Sec Form 13D Filing - Energy Evolution Master Fund Ltd. filing for EMPIRE PETROLEUM CORP (EP) - 2022-01-10

(Amendment No. 2)

$16,250,000 (the “Secured Convertible Note”) to EEF. The Secured Convertible Note was purchased using EEF’s working capital. Under the Secured Convertible Note, 40% of the principal amount outstanding together with accrued interest thereon (the “Maximum Convertible Amount”) may be converted at a conversion price of $1.25 per share (the “Conversion Price”) into Common Stock, or an aggregate of 5,200,000 shares of Common Stock (without giving effect to any interest that may be converted). The Conversion Price is subject to customary downward adjustments. As partial consideration for the issuance of the Secured Convertible Note, the Company issued (a) 1,500,000 shares of Common Stock along with (b) a warrant certificate (the “Note Warrant”) to purchase up to 3,000,000 shares of Common Stock (the “Note Warrant Shares”) at an exercise price of $1.00 per Note Warrant Share. Under the Note Warrant, the exercise price is subject to customary downward adjustments, including in the event that the Company conducts capital raises at a valuation less than $1.00 per share of Common Stock. Effective as of June 15, 2021, EEF partially exercised the Note Warrant by acquiring 1,500,000 shares of Common Stock for an aggregate exercise price of $1,500,000. Effective as of June 16, 2021, EEF exercised the remaining portion of the Note Warrant by acquiring 1,500,000 shares of Common Stock for an aggregate exercise price of $1,500,000. Such exercise prices were funded using EEF’s working capital.

Also on May 14, 2021, Green Tree New Mexico issued that certain Unsecured Convertible Note due May 9, 2022 in the aggregate principal amount of $1,500,000 (the “Unsecured Convertible Note”) to Phil E. Mulacek. The Unsecured Convertible Note was purchased using Mr. Mulacek’s personal funds. Under the Unsecured Convertible Note, 100% of the principal amount outstanding together with accrued interest thereon may be converted at a conversion price of $1.25 per share into Common Stock, or an aggregate of 1,200,000 shares of Common Stock (without giving effect to any interest that may be converted). Effective as of May 14, 2021, Mr. Mulacek converted the Unsecured Convertible Note in full by acquiring 1,200,000 shares of Common Stock, then contributed such 1,200,000 shares to EEF.

To incentivize Mr. Mulacek to purchase the Unsecured Convertible Note, executive officers of the Company entered into arrangements with Mr. Mulacek, pursuant to which Mr. Mulacek had the right to purchase up to 600,000 shares of Common Stock from such executive officers for $0.75 per share. Mr. Mulacek contributed such rights to EEF. On or about May 27, 2021, EEF exercised such rights in full. EEF used its working capital in connection with exercising such rights.

On or about June 1, 2021, third parties transferred 2,100,000 shares of Common Stock to EEF in exchange for an ownership interest in EEF on the basis of a valuation of $0.75 per share for each share of Common Stock.

On September 29, 2021, the Company and Green Tree New Mexico entered into a Loan Modification Agreement with EEF that made certain modifications to the Secured Convertible Note. In connection with the Loan Modification Agreement, among other things, (i) EEF converted $6,500,000 of principal under the Secured Convertible Note along with accrued interest into 5,305,208 shares of Common Stock on September 30, 2021, (ii) the maturity date of the Secured Convertible Note was extended from December 31, 2021 to June 30, 2023, (iii) the Company issued a Common Share Warrant Certificate dated as of September 30, 2021 pursuant to which EEF has the right to acquire 500,000 shares of Common Stock at an exercise price of $5.00 per share (assuming the effectiveness of the Company’s currently contemplated 1 for 4 reverse stock split, or an aggregate of 2,000,000 shares of Common Stock at $1.25 per share on a pre-reverse stock split basis) on or before December 31, 2023, (iv) each quarterly interest payment under the Secured Convertible Note shall be payable in shares of Common Stock converted at a conversion price of $5.00 per share (assuming the effectiveness of the Company’s currently contemplated 1 for 4 reverse stock split, or at $1.25 per share on a pre-reverse stock split basis) unless EEF otherwise elects to be paid in cash, and (v) upon maturity of the Secured Convertible Note, EEF has the option to convert the remaining principal balance along with accrued interest into common stock of the Company in lieu of cash payment. EEF used its working capital in connection with the conversion described in this paragraph.

On December 30, 2021, the Company, Green Tree New Mexico, and EEF amended the Secured Convertible Note so that EEF could covert 100% of the principal and accrued interest outstanding under the Senior Convertible Note, and EEF converted 100% of the principal ($5,715,353) and interest ($55,075) outstanding under the Secured Convertible Note into 4,616,343 shares of Common Stock. EEF used its working capital in connection with this conversion.