What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-31 compared with 2021-03-31 · 360 added, 598 removed, 9 unchanged (99% of the section changed)

1 unchanged sentence

Market Information

The Company's Common Stock is traded on the

OTCQB under the symbol "EMPR".

The following table sets forth the high and

low bid information for the Company's common stock during the time periods indicated.

Year ended December 31, 2019:

Year ended December 31, 2020:

reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.

December 31, 2020, there were approximately 270 stockholders of record of the Company's Common Stock.

Company has never paid cash dividends on its Common Stock.

The Company intends to retain future earnings for use in its business

and, therefore, does not anticipate paying cash dividends on its Common Stock in the foreseeable future.

SELECTED FINANCIAL DATA.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Note Regarding Forward-Looking Statements.

statements, other than statements of historical fact, contained in this report are forward-looking statements.

Forward-looking

statements generally are accompanied by words such as "anticipate,"

"believe,"

"estimate,"

"expect,"

"may,"

"might,"

"potential,"

"project"

or similar statements.

the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given

that such expectations will prove to be correct.

Factors that could cause results to differ materially from the results discussed

in such forward-looking statements include:

· the need for additional

· the costs expected to

be incurred in exploration and development,

· unforeseen engineering,

mechanical or technological difficulties in drilling wells,

· uncertainty of exploration

· operating hazards,

· competition from other

natural resource companies,

· the fluctuations of

prices for oil and gas,

· the effects of governmental

and environmental regulation, and

· general economic conditions

and other risks described in the Company's filings with the Securities and Exchange Commission (the "SEC").

Information on these and other risk factors

are discussed under "Factors That May Affect Future Results"

Accordingly, the actual results of operations in

the future may vary widely from the forward-looking statements included herein, and all forward-looking statements in this Form

10-K are expressly qualified in their entirety by the cautionary statements in this paragraph.

Readers are cautioned not to place undue reliance

on these forward-looking statements, which reflect management's analysis, judgment, belief and expectations only as of the date

The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances

that arise after the date hereof.

Factors That May Affect Future Results

The Company has limited financial resources.

For the past four years, the Company has financed

its operations significantly from sales of its equity securities and convertible notes issued to individual investors.

is no assurance that the Company will be able to continue to finance its operations through the sale of its equity securities,

or through loans or advances by third parties.

For the past three years, in addition to sales of equity securities and convertible

notes, the Company has utilized bank note payable financing to fund property acquisitions and operations.

There is no assurance

that the Company will be able to obtain debt financing in the future.

In 2020 and 2019, the Company acquired

certain oil and gas properties.

However, the Company reported losses of $(16,835,433) and $(6,654,602) for the years ended December

31, 2020 and 2019, respectively.

The Company also had an accumulated deficit of $(40,618,381) as of December 31, 2020.

can provide no assurance that it will be profitable in the future and, if the Company does not become profitable, it may have to

suspend its operations.

As a result of the foregoing, the audit report of the Company's independent registered public accounting

firm relating to the Company's financial statements has been modified because of a going concern uncertainty.

If the Company

is able to raise the funds necessary to continue its operations, its future performance will be dependent on the success of its

The failure of drilling activities to achieve sufficient quantities of economically attractive reserves and production

would have a material adverse effect on the Company's liquidity, operations and financial results.

Our management concluded that, as of December

31, 2020, our reporting and disclosure controls and procedures were not effective at a reasonable assurance level, and if we fail

to remediate material weakness identified by our management, we may not be able to accurately report our financial results, and

current and potential stockholders may lose confidence in our financial reporting.

Our management concluded that,

as of December 31, 2020, our reporting and disclosure controls and procedures were not effective at a reasonable assurance level.

Notwithstanding

the assessment that our internal control over financial reporting was not effective and that there is a material weakness as identified

by our management, we believe that our consolidated financial statements contained in this Annual Report on Form 10-K fairly present our

consolidated financial position, results of operations and cash flows for the periods covered thereby in all material respects.

to remediate material weakness identified by our management could adversely impact our ability to report our financial results on a timely

and accurate basis.

If our financial statements are not accurate, investors may not have a complete understanding of our operations.

if our financial statements are not filed on a timely basis as required by the SEC, we could face severe consequences from the SEC.

such event, there could result a material adverse effect on our business.

Ineffective internal controls could also cause investors to

lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

A substantial or extended decline in oil and natural

gas prices may adversely affect our business, financial condition or results of operations and our ability to meet our capital

expenditure obligations and financial commitments.

The price we receive for our oil and natural gas production

heavily influences our revenue, profitability, access to capital and future rate of growth.

Oil and natural gas are commodities

and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand.

Historically,

the markets for oil and natural gas have been volatile.

These markets will likely continue to be volatile in the future.

we receive for our production, and the levels of our production, depend on numerous factors beyond our control.

These factors include,

but are not limited to, the following:

● changes in global supply and demand

for oil and natural gas, which could be negatively affected by concerns about the ongoing impact of COVID-19;

● the price and quantity of imports of

foreign oil and natural gas;

● political conditions, including embargoes,

in or affecting other oil-producing activity;

● the level of global oil and natural

gas exploration and production activity;

● the level of global oil and natural

gas inventories;

● weather conditions;

● technological advances affecting energy

● the price and availability of alternative

Lower oil and natural gas prices may not only decrease

our revenues on a per unit basis but also may reduce the amount of oil and natural gas that we can produce economically.

prices also negatively impact the value of our proved reserves.

The recent volatility in the price of oil has forced the Company,

as well as other operators, to re-evaluate our current capital expenditure budget and make changes accordingly that we believe

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

A substantial or extended decline in oil or natural gas prices may

materially and adversely affect our future business, financial condition, results of operations, liquidity or ability to finance

planned capital expenditures.

The Company could be adversely affected

by increased costs of service providers utilized by the Company.

In accordance with customary industry practice,

the Company has relied and will rely on independent third-party service providers to provide most of the services necessary to

The industry has experienced significant price fluctuations for these services during the last year and this trend is

expected to continue into the future.

These cost uncertainties could, in the future, significantly increase the Company's

production costs.

Our producing properties and proved reserves

are concentrated in North Dakota, Montana, Texas and Louisiana, making us vulnerable to risks associated with operating in limited

major geographic areas.

Our producing properties are geographically

concentrated in North Dakota, Montana, Texas and Louisiana.

At December 31, 2020, all of our total estimated proved reserves were

attributable to properties located in these areas.

As a result of this concentration, we are exposed to the impact of regional

supply and demand factors, delays or interruptions of production from wells in this area caused by governmental regulation, processing

or transportation capacity constraints, market limitations, severe weather events, water shortages or other drought related conditions

or interruption of the processing or transportation of oil or natural gas.

This concentration of assets exposes us to

additional risks, such as changes in field-wide rules and regulations that could cause us to permanently or temporarily shut-in

all of our wells within a field.

The Standardized Measure and PV-10 of our

estimated reserves may not be accurate estimates of the current fair value of our estimated proved oil and natural gas reserves.

Standardized Measure is a reporting convention

that provides a common basis for comparing oil and natural gas companies subject to the rules and regulations of the SEC.

(Generally Accepted Accounting Principles) financial measure, PV-10, is a similar reporting convention that we have disclosed in

Both measures require the use of operating and development costs prevailing as of the date of computation.

Consequently,

they will not reflect the prices ordinarily received or that will be received for oil and natural gas production because of varying

market conditions, nor may it reflect the actual costs that will be required to produce or develop the oil and natural gas properties.

Accordingly, estimates included herein of future net cash flows may be materially different from the future net cash flows that

are ultimately received.

In addition, the 10 percent discount factor, which is required by the rules and regulations of the SEC

to be used in calculating discounted future net cash flows for reporting purposes, may not be the most appropriate discount factor

based on interest rates in effect from time to time and risks associated with our company or the oil and natural gas industry in

Therefore, Standardized Measure and PV-10

included in this report should not be construed as accurate estimates of the current fair value of our proved reserves.

estimates and our computation of future net cash flows at December 31, 2020 are based on SEC pricing of (i) $ 33.35 per Bbl oil

price and (ii) $ 1.41 per MMBtu natural gas price.

Climate change legislation, regulations

restricting emissions of “greenhouse gases”

(GHG’s) or legal or other action taken by public or private entities

related to climate change could result in increased operating costs and reduced demand for the oil and natural gas that we produce.

In response to findings that emissions of

carbon dioxide, methane and other greenhouse gases present an endangerment to public health and the environment, the EPA has issued

regulations to restrict emissions of GHGs under existing provisions of the CAA.

These regulations include limits on tailpipe emissions

from motor vehicles and preconstruction and operating permit requirements for certain large stationary sources.

The EPA has also

adopted rules requiring the reporting of GHG emissions from specified large GHG emission sources in the United States, as well

as certain onshore oil

and natural gas production facilities, on

an annual basis, including GHG emissions resulting from the completion and workover operations of hydraulically fractured oil wells.

Recent federal regulatory action with respect to climate change has focused on methane emissions.

For example, in June 2016, the

EPA finalized new air emission controls for emissions of methane from certain equipment and processes in the oil and natural gas

source category, including production, processing, transmission and storage activities.

The final rule package includes first-time

standards to address emissions of methane from equipment and processes across the source category, including hydraulically fractured

oil and natural gas well completions, and also imposes leak detection and repair requirements on operators.

However, in June 2017,

the EPA proposed a two year stay of fugitive emissions monitoring requirements, pneumatic pump standards, and closed vent system

certification requirements in the 2016 rule while it reconsiders these aspects of the rule.

Additionally, on September 11, 2018,

the EPA proposed targeted improvements to the 2016 rule, including amendments to the rule’s fugitive emissions monitoring

requirements, and expects to “significantly reduce”

the regulatory burden of the rule in doing so.

The BLM finalized

similar rules in November 2016 that limit methane emissions from new and existing oil and natural gas operations on federal lands

through limitations on the venting and flaring of gas, as well as enhanced leak detection and repair requirements but then finalized

a revised rule in 2018 which scaled back the waste prevention requirements of the 2016 rule.

Environmental groups have sued in

federal district court to challenge the legality of aspects of the revised rule, and the outcome of this litigation is currently

These methane emission rules have the potential to increase our compliance costs.

While Congress has from time to time considered

legislation to reduce emissions of GHGs, there has not been significant activity in the form of adopted legislation to reduce emissions

of GHGs in recent years.

In the absence of Congressional action, many states have established rules aimed at reducing GHG emissions,

including GHG cap and trade programs.

Most of these cap and trade programs work by requiring major sources of emissions, such as

electric power plants, or major producers of fuels, such as refineries and natural gas processing plants, to acquire and surrender

emission allowances.

The number of allowances available for purchase is reduced each year in an effort to achieve the overall GHG

emission reduction goal.

In the future, the United States may also choose to adhere to international agreements targeting GHG reductions.

The adoption of legislation or regulatory

programs to reduce emissions of GHGs could require us to incur increased operating costs, such as costs to purchase and operate

emissions control systems, to acquire emissions allowances or to comply with new regulatory or reporting requirements.

legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil and natural

gas we produce.

Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our

business, financial condition and results of operations.

Reduced demand for the oil and natural gas that we produce could also

have the effect of lowering the value of our reserves.

It should also be noted that some scientists have concluded that increasing

concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such

as increased frequency and severity of storms, droughts, and floods and other climatic events.

If any such effects were to occur,

they could have an adverse effect on our financial condition and results of operations.

In addition, there have also been efforts

in recent years to influence the investment community, including investment advisors and certain sovereign wealth, pension and

endowment funds promoting divestment of fossil fuel equities and pressuring lenders to limit funding to companies engaged in the

extraction of fossil fuel reserves.

Such environmental activism and initiatives aimed at limiting climate change and reducing air

pollution could interfere with our business activities, operations and ability to access capital.

Finally, increasing attention

to the risks of climate change has resulted in an increased possibility of lawsuits or investigations brought by public and private

entities against oil and natural gas companies in connection with their GHG emissions.

Should we be targeted by any such litigation

or investigations, we may incur liability, which, to the extent that societal pressures or political or other factors are involved,

could be imposed without regard to the causation of or contribution to the asserted damage, or to other mitigating factors.

ultimate impact of GHG emissions-related agreements, legislation and measures on our company’s financial performance is highly

uncertain because the Company is unable to predict with certainty, for a multitude of individual jurisdictions, the outcome of

political decision-making processes and the variables and tradeoffs that inevitably occur in connection with such processes.

The Company's insurance policies may not

adequately protect the Company against certain unforeseen risks.

In accordance with customary industry practice,

the Company maintains insurance against some, but not all, of the risks described herein.

There can be no assurance that any insurance

will be adequate to cover the Company's losses or liabilities.

The Company cannot predict the continued availability of insurance,

or its availability at premium levels that justify its purchase.

The Company is subject to various environmental

risks, and governmental regulation relating to environmental matters.

The Company is subject to a variety of federal,

state and local governmental laws and regulations related to the storage, use, discharge and disposal of toxic, volatile or otherwise

hazardous materials.

These regulations subject the Company to increased operating costs and potential liability associated with

the use and disposal of hazardous materials.

Although these laws and regulations have not had a material adverse effect on the

Company's financial condition or results of operations, there can be no assurance that the Company will not be required to make

material expenditures in the future.

Moreover, the Company anticipates that such laws and regulations will become increasingly

stringent in the future, which could lead to material costs for environmental compliance and remediation by the Company.

by the Company to obtain required permits for, control the use of, or adequately restrict the discharge of hazardous substances

under present or future regulations could subject the Company to substantial liability or could cause its operations to be suspended.

Such liability or suspension of operations could have a material adverse effect on the Company's business, financial condition

and results of operations.

The Company's activities are subject to extensive

governmental regulation.

Oil and gas operations are subject to various federal, state and local governmental regulations that may

be changed from time to time in response to economic or political conditions.

From time to time, regulatory agencies have imposed

price controls and limitations on production in order to conserve supplies of oil and gas.

In addition, the production, handling,

storage, transportation and disposal of oil and gas, by-products thereof and other substances and materials produced or used in

connection with oil and gas operations are subject to regulation under federal, state and local laws and regulations primarily

relating to protection of human health and the environment.

To date, expenditures related to complying with these laws and for

remediation of existing environmental contamination have not been significant in relation to the operations of the Company.

can be no assurance that the trend of more expansive and stricter environmental legislation and regulations will not continue.

Estimates of proved reserves and future net cash flows are not

The actual quantities of our proved reserves and our future net cash flows may prove to be lower than estimated.

Numerous uncertainties exist in

estimating quantities of proved reserves and future net cash flows therefrom.

Our estimates of proved reserves and related

future net cash flows are based on various assumptions, which may ultimately prove to be inaccurate.

Petroleum engineering is

a subjective process of estimating accumulations of oil and natural gas that cannot be measured in an exact manner.

of economically recoverable oil and natural gas reserves and of future net cash flows depend upon a number of variable

factors and assumptions, including the following:

- historical production from the area compared with production from

other producing areas;

- the assumed effects of regulations by governmental agencies;

- the quality, quantity and interpretation of available relevant data;

- assumptions concerning future commodity prices;

- assumptions concerning future operating costs, severance and ad valorem taxes, development costs

and workover and remedial costs.

Because all reserve estimates are to some degree subjective, each

of the following items, or other items not identified below, may differ materially from those assumed in estimating reserves:

- the quantities of oil and natural gas that are ultimately recovered;

- the production and operating costs incurred;

- the amount and timing of future development expenditures;

- future commodity prices.

Furthermore, different reserve engineers may

make different estimates of reserves and cash flows based on the same data.

Our actual production, revenues and expenditures with

respect to reserves will likely be different from estimates and the differences may be material.

As required by the SEC, the estimated discounted

future net cash flows from proved reserves are based on the average previous twelve months first-of-month prices preceding the

date of the estimate and costs as of the date of the estimate, while actual future prices and costs may be materially higher or

Actual future net cash flows also will be affected by factors such as:

- the amount and timing of actual production;

- levels of future capital spending;

- increases or decreases in the supply of or demand for oil and natural

- changes in governmental regulations or taxation.

Accordingly, estimates included herein of

future net cash flows may be materially different from the future net cash flows that are ultimately received.

Therefore, the estimates

of discounted future net cash flows in this report should not be construed as accurate estimates of the current market value of

our proved reserves.

Our business requires substantial capital

expenditures.

We may be unable to obtain needed capital or financing on satisfactory terms or at all, which could lead to a decline

in our oil and natural gas reserves.

The oil and natural gas industry is capital

We make and expect to continue to make substantial capital expenditures for the acquisition, exploration and development

of oil and natural gas reserves.

At December 31, 2020, we had approximately $8.1 million of debt outstanding under our Bank Credit

Facility, and we had approximately $.4 million of unused commitments under our Credit Facility.

Expenditures for acquisition, exploration

and development of oil and natural gas properties are the primary use of our capital resources.

We intend to finance our future

capital expenditures partially through borrowings under our Credit Facility.

However, our cash flow from operations and access

to capital are subject to a number of variables, including:

- the volume of oil and natural gas we are able to produce from existing

- our ability to transport our oil and natural gas to market;

- the prices at which our commodities are sold;

- the costs of producing oil and natural gas;

- global and domestic demand for oil and natural gas

- global credit and securities markets;

- the ability and willingness of lenders and investors to provide

capital and the cost of the capital;

- our ability to acquire, locate and produce new reserves;

- the impact of potential changes in our credit ratings;

- our proved reserves.

We may not generate expected cash flows and

obtain the capital necessary to sustain our operations at current or anticipated levels.

A decline in cash flow from operations

or our financing needs may require us to revise our capital program or alter or increase our capitalization substantially through

the issuance of debt or equity securities.

The issuance of additional equity securities could have a dilutive effect on the value

of our common stock.

Additional borrowings under our Credit Facility or the issuance of additional debt securities will require

that a greater portion of our cash flow from operations be used for the payment of interest and principal on our debt, thereby

reducing our ability to use cash flow to fund working capital, capital expenditures and acquisitions.

Additional financing also

may not be available on acceptable terms or at all.

In the event additional capital resources are unavailable, we may curtail drilling,

development and other activities or be forced to sell some of our assets on an untimely or unfavorable basis.

The failure to obtain additional financing

could result in a curtailment of our operations relating to the development of our undeveloped acreage or the curtailment of acquisitions

that may be favorable to us, which in turn could lead to a decline in our oil and natural gas reserves, and could adversely affect

our production, revenues and results of operations.

We have substantial indebtedness and may

incur substantially more debt.

Higher levels of indebtedness make us more vulnerable to economic downturn and adverse developments

in our business

We had approximately $9.0 million of outstanding

aggregate principal indebtedness at December 31, 2020.

At December 31, 2020, commitments from our bank group (as amended) were

$8.5 million, of which approximately $.4 million was unused commitments.

We continue to review our existing indebtedness, and we

may seek to repay, refinance, repurchase, redeem, exchange or otherwise terminate our indebtedness.

If we do seek to refinance

our existing indebtedness, there can be no guarantee that we would be able to execute the refinancing on favorable terms or at

As a result of our indebtedness, we use a

portion of our cash flow to pay interest, which reduces the amount we have available to fund our operations and other business

activities and could limit our flexibility in planning for or reacting to changes in our business and the industry in which we

Our indebtedness under our Credit Facility is at a variable interest rate, and so a rise in interest rates will generate

greater interest expense.

We may incur substantially more debt in the

Our Credit Facility contains restrictions on our incurrence of additional indebtedness.

Any increase in our level of indebtedness

could have adverse effects on our financial condition and results of operations, including:

- imposing additional cash requirements on us in order to support

interest payments, which reduces the amount we have available to fund our operations and other business activities;

- increasing the risk that we may default on our debt obligations;

- increasing our vulnerability to adverse changes in general economic

and industry conditions, economic downturns and adverse developments in our business;

- limiting our ability to sell assets, engage in strategic transactions

or obtain additional financing for working capital, capital expenditures, general corporate and other purposes;

- limiting our flexibility in planning for or reacting to changes

in our business and the industry in which we operate;

- increasing our exposure to a rise in interest rates, which will

generate greater interest expense.

Our ability to meet our debt obligations and

to reduce our level of indebtedness depends on our future performance, which is affected by general economic conditions and financial,

business and other factors, many of which are out of our control.

If we are unable to comply with the covenants

in our debt agreements, there could be a default under the terms of the agreements, which could result in an acceleration of payment

of funds that we have borrowed.

Our ability to meet our debt obligations and

other expenses will depend on our future performance, which will be affected by financial, business, economic, regulatory and other

factors, many of which we are unable to control.

If our cash flow is not sufficient to service our debt, we may be required to

refinance debt, sell assets or sell additional equity on terms that we may not find attractive if it may be done at all.

are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal,

premium, if any, and interest, if any, on our indebtedness, or if we otherwise fail to comply with the various covenants, including

financial and operating covenants, in the agreements governing our indebtedness, we could be in default under the terms of the

agreements governing such indebtedness.

In the event of such default:

- the holders of such indebtedness could elect to declare all the

funds borrowed thereunder to be due and payable, together with accrued and unpaid interest;

- the lenders could elect to terminate their commitments thereunder

and cease making further loans;

- we could be forced into bankruptcy or liquidation.

If our operating performance declines, we

may need to obtain waivers under our Senior Revolver Loan Agreement to avoid being in default.

If we breach our covenants and cannot

obtain a waiver from the required lenders, we would be in default and the lenders could exercise their rights, as described above,

and we could be forced into bankruptcy or liquidation.

Our ability to use our existing net operating

loss carryforwards or other tax attributes could be limited.

At December 31, 2020, we had approximately

$16.2 million of federal NOL carryforwards available to offset against future taxable income.

Utilization of any NOL depends on

many factors, including our ability to generate future taxable income, which cannot be assured.

The Company is subject to intense competition.

The Company operates in a highly competitive

environment and competes with major and independent oil and gas companies for the acquisition of desirable oil and gas properties,

as well as for the equipment and labor required to develop and operate such properties.

Many of these competitors have financial

and other resources substantially greater than those of the Company.

The Company currently depends on the Company's

President and Chief Executive Officer.

The Company is dependent on the experience,

abilities and continued services of its current President, Michael R.

Morrisett, and its Chief Executive Officer, Thomas Pritchard,

who currently serve the Company without formal compensation plans.

The loss or reduction of services of Mr.

Morrisett and/or

Pritchard could have a material adverse effect on the Company.

There has been a limited public trading

market for the Company's common stock, and there can be no assurance that an active trading market will be sustained.

There can be no assurance that the Common

Stock will trade at or above any particular price in the public market, if at all.

The trading price of the Common Stock could

be subject to significant fluctuations in response to variations in quarterly operating results or even mild expressions of interest

on a given day.

Accordingly, the Common Stock could experience substantial price changes in short periods of time.

Company is performing according to its plan and there is no legitimate company-specific financial basis for this volatility, it

must still be expected that substantial percentage price swings will occur in the Company's Common Stock for the foreseeable future.

The Company does not expect to declare

or pay any dividends in the foreseeable future.

The Company has not declared or paid any dividends

on its Common Stock.

The Company currently intends to retain future earnings to fund the development and growth of its business,

to repay indebtedness and for general corporate purposes, and therefore, does not anticipate paying any cash dividends on its Common

Stock in the foreseeable future.

The Company’s operations may be subject

to the COVID pandemic.

In 2020, there was a global outbreak of COVID-19 which has resulted

in changes in global supply and demand of certain mineral and energy products.

Decreased transportation, manufacturing and general economic

activity levels prompted by COVID-19 and related governmental and societal actions reduced the demand for oil-based products such

as gasoline, jet fuel and other refined products, which prompted purchasers of oil and condensate to reduce purchase levels.

situations led to production greater than storage capacity at some points during the year.

To the extent that this decreased demand

for our commodities continues and our margins are not at acceptable levels or storage for our production is not available, we may

have to reduce production from or completely shut in portions of our currently producing wells.

The inability to sell our production

or the decision to potentially reduce or shut in our production could materially and adversely affect our operating results and

our ability to comply with the financial covenants under our Credit Facility.

There is uncertainty around the continuing extent and duration

of the disruption.

The degree to which the COVID-19 pandemic or any other public health crisis adversely impacts our results will

depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration

and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, its impact on the economy and market

conditions, and how quickly and to what extent normal economic and operating conditions can resume.

Therefore, while we expect

this matter will likely continue to disrupt our operations, the degree of the adverse financial impact cannot be reasonably estimated

at this time.

The Company's common stock may be subject

to secondary trading restrictions related to penny stocks.

Certain transactions involving the purchase

or sale of Common Stock of the Company may be affected by a SEC rule for "penny stocks"

that imposes additional sales

practice burdens and requirements upon broker-dealers that purchase or sell such securities.

For transactions covered by this penny

stock rule, broker-dealers must make certain disclosures to purchasers prior to purchase or sale.

Consequently, the penny stock

rule may impede the ability of broker-dealers to purchase or sell the Company's securities for their customers and the ability

of persons now owning or subsequently acquiring the Company's securities to resell such securities.

RESULTS OF OPERATIONS

GENERAL TO ALL PERIODS

The Company's Common Stock is traded on the NYSE

American under the symbol "EP".

At both December 31, 2021, and March 31, 2022, there

were approximately 900 stockholders of record of the Company's Common Stock.

The Company has never paid cash dividends on its

Common Stock.

The Company intends to retain future earnings for use in its business and, therefore, does not anticipate paying cash dividends

on its Common Stock in the foreseeable future.

Future payment of dividends will depend upon, but not be limited to, the Company’s

financial condition, funds available for operations, the amount of anticipated capital and other expenditures, future business prospects

and any restrictions imposed by present or future financing arrangements.

Issuer Repurchase of Equity Securities

No private or open market repurchases of Common

Stock were made by the Company for the year ended December 31, 2021.

Unregistered Sales of Equity Securities

No such sales that have not been previously reported

on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read together

with the consolidated financial statements and notes to consolidated financial statements, which are included in this Annual Report on

Form 10-K in Item 8, Financial Statements and Supplementary Data and the information set forth in Part I, Item 1A – Risk Factors.

The Company's primary business is the exploration

and development of oil and gas interests.

The Company has incurred significant losses from operations, and there is no assurance

that it will achieve profitability or obtain funds necessary to finance its future operations.

For all periods presented, the Company's effective

tax rate is 0%.

The Company has generated net operating losses since inception, which would normally reflect a tax benefit in the

statement of operations and a deferred asset on the balance sheet.

However, because of the current uncertainty as to the Company's

ability to achieve profitability, a valuation reserve has been established that offsets the amount of any tax benefit available

for each period presented in the statements of operations.

TWELVE MONTH PERIOD ENDED DECEMBER 31, 2020,

COMPARED TO TWELVE MONTH PERIOD ENDED DECEMBER 31, 2019

For the twelve months ended December 31, 2020,

and 2019, revenues from oil and natural gas sales were $5,988,963 and $5,825,446 respectively, an increase of $163,517 (3%).

The Company purchased additional properties in Texas and Montana in 2020 and had production from North Dakota properties for the

full year in 2020.

The additional production was offset by declines in oil and natural gas prices.

The Company has incurred significant losses from operations, and there is no assurance that

it will achieve profitability or obtain funds necessary to finance its future operations.

The Company seeks to increase shareholder value

by growing reserves, production, revenues, and cash flow from operating activities by executing its mission to use highly-skilled personnel

to thoughtfully and expertly spend capital to realize reserves on producing properties.

Management places emphasis on operating cash flow

in managing its business, as operating cash flow considers the cash expenses incurred during the period and excludes non-cash expenditures

not related directly to the Company’s operations.

Business Strategy

The Company’s business strategy is to obtain

long-term growth in reserves and cash flow on a cost-effective basis utilizing experienced personnel throughout the Company.

regularly evaluates potential acquisitions of properties that would enhance current core areas of operation.

2021 XTO Acquisition

On 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.

information about the transaction, refer to the financial statements and footnotes incorporated by reference herein.

Results of Operations

The following table reflects our summary operating

Because of normal production declines, increased or decreased drilling activity and the effects of acquisitions, the historical

information presented below should not be interpreted as indicative of future results.

Years Ended December 31,

Natural gas revenues

Total revenues from product sales

Lease operating expense

Production and ad valorem taxes

Depreciation, depletion, amortization and accretion

Impairment expense

General and administrative expense (excluding stock-based compensation)

Stock-based compensation

Cash-based interest expense

Non-cash interest expense

Operating Loss

(17,583,006 )

Operating expenses, production taxes, depreciation, depletion, amortization and accretion increased $890,536 (11%) to $9,265,733 cumulatively for the twelve months ended December 31, 2020 from

$8,375,197 for the same period in 2019.

The increase was due to the acquisition of additional producing oil and natural gas properties

in 2020 and full year production from the North Dakota properties in 2020.

Realized and unrealized gain on derivatives increased $1,705,288

(5,069%) to $1,738,871 for the twelve months ended December 31, 2020 from $33,643 in the same period in 2019 due to decrease in

oil prices since the agreements were entered into.

Impairment of oil and natural gas properties increased to $8,671,303

for the twelve months ended December 31, 2020 compared to $-0- for the same period in 2019.

The increase was due to the decrease

in oil and natural gas prices at least partially attributable to COVID-19 in 2020 and management’s decision to focus on producing

properties rather than drill undeveloped properties.

General and administrative expenses increased

by $3,738,922 (103%) to $7,373,809 for the twelve months ended December 31, 2020, from $3,634,887 for the same period in 2019.

The increase was primarily due to stock options issued to management in 2020, travel and professional fees related to the acquisition

of oil and natural gas properties and capital raises in 2020, and higher administrative expenses due to the growth in properties

Interest expense was $521,187 and $503,607

for the twelve months ended December 31, 2020 and 2019, respectively, an increase of $17,580 (3%).

The increase in interest

expense resulted primarily from the full year of interest on debt issued to acquire oil and natural gas properties in 2019.

For the reasons discussed above, net loss

increased $10,180,831 (153%) to $(16,835,433) for the twelve months ended December 31, 2020 from $(6,654,602) for the twelve months

ended December 31, 2019.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2020, the Company had $157,695

cash on hand and approximately $400,000 available on its bank line of credit.

(18,614,962 )

(16,835,433 )

Revenues increased as a result of more volumes produced

from legacy assets due to successful execution of the Company’s mission to cost-effectively produce more volumes paired with the

XTO acquisition’s revenues and volumes brought online from efforts to make the field produce more volumes combined with favorable

pricing environments in the Company’s core operating areas.

Approximately $11.2 million in oil revenues, $1.7 million in gas revenue,

and $3.1 million in NGL revenue was attributed to production acquired with the XTO acquisition.

Lease Operating Expense and Taxes

Lease operating expense rose with the XTO acquisition

and in response to the Company’s execution of its mission to increase production in its legacy assets.

The Company has worked to

cost-effectively increase production throughout its asset base utilizing experienced personnel and third-party service providers.

and ad valorem taxes have increased as a direct result of the XTO acquisition’s properties and increased volumes produced and sold.

The acquisition of New Mexico assets accounted for approximately $5.0 million of the increase in lease operating expenses and $1.3 million

of the increase in production and ad valorem taxes.

Depreciation, Depletion, Amortization and Accretion

and Impairment

There were no indicators of impairment on the Company’s

properties at year-end, primarily due to favorable futures pricing at December 31, 2021.

Due to favorable pricing realized throughout

2021 and the addition of PDP reserves in New Mexico, DD&A expense decline year-over-year from approximately 13% in 2020 to 6% in

General and Administrative Expense

The Company’s implemented a new Board of

Directors compensation plan in 2021 resulting in board compensation paid of approximately $475,000 in 2021, exclusive of stock-based

compensation received.

Fees paid for legal and outsourced services increased by approximately $425,000 as a direct result of

acquisition-related work, SEC filings related to the Company’s operations, and the Company’s successful uplisting from

the OTCQB to be freely traded on the NYSE American.

Outsourced accounting fees increased by approximately $375,000 as additional

work was required to integrate the New Mexico assets into the existing accounting system as well as additional resources required to

perform routine accounting services on the new assets.

Also included in general and administrative expenses is $989,000 in non-cash

right to buy costs related to the unsecured notes payable discussed in the Related Party Transactions note below.

The Company utilizes stock-based compensation to

compensate members of management and retain talented personnel.

The Company anticipates stock-based compensation to continue to be utilized

in 2022 and beyond to attract and retain talented personnel.

Interest Expense

Cash-based interest expense declined with a

corresponding decrease in the Company’s Credit Facility.

The Company has minimal interest-bearing vehicle and equipment notes payable.

Non-cash interest expense is fully attributable

to the related party notes payable as described in Related Party Transactions below.

As of December 31, 2021, the Company had approximately

$3.6 million cash on hand and approximately $300,000 available on its Credit Facility.

The Company expects to incur costs related

to future oil and natural gas acquisitions for the foreseeable future.

It is expected that management will attempt to raise

additional capital and seek additional debt financing for future investment opportunities and working capital requirements.

In 2020, the Company generated $(2,090,060)

of cash from oil and natural gas activities after deducting cash operating costs and production taxes.

A significant amount of

the general and administrative cash costs of $4,298,553, after deducting the noncash option and warrant expenses, were for locating

and closing acquisitions.

It is expected that management will use a combination of

cash flows from operations as well as seeking additional debt and equity funding for these acquisitions and to fund ongoing operations.

Working Capital

Working capital (presented below) was $1.1 million

as of December 31, 2021 compared to a deficit of $3.9 million as of December 31, 2020, representing a change of approximately $5 million.

This change is primarily a result of the acquisition of producing properties in New Mexico, which served to increase volumes sold for

the year ended December 31, 2021, as well as the stronger pricing environment in 2021.

Current Assets

Current Liabilities

Working Capital (Deficit)

Year Ended December 31,

Cash flows provided by (used in):

Operating activities

$ (1,723,257 )

Investing activities

(24,716,878 )

(25,573,168 )

Financing activities

Cash Flows from Operating Activities

The Company incurred approximately $18.0 million

in non-cash expenses related to the convertible notes payable (See Related Party Transactions for more information) that contributed

to a net loss for financial reporting purposes.

Ongoing operations from core assets contributed to cash flows provided by operating activities

for the year ended December 31, 2021.

Cash Flows from Investing Activities

Cash flows from investing activities primarily increased

due to the XTO acquisition that occurred in May 2021 and established the Company in the state of New Mexico, the Company’s largest

single acquisition to date that resulted in cash outflows of approximately $17.9 million.

The Company also participated in the drilling

of four non-operated wells through its Empire North Dakota subsidiary that had a cash outflow of approximately $2.5 million for the year

ended December 31, 2021.

As part of the XTO acquisition, the Company entered into an agreement to create a sinking fund for future plugging

liabilities, paying approximately $4.8 million into that fund for the year.

Flows from Financing Activities

The XTO acquisition and operations executing the

Company’s mission were funded by proceeds from debt issued of approximately $20.5 million as well as proceeds from stock and warrant

issuances of approximately $11.3 million.

The Company has quarterly payment obligations related to its bank debt of $300,000 per quarter

in addition to minimal monthly payments for notes payable arising from the purchase of vehicles and equipment.

Related Party Transactions

The issuance of the Secured Note and an Unsecured Note to Energy

Evolution as described below are related party transactions for accounting purposes, but are not required to be disclosed under Item 13

of this Form 10-K.

Senior Secured Convertible Note

On May 14, 2021, 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”).

The Secured Note was collateralized by all assets of Empire New

Mexico prior to its conversion to common stock in December 2021.

Due to the terms of the Secured Note, the transaction had the following

non-cash elements for the year ended December 31, 2021:

debt discount of $2.2 million

million in derivative liability considerations, including the valuation of the redemption

interest expense of $7.4 million

On September 29, 2021 the parties entered into

a Loan Modification Agreement 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 $5 per share and

amended certain terms of the remaining $5,700,000 of principal under the Secured Note.

On December 30, 2021, the Secured Note was

amended to allow full conversion of the remaining balance and Energy Evolution converted 100% of the remaining principal ($5.7 million)

and accrued interest ($55,000) outstanding at that date into 1,154,085 shares of the Company’s common stock.

Unsecured Convertible Notes

In 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 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).

At December 31,

2021 $2,918,000 of the Unsecured Notes had been converted into 583,600 shares of common stock of the Company and 5,594 shares of common

stock have been issued as payment for accrued interest on the Unsecured Note.

The remaining Unsecured Notes in the amount of $325,000

were repaid in September 2021.

Amortization of these notes was recorded as a non-cash interest expense

of approximately $545,000.

The 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

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

The discount associated with these transactions

is amortized under the interest method and resulted in interest expense of $544,824 for the year ended December 31, 2021.

As 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 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 160,900 shares at an exercise price of $1.00 and $1.32 respectively.

The Company determined that offering the “right to buy” shares resulted in a non-cash 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.

The expense is included in General and Administrative

in the Consolidated Statement of Operations.

Effective Tax Rate

For all periods presented, the Company's effective

tax rate is 0%.

The Company has generated net operating losses since inception, which would normally reflect a tax benefit in the statement

of operations and a deferred asset on the balance sheet.

However, because of the current uncertainty as to the Company's ability to achieve

profitability, a valuation reserve has been established that offsets the amount of any tax benefit available for each period presented

in the statements of operations.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance

sheet arrangements.

The Company does not have any off-balance sheet

arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in

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

that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of

the financial statements and the reported amounts of revenues and expenses during the reporting period.

Because estimates and assumptions

require significant judgment, future actual results could differ from those estimates and could have a significant impact on the

Company's results of operations, financial position and cash flows.

The Company re-evaluates its estimates and assumptions at least

on a quarterly basis.

The following policies may involve a higher degree of estimation and assumption:

Successful efforts accounting - Under the

successful efforts method of accounting, the Company capitalizes all costs related to property acquisitions and successful exploratory

wells, all development costs and the costs of support equipment and facilities.

Certain costs of exploratory wells are capitalized

pending determination that proved reserves have been found.

Such determination is dependent upon the results of planned additional

wells and the cost of required capital expenditures to produce the reserves found.

All costs related to unsuccessful exploratory

wells are expensed when such wells are determined to be non-productive and other exploration costs, including geological and geophysical

costs, are expensed as incurred.

The application of the successful efforts method of accounting requires management's judgment

to determine the proper designation of wells as either developmental or exploratory, which will ultimately determine the proper

accounting treatment of the costs incurred.

The results from a drilling operation can take considerable time to analyze, and the

determination that commercial reserves have been discovered requires both judgment and application of industry experience.

may be completed that are assumed to be productive and actually deliver oil and gas in quantities insufficient to be economic,

which may result in the abandonment of the wells at a later date.

The evaluation of oil and gas leasehold acquisition costs requires

management's judgment to estimate the fair value of exploratory costs related to drilling activity in a given area.

Impairment of unproved oil and gas properties

- 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 economic to develop some of these unproved properties.

Asset retirement obligations - the Company

accounts for future abandonment costs of wells and related facilities in accordance with the provisions of Financial Accounting

Standards Board ("FASB") Accounting for Asset Retirement Obligations.

Under this method of accounting, the accrual

for future dismantlement and abandonment costs is based on estimates of these costs for each of the Company's properties based

upon the type of production structure, reservoir characteristics, depth of the reservoir, market demand for equipment, currently

available procedures and consultations with construction and engineering consultants.

Because these costs typically extend many

years into the future, estimating these future costs is difficult and requires management to make estimates and judgments that

are subject to future revisions based upon numerous factors, including changing technology and the political and regulatory environment

and, estimates as to the proper discount rate to use and timing of abandonment.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements of the Company are

set forth on pages 30 through 55 at the end of this Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

The preparation of financial statements in conformity

with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements

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

Because estimates and assumptions require significant

judgment, future actual results could differ from those estimates and could have a significant impact on the Company's results of operations,

financial position and cash flows.

The Company re-evaluates its estimates and assumptions at least on a quarterly basis.

The following

policies may involve a higher degree of estimation and assumption:

Oil and Natural Gas Properties

The Company uses the successful efforts method of

accounting for oil and natural gas operations.

Under this method, costs to acquire oil and natural gas properties, drill successful exploratory

wells, drill and equip development wells, and install production facilities are capitalized.

Exploration costs, including unsuccessful

exploratory wells, geological and geophysical are charged to operations as incurred.

Depreciation, depletion and amortization of the

leasehold and development costs that are capitalized for proved oil and natural gas properties are computed using the units-of-production

method, at the field level, based on total proved reserves and proved developed reserves, respectively, as estimated by independent petroleum

Oil and natural gas properties are periodically assessed for impairment whenever changes in facts and circumstances indicate

a possible significant deterioration in the future cashflows expected to be generated by an asset group, but at least annually.

assets are grouped for impairment purposes at the lowest level for which there are identifiable cash flows that are largely independent

of the cash flows of other groups of assets, generally on a state-by-state basis.

All of our properties are located within the continental

United States.

All costs related to unsuccessful exploratory wells

are expensed when such wells are determined to be non-productive and other exploration costs, including geological and geophysical costs,

are expensed as incurred.

The application of the successful efforts method of accounting requires management's judgment to determine

the proper designation of wells as either developmental or exploratory, which will ultimately determine the proper accounting treatment

of the costs incurred.

The results from a drilling operation can take considerable time to analyze, and the determination that commercial

reserves have been discovered requires both judgment and application of industry experience.

Wells may be completed that are assumed

to be productive and actually deliver oil and gas in quantities insufficient to be economic, which may result in the abandonment of the

wells at a later date.

The evaluation of oil and gas leasehold acquisition costs requires management's judgment to estimate the fair

value of exploratory costs related to drilling activity in a given area.

Impairment of Oil and Gas Properties

Management’s assessment of the results of

commodity price outlooks, planned future sales or expiration of all or a portion of such leaseholds impact the amount and timing of impairment

An impairment expense could result if oil and gas prices decline in the future as it may not be economic to develop some

of these unproved properties.

Oil and Natural Gas Reserve Quantities

Reserve quantities and the related estimates of future

net cash flows affect periodic calculations of depletion, impairment of oil and natural gas properties, and asset retirement obligations.

Proved oil and natural gas reserves are the estimated quantities of oil, natural gas and NGLs which geological and engineering data demonstrate

with reasonable certainty to be recoverable in future periods from known reservoirs under existing economic and operating conditions.

Reserve quantities and future cash flows included in this report are prepared in accordance with guidelines established by the SEC and

the Financial Accounting Standards Board (“FASB”).

The accuracy of reserve estimates is a function of:

quality and quantity of available data;

interpretation of that data;

accuracy of various mandated economic assumptions;

judgments of the persons preparing the estimates.

Proved reserves information included in

this report is based on estimates prepared by independent petroleum engineers, Cawley Gillespie &Associates.

The independent

petroleum engineers evaluated 100% of the Company’s estimated proved producing reserve quantities and their related future net

cash flows as of December 31, 2021.

Estimates prepared by others may be higher or lower than these estimates.

Because these

estimates depend on many assumptions, all of which may differ substantially from actual results, reserve estimates may be different

from the quantities of oil and natural gas that are ultimately recovered.

Management may make revisions to reserve estimates

throughout the year as additional information becomes available.

Management makes changes to depletion rates, impairment

calculations, and asset retirement obligations in the same period that changes to reserve estimates are made.

Depreciation, Depletion and Amortization

The rate used to calculate and record DD&A is

dependent upon estimates of total proved developed reserves, which incorporate various assumptions and future projections.

If the estimates

of total proved or proved developed reserves decline, DD&A expense increases.

Such a decline in reserves may result from lower commodity

prices, which may make it uneconomic to operate wells due to higher cost fields.

Management is unable to predict changes in reserve quantity

estimates as such quantities are dependent on the success of executing the Company’s mission as well as future economic conditions.

Asset Retirement Obligation

Asset retirement obligations (“AROs”)

consist primarily of estimated future costs associated with the plugging and abandonment of oil and natural gas wells, removal of equipment

and facilities from leased acreage, and land restoration in accordance with applicable local, state and federal laws.

The discounted

fair value of an ARO liability is required to be recognized in the period in which it is incurred, with the associated asset retirement

cost capitalized as part of the carrying cost of the oil and natural gas asset.

The recognition of an ARO requires that management make

numerous assumptions regarding such factors as the estimated probabilities, amounts and timing of settlements;

the credit-adjusted risk-free

rate to be used;

inflation rates;

and future advances in technology.

In periods subsequent to the initial measurement of the ARO, we

must recognize period-to-period changes in the liability resulting from the passage of time and revisions to either the timing or the

amount of the original estimate of undiscounted cash flows.

Increases in the ARO liability due to passage of time impact net income as

accretion expense.

The related capitalized cost, including revisions thereto, is charged to expense through DD&A over the life of

Stock-Based Compensation

The Company recognized stock-based compensation expense

associated with restricted stock units, which consists of time-based awards.

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 Company’s

common stock, $0.001 par value per share on the grant date.

The Company classifies grants to be settled in shares as equity awards.

Income Taxes and Uncertain Tax Positions

The Company’s tax provision is based upon the

tax laws and rates in effect in the applicable jurisdiction in which operations are conducted and income is earned.

As part of the process

of preparing the consolidated financial statements, management is required to estimate the income tax provision.

This process involves

estimating the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items,

such as depreciation, amortization and certain accrued liabilities for tax and accounting purposes.

The effective tax rate for financial

statement purposes is 0% for all periods presented.

Deferred tax expense or benefit represents the change

in the balance of deferred tax assets or liabilities.

Valuation allowances are established to reduce deferred tax assets when it is more

likely than not that some portion or all of the deferred tax assets will not be realized.

At December 31, 2021 and 2020, a valuation

allowance for deferred tax assets was recorded.

Management applies the accounting standards related

to uncertainty in income taxes.

This accounting guidance clarifies the accounting for uncertainties in income taxes by prescribing a

minimum recognition threshold that a tax position is required to meet before being recognized in the consolidated financial statements.

It requires that we recognize in the consolidated financial statements the financial effects of a tax position, if that position is more

likely than not of being sustained upon examination, including resolution of any appeals or litigation processes, based upon the technical

merits of the position.

It also provides guidance on measurement, classification, interest, penalties and disclosure.

The Company has

no uncertain tax positions at either December 31, 2021 or December 31, 2020.

Revenue Recognition

The Company predominantly derives its revenue from

the sale of produced oil, natural gas and NGLs.

Revenues are recognized when the recognition criteria of FASB ASC Topic 606, Revenue

from Contracts with Customers , are met, which generally occurs at the point in which title passes to the customers.

We receive payment

from one to three months after delivery.

At the end of each quarter, we estimate the amount of production delivered to purchasers and

the price we will receive.

Variances between our estimated revenue and actual payment are recorded in the month the payment is received.

Historically, differences have been insignificant.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is a smaller reporting company as defined

by Rule 12b-2 of the Exchange Act and is not required to provide this information.

STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements of the Company are set

forth at the end of this Form 10-K.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 5. Market for Registrant’s Common Equity