity Bank Credit Facility

CrossFirst Senior Revolver Loan Agreement

Note Payable – Related Party

Equipment and vehicle notes, 0.00 % to 9.00 % interest rates, due in 2025 to 2028 with monthly payments ranging from $ 900 to $ 1,400 per month

Note Payable to Insurance Provider, bears 3.63 % interest, matures November 2022, monthly payments of principal and interest of $ 50,083

Current Maturities

( 2,059,309 )

Note Payable – Related Party

( 1,060,004 )

Long Term Note Payable – Related Party

( 1,076,987 )

Long-Term Debt

July 7, 2021 the Company entered into the Fourth Amendment to its Senior Revolver Loan Agreement with CrossFirst Bank (“CrossFirst”)

as further amended by Letter Agreements in conjunction with redetermination dates (“the Amended Agreement”).

amount that can be advanced under the Agreement is $20,000,000 and the existing commitment amount following a February 27, 2023 Letter

agreement is $ 6,180,000 which is reduced by $ 500,000 per calendar quarter beginning March 31, 2023 and includes interest at Wall Street

Journal Prime plus 150 basis points ( 9.0 % as of December 31, 2022).

The Amended Agreement matures on May 26, 2024 .

Collateral for the

loan is a lien on all of the assets of Empire Louisiana and Empire North Dakota, wholly owned subsidiaries of the Company, and a first

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

producing oil, gas and other leasehold and mineral interests.

The Amended Agreement requires the Company maintain commodity derivatives

at certain thresholds based on projected production and, beginning March 31, 2021, to maintain certain covenants including an EBITDAX

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

The current maturities of the

Amended Agreement is $ 2,000,000 .

The Company was in compliance with the loan covenants at December 31, 2022.

May 5, 2020, the Company received an SBA Payroll Protection Plan (“PPP”) loan for $ 160,700 .

The loan was scheduled to mature

on May 5, 2022, and had an interest rate of 1 %.

In June 2021 the Company was informed that the SBA had forgiven the entire loan balance .

Forgiveness is included in Other Income on the Consolidated Statements of Operations.

April 30, 2021, the Company received a Second Draw SBA PPP loan for $ 106,850 .

The loan was scheduled to mature on April 30, 2026 , and

bore interest at 1%.

In October 2021 the Company was informed that the SBA had forgiven the entire loan balance.

Forgiveness is included

in Other Income on the Consolidated Statements of Operations.

Term Note Payable - Related Party

August 2020, concurrent with the Joint Development Agreement with Petroleum and Independent Exploration, LLC (“PIE”), a related

party, 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.

On December 29, 2023, Empire North Dakota and Empire

NDA ("Borrowers”), entered into a Revolver Loan Agreement with Equity Bank (the "Credit Facility”).

the Credit Facility (a) the initial revolver commitment amount is $10,000,000;

(b) the maximum revolver commitment amount is $15,000,000;

(c) commencing on January 31, 2024, and occurring on the last day of each calendar month thereafter, the revolver commitment amount is

reduced by $150,000;

(d) commencing on March 31, 2024, there are scheduled semiannual collateral borrowing base redeterminations each

year on March 31 and September 30;

(e) the final maturity date is December 29, 2026;

(f) outstanding borrowings bear interest at a rate

equal to the prime rate of interest plus 1.50%, and in no event lower than 8.50%;

(g) a quarterly commitment fee is based on the unused

portion of the commitments;

and (h) Borrowers have the right to prepay loans under the Credit Facility at any time without a prepayment

The Credit Facility is guaranteed by the Company.

Borrowers entered into a security agreement, pursuant to which the obligations under the Credit Facility are secured by liens on substantially

all of the assets of Borrowers.

Furthermore, the obligations under the Credit Facility are secured by a continuing, first priority mortgage

lien, pledge of and security interest in not less than 80% of Borrowers’ producing oil, gas and other leasehold and mineral interests,

including without limitation, those situated in the States of North Dakota and Montana.

The Credit Facility requires Borrowers to, commencing

as of the fiscal quarter ended December 31, 2023, maintain (a) a current ratio of 1.0 to 1.0 or more and (b) a ratio of funded debt to

EBITDAX, calculated quarterly and annually based on a trailing twelve-month basis, of no more than 3.50 to 1.00.

At December 31, 2023,

the Borrowers were not in compliance with the current ratio, however, a waiver was obtained from the lender.

The Company is in compliance

with the other covenants as of December 31, 2023.

On July 7, 2021, the Company entered into the Fourth

Amendment to its Senior Revolver Loan Agreement with CrossFirst Bank ("CrossFirst”) as further amended by Letter Agreements

in conjunction with redetermination dates (the “Amended Agreement”).

The maximum amount that could be advanced under the Amended

Agreement was $ 20,000,000 and the commitment amount following an August 9, 2023 amendment agreement was $ 5,180,000 .

Amended Agreement was subsequently retired with proceeds from the new Credit Facility discussed above.

On September 19, 2023, each of Phil Mulacek, a member

of the Company’s Board of Dierctors, and Energy Evolution made a bridge loan to Empire North Dakota in the amount of $ 5.0 million (collectively,

the "Bridge Loans”).

These Bridge Loans were subsequently converted to our common shares.

Mulacek and Energy Evolution

are each a related party of the Company.

See Note 15 for additional information regarding these Bridge Loans and the subsequent conversion

to our common shares.

Note Payable - Related Party

In August 2020, concurrent with the JDA with PIE,

a related party, 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 85% working and revenue interest to PIE in the designated wells which

will be applied to repayment of the loan.

In addition, the Company assigned 85% working and revenue interest to PIE in the designated wells which will

be applied to repayment of the loan.

As of December 31, 2023, $1,060,004 has been advanced from the PIE loan.

9 – Convertible Notes Payable

Secured Note Agreement

May 14, 2021, the Company’s wholly owned subsidiary, Empire New Mexico entered into a Senior Secured Convertible Note Agreement

(the “Secured Note”) in the amount of $ 16,250,000

with Energy Evolution Master Fund, Ltd., a related party (“Energy

Evolution”) (See Note 11).

The Secured Note is collateralized by all assets of Empire New Mexico, matures on December 31, 2021

and bears an interest rate of 3.8 %.

The Secured Note provides that up to 40% of the balance, together with accrued interest, can be converted

into the Company’s common stock at the lesser of $1.25 per share or the offering price if the Company has a subsequent capital

raise or an aggregate of 1,300,000 shares of common stock (without giving effect to any interest that may be converted).

The conversion

terms of the Secured Note were subject to further adjustments as defined in that agreement.

The embedded conversion option has been bifurcated

and accounted for separately as a derivative financial instrument.

The separated derivative was initially recorded at fair value at the

inception date and revalued as of September 30, 2021 resulting in a fair value of $ 5,530,677 and $ 5,437,746 , respectively.

30, 2021, the existing bifurcated derivative liability was removed in connection with the Amended Secured Note as further discussed.

partial consideration for the issuance of the Secured Note, Energy Evolution received a closing fee of 375,000 shares of the Company’s

common stock and warrants to purchase 750,000 shares of common stock for $ 4.00 per share which expire on May 14, 2022.

The Company determined

these were equity-classified financing instruments and the proceeds are allocated on a relative fair value basis between the debt, warrants,

and common shares at issuance.

At issuance, the discount associated with the Secured Note was $ 10,125,177 ;

consisting of $ 5,530,677 relating

to the embedded derivative liability, $ 1,500 and $ 2,773,500 in common stock and paid in capital, respectively, relating to the issuance

of shares of the Company’s common stock, and $ 1,819,500 in paid in capital relating to the issuance of warrants to purchase common

The fair value of the warrants was determined using a Black-Scholes model.

The warrants were exercised in 2021 and the Company

received cash proceeds of $ 3,000,000 .

The discount associated with the Secured Note related to the embedded conversion liability and

the issuance of the equity-classified financing instruments is amortized under the interest method and resulted in interest expense.

Prior to amending the Secured Note in September 2021, the Company made principal payments totaling $4,050,000.

September 29, 2021 the parties entered into a Loan Modification Agreement (the “Amended Secured Note”) pursuant to which

Energy Evolution exchanged $ 6,500,000 in principal under the Secured Note in exchange for 1,326,302 shares of common stock, warrants

to purchase 500,000 shares of the Company’s common stock at $ 1.25 per share and amended certain terms of the remaining $ 5,700,000

of principal under the Secured Note.

As amended, the remaining principal balance matures and becomes due on June 30, 2023 and upon maturity

of the Amended Secured Note, Energy Evolution has the sole discretion to require cash settlement or to redeem the principal balance,

together with accrued interest, in exchange for the Company’s common stock at $ 8 per share.

Prior to maturity, interest accrues

quarterly at 3.8% and Energy Evolution has the option to receive interest in common stock at $5.00 per share in lieu of cash.

to the Amended Secured Note, the Company’s obligations with respect to a registration statement under the Secured Note were extended,

the Company executed and delivered a Pledge and Security Agreement granting Energy Evolution a first priority perfected security interest

in the Company’s membership interest in Empire New Mexico, d/b/a Green Tree New Mexico, the Company and Green Tree New Mexico agreed

to use commercial reasonable best efforts to separate Green Tree New Mexico from the Company as an independent business on or before

December 31, 2022 in a spin-off to stockholders of the Company.

In accordance with ASC 470-20, the Company accounted for this exchange

as an induced conversion based on the short period time of the offer was open and the substantive conversion feature offer.

accounted for the conversion of the debt instruments as an inducement by expensing the fair value of the instruments that were issued

in excess of the original terms of the Secured Notes.

The Company reduced the outstanding debt by $ 9,141,327 , representing the face amount

of the Secured Notes converted of $ 6,500,000 , net of unamortized discount costs of $ 2,796,419 , and the embedded conversion liability

of $ 5,437,746 .

The Company recorded induced conversion expense of $ 2,276,813 representing the difference in fair value of the instruments

exchanged, including the fair value of the warrants to purchase 500,000 shares of common stock at $ 5.00 per share.

The embedded conversion

option of the principal balance outstanding after the conversion and amendment, has been bifurcated and accounted for separately as a

derivative financial instrument.

The separated derivative was initially recorded at fair value of $ 2,017,287 , with the amount recorded

as a discount against the surviving Amended Secured Note balance and the derivative liability will be revalued on a quarterly basis.

On September 30, 2021, 23,802 shares of common stock were issued as payment for the outstanding accrued interest on the Secured Note.

December 30, 2021, the Company amended the Amended Secured Note to allow full conversion of the remaining principal and accrued interest

at that date.

$ 5,715,353 of outstanding principal and $ 55,075 of accrued interest were converted into 1,154,085 shares of the Company’s

common stock.

As a result of this conversion, the mortgage that Energy Evolution held on the Company’s New Mexico assets was released.

Convertible Notes

May 2021 the Empire New Mexico entered into $ 3,243,000 of Unsecured Convertible Notes (the “Unsecured Notes”) with a group

of accredited investors, including the Company’s related party Energy Evolution, constituting $1,500,000 of the total Unsecured

Convertible Notes.

The Unsecured Notes had a maturity of May 9, 2022 , with a single payment and interest at 5 %.

The Unsecured Note holders

had the ability to convert their notes to common stock of the Company at the lesser of $5.00 per share or the price per share offered

by the Company if the Company has a future capital raise for an aggregate 648,600 shares of common stock (without giving effect to any

interest that may be converted).

In September 2021, $ 325,000 of the notes were repaid and the remaining Unsecured Notes were fully converted

to Common Stock.

Company determined the embedded conversion features of the Unsecured Notes were equity-classified financing instruments.

The fair value

of the conversion feature was determined using a beneficial conversion model based on a 60-day weighted average stock price and the maximum

number of shares to be received if converted.

As issuance, the amount recorded to additional paid in capital was $ 544,824 .

associated with these transactions is amortized under the interest method and resulted in interest expense approximately $ 540,000 for

the year ended December 31, 2021.

an inducement for investors to enter into the Unsecured Convertible Notes, the Company’s Chief Executive Officer and President

collectively offered to each investor the right to purchase a number of shares of common stock equal to 40 % of such investor’s

principal balance under its Unsecured Convertible Note at $ 3.00 per share (the “right to buy”).

Energy Evolution exercised

its right to buy 150,000 shares of the Company’s common stock.

In conjunction with the conversion of the Unsecured Notes, each

of the Company’s Chief Executive Officer and President partially exercised a warrant and options to purchase 160,000 shares at

an exercise price of $ 1.00 and $ 1.32 respectively.

The Company determined that offering the “right to buy” shares resulted

in an expense of $ 989,155 of the Company based on the fair value of contributions made by the Company’s Chief Executive Officer

and President on its behalf.

The fair value of the “right to buy” shares was determined using a Black-Scholes model.

expense is included in General and Administrative in the Consolidated Statement of Operations.

a lessee, the Company leases its corporate office headquarters in Tulsa, Oklahoma and three field offices.

The leases expire between

2024 and 2027.

The corporate office has an option to renew for an additional five-year term.

The option 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.

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.

of use lease expense was approximately $ 267,000 for the year ended December 31, 2022.

Note 8 – Leases

As a lessee, the Company leases its corporate office

headquarters in Tulsa, Oklahoma and one field office.

The leases expire between 2024 and 2028.

The corporate office has an option to renew

for an additional five-year term.

The option to renew the lease is generally not considered reasonably certain to be exercised.

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.

The Company also leases vehicles primarily for use

by our field operations.

These vehicle leases typically have a three-year life.

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.

Right of use lease expense was approximately $ 424,000

and $ 267,000 for the years ended December 31, 2023 and 2022, respectively.

Cash paid for right of use lease was approximately $ 404,000

$2 68,000 for the same period.

balance sheet information related to the right of use leases is as follows:

and $ 268,000 for the same period.

Supplemental balance sheet information related to the right of use leases

is as follows:

Schedule of right of use leases

As of December 31,

Operating lease asset (included in Other Property and Equipment)

Net operating lease asset (included in Other Property and Equipment)

Current portion of lease liability

1 unchanged sentence

Total right of use lease liabilities

average remaining term for the Company’s right of use leases is 3.04 years.

Maturities of

lease liabilities as of December 31, 2022 are as follows:

The weighted average remaining term for the Company’s

right of use leases is 2.28

The weighted average discount rate was 8.56 %

Maturities of lease liabilities as of December 31, 2023 are as follows:

Total lease payments

imputed interest

lease obligation

to the Company’s Amended and Restated Certificate of Incorporation (“Charter”), effective as of March 4, 2022, the

total number of shares of all classes of stock that the Company has the authority to issue is 200,000,000, consisting of 190,000,000

shares of common stock, par value $ 0.001 per share, and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

stock may be issued from time to time in one or more series at the direction of the Board of Directors and the directors also have the

ability to fix dividend rates and rights, liquidation preferences, voting rights, conversion rights, rights and terms of redemption and

other rights, preferences, privileges and restrictions as determined by the Board of Directors, subject to certain limitations set forth

in the Charter.

Less imputed interest

Total lease obligation

Note 9 – Equity

Pursuant to the Company’s Amended and

Restated Certificate of Incorporation (“Charter”), effective as of March 4, 2022, the total number of shares of all classes

of stock that the Company has the authority to issue is 200,000,000, consisting of 190,000,000 shares of common stock, par value $ 0.001

per share, and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

Preferred Stock

Preferred stock may be issued from time to time

in one or more series at the direction of the Company’s Board of Directors and the directors also have the ability to fix dividend

rates and rights, liquidation preferences, voting rights, conversion rights, rights and terms of redemption and other rights, preferences,

privileges and restrictions as determined by the Company’s Board of Directors, subject to certain limitations set forth in the Charter.

A Voting Preferred Stock

March 8, 2022, the Company formalized the issuance of preferred stock as was required under the terms of the Company's May 2021 financing

agreements with Energy Evolution (Master Fund), Ltd.

(the “Fund”) and issued six shares of Series A Voting Preferred Stock.

The Series A Voting Preferred Stock was issued in connection with the strategic investment in the

Company by the Fund.

For so long as the Series A Voting Preferred Stock is outstanding, the Company’s Board of Directors will consist

of six directors.

Three of the directors are designated as the Series A Directors and the three other directors (each, a “common

director”) are elected by the holders of common stock and/or any preferred stock (other than the Series A Voting Preferred Stock)

granted the right to vote on the common directors.

Any Series A Director may be removed with or without cause but only by the affirmative

vote of the holders of a majority of the Series A Voting Preferred Stock voting separately and as a single class.

The holders of the

Series A Voting Preferred Stock have the exclusive right, voting separately and as a single class, to vote on the election, removal and/or

replacement of the Series A Directors.

Holders of common stock or other preferred stock do not have the right to vote on the Series A

The approval of the holders of the Series A Voting Preferred Stock, voting separately and as a single class, is required to

authorize any resolution or other action to issue or modify the number, voting rights or any other rights, privileges, benefits, or characteristics

of the Series A Voting Preferred Stock, including without limitation, any action to modify the number, structure and/or composition of

the Company’s current Board of Directors.

Series A Voting Preferred Stock is held by Phil Mulacek, chairman of the Board of Directors and one of the principals of the Fund, as

the Fund’s designee (the “Initial Holder”).

The Series A Voting Preferred Stock may be transferred only to certain

controlled affiliates of the Initial Holder (“Permitted Transferees”), and the voting rights of the Series A Voting Preferred

Stock are contingent upon the Initial Holder and Permitted Transferees (collectively, the “Series A Holders”) holding together

at least 3,000,000 shares of the Company’s outstanding common stock.

Series A Voting Preferred Stock is not entitled to receive any dividends or distributions of cash or other property except in the event

of any liquidation, dissolution or winding up of the Company’s affairs.

In such event, before any amount is paid to the holders

of the Company’s common stock but after any amount is paid to the holders of the Company’s senior securities, the holders

of the Series A Voting Preferred Stock will be entitled to receive an amount per share equal to $1.00.

as discussed above or as otherwise set forth in the certificate of designation of the Series A Voting Preferred Stock, the holders of

the Series A Voting Preferred Stock have no voting rights.

Series A Voting Preferred Stock is not redeemable at the Company’s election or the election of any holder, except the Company may

elect to redeem the Series A Voting Preferred Stock for $1.00 per share following satisfaction of its notice and cure requirements in

the event that:

or all shares of Series A Voting Preferred Stock are held by anyone other than the Initial

Holder or a Permitted Transferee;

Series A Holders together hold less than 3,000,000 shares of the Company’s outstanding

common stock.

Series A Voting Preferred Stock is not convertible into common stock or any other security.

August 27, 2021 the Company’s Board of Directors approved a one-for-four reverse stock split such that every holder of the Company’s

common stock would receive one share of common stock for every four shares owned.

On March 8, 2022, the Company formalized the

issuance of preferred stock as was required under the terms of the Company's May 2021 financing agreements with Energy Evolution and issued

six shares of Series A Voting Preferred Stock.

The Series A Voting Preferred Stock was issued in

connection with the strategic investment in the Company by Energy Evolution.

For so long as the Series

Voting Preferred Stock is outstanding, the Company’s Board of Directors will consist of six directors.

Three of the directors are

designated as the Series A Directors and the three other directors (each, a “common director”) are elected by the holders

of common stock and/or any preferred stock (other than the Series A Voting Preferred Stock) granted the right to vote on the common directors.

Any Series A Director may be removed with or without cause but only by the affirmative vote of the holders of a majority of the Series

A Voting Preferred Stock voting separately and as a single class.

The holders of the Series A Voting Preferred Stock have the exclusive

right, voting separately and as a single class, to vote on the election, removal and/or replacement of the Series A Directors.

of common stock or other preferred stock do not have the right to vote on the Series A Directors.

The approval of the holders of the

Series A Voting Preferred Stock, voting separately and as a single class, is required to authorize any resolution or other action to

issue or modify the number, voting rights or any other rights, privileges, benefits, or characteristics of the Series A Voting Preferred

Stock, including without limitation, any action to modify the number, structure and/or composition of the Company’s current Board

of Directors.

A Voting Preferred Stock is held by Phil Mulacek, Chairman of the Board of Directors of the Company and one of the principals of Energy

Evolution, as Energy Evolution’s designee (the “Initial Holder”).

The Series A Voting Preferred Stock may be transferred

only to certain controlled affiliates of the Initial Holder (“Permitted Transferees”), and the voting rights of the Series

A Voting Preferred Stock are contingent upon the Initial Holder and Permitted Transferees (collectively, the “Series A Holders”)

holding together at least 3,000,000 shares of the Company’s outstanding common stock.

The Series A Voting Preferred

Stock is not entitled to receive any dividends or distributions of cash or other property except in the event of any liquidation, dissolution

or winding up of the Company’s affairs.

In such event, before any amount is paid to the holders of the Company’s common stock

but after any amount is paid to the holders of the Company’s senior securities, the holders of the Series A Voting Preferred Stock

will be entitled to receive an amount per share equal to $1.00.

Except as discussed above

or as otherwise set forth in the certificate of designation of the Series A Voting Preferred Stock, the holders of the Series A Voting

Preferred Stock have no voting rights.

The Series A Voting Preferred

Stock is not redeemable at the Company’s election or the election of any holder, except the Company may elect to redeem the Series

A Voting Preferred Stock for $1.00 per share following satisfaction of its notice and cure requirements in the event that:

· any or all shares of Series A Voting Preferred Stock are held by anyone

other than the Initial Holder or a Permitted Transferee;

· the Series A Holders together hold less than 3,000,000 shares of the Company’s

outstanding common stock.

The Series A Voting Preferred

Stock is not convertible into common stock or any other security.

On August 27, 2021 the Company’s Board of Directors

approved a one-for-four reverse stock split such that every holder of the Company’s common stock would receive one share of common

stock for every four shares owned.

The reverse stock split was effective as of 6:00 p.m.

Eastern Time on March 7, 2022, immediately prior to the Company’s listing of its common stock on the NYSE American.

All share amounts

have retrospectively been stated at post-reverse split amounts and pricing.

holders of shares of common stock are entitled to one vote per share for all matters on which common stockholders are authorized to vote

Examples of matters that common stockholders are entitled to vote on include, but are not limited to, election of three of the six

directors and other common voting situations afforded to common stockholders.

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) 875,000 shares of Empire common stock, (b) warrants to purchase 656,250 shares of Empire common stock at an exercise

price of $0.80 per share, (c) warrants to purchase 450,000 shares of Empire common stock at an exercise price of $1.00 per share, (d)

warrants to purchase 2,034,129 shares of Empire common stock at an exercise price of $0.40 per share, and (c) warrants to purchase up

to 2,766,666 shares of Empire common stock at an exercise price of $ 0.564 per share pursuant to various vesting provisions as detailed

in the Securities Agreement.

Eastern Time on March 7, 2022, immediately prior

to the Company’s listing of its common stock on the NYSE American.

All share amounts have retrospectively been stated at post-reverse

split amounts and pricing.

The holders of shares of common stock are entitled

to one vote per share for all matters on which common stockholders are authorized to vote on.

Examples of matters that common stockholders

are entitled to vote on include, but are not limited to, election of three of the six directors and other common voting situations afforded

to common stockholders.

During February and March 2021, the Company issued

to a group of accredited investors 2,248,464 shares of its common stock and warrants to purchase 2,248,464 shares of its common stock

for $ 2.00 per share which expires on December 31, 2022 with that day being accelerated should certain performance criteria be met.

from the sale were $ 3,147,850 .

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.

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 5).

February and March 2021, the Company issued to a group of accredited investors 2,248,464 shares of its common stock and warrants to purchase

2,248,464 shares of its common stock for $ 2.00 per share which expires on December 31, 2022 that would be accelerated should certain

performance criteria be met.

Proceeds from the sale were $ 3,147,850 .

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 180 %,

risk free interest rate of .

14 % and an expected useful life of 21 months.

The fair value of the warrants of $ 2,350,407 was allocated

to Additional Paid in Capital.

The performance criteria triggering early maturity occurred in April 2022, accelerating the warrant maturity

date to July 2022.

During the nine months ended September 30, 2022, 1,782,347 shares of common stock were issued as a result of warrant

As of July 10, 2022, all warrants such were fully exercised.

September and October 2022, a former director of the Company exercised warrants granted in November 2017 to purchase 475,000 shares of

common stock for $ 1.00 per share.

connection with the purchase of XTO assets the Company issued a Senior Secured Convertible Note due December 31, 2021 , in the aggregate

principal amount $ 16,250,000 (the “Secured Convertible Note”) to Energy Evolution, a related party.

As partial consideration

for the issuance of the Secured Convertible Note, Empire issued to Energy Evolution Ltd (i) 375,000 shares of common stock along with

(ii) a warrant certificate to purchase up to 750,000 shares of common stock at an exercise price of $4.00 per Warrant Share until May

Under the warrant certificate, the exercise price is subject to customary downward adjustments.

The value allocated to

the common stock, conversion feature, and warrants was $ 10,125,177 .

In September 2021, the Company and the Energy Evolution Master Fund,

entered into a Loan Modification Agreement (the “Amended Secured Notes”).

Under the Amended Secured Notes, among other

terms the Company issued a warrant certificate to purchase up to 500,000 shares of common stock at an exercise price of $5.00 per Warrant

Share until December 31, 2023.

The exercise price is subject to customary downward adjustments.

An additional 1,154,085 shares of common

stock were issued to Energy Evolution on December 30, 2021, in conjunction with its conversion of all remaining principal and accrued

interest on the note.

Additionally,

in conjunction with the purchase of XTO assets, the Company entered into $ 3,243,000 of Unsecured Convertible Notes (the “Unsecured

Notes”) with a group of accredited investors.

The Unsecured Notes had a maturity date of May 9, 2022 with a single payment and

interest at 5 % (See Note 9).

The Unsecured Note holders had the ability to convert their notes to common stock of the Company at the

lesser of $ 5.00 per share or the price per share offered by the Company if the Company has a future capital raise.

At December 31, 2021

$ 2,918,000 of the Unsecured Notes have been converted into 583,600 shares of common stock of the Company.

The fair value of the warrants

of $ 589,194 was allocated to Paid in Capital.

12 – Stock Based Compensation

April 3, 2019, the Board of Directors of the Company adopted the Empire Petroleum Corporation 2019 Stock Option Plan (the “2019

Stock Option Plan”).

The total number of shares of common stock that may be issued pursuant to stock options under the 2019 Stock

Option Plan was 2,500,000 .

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

Pritchard and Mr.

Morrisett each, options to purchase 625,000

shares of common stock of the Company at an exercise price of $ 1.32 per share.

The options vested in three installments with

vesting immediately and 156,250 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:

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 in 2019.

In 2021 and 2020, the

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

to Additional Paid in Capital.

All of the options were vested as of December 31, 2021.

As a result of the adoption of a 2021 plan, the

Board of Directors and management have determined that there would be no further issuances from the 2019 Stock Option Plan.

Pritchard exercised options to purchase 235,000 shares of common stock.

As of December 31, 2022, there were 1,943,200 unexercised

options under the Stock Option Plan.

August 27, 2021, the Board of Directors of the Company adopted the Company’s 2021 Stock and Incentive Compensation Plan (the “2021

Incentive Plan”) which was subsequently approved by stockholders of the Company.

no dividend yield, expected annual volatility of 180 %, risk free interest rate of .14 % and an expected

useful life of 21 months.

The fair value of the warrants of $ 2,350,407 was allocated to Additional Paid-in-Capital.

The performance criteria

triggering early maturity occurred in April 2022, accelerating the warrant maturity date to July 2022.

During the nine months ended September

30, 2022, 1,782,347 shares of common stock were issued as a result of warrant exercises.

As of July 10, 2022, all such warrants were fully

In September and October 2022, a former director of

the Company exercised warrants granted in November 2017 to purchase 475,000 shares of common stock for $ 1.00 per share.

In connection with the purchase of XTO assets, the

Company issued a Senior Secured Convertible Note due December 31, 2021, in the aggregate principal amount $ 16,250,000 (the “Secured

Convertible Note”) to Energy Evolution, a related party.

As partial consideration for the issuance of the Secured Convertible Note,

Empire issued to Energy Evolution (i) 375,000 shares of common stock along with (ii) a warrant certificate to purchase up to 750,000 shares

of common stock at an exercise price of $4.00 per Warrant Share until May 14, 2022.

Under the warrant certificate, the exercise price

is subject to customary downward adjustments.

The value allocated to the

common stock, conversion

feature, and warrants was $ 10,125,177 .

In September 2021, the Company and Energy Evolution entered into a Loan Modification Agreement

(the “Amended Secured Notes”).

Under the Amended Secured Notes, among other terms the Company issued a warrant certificate

to purchase up to 500,000 shares of common stock at an exercise price of $5.00 per Warrant Share until December 31, 2023.

In July 2023,

Energy Evolution exercised its remaining warrants for 500,000 shares of common stock for $5.00 per share.

The Company received $2.5 million

related to this transaction.

See Note 15 for information regarding Bridge Loans

issued from two related parties that were subsequently converted to our common shares and additional shares purchased with cash by those

same parties.

Note 10 – Stock Based Compensation

On April 3, 2019, the Board of Directors of the Company adopted the Empire

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

The total number of shares of common stock that

could be issued pursuant to the 2021 Incentive Pla n is 750,000 .

grants were made in 2021 that amounted to 187,500 options.

Two of the grants were for a cumulative amount of 62,500 options and vested

immediately upon grant in November 2021.

Valuation was calculated using the Black-Scholes option valuation model with the following assumptions:

no dividend yield, expected annual volatility of 229 %, risk free interest rate of 0.81 %, and term of 3 years.

The third grant was for

62,500 options and the valuation used the following inputs:

no dividend yield, expected annual volatility of 277%, risk free interest

rate of 0.99%, and term of 4 years.

The fourth grant was for 62,500 options and inputs used to value the grant included no dividend yield,

expected annual volatility of 335%, risk free interest rate of 1.16%, and a term of 5 years.

February 28, 2022, the Board of Directors of the Company granted a combination of stock options and restricted stock units under the

2021 Incentive Plan.

Stock options totaling 249,000

shares were granted to employees and members of management with

vesting terms and expirations of August

2025 and 2026 .

Stock option values were calculated

using a Black-Scholes option valuation with the following assumptions:

no dividend yield, expected annual volatility of 56 %

as calculated by utilizing the stock price from the date of the XTO acquisition through grant date, risk free interest rate of 1.62 %

for the 2025 and 2026 options, respectively, and expected useful lives of 2.75

years for the 2025 and 2026 options, respectively.

value of the stock option grants was approximately $ 1.2

The value of these options is recognized to expense on

a straight-line method from date of grant through expiration date.

On August 26, 2022, the stockholders of the Company approved

the Company’s 2022 Stock and Incentive Compensation Plan (the “2022 Incentive Plan”) which reserves 750,000

shares of the Company’s common stock for issuance thereunder.

As a result of such approval, no further awards will be made

under the 2021 Incentive Plan.

The 2022 Stock and Incentive Plan authorizes the grant of nonqualified stock options, incentive stock

options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other stock-based

awards (restricted stock awards, restricted stock units, performance shares and performance units are collectively referred to as restricted

stock units for purposes of this footnote.

may be issued pursuant to stock options under the 2019 Stock Option Plan was 2,500,000 .

On August 27, 2021, the Board of Directors of

the Company adopted the Company’s 2021 Stock and Incentive Compensation Plan (the “2021 Incentive Plan”) which was

subsequently approved by stockholders of the Company.

As a result of such approval, no further awards will be made under the 2019 Incentive

The total number of shares of common stock that could be issued pursuant to the 2021 Incentive Plan is 750,000 .

On August 26, 2022,

the stockholders of the Company approved the Company’s 2022 Stock and Incentive Compensation Plan (the “2022 Incentive Plan”)

which reserves 750,000 shares of the Company’s common stock for issuance thereunder.

As a result of such approval, no further awards

will be made under the 2021 Incentive Plan.

On June 9, 2023, the stockholders of the Company approved the Company’s 2023 Stock

and Incentive Compensation Plan (the “2023 Incentive Plan”) which reserves 700,000 shares of the Company’s common stock

for issuance thereunder.

As a result of such approval, no further awards will be made under the 2022 Incentive Plan.

The 2023 Incentive

Plan authorizes the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted

stock units, performance shares, performance units and other stock-based awards (restricted stock awards, restricted stock units, performance

shares and performance units are collectively referred to as restricted stock units for purposes of this note).

At December 31, 2023,

436,935 shares of our common stock were available for future grants.

Each RSU represents the contingent right to receive one share of common stock.

The holders of outstanding RSUs do not

receive dividends or have voting rights prior to vesting and settlement.

The Company determines the fair value of granted RSUs based

on the market price of the common stock on the date of the grant.

Compensation expense for granted RSUs is recognized on a straight-line

basis over the vesting and is net of forfeitures, as incurred.

Stock-based compensation is included in General and Administrative expense

in the Consolidated Statements of Operations and is recorded with a corresponding increase in Additional Paid-in Capital within

the Consolidated Balance Sheets.

were granted on February 28, 2022, May 22, 2022, October 11, 2022 and December 30, 2022 with 12- and 13-month service periods.

value assigned to the RSUs based on grant date price approximated $ 3,151,000 .

For the year ended December 31, 2022, approximately $ 1,227,000

of compensation expense related to RSUs was recognized, leaving approximately $ 1,971,000 of unrecognized compensation expense which will

be recognized on a straight-line basis depending on the service period of each grant.

following summary reflects nonvested restricted stock unit activity and related information for the year ended December 31, 2022.

Stock-based compensation expense

for restricted stock units and stock options is included in General and Administrative expense in the Consolidated Statements of Operations

and is recorded with a corresponding increase in Additional Paid-in Capital within the Consolidated Balance Sheets.

Restricted Stock Units

Each RSU represents the contingent right to receive

one share of common stock.

The holders of outstanding RSUs do not receive dividends or have voting rights prior to vesting and settlement.

The Company determines the fair value of granted RSUs based on the market price of the common stock on the date of the grant.

expense for granted RSUs is recognized on a straight-line basis over the vesting and is net of forfeitures, as incurred.

RSUs are generally granted with

12-month, 13-month, or 3 year service periods.

Total value assigned to the RSUs granted in 2023 based on grant date price approximated

$ 1,837,000 .

For the year ended December 31, 2023 and 2022, approximately $ 2,271,000 and $ 1,227,000 of compensation expense related to

RSUs was recognized.

At December 31, 2023, approximately $ 1,230,000 of unrecognized compensation expense remained and will be recognized

on a straight-line basis depending on the service period of each grant.

The following summary reflects nonvested restricted

stock unit activity and related information:

Weighted Average

2 unchanged sentences

Outstanding, December 31, 2022

Outstanding, December 31, 2023

(a) Shares are valued at the grant-date market price.

1 unchanged sentence

Total fair value of restricted stock units vested during the year

following summary reflects stock option activity and related information:

Stock Options

Each stock option award provides the opportunity in

the future to purchase Empire common shares at the market price of our common stock on the date the award is granted (the strike price).

The options generally become exercisable in equal amounts over a three-year vesting period or over one-year for options awarded to the

Board of Directors of the Company.

Stock options have no financial statement effect on the date they are granted but rather are reflected

over time through recording stock-based compensation expense.

The stock-based compensation expense is based on the estimated fair value

of the awards expected to vest, and that amount is amortized as compensation expense on a straight-line basis over the respective vesting

period and is net of forfeitures, as incurred.

The estimated fair value of an option is calculated

using a Black-Scholes option valuation model with the following assumption inputs:

dividend yield, expected annual volatility, risk free

interest rate and an expected life of the option.

The following table summarizes the weighted average fair value and assumptions for 2023

Weighted average grant-date fair value of stock options

Stock Options Valuation Assumptions:

Risk-free interest rate

Dividend yield

Expected volatility

Expected option life (in years)

Other pricing model inputs:

Weighted average grant-date market prices of Empire stock (strike price)

For the year ended December 31,

2023 and 2022, approximately $ 874,000 and $ 1,458,000 of compensation expense related to stock options was recognized.

At December 31,

2023, approximately $ 1,546,000 of unrecognized compensation expense remained and will be recognized on a straight-line basis depending

on the service period of each grant.

The following summary reflects stock option activity

and related information:

Weighted Average

3 unchanged sentences

Outstanding, December 31, 2023

following table summarizes information about stock options outstanding as of December 31, 2022:

The following table summarizes information about stock

options outstanding as of December 31, 2023:

Weighted Average

3 unchanged sentences

$ 1.32 to $ 12.36

current and deferred income tax provision for the years ended December 31, 2022 and 2021 were comprised for the following:

Income tax provision (benefit)

December 31, 2022, the Company had net operating loss carryforwards of approximately $ 18.6 million for federal income tax purposes available

to offset future taxable income, as limited by the applicable provisions, which expire at various dates beginning in 2022 for the federal

net operating loss carryforwards.

In accordance with Section 382 of the Internal Revenue Code, the usage of the Company's net operating

loss carryforwards may be limited in the event of a change in ownership.

A full Section 382 analysis has not been prepared and NOLs could

be subject to limitation under Section 382.

tax assets and liabilities are the result of temporary differences between the financial statement carrying values and the tax basis

of assets and liabilities.

The Company’s net tax position as of December 31, 2022 and 2021 is as follows:

Note 12 – Income Taxes

The current and deferred income tax provision for

the years ended December 31, 2023 and 2022 were comprised of the following:

$ ( 132,192 )

Income tax provision

$ ( 132,192 )

event that an entity has an “ownership change” (as defined in Section 382 of the Internal Revenue Code of 1986, as

amended ( “IRC”)), an entity’s federal net operating loss carryforwards (“NOLs”) generated prior

to an ownership change would be subject to annual limitations, which could defer or eliminate the Company’s ability to utilize

these tax losses against future taxable income.

Generally, an “ownership change” occurs if one or more stockholders,

each of whom owns 5% or more in value of a corporation’s stock, increase their aggregate percentage ownership by more than

50% over the lowest percentage of stock owned by those stockholders at any time during the preceding three-year period.

Section 382 analysis was prepared in 2023 and it was determined that our NOLs were subject to limitations under IRC Section 382.

The Company's ability to use NOLs and other tax attributes to reduce taxable income and income taxes could be materially impacted

by a future IRC 382 ownership change.

Future transactions involving the Company's stock including those outside of the Company's

control could cause an IRC Section 382 ownership change resulting in a limitation on tax attributes currently not limited and

a more restrictive limitation on tax attributes currently subject to the previous IRC 382 limitation.

31, 2023, the Company had approximately $ 24.3 million of federal NOLs generated in prior years available to offset against future

taxable income, net of NOLs expected to expire unused due to IRC Section 382 limitations.

Of the $24.3 million NOLs, approximately

$ 23 million relate to periods after 2017 and have an indefinite life.

Additionally, $ 1.3 million will begin to expire between

2023-2037 if not used.

Approximately, $4.7 million of the NOLs were limited as of December 31, 2023 due to previous ownership

Deferred tax assets and liabilities are the result

of temporary differences between the financial statement carrying values and the tax basis of assets and liabilities.

The Company’s

net tax position as of December 31, 2023 and 2022 is as follows:

Deferred tax assets:

Loss carry-forwards

Oil and gas Properties

Right of use assets

5 unchanged sentences

( 7,327,620 )

( 5,552,159 )

Other property and equipment

Lease liabilities

Total deferred tax liabilities

( 7,581,624 )

Net deferred tax asset (liability) before valuation allowance

( 5,824,866 )

Net deferred tax asset before valuation allowance

Valuation allowance

2 unchanged sentences

Net deferred taxes

Reconciliations

of the tax provision computed at the statutory federal rate to the Company’s total income tax benefit for the years ended

December 31, 2022 and 2021 are as follows:

Utilization of the Company’s loss carryforwards

is dependent on realizing taxable income.

The Company’s recorded valuation allowances of $ 8.7 million and $ 7.4 million as of December

31, 2023 and 2022, respectively, are due to the uncertainty related to its ability to utilize some of its deferred income tax assets,

primarily consisting of net operating loss carryforwards prior to expiration or the limitation under Section 382 as discussed above.

Reconciliations of the tax provision (benefit) computed

at the statutory federal rate to the Company’s total income tax benefit for the years ended December 31, 2023 and 2022 are as follows:

Provision (benefit) at statutory rate

4 unchanged sentences

( 2,135,704 )

NOLs Expected to Expire Unused Due to Section 382 Limitation

Valuation Allowance

Income tax provision

of the Company’s loss carryforwards is dependent on realizing taxable income.

The Company recorded valuation allowances of

$ 7.4 million and $ 7.0 million as of December 31, 2022 and 2021, respectively, due to the uncertainty related to its ability to

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

expiration or limitation under Section 382 as discussed above.

Company has evaluated all tax positions for which the statute of limitations remains open and believes that the material positions taken

would likely than not would be sustained by examination.

Therefore, at December 31, 2022, the Company has not established any reserves

for, nor recorded any unrecognized benefits related to uncertain tax positions.

14 – Earnings (loss) per share

Earnings per Share (“EPS”) gives effect to all dilutive potential common shares outstanding during the period.

The computation

of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on losses.

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

At December 31,

2021, the Company had 2,440,700 options outstanding that were not included in the calculation of earnings per share for the periods then

15 – Related Party Transactions

Energy Evolution Master Fund, Ltd.

(“Energy Evolution”) is a related party of the Company as it beneficially owns approximately

of the Company’s outstanding shares of common stock as of December 31, 2022.

Additionally, a board member of Energy Evolution was

appointed to the Company’s board in October 2021.

This board member separately beneficially owns approximately 17 %

of the Company’s outstanding shares of common stock as of December 31, 2022.

The board member also is a majority owner of PIE.

In October 2021 another Energy Evolution member was appointed to the Company’s board of directors.

March 2021, the majority owner of PIE, through the exercise of warrants, became a significant shareholder of the Company’s outstanding

shares of stock (See Note 11).

The Company has a joint development agreement with PIE to perform recompletion or workover on specified

mutually agreed upon wells (See Note 5).

As of December 31, 2022, the Company has incurred obligations of approximately $ 1.1 million

as a part of the joint development agreement (See Note 9).

16 – Commitments and Contingencies

time to time, the Company is subject to various legal proceedings arising in the ordinary course of business, including proceedings for

which the Company may not have insurance coverage.

While many of these matters involve inherent uncertainty, as of the date hereof, the

Company does not currently believe that any such legal proceedings will have a material adverse effect on the Company’s business,

financial position, results of operations or liquidity.

Company is subject to extensive federal, state, and local environmental laws and regulations.

These laws, among other things, regulate

the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal

or release of petroleum or chemical substances at various sites.

Management believes no materially significant liabilities

of this nature existed as of the balance sheet date.

Company was subject to a sales tax audit related to its Texas entity and received the initial assessment notice in April 2022.

has accrued $ 528,000 for this contingency as of December 31, 2022.

An agreement in principle was reached in 2022 and a final settlement

agreement signed in 2023.

The Company will remit a payment of $ 528,000 in the first quarter of 2023.

Concentrations

Company’s producing properties and oil and natural gas reserves are all located in Louisiana, New Mexico, North Dakota, Montana,

Because of the concentration, the Company is exposed to the impact of regional supply and demand factors, processing or transportation

capacity constraints, severe weather events, water shortages, and government regulations specific to the geographic area.

the year ended December 31, 2022, the Company sold 68 %

of its oil, natural gas, and NGL to four customers.

For the year ended December 31, 2021, the Company sold 63 %

of its oil and natural gas production to four customers.

The loss of these purchasers could result in a temporary interruption in sales

or a lower price for production.

The Company’s

cash balances may at times exceed FDIC insurance limits.

The Company maintains cash accounts at reputable financial institutions.

18 – Subsequent Events

March 16, 2023, Thomas W.

Pritchard resigned as Chief Executive Officer and a director of the Company to pursue other opportunities.

Income tax provision (benefit)

The Company has evaluated all tax positions for which

the statute of limitations remains open and believes that the material positions taken would more likely than not be sustained by examination.

Therefore, at December 31, 2023, the Company has not established any reserves for, nor recorded any unrecognized benefits related to uncertain

tax positions.

The Company’s only taxing jurisdiction

is the United States (federal and state).

The Company’s tax years 2020 to present remain open for federal examination.

Additionally,

tax years 2003 through 2019 remain subject to examination for the purpose of determining the amount of federal NOL and other carryforwards.

The number of years open for state tax audits varies, depending on the state, but is generally from three to five years.

Note 13 – Earnings (Loss) per Share

Diluted Earnings per Share (“EPS”) gives

effect to all dilutive potential common shares outstanding during the period.

The computation of Diluted EPS does not assume conversion,

exercise or contingent exercise of securities that would have an anti-dilutive effect on losses.

As a result, if there is a loss from

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

In addition, approximately 348,000 options were excluded

due to the option exercise price exceeding the weighted-average market price of our common shares.

The following table summarizes the calculation of

income (loss) per share.

Net Income (Loss)

$ ( 12,469,605 )

Basic Weighted-Average Shares

Effect of Dilutive Securities:

Restricted Stock Units and Stock Options (a)

Diluted Weighted-Average Shares

Income (Loss) per Common Share

(a) At December 31, 2023 the Company had approximately 1,361,200 RSUs and options that were excluded from the calculation of net income (loss) per share as their inclusion would be antidilutive due to a net loss for the period.

Note 14 – Executive Separations

On March 16, 2023, Thomas W.

Pritchard resigned as

Chief Executive Officer and a director of the Company to pursue other opportunities.

Although not required under Mr.

Pritchard’s Employment Agreement with the Company, in recognition of Mr.

Pritchard’s past

service to the Company, the Company will pay Mr.

Pritchard severance benefits in the amount of approximately $ 360,000 , as set forth in

Section 4.2 of his Employment Agreement, in one lump sum payment within 30 days after March 23, 2023, rather than in monthly installments.

The Company is also extending the period under which Mr.

Pritchard has the right to exercise his outstanding vested non-qualified stock

options from three months after the date of his termination of employment to September 16, 2024.

Employment Agreement with the Company, in recognition of Mr.

Pritchard’s past service to the Company, the Company will pay Mr.

severance benefits in the amount of approximately $ 360,000 , as set forth in Section 4.2 of his Employment Agreement, in one lump sum payment

within 30 days after March 23, 2023, rather than in monthly installments.

This was accrued as of March 31, 2023, and payment was made

in April 2023.

The Company also extended the period under which Mr.

Pritchard has the right to exercise his outstanding vested non-qualified

stock options from three months after the date of his termination of employment to September 16, 2024.

In addition, Mr.

Pritchard has surrendered to the Company 340,234 shares

and options as satisfaction for the $ 2.1 million receivable that primarily resulted from incorrect withholdings associated with an April

2022 option exercise by Mr.

The Company also has a $ 2.1 million liability recorded at December 31, 2022, related to withholding

payables that were remitted in the first-quarter 2023.

March 17, 2023, the Board of Directors appointed Michael R.

Morrisett to the position of Chief Executive Officer, in addition to his

current duties of President and Principal Financial Officer of the Company.

Morrisett is not receiving any additional compensation

has surrendered to the Company 340,234 RSUs and options as satisfaction for the $ 2.1 million receivable that primarily

resulted from incorrect withholdings associated with an April 2022 option exercise by Mr.

The Company also had a $ 2.1 million

liability recorded at December 31, 2022, related to withholding payables that were remitted in 2023.

On March 17, 2023, the Board of Directors of the Company

appointed Michael R.

Morrisett to the position of Chief Executive Officer.

Morrisett did not receive any additional compensation

for assuming the role of Chief Executive Officer.

PETROLEUM CORPORATION

Information of Oil and Natural Gas Producing Activities (Unaudited)

31, 2022 and 2021

following reserve estimates present the Company's estimate of the proven natural gas and oil reserves and net cash flow of the Company’s

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.

and natural gas reserves are located in Louisiana, New Mexico, North Dakota, Montana and Texas.

Costs Incurred

Related to Oil and Gas Activities

Costs incurred

includes capitalized costs of properties, equipment, and lease facilities for oil and natural gas producing activities.

In July 2023, the Company’s Chief Operating

Officer separated from the Company and will receive severance of $ 145,000 over six months.

Additionally, certain vested options were

forfeited resulting in the reversal of $ 576,000 of previously recorded stock-based compensation.

Note 15 – Related Party Transactions

Energy Evolution is a related party of the Company

as it beneficially owns approximately 26.6 % of the Company’s outstanding shares of common stock as of December 31, 2023.

Additionally,

a board member of Energy Evolution was appointed to the Company’s Board of Directors in October 2021.

This board member separately

beneficially owns approximately 19.3 % of the Company’s outstanding shares of common stock as of December 31, 2023.

This board member

also is a majority owner of PIE.

In October 2021 another Energy Evolution member was appointed to the Company’s Board of Directors.

The Company has a JDA with PIE to perform recompletion

or workover on specified mutually agreed upon wells (See Note 4).

As of December 31, 2023, the Company has incurred obligations of approximately

$ 1.1 million as a part of the JDA.

On November 29, 2023, the Company entered into

a Securities Purchase Agreement with Phil Mulacek, which agreement was amended on December 1, 2023, pursuant to which Mr.

Mulacek purchased

from the Company (a) 609,013 shares of common stock of the Company for an aggregate purchase price of $5,000,000 (or $8.21 per share)

in cash and (b) 631,832 shares of common stock of the Company for an aggregate purchase price of $5,054,658 (or $8.00 per share) which

was paid through cancellation and extinguishment of the outstanding principal amount and all accrued interest thereon under that certain

Amended and Restated Promissory Note due December 31, 2024, in the original aggregate principal amount of $5,000,000 issued by Empire

North Dakota to Mr.

On November 29, 2023, the Company entered into

a Securities Purchase Agreement with Energy Evolution pursuant to which Energy Evolution purchased 1,256,832 shares of common stock of

the Company for an aggregate purchase price of $10,054,658 (or $8.00 per share), of which $2,000,000 was advanced in cash to the Company

on November 22, 2023, $3,000,000 was paid in cash to the Company and $5,054,658 was paid through cancellation and extinguishment

of the outstanding principal amount and all accrued interest thereon under that certain Amended and Restated Promissory Note due December

31, 2024, in the original aggregate principal amount of $5,000,000 issued by Empire North Dakota to Energy Evolution.

Accounts receivable on the Consolidated Balance Sheet

includes approximately $ 895,000 receivable from Energy Evolution.

Accrued Expenses includes approximately $ 452,000 of revenue payable

to Energy Evolution.

Note 16 – Commitments and

Contingencies

From time to time, the Company is subject to

various legal proceedings arising in the ordinary course of business, including proceedings for which the Company may not have insurance

While many of these matters involve inherent uncertainty, as of the date hereof, the Company does not currently believe that

any such legal proceedings will have a material adverse effect on the Company’s business, financial position, results of operations

or liquidity.

The Company is subject to extensive federal,

state, and local environmental laws and regulations.

These laws, among other things, regulate the discharge of materials into the environment

and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances

at various sites.

Management believes no materially significant liabilities of this nature existed as of the balance sheet date.

Note 17 – Concentrations

The Company’s producing properties and oil and

natural gas reserves are all located in Louisiana, New Mexico, North Dakota, Montana, and Texas.

Because of the concentration, the Company

is exposed to the impact of regional supply and demand factors, processing or transportation capacity constraints, severe weather events,

water shortages, and government regulations specific to the geographic area.

For the year ended December 31, 2023, the Company sold 70 % of its oil,

natural gas, and NGL to four customers.

For the year ended December 31, 2022, the Company sold 68 % of its oil and natural gas production

to four customers.

The loss of these purchasers could result in a temporary interruption in sales or a lower price for production.

The Company’s cash balances may at times exceed FDIC insurance limits.

The Company maintains cash accounts at reputable financial institutions.

Note 18 – Subsequent Events

Promissory Note

On February 16, 2024, the Company issued a Promissory Note in the

aggregate principal amount of $5,000,000 (the "Note”) to Energy Evolution.

Energy Evolution has advanced the Company $5,000,000

under the Note.

The proceeds of the Note will be used by the Company to fund, in part, its ongoing oil and gas drilling program and for

working capital purposes.

The Note matures on February 15, 2026 (the "Maturity Date”)

and accrues interest at the rate of 7 % per annum.

After the Maturity Date, any principal balance of the Note remaining unpaid accrues

interest at the rate of 9% per annum.

At the option of Energy Evolution, interest payments will be paid either in cash or in shares of

common stock of the Company on each of the following dates (or if any such date is not a business day, the next following business day)

(each an "Interest Payment Date”), except upon the occurrence of an Event of Default, in which case interest will accrue and

be paid in cash on demand:

(i) March 31, 2024;

(ii) June 30, 2024;

(iii) September 30, 2024;

(iv) December 31, 2024;

(v) March 31, 2025;

(vi) June 30, 2025;

(vii) September 30, 2025;

(viii) December 31, 2025;

and (ix) the Maturity

All or any portion of the outstanding principal amount of the Note may be converted into shares of common stock of the Company at

a conversion price of $6.25 per share (the "Conversion Price”), at the option of Energy Evolution, at any time and from time

If the full principal amount of the Note is drawn and converted into shares of common stock of the Company, 800,000 shares would

be issued (without giving effect to any interest that may be converted).

Accrued interest on the principal amount converted will be due

on the applicable date of conversion in cash or, at the option of Energy Evolution, by issuance of shares of common stock of the Company

in the manner set forth in the Note (where the date of conversion is the relevant Interest Payment Date”).

The Conversion Price

is subject to customary adjustments.

The Note may be prepaid at any time or from time to time without the consent of Energy Evolution

and without penalty or premium, provided that the Company provides Energy Evolution with at least five business days prior written notice,

each principal payment is made in cash and all accrued interest is paid in cash, or at the option of Energy Evolution, by issuance of

shares of common stock of the Company in the manner set forth in the Note (where the Interest Payment Date is the date of prepayment).

Rights Offering

In March 2024, the

Company announced that it has commenced a subscription rights offering (“Rights Offering”) pursuant to which it intends

to raise gross proceeds of up to approximately $25.0 million.

The Company has distributed at no charge to holders of its common

stock, as of the close of business on March 7, 2024 (the record date for

the Rights Offering), one subscription right for each share of Common Stock held.

Each subscription right initially entitled the holder to

purchase 0.161 shares of Common Stock at a subscription price of $6.05 per share per one whole share of Common

On March 28, 2024, the Company announced a reduction in the subscription price to $5.00 which

results in gross proceeds to the Company of up to approximately $20.66 million.

The subscription rights are

non-transferable, and will not be listed for trading on any stock exchange or market.

In addition, holders of subscription rights

who fully exercise their subscription rights are entitled to over-subscribe for additional shares of Common Stock, subject to

The Rights Offering is expected to expire at 5:00 p.m., Eastern Time, on April 10, 2024, subject to extension or earlier

Phil Mulacek and Energy Evolution, both related parties

of the Company (see Note 15) and our largest stockholders, have indicated that they intend to participate in the Rights Offering and fully

subscribe to the shares of Common Stock corresponding to their subscription rights.

They have each also indicated that they intend to

fully exercise their over-subscription rights to purchase their pro rata share of the underlying securities related to the Rights Offering

that remain unsubscribed at the Expiration Date.

EMPIRE PETROLEUM CORPORATION

Supplemental Information of Oil and Natural Gas

Producing Activities (Unaudited)

December 31, 2023 and 2022

The following reserve estimates present the Company's

estimate of the proven natural gas and oil reserves and net cash flow of the Company’s 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, New

Mexico, North Dakota, Montana and Texas.

Costs Incurred Related to Oil and Gas Activities

Costs incurred includes capitalized costs of properties, equipment, and

lease facilities for oil and natural gas producing activities.

Years Ended December 31,

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.

The information below

excludes proved undeveloped reserves.

Below are the net quantities of net proved developed reserves of the Company’s properties:

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

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 information below excludes proved undeveloped reserves.

Below are the net quantities

of net proved developed reserves of the Company’s properties:

Balance, December 31, 2021

Acquisition of Reserves

Divestiture of Reserves

Balance, December 31, 2022

1 unchanged sentence

Balance, December 31, 2023

The Company did not present NGLs separately in 2021.

acquisitions primarily relate to the XTO acquisition.

The 2022 acquisitions relate to small acquisition in our Rockies and New Mexico

Measure of Discounted 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.

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 yearend costs and assuming continuation of existing economic conditions.

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:

The 2023 acquisitions primarily relate to additional working interests

in certain of the Company’s New Mexico properties (See Note 3).

The 2022 acquisitions relate to small acquisition in our Rockies

and New Mexico regions.

The revisions in 2023 are primarily related to decreases in prices.

Standardized Measure of Discounted Future Net Cash Flows Relating

to 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

yearend 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

Future cash inflows

16 unchanged sentences

$ 147,667,413

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 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:

Natural gas (MMBtu)

includes revenue received from NGL sales as well as natural gas.

in the Standardized Measure of Discounted Future Net Cash Flows at 10% per annum are as follows:

Changes in the Standardized Measure of Discounted

Future Net Cash Flows at 10% per annum are as follows:

Beginning of year

$ 147,667,413

Net change in prices and production costs

(71,619,375 )

Net change in future development costs

1 unchanged sentence

(21,418,327 )

(10,587,395 )

Acquisition of reserves

Divestiture of reserves

Revisions of previous quantity estimates

Net change in taxes

(55,329,684 )

Net change in taxes

(32,133,473 )

2 unchanged sentences

$ 147,667,413

of economically recoverable natural gas and oil reserves and of future net revenues are based upon a number of variable factors and assumptions,

all of which are to some degree subjective and may vary considerably from actual results.

Therefore, actual production, revenues,

development and operating expenditures may not occur as estimated.

The reserve data are estimates only, are subject to many uncertainties,

and are based on data gained from production histories and on assumptions as to geologic formations and other matters.

Actual quantities

of natural gas and oil may differ materially from the amounts estimated.

Estimates of economically recoverable natural

gas and oil reserves and of future net revenues are based upon a number of variable factors and assumptions, all of which are to some

degree subjective and may vary considerably from actual results.

Therefore, actual production, revenues, development and operating

expenditures may not occur as estimated.

The reserve data are estimates only, are subject to many uncertainties, and are based on

data gained from production histories and on assumptions as to geologic formations and other matters.

Actual quantities of natural

gas and oil may differ materially from the amounts estimated.

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