What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-31 compared with 2021-03-31 · 1675 added, 1501 removed, 218 unchanged (94% of the section changed)

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by

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

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

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

Based on this evaluation, the

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

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

Annual Report on Internal Control Over Financial Reporting

Limitations on Effectiveness of Controls .

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

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

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

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

Evaluation of Disclosure Controls and Procedures .

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

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

AND PROCEDURES.

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

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

The Company’s internal control over financial reporting is

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

for external purposes in accordance with generally accepted accounting principles.

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

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

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

Control - Integrated Framework.

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 Chief Executive Officer and Chief

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

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

Control - Integrated Framework.

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

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

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

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

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

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

Management believes the Company’s lack of

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

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

financial reporting.

a result, at December 31, 2021 and on the date of this Report, its internal control over financial reporting is not effective.

Plant to Remediate the Material Weakness

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

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

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

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

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

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

We are committed to continuing to improve our internal

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

in Internal Controls over Financial Reporting

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

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

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

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

control over financial reporting.

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

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

In making this

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

in Internal Control —

Integrated Framework (2013).

The term “disclosure controls and procedures,”

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

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

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

in the SEC’s rules and forms.

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

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

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

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

Based on our evaluation, our Chief Executive Officer

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

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

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

a timely manner.

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

may not be economically feasible.

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

of its disclosure controls and procedures.

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

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

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

related to financial reporting.

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

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

Notwithstanding the assessment that our internal control

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

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

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

Changes on Internal Control over Financial

There was no change in the Company's internal

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

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

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

OTHER INFORMATION.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

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.

REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following lists the directors and executive

officers of the Company:

Thomas Pritchard

Director and Chief Executive Officer

Director and President

Director and Chairman of the Board

_________________

Directors hold office until their successors

are elected by the stockholders of the Company and qualified.

Chief Executive Officer and Director

President and Director

Chief Operating Officer

Director and Co-Chairman of the Board

Directors hold office until their successors are

elected by the stockholders of the Company and qualified.

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

Thomas Pritchard

Thomas Pritchard co-founded Pritchard Griffin

Advisors (“PGA”) in 2015 to serve the unique investment banking needs of the energy sector, including upstream, midstream,

downstream and renewables.

Prior to PGA, he formed Pritchard Energy Advisors, LLC in 2014.

From 2012 to 2014, Mr.

Pritchard served as Managing Director of the

Energy Investment Banking division of Imperial Capital.

Prior to this role, Mr.

Pritchard served as CEO and Managing Director of

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

Over a period of ten years, Pritchard

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

and research services annually to over 150 energy companies.

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

an oilfield services company that was sold in 2001.

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

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

Pritchard earned his undergraduate degree in Geology from Washington

and Lee University.

Morrisett has served as a director of the Company

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

Morrisett has over 25 years of experience in investment banking

and considerable experience in the management of non-operated oil and gas operations.

From April 2014 to May 2017, Mr.

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

company based in San Francisco, California.

From November 2012 to January 2018 Mr.

Morrisett served Total Energy Partners Funds,

an investment fund engaged in the ownership of non-operated oil and gas working interests, in several capacities, including as

Prior to 2013, Mr.

Morrisett served in various executive capacities at other investment banking firms and

oil and gas concerns.

serves as the President of Eastwood Investment Management (EIM), which he founded in 2001.

EIM is a multi-strategy, multi-asset

class family office which has been an active investor in energy and resource companies.

Kamin is the Founder and Executive

Chairman of Clean Plate Restaurants Inc.

He was a Venture Partner with Venture Strategy Partners from 1998 to 2003 helping launch

its venture operations.

Kamin received a Master’s Degree from Yale University in international relations with a concentration

in international law in 1985.

Recommendation of Nominees to the

Company's Board of Directors

The Company’s Board of Directors

does not have a nominating committee.

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

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

for the Board’s selection the director nominees.

The Independent Directors will consider director candidates submitted to them

by other directors, employees and stockholders.

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

and evaluating potential candidates.

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

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

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

Independent Directors, c/o Secretary, 2200 S.

Utica Place, Suite 150, Tulsa, Oklahoma 74114.

The Independent Directors may require the stockholder submitting the recommendation or

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

In addition, the Company’s

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

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

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

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

Candidates are selected for their ability to exercise

good judgment and provide practical insights and diverse perspectives.

The Independent Directors consider the following qualifications

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

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

and/or financial expertise;

· objectivity;

· demonstrated

exercise of sound business judgment;

relevant to Empire Petroleum’s lines of business;

governance experience;

to serve the interests of all stockholders;

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

her responsibilities as a director;

· independence;

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

of the NYSE American.

Other than the foregoing, there are no

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

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

When considering potential nominees for the Board, the Independent

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

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

In connection therewith, the Independent Directors will consider

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

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

With respect to diversity, particular emphasis is placed on

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

Board given the circumstances of the Company.

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

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

of such directors is not subject to the foregoing process.

Identification of Audit Committee;

Committee Financial Expert

As of December 31, 2020, the Company had not

established any committees (including an audit committee) because of the small size of its Board of Directors.

Company does not have an audit committee or an audit committee financial expert serving on such committee.

As of December

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

Audit Committee Financial Expert

The Company has a separately-designated

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

The audit committee’s members

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

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

has determined that both Messrs.

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

sophisticated as contemplated under the rules of the NYSE American.

The Board does not have an audit committee financial expert

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

Code of Ethics

The Company has adopted a Code of Ethics that

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

officer and principal accounting officer or persons performing similar functions.

The Company undertakes to provide any person

without charge, upon request, a copy of the Code of Ethics.

Requests may be directed to Empire Petroleum Corporation, 2200

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

Section 16(a) Beneficial Ownership Reporting

Section 16(a) of the Securities Exchange Act

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

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

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

Officers, directors and greater than ten percent

stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

Based solely on review of the copies of such

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

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

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

The Company has adopted a Code of Business

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

principal financial officer and principal accounting officer or persons performing similar functions.

The Code of Business Conduct

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

Corporate Governance” caption.

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

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

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

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of

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

of the Company's equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock

and other equity securities of the Company.

Based solely on a review of the reports filed

with the SEC and any written representations that no other reports were required during the year ended December 31, 2021, to the

Company's knowledge, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial

owners during the year ended December 31, 2021 were complied with on a timely basis, except that the initial report for (a) each of

Marchive and Matschke and Energy Evolution Master Fund, Ltd.

was filed late and (b) Mr.

Pritchard inadvertently omitted a

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

COMPENSATION.

Executive Compensation

Board of Directors does not have a Compensation Committee.

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

The following table set forth certain

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

The persons named below constitute all of the executive

officers of the Company as of December 31, 2021.

On August 18, 2021, each of Messrs.

Pritchard and Morrisett entered into an Employment

Agreement with the Company.

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

Name and Principal Position

Stock Awards ($)

Option Awards 1

Non-Equity Incentive Plan Compensation ($)

Life Insurance Premiums Paid ($)

All Other Compensation ($)

Total Compensation ($)

Thomas Pritchard

Chief Executive Officer

Michael Morrisett

_______________________

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

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

2 The current

salary of both Mr.

Pritchard and Mr.

Morrisett is $250,000 per year.

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

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

4 This amount is for

the extension of warrants described immediately below this table.

For information on the assumptions used in the valuation of

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

Smith’s

current salary is $190,000 per year.

This amount represents payment for a partial year.

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

December 31, 2020, warrant certificates issued to Mr.

Pritchard and Mr.

Morrisett pursuant to which each such named executive

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

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

2019 Stock Plan.

December 31, 2020, each of Mr.

Pritchard and Mr.

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

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

Equity Awards at December 31, 2020

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

and warrant awards

of securities underlying unexercised options and warrants (#) exercisable

of securities underlying unexercised options and warrants (#) unexercisable

incentive plan awards:

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

Option / warrant

expiration date

_______________________

The vest date is April 2, 2021.

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

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

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

Board of Directors does not have a Compensation Plan.

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

for service through the issuance of warrants or options.

On December 31, 2020, Mr.

Kamin was issued options to acquire 300,000

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

1 For further information

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

included in this Annual Report on Form 10-K.

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

Securities Authorized for Issuance under

Equity Compensation Plans

On April 3, 2019, the Board of Directors of

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

The total number

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

Further, on April

3, 2019, the Company granted Mr.

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

in this Annual Report on Form 10-K.

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

2 On December 31, 2020, warrant

certificates issued to Messrs.

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

shares of the Company’s common stock at an exercise price of $1.00 per share were extended so that such warrant certificates can

be exercised on or before April 2, 2029 to make such grants consistent with the 2019 Stock Plan.

On December 31, 2020, each of Messrs.

Pritchard and Morrisett were issued options

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

3 All Other Compensation in

2021 consists of vehicle allowances and club dues.

Director Compensation

Annual compensation for non-employee

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

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

service as necessary

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

based on date of service as necessary

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

based on date of service

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

and committee meetings

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

for Board membership

The following table shows total compensation

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

Fees Earned or Paid in Cash

Stock Awards 1

As of December 31, 2021, Mr.

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

Outstanding Equity Awards at December

The following table sets forth certain

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

Option Awards

Number of securities underlying unexercised options (#) exercisable

Number of securities underlying unexercised options (#) unexercisable

Equity incentive plan awards:

Number of securities underlying unexercised unearned options (#)

Option Exercise Price ($)

Option Expiration Date

Thomas Pritchard

Michael Morrisett

Employment Agreements

On August 18, 2021

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

Pritchard, Chief Executive Officer

of the Company.

The initial term of Mr.

Pritchard’s Employment Agreement is three years;

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

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

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

Pritchard within certain

time periods.

Pritchard’s initial

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

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

Pritchard additional

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

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

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

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

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

provided that

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

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

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

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

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

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

employment is terminated by the Company for convenience or Mr.

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

then, in addition to the Accrued Amounts, Mr.

Pritchard will be entitled to the following:

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

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

Severance Period is defined

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

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

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

Payment of such amounts are conditioned on Mr.

Pritchard’s execution

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

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

On August 18, 2021,

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

Morrisett, President of the Company.

The terms and conditions

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

Pritchard’s Employment Agreement.

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

Securities Authorized for Issuance under Equity

Compensation Plans

On April 3, 2019, the Board of Directors of the

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

The total number of shares

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

Further, on April 3, 2019 the

Company granted Mr.

Pritchard and Mr.

Morrissett each, options to purchase 2,500,000 shares of common stock of the

Company at an exercise price of $0.33 per share.

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

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

The following table provides certain information

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

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

price of $1.32 per share.

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

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

No further grants will be

made under the Stock Option Plan.

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

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

The total number of shares

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

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

187,500 options.

Number of securities

13 unchanged sentences

Equity compensation plans

not approved by security

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information

regarding the beneficial ownership of our Common Stock as of March 30, 2021 for:

* each person who is known to own beneficially

more than 5% of our outstanding Common Stock;

not approved by security holders

Equity compensation plans

approved by security holders

Security Ownership of Certain Beneficial

Owners and Management

The following table sets forth information regarding

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

* Each person who is known to own beneficially more

than 5% of our outstanding Common Stock;

* Each of our executive officers and directors;

* all executive officers and directors as

The percentage of beneficial ownership for

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

* All executive officers and directors as a group.

The percentage of beneficial ownership for the following

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

Unless otherwise indicated below, to the Company's

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

Security Ownership of Certain Beneficial

Amount and nature of

Security Ownership of Certain Beneficial Owners

Name and address of beneficial owner

beneficial ownership

Amount and nature of beneficial ownership

Percent of class (1)

2 unchanged sentences

Greenwood Village, CO 80111

Energy Evolution Master Fund, LTD

25025 I-45 North, Suite 420

Woodlands, Texas 77380

(1) The percentage ownership for

each person is calculated in accordance with the rules of the SEC, which provide that any shares a person is deemed to beneficially

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

for purposes of calculating such person's percentage ownership.

(2) The total includes

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

Security Ownership of Management

and nature of

and address of beneficial owner

The Woodlands, Texas 77380

_______________________

Director and President

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

person or entity is deemed to beneficially own by virtue of having a right to acquire shares upon the conversion of options or other

rights are considered outstanding solely for purposes of calculating such person's percentage ownership.

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

Security Ownership of

Name and address of beneficial owner

Amount and nature of beneficial ownership

Percent of class (1)

President and Director

2200 South Utica Place, Suite 150

Tulsa, Oklahoma 74114

Chief Executive Officer and Director

2200 South Utica Place, Suite 150

Tulsa, Oklahoma 74114

Anthony Kamin

5,498,114 (3)

Director and Board Co-Chairman

2200 South Utica Place, Suite 150

Oklahoma 74114

and Chief Executive Officer

4,468,333 (4)

Tulsa, Oklahoma 74114

Director and Board Co-Chairman

25025 I-45 North, Suite 420

The Woodlands, Texas 77380

Chief Operating Officer

2200 South Utica Place, Suite 150

Oklahoma 74114

All current directors and executive officers

as a group (3 persons)

16,034,575 (5)

(1) The percentage ownership for

each person is calculated in accordance with the rules of the SEC, which provide that any shares a person is deemed to beneficially

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

for purposes of calculating such person's percentage ownership.

(2) The total

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

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

(3) The total

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

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

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

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

(4) The total

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

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

Tulsa, Oklahoma 74114

2200 South Utica Place, Suite 150

Tulsa, Oklahoma 74114

2200 South Utica Place, Suite 150

Tulsa, Oklahoma 74114

(1) The percentage ownership for each

person is calculated in accordance with the rules of the SEC, which provide that any shares a person is deemed to beneficially own by

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

of calculating such person's percentage ownership.

(2) The total includes

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

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

options to purchase 1,089,100 shares of common stock at an exercise price of $1.32 and $1.40 per share.

(3) The total includes

options to purchase 1,089,100 shares of common stock at an exercise price of $1.32 and $1.40 per share, and 19,583 shares owned by

Pritchard Energy Partners.

(4) The total includes

options to purchase 75,000 shares of common stock at an exercise price of $1.40 per share, 125,000 shares of common stock issued

upon the exercise of $0.60 warrants, 625 shares of common stock issued upon the exercise of $1.00 warrants, and 625,000 shares of

common stock issued upon the exercise of $2.00 warrants.

(5) The total includes

137,000 common stock shares issued upon the exercise of $2.00 warrants.

(6) The total includes

options to purchase 62,500 shares of common stock at an exercise price of $12.20 per share and 15,000 shares issued upon the exercise

of $2.00 warrants.

(7) The total

includes 16,875 common shares issued upon the conversion of $2.00 warrants.

RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

Director Independence

Because of the small size of the Company's

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

Rather, the entire Board acts as, and performs the same

functions as, the audit committee, compensation committee and nominating committee, as necessary.

Morrisett is not considered

"independent"

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

PRINCIPAL ACCOUNTING FEES AND SERVICES.

The following is a summary of the fees billed

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

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

The Company’s common stock is currently

listed on the NYSE American.

Under the corporate governance standards of the NYSE, generally, a director does not qualify as independent

if the director (or in some cases, members of the director’s immediate family) has, or in the past three years has had, certain

relationships or affiliations with the Company, the Company’s auditors or other companies that do business with the Company.

Company’s Board of Directors has determined that all of the Company’s directors, except Messrs.

Pritchard and Morrisett,

are independent under the NYSE standards.

The Board determined that none of the independent directors has any material relationship with

the Company that could impair such individual’s independence.

Pritchard and Morrisett are not considered to be independent

directors because of their employment as executive officers of the Company.

Each member of each of the Company’s Audit and Compensation

Committees also qualifies as independent under NYSE standards.

Related Party Transactions

For information regarding a joint

development agreement and loan agreement entered into with Petroleum & Independent Exploration, LLC, an entity controlled by the

Company’s Co-Chairman of the Board (Phil E.

Mulacek), see Note 5 to the financial statements of the Company set forth at the

end of this Form 10-K.

Neither Petroleum & Independent Exploration, LLC nor Phil E.

Mulacek was a related party at the time the

Company entered into the joint development agreement and loan agreement.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

The following is a summary of the fees billed or

to be billed to the Company by Moss Adams and HoganTaylor LLP, the Company's current and former independent registered public accounting

firms, respectively, for professional services rendered for the fiscal years ended December 31, 2021 and December 31, 2020 in which each

firm was the designated independent auditor:

Fiscal 2021 Fees

3 unchanged sentences

All Other Fees (3)

(1) Audit Fees consist of aggregate

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

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

accounting firm in connection with statutory and regulatory filings or engagements for the years ended December 31, 2020 and December

31, 2019, respectively.

(1) Audit Fees consist of aggregate fees billed

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

included in quarterly reports or services that are normally provided by the independent registered public accounting firm in connection

with statutory and regulatory filings or engagements for the years ended December 31, 2021 and December 31, 2020, respectively.

include work performed for the 8-K/A, S-3, and S-8 filings.

(2) Audit-Related fees consist of aggregate

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

statements and are not reported under "Audit Fees."

These include work performed for 8K/A filings.

(3) All Other Fees consist of aggregate

fees billed for products and services provided by HoganTaylor LLP, other than those disclosed above.

The entire Board of Directors of the Company

is responsible for the appointment, compensation and oversight of the work of the independent registered public accounting firm

and approves in advance any services to be performed by the independent registered public accounting firm, whether audit-related

The entire Board of Directors reviews each proposed engagement to determine whether the provision of services is

compatible with maintaining the independence of the independent registered public accounting firm.

All of the fees shown

statements and are not reported under "Audit Fees."

(3) All Other Fees consist of aggregate fees

billed for products and services provided by independent auditors, other than those disclosed above.

Audit Committee Pre-Approval Policies and Procedures

Beginning in 2022, the Audit Committee is responsible

for the appointment, compensation and oversight of the work of the independent registered public accounting firm and approves in advance

any services to be performed by the independent registered public accounting firm, whether audit-related or not.

The Audit Committee

reviews each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the

independent registered public accounting firm.

As no Audit Committee was in place as of December 31, 2021, all of the fees shown

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

AND FINANCIAL STATEMENT SCHEDULES.

(a) (1) Financial Statements

The financial statements under this item are

included in Item 8 of Part II.

(a) (1) Financial

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

(2) Schedules

Purchase and Sale Agreement dated as

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

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

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

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

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

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

Description of the Common Stock of Empire Petroleum

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

Empire Petroleum Corporation 2019 Stock Option

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

Form of Non-Qualified Stock Option Award Agreement

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

Senior Revolver Loan Agreement dated as of

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

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

First Amendment to Senior Revolver Loan Agreement,

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

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

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

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

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

Common Share Warrant Certificate No.

PIE-1 dated August 6, 2020

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

Common Share Warrant Certificate No.

PIE-2 dated August 6, 2020

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

Common Share Warrant Certificate No.

PIE-3 dated August 6, 2020

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

Common Share Warrant Certificate No.

PIE-4 dated August 6, 2020

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

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

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

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

Second Amendment to Senior Revolver Loan Agreement, dated as of

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

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

Third Amendment to Senior Revolver Loan Agreement, dated as of

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

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

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

Rule 13a –

14(a)/15d –

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

Rule 13a –

14(a)/15d –

14(a) Certification of Michael R.

Morrisett, principal financial officer (submitted herewith).

Section 1350 Certification of Thomas Pritchard, Chief Executive Officer (submitted herewith).

Section 1350 Certification of Michael R.

Morrisett, principal financial officer (submitted herewith).

Financial Statements for XBRL format (submitted herewith).

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 31, 2021

/s/ Michael R.

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 indicated.

/s/ Thomas Pritchard

Director and Chief Executive Officer

March 31, 2021

THOMAS PRITCHARD

/s/ Michael R.

Director and President

March 31, 2021

(principal financial officer)

/s/ Anthony J.

Director and Chairman of the Board

March 31, 2021

EXHIBIT INDEX

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

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

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

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

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).

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) .

and Restated Certificate of Incorporation of Empire Petroleum Corporation (incorporated herein by reference to Exhibit 3.1 to the

Company’s Form 8-K dated March 4, 2022, which was filed on March 9, 2022).

of Designation of Series A Voting Preferred Stock of Empire Petroleum Corporation (incorporated herein by reference to Exhibit 3.2

to the Company’s Form 8-K dated March 4, 2022, which was filed on March 9, 2022).

and Restated Bylaws of Empire Petroleum Corporation (incorporated herein by reference to Exhibit 3.3 to the Company’s Form

8-K dated March 4, 2022, which was filed on March 9, 2022).

of the Common Stock of Empire Petroleum Corporation (submitted herewith).

Secured Convertible Note due December 31, 2021 (incorporated herein by reference to Exhibit 4.1 to the Company’s Form 8-K dated

May 14, 2021, which was filed on May 20, 2021).

Share Warrant Certificate No.

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).

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).

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).

Articles of Incorporation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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) .

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).

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

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

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

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

LLC and CrossFirst Bank (incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K dated September 30,

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

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

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

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

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

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

on March 15, 2021).

Rule 13a –

14(a)/15d –

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

Rule 13a –

14(a)/15d –

14(a) Certification

of Michael R.

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 (submitted herewith).

of Restricted Stock Units Award Agreement (Non-Employee Directors) (submitted herewith).

of Restricted Stock Units Award Agreement (Executive Officers) (submitted herewith).

Moss Adams LLP (submitted herewith).

Consent of HoganTaylor LLP (submitted herewith).

of Cawley, Gillespie & Associates, Inc.

(submitted herewith).

13a – 14(a)/15d – 14(a) Certification of Thomas Pritchard, Chief Executive Officer (submitted

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

Morrisett, principal financial officer

(submitted herewith).

1350 Certification of Thomas Pritchard, Chief Executive Officer (submitted herewith).

1350 Certification of Michael R.

Morrisett, principal financial officer (submitted herewith).

Section 1350 Certification of Thomas Pritchard,

Chief Executive Officer (submitted herewith).

Section 1350 Certification of Michael R.

principal financial officer (submitted herewith).

Financial Statements for XBRL format (submitted

Gillespie & Associates, Inc.

Summary Report (submitted herewith).

Financial Statements for

XBRL format (submitted herewith).

*Indicates a management contract or compensatory

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

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

March 31, 2022

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 indicated.

and President

(Principal Financial Officer)

Thomas Pritchard

Executive Officer and Director

THOMAS PRITCHARD

(Principal Executive Officer)

Accounting Officer

March 31, 2022

Accounting Officer)

and Co-Chairman of the Board

Director and Co-Chairman of the Board

March 31, 2022

/s/ Mason Matschke

March 31, 2022

MASON MATSCHKE

March 31, 2022

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

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

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

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

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

of Independent Registered Public Accounting Firm – Moss Adams LLP (PCAOB ID:

of Independent Registered Public Accounting Firm – HoganTaylor LLP (PCAOB ID:

Balance Sheets as of December 31, 2021 and 2020

Statements of Operations for the years ended December 31, 2021 and 2020

Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2021 and 2020

Statements of Cash Flows for the years ended December 31, 2021 and 2020

to Consolidated Financial Statements

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 to the consolidated financial statements (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.

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

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.

Accordingly, we express no such opinion.

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.

Audit Matters

critical audit matters communicated below 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.

The communication of critical audit matters

does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the

critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they

of Related Party Convertible Debt and the Valuation of the Embedded Conversion Option Thereof

described in Note 9 to the consolidated financial statements, on May 14, 2021 the Company’s wholly owned subsidiary Empire New

Mexico entered into a Senior Secured Convertible Note Agreement (the “Secured Note’”) with Energy Evolution Master

(“Energy Evolution”), a related party, pursuant to which a portion of the Secured Note was convertible into common

shares of the Company at the election of Energy Evolution.

The value of the embedded conversion option of the Secured Note was bifurcated

and accounted for separately as a derivative financial instrument;

the derivative was initially recorded at fair value at the inception

date and was revalued at each subsequent quarter-end date.

On September 29, 2021 the parties entered into a Loan Modification Agreement

(the “Amended Secured Note”) pursuant to which the Company induced the conversion of principal by Energy Evolution into common

stock by increasing the maximum principal amount then convertible by Energy Evolution, issued Energy Evolution warrants to purchase additional

shares of common stock at $1.25 per share and established that interest payments were to be paid in-kind or in cash at Energy Evolution’s

Upon conversion of the amended maximum principal convertible, the remaining principal outstanding under the Secured Note became

convertible into shares of common stock, the maturity date of the Secured Note was extended and the parties amended certain other terms

of the Secured Note.

The previously existing bifurcated derivative liability was extinguished in connection with this Amended Secured

Note as Energy Evolution had fully converted the maximum amount and the Company bifurcated and recorded the newly established embedded

conversion option of the remaining principal under the Amended Secured Note separately as a derivative liability.

These agreements included

requirements that the Company appoint one designee of Energy Evolution, or its affiliate, to the Board of Directors and appoint that

designee, or one of the two designees previously appointed to the Board of Directors by Energy Evolution’s affiliate, the Chairman

of the Board of Directors with the power to cast the deciding vote in the event of a deadlocked board vote.

identified these complex financing transactions as a critical audit matter due to the degree of complexity of the accounting and specialized

skills and knowledge required by management’s specialists in order to accurately account for and value the embedded conversion

options associated with these transactions.

This in turn led to a high degree of auditor subjectivity and judgment, including consultation

with Firm specialists, in order to evaluate the audit evidence supporting management’s valuation of the embedded conversion options

of both the Secured Note and Amended Secured Note.

primary procedures we performed to address this critical audit matter included:

the underlying agreements and amendments and assessing management’s analysis of the

accounting treatment of the original transactions and subsequent amendments.

an understanding of management’s valuation estimation process and reviewing management’s

specialists’ findings.

the qualifications and objectivity of management’s specialists.

the significant assumptions used by management’s specialists in developing the estimated

value of the embedded conversion features, including normalized volatility, risk free rates,

expected dividend yields, and the probability of conversion under various scenarios.

included comparing inputs to market data and analyzing conversion probabilities in comparison

to economic outcome of each scenario at that time.

Firm specialists to evaluate accounting treatment as well the accuracy and appropriateness

of valuation calculations prepared by management’s specialists.

• Mathematically

recalculating the amortization associated with debt discount.

agreements and amendments in order to verify the accuracy and completeness of disclosures

and presentation of the related party nature of the Secured Note and the rights granted to

Energy Evolution and its affiliates.

Impact of Proved Oil & Natural Gas Reserves on Depreciation, Depletion, and Amortization (“DD&A”) and Impairment

Company’s net proved oil and natural gas properties balance was $29,388,408 as of December 31, 2021, and the associated depreciation,

depletion and amortization expense for the year ended December 31, 2021 was $2,420,736.

The Company recorded no impairment expense for

the year ended December 31, 2021.

As described in Note 2 of the consolidated financial statements, the Company uses the successful efforts

method of accounting for its oil and natural gas activities.

Under this method, costs incurred are deferred until exploration and completion

results are evaluated, at which time costs of activities associated with economically recoverable reserves are capitalized as proved

properties and costs of unsuccessful or uneconomical activities are expensed.

Depreciation, depletion, and amortization of producing

properties is computed using the units-of-production method.

Management’s assessment of the results of exploration activities,

commodity price outlooks, planned future sales or expiration of all or a portion of leaseholds impacts the amount and timing of potential

impairment provisions.

identified the impact of proved oil and natural gas reserves on depletion, depreciation, and amortization expense and the carrying value

of the oil and gas properties as a critical audit matter due to the use of significant judgment by management, including the use of specialists,

when developing the estimates of proved oil and natural gas reserves.

This in turn led to a high degree of auditor judgment, subjectivity,

and effort in performing procedures and evaluating audit evidence related to the significant assumptions used in developing those estimates

of proved oil and natural gas reserves.

primary procedures we performed to address this critical audit matter included:

the significant assumptions used by management in developing the estimates of proved oil

and natural gas reserves, including pricing benchmarks to observable market data, and comparing

pricing differentials, future operations costs, and future production rates to historical

management’s specialists’ qualifications and objectivity, as well as the appropriateness

of methods and assumptions used by the specialists in developing the estimates of proved

oil and natural gas reserves.

The procedures performed included tests of the data used by

specialists and an analysis of the specialist’s findings.

the significant assumptions relating to the estimates of proved oil and natural gas reserves

and obtaining evidence to support the accuracy of the assumptions, including whether the

assumptions used were consistent with the past performance of the Company and evidence obtained

in other areas of the audit.

the inputs and mathematically recalculating management’s depletion and depreciation

expense calculation and assessed for compliance with industry and regulatory standards.

management’s impairment assessment of proved oil and natural gas properties, including

management’s cash flows analysis related to the proved oil and natural gas properties.

the working and net revenue interests used in the reserve report by testing a sample of land

and division order records.

Moss Adams LLP

have served as the Company’s auditor since 2021.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and the Board of Directors

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on the Financial Statements

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

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

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

In our opinion, the financial

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

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

accepted in the United States of America.

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

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

The Company's ability to continue

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

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

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

Management's plans in regard to these matters also

are described in Note 1.

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

have audited the accompanying consolidated balance sheet of Empire Petroleum Corporation (the Company) as of December 31, 2020, the related

consolidated statements of operations, stockholders' equity and cash flows for the year then ended, and the related notes to the consolidated

financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material

respects, the financial position of the Company as of December 31, 2020, and the 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.

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

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

financial statements based on our audits.

financial statements based on our audit.

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

2 unchanged sentences

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

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

Those standards require that we plan and perform the audit

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

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

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

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

we express no such opinion.

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

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

Such procedures included examining, on a test

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

Our audits also included evaluating the

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

the financial statements.

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

Audit Matters

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

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

(1) relate to accounts or disclosures that are

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

The communication

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

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

or disclosures to which they relate.

Oil and Natural Gas Properties –

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

and to Assess Impairment

Audit Matter Description

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

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

flows of the underlying oil and natural gas reserves.

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

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

As a result of changing market conditions and

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

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

and engineering data.

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

and any proved oil and natural gas property impairment.

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

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

Related depreciation, depletion,

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

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

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

and an increased extent of effort.

the Critical Audit Matter Was Addressed in the Audit

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

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

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

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

forecasted production by comparing to historical production and decline rates.

management's estimated oil and natural gas prices by:

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

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

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

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

to average historical prices.

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

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

to historical cost data.

Concern Assessment

Audit Matter Description

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

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

The Company determined these, and other factors,

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

financial statements.

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

Management used significant

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

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

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

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

the Critical Audit Matter Was Addressed in the Audit

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

included the following, among others:

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

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

flow projections.

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

the adequacy of the Company's financial statement disclosures.

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

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 our opinion.

HoganTaylor LLP

have served as the Company's auditor since 2003.

served as the Company’s auditor from 2003 to 2020.

EMPIRE PETROLEUM CORPORATION

2 unchanged sentences

Current Assets:

Accounts Receivable

Unrealized Gain on Derivative Instruments

Total Current Assets

Property and equipment:

and Natural Gas Properties, Successful Efforts

Oil and Natural Gas Properties, Successful Efforts

Accumulated Depreciation, Depletion and Impairment

( 17,525,918 )

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

Property and Equipment, net

and Other Deposits

AND STOCKHOLDERS' DEFICIT

( 15,148,444 )

Other Property and Equipment, net of $ 258,714 and $ 76,421 Accumulated Depreciation in 2021 and 2020, respectively

Total Property and Equipment, Net

Unrealized Gain on Derivative Instruments - Long Term

Utility and Other Deposits

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Loss on Derivative Instruments

Payment (see Note 4)

Portion of Lease Liability

Portion of Long-term Notes Payable

Accounts Payable

Accrued Expenses

Unrealized Loss on Derivative Instruments

Contingent Payment

Current Portion of Lease Liability

Current Portion of Long-term Notes Payable

Total Current Liabilities

Term Portion of Unrealized Loss on Derivative Instruments

Notes Payable

Term Lease Liability

Retirement Obligations

Long-Term Notes Payable

Long Term Lease Liability

Asset Retirement Obligations

Total Liabilities

Stockholders' Equity

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

Stockholders' Equity (Deficit):

Common Stock - $ .001

Par Value 190,000,000 Common

Shares Authorized,

19,840,648 and 6,223,069 Shares Issued and Outstanding, Respectively

Paid-in Capital

(40,618,381 )

Additional Paid-in Capital

Accumulated Deficit

( 59,233,343 )

Stockholders' Equity (Deficit)

( 40,618,381 )

Liabilities and Stockholders' Equity (Deficit)

Total Stockholders' Equity (Deficit)

( 18,441,038 )

See accompanying notes to consolidated

financial statements

Total Liabilities and Stockholders' Equity (Deficit)

See accompanying notes to consolidated financial

EMPIRE PETROLEUM CORPORATION

1 unchanged sentence

Years Ended December 31, 2021 and 2020

and Gas Sales

Realized and Unrealized Gain on Derivatives

Net Realized and Unrealized Gain (Loss) on Derivatives

Total Revenue

Costs and Expenses:

Depreciation & Amortization

of Oil and Natural Gas Properties

of Asset Retirement Obligation

and Administrative

Cost and Expenses

Taxes - Production

Depletion, Depreciation & Amortization

Impairment of Oil and Natural Gas Properties

Accretion of Asset Retirement Obligation

General and Administrative

Total Cost and Expenses

Operating Loss

1 unchanged sentence

Other Income and (Expense):

on Sale of Assets

Convertible Debt Modification Inducement Expense

( 2,276,813 )

Loss on Convertible Debt Redemption Option

( 3,169,201 )

Net Loss per Common Share,

Loss on Embedded Conversion Option

( 4,504,104 )

Gain on Sale of Assets

Interest Expense

( 8,600,699 )

$ ( 18,614,962 )

$ ( 16,835,433 )

Net Loss per Common Share, Basic & Diluted

Weighted Average Number of Common Shares Outstanding,

Basic & Diluted

Weighted Average Number

of Common Shares Outstanding,

See accompanying notes to consolidated financial

EMPIRE PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'

EQUITY (DEFICIT)

Years ended December 31, 2020 and 2019

December 31, 2018

$ (17,128,346 )

Options, Warrants

Conversion Features Issued

EMPIRE PETROLEUM

CONSOLIDATED STATEMENTS

OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

Years ended December

31, 2021 and 2020

Balances, December 31, 2019

3 unchanged sentences

( 16,835,433 )

Options, Warrants

Conversion Features Issued

Shares, Options, Warrants

and Conversion Features Issued

Balances, December 31, 2020

1 unchanged sentence

$ ( 18,441,038 )

( 18,614,962 )

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

$ ( 59,233,343 )

See accompanying notes to consolidated financial

2 unchanged sentences

Years ended December 31, 2021 and 2020

Cash Flows From Operating

Cash Flows From Operating Activities:

$ ( 18,614,962 )

$ ( 16,835,433 )

Adjustments to Reconcile

Net Loss to Net Cash

by (used in) Operating Activities:

on Sale of Assets

of Warrants and Options Granted

of Warrant Value and Conversion Feature on Convertible Notes

of Loan Issue Costs

Depreciation,

Depletion and Amortization

of Oil and Natural Gas Properties

of Asset Retirement Obligation

Gain (Loss) on Derivatives

of Operating Lease Liability

paid to Ovintiv (see Note 4)

Relating to Ovintiv Purchase Deposit (see Note 4)

in Operating Assets and Liabilities:

Cash Used In Operating Activities

Cash Flows from Investing

of Oil and Natural Gas Properties

of Other Fixed Assets

from Sale of Oil and Natural Gas Properties

Cash Used in Investing Activities

Cash Flows from Financing

from Debt Issued

Payments of Debt

from Stock and Warrant Issuance

Cash Provided by Financing Activities

Adjustments to Reconcile Net Loss to Net Cash

Provided By (Used In) Operating Activities:

Gain on Sale of Assets

( 1,268,760 )

Value of Warrants and Options Granted

Stock Issued in Lieu of Cash Interest Payment - Senior Secured Convertible Note

Right to Buy Issuance Costs

Loss on Embedded Conversion Option - Senior Secured Convertible Note

Convertible Debt Modification Inducement Expense

Amortization of Discount on Convertible Notes

Amortization of Loan Issue Costs

Loss on Extinguishment of Debt

Change in Right of Use Assets, net

Depreciation, Depletion and Amortization

Impairment of Oil and Natural Gas Properties

Accretion of Asset Retirement Obligation

Paycheck Protection Program Loan Forgiveness

Deposit paid to Ovintiv

Loss Relating to Ovintiv Purchase Deposit

Change in Operating Assets and Liabilities:

Accounts Receivable

( 6,482,271 )

Unrealized Loss on Derivatives

Prepaids, Current

Accounts Payable

Accrued Expenses

Net Cash Provided By (Used In) Operating Activities

( 1,723,257 )

Cash Flows from Investing Activities:

Acquisition of Oil and Natural Gas Properties

( 19,545,505 )

Purchase of Other Fixed Assets

Cash Paid for Right of Use Assets

Sinking Fund Deposit

( 4,810,000 )

Proceeds from Sale of Oil and Natural Gas Properties

Net Cash Provided By (Used In) Investing Activities

( 24,716,878 )

Cash Flows from Financing Activities:

Proceeds from Debt Issued

Paycheck Protection Program Loan Proceeds

Principal Payments of Debt

( 5,893,984 )

Proceeds from Stock and Warrant Issuance

Net Cash Provided by Financing Activities

Net Change in Cash

- Beginning of Period

- End of Period

Supplemental Cash Flow

Paid for Interest

Non-cash Investing

and Financing Activities:

Additions to Asset Retirement Obligations

Stock Issued in Exchange for Outstanding Notes Payable

Cash - Beginning of Period

Cash - End of Period

Supplemental Cash Flow Information:

Cash Paid for Interest

Non-cash Investing and Financing Activities:

Non-cash Additions and Revisions to Asset Retirement Obligations

Common Stock Issued in Exchange for Outstanding Notes Payable

Equipment purchased utilizing note payable

Property additions in notes payable

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

purchased utilizing note payable

Payable issued - PIE Agreement (see Note 5)

Note Payable issued - PIE Agreement (see Note 5)

See accompanying notes to consolidated financial

EMPIRE PETROLEUM

EMPIRE PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021 and 2020

On July 20, 2001, Americomm Resources Corporation

merged with its wholly-owned subsidiary, Empire Petroleum Corporation, and simultaneously changed the name of the corporation to

Empire Petroleum Corporation.

Both the merger and name change were effective as of August 15, 2001.

Americomm Resources

Corporation was originally incorporated in the State of Utah on the 22nd day of August 1983, as Chambers Energy Corporation.

the 7th day of March 1985, the state of incorporation was changed to Delaware by means of a merger with Americomm Corporation,

a Delaware corporation formed for the purpose of effecting the said change.

In July 1995, its name was changed to Americomm Resources

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

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

Empire Petroleum Corporation and subsidiaries.

("Empire"

or the "Company").

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

Continuing operations:

The ultimate recoverability of the Company's

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

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

to attain future profitable production.

The Company has been incurring significant losses in recent years and future financing

is uncertain.

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

The continuation of the Company is dependent

upon the ability of the Company to raise capital and attain future profitable operations.

These financial statements have

been prepared on the basis of United States generally accepted accounting principles applicable to a company with continuing operations,

which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and

discharge its obligations in the normal course of operations.

These financial statements do not include any adjustments that

might be necessary to the carrying value of assets and liabilities, reported expenses and the balance sheet classifications used

should the Company be unable to continue as a going concern.

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.

Significant accounting policies:

The preparation of financial statements in

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

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

Actual results could differ

from those estimates.

(a) Principles of consolidation

The consolidated financial statements of the Company include the

accounts of the Company and its wholly owned subsidiaries.

The Company consolidates the financial statements of these entities.

All material intercompany balances and transactions have been eliminated.

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

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

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

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

Actual results could differ from

these estimates.

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

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

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

Similarly, evaluations for impairment of proved and

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

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

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

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

instruments and income taxes.

The Company sells oil and natural gas to various customers.

receivables related to these operations are generally unsecured.

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 for the years ended December

31, 2020 or 2019.

(d) Oil and natural gas properties

The Company uses the successful efforts method

of accounting for its oil and gas activities.

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 has four wholly-owned subsidiaries in its areas

of operations:

North Dakota LLC (“Empire North Dakota”)

New Mexico, LLC (“Empire New Mexico”)

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

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 Utah in

August 1983 and subsequently 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.

On August 27, 2021 the Company’s Board of

Directors, in conjunction with the majority of the common stock holders, 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 no-par value Preferred Stock.

As of December 31, 2021, the Company had

not made the reverse stock split effective, nor had it issued any Preferred Stock.

The reverse stock split was made effective on

March 7, 2022, simultaneous with the Company’s listing to the NYSE American.

All shares amounts have retrospectively been

stated at post-reverse split amounts and pricing.

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, including revenues and expenses, 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.

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 On Oil And Gas Exploration

And Production 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 natural gas liquids 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, conversion features on debt convertible, 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

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.

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 withing 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, 2021 or 2020.

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 value of the outstanding

Inventory 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.

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

or uneconomical activities are expensed.

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

2 unchanged sentences

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.

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.

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.

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.

(e) Derivative instruments

The Company enters into swap agreements to

manage its exposure to oil and natural gas price fluctuations.

The fair value of derivative contracts are recognized as an asset

or liability on the Company’s balance sheet.

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

contracts mature.

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

(f) Asset retirement obligations

Segment Reporting

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.

Comprehensive Income

The Company has no elements of comprehensive income other than net income.

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

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.

(g) Revenue recognition

The Company enters into contracts with customers

to sell its oil and natural gas production.

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

model prescribed in ASC 606.

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

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

Control is generally

considered transferred when the following criteria are met:

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

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

Given the nature of the products sold,

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

the price specified in the contract.

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

the purchaser one to two months after production.

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

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

The Company follows the sales method of accounting

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

on an accrual basis.

Revenues are reported net to working interest

and after royalty amounts due.

(h) Per share amounts:

The Company calculates and discloses basic

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

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.

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.

At December 31, 2020 and 2019,

the Company had 37,928,245 and 18,345,834 options and warrants outstanding, respectively, that were not included in the calculation

of earnings per share for the periods then ended.

Such financial instruments may become dilutive and would then need to be

included in future calculations of Diluted EPS.

At December 31, 2020 and 2019, the outstanding options were considered anti-dilutive

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

(i) Income taxes:

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

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 when the recognition criteria of Accounting Standards

Codification 606 “Revenue from Contracts with Customers,” (“ASC 606”) are met, which generally occurs at

a point in time when production is sold to a purchaser at a determinable price, delivery has occurred, control has transferred and collection

of the revenue is probable .

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 and the Company receives payment from one to three months after

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, revenues 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 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.

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

Historically, these

differences have been insignificant.

At the end of each month when

the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are recorded

in Accounts Receivable in the Consolidated Balance Sheets.

Taxes assessed by governmental authorities on oil, natural gas and NGL sales

are presented separately from such revenues in the Consolidated Statements of Operations.

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.

Revenue 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.

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.

Contract Balances

Under the Company’s product

sales contracts, the Company invoices customers once performance obligations have been satisfied, at which point payment is unconditional.

Accordingly, the Company’s product sales contracts do not give rise to contract assets or liabilities under ASC 606.

Transaction 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.

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 NGLs 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, 2021 and 2020, revenue recognized in the reporting period related

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

Stock-Based Compensation

The Company recognized stock-based

compensation expense associated with granted stock options.

The Company accounts for forfeitures of equity-based incentive awards as

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.

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.

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.

(j) Financial instruments:

The carrying value of current assets and current

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

Management's estimates,

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

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

(k) Stock option plan:

The Company expenses options granted over

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

(l) Recently issued accounting pronouncements:

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

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.

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.

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 year ended

December 31, 2021.

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 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.

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.

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 and published LIBOR forward

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.

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;

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;

owners of the entity and members of their immediate families;

management of the entity and members of their immediate families;

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 July 2018, the FASB issued ASU No.

“Codification Improvements,”

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

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

The effective date of the standard

is dependent on the facts and circumstances of each amendment.

Some amendments do not require transition guidance and will be effective

upon the issuance of this standard.

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

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

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

financial statements.

In 2020, the Company, through its subsidiaries purchased oil

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

In 2019, the Company, through its subsidiary

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

The aggregate capitalized costs

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

The Company has reviewed the recently issued pronouncements

and concluded that the following new accounting standards are applicable:

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 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

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 expect a material impact as a result of adopting these standards.

Note 3 – Property

In May 2021 the Company purchased oil and natural gas properties

in New Mexico (see Note 4).

The aggregate capitalized costs of oil

and natural gas properties as of December 31, 2021 and 2020 are as follows:

Proved producing wells

3 unchanged sentences

Gross capitalized costs

Accumulated Depreciation,

Depletion, Amortization and Impairment

Depreciation, depletion, amortization and impairment

( 17,525,918 )

( 15,148,444 )

Net capitalized costs

of oil and gas properties:

2020 Acquisitions

Pardus Acquisition

On April 6, 2020 the Company, through

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

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

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

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

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

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

with the purchase.

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

Ovintiv Acquisition

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

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

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

The purchase price was $8,500,000, subject to adjustments with an effective date of January 1, 2020 and a closing

date of April 30, 2020.

The Company made an $850,000 deposit relating to the purchase.

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

financing to complete the purchase from its lenders.

The Agreement has been terminated and the parties have agreed to settle with

Empire receiving a $50,000 return of its deposit.

The forfeited deposit is included in general and administrative expenses in the

financial statements.

2019 Acquisitions

Warhorse Acquisition

On June 10, 2019, the Company received a sheriff's deed dated

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

Landry Parish purchased from Business First

Bancshares, Inc.

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

Pursuant to the Sheriff's Deed, the

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

Landry Parish, Louisiana, including operated working

interest in two producing wells.

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

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

sheriff fees.

The payment was paid from loan proceeds.

The Company treated the acquisition as an asset purchase.

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

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

EnergyQuest Acquisition

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

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

The effective date of the transaction was

January 1, 2019.

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

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

The following table sets forth the Company’s purchase price

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

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

in value of the oil and natural gas properties.

Fair Value of Assets Acquired

Accounts receivable

Inventory of oil in tanks

Equipment & gathering lines

Other property and equipment consists of operating lease assets,

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

Other property and equipment, at cost

accumulated depreciation

Oher property and equipment, net

Note 4 – Acquisition of XTO Properties

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.

The XTO acquisition has been assessed under

the screen test for business combinations under FASB ASC 805, Business Combinations (“ASC 805”).

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.

As 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.

In addition, 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.

Subsequent amendments increased the monthly payment amounts to $ 160,000 in response to additional bonding

requested by the State of New Mexico.

The following table sets forth the

Company's preliminary purchase price allocation:

Preliminary Fair Value of Assets Acquired

Oil and natural gas properties

Total Assets Acquired

Fair Value of liabilities Assumed

Accounts payable –

Notes payable –

Inventory of oil in tanks

Asset retirement obligations

Total preliminary assets acquired

Preliminary Fair Value of Liabilities Assumed

Royalty suspense

Asset retirement obligations

Total Liabilities Assumed

Total preliminary liabilities assumed

Purchase Price

The fair values of assets acquired and liabilities

assumed were based on the following key inputs:

Oil and natural gas properties

For the EnergyQuest acquisition, the fair value of

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

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

(i) recoverable reserves;

(ii) production rates;

(iii) future operating and development costs;

(iv) future commodity prices;

and (v) a market-based weighted

average costs of capital.

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

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

other risk characteristics.

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

and natural gas properties acquired.

For the Pardus acquisition, the value of oil and

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

acquired and liabilities assumed.

The fair value of asset retirement obligations are

included in proved oil and natural gas properties with a corresponding liability in the table above.

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

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

and accounts payable –

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

Inventory acquired as a part of the acquisition was

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

Deposits were valued based on the actual amount paid

by the seller and held with third parties.

Accounts payable - trade includes liabilities primarily

related to well activity prior to close.

For 2020, the financial statements include Pardus

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

Joint development agreement

On August 6, 2020 the Company, through its wholly owned subsidiary,

Empire Texas, LLC (“ET”), entered into a joint development agreement (the “Agreement”) with Petroleum &

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

Under the terms of the Agreement, PIE

will perform recompletion or workover on specified mutually agreed upon wells (“Workover Wells”) owned by ET.

the work, PIE entered into a term loan agreement with ET dated August 1, 2020, whereby PIE will loan up to $2,000,000, at an interest

rate of 6% per annum, maturing August 6, 2024 unless terminated earlier by PIE.

Proceeds of the loan will be used for recompletion

or workover of the Workover Wells.

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

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

an assignment was completed

in October 2020 for the initial three Workover Wells.

Of the assigned interest, 70% working and revenue interest will be used to

repay the obligations under the term loan agreement.

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

interest to ET in each of the Workover Wells and retain a 50% working and revenue interest (See Note 8).

Activity resulting from

this agreement is being treated as a conveyance.

In addition, PIE and Empire entered into a Securities Purchase

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

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

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

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

at an exercise price of $0.141 per share.

PIE is obligated to exercise the $0.20 warrants within 45 days of when 3 month trailing

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

as of July 2020.

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

stock have been exercised or lapsed.

For the $0.141 warrants, PIE may initially acquire 7,533,333 shares of Empire common stock

(See Note 10).

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

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

Asset retirement obligations

The Company’s asset retirement obligations represent the

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

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

Market risk premiums associated with asset retirement

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

calculations of asset retirement obligations.

The Company’s asset retirement obligation transactions

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

the year ended December 31, 2020

For the year ended

December 31, 2019

The value of oil and gas properties

was based on an allocation of the purchase price which included assignment of values to the other identifiable assets acquired and liabilities

The value of inventory, vehicles, and royalty suspense was based on their relative fair values as described above.

The fair value of asset retirement

obligations are included in proved oil and natural gas properties with a corresponding liability in the table above.

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.

Final settlement on this acquisition

is in process and is expected to occur in 2022.

Note 5 – Joint Development Agreement

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 (See Note 12), 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

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, 2021 approximately $ 800,000 has been advanced from the loan and is

included in Long Term Notes Payable on the Consolidated Balance Sheet.

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.

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 and the activity resulting from the JDA is being treated as a carried interest

with a corresponding term loan.

In 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.

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

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, 2021 and 2020 are summarized in the table below.

For the Year Ended December 31,

Asset retirement obligations, beginning of period

1 unchanged sentence

Revision to estimates

( 2,055,806 )

Accretion expense

Asset retirement obligation, end of period

Derivative financial instruments:

Note 7 – 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 gas the Company produces and sells.

The Company’s derivative financial instruments consist of oil

and natural gas swaps.

The Company does not enter into derivative financial instruments

for speculative or trading purposes.

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.

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.

Unrealized gains and losses related to the swap contracts are recognized and recorded as

an asset or liability on the Company’s balance sheet.

The following table summarized the amounts reported in earnings,

as a component of revenue, related to the commodity derivative instruments for the years ended December 31, 2020 and 2019:

As of December 31,

Gain on derivatives:

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.

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, 2021 and 2020:

For the Year Ended December 31,

Gain (loss) on derivatives:

Oil derivatives

Natural gas derivatives

The following represents the Company’s net cash receipts from

$ ( 586,181 )

The following represents the Company’s net cash receipts from

(payments on) derivatives for the years ended December, 2021 and 2020:

As of December 31,

Net cash receipts from derivatives:

For the Year Ended December 31,

Oil derivatives

$ ( 299,481 )

Natural gas derivatives

The following table sets forth the Company’s

outstanding oil derivative contracts at December 31, 2020.

The Company has no outstanding natural gas derivatives.

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

Price per Bbl

Notes payable:

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

2020 and 2019.

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

in the accompanying consolidated balance sheets.

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

When debt is retired

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

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

December 31, 2020

December 31, 2019

Senior Revolver Loan Agreement, 4.75%, due 2022

Unsecured note –

Pardus acquisition, 1%, due 2021

SBA Payroll Protection Plan note, 1%, due 2023

Term Loan –

PIE, 6%, due 2024

Equipment note, 0%, due in 2025

Senior Unsecured Promissory Notes, 6%, due 2020

$ ( 835,441 )

The following table sets forth the Company’s outstanding derivative

contracts at December 31, 2021:

WTI Index Put Options:

Quarterly volume (MBbl)

Floor Price (Bbl)

WTI Index Put Options:

Quarterly volume (MBbl)

Floor Price (Bbl)

Note 8 - Debt

The following table represents the Company’s

outstanding debt .

Senior Revolver Loan Agreement

Term Loan – PIE

Equipment and vehicle notes, 0 % to 6.99 % interest rates, due in 2025 to 2027 with monthly payments ranging from $ 400 to $ 1,400 per month

Unsecured Note, Pardus Acquisition

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

SBA Payroll Protection Program Note Payable

Unamortized debt issue costs

Total debt, net of debt issue costs

In February 2019, the Company entered into

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

The notes were due May 1, 2019, and accrued

interest at 8%.

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

Morrisett, the Company's President.

notes and the related interest were paid in May 2019.

In September 20, 2018 the Company

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

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

Agreement”).

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

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

Journal Prime plus 150 basis points (4.75% as of December 31, 2020).

The Agreement matured on March 27, 2021.

Collateral for

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

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

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

The Agreement requires the

Company to maintain certain covenants including an EBITDAX to interest expense of at least 3:1 and funded debt to EBITDAX of

4:1 on a trailing twelve month basis.

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

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

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

The Third Amendment, among other things, extended the

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

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

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

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

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

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

the amount of $378,000.

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

as of December 31, 2020).

On May 5, 2020, the Company, through its

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

for $160,700.

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

There are no payments due until ten months

after the covered period which ended October 20, 2020, at which time the payment amount will be determined based on the

portion of the loan which has not been forgiven under criteria established by the SBA, using an eighteen-month amortization.

The Company expects that the loan amount will be forgiven based on currently published guidelines of the United States Small

Business Administration.

In August 2020, concurrent with the Joint Development Agreement

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

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

earlier by PIE.

Less Current Maturities

Total Long-Term Debt

On July 7, 2021 the Company entered into the

Fourth Amendment to its Senior Revolver Loan Agreement (“the Amended Agreement”) with CrossFirst Bank (“CrossFirst”).

The maximum amount that can be advanced under the Agreement is $20,000,000 and the existing commitment amount is $ 7,680,000 which is

reduced by $ 300,000 per calendar quarter beginning September 30, 2021 and includes interest at Wall Street Journal Prime plus 150 basis

points ( 4.75 % as of December 31, 2021).

The Amended Agreement matures on March 27, 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 6:1 on a trailing twelve-month basis and reducing quarterly to 4:1 as of March 31, 2022 and

As of December 31, 2021, the Company has an outstanding loan balance of $ 7,069,500 under the Amended Agreement.

maturities of the Amended Agreement is $1,200,000.

The Company was in compliance with the loan covenants at December 31, 2021.

In 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.

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

In addition, the Company

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

September 30, 2020, approximately $315,000 has been advanced from the loan (See Note 5).

In December 2020 the Company purchased certain equipment totaling

$66,819 to be used on lease sites.

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

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

Senior unsecured convertible promissory

In December 2016, the Company entered into

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

and, collectively, the "Securities Purchase

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

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

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

amount of $132,500 in cash.

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

the option of the holder at $0.15 per share.

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

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

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

The full amount interest

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

The value allocated to the Warrant Certificates

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

no dividend yield,

expected annual volatility of 112%, risk free interest rate of 0.91% and an expected useful life of two years, the fair value of

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

The Notes' conversion

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

in Capital and Debt Issue Costs.

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

amortized as interest expense over the life of the Notes.

In January 2017, the Company entered into

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

and, collectively, the "Securities Purchase

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

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

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

amount of $62,500 in cash.

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

option of the holder at $0.15 per share.

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

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

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

The full amount of

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

The value allocated to the Warrant Certificates

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, 2021, $797,010 has been advanced from the PIE loan.

On April 1, 2020, in conjunction with the purchase

of assets from Pardus Oil & Gas, LLC, the Company entered into an unsecured promissory note agreement with the seller in the amount

of $ 378,000 .

The note was payable in one installment on April 1, 2021 and bore interest at the one-year LIBOR rate.

The note was paid

on April 1, 2021 .

On 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

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.

On 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%.

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.

Note 9 – Convertible Notes Payable

Senior Secured Note Agreement

On 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 12).

Note is collateralized by all assets of Empire New Mexico, matures on December 31, 2021 and bears an interest rate of 3.8 %.

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.

On September 30, 2021, the existing bifurcated

derivative liability was removed in connection with the Amended Secured Note as further discussed.

As 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

three million 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

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 stock.

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.

On 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.

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 .

Pursuant 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.

The Company accounted for the conversion of the

instruments as an inducement by expensing the fair value of the instruments that were issued in excess of the original terms of the Secured

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.

On 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.

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 $5.00 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) .

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

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 approximately $ 540,000 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 $ 3.00 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.

The expense is included in General and Administrative in

the Consolidated Statement of Operations.

Note 10 - Leases

As 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

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.

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 $ 190,000 for the year

ended December 31, 2021.

Cash paid for right of use lease was approximately $ 142,000 for the same period.

Supplemental balance sheet information related to the right of use

leases as of December 31, 2021 is as follows:

Operating lease asset (included in Other Property and Equipment)

Current portion of lease liability

Long-term lease liability

Total right of use lease liabilities

The weighted average remaining term for the Company’s right

of use leases is 3.7 years.

Maturities of lease liabilities as of December 31, 2021 are as follows:

Total lease payments

Less imputed interest

Total lease obligation

Note 11 – Equity

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.

At December 31, 2021 and 2020, the Company had 2,440,700

and 2,500,000 options outstanding that were not included in the calculation of earnings per share for the periods then ended.

Such financial

instruments may become dilutive and would then need to be included in future calculations of Diluted EPS.

On August 7, 2020 concurrently with the Joint Development Agreement

with Petroleum & Independent Exploration, LLC and related entities (“PIE”), the companies entered into a Securities Purchase

Agreement (“Securities Agreement”) whereby PIE purchased for $525,000 (a) 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.

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 110%, risk free interest rate of 1.23% and an expected useful life of two years.

The fair value of

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

The Notes' conversion features were valued at their intrinsic

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

The Debt Issue Costs represent

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

In September and October 2017, the

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

and, collectively, the

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

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

and, collectively, the

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

Each Convertible Note accrued interest at

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

Each investor was also

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

and, collectively, the "Warrant

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

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

The full amount of interest under each

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

The value allocated to the September

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

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

useful life of 28 months.

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

the Black-Scholes option valuation with the following assumptions:

no dividend yield, expected annual volatility of

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

The fair value of the Warrant Certificates

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

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

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

The Debt Issue Costs represent a

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

On December 31, 2018 the Company and investors

for all of the Senior Unsecured Convertible Promissory Notes entered into amended agreements whereby the maturity dates for the

notes maturing December 31, 2018 were extended to December 31, 2019, the conversion feature of the notes was modified from $0.15

per share of common stock to $0.10 per share.

Additionally, the Warrant Certificates to purchase shares of common stock of the

Company, which were issued as a part of the original agreements, were repriced from $0.25 per share to $0.15 per share.

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

with the following assumptions:

no dividend yield, expected annual volatility of 167%, risk free interest rate of 2.63% and

an expected useful life of 12 months.

The change in fair value of the Warrant Certificates as a result of the modifications of

$139,985 was allocated to Paid in Capital and included as an expense in 2018.

The Notes conversion features were equivalent

to their intrinsic value at the date of modification.

In 2019, five of the Senior Unsecured Promissory Note investors

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

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

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

In January 2020

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

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

Common stock:

During December 2016, the Company issued $132,500

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

(See Note 9).

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

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

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

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

During January 2017 the Company issued $62,500

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

(See Note 9).

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

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

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

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

During September and October 2017, the Company

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

investors (See Note 9).

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

at $0.10 per share.

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

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

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

In 2019 and 2020 all of the convertible promissory

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

During January 2018 the Company issued to

several accredited investors 1,100,000 shares of its common stock and warrants to purchase 1,100,000 shares of its common stock

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

The value allocated to the warrants was the fair value determined using

the Black-Scholes option valuation with the following assumptions:

no dividend yield, expected annual volatility of 185%,

risk free interest rate of 2.05% and an expected useful life of 24 months.

The fair value of the warrants of $108,900 was allocated

to Paid in Capital.

During March 2018 the Company issued to an

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

share which expired on December 31, 2019.

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

option valuation with the following assumptions:

no dividend yield, expected annual volatility of 179%, risk free interest

rate of 2.22% and an expected useful life of 22 months.

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

During June 2018 the Company issued warrants

to purchase 645,000 shares of its common stock for $.25 per share which expired on December 31, 2019 to several professionals for

business assistance provided.

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 174%, risk free interest rate

of 2.38% and an expected useful life of 19 months.

The fair value of the warrants of $117,068 was recorded as compensation expense

and allocated to Paid in Capital.

During June 2018 the Company issued to

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

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

The value allocated to the warrants was the fair value determined

using the Black-Scholes option valuation with the following assumptions:

no dividend yield, expected annual volatility

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

The fair value of the warrants of $9,900

was allocated to Paid in Capital.

During August and September 2018, the Company

issued to a group of accredited investors 1,016,667 shares of its common stock and warrants to purchase 1,16,667 shares of its

common stock for $.25 per share which expired on December 31, 2019.

The value allocated to the warrants was the fair value

determined using the Black-Scholes option valuation with the following assumptions:

no dividend yield, expected annual volatility

of 210%, risk free interest rate of 2.49% and an expected useful life of 15 months.

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.

During August and September 2018, the Company

issued to an accredited investor 5,000,000 shares of its common stock and warrants to purchase 5,000,000 shares of its common stock

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 6).

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 .

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 189%,

risk free interest rate of 2.71% and an expected useful life of 27 months.

The fair value of the warrants of $495,000 was allocated

to Paid in Capital.

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

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

warrants were converted to shares of common stock of the Company.

Proceeds received from the conversion was $217,000 including

$50,000 of notes payable conversion by Mr.

During May 2019, the Company issued warrants

to purchase 300,000 shares of its common stock for $0.17 per share which expire on December 31, 2021 to a former employee for business

assistance provided.

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 217%, risk free interest rate of 1.92% and

an expected useful life of 31 months.

The fair value of the warrants of $58,380 was recorded as compensation expense and allocated

to Paid in Capital.

On April 3, 2019 the Board of Directors of

the Company amended certain warrant certificates which had been issued to Mr.

Kamin covering 3,000,000 warrants to purchase common

stock of the Company.

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

and 2,500,000 shares, respectively.

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

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

The fair value of

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

On August 7, 2020 concurrently with the Joint Development

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

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

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

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

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

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

PIE is obligated to exercise the $0.20 warrants within

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

month trailing average production as of July 2020.

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

warrants to purchase Empire common stock have been exercised or lapsed.

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

shares of Empire common stock.

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

valuation with the following assumptions:

no dividend yield, expected annual volatility of 147%, risk free interest rate

of .19% and an expected useful life of 4 years.

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

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

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

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

amended certain warrant certificates which had been issued to Mr.

Pritchard and Mr.

Morrisett covering 1,000,000 warrants to purchase

common stock of the Company.

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

were extended to expire on April 2, 2029.

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

Black-Scholes option valuation with the following assumptions:

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

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

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

as compensation expense and allocated to Paid in Capital.

Stock options:

At the Company's 2006 Annual Meeting of Stockholders,

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

The Plan permitted the issuance of stock

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

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

The total number of shares of common stock that may be issued pursuant to awards under the Plan is 5,000,000.

Under the Plan,

no participant may receive awards of stock options that cover, in the aggregate, more than 500,000 shares of common stock in any

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

which occurred on June 5, 2016.

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

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 Paid in Capital.

For the year ended December 31, 2021, warrants for 700,714 shares of common stock have

been exercised.

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 Ltd (i) 375,000 shares of common stock along with (ii) a warrant certificate to purchase up

to 750,000 three million shares of common stock at an exercise price of $4.00 per Warrant Share until May 14, 2022.

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, Ltd.

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 two million 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

The Unsecured Notes had a maturity date of May 9, 2022 with a single payment and interest at 5 % (See Note 7).

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

On April 3, 2019, the Board of Directors

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

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

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

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

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

Pritchard and Mr.

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

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

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

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

Morrisett each, options to purchase 625,000

shares of common stock of the Company at an exercise price of $ 1.32

The options vested in three installments with 312,500

vesting immediately and 156,250

vesting each in April 2020 and April 2021.

All of the options expire in April 2029.

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

following assumptions:

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

expected useful life of 5.375 years.

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

allocated to Paid in Capital in 2019.

In 2020, the fair value of the

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

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

On December 31, 2020 the Company granted Mr.

Pritchard and Mr.

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

$0.35 per share.

The options vested immediately.

All of the options expire in December 2030.

The value allocated to the vested

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

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

The fair value

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

The Company expenses the cost of options granted

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

Option fair values are estimated at

the grant date using the Black-Scholes option valuation model.

The Black-Scholes option valuation model was developed for

use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.

of determining the expected life of the options, the Company utilizes the Simplified Method as defined in Staff Accounting Bulletin

107 issued by the Securities and Exchange Commission.

In addition, the Black-Scholes option valuation model requires

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

A summary of the Company's Incentive Plan

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

dividend yield, expected annual volatility of 213%, risk free interest rate of 2.32 %

and an expected useful life of 5.375

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 Paid in Capital.

All of the options were vested as of December 31,

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

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

The total number of shares of common stock that

may be issued pursuant to the Incentive Plan is three million.

As of December 31, 2021, grants were made amounting to 187,500 options.

A summary of the Company's Incentive Plan as of

December 31, 2021, and changes during the year is presented below:

Weighted Average

Exercise Price

Outstanding at End of Year 2018

Outstanding at End of Year 2019

Outstanding at End of Year 2020

The following table summarizes information

about stock options outstanding at December 31, 2020:

Income taxes:

The provision for income taxes differs from

the amount obtained by applying the applicable Federal income tax rate of 21% at year-ends 2020 and 2019 to income before income

The difference relates to the following items:

Statutory tax rate

Outstanding at December 31, 2019

Outstanding at December 31, 2020

Outstanding at December 31, 2021

The following table summarizes information about

stock options outstanding at December 31, 2021:

Options Outstanding

Options Exercisable

$ 1.32 to $ 12.20

Note 12 – Income Taxes

The current income tax provision and deferred income tax provision for the years ended December 31, 2021 and 2020 were comprised

for the following:

Expected tax benefit

$ ( 4,802,660 )

$ ( 4,343,542 )

Nondeductible expenses

1 unchanged sentence

Tax provision (benefit) as reported

The components of deferred income taxes at December 31, are as follows:

Deferred tax assets:

At December 31, 2021, the Company had

net operating loss carryforwards of approximately $ 20.7 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.

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 nettax position as of December 31, 2021 and 2020 is as follows

Deferred tax assets (liabilities):

Loss carry-forwards

Depreciation, depletion and impairment

Right of use assets

Stock option grants

Other property and equipment

Unrecognized losses on derivatives

1 unchanged sentence

Valuation allowance

( 6,952,668 )

( 6,768,967 )

Net deferred taxes

At December 31, 2020, the Company has accumulated

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

Reconciliations of the tax expense (benefit) computed

at the statutory federal rate to the Company’s total income tax benefit for the years ended December 31, 2021 and 2020 are as follows:

Pretax GAAP Loss

( 18,614,962 )

( 16,835,434 )

Pretax GAAP Loss at Statutory Rate

( 3,909,142 )

( 3,535,441 )

Nondeductible Expenses

Valuation Allowance

Utilization of the Company’s loss carryforwards

is dependent on realizing taxable income.

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

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

before they expire.

The Company is no longer subject to income

tax examinations by tax authorities for years before 2017.

The Company is not currently the subject of any income tax examinations

by any tax authorities.

Based upon a review of its income tax filing

positions, the Company believes that its positions would be sustained upon an audit and does not anticipate any adjustments that

would result in a material change to its financial position.

Therefore, no reserves for uncertain income tax positions have

been recorded.

The Company recognizes interest related to income taxes as interest expense and penalties as operating expenses.

Operating lease:

The Company adopted ASU No.

2016-02, Topic 842 (ASC 842) -

Leases, effective January 1, 2020.

This ASU requires lessees to recognize an operating lease or right-of-use

("ROU") asset and liability on the balance sheet for all right-of-use leases with an initial lease term greater

Under the transition option, the Company will continue to

apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented and will

make only annual disclosures for the comparative periods because ASC 840 does not require interim disclosures.

amounts have not been adjusted and continue to be reflected in accordance with the Company’s historical accounting.

adoption of this standard on January 1, 2020, had no impact on the Company's consolidated statements of stockholders' equity

or consolidated statements of operations.

As a lessee, the Company leases its corporate office headquarters

in Tulsa, Oklahoma.

The lease expires on December 31, 2025 and has an option to renew for an additional five-year term.

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

Therefore, the period covered by such optional

period is not included in the determination of the term of the lease and the lease payments during these periods are similarly

excluded from the calculation of right-of-use lease asset and lease liability balances.

ROU lease expense consists of rent

expense related to leases that were included in ROU assets under ASC 842.

The Company recognizes right-of use lease expense

on a straight-line basis, except for certain variable expenses that are recognized when the variability is resolved,

typically during the period in which they are paid.

Variable right-of-use lease payments typically include charges for

property taxes, insurance, and variable payments related to non-lease components, including common area maintenance.

As a result of adopting ASC 842, on the effective date, the Company

recognized right-of-use assets and liabilities of $613,901.

Right-of-use leases are included in right-of-use assets (included in

Other Property and Equipment) and current or long-term right-of-use obligations on the consolidated balance sheets.

assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

The Company uses a discount rate that approximates the rate of interest for a collateralized loan over a similar term as the discount

rate for present value of lease payments when the rate implicit in the contract is not readily determinable.

Right of use lease expanse was $34,989 for the year ended December

Cash flows for right of use leases was $-0- for the year as the lease payments did not commence until 2021.

Supplemental balance sheet information related to the right of

use leases as of December 31, 2020:

Right of use lease assets

Right of use lease obligations –

Total right of use lease liabilities

The weighted average remaining term for the Company’s right

of use leases is 5 years.

Maturities of lease liabilities as of December 31, 2020:

Total Lease payments

Less imputed interest

Total lease obligation

Rent expense for the Company’s former

Tulsa office for the year ended December 31, 2020 was $21,117 and $22,700 for the year ended December 31, 2019.

Concentrations:

The Company’s producing properties and oil and natural gas

reserves are all located in Louisiana, North Dakota, and 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,

The Company recorded valuation allowances as of December 31, 2021 and 2020 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.

The 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, 2021, the Company has not established any reserves for, nor recorded any unrecognized benefits

related to uncertain tax positions.

Note 13 – Related Party Transactions

The Energy Evolution Master Fund, Ltd.

Evolution”) is a related party of the Company as it beneficially owns approximately 27 % of the Company’s outstanding shares

of common stock as of December 31, 2021.

Additionally, a board member of Energy Evolution was appointed to the Company’s board

in October 2021.

This board member separately beneficially owns approximately 18 % of the Company’s outstanding shares of common

stock as of December 31, 2021.

The board member also is a majority owner of Petroleum & Independent

Exploration, LLC and related entities (“PIE”).

In October 2021 another Energy Evolution member was appointed to the Company’s

board of directors.

In 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).

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, 2021, the Company has incurred obligations of approximately $ 800,000 as a part of the joint development agreement

(See Note 8).

Note 14 – 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.

The Company is undergoing a sales tax audit related to its Texas entity.

No formal assessment has been

provided to the Company.

The maximum exposure of this sales tax assessment is approximately $ 1.3 million though the Company is

confident that the final assessment will be less than the maximum as previously stated.

Note 15 – 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.

The Company sells 96% of its oil and natural gas production to

four customers.

For the year ended December 31, 2021, the Company sold 63 % of its oil,

natural gas, and NGL to four customers.

For the year ended December 31, 2020, the Company sold 96 % 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.

Subsequent events:

On March 10, 2021 the Company entered into the Third Amendment

(the “Third Amendment”) of its Senior Revolver Loan Agreement (the “Agreement’) with CrossFirst Bank (see

On March 11, 2021 the Company amended the Securities Agreement

with Petroleum & Independent Exploration, LLC (“PIE) to remove the vesting provisions for the warrants, and PIE exercised

all of its warrants to purchase 23,628,185 shares of the Company’s common stock for an aggregate exercise price of $3,349,052

(See Note 5).

On March 12, 2021 the Company, through

its subsidiary Empire New Mexico, LLC entered into a purchase and sale agreement with XTO Holdings, LLC (a subsidiary of

ExxonMobil) (the “Seller’) to acquire, among other things, certain oil and gas properties in New Mexico.

purchase price is $17,800,000 subject to customary adjustments, is effective as of January 1, 2021, and is scheduled to close

April 26,2021.

The Company has wired a deposit of $1,780,000 to the Seller on March 12, 2021.

As a part of the transaction,

the Company established Empire New Mexico, LLC, a wholly owned subsidiary.

On March 22, 2021 the Company, through its wholly owned subsidiary,

Empire ND Acquisitions, LLC, entered into a purchase and sale agreement with 31 Group, LLC to acquire among other things, certain

oil and gas properties in North Dakota.

The purchase price is $900,000 and is reduced by certain expenses which the Company may

incur relating to the properties for up to one year from the April 21, 2021 closing date.

As a part of the transaction, the Company

established Empire ND Acquisition, LLC.

During February

and March 2021, the Company issued to a group of accredited investors 8,993,857 shares of its common stock and warrants to purchase

8,993,857 shares of its common stock for $.50 per share which expires on December 31, 2022.

Proceeds from the sale were $3,147,850.

Note 16 – Subsequent Events

The Company uplisted from the OTCQB to the NYSE American effective March 8, 2022.

Immediately prior to

the listing, a reverse stock split of 1 for 4 occurred.

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

On February 28, 2022, the Company granted approximately 249,000

stock options under the 2021 Stock Option and Incentive plan to management and employees of the Company.

These options vest in equal

1/3 increments over the course of three years and expire 3.5 years after the grant date and have a grant price of $ 11.80 .

The Company named Eugene J.

Sweeney as Chief Operating Officer in

Sweeney previously served as the Company’s Vice President of Operations from May 2021 to the date of his promotion.

EMPIRE PETROLEUM CORPORATION

UNAUDITED SUPPLEMENTARY DATA

Supplemental Information “Oil and Natural

Gas Producing Activities (Unaudited)

December 31, 2021 and 2020

The following reserve estimates

present the Company's estimate of the proven natural gas and oil reserves and net cash flow of the Properties, in accordance with

the guidelines established by the Securities and Exchange Commission.

The Company emphasizes that reserve estimates are inherently

imprecise and that estimates of new discoveries are more imprecise than those of producing natural gas and oil properties.

Accordingly, the estimates are expected to change as future information becomes available.

All the oil and natural gas reserves

are located in Louisiana, North Dakota, Montana and Texas.

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

Capitalized costs include the cost of properties, equipment,

and facilities for oil and natural gas producing activities.

Capitalized costs for proved properties includes costs for oil and natural

gas leaseholds where proved reserves have been identified and non-operated development wells and related equipment and facilities.

Years Ended December 31,

Proved acquisition costs

Revisions to abandonment costs

Development costs

Total additions

Reserve Quantity Information

Proved oil and natural gas reserves

are those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty

to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating

methods, and government regulations.

Proved developed reserves are proved reserves that can be expected to be recovered through

existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor

compared to the cost of a new well.

Proved undeveloped reserves are proved reserves that are expected to be recovered from new

wells on undrilled acreage, or from existing wells where a relatively major expenditures is required for recompletion.

the net quantities of net proved developed and undeveloped reserves of the Properties:

of December 31,

of December, 31

Proved developed reserves:

Beginning of year

Purchase of minerals in place

Revision of previous estimates

Proved developed

Proved undeveloped

Proved behind pipe

Proved shut in

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 year end costs and assuming continuation of existing economic conditions.

Future net cash

flows are discounted at the rate of 10% annually to derive the standardized measure of discounted cash flows.

Actual future

cash inflows may vary considerably, and the standardized measure does not necessarily represent the fair value of the acquired

properties' oil and natural gas reserves.

Standard measure amounts are:

Proved oil and natural gas reserves are

those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to

be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods,

and government regulations.

Proved developed reserves are proved reserves that can be expected to be recovered through existing wells

with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost

of a new well.

Proved undeveloped reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage,

or from existing wells where a relatively major expenditures is required for recompletion.

Below are the net quantities of net proved

developed reserves of the Company’s properties:

Balance, December 31, 2019

Acquisition of Reserves

Balance, December 31, 2020

Acquisition of Reserves

Divestiture of Reserves

Total Reserves

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

year end costs and assuming continuation of existing economic conditions.

Future net cash flows are discounted at the rate of 10%

annually to derive the standardized measure of discounted cash flows.

Actual future cash inflows may vary considerably, and the

standardized measure does not necessarily represent the fair value of the acquired properties' oil and natural gas reserves.

measure amounts are:

Future cash inflows

6 unchanged sentences

(33,021,749 )

Future income tax expense

(30,614,383 )

Future net cash flows

10% annual discount for timing of cash flows

10% annual discount for estimated timing of cash flows

(107,911,087 )

2 unchanged sentences

The 12-month average prices were adjusted

to reflect applicable transportation and quality differentials on a well-by-well basis to arrive at realized sales prices used

to estimate the properties' reserves.

to reflect applicable transportation and quality differentials on a well-by-well basis to arrive at realized sales prices used to estimate

the properties' reserves.

The prices for the properties' reserves were as follows:

Natural gas (MMBtu)

Changes in the Standardized Measure

of Discounted Future Net Cash Flows at 10% per annum are as follows:

Standardized measure –

*Pricing includes revenue received

from NGL sales as well as natural gas.

Changes in the Standardized Measure of

Discounted Future Net Cash Flows at 10% per annum are as follows:

Beginning of year

Sales of oil and gas production

Purchase of minerals in place

Changes in price and production costs

Net change in prices and production costs

(18,386,232 )

Revisions of quantity estimates

Changes in estimated development cost

Accretion of discount

Changes in estimated timing and other, net

Net change in future development costs

Oil & Gas net revenue

(10,587,395 )

Change in standardized measure

Acquisition of reserves

Divestiture of reserves

Revisions of previous quantity estimates

Net change in taxes

(15,544,094 )

Standardized measure –

Accretion of discount

Changes in timing and other

(27,364,345 )

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.

quantities of natural gas and oil may differ materially from the amounts estimated.

Capitalization of Oil and Gas

Empire has not incurred and capitalized exploratory

well costs for properties pending the determination of proved status, exploratory well costs reclassified to wells or exploratory

well costs that were charged to expense.

The aggregate capitalized costs of oil and

gas properties are as follows:

Proved producing wells

Proved undeveloped

Lease and well equipment

Unproved leasehold

Asset retirement obligation

Gross capitalized costs

Depreciation, Depletion and Amortization

Net capitalized costs

Total gross capitalized costs

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