UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

 

                                                   (Mark One)

   [X] Quarterly Report Pursuant to Section 13 OR 15(d) of theSecurities Exchange Act of 1934

For the quarterly period ended September 30, 2001

[] Transition Report Under Section 13 or 15(d) of the Exchange Act

For the transition period from _______________to________________

Commission file number 0-20193

EMPIRE PETROLEUM CORPORATION

(Exact name of small business issuer as specified in its Charter)

|  | DELAWARE
95-4833049
(State or other jurisdiction of    incorporation or organization)
(I.R.S. Employer Identification No.)
610, 715 – 5th AVENUE,    S.W., Calgary, Alberta, Canada
T2P 2X6
(Address of principal executive offices)
(Zip Code)
(Issuer's telephone number)
(403) 262-1118
 

Americomm Resources Corporation

(Former name, former address and former fiscal year, if changed sincelast report)

State the number of shares outstanding of each of the issuer's classesof common equity, as of the latest practicable date:

Common Stock, $.001 Par Value – 23,495,259 shares outstanding as ofSeptember 30, 2001.

Transitional Small Business Disclosure Format: [ ] Yes [X] No

 

 

EMPIRE PETROLEUM CORPORATION

INDEX TO FORM 10-QSB
Part I. FINANCIAL INFORMATIONPageItem 1. Financial StatementsBalance Sheet at September 30, 2001 (Unaudited)
3Statements of Operations for the three months ended September    30, 2001 and 2000, and the nine months ended September 30, 2001 and 2000 (Unaudited)
4Statements of Cash Flows for the nine months ended September    30, 2001 and 2000 (Unaudited)
5Notes to Financial Statements
6Part II. OTHER INFORMATIONItem 2. Changes in Securities
Item 5. Other information
9

10Item 6. Exhibits and Reports on Form 8-K
10Signatures
10
 

 

Item 1. FINANCIAL STATEMENTS

EMPIRE PETROLEUM CORPORATION

BALANCE SHEET

 

ASSETS**September 30,

2001**December 31,

2000Current assets:**(Unaudited)Cash and cash equivalents
$ 32,218 
$ 13,000Accounts receivable
Prepaid expenses
157,249

2,783
35,604

3,569Total current assets
192,250
52,173Investment in prospects
-
881,407Property & equipment net of accumulated
depreciation    and depletion
7,036,854
9,358
$ 7,229,104 
$ 942,938LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued liabilities
Notes payable    (Note 3)
$ 273,534

116,000
$ 95,030 

-Notes payable to affiliate (Note 3)
66,000
282,754Total current liabilities
455,534
377,784Long-term note payable (Note 3)
30,000
-Deferred taxes
1,250,000
-Total liabilities
1,735,534
377,784Stockholders' equity:Common stock at par value
23,495
14,880Additional paid in capital
Accumulated deficit
7,444,673

(1,974,598)
2,365,528

(1,815,254)Total stockholders' equity
5,493,570
565,154
$ 7,229,104 
$ 942,938
See accompanying notes to financial statements.

 

EMPIRE PETROLEUM CORPORATION

STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended 

September 30,
Nine Months Ended

September 30,
2001
2000
2001
2000Revenue:
Revenues, net 
$              - 
$               -
$ 12,410
$              -Less royalty expense
-
-
(2,482)
-
-
-
9,928
-Costs and expenses:Operating expenses
7,446
-
17,600
-General and administrative
77,952
26,295
150,067
108,369Depletion and amortization
-
-
1,050
2,043
85,398
26,295
168,717
110,412Operating loss
85,398
26,295
158,789
110,412Other income and expense:Interest income
-
(1,029)
(6,918)
(2,841)Interest expense
5,918
-
7,473
-Total other income and expense
5,918
(1,029)
555
(2,841)Net loss
$    (91,316) 
$    (25,266)
$    (159,344) 
$(107,571)Net loss per common share
$ 0.00
$ 0.00
$ 0.01
$ 0.01Weighted average number of
common shares outstanding
21,284,401
14,879,589
19,362,947
14,879,589
See accompanying notes to financial statements

 

EMPIRE PETROLEUM CORPORATION

STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended 
September 30,

2001
September 30,

2000Cash flows from operating activities:Net loss
$ (159,344)
$ (107,571)Adjustments to reconcile net loss to net cash    used in operating activities:Depletion and amortization
1,050
2,043(Increase) decrease in assets:
Accounts    receivable 
(121,645)
-Prepaid expenses
786
3,244Increase in liabilities:Accounts payable and accrued expenses
178,504
3,189Net cash used in operating activities 
(100,649)
(99,095)Cash flows from investing activities:Additions to property, plant and equipment
(723,176)
-Cash payments for investments in prospects
-
(141,028)Net cash used in investing activities
(723,176)
(141,028)Cash flows from financing activities:Issuance of common stock
913,797
200,000(Repayment) proceeds of note payable –    affiliate
(70,754)
110,000Net cash provided by financing activities
843,043
310,000Net increase in cash
19,218
69,877Cash and cash equivalents – Beginning
13,000
23,153Cash and cash equivalents – Ending
$   32,218
$   93,030
See accompanying notes to financial statements

 

EMPIRE PETROLEUM CORPORATION 

NOTES TO CONSOLDIATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1.     BASIS OF PRESENTATION:

The accompanying unaudited financial statements of Empire PetroleumCorporation ("Empire", or the "Company") have been prepared inaccordance with generally accepted accounting principles for interim financial informationand the instructions to Form 10-QSB. Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principles forcomplete financial statements. In the opinion of management, all adjustments (consistingof only normal recurring accruals) considered necessary for a fair presentation of theCompany’s financial position, the results of operations, and the cash flows for theinterim periods are included. Operating results for the interim periods are notnecessarily indicative of the results that may be expected for the year ending December31, 2001.

On July 20, 2001, the Board of Directors approved the merger ofAmericomm Resources Corporation with its wholly owned subsidiary Empire PetroleumCorporation and the simultaneous change in the name of the corporation to Empire PetroleumCorporation. Both the merger and name change were effective August 15, 2001.

The information contained in this Form 10-QSB should be read inconjunction with audited financial statements and related notes for the year endedDecember 31, 2000 which are contained in the Company’s Annual Report on Form 10-KSBfiled with the Securities and Exchange Commission (the "SEC") on March 29, 2001,Form 10KSB/A Number 1 filed on May 7, 2001.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Oil and gas properties - The Company uses the successful efforts methodof accounting for its oil and gas activities. Costs incurred are deferred untilexploration and completion results are evaluated. At such time, costs of activities witheconomically recoverable reserves are capitalized as proven properties, and costs ofunsuccessful or uneconomical development work are expensed.

Cash and cash equivalents - The Company defines cash and cashequivalents to be cash on hand, cash in checking accounts, certificates of deposit, cashin money market accounts and certain investments with maturities of three months or lessfrom the date of purchase.

3.    NOTES PAYABLE 

On June 4, 2001 the corporation received proceeds from two notespayable in the amount of $116,000 and further signed a debenture note payable from anaffiliated person for a further $66,000. These notes are unsecured and bear interest at12% per year, with interest payable monthly. They are due and payable by the corporationon June 4, 2002 including a 3% premium on the principal amounts due. In no event shallinterest to be paid exceed an amount equal to simple interest on the unpaid principalbalances of the notes at the maximum rate permitted by applicable law.

On August 23, 2001 the corporation received proceeds of a long-termnote payable in the amount of $30,000. The note is unsecured and bears interest at 1% permonth and is convertible, at the note holder’s option, into a .5% working interest inthe Timber Draw project.

4.    INCOME TAXES

As of September 30, 2001 the Company has tax net operating losscarry forwards totalling approximately $1,754,000. If not used, these carry forwards willexpire in the years 2001 to 2020. 

5.    EMPIRE PETROLEUM CORPORATION ACQUISITION

On May 29, 2001 the Company acquired Empire Petroleum Corporation, aprivate company that owns a 25% interest in the Cheyenne River Prospect, increasing theCompany’s working interest in the Cheyenne River Wyoming Prospect to 75%. Theacquisition of Empire was accomplished by the issue of 7,492,351 common shares or 30.6% ofthe total 24,476,925 shares now outstanding on a fully diluted basis. The Company’sshares issued were valued at $0.55 each for this transaction. The acquisition wasaccounted for as follows:

USD$Value of shares issued  4,120,793Current assets347,762Investments206,250Current Liabilities(607,182)Deferred Taxes (1,250,000)Petroleum and natural gas properties5,423,963  4,120,793
 

Management changes concurrent with the Empire acquisition included theappointment of John P. McGrain as Chairman and Chief Executive Officer, and Thomas J.Jacobsen as President and Chief Operating Officer of the combined company. Mr. McGrain,has 30 years experience as an investor with a focus on oil and gas companies and iscurrently the Chairman of Westlinks Resources (Nasdaq: WLKS). Mr. Jacobsen, also aDirector of Westlinks, has more than 40 years experience in the oil and gas industrywithin Canada, the United States and internationally.

The Board of Directors is now comprised of John P. McGrain, Thomas J.Jacobsen, Albert E. Whitehead, Thomas R. Bradley and John C. Kinnard. George H. Plewes hasresigned as a director. Al Whitehead and Tom Bradley, in addition to their board duties,will continue to manage the company's land inventory of over 100,000 acres of leases.

On July 20, 2001 the Board of Directors approved the merger of theCompany with its now wholly owned subsidiary Empire Petroleum Corporation and thesimultaneous change in the name to Empire Petroleum Corporation. Both the merger and namechange were effective August 15, 2001.

Item 2. PLAN OF OPERATION

All statements, other than statements of historical fact contained inthis report are forward-looking statements. Forward-looking statements generally areaccompanied by words such as "anticipate," "believe,""estimate," "expect," "may," "might,""potential," "project" or similar statements. Although the Registrantbelieves that the expectations reflected in such forward-looking statements arereasonable, no assurance can be given that such expectations will prove correct. Factorsthat could cause the Registrant's results to differ materially from the results discussedin such forward-looking statements include the need for additional capital, the costsexpected to be incurred in the exploration and development of the Registrant's properties,unforeseen engineering, mechanical or technological difficulties in drilling wells,uncertainty of exploration results, operating hazards, competition from other naturalresource companies, the fluctuations of prices for oil and gas, the effects ofgovernmental and environmental regulation, general economic conditions and other risksdescribed in the Registrant's filings with the Securities and Exchange Commission.Accordingly, the actual results of the Registrant's operations in the future may varywidely from the forward-looking statements included herein, and all forward-lookingstatements in this Report are expressly qualified in their entirety by the cautionarystatements in this paragraph.

Empire has no income producing oil and gas properties at September 30,2001. However, an oil and gas test well was drilled in January 2001 on the Cheyenne RiverProspect. The test well encountered flows of oil and natural gas during the drillingperiod and was subsequently completed as an oil well as described below.

As of September 30, 2001, Empire had $32,218 of cash on hand. Empireexpects that its cash on hand will be sufficient to fund its operations for the next 3months. Empire’s material commitments consist of annual lease payments on theCheyenne River Prospect of approximately $142,882, of which $102,942 were paid in March2001, with $40,424 of this amount paid by the Registrant and the balance of $62,518 paidby the parties to the Farmout Agreement in the Cheyenne River Prospect. The Registrant'sadditional commitments consist of office lease payments of $3,568 per month and the salaryof one secretary. In January 2001, the Registrant sublet a portion of its office space at$1,000 per month. Mr. McGrain serves as an executive officer of the Registrant withoutcompensation. 

During the period from February 13, to June 22, 2001, the Companyconducted a series of production methods on its Timber Draw Unit #1-AH oil and gasdiscovery. During the test period, the well flowed 8,139 barrels of 44 degree lightgravity sweet crude and 29,072,000 cubic feet of natural gas with a BTU content of 1,493and rich in natural gas liquids. Consulting engineers have calculated natural gas liquidsof approximately 70 barrels per day based on estimated gas production of 500,000 cubicfeet per day. Due to the lack of a nearby pipeline connection the well was shut-in on June22, 2001 to conserve the natural gas, which was flared during the test period. 

It was previously reported that the Company anticipated drillingadditional wells in the fourth quarter, however, due to poor financial market conditionsit was not possible to raise the funds necessary to conduct the forth quarter drillingprogram. The Company now has elected to make an effort to sell and/or sell-farmout a 25%working interest in the Timber Draw #1-AH discovery well and the 100,000 acres under leasein the Cheyenne River Prospect. Upon concluding a sale or sale-farmout, steps will betaken to conduct a sixteen square mile seismic survey surrounding the discovery well andbuilding a ten mile pipeline to a gas purchaser in order to place the well on production. 

The Bureau of Land Management (BLM) has advised the Company it willrequire additional test data before it can determine the economic status of the wellpursuant to the terms of the Timber Draw Unit. A continuous test of the well will becarried out after its connection to a purchaser’s pipeline and the Companyanticipates the BLM will require about six months of production history before it rendersits ruling on whether the Company has a paying or non-paying well based on its criteriawhich is essentially based on whether or not the production from the well will payout thecost of such well. Based on results of the production testing, 3D seismic interpretationand financing, the Company now plans additional drilling in the 2nd Quarter of2002.

Empire does not at this time expect any significant change in thenumber of its employees during the next twelve months. If Empire is successful in raisingadditional capital, it will employ part-time or temporary persons and consultants insituations where special expertise is required.

PART II. OTHER INFORMATION

Item 2. CHANGES IN SECURITIES

Recent Sales of Unregistered Securities

On June 29, 2001, The Company issued 7,492,351 shares of Common Stockin conjunction with the acquisition of Empire Petroleum Corporation.

During March 2001, as described elsewhere herein, the Registrant issued748,319 shares of common stock to the Albert E. Whitehead Living Trust upon conversion bysuch trust of a convertible promissory note due March 15, 2001. The convertible promissorynote had an outstanding balance of principal and accrued interest of $327,015.63 and wasconvertible at the rate of $0.4370 per share of common stock, which represents the marketprice of the common stock on the date this convertible promissory note was issued.

During January 2001 in connection with the Farmout Agreement relatingto its Cheyenne River Prospect, the Registrant sold to Empire Petroleum Corporation375,000 shares of Common Stock for $0.40 per share for a total purchase price of $150,000.

All of such shares were issued in reliance on the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended. Among thefacts supporting the Registrant's reliance on such exemption are that the shares wereissued to a small number of sophisticated purchasers and that the purchasers acquired theshares for their own accounts and without intention of distributing or reselling theshares except in compliance with applicable securities laws. The shares bear appropriaterestrictive legends.

Item 5. Other information

On July 20, 2001 the Board of Directors approved the merger of theCompany with its wholly owned subsidiary Empire Petroleum Corporation and the simultaneouschange in the name of the Company to Empire Petroleum Corporation. Both the merger andname change are effective August 15, 2001. 

Item 6. Exhibits and Reports on Form 8-K

Exhibits - none

Reports on Form 8-K. 

A form 8-K was filed June 30, 2001 regarding the acquisition of Empire      Petroleum Corporation. An amended form 8-K regarding the acquisition of Empire Petroleum      Corporation was filed July 23, 2001.

 

 

EMPIRE PETROLEUM CORPORATION 

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of1934, the Registrant caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

EMPIRE PETROLEUM CORPORATION 

Date: December 6, 2001                    By: /s/ Thomas J. Jacobsen

Thomas J. Jacobsen

                                                           President & Chief Operating Officer****** |
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