Empire Energy Group Limited 424B3 Prospectus supplement

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-159119

EMPIRE ENERGY CORPORATION INTERNATIONAL

164,865,365

Shares of Common Stock

Par Value $0.001 Per Share

This prospectus relates to the offering by the selling stockholders of Empire Energy Corporation International of up to 164,865,365 shares of our Class A common stock, par value $0.001 per share, including shares issuable to persons holding warrants and a convertible debenture. We are registering the offer and sale of the common stock, to satisfy registration rights we have granted to the selling stockholders.

We will not receive any proceeds from the sale of common stock. We will receive proceeds from the exercise price of certain warrants and options if they are exercised by the holders. We intend to use any proceeds received from the selling stockholders’ exercise of the warrants for working capital and general corporate purposes.

The selling stockholders have advised us that they will sell the shares of common stock from time to time in the open market, on the OTC Bulletin Board, in privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or otherwise as described under the section of this prospectus titled “Plan of Distribution.”

Our common stock is traded on the OTC Bulletin Board under the symbol “EEGC.” On August 20, 2009the closing price of the common stock was $0.02 per share.

You should rely only on the information contained in this prospectus or any prospectus supplement or amendment. We have not authorized anyone to provide you with different information.

Investing in these securities involves significant risks. See “Risk Factors” beginning on page 3.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this Prospectus is September 22, 2009

TABLE OF CONTENTS


	Page
SUMMARY	3
THE OFFERING	4
RISK FACTORS	4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	8
USE OF PROCEEDS	8
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	8
MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS	9
DESCRIPTION OF BUSINESS	15
DESCRIPTION OF PROPERTY	19
MANAGEMENT	24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	29
DESCRIPTION OF SECURITIES	31
SELLING SECURITY HOLDERS	32
PLAN OF DISTRIBUTION	34
LEGAL PROCEEDINGS	35
LEGAL MATTERS	36
EXPERTS	36
ADDITIONAL INFORMATION	36
FINANCIAL STATEMENTS	F-1

SUMMARY

The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the “Risk Factors” section, the financial statements, and the notes to the financial statements.

For purposes of this prospectus, unless otherwise indicated or the context otherwise requires, all references herein to “Empire,” “we,” “us,” and “our,” refer to Empire Energy Corporation International, a Nevada corporation.

Our Company

Empire is a reporting company under the Securities Exchange Act of 1934 whose common stock trades on the OTC Bulletin Board under ticker symbol EEGC. The Company is headquartered in Leawood, Kansas (Kansas City area). Empire is principally an exploration stage oil and gas exploration company, devoting substantially all of its efforts to exploration and development of sub-surface hydrocarbons (oil and gas) in commercial quantities in Tasmania.

Empire was incorporated on November 10, 1983 in the state of Utah under the name Medivest, Inc. In 1999, the stockholders of Medivest approved a change of name from Medivest Inc. to Empire Energy Corporation and Empire commenced commercial activity in the oil and gas industry. In July 2002, Empire entered into an agreement to acquire Great South Land Minerals, Ltd., an oil and gas exploration company in Tasmania, Australia, which it completed on April 15, 2005 by issuing 62,426,782 shares of Class A common stock, after which former shareholders of Great South Land owned approximately 95% of the outstanding shares of Empire Energy. To facilitate the merger with Great South Land, Empire sold all of its assets in exchange for the purchasers’ assumption of Empire’s liabilities, changed it name from Empire Energy Corporation to Empire Energy Corporation International, reincorporated in the state of Nevada, increased the authorized shar es of common stock to 100,000,000 (subsequently increased to 300 million and to 600 million) and effected a 1 for 10 reverse stock split.

At present, the Company’s principal assets are the exploration license held through its wholly-owned subsidiary Great South Land Minerals Limited.

This prospectus

We have undertaken several transactions the result of which has been the issuance of shares that have restrictions on their transferability, including shares acquired by certain of our officers and directors. In order to provide those investors with liquidity for their shares, we are filing with the SEC this prospectus as part of a registration statement to register those securities. We are also registering the resale of shares of Class A common stock to be issued to persons who exercise Class A, Class B or Class C warrants. We will not receive any proceeds from any sales of these shares but may receive the exercise price from warrant holders electing to exercise their warrants to acquire common stock at a set price. Any funds we receive upon exercise of warrants would be used for general corporate purposes.

THE OFFERING


Common stock currently outstanding		278,543,190 shares

Common stock offered by the selling stockholders, not included in currently outstanding (1)		85,041,871 shares

Common stock outstanding after the offering⁽²⁾		363,585,061 shares

Common stock offered by the selling stockholders, included in common stock currently outstanding (3)		79,823,494 shares

Total common stock offered by the selling stockholders (4)		164,865,365 shares

Use of proceeds		We will not receive any proceeds from the sale of common stock offered by this prospectus except proceeds from the exercise of options or warrants, if any.

OTC Bulletin Board symbol		EEGC

(1)

Assumes full exercise of warrants for 28,813,300 shares and options for 4,400,000 shares as well as the conversion of the full principal of convertible debt into 28,828,571 shares and conversion of additional debt into 23,000,000 shares presently held as collateral.

(2)

Includes 278,543,190 shares currently outstanding and assumes full exercise of warrants for 28,813,300 shares and options for 4,400,000 shares as well as the conversion of the full principal of convertible debt into 28,828,571 shares and conversion of additional debt into 23,000,000 shares presently held as collateral.

(3)

Includes 79,823,494 shares currently outstanding.

(4)

Includes 79,823,494 shares currently outstanding and assumes full exercise of warrants for 28,813,300 shares and options for 4,400,000 shares as well as the conversion of the full principal of convertible debt into 28,828,571 shares and conversion of additional debt into 23,000,000 shares presently held as collateral.

RISK FACTORS

You should carefully consider the following risk factors, together with the information contained in this registration statement and the documents referred to herein. You should also be aware that the risks described below may not be the only risks relevant to your determination. Instead, these are the risks that we believe may be most material to your decision.

Risks related to the oil and gas industry

We may not be able to meet our substantial capital requirements.

Our business is capital intensive. We must invest a significant amount in development and exploration activities. We are currently making and intend to continue to make substantial capital expenditures to find, develop and produce natural gas and oil reserves. If our capital resources diminish, we may not be able to meet the exploration expenditure requirements of our petroleum license – thus voiding the license. The license is our single most important asset and its loss would result in a substantial decrease in our ability to eventually become a profit-generating company.

Even if we acquire sufficient financing to meet the license expenditures, we may not be able to expend the capital necessary to undertake or complete future drilling programs or acquisition opportunities unless we raise additional funds through debt or equity financings. We may not be able to obtain debt or equity financing to meet our capital requirements. Moreover, our future cash flow from operations may not be sufficient for continued exploration, development or acquisition activities, and we may not be able to obtain the necessary funds from other sources.

We anticipate future losses and negative cash flow.

We have experienced negative cash flow from our operations and exploration and development activities in Tasmania since inception. We are strictly in the exploration phase and have no proven petroleum reserves. We expect to continue to incur significant expenditures over the next several years with our operations and development activity, including further seismic studies and exploratory and development drilling. Based on the exploration results to date, we anticipate that the cost per commercial well, if further results justify attempts at commercial drilling, would be no less than US$ 3.5 million each.

New investors may require participation interests which could decrease future profitability.

The pace of exploration and development activity may be determined by the amount of funding available. If funding is limited, exploration and development may be continued under agreements that provide investors with a participation interest in a particular property held by us. Under this type of arrangement, an investor would invest in a specific property and receive a negotiated interest in that specific property. This could reduce the potential profitability of the remaining interest in the property and reduce our ability to control and manage the property.

The success of our business depends upon our ability to find, develop and acquire oil and gas reserves.

We expect to find reserves of gas and oil that can be profitably exploited. There is, however, no guarantee that we will find reserves that will be economically feasible. Future drilling activities could subject us to many risks, including the risk that we will not find commercially productive reservoirs. Drilling for oil and natural gas can be unprofitable, not only from dry wells, but also from productive wells that do not produce sufficient revenues to return a profit. Also, title problems, weather conditions, governmental requirements and shortages or delays in the delivery of equipment and services can delay our drilling operations or result in their cancellation. The cost of drilling, completing and operating wells is often uncertain, and new wells may not be productive. As a result, we may not recover all or any portion of our investment. Moreover, if natural gas and oil prices decline, the amount of natural gas and oil we can economically produce may be reduced.

Drilling new wells could result in new liabilities, which could endanger our interests in our properties and assets.

There are risks associated with the drilling of oil and natural gas wells, including encountering unexpected formations or pressures, premature declines of reservoirs, blow-outs, craterings, sour gas releases, fires and spills. The occurrence of any of these events could cause substantial losses and impair our future operating results. Empire Energy may become subject to liability for pollution, blow-outs or other hazards. We intend to obtain insurance with respect to these hazards, but such insurance has limitations on liability that may not be sufficient to cover the full extent of such liabilities. The payment of such liabilities could reduce the funds available to us or could, in an extreme case, result in a total loss of our properties and assets. Moreover, we may not be able to maintain adequate insurance in the future at rates that are considered reasonable. Oil and natural gas production operations are also subject to all the risks typically assoc iated with such operations, including premature decline of reservoirs and the invasion of water into producing formations.

Decommissioning costs may be substantial; unplanned costs could divert resources from other projects.

We may become responsible for costs associated with abandoning and reclaiming wells, facilities and pipelines which we use for production of oil and gas reserves. Abandonment and reclamation of these facilities and the costs associated therewith is often referred to as “decommissioning.” We have not yet determined whether we will establish a cash reserve account for these potential costs in respect of any of our current properties or facilities, or if we will satisfy such costs of decommissioning from the proceeds of production in accordance with the practice generally employed in onshore and offshore oilfield operations. If decommissioning is required before economic depletion of our properties or if our estimates of the costs of decommissioning exceed the value of the reserves remaining at any particular time to cover such decommissioning costs, we may have to draw on funds from other sources to satisfy such costs. The use of other funds to sa tisfy such decommissioning costs could impair our ability to focus capital investment in other areas of our business.

We may not be able to effectively manage our growth, which may harm our profitability.

Our strategy envisions expanding our business. If we fail to effectively manage our growth, our financial results could be adversely affected. Growth may place a strain on our management systems and resources. We must continue to refine and expand our business development capabilities, our systems and processes and our access to financing sources. As we grow, we must continue to hire, train, supervise and manage new employees. We cannot assure you that we will be able to:


	•		expand our systems effectively or efficiently or in a timely manner;


	•		allocate our human resources optimally;


	•		identify and hire qualified employees or retain valued employees; or


	•		incorporate effectively the components of any business that we may acquire in our effort to achieve growth.

If we are unable to manage our growth and our operations our financial results could be adversely affected by inefficiency, which could diminish our profitability.

A decline in natural gas and oil prices may adversely affect our financial results.

Revenues we generate from future operations would be highly dependent on the price of, and demand for, natural gas and oil. Even relatively modest changes in oil and natural gas prices may significantly change those revenues, results of operations, and cash flows. Historically, the markets for natural gas and oil have been volatile and are likely to continue to be volatile in the future. Prices for natural gas and oil may fluctuate widely in response to relatively minor changes in the supply of and demand for natural gas and oil, market uncertainty and a variety of additional factors that are beyond our control, such as:


	•		the domestic and foreign supply of natural gas and oil;


	•		the price of foreign imports;


	•		overall domestic and global economic conditions;


	•		political and economic conditions or hostilities in oil producing countries, including the Middle East and South America;


	•		the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;


	•		the level of consumer product demand;


	•		weather conditions;


	•		domestic and foreign governmental regulations;


	•		development of alternate technologies; and


	•		the price and availability of alternative fuels.

Competitive industry conditions may adversely affect our results of operations.

As a prospective independent natural gas and oil producer, we face strong competition in all aspects of our business. Many of our competitors are large, well-established companies that have substantially larger operating staffs and greater capital resources than we do. These companies may be able to pay more for productive natural gas and oil properties and exploratory prospects and to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial and human resources permit.

We may incur substantial costs to comply with environmental and other governmental regulations.

Our exploration and development activities are regulated extensively. We have made and will continue to make all necessary expenditures, both financial and managerial, in our efforts to comply with the requirements of environmental and governmental regulations. Increasingly strict environmental laws, regulations and enforcement policies and claims for damages to property, employees, other persons and the environment resulting from our activities could result in substantial costs and liabilities in the future.

Foreign currency exchange rate fluctuations may affect our financial results.

We expect to sell our oil and natural gas production under agreements that may be denominated in United States dollars and foreign currencies. Many of the operational and other expenses we incur may be paid in the local currency of the country where we perform our operations. As a result, fluctuations in the United States dollar against the local currencies in jurisdictions where we operate could result in unanticipated and material fluctuations in our financial results. Local operations may require funding that exceeds operating cash flow and there may be restrictions on expatriating proceeds and/or adverse tax consequences associated with such funding. We presently do not use derivatives to hedge changes in foreign currency.

Our management team does not have extensive experience in public company matters, which could impair our ability to comply with legal and regulatory requirements.

Our management team has had limited U.S. public company management experience or responsibilities, which could impair our ability to comply with legal and regulatory requirements, such as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws including filing required reports and other information required on a timely basis. Our management may not be able to implement and affect programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.

Going Concern and Liquidity may be concerns.

We are in the development stage, devoting substantially all of our efforts to exploration and raising financing. We have substantially funded our operations with proceeds from the issuance of common stock. In the course of our exploration activities, we have sustained operating losses and expect such losses to continue for the foreseeable future. We will finance our operations primarily through cash and cash equivalents on hand, future financing from the issuance of debt or equity instruments and through the generation of revenues once commercial operations get underway. However, the Company has yet to generate any significant revenues and has no assurance of future revenues. To management’s knowledge, no company has yet successfully developed sub-surface hydrocarbons in commercial quantities in Tasmania. Even if development efforts are successful, substantial time may pass before revenues are realized.

Market risks

The trading price of our common stock may be volatile.

Our common stock trades on the OTC Bulletin Board. The OTC Bulletin Board is not an exchange. Trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on an exchange or NASDAQ. You may have difficulty reselling any of the shares that you purchase from the selling shareholders. We are not certain that a more active trading market in our common stock will develop, or if such a market develops, that it will be sustained. Sales of a significant number of shares of our common stock in the public market could result in a decline in the market price of our common stock, particularly in light of the illiquidity and low trading volume in our common stock.

The trading price of our common stock has from time to time fluctuated widely and in the future may be subject to similar fluctuations. The trading price may be affected by a number of factors including the risk factors set forth herein, as well as our operating results, financial condition, general conditions in the oil and gas exploration and development industry, market demand for our common stock, various other events or factors both in and out of our control. In addition, the sale of our common stock into the public market upon the effectiveness of this registration statement could put downward pressure on the trading price of our common stock. In recent years, broad stock market indices, in general, and smaller capitalization companies, in particular, have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our common stock. These fluctuations may have a negative effect on the market price of our common stock.

We do not expect to pay dividends in the foreseeable future.

We do not intend to declare dividends for the foreseeable future, as we anticipate that we may reinvest any future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms or at all. Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in our common stock.

Applicable SEC rules governing the trading of “penny stocks” limit the liquidity of our common stock, which may affect the trading price of our common stock.

Our common stock currently trades on the OTC Bulletin Board. Since our common stock continues to trade well below $5.00 per share, our common stock is considered a “penny stock” and is subject to SEC rules and regulations that impose limitations upon the manner in which our shares can be publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination for the purchaser and receive the written purchaser’s agreement to a transaction prior to purchase. These regulations have the effect of limiting the trading activity of our common stock and reducing the liquidity of an investment in our common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). This prospectus includes statements regarding our plans, goals, strategies, intent, beliefs or current expectations. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished. These forward looking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions “may,” “could,” “should,” etc. Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results als o constitute such forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.We will have little likelihood of long-term success unless we are able to continue to raise capital from the sale of our securities until, if ever, we generate positive cash flow from operations.

USE OF PROCEEDS

This prospectus relates to the resale of certain shares of our Class A common stock that may be offered and sold from time to time by the selling stockholders. This prospectus also relates to shares of our Class A common stock to be issued to persons who exercise warrants or options, convert debt access shares held as collateral. We will not receive any proceeds from the sale of shares of common stock in this offering. However, we will receive proceeds from the exercise of any warrants or options and we will use any such proceeds for general working capital purposes.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted on the Over-the-Counter Bulletin Board under the symbol “EEGC”.

As of August 20, 2009, we had 278,543,190 shares of our Class A common stock outstanding held by approximately 1,400 shareholders of record and 100,607 shares of our Class B common stock outstanding, held by approximately 450 shareholders of record. Each share of Class B common stock can be exchanged for one share of our Class A common stock.

The following table sets forth the quarterly high and low bid information for our common stock as reported by the National Association of Securities Dealers' Over−The−Counter Bulletin Board for the periods indicated below. The over−the−counter quotations reflect inter−dealer prices, without retail mark−up, mark−down or commission and may not represent actual transactions.


	Fiscal Year 2006		Fiscal Year 2007		Fiscal Year 2008
	High	Low	High	Low	High	Low
First Quarter	$0.18	$0.09	$0.14	$0.13	$0.17	$0.09
Second Quarter	$0.29	$0.15	$0.19	$0.09	$0.16	$0.11
Third Quarter	$0.19	$0.06	$0.18	$0.10	$0.19	$0.13
Fourth Quarter	$0.09	$0.07	$0.14	$0.08	$0.17	$0.04

As of August 20, 2009, the bid price of the Company’s Class A common stock was $0.02.

First quarter 2009 high and low prices were $0.09 and $0.03, respectively. Second quarter 2009 high and low prices were $0.06 and $0.02, respectively.

The Company has not paid any dividends on its common stock and the board of directors presently intends to continue a policy of retaining earnings, if any, to use in the Company’s operations and to finance expansion of its business. The declaration and payment of dividends in the future, of which there can be no assurance, will be determined by the board of directors in light of conditions then existing, including earnings, financial condition, capital requirements and other factors. There are no restrictions that currently materially limit the Company’s ability to pay dividends or which the Company reasonably believes are likely to limit materially the future payment of dividends on common stock.

The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Commission, which: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies a vailable to the customer with respect to a violation to such duties or other requirements of Securities’ laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form as the Commission shall require by rule or regulation. The broker-dealer also must provide to the customer, prior to effecting any transaction in a penny stock, (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.

MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS

The following discussion should be read in conjunction with the attached financial statements and notes thereto. Except for the historical information contained herein, the matters discussed below are forward-looking statements that involve certain risks and uncertainties, including, among others, the risks and uncertainties discussed below.

Overview

We are an exploration stage oil and gas exploration company, devoting substantial effort to raising capital to support our exploration and development of sub-surface hydrocarbons in commercial quantities in Tasmania, Australia. Our primary focus is the discovery and exploitation of oil and gas and we intend to apply all resources to that purpose. We currently have four wholly-owned subsidiaries, Great South Land Minerals Limited, Cyber Finance Group Limited, Bob Owen & Co and Expedia International. Great South Land Minerals Limited undertakes all of our Tasmanian operations. Cyber Finance Group Limited held our stake in Zeehan Zinc Limited and is otherwise dormant. Bob Owen & Co. is not actively conducting business. Expedia International was acquired to act as our joint venture counter-party with Batego Limited in developing and exploiting intellectual property owned by Batego Limited, which was cancelled in 2007, and now holds our share interest in Libertas Capital plc. Grand Monarch Holdings Inc. was recently acquired to facilitate an acquisition that was not completed, remained inactive and was subsequently sold.

Our principal business is the exploration for petroleum/natural gas in Tasmania, Australia through our wholly-owned subsidiary and operating company, Great South Land Minerals Limited. Great South Land Minerals Limited operates pursuant to a license issued by the Tasmanian Minister for Infrastructure, Energy and Resources which license is subject to minimum expenditures over its term and is, at the Minister’s discretion, subject to forfeiture for failure to complete the necessary infrastructure expenditures. We have completed 1,149 line kilometers of 2D seismic over the licensed premises and incurred significant costs which we believe satisfy the required expenditure. The 2D seismic work was completed in 2007 with additional processing in 2008. We began exploratory drilling operations in 2008, beginning with Bellevue #1, but operations were suspended when expected funding was interrupted. We intend to resume operations as funding is available in the third quarter of 2009. Each well is expected to cost approximately $3.5 million and, if we discover adequate producible reserves of oil and gas, we expect to expend an additional $1.5 million to complete each well. As a result of the significant costs expected to be incurred, we may enter into a joint venture type of arrangement with a driller/operator in addition to our other capital raising activities. We have a day-rate contract with a drilling company in support of this program.

In 2005, we acquired an interest in shares of Zeehan Zinc Limited, a zinc, lead and silver mining company located near our license area in Tasmania. We owned as much as 37% of Zeehan initially but sold the interest, partially in 2006 and completely in 2007 to focus resources to the oil and gas exploration program. In May 2006, we entered into a joint venture for the development and exploitation of certain intellectual property held by Batego Limited. This intellectual property license was cancelled in June 2007 and the committed resources were returned to the oil and gas exploration program. During 2007, we sold non-core assets for total proceeds of approximately $9 million which we applied to pursue the oil and gas exploration activities and reduce notes payable.

In March 2006, we acquired a controlling interest in Pacific Rim Foods Ltd., a Mauritius-based entity with interests in the Chinese shelf foods industry. This interest was sold in December 2008 in exchange for securities of Mach One Corporation that were sold in 2008 and 2009 to support the oil and gas exploration program and to reduce debt.

In April 2009 we acquired Grand Monarch Holding Ltd. Grand Monarch is a publicly reporting company that was acquired to facilitate an acquisition that was not completed. It remained inactive and was sold in June 2009.

In April 2009, we filed applications for two additional tenement licenses in Tasmania. One application for the coal-bed methane horizons of the existing SEL 13/98 tenement which would be tested commencing with the Bellevue #1 exploratory well. The second application for a further 12,040 sq kilometers of tenement on the Eastern seaboard of Tasmania, which includes approximately 5,000 sq kilometers of offshore area, where 7 kilometers of onshore and 256 kilometers seismic operations were previously carried out.

Great South Land Minerals Technical Program

Great South Land Minerals Limited’s principal asset is its exploration license in Tasmania, 15,035 km²(37.2 million acres) Special Exploration License 13/98. The terms of the Great South Land Minerals Limited Special Exploration License 13/98 have been contractually agreed with Mineral Resources Tasmania, the local authority under the Department of Industry, Energy and Resources of Tasmania. The Company has expenditure obligations under the license conditions (refer Table 3 and rider). The conditions require scheduled reported expenditure of AUD $21.5 million (US $16.69 million), by September 2009. The company has accumulated expenditure to date of AUD $36.8 million (US $32.3 million).

Terrex Seismic performed on our behalf a AUD $4.4 million (US $3.0 million) 2007 seismic survey which was additional to the approximately AUD $2.23 million (US $1.54 million) 2006 program and the 660 line kilometers of survey that we acquired from 2001. A total of 1149 line kilometers have been acquired. These surveys have indicated the presence of over 14 structures which have the potential to have trapped oil and gas. Our two largest structures the Bellevue Dome (anticline) and the Thunderbolt Dome (anticline) are structures over 1000 sq km (2.47 million acres) in area and have the potential to contain substantial volumes of oil and gas.

The seismic program commenced on a 58.76 kilometer survey area in Tasmania around the township of Zeehan in March 2007, finished that survey and commenced the program on Special Exploration License 13/98 in April 2007. The information obtained from this activity on an outside area assisted with the interpretation of the seismic signature of deeper rock sequences under the Tasmania Basin which we have classified as being within the Larapintine petroleum system. It is one of three petroleum systems currently identified as prospective onshore Tasmania and the Gondwana Land System which outcrops at the surface (commonly known as the Tasmania Basin) is analogous to the Cooper Basin (in central Australia) which was discovered in the early 1960’s.

With our consultants, we reviewed the geology and geophysics of the Central Highlands of Tasmania, using data acquired from the 2001, 2006 and 2007 seismic surveys and previous extensive regional ground gravity and aerial magnetic surveys acquired during the last 20 years. This work assisted in further defining drilling targets and will form the basis of well location, design and engineering. He also coordinated a more detailed prospect definition gravity survey to assist with the interpretation and analysis of the seismic results. The gravity data was acquired by independent contractor Solo Geophysics.

In the fourth quarter 2007, we performed additional seismic surveys in certain areas identified by the prior 2D survey as the apex of potential targets that have potential oil and gas traps and then engaged in 3D surveys to supplement and expand earlier data with the view of assisting in the management of an extraction plan should our exploration wells be successful in discovering reserves which can be produced.

In 2008 international geoscience consulting company RPS Energy prepared an updated Competent Person’s Report on GSLM’s tenement and Beacon Equity prepared a research report on Empire Energy that covered GSLM’s activities. During early 2008, final site selection was carried out for drilling exploratory wells using previously acquired geological, geophysical and geochemical data. Extensive environmental, forestry, heritage, archaeological, acoustic, hydrogeological and engineering studies were carried out on the Bellevue and Thunderbolt structures and sites at Bellevue and Thunderbolt were selected. A management system audit of Hunt Energy and GSLM was carried out in August 2008, drilling plans for Bellevue#1 and Thunderbolt#1 were submitted to Mineral Resources Tasmania and approval to drill both exploratory wells was obtained. Preliminary investigations were also carried out at the Lonnavale #1 well site. Extensive site work began at Bellev ue#1 in the July and August 2008.

In July 2008, with the financial guarantee of our Chief Executive Officer, we obtained a secured loan in the amount of AU$5 million (US$ 3.45 million) to pursue the drilling program on SEL 13/98. Initial draw on this loan of approximately AU$2.7 million (US$1.86 million) allowed mobilization of the drilling contractor, prepaid initial drilling cost and provided working capital to the Company. Additional drawing under this note was expected to fund the drilling program and complete at least the first well. In conjunction with this note, we agreed to a memorandum of understanding that could bring up to AU$45 million (US$31.1 million) to the drilling program in exchange for up to a 50% interest in the license property. This additional funding should allow drilling of up to an additional 14 exploratory wells in 2009.

During August and September 2008 we commenced drilling on the Bellevue # 1 site and completed the pre collar hole to 272 meters. The initial rig was removed to make way for the deep drilling Hunt Energy rig to move on site to finish the well. Onsite inspection was conducted by MODUSPEC whose report on the condition of the rig was received on the 30^th December 2008. The continued drilling has not commenced, as we have been unable to raise the necessary funds to progress. This includes the failure of SmartWin to advance the remaining AUD$1.1 million (USD $759,770) due under the AU$5 million (USD $3.45 million) Note as well as the effects of the global financial crisis and the apparent refusal of creditors to advance funds on new projects and the failure of historic sources of those funding exploration ventures. Management remains confident that this shortage of operating capital will ease but there can be no guaranty that we will be able to finan ce the balance of our project at this juncture, which could cause the failure of our business. We have incurred significant standby charges since September 30, 2008 and continue to incur costs at a rate over $ 10,000 per day.

We have analyzed the data collected over the past thirty years, have selected prospective sites, arranged a drilling contractor, arranged interim funding and are aggressively pursuing additional funding to drill wells on these sites as well as continue to expand the seismic and other technical knowledge on this license area.

Pacific Rim Foods Limited

We acquired our 51% interest our Pacific Rim Foods Ltd. subsidiary in 2006 in consideration of issuing 9,000,000 shares of our common stock to Pacific Rim Foods Ltd. Activities of Pacific Rim were included in our consolidated financial statements through 2008, and presented as discontinued operations for all periods presented as a result of the sale to Mach One Corporation on December 31, 2008.

In December 2008, Pacific Rim was sold to Mach One Corporation (www.machonecorp.com). Mach One is publicly traded. The sale reduced our ownership percentage and increased the liquidity of the investment. Accordingly, our financial statements have been retroactively restated to report the investment in Pacific Rim as discontinued operations. We were able to use the increased liquidity and value for this investment to pay expenses and reduce company debt in 2009.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effect on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses except as noted hereinafter. We are a party to operating leases and license agreements that represent commitments for future payments (described in Note 4 to the 2008 financial statements). In addition, we have issued purchase orders in the ordinary course of business that represent commitments to future payments for goods and services.

Liquidity and future capital requirements

Liquidity and going concern

On December 31, 2008, the Company had $54,000 in cash and $9,700,000 in liabilities. The liabilities include approximately $3,700,000 in convertible notes and debentures, $3,000,000 in notes payable and the remainder substantially in trade payables and accrued expenses. Net cash used in operating activities for the twelve months ended December 31, 2008 was $1,415,000 compared to $5,773,000 for the twelve months ended December 31, 2007. Cash used by investing activities during the twelve months ended December 31, 2008 was $4,335,000, primarily including $4,442,000 used in development of oil and gas properties compared to $8,488,000 provided by investing activities in 2007. Net cash provided in financing activities was $5,426,000, largely from the proceeds of issuing notes payable. Net cash of $3,330,000 was used by financing activities during the twelve months ended 31, December 2007. Subsequently, in January 2009 we reduced approx imately $2 million of convertible debt by exchange of shares of marketable securities and a note receivable that we acquired in December 2008. Additional financing may be needed to develop the license property and pursue the company’s business plan.

On June 30, 2009, the Company had $2,500 in cash, $210,000 in prepayments of exploration costs and other expenses, $8,000 in receivables and $9,371,000 in current liabilities including trade payables, accrued liabilities, and current maturities of debt. Additional liabilities include approximately $1,115,000 in long-term debt. Approximately $2 million of debt includes provisions by which the holder may convert the debt to common equity. Net cash used by operating activities for the six months ended June 30, 2009 was $467,000 compared to cash used of $3,172,000 for the six months ended June 30, 2008. Cash used by investing activities was $972,000 during the six months ended June 30, 2009. Cash used in investing activities during the six months ended June 30, 2008 was $38,000. Net cash provided by financing activities during the six months ended June 30, 2009 was $462,000. Net cash provided by financing activities was $2,147,000, p rimarily proceeds from notes payable during the six months ended June 30, 2008. Additional financing will be needed during 2009 to continue to develop the license property and pursue the company’s business plan.

EEGC is in the development stage, devoting substantially all of its efforts to exploration of its oil and gas license in Tasmania and raising capital to finance its exploration of its oil and gas license. EEGC has substantially funded its operations with proceeds from the issuance of common stock. In the course of its exploration activities, EEGC has sustained operating losses and expects such losses to continue for the foreseeable future. EEGC will finance its operations primarily through cash and cash equivalents on hand, future financing from the issuance of debt or equity instruments and through the generation of revenues if commercial operations get underway. The Company has yet to generate any oil or gas revenues and has no assurance of future oil or gas revenues. To management’s knowledge, no company has yet successfully developed sub-surface hydrocarbons in commercial quantities in Tasmania. Even if development efforts are successful, substan tial time may pass before revenues are realized.

The accompanying consolidated financial statements for the year ended December 31, 2008 and for the six months ended June 30, 2009 have been prepared assuming that the Company will continue as a going concern. As discussed in the Notes to the consolidated financial statements, the Company has a working capital deficiency, has incurred net losses in recent years, and has a significant accumulated deficit. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to those matters are described therein. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

On March 21, 2006, pursuant to a subscription agreement with RAB Special Situations (Master) Fund Limited, we issued 17,100,000 shares of our Class A Common Stock, together with warrants entitling the holder to acquire an additional 8,550,000 shares, in exchange for $1,881,000, which we used for general corporate purposes. The warrants were exercisable at a price of $0.13 over a period of three years. On the same date, we also sold $1.5 million of our 6% convertible debenture and a Class B Warrant offering up to 5 million shares exercisable at $.15 per share for 3 years. The convertible debenture had a maturity date in March 2009, bore an interest in arrears semi-annually, is convertible at the holder’s discretion and had an initial conversion price of $0.18 per share. The convertible debenture and the warrants have restrictions on transferability in compliance with U.S. securities laws. In March 2009, the convertible debenture was ext ended to mature March 21, 2011 and the conversion price was adjusted to $.07 per share. In conjunction with this extension, we issued to RAB an additional warrant to purchase 7.5 million Empire shares for a period of five years, extended the existing warrants for a period of five years and adjusted the exercise price of all warrants to $.07 per share.

Matters affecting liquidity during the 2009.

In January 2009, the Company settled loans provided in 2008 by Directors of the Company in the original amounts of $1.5 million and raised an additional $200,000 by selling marketable securities and a note receivable.

The Company has incurred additional contracted standby charges while it seeks adequate funding and is preparing for its well drilling program and continues to incur such costs in excess of $10,000 per day. At June 30, 2009 we had accrued a balance of $1.3 million in charges owed to Hunt Energy.

In February 2009, the Company entered into consulting and promotion arrangements with two parties at a cost of five million common shares. Expense of 275,000 was recorded based on the market value of the shares when issued.

In March 2009, the 6% convertible debenture due to RAB Special Situations Fund was extended to mature March 2011 and the conversion price was adjusted to $.07 per share. In conjunction with this extension, we issued to RAB an additional warrant to purchase 7.5 million Empire shares for a period of five years, extended the existing warrants for a period of five years and adjusted the exercise price of all warrants to $.07 per share.

In April 2009, we filed applications for two additional tenement licenses in Tasmania. One application is for the coal-bed methane horizons of the existing SEL 13/98 tenement which would be tested commencing with the Bellevue #1 exploratory well. The second application is for a further 12,040 sq. kilometers of tenement on the Eastern seaboard of Tasmania, which includes approximately 5,000 sq. kilometers of offshore area, where 7 kilometers of onshore and 256 kilometers seismic operations were previously carried out.

In April 2009, we issued 10,177,500 common shares to establish a borrowing facility in April 2009; the borrowing facility has no stated repayment terms or maturity date and no stated interest rate but is secured by 8,850,000 of the Company’s common stock and guaranteed by our CEO. These shares are contingently returnable to the Company once the amounts borrowed have been repaid. As a result of the shares being contingently returnable, they have not been recognized as issued in the consolidated financial statements. The remainder of the shares issued, 1,327,500, were issued to enable the arrangement, were valued at current market and the Company recognized a current expense in the amount of $92,925 in the consolidated statement of operations. At June 30, 2009, the Company had been advanced $200,000 from the borrowing facility; the lender has discretion to loan up to $500,000 to the Company. The Company utilized the $200,000 for working capital during the three months ended June 30, 2009. Future funding will depend on market conditions.

Capital requirements

Infrastructure

For the coming twelve months, we have currently budgeted US $29.0 million to sustain Tasmanian operations and continue drilling operations, with our International offices estimated to cost US $1.0 million (United States of America) over the same period. We anticipate acceleration of spending if capital is available and if we are successful.

Exploration & Development

Notwithstanding the fact that Great South Land Minerals Limited maintains it has exceeded its expenditure obligations to meet the license conditions (refer Table 3 and rider), Empire Energy Corporation International is pursing an aggressive drilling and seismic program with the intention of discovering commercially producible oil and gas resources in Tasmania and potentially going into commercial production.

A current 8 well drilling program, selected from our 14 identified prospects is estimated to cost a total of US $30 million. Mud and wire logging is estimated to cost US $5.5 million and processing and interpretation and related costs are estimated at US $1 million.

Total program costs are estimated at approximately US $36 million per annum. We currently are seeking significant potential funding sources to cover the next 12 months operations.

Sources of additional funding identified and currently being pursued by Empire Energy Corporation International are as follows, however amounts available from each source cannot presently be estimated:


	•		Success of our $.07 Rights Offering

	•		Capital raising & potential dual listing of Empire and Great South Land Minerals Limited on NASDAQ and Alternative Investment Market listing in London.


	•		Potential capital raise by a United States based securities broker.


	•		Potential private placement options from independent investors.


	•		Exercise of Empire warrants and agreements.


	•		Other revenues and investments in subsidiary entities.


	•		Joint Venture and participation arrangements with industry partners.

Results of operations

Since the inception of our current business plan 2005, we have been an exploration stage oil and gas exploration company, devoting substantially all of our efforts to raising capital to support our exploration and development of sub-surface hydrocarbons in commercial quantities in Tasmania, Australia.

During 2008, the Company generated no revenue. The Company generated an operating loss of $5,398,000 by incurring general and administrative expenses of $5,286,000, primarily legal and consulting expenses required to maintain its corporate existence and pursue the license exploration and incurred $112,000 for its oil and gas exploration expenses. During 2008, the Company also incurred $4,442,000 in costs of preparing and drilling its first exploration well. During the year ended December 31, 2007, the Company also generated no revenue and reported an operating loss of $8,044,000, including general expense of 4,746,000 and exploration expense of $3,298,000. We expanded our exploration activities in 2008 from evaluation efforts and to begin site development and exploratory drilling operations. Costs of the exploratory drilling and development wells of $4,442,000 have been capitalized pending determination of commercially producible resources for the well.

In January and December 2007, the Company sold its entire interest in Zeehan Zinc shares held as an investment and reported a gain on the sale of the shares in the amount of $1.2 million. Proceeds of the sale of shares in January of $4.5 million were used for working capital and proceeds of the sale of shares in December of $3.5 million were used to retire a note payable to Wind City, Inc.

In December 2008, our Pacific Rim subsidiary was sold to Mach One Corporation in exchange for common shares and a note receivable. Mach One is publicly traded. Accordingly, our financial statements have been restated to report the investment in Pacific Rim as discontinued operations in 2008. The exchange of Empire's 35% ownership of Pacific Rim results in an approximate 10% ownership in Mach One, the shares will be reported as available for sale and reported on the Balance sheet at fair market value. We were able to benefit from the increased liquidity and appreciated value for this investment to record a gain on sale, obtain working capital, pay expenses and reduce Company debt in 2009.

In July 2008, we entered into a loan agreement with Smart Win Limited to provide AU$5 million (US$3.5 million) in working capital to drill an exploratory well on our license property. Smart win funded AU$3.9 million (US$2.7 million) of this note in July and August 2008. The loan is denominated in Australian dollars. The value of the Australian dollar compared to the US dollar decreased during the later part of 2008, resulting in a gain on currency fluctuations reported in the financial statements of $926,000 for the period ended December 31, 2008 and a loss of $531,000 for the six months ended June 30, 2009.

The convertible note payable to RAB Special Situations Fund matured in 2008. Accordingly, unamortized discount in the amount of $470,000 on the note was charged to income during 2008. The note was renegotiated and extended in March 2009 and an additional $334,000 of note discount will be charged to income in 2009.

During the quarter ended June 30, 2009, the Company generated no oil and gas revenue. The Company generated a loss from operations of $902,000 primarily by incurring GSLM exploration expenses of $17,000 and general & administrative expenses of $885,000, including legal, accounting, auditing and consulting expenses required to maintain the corporate existence and pursue funding and GSLM exploration activities. During the quarter ended June 30, 2008, the Company also generated no revenue. The Company generated a loss from operations of $2,081,000 primarily by incurring exploration expenses of $202,000 and general and administrative expenses of $1,880,000, primarily legal, accounting, auditing and consulting expenses required to maintain the corporate existence and pursue funding for exploration.

In anticipation of the drilling program, the Company leased living quarters for workers near the lease site. With the delay in the drilling program, the Company is operating the facility and generating income from the facility. Total income earned of $143,000 and offset by operating expenses, is reported as $83,000 of other income in the financial statements.

During the six months ended June 30, 2009, the Company generated no revenue. The Company generated an operating loss of $1,827,000 primarily by incurring GSLM seismic and exploration expenses of $25,000 and general & administrative expenses of $1,802,000, primarily personnel, consulting and legal required to pursue funding and planning for GSLM exploration activities and oversee the seismic and gravity evaluation work. During the six months ended June 30, 2008, the Company also generated no revenue. The Company generated an operating loss of $4,384,000 primarily by incurring exploration expenses of $889,000 and general and administrative expenses of $3,495,000, primarily legal, accounting, auditing and consulting expenses required to maintain the corporate existence and pursue funding for and planning for the exploration and drilling program.

Total income earned for the six months ended June 30, 2009 for the leased living quarters near the drilling lease site is $213,000, offset by operating expenses, and is reported as $112,000 of other income in the financial statements..

The Company sold its investment in Mach One Corporation and its Note Receivable from Mach One in January to reduce debt and generate working capital. The Mach One investment was received in exchange for the longer term investment in Pacific Rim Foods and was not deemed a key asset. Appreciation in the Mach One shares allowed us to record a gain of $1,443,000 on the sale of the shares and debt settlement. Due to a lack of liquidity and uncertainty, we recorded a permanent impairment in the value of our investment in the common stock of Libertas Capital. We hold 7,660,000 shares that we received in 2008 in exchange for Empire shares. We presently report no asset value for marketable securities.

In April 2009 we filed applications for two additional tenement licenses in Tasmania. One application is for the coal-bed methane horizons of the existing SEL 13/98 tenement which would be tested commencing with the Bellevue #1 exploratory well. The second application is for a further 12,040 sq. kilometers of tenement on the Eastern seaboard of Tasmania, which includes approximately 5,000 sq. kilometers of offshore area, where 7 kilometers of onshore and 256 kilometers seismic operations were previously carried out.

DESCRIPTION OF BUSINESS

Our principal business is the exploration for petroleum/natural gas in Tasmania, Australia via our wholly-owned subsidiary Great South Land Minerals Limited. Empire in its present form began in April 2005, when it acquired, via reverse merger, the Tasmanian Company Great South Land Minerals Limited, then a publicly held Australian company.

We are still in the exploration stage and have not yet produced any natural resources or revenues. As an exploration company without proven reserves, we cannot guarantee we ever will earn revenues or pay dividends. A description of our leaseholds where we have exclusive rights to explore for gas, oil and helium is set out in the section “Description of Properties” below. At present we are primarily fund-raising to continue the exploration of our leasehold tenements. During 2007, we sold non-core assets for total proceeds of approximately $9 million which we applied to pursue the oil and gas exploration activities and reduce notes payable. During 2008, we raised additional funds by borrowing, proposed joint venture and equity sale arrangements to begin well drilling activities on the core property. We sold additional noncore assets to improve liquidity and reduce debt. We view our investment of over AUD $36 million (US $25 million) (refer Table 3 and rider) on the Tasmania Basin in developing our current database, built over 30 years of study, as the company’s key asset. This expenditure includes significant efforts in seismic, gravity, magnetic, geochemical and geophysical compilations and several independent expert reports. These reports indicate the potential of a significant resource of oil equivalent in the geological structures onshore Tasmania.

Background

Empire

Empire is headquartered in Leawood, Kansas (Kansas City area). We are a reporting company under the Securities Exchange Act of 1934 whose common shares trade on the OTC bulletin board under ticker symbol EEGC. At present, the Company’s principal assets are the exploration license held through its wholly-owned subsidiary Great South Land Minerals Limited.

Empire was incorporated in November of 1983 in the state of Utah under the name Medivest, Inc. In 1999 a majority of the then outstanding shares of Medivest were sold and the shareholders of Medivest approved a change of name from Medivest Inc. to Empire Energy Corporation.

In July 2002, Empire entered into an agreement to acquire Great South Land Minerals, Ltd., an oil and gas exploration company in Tasmania, Australia. This acquisition was completed in April 2005 by issuing 62,426,782 shares of Class A common stock, after which former shareholders of Great South Land owned approximately 95% of the outstanding shares of Empire Energy. The transaction was accounted for as a reverse merger To facilitate the merger with Great South Land, Empire sold all of its assets in exchange for the purchasers’ assumption of Empire’s liabilities, changed it name from Empire Energy Corporation to Empire Energy Corporation International, reincorporated in the state of Nevada, increased the authorized shares of common stock to 100,000,000 and effected a 1 for 10 reverse stock split.

In August, 2005, the Company’s shareholders approved a resolution increasing the authorized shares of common stock from 100 million to 300 million shares. In November, 2007, the Company’s shareholders approved a resolution increasing the authorized shares of common stock from 300 million to 600 million shares.

On March 21, 2006, pursuant to a subscription agreement with RAB Special Situations (Master) Fund Limited, we issued 17,100,000 shares of our Class A Common Stock, together with warrants entitling the holder to acquire an additional 8,550,000 shares, in exchange for $1,881,000, which we used for general corporate purposes. The warrants were exercisable at a price of $0.13 per share over a period of three years. On the same date, we also sold $1.5 million of our 6% convertible debenture and a Class B Warrant offering up to 5 million shares exercisable at $.15 per share for 3 years. The convertible debenture had a maturity date in March 2009, bore an interest in arrears semi-annually, is convertible at the holder’s discretion and had an initial conversion price of $0.18 per share. RAB Special Situations (Master) Fund Limited represented itself as a non U.S. person. Libertas Capital, a U.K. investment banking fir m, acted as our financial adviser in exchange for 4,065,000 shares of our Class A common stock (equal to 10% of the RAB shares issuable) as their fees for those services. We relied on Regulation S as the exemption from registration as the offering was conducted entirely overseas and the investor is a non-U.S. person. The convertible debenture and the warrants have restrictions on transferability in compliance with U.S. securities laws. In March 2009, the convertible debenture was extended to mature March 21, 2011 and the conversion price was adjusted to $.07 per share. In conjunction with this extension, we issued to RAB an additional warrant to purchase 7.5 million Empire shares for a period of five years, extended the existing warrants for a period of five years and adjusted the exercise price of all warrants to $.07 per share.

In July 2008 we entered into a Memorandum of Understanding, and a Senior Secured Note that was personally guaranteed by our CEO, Malcolm Bendall. As a result of this transaction, we were provided $5 million AUD (US $ 3.5 million) of credit facilities by Smart Win International Limited. The purpose of the loan was to provide the financing to drill up to two exploratory wells on our leaseholds in Tasmania. The Memorandum of Understanding provides for the referenced loan transaction and for a possible Joint Venture by us and Smart Win which remains to be negotiated. The MOU provides that if we are successful in completing the negotiations with Smart Win, Smart Win will have the option at the conclusion of our first or second exploratory well to either have the loan repaid or to have the balance of the loan to be applied towards a $45 million AUD investment in the Joint Venture which relates to our leaseholds interests set out in SEL 13/98.

On September 16, 2008 we commenced drilling operations on our first oil and gas exploration well on SEL 13/98- known as Bellevue #1. Additionally we have filed for and expect to receive a drilling permit for our Thunderbolt #1 prospect which we hope to commence drilling on immediately following the completion of drilling operations at Bellevue #1. In October 2008, Smart Win discontinued funding the costs of the Bellevue #1 well with approximately AU$1.1 million (US$759,000) remaining due under the Note agreement. Drilling is expected to continue on the Bellevue and additional wells when adequate additional funding is available.

Great South Land Minerals Limited

During 1995 Great South Land Minerals Proprietary Limited was incorporated in Australia to acquire the assets and licenses of a predecessor company as well as two further licenses, all in Tasmania. Over the period 1995 to 1998 it undertook further collaborative studies and appointed independent consultants to undertake various reviews. In March 1998 Great South Land Minerals Proprietary Limited changed from a private to an Australian public company, Great South Land Minerals Limited, by way of a Special Resolution approved by shareholders. In 1999, Great South Land Minerals Limited acquired rights to the largest onshore petroleum license in Australia, Special Exploration License 13/98, initially comprising 30,356 square kilometers (74.9 million acres) and covering the whole Tasmania Basin. In settlement of a prior dispute, Great South Land Minerals Limited transferred rights to explore for coal-bed methane to an unaffiliated third party. Empire has recent ly submitted an application to regain exploration rights to the potential coal-bed methane resource.

In 2001, the Australian Federal Government, through the Australian Research Grants Scheme awarded the University of Tasmania and Great South Land Minerals Limited an AUD $417,000 (USD $329,128) Research and Development grant to study the petroleum systems in Tasmania. This grant enabled a team of university and Great South Land Minerals Limited geoscientists to develop a computer model for the geological, tectonic and fluid flow evolution of central Tasmania for the last 500 million years. The grant was supported by an AUD $268,000 (USD $211,532) payment from Great South Land Minerals Limited.

In 2000, Great South Land Minerals Limited undertook the first major regional seismic survey to be carried out onshore Tasmania, completing in 2001. We believe that the 660 kilometer line survey, coupled with prior studies established that large geological structures, with the potential to be petroleum traps, exist south of Launceston in northern Tasmania and under the Central Highlands.

Great South Land Minerals Limited and its predecessor companies have researched the potential for oil and gas discovery and have shown the Tasmania Basin as being similar in geological terms to major oil producing regions such as Oman in the Middle East and the Cooper Basin in Australia. Tests by these companies have also demonstrated, and five independent consulting petroleum geologists have confirmed, that the Tasmania Basin has potential for oil, hydrocarbon gases and helium.

Operations

Empire has one administrative employee. Contracted management and professional services were rendered by John Garrison (President and Director) and Malcolm Bendall (CEO and Director) during the period. Mr. Bendall resigned his positions in August 2007 upon addition of new executive management, but returned to the position in February 2008 after the resignation of those executives.

Great South Land Minerals Limited employed 14 Management, Administration, Geological & contracted part-time staff in addition to the contracted management and technical services of Mr. Malcolm Bendall (CEO). Exploration and development personnel and specialized services are contracted by the companies from time to time.

Australian law and regulation of our industries

Great South Land Minerals Limited operations are under the operational jurisdiction of Mineral Resources Tasmania, a state government body assigned to govern mining and resource development within the State of Tasmania, Australia. Various pieces of legislation govern administration of natural resources businesses such as Great South Land Minerals Limited, including The Mineral Resources Development Act, 1995, which provides for the development of mineral resources consistent with sound economic and environmental land use under Tasmanian law.

Environmental controls are imposed within the provisions of the Environmental Management and Pollution Control Act 1994, which has as its fundamental basis, the prevention, reduction and remediation of environmental harm, including environmental nuisance and its adverse effect on the environment. Permits are issued in accordance with the Land Use Planning and Approvals Act 1993 in respect of proposed use or development affecting the leased land.

Great South Land Minerals Limited uses bonds to ensure that sites are adequately rehabilitated so that there are no remaining environmental or safety hazards requiring remediation in the event of failure of the respective company to carry out site remediation obligations and is consistent with other Australian jurisdictions. Great South Land Minerals Limited has provided a guarantee and a bond in the amount of AUD $75,000 (USD $65,754).

Our strategy

The exploration objective of Great South Land Minerals Limited is to discover commercial quantities of oil and gas onshore Tasmania. Great South Land Minerals Limited’s current exploration strategy is based on an extensive gravity, seismic and drilling program, involving the acquisition of up to 2,000 line kilometers of seismic data, and is designed to:


	•		Improve the definition of currently identified world class anticlines (domes) and other suitable reservoir structures;


	•		Determine the extent of the two petroleum systems that have been outlined within the Special Exploration License 13/98 leasehold;


	•		Define more potential petroleum targets; and


	•		Test existing potential targets already defined through a drilling program.

On the basis of research carried out mainly in the last five years, three petroleum systems have been identified onshore Tasmania: a Precambrian Petroleum System, an Ordovician to Early Devonian Larapintine System within the Wurawina Supergroup below the Tasmania Basin and a Permo-Triassic Gondwanan System within the Parmeener Supergroup of the Tasmania Basin.

The mainly type 1 Kerogen oil prone Gondwanan Petroleum System is considered more prospective than the mainly gas prone Larapintine Petroleum System. Maturation of the Gondwanan Petroleum System as measured by vitrinite reflectance and geochemical analyses increases towards the south of the basin, being under mature in the north to possibly over mature for oil in the south, whereas reservoir quality increases towards the north. Faulting is much more intense in the southern half than in the northern half of the basin, thereby reducing trap size and increasing the risk of seal breaching. Additionally, the centre of the basin has not been uplifted to the extent of areas in the Central Highlands and in the south. Great South Land Minerals Limited therefore proposes to continue an exploration program that concentrates seismic exploration in the central parts of the Tasmania Basin and which also explores the potential of the Larapintine Petroleum System under t he Central Highlands.

Recent Developments

Great South Land Minerals Limited

On September 28, 2005, Great South Land Minerals Limited signed a seismic services agreement with Terrex Seismic Pty Ltd., an Australian company specializing in seismic survey work. Under the terms of the agreement, Terrex, provided 271 line kilometers of 2D seismic, spread throughout Special Exploration License 13/98. During 2007, this contract was substantially completed with a total of 1,149 line kilometers of 2D seismic being completed.

The Terrex budget described below had been initially planned to commence in 2005, but was delayed due to unavailability of seismic equipment, due to the increase in global oil prices and subsequent demand on limited equipment and resources in Australia. We believe the budget, including the Seismic contract work described above and expenditure meeting the license conditions (refer Table 3 and rider), has exceeded the license conditions (over a five year term) as at December 31, 2008.

Table 1

Claimed annual exploration expenditure meeting license conditions

period January 1, 2008 to December 31, 2008

(all numbers in Australian dollars)


Activity	Q1 ‘08 actual	Q2 ‘08 actual	Q3 ‘08 actual	Q4 ‘08 actual
Geology & Geochemistry	27,004	23,146	52,772	73,802
Geophysics – Ground (Seismic)	25,216	52,297	62,718	11,214
Drilling / Gridding	974,374	2,405,864	900,384	3,588,477
Other	4,329	2,346	40,039	7,210
Administration	102,659	248,131	104,949	367,349
Quarterly Total	1,133,582	2,731,784	1,161,480	4,048,052
Annual Total				9,074,898

The following major projects & developments completed through 2008 and anticipated in 2009:


	•		A major seismic program covering Central and Eastern Tasmania managed by Terrex Seismic of Perth, Western Australia was completed. A further environmental survey has been completed on seismic lines in the Midlands of Tasmania. Over 1,149 kilometers of seismic data were obtained and processed through December 31, 2008.


	•		Great South Land Minerals Limited has commissioned a petroleum drill-rig which is scheduled to drill at least 8 holes in 2009. Great South Land Minerals Limited has also completed most of the environmental, threatened species, archaeological, cultural, hydrological, acoustic and fire-risk assessments of its eight potential drill sites, and has obtained provisional land-owner approval for the first five sites. Drilling of the first site began in 2008 but completion of the first well and commencement of additional wells has been delayed.


	•		A major synthesis of all previous work as part of a basin analysis study of onshore Tasmania by RPS Energy Perth Western Australia is ongoing, with completion of a Competent Persons Report for capital raising purposes.


	•		Geochemical studies of oil shows from western and southern Tasmania by Geotechnical Services of Perth Western Australia is ongoing;


	•		A major gravity survey of the Central Highlands of Tasmania by Solo Geophysics of Adelaide was completed and its interpretation is continuing.


	•		Planning and tendering for an aerial magnetic survey of Central Tasmania has been started.


	•		An integrated study has commenced of the geology and geophysics of Central Tasmania by Dr David Leaman, of Leaman Geophysics, utilizing current Gravity and Seismic results and is ongoing;


	•		Re-processing of seismic lines shot in 2001 by Fugro Seismic Imaging of Perth has been completed;


	•		Two Great South Land Minerals Limited Federal Government sponsored PhD theses at the University of Tasmania on the petroleum geology of onshore Tasmania were completed.


	•		The seismic and drilling programs are planned to be ongoing subject to logistical and weather restrictions


	•		Great South Land Minerals Limited has refurbished the suite of offices at level 3, 65 Murray Street Hobart Tasmania as a Seismic centre for seismic & GIS personnel and equipment.


	•		The purchase of state-of the art seismic interpretation software (Kingdom Suite) for use on high-end computers which have been installed at our refurbished Murray Street offices.


	•		We have recruited nine new staff members, including four geoscientists, bringing our staff numbers to fourteen.


	•		Great South Land Minerals Limited has spent in excess of AUD $50,000 (USD $39,465) on sophisticated GIS, seismic data analysis and interpretation hardware and software, contributed over AUD $100,000 (USD $78,930) to the University of Tasmania for data acquisition, teaching and research programs in Geology, acquired vehicles, put over 40 seismic crew and 4 seismic trucks to work for the 2007 campaign and commenced its drilling program with up to 3, 5 to 7 member crews. All this has required, food, accommodation, fuel, rig and equipment storage, insurance, certification and a host of other services, many of which will be in demand over at least the remaining term of the lease.

It has been difficult to undertake a petroleum drilling program in Tasmania due to a general shortage of petroleum drill-rigs in Australia. We intend to drill numerous suitable targets defined on our 2001, 2006 and 2007 seismic programs. Given the large number of reports for each drill site and the general regulatory environment, it takes much longer to obtain permission to drill a well than to actually drill the well.

As of September 16, 2008 we commenced exploratory drilling on our first seismically defined target known as the Bellevue #1. The Company has specifically defined fourteen targets and aims to define accurately as many targets as possible before drilling exploration wells on those targets. Stratigraphic wells may also be drilled in order to increase geological and petrophysical knowledge of what is still a frontier basin. The results of the AUD $4.4 million (US$3.0million) seismic survey completed in 2007 by Terrex Seismic on behalf of Empire helped to define prospects and leads and assisted in determining exact drill locations and RPS Energy has completed a competent persons report on the property. We have obtained regulatory approval to drill our first exploratory well and are substantially advanced in preparing regulatory reports for another seven wells. We have submitted a full application for drilling our second well Thunderbolt #1 which is 50 miles so uth of Bellevue#1. Subject to further approvals and financial and personnel resources, we intend to drill all fourteen structures so far defined as soon as practical. We are also simultaneously pursuing joint venture opportunities to determine whether such ventures might provide the economic means for exploiting the potential of the Special Exploration License.

DESCRIPTION OF PROPERTY.

The Company’s executive offices are located at 4500 College Boulevard, Suite 240, Leawood, Kansas 66211, where we rent approximately 5,000 sq. ft. of shared, supported office space at a cost of $850 per month on a short term basis. The Great South Land Minerals Limited office premises at level 3/65 Murray Street have been refurbished to accommodate a specialized data room for seismic and other technical information relating to exploration activities. Our management believes that the current space available to it both in Kansas and Hobart, Tasmania will suit our needs for the foreseeable future.

The Company does not directly own any real estate, but our wholly-owned subsidiary, Great South Land Minerals Limited, has rights under a leasehold granted by the Tasmanian government which is described in detail below.

Oil and natural gas properties

We conduct our oil and gas activities through our wholly-owned subsidiary, Great South Land Minerals Limited. Great South Land Minerals Limited has rights to an onshore petroleum license, Special Exploration License 13/98, in Tasmania, Australia, that the Great South Land Minerals Limited Board believes has prospects for economic exploitation of oil, hydrocarbon gases and helium. The Tasmanian Department of Industry, Energy and Resources granted Special Exploration License 13/98 to Great South Land Minerals Limited for an initial period of five years expiring on May 18, 2004, with the subsequent extension of the license for another five years to September 2009. We are actively pursuing exploration on the license property, making application for additional property and investigating opportunities for additional exploration license opportunities.

Special Exploration License 13/1998 (Special Exploration License 13/98) was granted to Great South Land Minerals Limited on May 18, 1999. The license covered an area of 30,356 square kilometers and replaced three licenses held by Great South Land Minerals Limited. These licenses EL 1/88, EL 9/95 and EL 21/95 were originally held by Great South Land Minerals Limited’s predecessor companies.

Modern exploration in the Tasmanian Basin commenced when the Broken Hill Proprietary Company was awarded an exploration license on April 15, 1981, to explore for coal. Mobil Energy Australia subsequently farmed in and worked the license until April 15, 1984 at which time the license was relinquished.

In June 1984, the recent phase of oil and gas exploration commenced when Conga Oil Pty Ltd, the earliest predecessor of Great South Land Minerals Limited, acquired part of the D’Entrecasteaux Region of Southern Tasmania in order to verify old hydrocarbon seeps and drilling reports. Conga Oil continued to acquire exploration rights to a large part of Southern Tasmania. In 1988, Conga Oil’s initial license area covering 50 square kilometers was incorporated into a new permit which covered an area of 3500 square kilometers. Conga Oil continued to explore this area until 1995 when it formed Great South Land Minerals Pty Ltd. and assigned the permit to Great South Land Minerals Pty Ltd. After receiving two other licenses, Great South Land Minerals Pty Ltd now held a total area of 13,200 square kilometers (32.6 million acres). All licenses expired in 2001. In March 1998 Great South Land Minerals Pty Ltd changed from a private to a public company, Grea t South Land Minerals Limited, by way of a special resolution approved by shareholders. A new, enlarged exploration license, Special Exploration License 13/98 was formed from the three prior exploration licenses and Great South Land Minerals Limited continued to explore these areas until the permit officially expired on May 18, 2004.

Special Exploration License 13/98 initially comprised 30,356 square kilometers and covered the whole Tasmania Basin or about half the State. When renewed on October 28, 2004, Special Exploration License 13/98 was decreased in size and now covers a reduced area of 15,035 square kilometers. The terms of the lease renewal require an exploration expenditure of AUD $21.5 million (US$ 14.9 million) over five years.

Below is a map of Tasmania illustrating the area covered by Special Exploration License 13/98. The cross-hatched area highlighted in the center of the map is the area within Tasmania in which Special Exploration License 13/98 permits Great South Land Minerals Limited to conduct exploratory work to uncover potential petroleum reservoirs suitable for developing.

License area Special Exploration License 13/98 onshore Tasmania (in Red hash)

[empireenergy424b3001.jpg]

As a condition to the granting of the lease, the Department of Industry, Energy and Resources of Tasmania required Great South Land Minerals Limited to satisfy a specific schedule of expenditures and indicated that failure in any given year, as at October 1 each year, to perform at least 80% of the required expenditures for that year, would be grounds for terminating the leasehold. The schedule is set out below:

Claimed Special Exploration License 13/98 Expenditure to meet the License conditions for the period

2004 (year 5) to 2009 (year 10) including expenditure from 1998 to 2003 brought forward*


Year and quarter			Annual expenditure requirement (AUD $)		Cumulative expenditure requirements (AUD $)		Cumulative Mandatory expenditure (80%) (AUD $)		Actual Claimed expenditure (AUD $)		Actual Claimed expenditure (USD $)		Claimed Cumulative Expenditure (by year) (AUD $)
Year 1, 1998 – to Year 5—2004								$	6,636,518	$	5,818,434	$	6,636,518
Year 6 License Requirements	AUD	$	5,341,000	$	5,341,000	$	4,272,800	$	17,981,424			$	24,617,942
	*USD*	$	*4,682,615*	$	*4,682,615*	$	*3,746,092*			$	*15,764,854*	$	*21,583,288*
1st quarter – Dec 04								$	35,837	$	31,419
2nd quarter – Mar 05								$	—	$	—
3rd quarter – Jun 05								$	17,780,730	$	15,588,899
4th quarter – Sep 05								$	164,857	$	144,535

Total for Year 6								$	17,981,424	$	15,764,854
Year 7 License Requirements	AUD	$	3,020,000	$	8,361,000	$	6,688,800	$	2,919,413			$	27,537,355
	*USD*	$	*2,647,725*	$	*7,330,340*	$	*5,864,272*			$	*2,559,537*	$	*24,142,825*
1st quarter – Dec 05								$	208,570	$	182,860
2nd quarter – Mar 06								$	2,306,962	$	2,022,583
3rd quarter – Jun 06								$	149,464	$	131,040
4th quarter – Sept 06								$	254,416	$	223,054

Total for Year 7								$	2,919,413	$	2,559,537
Year 8 License Requirements	AUD	$	4,799,000	$	13,160,000	$	10,528,000	$	8,961,762			$	36,499,117
	*USD*	$	*4,207,427*	$	*11,537,767*	$	*9,230,213*			$	*7,857,046*	$	*31,999,871*
4th quarter – Dec 06								$	6,092,355	$	5,341,350
1st quarter – Mar 07								$	892,768	$	782,716
2nd quarter – June 07								$	1,168,718	$	1,024,650
3rd quarter – Sep 07								$	807,921	$	708,329

Total for Year 8								$	8,961,762	$	7,857,046
Year 9 License Requirements	AUD	$	6,530,000	$	19,630,000	$	15,752,000	$	5,362,947			$	41,862,064
	*USD*	$	*5,725,047*	$	*17,210,210*	$	*13,810,251*			$	*4,938,999*	$	*36,938,870*
4th quarter – Dec 07								$	336,101	$	294,670
1st quarter – Marc 08								$	1,133,582	$	1,027,683
2nd quarter – June 08								$	2,731,784	$	2,574,624
3rd quarter Sept 08								$	1,161,480	$	1,042,022

Total for Year 9								$	5,362,947	$	4,938,999
Year 10 License Requirements	AUD	$	1,810,000	$	21,500,000	$	17,200,000
	*USD*	$	*1,250,167*	$	*14,850,050*	$	*11,880,040*
4th quarter – Dec 08								$	4,048,052	$	2,879,217
1st quarter – Mar 09								$	465,077	$	309,332
2nd quarter – June 09								$	1,899,040	$	1,351,832
3rd quarter Sept 09								$	—	$	—
Total for Year 10								$	—	$	—

Table 3 above represents the claimed AUD $41.8 million expenditure by Great South Land Minerals Limited which the Company believes meets the license conditions of Special Exploration License 13/98. The expenditure claimed and reported to Mineral Resources Tasmania is based on the contract’s October to September reporting year. The exploration and development expenditures disclosed in the Consolidated Financials and Notes thereto of Empire Energy Corporation International for the year ended 31, December 2008 were prepared using USA Generally Accepted Accounting Principles which is different to the definition of exploration expenditure of Special Exploration License 13/98. In December 2007, we sold drilling equipment and used the proceeds to repay a note payable and obtain release of the security interest on Great South Land Minerals. The original purchase of this equipment in the amount of AUD $1,407,549 has been included in the claimed expenditures and will offset future expenditures to be claimed under this license.

In 2006 and again in 2007, the company received letters from the Minister of Infrastructure, Energy & Resources giving Great South Land Minerals Limited an opportunity to show cause why the Special Exploration License should not be revoked. Great South Land Minerals Limited has made submissions supporting its case to the Minister on both occasions and has no reason to believe that Special Exploration License 13/98 should be revoked. The license has not to this date been revoked.

Great South Land Minerals Limited and its predecessor companies have spent substantial amounts on exploration activities. These activities have so far established the presence of significant petroleum systems, including the Larapintine Petroleum System and the Gondwana Petroleum System. In identifying these petroleum systems, Great South Land Minerals Limited has proved the presence of quality source rocks, including the Tasmanite Oil Shale which is an oil and gas source rock and is used as the world standard for type 1 kerogen, that are thermally mature for the generation of gaseous and liquid hydrocarbons. This determination shows that hydrocarbons have been generated, expelled and migrated into potential reservoir units. Although recent seismic data has shown the potential for trapping mechanisms, the Company is undertaking additional gravity and seismic work to identify potential drill targets. Great South Land Minerals Limit ed continues its exploration activities with exploration drilling & stratigraphic coring activities being planned in strategic locations.

History of Great South Land Minerals Limited license area Special Exploration License13/98

Exploration in Special Exploration License 13/98

In its exploration for coal under the coal exploration lease, Mobil Energy Australia commenced drilling operations, preceded by a ground based magnetics survey, on October 2, 1983 resulting in five cored holes totaling 987.75 meters, 814.19 meters of which was cored. The drilling targeted two horizons in the Permian sequence:


	•		Cygnet Coal Measures equivalents


	•		Faulkner Group containing the Mersey Coal Measures equivalents

Sedimentological studies were also undertaken to enable, in conjunction with the additional stratigraphic information, an environmental map of the Permian to be drawn and to make recommendations on future drilling.

Conga Oil began work in 1984 and during the period to 1987 focused most of its work on undertaking reviews of the basin. During 1987, after a reported seepage was relocated and analyzed, the Company began a systematic exploration program in the region. Recognizing the need to map sub-dolerite structure, Conga Oil first attempted to extend the gravity and magnetics databases in the Tasmanian Basin. Although this helped in defining regional trends and lineations, the lack of subsurface control and the limitations of the methods themselves the usefulness of these techniques for the purpose of identifying potential hydrocarbon traps.

The work completed by Conga Oil established that:


	•		oil had definitely been generated and that active seeps were observed in certain areas;


	•		source rock studies of vitrinite reflectance and conodont alteration index confirmed that Ordovician carbonates exposed around the region were within the oil window;


	•		Permian and younger rocks blanket most of the region and obscure distribution;


	•		basin development began in the late Precambrian, was most active in the Cambrian, but continued up to Middle Devonian times.

After 1988, exploration continued in the newly incorporated and expanded area of Conga Oil’s license. Despite earlier discouraging seismic acquisition data results, due dominantly to the widespread coverage of dolerites onshore Tasmania, Conga Oil attempted to acquire additional seismic data both on the main island and North Bruny Island in the vicinity of Johnson’s seep and acquired additional data offshore in Storm Bay utilizing AGSO’s Rig seismic vessel. The seismic acquired was disappointing with data quality of the records very poor to the point that none of the sections were adequate for the purposes of identifying and mapping petroleum traps.

In 1992, Condor Oil took over responsibility for exploration and during this period up to and including 1994, produced several consultants’ reports. During 1994 the stratigraphic wells, Shittim #1 (1751m) and Gilgal #1 (50m), were drilled on Bruny Island.

During 1995, when Conga Oil incorporated Great South Land Minerals Pty Ltd., Congo Oil gave Great South Land Minerals Pty Ltd. the role of exploration project manager and Condor Oil became an equity holder in Great South Land Minerals Pty Ltd. Great South Land Minerals Pty Ltd. initiated collaborative studies with a number of individual consultants and agencies which added a considerable amount of data and improved the Company’s understanding of the basin. The Department of Mineral Resources undertook rock evaluation studies, honors students at the University of Tasmania provided basin studies, Shell Development Australia reprocessed some earlier seismic data, BHP provided analyses in oil geochemistry, the state Mines Department acquired gravity and seismic data, CSIRO provided analyses of seep studies and geochemistry and Eugene Domack completed studies on the maturation and depositional environment of the Tasmanite oil shale.

At the request of the Mines Department, Great South Land Minerals Pty Ltd. employed an independent consultant, to assess the significance of the gas encountered at Shittim #l. The consultant concluded the hole had established that a seal, reservoir and gas were present and that the results encouraged further investigation of the basin depocentre located in central Tasmania. On the basis of this report, Great South Land Minerals Pty Ltd. then focused its exploration activities in this area of the basin. Concurrent with this work, Trent J. Woods, University of Tasmania, investigated the timing of potential hydrocarbon generation from Paleozoic sediments and the characterization of potential reservoirs of the Lower Parmeener Supergroup.

During late 1995, the Australian Geological Survey Organisation undertook a land-based seismic survey over parts of the basin. During 1996, a third stratigraphic well, Jericho #1 was pre-collared and drilled to a depth of 640m on Bruny Island.

The stratigraphic holes were located for the following reasons:


	•		Onshore and offshore seismic existed in the area and needed velocity control, which was only obtainable by a downhole shot so that previous processing could be repeated with actual real velocities.


	•		Historic records indicated that the area had numerous seeps of both oil and gas and that at least five shallow wildcat holes had been drilled but were depth limited because of previous technology.


	•		Results of gravity and magnetics surveys indicated that North Bruny Island is located on a basement high with a good potential regional trap for oil and gas.


	•		Modern geochemical oil exploration methods indicated that there were crude oil seeps in creeks and around old drill sites that warranted investigation.


	•		A recent Mines Department hole on the neck of Bruny Island had discovered oil in loose sand at 30meter depth.

All three holes recorded petroleum hydrocarbons in a gaseous state.


	•		Shittim#l recorded tar with zeolites in the fractured dolerite and gas from 810 meters depth. The hole was drilled onto 1751 meters, reaching the unconformity.


	•		Gilgal#l recorded gas at its total depth of 51 meters.


	•		Jericho#l recorded gas from 15 meters to the bottom of the hole at 228 meters.

During 1996 Great South Land Minerals Pty Ltd. contracted Robert S. Young, previously Chief Petroleum Exploration Geologist for Getty Oil, to review the potential of oil and gas in the Tasmanian onshore Basin. The primary focus of Young’s review involved analyzing the work undertaken up to that date from a petroleum systems perspective. In this sense, he set about identifying whether the basic building blocks for the potential commercial production of hydrocarbons existed within the Tasmanian Basin.

Young concluded that:


	•		With some 270 seeps and shows, which have been studied geochemically and have identified at least four mature oils, that it was very probable there are several possible hydrocarbon sources in the Tasmanian Basin. Geochemical comparisons of seeps show that the most likely source would be the Ordovician of the Gordon Group Limestones. Ratios of C27:C28:C29 Steranes are identical between seeps of the Bruny Island Johnson well and the Ordovician Gordon Limestone and the predominance of C27 Steranes and the abundant diasteranes in Tasmanian bitumens suggest a widespread algae– and clay– rich source rock.


	•		Conodonts’ color indicates that much of the Gordon Limestone, particularly in central and southern Tasmania, is in the oil and gas windows. This limestone is expected to underlay Permian and Triassic sediments in much of the Tasmanian Basin. He also included the Permian Quamby Mudstone, “Freshwater Sequence” and Preolenna coal Measures as other potential source rocks. In all three rock units of which the total organic carbon may reach 25%, vitrinite reflectance data and fossil pollen colors show that these source rocks are within the oil window over large areas of the basin.


	•		Reservoirs are very easily envisioned in the shallow marine Ordovician Limestones as palaeokarsts, reefal or fractural. Since limestones are considered source material, migration would be minimal. Additional potential reservoirs are within the Siluro-Devonian sandstones of the Eldon and Tiger Range Groups and within sandstones of the Permian Bundella Formation, Faulkner Group and Liffey Sandstone of the Lower Parmeener Super Group. Measured porosities in the Faulkner and Liffey are 13% and 12% respectively, while other Permian sandstones in the northern area of the license have porosities averaging 16% and horizontal permeabilities ranging up to 386 millidarcies.


	•		Evaporites are most efficient seals mainly because they offer very little or no pore space; however, the long-term sealing properties of very fine grained, water wet porous rocks such as shales are also remarkably efficient in the absence of open fractures. This is due to the displacement pressure barrier effect created by capillary pressure between oil and water in rock pores. It is anticipated that the Ordovician Limestones reservoirs would be sealed by additional limestone within the Gordon Group or by the Turo Tillite above the unconformity. Good seals of shale and silts are found throughout the Permian-Triassic sedimentary sequence. The Jurassic dolerite sills also make excellent cap rock for the Permian-Triassic reservoirs.


	•		Defining traps and structural features within the basin is very difficult to impossible without good reflection seismic records. To date, there has been very little reflection seismic data and most of the data is poor quality due to the extensive dolerite cover over a large part of the basinal sediments. Relatively good quality seismic data has been obtained in areas where the dolerite cover is thin or absent. The results of the seismic work on the TASGO project show that an improvement in data quality and penetration of recordings through the dolerite can be achieved and this will aid in better defining structural traps. The present gravity and magnetics, which have been extensively used to date, have been able to define regional structural elements of mostly Paleozoic Structures in the Permian, or younger, are probably going to be faulted, and of low relief.


	•		Except in unusual circumstances, most untrapped oil in sedimentary basins originates from synclinal drainage areas that surround the trap itself. Thus, migration distances commonly range in tens rather than hundreds of miles, particularly on strongly structured or faulted basins.

During 1997, four stratigraphic wells were planned and drilled. Lonnavale #1 was pre-collared and drilled to 557m; Hunterston #1 was pre-collared and drilled to 336m; Bridgewater #1 was pre-collared and drilled to 252m and Pelham was pre-collared and drilled to 503m.

During 2001, Great South Land Minerals Limited completed 660 line kilometers of regional seismic survey over part of the area of Special Exploration License 13/98. At the conclusion of the seismic program, Great South Land Minerals Limited submitted an environmental report to the Department of Primary Industry, Water and the Environment’s Threatened Species Unit. The preliminary results of the interpretation identified several potential anticlinal/domal traps. Two small anticlinal structures were identified in the Parmeener Supergroup beneath the Longford basin and one in the Tertiary infill of the Longford Basin. Six potential traps were recognized in the Central Highlands area where gently dipping anticlines in the Parmeener almost directly overlie and reflect more steeply dipping anticlines beneath the Devonian unconformity. These Devonian structures are probably mainly within the Wurawina Supergroup and contained within the Devonian fold-thrust b elt. Based on these seismic results Great South Land Minerals Limited planned a 1075 line kilometer program designed to acquire further regional data, to define structures identified during the prior survey and to place lines close to wells that were drilled and pre-collared in 1997. This survey started in April 2006 and 152 line kilometers were acquired within the Central Highlands of Tasmania.

On May 10, 2002, Great South Land Minerals Limited entered into a joint venture agreement with OME Resources Australia Pty Ltd under which OME earned a joint venture interest in Special Exploration License 13/98 by conducting drilling and related work. Stage 1 of the work related to the expenditure of $1,000,000 to complete the deepening drilling/coring of Hunterston#1 well and other activities for a 5% interest in the license. A dispute between Great South Land Minerals Limited and OME arose as to valuation of work done by September 30, 2002, the result of which was the assignment to OME of all coal bed methane rights in the Special Exploration License 13/98 tenement in full satisfaction against any potential claims. The Company has recently made application to MRT to regain the coal bed methane exploration rights.

During 2002 and 2003 Great South Land Minerals Limited continued to work on the 2D seismic data acquired during 2001 and completed a report on an analysis of the Longford Sub-basin. Great South Land Minerals Limited also obtained approval to reenter and deepen (1700m) the stratigraphic well, Hunterston#1. The well was eventually terminated at a depth of 1324m, which was carried out as part of the OME joint venture. Hydrocarbon gas was noted at various depths while coring and analyses of gas samples confirmed the presence of Helium gas (>1.0%) from the formations below the Tasmania Basin.

MANAGEMENT

Set forth below is certain information regarding our directors, executive officers and key personnel.

Executive Officers and Directors


Name	Age	Position
Malcolm R. Bendall	50	Chief Executive Officer and Director
Clive F. Burrett	60	Chairman of the Board of Directors
Mark Callaway	56	Director, Corporate Finance & Business Development
John C. Garrison	57	Chief Financial Officer, Secretary and Director
Tad M. Ballantyne	53	Director

The directors of the Company are elected each year at the annual meeting of shareholders for a term of one year. Each director serves until the expiration of his term or until the earlier of his death, resignation, or removal, or until his successor has been qualified. Executive officers of the Company are appointed by the board of directors on an annual basis and serve until their successors are appointed by the board of directors. Currently, our directors are not compensated for their Board services, although their expenses in attending meetings are reimbursed.

Malcolm R. Bendall

Malcolm Bendall was a founding director of Great Southland Minerals Limited (GSLM) and was appointed Chief Executive Officer and Board Chairman of Empire Energy on June 4, 2004 for the purpose of progressing the merger between GSLM and Empire Energy and served in that capacity until August 2007 and was reappointed in March 2008. He has been involved in organizations investigating the viability of petroleum resources in Special Exploration License 13/98 since 1978. Mr. Bendall has worked as a mine manager and drill supervisor and has been published in two international petroleum magazines. He is a fellow of the Institute of Company Directors, Tasmania.

Clive F. Burrett

Dr. Clive Burrett of Hobart, Tasmania, was appointed to the board of directors in October 2005. Dr. Burrett was a founding member of the Board of Directors of Great South Land Minerals Limited which is a wholly owned subsidiary of Empire. He currently serves as President of Great South Land Minerals Limited. Dr. Burrett received his Bachelor of Science with honors from the University of London in 1970, and a PhD from the University of Tasmania in 1978. He was a Professor of Geology in the School of Earth Sciences in the University of Tasmania. He previously served as Chairman of the Department of Geology from 1998 to 2002. He has published over 100 scientific papers and edited the standard volume on the “Geology of Tasmania.” He has also supervised a graduate study focusing on the Paleozoic basin evolution in Tasmania and Laos. Dr. Burrett has consulted on applied aspects of basin evolution, petroleum, lead and zinc deposits to companies such as Shell, CRA, Oxania and BHP in Australia, Oman, Laos, China and Thailand.

Mark Callaway

Mark Callaway, FCA, was appointed to the Board of Directors in February 2009 and also serves as an Executive Director for Corporate Finance and Business Development. Mr. Callaway is a Fellow of the Institute of Chartered Accountants in England and Wales, and has held various CEO and CFO positions at country and international level for Shell over a 24 year period, including many years in French West Africa and a prolonged stay in Kazakhstan where he was the Chief Financial Officer of the North Caspian Sea Consortium which discovered Kashagan, a world-class oil field. This was followed by a further seven year record of several successful start-up oil and gas companies, including FTSE, AIM and TSX listed companies, Imperial Energy Plc, Nelson Resources Limited, FirstAfrica Plc and Elko Energy Inc, a private Canadian company.

John C. Garrison

John C. Garrison has been a director of the Company since April 1999. Mr. Garrison is a certified public accountant with over thirty years of experience in accounting, auditing and financial management. He served as corporate secretary, director and chief accounting officer of Infinity, Inc., a publicly traded oilfield service and oil and gas exploration and development company from April 1995 to August 1999. He is also a director of Quest Resource Corporation, a publicly traded energy company. He has been involved in an active practice of public accountancy since 1976. Mr. Garrison received a degree in business administration and accounting from Kansas State University in 1974.

Tad M. Ballantyne

Tad M. Ballantyne, was appointed as an independent member of the board of directors in October 2005 and served as President of our former subsidiary Pacific Rim since March 2006. Mr. Ballantyne has been CEO of Hoopeston Foods, Inc. since March of 2004. Mr. Ballantyne is a director and chairman of the audit committee of Life Partners Holdings, Inc., and is an officer and director of several private companies including BR Industries, Inc, Hoopeston Foods, Inc., L.C. Thomson Inc., Jilin Jimei Foods, Ltd., Pacific Rim, and other companies engaged in manufacturing and food processing industries as well as real estate acquisition. During 2003, Texas Steel Partners Inc., a Texas-based steel foundry, filed for reorganization and was liquidated pursuant to a bankruptcy Chapter 7 conversion. Mr. Ballantyne was an officer and director and 50% shareholder of Texas Steel Partners. During the last 15 years, Mr. Ballantyne has been, on a global basis , in the business of acquiring and operating troubled companies or assets being divested by public and private companies. In addition, he has been both an officer and director of a public company, Amacan Resources Corporation, previously engaged in the oil and gas business on the production and refining side. He holds a Bachelor of Arts degree in business management from the University of Wisconsin.

Audit Committee and Financial Expert

The Company’s Board of Directors functions as its audit committee and performs some of the same functions of an audit committee, such as recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management’s administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document. John Garrison, Tad Ballantyne and Mark Callaway qualify as financial experts, however they do not qualify as independent.

Code of Ethics

A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:


	•		Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;


	•		Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by an issuer;
	•		Compliance with applicable governmental laws, rules and regulations;


	•		The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and


	•		Accountability for adherence to the code.

Due to the limited scope of our current operations, we have not yet adopted a corporate code of ethics that applies to our principal executive officer, principal accounting officer, or persons performing similar functions.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security ownership of certain beneficial owners.

The following table sets forth certain information regarding the beneficial ownership of our common stock as of September 16, 2009 by (1) each person who, to our knowledge, beneficially owns more than 5% of the outstanding shares of our common stock (aggregate of Class A and Class B); (2) each of our directors and executive officers; and (3) all of our executive officers and directors as a group. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and that person’s address is 4500 College Blvd Ste. 240, Leawood, Kansas, 66211. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days following June 30, 2009 are deemed outstanding for computing the share ownership and percentage of the person holding such options and warrants, but are not deemed outstanding for computing the percentage of any other person. All share numbers and ownership percentage calculations below assume that all shares of Class B redeemable common stock have been converted on a one-for-one basis into c orresponding shares of our Class A common stock.

Table 9


Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner	Percent of Class
Class A Common Stock	Malcolm R. Bendall 37 Nicholas Drive Sandy Bay, Hobart, Tasmania Australia 7005	25,850,000(1) Direct 7,357,301 Indirect Direct option to acquire 4,000,000 shares at $.20AU	15.1%

Class A Common Stock	John C. Garrison 7211 High Drive Prairie Village, KS 66208	2,022,288 Direct Direct option to acquire 2,000,000 shares at $.20AU	1.4%

Class A Common Stock	Tad M. Ballantyne 5118 Hunt Club Rd Racine, WI 53402 USA	None (2)	*

Class A Common Stock	Clive F. Burrett 22 Hinman Drive Kingston, Tasmania 7050	565,632 Direct Option to acquire 600,000 shares at AU $0.20	*

Class A Common Stock	Mark Callaway 4500 College Blvd Leawood, KS 66211	none	*

*All officers and directors as a group*		50,227,354	16.7%

Class A Common Stock	Phil Simpson P.O. Box 35 Cressy Tasmania 7302	19,677,500 Indirect (3) Direct Option to acquire 400,000 shares at AU $0.20	7.6%

Class A Common Stock	RAB Special Situations Master Fund Limited 1 Adam Street London, England WG2N 6LE	14,075,000(4)	9.9%

Class A Common Stock	Libertas Capital Group plc 16 Berkeley St, London W1J 8DZ UK	21,757,777	8.1%


*	less than 1%


(1)	Indirect shares, 7,357,301 are owned by trusts or entities that may be controlled by Mr. Bendall. In addition, the trust holds an option to convert debt of the Company to up to 7.4 million shares.


(2)	This number does not include 10,000,000 shares owned by Mach One Corporation, of which Mr. Ballantyne is one of several directors. He does not have the right to vote the shares or and dispository power over the shares.


(3)	Indirect Shares, 4,750,000 are owned by entities that may be controlled by Mr. Simpson and the entity holds a warrant for an additional 7 million shares. In addition, 7 million shares of common stock are owned by an entity of which Mr. Simpson is a beneficiary.

(4)

This number does not include the shares of stock in the aggregate amount of 42,478,571 underlying the Class A Warrants, Class B Warrants, Class C Warrants and 6% convertible debenture held by the investor. Each of these warrants and the convertible debenture has restrictions on exercise or conversion such that the holder’s beneficial ownership interest may not exceed 9.99% of the issuer’s issued and outstanding voting securities at the time of any such conversion or exercise.

There are no arrangements or understandings among members of both the former and new control groups and their associates with respect to election of directors or other matters.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows all cash compensation paid or to be paid by the Company during the fiscal years indicated to the chief executive officer and the highest paid executive officers of the Company as of the end of the Company’s last fiscal year whose salary and bonus for such period in all capacities in which the executive officer served exceeded $100,000.

Table 5

Summary Compensation Table for 2008 and 2007


Name and Principal Position (a)	Year (b)	Salary ($) (c)	Bonus ($) (d)	Stock Awards ($) (e)	Option Awards ($) (f)	Non-Equity Incentive Plan Compensation ($) (g)	Change in Pension Value and Nonqualified Deferred Compensation Earrings ($) (h)	All Other Compensation ($) (i)	Total ($) (j)
Malcolm Bendall	2008	216,000	—	—	—	—	—	—	216,000
Principal Executive Officer	2007	216,000	—	—	—	—	—	—	216,000
John Garrison	2008	240,000	—	—	—	—	—	—	240,000
Principal Financial Officer	2007	190,000	—	—	—	25	—	—	190,000
S. A. Sehsuvaroglu	2008	75,000	—	568,350	—	—	—	—	643,350
Principal Executive Officer	2007	225,000	—	—	983,835	—	—	—	1,208,835

Mr. Bendall earned compensation through his consulting company Bass Gas and Oil of $216,000 during 2008 and $216,000 during 2007. Under a separation agreement executed in August 2007 when Mr. Bendall resigned his position, accrued compensation and expenses owed to Mr. Bendall were paid by the company issuing a total of 5,600,000 common shares. In addition the agreement provided a monthly payment of $18,000 to Mr. Bendall for a period of five years. Mr. Bendall was reappointed as Chief Executive Officer in March 2008.

Mr. Sehsuvaroglu became Principal Executive Officer August 22, 2007 and received vested options to purchase approximately six million shares. The options were forfeited and cancelled when he resigned in February 2008 in conjunction with cancellation of his contract and award of 6,315,800 shares.

Table 6

Outstanding Equity Awards At December 31, 2008


(a)	Number of Securities Underlying Unexercised Options (#) Exercisable (b)	Option Exercise Price ($) (e)	Option Expiration Date (f)
Malcolm Bendall	4,000,000	0.14	31/12/2009
Principal Executive Officer

Table 7

Director Compensation For 2008


Name (a)	Directors Fees Earned or Paid in Cash ($) (b)	Option Awards ($) (d)	All Other Compensation ($) (g)	Total ($) (h)
Tad Ballantyne	—	—	(1)	(1)
Clive Burrett	—	—	(2)	(2)
John Garrison	—	—	(3)	(3)
Phil Simpson	—	—	(4)	(4)
Graham Rogers	—	—	(4)	(4)


(1)	Mr. Ballantyne also served as manager of the Pacific Rim subsidiary that was sold in December 2008 and received 1,500,000 shares of Empire common stock valued at $225,000 in 2006 as compensation for a five year management agreement.


(2)	Mr. Burrett also serves as a director and manager of the Great South Land Minerals Limited Subsidiary and received compensation of $156,000 in that capacity.


(3)	Mr. Garrison earned consulting and accounting fees in the amount of $240,000 during 2008.


(4)	Mr. Simpson also served as Executive Director of the Great South Land Minerals Limited Subsidiary and received compensation of $116,000 in that Capacity.


(4)	Mr. Rogers also served as Chief Financial Officer of the Company and Great South Land Minerals Limited Subsidiary and received compensation of $177,000 in that Capacity.

Table 8

Equity Compensation Plan Information


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted- average exercise price of outstanding options, warrants and rights (b)
Equity compensation plans approved by security holders
Stock Option Plan	9,000,000	$		0.138
Equity compensation plans not approved by security holders
Stock Option Plan	—			—
Total	9,000,000

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

A number of directors of Empire and its subsidiaries hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. The terms and conditions of the transactions with directors and their director related entities were no more favorable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arms length basis.

Effective April 1, 2002, Great South Land Minerals Limited signed a consultancy agreement with Bass Gas and Oil Pty Ltd to receive the services of Mr. Bendall. The agreement continued until April 1, 2007. Mr. Bendall is to provide us with professional guidance, advice and assistance in the general area of oil and gas exploration. In return for providing these services, Bass Gas and Oil Pty Ltd is entitled to receive $13,142 per month from Great South Land Minerals Limited. After the term expiry, the agreement will be extended for a further 5 year period. This agreement was cancelled in August 2007 with a separation agreement that provided Mr. Bendall with 5,600,000 common shares, valued at $840,000 to settle all accrued fees and expenses and an ongoing fee of $18,000 for a period of five years to provide similar services.

Two former directors of Great South Land Minerals Limited, Messrs. D. Tanner and R. Watson, have personally provided joint and several guarantees, on behalf of Great South Land Minerals Limited, in favor of Mineral Resources of Tasmania, the government body responsible for the activities of Great South Land Minerals Limited. This guarantee is for a total of $54,758, and relates to future environmental rehabilitation costs that may arise in respect of exploration activities within Special Exploration License 13/98.

In earlier periods, Empire made conditional offers of share options covering 9,000,000 shares to Directors, Director Related Entities and officers of the Company. The issue of any of these options was conditional on the successful completion of the merger with Empire, the extension of the license over key areas of Special Exploration License 13/98 and the securing of additional available funding of at least AUD $15,000,000 before December 31, 2006 (USD $10,951,000 at December 31, 2005 interbank spot exchange rates). These options have a term of three years and an exercise price of AUD $0.20 per share. Following the successful acquisition of Great South Land Minerals Limited by Empire as at April 6, 2005, these options were transferred to Empire for execution. The conditions to vest these options were met in December 2006. The exercise price of each option at December 31, 2008 in USD $ is $0.138 per share.

Empire in April 2006 completed a private placement with RAB Special Situations (Master) Fund Limited, wherein RAB acquired 17,100,000 shares of our common stock, a 6% convertible debenture, Class A Warrants and Class B Warrants. Details about the transaction and the terms of the securities are set out in “Description of Business – Recent Developments” above. In March 2009, maturity of the convertible debenture was extended to March 2011 and expiration of the Warrants, including new Class C warrants, was extended to March 2014.

On August 15, 2007 the Company entered into an employment agreement with Mr. S. A. Sehsuvaroglu whereby Mr. Sehsuvaroglu agreed to serve as our Chief Executive Officer and President. Among other provisions, Mr. Sehsuvaroglu’s Employment Agreement granted him options to acquire, in the aggregate, 18,574,103 shares of the Company’s Class A Common Stock. These options were forfeited when Mr. Sehsuvaroglu resigned his officer and director positions in February 2008.

On September 27, 2007, the Company entered into a Compromise Agreement with Mr. Bendall, the former President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of the Company. The agreement serves as the full and final settlement of approximately $840,000 owed to Mr. Bendall in accrued income and unreimbursed expenses and serves to employ Mr. Bendall as a consultant to the Company for five years. In consideration of the debt forgiveness and his future service as a consultant, Mr. Bendall (1) was issued 5,600,000 shares of Empire Class A Common Stock, valued at $840,000 and (2) is entitled to receive sixty monthly installments of $18,000 each, net of United Kingdom taxes. In light of Mr. Bendall’s unique knowledge of the Company’s operations and the geology and prospects of our license area, it was important to retain his continued participation on a consulting basis.

In November 2007, the Company issued 1,800,000 shares of common stock valued at $216,000 to a Director of the GSLM subsidiary in settlement of damages in the breach of a contract in 2006 in the claimed amount of AU$450,000 (USD $311,000).

On October 12, 2007, the Company entered into a Put and Call Option Agreement with MR Associates, a sole trader wholly-owned by the Chairman of the Board of Directors, Michael Roberts, regarding the proposed transfer to the Company of exploration rights to approximately 13,336 sq. km. of real property in exchange for the issuance of 19,500,000 shares of our Class A Common Stock. As initial consideration for entering into the agreement, the Company has issued 2,500,000 shares to MR Associates. Payment of the remaining 17,000,000 shares, and completion of this agreement, are contingent on several matters. The Company and Mr. Roberts agreed to let this agreement expire unexercised when Mr. Roberts resigned in February 2008.

In December 2007, the Company sold its interest of 7,641,403 common shares in Zeehan Zinc Limited for net proceeds of $3.5 million. Proceeds of this sale were used to partially repay the $4,000,000 floating rate note payable to Wind City, Inc. that had been called for early redemption by the lender. To comply with the timing required to complete the sale transaction and note repayment, and to provide additional working capital to the Company, Empire borrowed a total of 9,000,000 shares of Zeehan stock from two entities. A current director is a beneficiary of one entity and the current CEO and director could be considered a control person of the other entity. Empire agreed to pay a total of 7,000,000 Empire shares as compensation for this loan of Zeehan shares. The 7,000,000 Empire shares were issued to one entity in 2008 and were valued at the market price at the time of the loan was made. The value of 5,000,000 Empire shares, $600,000, was accrued as a l ong term payable at the time of the sale of the Zeehan shares and recorded as a cost of the sale of those shares. The remaining 2,000,000 Empire shares were issued as compensation for unexpected processing delays in the return of the borrowed Zeehan shares and were recorded as an expense when the settlement agreement was made with the lender and the shares issued in 2008. Further Empire issued a note payable to the other entity for $518,013, the proceeds of the sale of the remaining 1,359,597 Zeehan shares borrowed in excess of the shares owned by Empire. In addition to the $600,000 cost of borrowing shares mentioned above, the company recorded $784,088 additional costs to intermediaries for a total transaction cost of $1,384,088. The additional costs were paid by transferring 140,000 Zeehan shares, issuing 4,766,667 Empire shares in 2007, issuing 1,000,000 Empire shares in 2008 and paying $167,254 in cash in 2008.

In February 2008, the GSLM subsidiary obtained working capital in the form of a convertible debenture from a company owned by a Director. The debenture matured in six months, earned interest at a rate of 10% per quarter and is convertible into common stock at a rate of $.15 per share. This debenture was fully paid in 2009 by transfer of part of Empire’s investment in Mach One Corporation and it’s Note Receivable from Mach One.

DESCRIPTION OF SECURITIES

Authorized Capital Stock

The Certificate of Amendment to our Articles of Incorporation filed with the Secretary of State of Nevada on November 15, 2007, authorized the issuance of 600 million shares of our capital stock, of which 599,000,000 were designated as Class A common stock, par value $0.001 per share and 1,000,000 shares were designated as Class B common stock, par value $0.001 per share. Our Articles of Incorporation do not authorize any classes of preferred stock.

Capital Stock Issued and Outstanding

As of August 20, 2009 there were issued and outstanding 278,543,190 shares of Class A common stock held by approximately 1,400 holders of record and 100,607 shares of Class B redeemable common stock held by 450 holders of record.

The following description of our capital stock is derived from various provisions of our Articles of Incorporation and Bylaws as well as provisions of applicable law. Such description is not intended to be complete and is qualified in it’s entirely by reference to the relevant provisions of our Articles of Incorporation and Bylaws.

Description of Common Stock

Holders of the common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of common stock do not have cumulative voting rights. Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. Holders of the common stock representing one-half of the total voting power of the capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders. A vote by the holders of a majority of the outstanding shares of common stock is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to the Articles of Incorporation.

Holders of common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of a liquidation, dissolution or winding up, each outstanding share of Class A common stock entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. Holders of Class B redeemable common stock are entitled only to the par value of their shares upon a liquidation, dissolution or winding up. Holders of the common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to the Class A common stock.

Shares in Class B redeemable common stock do not trade publicly and are not transferable. Any holder of Class B shares wanting to sell or trade those shares must first redeem them with the Company for an equal number of shares of Class A common stock. We issued the Class B redeemable common stock in 2001 as partial consideration in an exchange offer with the shareholders of Commonwealth Energy Corporation, a Canadian corporation. By structuring the transaction as an exchangeable share transaction we permitted Canadian tax deferral for former Commonwealth Canadian shareholders who elected to receive the Exchangeable Shares rather than Empire Class A Common Stock upon consummation of the transaction.

Warrants

As of June 30, 2009, warrants representing the right to purchase 28,800,000 shares of our common stock are issued and outstanding. The terms and exercise prices of the warrants are set out in the table below. The shares of common stock underlying the outstanding warrants are being registered under this registration statement of which this prospectus is a part.


Number of shares		Exercise price	Warrant expiration date
750,000	$	0.50	August 4, 2009
8,550,000	$	0.07	March 14, 2014
5,000,000	$	0.07	March 14, 2014
7,500,000	$	0.07	March 14, 2014
7,000,000	$	0.07	January 27, 2014

Each warrant may be exercised in whole or in part at any time to purchase shares of common stock at the respective exercise price, subject to adjustment from time to time upon the occurrence of certain events. The Company granted the warrant holder certain registration rights relating to the underlying shares of common stock, but not the warrants themselves, pursuant to which the Company is required to prepare and file a registration statement within 120 calendar days of closing.

Securities Convertible into Common Stock

As of the date of this prospectus, Empire had outstanding a 6% convertible debenture representing the right to convert in whole or in part the principal balance of the note into shares of our Class A common stock at a conversion price of USD $0.07 per share, subject to customary non-dilution provisions. The debenture is due March 21, 2011 and accrues interest at the rate of 6% per annum. The Company granted the holder of the debenture certain registration rights relating to the underlying shares into which the debenture may be converted, but not the debenture itself, pursuant to which the Company is required to prepare and file a registration statement.

Empire received funding in 2007 from an entity related to an officer and director in the amount of $518,000, 400,000 of which remains outstanding and payable on demand. Terms of this debt allow the officer to convert the debt to common shares at his discretion at a conversion price of USD $0.07 per share.

Options

We also have options representing the right to purchase 9,000,000 shares of Class A common stock that became exercisable when the officers and directors were successful in raising no less than AUD $15,000,000 in capital by December 31, 2006, on behalf of the Company. The options have a term of three years from the date of issue and have an exercise price of AUD $0.20 (US$ 0.14).

SELLING SECURITY HOLDERS

The following table sets forth the shares beneficially owned, as of the date of this prospectus, by the selling stockholders prior to the offering contemplated by this prospectus, the number of shares each selling stockholder is offering by this prospectus and the number of shares which each selling stockholder would own beneficially if all such offered shares are sold. Except as expressly set forth below, none of the selling stockholders is known to us to be a registered broker-dealer or an affiliate of a registered broker-dealer. Each of the selling stockholders has acquired his, her or its shares solely for investment and not with a view to or for resale or distribution of such securities. Beneficial ownership is determined in accordance with SEC rules and includes voting or investment power with respect to the securities.


Name	Shares of common stock owned prior to the offering	Percentage of common stock owned prior to the offering⁽¹⁾	Shares of common stock to be sold	Shares of common stock owned after the offering	Percentage of common stock owned as a result of the offering⁽²⁾
Malcolm Bendall⁽³⁾⁽⁴⁾	37,250,000	13.37%	37,250,000	0	0.00%
Credit Suisse⁽⁵⁾
RAB Special Situations Master Fund Limited⁽⁶⁾	56,553,571	20.30%	56,553,571	0	0.00%
Terralinna Pty Ltd TTEE FBO⁽⁷⁾	14,384,579	5.16%	14,384,579	0	0.00%
Kingdom Securities Ltd⁽⁷⁾	8,050,000	2.89%	8,050,000	0	0.00%
Larry Werecky⁽⁸⁾	10,000,000	3.59%	10,000,000	0	0.00%
Hunt Energy and Mineral Co⁽⁸⁾	10,000,000	3.59%	10,000,000	0	0.00%
Spaulding Drillers⁽⁸⁾	3,000,000	1.08%	3,000,000	0	0.00%
Bendall Family Trust⁽⁴⁾	7,357,301	2.64%	7,357,301	0	0.00%
Dave West⁽⁹⁾	6,596,614	2.37%	6,596,614	0	0.00%
J. Michael Blalock⁽¹⁰⁾	2,970,000	1.07%	2,970,000	0	0.00%
Mach One Corporation⁽¹¹⁾	10,000,000	3.59%	2,500,000	7,500,000	2.69%
Mackay Partnership⁽¹²⁾	1,500,000	*	1,500,000	0	0.00%
D Stewart Armstrong⁽¹⁰⁾	1,500,000	*	1,500,000	0	0.00%
Seacoast Publishing⁽¹⁰⁾	1,000,000	*	1,000,000	0	0.00%
Avalor Capital LLC⁽¹³⁾	763,300	*	763,300	0	0.00%
Eric Eisenberg⁽¹⁰⁾	480,000	*	480,000	0	0.00%
James H. Caplan⁽¹⁰⁾	480,000	*	480,000	0	0.00%
Victor Nostas⁽¹⁰⁾	480,000	*	480,000	0	0.00%

Less than 1%.

(1)

Percentage calculated on the basis of 278,543,190 share of Class A common stock outstanding as of August 20, 2009.

(2)

Assumes the sale of all shares of Class A common stock registered pursuant to this prospectus, although the selling stockholders are under no obligations known to us to sell any shares of Class A common stock at this time.

(3)

Mr. Bendall will also beneficially own 32 million shares presently held as collateral by Smart Win International Ltd. should Smart Win execute against the guarantee provided by Mr. Bendall on behalf of Empire to collect The Senior Secured Note dated July 17, 2008.

(4)

Mr. Bendall is a director and CEO of both Empire and GSLM. Mr. Bendall holds directly 25,850,000 shares, has the right to convert debt owed to him by the company into up to 7.4 million shares of common stock, and holds options to acquire 4 million shares at a price of AU$0.20. Shares held by Bendall Trust could be attributed to Mr. Bendall.

(5)

Credit Suisse holds shares owned by Mr. Bendall as collateral pursuant to a loan agreement entered into in September 2008 with our CEO Malcolm Bendall. The shares may only be sold upon a default by Mr. Bendall pursuant to the terms of his loan agreement with Credit Suisse.

(6)

RAB Special Situations (Master) Fund Limited holds 14, 075,000 shares of common stock, a 6% convertible debenture exercisable to acquire 21,428,571 shares of common stock, Class A Warrants exercisable to acquire 8,550,000 shares of common stock, Class B Warrants exercisable to acquire 5,000,000 shares of common stock and Class C Warrants exercisable to acquire 7,500,000shares of common stock. The convertible debenture, Class A Warrants, Class B Warrants and Class C Warrants have restrictions on conversion or exercise and the holder’s beneficial ownership interest may not exceed 9.99% of the issuer’s issued and outstanding voting securities at the time of any conversion or exercise. These securities are registered in the custodial account of Credit Suisse Securities (USA) LLC and Phillip Richard as fund manager has investment and voting control over these securities. The securities held by RAB Special Situations (Master) Fund Limited were su bstantially acquired in March 2006 in private placements reliant on the safe harbor from registration provided by Regulation S and amended and extended as disclosed on our Form 10-K for the year ending December 31, 2008.

(7)

Mr. Simpson holds shares both directly and in the name of Terralinna Pty Ltd. TTEE FBO Phillips Simpson Family Trust. Mr. Simpson holds 6,984,579 shares, has a Warrant to Acquire 7,000,000 shares of common stock at a price of US$0.07, and holds options to acquire 400,000 shares at a price of AU$0.20. Mr. Simpson is also a beneficiary of Kingdom Securities Ltd which holds 8,050,000 shares of common stock.

(8)

Shares are held as collateral for amounts due under trade payables and notes payable. Included in this registration is a total of 23 million shares held as collateral but not considered outstanding at the date of this filing. Should the company default on the debt obligations, the shares could be released and could be sold under this registration.

(9)

The securities held by Dave West were acquired in December 2008 in private placements reliant on the safe harbor from registration provided by Regulation S.

(10)

The shareholder received its shares in consideration of public relations services rendered to Empire Energy in 2008 and 2009.

(11)

The shareholder received the shares in merger acquisition transaction in April 2009.

(12)

The ultimate beneficial owner of the Mackay Limited Partnership is Mr. Tad Ballantyne, a director of Empire Energy.

(13)

Mr. Frank Bachinsky is the ultimate beneficial owner of Avalor Capital, LLC. Avalor Capital has the right to acquire 763,300 shares of common stock upon exercise of a warrant acquired in a private placement as compensation.

PLAN OF DISTRIBUTION

The selling stockholders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commission or agent’s commissions. These sales may be at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:

•

any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

•

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

•

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

•

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

•

transactions otherwise than on these exchanges or systems or in the over-the-counter market;

•

through the writing of options, whether such options are listed on an options exchange or otherwise;

•

an exchange distribution in accordance with the rules of the applicable exchange;

•

privately negotiated transactions;

•

short sales;

•

broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

•

a combination of any such methods of sale; and

•

any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

The selling stockholders may also engage in short sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades.

Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person und er the Securities Act.

In connection with the sale of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume.

The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares. The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.

The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions paid, or any discounts or concessions allowed to, such broker-dealers or agents and any profit realized on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers. Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brok ers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with. There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the shelf registration statement, of which this prospectus forms a part.

Each selling stockholder has informed us that it does not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock. None of the selling stockholders who are affiliates of broker-dealers, other than the initial purchasers in private transactions, purchased the shares of common stock outside of the ordinary course of business or, at the time of the purchase of the common stock, had any agreements, plans or understandings, directly or indirectly, with any person to distribute the securities.

We are required to pay all fees and expenses incident to the registration of the shares of common stock. Except as provided for indemnification of the selling stockholders, we are not obligated to pay any of the expenses of any attorney or other advisor engaged by a selling stockholder. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling stockholders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act.

The anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of our common stock and activities of the selling stockholders, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in passive market-making activities with respect to the shares of common stock. Passive market making involves transactions in which a market maker acts as both our underwriter and as a purchaser of our common stock in the secondary market. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

LEGAL PROCEEDINGS

On March 31, 2009 our wholly-owned subsidiary, Great Southland Minerals Ltd., was served with a Form 509H, Creditor’s Statutory Demand relating to a claim by Hunt Energy & Mineral Company -- Australia Ltd. PTY for payment of approximately AU$441,000 (US$309,000) claimed due pursuant to our drilling contract with Hunt. The statutory demand notice has been filed with the Tasmanian District Court. The company was provided 21 days to respond to the Statutory Demand notice. If we should fail to respond or should the court determined in favor of Hunt and the demand is not paid, the procedure for Statutory Demand could result in the court ordering the business of Great Southland Minerals to be wound up. Management believes that it has substantial defenses to the claim including the defense that the contract provides for all disputes to be submitted to the dispute resolution process contained in the contract and that substantial sums have been deposited with the claimant, which sums exceed the amount being claimed. The Company negotiated an ongoing arrangement with Hunt that has deferred any action and withdrawn the statutory claim and is allowing work to proceed on the exploratory drilling. In July 2009, GSLM was served by Hunt Energy with a Statutory Demand claiming balance due of AU$173,678 of the original debt and a separate additional Statutory Demand in an amount of AU$1,509,200.00. The Company believes it has significant defenses and continues to negotiate with Hunt Energy.

An additional Creditor’s Statutory Demand claim was presented in April 2009 from D&M Drilling in the amount of AU$55, 000 (US$38,000). Action on the claim has been deferred and payment terms are being negotiated. We are currently not aware of any other legal proceedings or claims that we believe will have, individually, or in the aggregate, a material adverse affect on our business, financial condition or operating results.

LEGAL MATTERS

The validity of the shares of common stock to be sold in the offering will be passed upon for us by the law firm of Davidson & Shear, LLC.

EXPERTS

Our financial statements for the year ended December 31, 2007, in this prospectus have been audited by UHY Haines Norton independent certified public accountants and our financial statements for the year ended December 31, 2008, in this prospectus have been audited by GBH CPAs, PC, to the extent and for the periods set forth in their reports, and are set forth in this prospectus in reliance upon such report given upon the authority of them as experts in auditing and accounting.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 31, 2009, we engaged GBH CPAs, LLC as registered accountants for the company replacing UHY Haines Norton. We have had no disagreements with our current auditors or prior auditors regarding our accounting or financial disclosure since they were appointed. The change in auditors was approved by the board of directors.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the Company are included as an exhibit to this Form S-1/A commencing on page F-1.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

MATERIAL CHANGES

Not applicable.

ADDITIONAL INFORMATION

We file annual, quarterly and current reports, and other information the SEC. Our filings are available to the public at the SEC’s web site at http://www.sec.gov. You may also read and copy any document with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Further information on the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

We have filed a registration statement on Form S-1/A with the SEC under the Securities Act for the common stock offered by this prospectus. This prospectus does not contain all of the information set forth in the registration statement, certain parts of which have been omitted in accordance with the rules and regulations of the SEC. For further information, reference is made to the registration statement and its exhibits. Whenever we make references in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for the copies of the actual contract, agreement or other document.

FINANCIAL STATEMENTS

The consolidated financial statements of Empire commencing on page F-1 are included with this prospectus. These financial statements have been prepared on the basis of accounting principles generally accepted in the United States and are expressed in US dollars.

EMPIRE ENERGY CORPORATION INTERNATIONAL

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2009


	Page
Consolidated Balance Sheets	F-2
Consolidated Statements of Operations	F-3
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)	F-5
Consolidated Statements of Cash Flows	F-10
Notes to Consolidated Financial Statements	F-11

F-1

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 30, 2009			December 31, 2008

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,583		$	53,885
Receivables		8,222			12,785
Prepayments and other current assets		209,472			2,123,416

TOTAL CURRENT ASSETS		220,277			2,190,086

MARKETABLE SECURITIES		—			1,152,638
NOTE RECEIVABLE		—			523,821
OIL AND GAS PROPERTIES UNDER DEVELOPMENT		8,513,124			4,441,716
PROPERTY AND EQUIPMENT, NET		140,326			170,427

TOTAL ASSETS	$	8,873,727		$	8,478,688

LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Trade and other payables	$	3,978,382		$	2,348,354
Trade and other payables—related party		875,347			570,419
Short term debt		3,170,117			44,437
Short term debt—related party		1,054,497			2,305,502
Accrued interest payable		292,500			247,500

TOTAL CURRENT LIABILITIES		9,370,843			5,516,212

NOTES PAYABLE		1,114,495			4,183,910

TOTAL LIABILITIES		10,485,338			9,700,122

COMMITMENTS AND CONTINGENCIES		—			—

STOCKHOLDERS’ DEFICIT
Class A Common stock, (599,000,000 authorized) issued with a par value of $0.001, 278,543,190 and 267,215,423 shares issued and outstanding respectively		278,543			267,215
Class B Common stock, (1,000,000 authorized) issued with a par value of $0.001, 100,607 and 100,874 shares issued and outstanding respectively		101			101
Additional paid-in capital		34,378,321			33,108,372
Deficit accumulated during the exploration stage		(36,215,259	)		(33,015,864	)
Accumulated other comprehensive income (loss)		(53,317	)		(1,581,258	)

TOTAL STOCKHOLDERS’ DEFICIT		(1,611,611	)		(1,221,434	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	8,873,727		$	8,478,688

See summary of significant accounting policies and notes to financial statements

F-2

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, 2009 and 2008

(UNAUDITED)


	Three Months Ended June 30, 2009			Three Months Ended June 30, 2008
TOTAL REVENUES	$	—		$	—

COSTS AND EXPENSES
Selling, general & administrative		885,523			1,879,635
Exploration		17,429			201,479

TOTAL COSTS AND EXPENSES		902,952			2,081,114

LOSS FROM OPERATIONS		(902,952	)		(2,081,114	)

OTHER INCOME (EXPENSE)
Foreign currency transaction gains (losses)		(531,275	)		—
Loss on equity investment		(100,000	)		—
Other income		83,179			—
Interest (expense)		(167,346	)		(237,182	)

LOSS BEFORE INCOME TAXES		(1,618,394	)		(2,318,296	)
INCOME TAXES		—			—

NET LOSS FROM CONTINUING OPERATIONS		(1,618,394	)		(2,318,296	)

LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—			(15,915	)
NET LOSS	$	(1,618,394	)	$	(2,334,211	)

NET LOSS PER COMMON SHARE:
Basic and diluted loss per share from continuing operations	$	(0.01	)	$	(0.01	)
Basic and diluted loss per share from discontinued operations	$	—		$	(0.00	)
Basic and diluted loss per share	$	(0.01	)	$	(0.01	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic and diluted		277,905,273			219,815,421

See summary of significant accounting policies and notes to financial statements

F-3

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months Ended June 30, 2009 and 2008

(Unaudited)


	Six Months Ended June 30, 2009		Six Months Ended June 30, 2008		March 15, 1995 (Inception) to June 30, 2009
TOTAL REVENUES	$	—	$	—	$	—

COSTS AND EXPENSES
Selling, general & administrative		1,802,062		3,494,875		22,859,713
Exploration		24,622		889,449		9,283,539

TOTAL COSTS AND EXPENSES		1,826,684		4,384,324		32,143,252

LOSS FROM OPERATIONS		(1,826,684)		(4,384,324)		(32,143,252)

OTHER INCOME (EXPENSE)

Gain on marketable securities and note receivable		1,443,403		—		1,496,459
Impairment loss on marketable securities		(1,276,667)		—		(1,277,336)
Foreign currency transaction gains (losses)		(502,947)		—		423,657
Loss on extinguishments of debt		(610,326)		—		(610,326)
Loss on equity investment		(100,000)		—		(829,000)
Other income		112,010		—		268,817
Interest (expense)		(438,184)		(407,974)		(3,523,802)

LOSS BEFORE INCOME TAXES		(3,199,395)		(4,792,298)		(36,194,783)
INCOME TAXES		—		—		—
NET LOSS FROM CONTINUING OPERATIONS		(3,199,395)		(4,792,298)		(36,194,783)
GAIN (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		—		72,459		(20,476)

NET LOSS	$	(3,199,395)	$	(4,719,839)	$	(36,215,259)

NET LOSS PER COMMON SHARE:
Basic and diluted loss per share from continuing operations	$	(0.01)	$	(0.02)
Basic and diluted loss per share from discontinued operations		(0.00)		(0.00)
Basic and diluted loss per share		(0.01)		(0.02)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic and diluted		274,852,037		211,630,740

See summary of significant accounting policies and notes to financial statements

F-4

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Period From March 1995 (inception) Through June 30, 2009

(UNAUDITED)


	Common	Stock - A	Common	Stock - B	Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Deficit Accumulated during the Exploration Stage		Total Stockholders’ Equity (Deficit)
	No	$	No	$	$		$		$		$
Balance at March 15, 1995	—	—	—	—	—		—		—		—
Reverse Acquisition of GSLM	8,747,012	8,747	105,857	106	(8,853	)	—		—		—
Issuance of common stock: cash	1,000	1			745						746
Net loss	—	—	—	—	—		—		—		—

Balance at June 30, 1996	8,748,012	8,748	105,857	106	(8,108	)	—		—		746
Issuance of common stock: cash	59,000	59	—	—	53,977		—		—		54,036
Issuance of common stock: share premium	—	—	—	—	391,761		—		—		391,761
Net loss	—	—	—	—	—		—		(477,078	)	(477,078	)
Foreign currency translations	—	—	—	—	—		24,122		—		24,122

Balance at June 30, 1997	8,807,012	8,807	105,857	106	437,630		24,122		(477,078	)	(6,413	)
Issuance of common stock: cash	138,688	139	—	—	86,318		—		—		86,457
Issuance of common stock: share premium	—	—	—	—	857,737		—		—		857,737
Net loss	—	—	—	—	—		—		(1,247,314	)	(1,247,314	)
Foreign currency translations	—	—	—	—	—		185,864		—		185,864

Balance at June 30, 1998	8,945,700	8,946	105,857	106	1,381,685		209,986		(1,724,392	)	(123,669	)
Issuance of common stock: cash	69,581	70	—	—	328,899		—		—		328,969
Net loss	—	—	—	—	—		—		(267,403	)	(267,403	)
Foreign currency translations	—	—	—	—	—		(106,064	)	—		(106,064	)

Balance at June 30, 1999	9,015,281	9,016	105,857	106	1,710,584		103,922		(1,991,795	)	(168,167	)
Issuance of common stock: cash	35,971	36	—	—	137,205		—		—		137,241
Issuance of common stock: services	23,214	23	—	—	151,099		—		—		151,122
Net loss	—	—	—	—	—		—		(186,666	)	(186,666	)
Foreign currency translations	—	—	—	—	—		22,585		—		22,585

Balance at June 30, 2000	9,074,466	9,075	105,857	106	1,998,888		126,507		(2,178,461	)	(43,885	)

See summary of significant accounting policies and notes to financial statements

F-5

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Period From March 1995 (inception) Through June 30, 2009

(UNAUDITED)


	Common	Stock - A	Common	Stock - B	Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Deficit Accumulated during the Exploration Stage		Total Stockholders’ Equity (Deficit)
	No	$	No	$	$		$		$		$
Balance at July 1, 2000	9,074,466	9,075	105,857	106	1,998,888		126,507		(2,178,461	)	(43,885	)
Issuance of common stock: cash	348,214	348	—	—	1,174,477		—		—		1,174,825
Issuance of common stock: services	23,317	23	—	—	67,863		—		—		67,886
Issuance of common stock: bonus issue	51,911,055	51,911	—	—	(51,911	)	—		—		—
Net loss	—	—	—	—	—		—		(1,767,759	)	(1,767,759	)
Foreign currency translations	—	—	—	—	—		73,133		—		73,133

Balance at June 30, 2001	61,357,052	61,357	105,857	106	3,189,317		199,640		(3,946,220	)	(495,800	)
Issuance of common stock: cash	609,000	609	—	—	590,642		—		—		591,251
Issuance of common stock: services	3,955,125	3,955	—	—	530,778		—		—		534,733
Stock issuance costs	—	—	—	—	(44,109	)	—		—		(44,109	)
Net loss	—	—	—	—	—		—		(1,382,217	)	(1,382,217	)
Foreign currency translations	—	—	—	—	—		(83,949	)	—		(83,949	)

Balance at June 30, 2002	65,921,177	65,921	105,857	106	4,266,628		115,691		(5,328,437	)	(880,091	)
Issuance of common stock: cash	1,028,764	1,029	—	—	607,613		—		—		608,642
Issuance of common stock: services	3,955,125	3,955	—	—	2,119,156		—		—		2,123,111
Stock issuance costs	—	—	—	—	(286,040	)	—		—		(286,040	)
Net loss	—	—	—	—	—		—		(2,901,629	)	(2,901,629	)
Foreign currency translations	—	—	—	—	—		(233,528	)	—		(233,528	)

Balance at June 30, 2003	70,905,066	70,905	105,857	106	6,707,357		(117,837	)	(8,230,066	)	(1,569,535	)
Issuance of common stock: cash	246,800	247	—	—	159,926		—		—		160,173
Issuance of common stock: services	21,928	22	—	—	16,238		—		—		16,260
Stock issuance costs	—	—	—	—	2,007		—		—		2,007
Net loss	—	—	—	—	—		—		(599,870	)	(599,870	)
Foreign currency translations	—	—	—	—	—		(24,630	)	—		(24,630	)

Balance at June 30, 2004	71,173,794	71,174	105,857	106	6,885,528		(142,467	)	(8,829,936	)	(2,015,595	)

See summary of significant accounting policies and notes to financial statements

F-6

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Period From March 1995 (inception) Through June 30, 2009

(UNAUDITED)


	Common	Stock - A	Common		Stock - B		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Deficit Accumulated during the Exploration Stage		Total Stockholders’ Equity (Deficit)
	No	$	No		$		$		$		$		$
Balance at July 1, 2004	71,173,794	71,174	105,857		106		6,885,528		(142,467	)	(8,829,936	)	(2,015,595	)
Net loss for six months	—	—	—		—		—		—		(188,615	)	(188,615	)
Foreign currency translations for six months	—	—	—		—		—		(274,088	)	—		(274,088	)

Balance at December 31, 2004	71,173,794	71,174	105,857		106		6,885,528		(416,555	)	(9,018,551	)	(2,478,298	)
Issuance of common stock: debt	29,458	29	—		—		(29	)	—		—		—
Issuance of common stock: services	2,634,319	2,634	—		—		(2,634	)	—		—		—
Conversion of Class B stock into Class A	2,471	3	(2,471	)	(3	)			—		—		—
Reverse Acquisition of GSLM	—	—	—		—		(213,249	)	—		—		(213,249	)
Issuance of common stock: contingency	2,490,000	2,490	—		—		(2,490	)	—		—		—
Issuance of common stock: Acquisition of Cyber Finance	37,500,000	37,500	—		—		5,962,500		—		—		6,000,000
Issuance of common stock: services	830,000	830	—		—		98,770		—		—		99,600
Net loss for year	—	—	—		—		—		—		(1,897,847	)	(1,897,847	)
Foreign currency translations	—	—	—		—		—		159,086		—		159,086

Balance at December 31, 2005	114,660,042	114,660	103,386		103		12,728,396		(257,469	)	(10,916,398	)	1,669,292
Issuance of common stock: HEM convertible debenture	6,222,675	6,223	—		—		498,500		—		—		504,723
Issuance of common stock: services	21,185,493	21,186	—		—		2,398,121		—		—		2,419,307
Conversion of Class B stock into Class A	1,604	1	(1,604	)	(1	)	—		—		—		—
Issuance of common stock: Exchange for debt	19,360,774	19,361	—		—		1,895,665		—		—		1,915,026

See summary of significant accounting policies and notes to financial statements

F-7

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Period From March 1995 (inception) Through June 30, 2009

(UNAUDITED)


	Common		Stock – A		Common		Stock – B		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Deficit Accumulated During the Exploration Stage		Total Stockholders’ Equity (Deficit)
	No		$		No		$		$		$		$		$
Issuance of common stock: Cash	17,933,333		17,933		—		—		2,013,067		—		—		2,031,000
Issuance of common stock: Libertas, less stock fees of $359,400	4,065,000		4,065		—		—		205,935		—		—		210,000
Issuance of common stock: exercise of options	450,000		450		—		—		2,835		—		—		3,285
Issuance of common stock: License	15,000,000		15,000		—		—		2,985,000		—		—		3,000,000
Beneficial conversion feature, convertible debenture	—		—		—		—		837,173		—		—		837,173
Vesting of Common Stock Options	—		—		—		—		323,640		—		—		323,640
Warrants Issued: Wind City Note discount	—		—		—		—		250,000		—		—		250,000
Net loss for period	—		—		—		—		—		—		(9,030,480	)	(9,030480	)
Marketable securities, unrealized loss	—		—		—		—		—		(15,006	)	—		(15,006	)
Foreign currency translations	—		—		—		—		—		(201,086	)	—		(201,086	)

Balance at December 31, 2006	198,878,921		198,879		101,782		102		24,138,332		(473,561	)	(19,946,878	)	3,916,874
Conversion of Class B stock into Class A	865		1		(865	)	(1	)	—		—		—		—
Restricted shares issued in exchange for services	14,666,670		14,667		—		—		1,845,333		—		—		1,860,000
Stock options issued in exchange for services	—		—		—		—		456,506		—		—		456,506
Return of shares in rescission of license agreement	(15,000,000	)	(15,000	)	—		—		(2,052,500	)	—		—		(2,067,500	)

See summary of significant accounting policies and notes to financial statements

F-8

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Period From March 1995 (inception) Through June 30, 2009

(UNAUDITED)


	Common	Stock – A	Common		Stock B		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Deficit Accumulated During the Exploration Stage		Total Stockholders’ Equity (Deficit)
	No	$	No		$		$		$		$		$
Foreign currency translations	—	—	—		—		—		386,399		—		386,399
Marketable securities, unrealized loss	—	—	—		—		—		29,364		—		29,364
Net loss for the year	—	—	—		—		—		—		(8,162,062	)	(8,162,062	)

Balance at December 31, 2007	198,546,456	198,546	100,917		101		24,387,671		(116,526	)	(28,108,940	)	(3,639,148	)
Conversion of Class B stock into Class A	43	0	(43	)	(0	)	—		—		—		—
Restricted shares issued in exchange for services	38,395,800	38,396	—		—		5,050,200		—		—		5,088,596
Restricted shares issued in exchange for debt	6,998,732	6,999	—		—		835,811		—		—		842,810
Restricted shares issued in exchange for marketable security	8,511,111	8,511	—		—		1,268,156		—		—		1,276,667
Release of shares in sale of Pacific Rim	7,500,000	7,500	—		—		1,117,500		—		—		1,125,000
Restricted shares issued in exchange for cash	7,263,281	7,263	—		—		554,500		—		—		561,763
Unrealized effect of the change in foreign currency exchange rates	—	—	—		—		—		(850,365	)	—		(850,365	)
Value of stock options vested	—	—	—		—		(105,466	)	—		—		(105,466	)
Marketable securities, unrealized loss	—	—	—		—		—		(614,367	)	—		(614,367	)
Net loss for the period ended December 31, 2008	—	—	—		—		—		—		(4,906,924	)	(4,906,924	)

Balance at December 31, 2008	267,215,423	267,215	100,874		101		33,108,372		(1,581,258	)	(33,015,864	)	(1,221,434	)
Conversion of Class B stock into Class A	267	—	(267	)	—		—		—		—		—
Restricted shares issued in exchange for services	8,827,500	8,828	—		—		469,270		—		—		478,098
Restricted shares issued in exchange for the acquisition of Grand Monarch Holdings	2,500,000	2,500	—		—		122,500		—		—		125,000
Unrealized effect of the change in foreign currency exchange rates	—	—	—		—				869,197		—		869,197
Warrants issued with debt	—	—	—		—		678,179				—		678,179
Marketable securities, unrealized loss	—	—	—		—		—		658,744		—		658,744
Net loss for the period ended June 30, 2009	—	—	—		—		—		—		(3,199,395	)	(3,199,395	)
Balance at June 30, 2009	278,543,190	278,543	100,607		101		34,378,321		(53,317	)	(36,215,259	)	(1,611,611	)
Comprehensive loss June 30, 2008	—	—	—		—		—		(4,661,715	)	—		—
Comprehensive loss June 30, 2009	—	—	—		—		—		(1,671,454	)	—		—

See summary of significant accounting policies and notes to financial statements

F-9

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30, 2009 and 2008

(Unaudited)


	2009		2008		March 15, 1995 (Inception) to June 30, 2009
	$		$		$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	(3,199,395	)	(4,719,839	)	(36,215,259	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share based payments	478,098		1,970,050		9,838,713
Discontinued operations	—		(72,459	)	(1,090,022	)
Depreciation	30,101		51,579		181,565
Amortization of debt discount	135,676		—		135,676
Stock options vested (forfeited)	—		(105,466	)	674,680
Loss on disposal of fixed assets	—		—		207
Loss on equity investment	100,000		—		829,000
Loss on extinguishments of debt	610,326		—		610,326
Gain on marketable securities and note receivable	(1,443,403	)	—		(1,442,735)
Impairment loss on marketable securities	1,276,667		—		1,276,667
Foreign currency transaction loss (gain)	502,947		—		(423,660	)
Changes in operating assets and liabilities:
(Increase) Decrease in receivables	4,563		(968	)	(112,691	)
(Increase) Decrease in prepaid expenses and other assets	311,151		18,832		1,292,203
Increase (Decrease) in payables and accrued expenses	726,391		(314,010	)	8,700,478
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(466,878	)	(3,172,281	)	(15,744,852	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equity investments	—		—		7,519,084
Investment in brands	—		—		(80,000	)
Purchase of property and equipment	—		(29,122	)	(2,032,224	)
Proceeds of sale of property and equipment	—		—		1,741,967
Oil and gas properties under development	(1,151,714	)	—		(6,910,331	)
Proceeds (cost) of marketable securities	154,837		(8,981	)	(33,199	)
Proceeds from collection of note receivable	—		—		320,178
Proceeds from sale of subsidiary	25,000		—		(185,116	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(971,877	)	(38,103	)	340,359
CASH FLOWS FROM FINANCING ACTIVITIES
Capital raising costs	—		—		(328,142	)
Proceeds from issuance of notes payable	496,731		1,858,747		12,048,341
Proceeds from issuance of common shares	—		—		6,984,601
Principal payments on notes payable	(34,540	)	(12,108	)	(4,341,205	)
Proceeds from the sale of non-controlling interests	—		300,000		1,140,741
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	462,191		2,146,639		15,504,336
EFFECT OF EXCHANGE RATE CHANGES ON CASH	925,262		76,717		(97,260	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(51,302	)	(987,028	)	2,583
CASH AND CASH EQUIVALENTS – beginning of period	53,885		1,228,903		—
CASH AND CASH EQUIVALENTS – end of period	2,583		241,875		2,583
CASH PAID FOR:
Taxes	—		—		—
Interest	728		17,223		515,720
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Debt settled with Empire stock	—		842,810
Issuance of stock for acquisition of Grand Monarch Holdings	125,000		—
Debt settled with marketable securities	1,945,555		—
Accrued exploration costs	1,316,901		—
Fair value of warrants issued with debt	428,557		—

See summary of significant accounting policies and notes to financial statements

F-10

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2009 and 2008

(UNAUDITED)

NOTE 1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The accompanying unaudited interim financial statements of Empire Energy Corporation International (“EEGC” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in Empire’s Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2008. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substanti ally duplicate the disclosure contained in the audited financial statements for 2008 as reported in the 10-K have been omitted. All balances are stated in United States dollars unless otherwise noted.

Principles of Consolidation: The consolidated financial statements include the accounts of EEGC (the “Parent” entity) and its wholly owned or controlled subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation. We currently have four wholly-owned subsidiaries, Great South Land Minerals Limited, Cyber Finance Group Limited, Bob Owen & Co., and Expedia International.

Since March 2006, we held a substantial and consolidated interest in Pacific Rim Foods Limited, a China based food processing concern. In December 2008, we completed the sale of this Subsidiary to Mach One Corporation, a publicly traded health research company. The accompanying consolidated financial statements have been retroactively restated to reflect the former investment in Pacific Rim as discontinued operations.

Going Concern and Liquidity: EEGC is in the exploration and development stage, devoting substantially all of its efforts to exploration and raising financing. EEGC has substantially funded its operations with proceeds from the issuance of common stock and convertible debt. In the course of its exploration activities, EEGC has sustained operating losses and expects such losses to continue for the foreseeable future. EEGC will finance its operations primarily through cash and cash equivalents on hand, future financing from the issuance of debt or equity instruments and through the generation of revenues once commercial operations get underway. However, the Company has yet to generate any revenues and has no assurance of future revenues. To management’s knowledge, no company has yet successfully developed sub-surface hydrocarbons in commercial quantities in Tasmania. Even if development efforts are successful, substantial time may pass before revenues are realized .

The financial statements are prepared on a going concern basis. However, significant uncertainties exist in relation to conditions that raise substantial doubt about the Company’s ability to continue as a going concern. These are:


	•		Substantial losses incurred through supporting the ongoing exploration expenditures during the period since the inception of the Company.


	•		Uncertainties in terms of the ability to generate cash flows in the future considering that production operations have not yet commenced.


	•		Extensive commitments for expenditures under the Company’s key mineral exploration lease.

			The Company’s key mineral exploration lease expires September 30, 2009.


	•		Current liabilities of $9,370,843 exceed current assets of $220,277 including cash or cash equivalents of $2,583 at June 30, 2009.

There can be no assurance that the Company will be able to obtain financing on commercially reasonable terms. The continuing viability and its ability to continue as a going concern and to meet its obligations as they fall due is dependent on the Company being successful in raising additional funds. The Company’s inability to raise capital may have a material adverse affect on its financial condition, ability to meet its obligations and operating needs and results of operations.

F-11

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts nor to the amounts and classification of liabilities that might be necessary should the Company not continue as a going concern.

The Company has either planned the following activities or completed the following activities exist to address the above going concern issues.


	•		Great South Land Minerals Limited received loans from directors and other parties in the amount of $500,000 and the Company continues to seek funding opportunities from other sources.


	•		Empire sold investment assets to reduce debt and provide working capital in the amount of $2 million.


	•		Empire issued common shares to pay liabilities and expenses totaling approximately $500,000.

	•		Obtain approval to increase authorized shares to allow additional acquisitions and fund-raising activities


	•		Seek acquisitions that will provide capital and cash flow


	•		Refinance opportunities and use additional shares to pursue development activities.


	•		Enter into negotiations with a number of parties for additional funding.

NOTE 2 – TAXATION

In assessing the realisability of deferred tax assets, the Company applies SFAS No. 109 to determine whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As a result, the Company’s valuation allowance at June 30, 2008 and 2009 reduces the net deferred tax assets to $0.

NOTE 3 –RELATED PARTY TRANSACTIONS

In January 2009, in conjunction with the resignation of a director, the Company paid certain employment entitlements to the resigning director by issuing 2.5 million shares of the Company’s common stock valued at approximately $150,000 which was recognized as compensation expense in the consolidated statement of operations for the period ended June 30, 2009; additionally, the Company made payment of approximately $18,000 to settle outstanding amounts owed to a company controlled by the former director. Shares were valued at quoted market price on the date of the agreement.

In January 2009, in conjunction with the aforementioned resignation, a company controlled by the former director provided new funding in the form of a demand note payable by the Company in the amount of approximately $262,000 (AU$400,000) earning interest at an annual rate of 10% per annum. In conjunction with the note payable, the Company issued a warrant to allow for the purchase of 7 million Empire common shares for a period of five years at a price of $.07 per share. The fair value of the warrant was determined to be $92,622 using the Black Scholes option pricing model with expected volatility of 101%, no expected dividends, an expected term of three years and risk-free interest rate of 0.5%. Since the note is due on demand, the value of the warrant, which represented a debt discount, was recognized as interest expense in the consolidated statement of operations for the period ended March 31, 2009. Additionally, the Company, via the principal shareholder, issued 2 mill ion common shares of Zeehan Zinc Limited (ZZL.L), an AIM listed company which had a fair value of approximately $24,000, which represented a debt discount, was recognized as interest expense in the consolidated statement of operations for the period ended June 30, 2009 and a related party payable in the consolidated balance sheet at June 30, 2009.

In January 2009, in conjunction with the aforementioned resignation, the Company, repaid loans made to the company by a company controlled by the former director in the principal amount of $1,430,000 plus accrued interest approximating $265,000. Consideration paid by the Company included 4,506,000 shares of marketable securities valued at approximately $1,125,000 and a convertible note receivable valued at approximately $1,050,000, net of approximately $155,000 in cash received and forgiveness of approximately $5,000 of amounts owed by the Company. The Company recognized a combined net loss of approximately $320,000 representing the difference between the fair value of the net consideration issued in the settlement transaction and the carrying value of the amounts due. The Company evaluated the classification of this loss and determined that the loss does not meet the criteria for classification as an extraordinary item. As a result, the loss has been included as “Los s on extinguishments of debt” under “Other income (expense)” within income from continuing operations in the accompanying Consolidated Statement of Operations for the period ended June 30, 2009.

F-12

In February 2009, the Company repaid loans made to the company by a director in the principal amount of $210,000 plus accrued interest approximating $5,000. Consideration paid by the Company included 1,810,000 shares of marketable securities valued at approximately $344,000 and an option to convert the remaining amounts owed of approximately $10,000 into the Company’s common stock at an exercise price of $0.07 per share for a period of up to 5 years; the fair value of the option was determined to be approximately $5,000 using the Black Scholes model with expected volatility of 101%, no expected dividends, an expected term of five years and risk-free interest rate of 0.5%. The Company recognized a loss of approximately $134,000 representing the difference between the fair value of the net consideration issued in the settlement transaction and the carrying value of the amounts due. The Company evaluated the classification of this loss and deter mined that the loss does not meet the criteria for classification as an extraordinary item. As a result, the loss has been included as “Loss on extinguishments of debt” under “Other income (expense)” within income from continuing operations in the accompanying Consolidated Statement of Operations for the period ended June 30, 2009.

We issued 10,177,500 common shares to establish a borrowing facility in April 2009; the borrowing facility has no stated repayment terms or maturity date and no stated interest rate but is secured by 8,850,000 of the Company’s common stock and guaranteed by our CEO. These shares are contingently returnable to the Company once the amounts borrowed have been repaid. As a result of the shares being contingently returnable, they have not been recognized as issued in the consolidated financial statements. The remainder of the shares issued, 1,327,500, were issued to enable the arrangement, were valued at current market and the Company recognized a current expense in the amount of $92,925 in the consolidated statement of operations. At June 30, 2009, the Company had been advanced $200,000 from the borrowing facility; the lender has discretion to loan up to $500,000 to the Company. The Company utilized the $200,000 for working capital during the three months ended June 30, 2 009.

NOTE 4—LONG-TERM DEBT

Long-term debt consists of the following:


	June 30, 2009	December 31, 2008
	$	$
RAB Loan	1,500,000	1,500,000
RAB Loan discount	(385,505)	—
Terralinna Loan	321,908	1,695,489
Bendall Trust Loan	400,013	400,013
Trafalgar Loan	200,000	—
Other Loans	132,576	210,000
SmartWin Loan	3,127,217	2,683,910
Asset Purchase Loan	42,900	44,437

	5,339,109	6,533,849
Less: current portion	(4,224,614)	(2,349,939)

Long term debt	1,114,495	4,183,910

The maturities of the Company’s long-term debts consist of the following:


Year Ending December 31,		2008
		$
2009		4,224,614
2010		—
2011		1,114,495
2012		—
		5,339,109

F-13

In March 2009, the 6% convertible debenture agreement with RAB Special Situations (Master) Fund Limited in the face amount of $1,500,000 was extended to mature March 21, 2011 and the conversion price was reduced to $.07 per share. In conjunction with this extension, the expiration dates on the expiring Class A and Class B warrants were extended to March 21, 2014 and the Company issued to RAB a Class C warrant to purchase 7.5 million additional Empire shares for a period of five years. The adjusted exercise price of the Class A and Class B warrants was reset to $.07 per share. The Company evaluated the modification under EITF 96-19 and concluded that this modification was an extinguishment of the original debt. The convertible debenture has been discounted by $428,557 to record the fair value of the convertible note as extended. The fair value of the new warrant, the extended warrants and the convertible feature of the note was determined to be $58 5,640 using the Black Scholes option pricing model with expected volatility of 101%, no expected dividends, an expected term of three years and risk-free interest rate of 0.5%. The discount value of the warrant will be amortized to interest expense over the two year term of the debenture. The value of the warrants and conversion feature was recorded as an addition to paid in capital. The Company recognized a loss of approximately $157,000 representing the difference between the fair value of the net consideration issued of $1,657,000 ($1,071,000 fair value of the extended debt plus the fair value of the new warrant, the extended warrants and the convertible feature of the note of $586,000) in the settlement transaction and the carrying value of the amounts due of $1,500,000 The Company evaluated the classification of this loss and determined that the loss does not meet the criteria for classification as an extraordinary item. As a result, the loss has been included as “Loss on extinguishments of debt 48; under “Other income (expense)” within income from continuing operations in the accompanying Consolidated Statement of Operations for the period ended June 30, 2009. As of June 30, 2009, no shares of common stock had been issued in conversion of the debenture and no warrants had been exercised. The discount will be amortized over the term of the debenture.


		2009			2008
Notes payable:
Carrying value of original note	$	1,500,000		$	1,500,000
Less: adjustment to fair value (as if converted)		(428,557	)		(1,047,172	)
Add: fair value of stock converted for debt		—			—
Add: amortization discounts		43,052			1,047,172

Carrying value of note on June 30, 2009 and December 31, 2008	$	1,114,495		$	1,500,000

The terms and exercise prices of the warrants are set out in the table below.


Number of shares	Exercise price	Warrant expiration date
8,550,000	$0.07	March 2014
5,000,000	$0.07	March 2014
7,500,000	$0.07	March 2014

NOTE 5 – SHAREHOLDERS EQUITY

The Company has outstanding at June 30, 2009, 278,543,190 shares of class A common stock and 100,607 shares of Class B common stock. All share transactions use Class A common stock. Class B common stock can be transacted only by conversion first to Class A shares.

In February 2009, the Company entered into consulting and promotion arrangements with two parties at a cost of 5 million common shares reported at a value of $275,000. Shares were valued at quoted market prices on the date of the agreement.

In April 2009 we acquired a 100% ownership interest in Grand Monarch Holdings, Ltd., a publicly reporting company at a cost of 2.5 million Empire shares valued at $125,000 on the date of issuance. This company was acquired to facilitate an acquisition that was subsequently not completed. It remained inactive, recorded no revenue, nominal expense, had no substantial assets or liabilities and was sold in June 2009. The acquisition has been recorded in accordance with Statements of Financial Accounting Standards (SFAS) 141(R),: “Business Combinations” which became effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. There were no significant acquisition-related costs incurred. Additional disclosures required by SFAS 141(R) are not presented as the acquired entity’s financial position, results of operations or cash flows would not materially i mpact either the historical consolidated financial statements or the supplemental pro forma information for the Company. Since the planned acquisition was not completed, there was no business purpose to hold and maintain the inactive wholly owned subsidiary. It was sold in June 2009 for a cash price of $25,000, resulting in a loss on sale of $100,000 and was deconsolidated on the date of disposal.

F-14

NOTE 6— WARRANTS

The following table summarizes the movements in warrants for the year ended December 31, 2008 and the six month period ended June 30, 2009:


	For the Six Months			For the Year Ending
	June 30, 2009			December 31, 2008
	Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Warrants outstanding:
Beginning of period	14,300,000	$	0.09	15,800,000		$	0.15
Warrants granted	14,500,000		0.07	—			—
Warrants exercised	—		—	—			—
Warrants expired	—		—	(1,500,000	)		0.10

End of period	28,800,000	$	0.08	14,300,000		$	0.09

Warrants exercisable	28,800,000	$	0.08	14,300,000		$	0.09

The warrants have a weighted average remaining contractual life of 4.7 years, are fully vested and have a weighted average exercise price of $0.08 per share. Warrants have no aggregate intrinsic value at June 30, 2009 or at December 31, 2008.

The following table summarizes information about warrants outstanding at June 30, 2009:


	Exercise Prices		Number outstanding	Average remaining life in years
Avalor Capital LLC and Frank W Bachinsky, III Common Stock, rights expiring October 10, 2009		0.50	750,000	0.25
RAB Special Situations (Master) Fund Limited Common Stock, rights expiring March 2014		0.07	8,550,000	4.8
RAB Special Situations (Master) Fund Limited Common Stock, rights expiring March 2014		0.07	5,000,000	4.8
RAB Special Situations (Master) Fund Limited Common Stock, rights expiring March 2014		0.07	7,500,000	4.8
Terralinna pty Ltd., rights expiring January 2014		0.07	7,000,000	4.5

			28,800,000

F-15

NOTE 7— COMMITMENTS AND CONTINGENCIES

On March 31, 2009 our wholly-owned subsidiary, Great Southland Minerals Ltd., was served with a Form 509H, Creditor’s Statutory Demand relating to a claim by Hunt Energy & Mineral Company -- Australia Ltd. PTY for payment of approximately AU$441,000 (US$309,000) claimed due pursuant to our drilling contract with Hunt. The statutory demand notice has been filed with the Tasmanian District Court. The company was provided 21 days to respond to the Statutory Demand notice. If we should fail to respond or should the court determined in favor of Hunt and the demand is not paid, the procedure for Statutory Demand could result in the court ordering the business of Great Southland Minerals to be wound up. Management believes that it has substantial defenses to the claim including the defense that the contract provides for all disputes to be submitted to the dispute resolution process contained in the contract and that substantial sums have been deposited with the clai mant, which sums exceed the amount being claimed. The Company negotiated an ongoing arrangement with Hunt that has deferred any action and withdrawn the statutory claim and is allowing work to proceed on the exploratory drilling. In July 2009, GSLM was served by Hunt Energy with a Statutory Demand claiming balance due of AU$173,678 of the original debt and a separate additional Statutory Demand in an amount of AU$1,509,200.00. The Company believes it has significant defenses and continues to negotiate with Hunt Energy.

Great South Land Minerals Limited’s principal asset is its exploration license in Tasmania, 15,035 km²(37.2 million acres) Special Exploration License 13/98. The terms of the Great South Land Minerals Limited Special Exploration License 13/98 have been contractually agreed with Mineral Resources Tasmania, the local authority under the Department of Industry, Energy and Resources of Tasmania. The Company has expenditure obligations under the license conditions. The conditions require scheduled reported expenditure of AUD $21.5 million (US $16.69 million), by September 2009. The company has accumulated expenditure to date of AUD $36.8 million (US $32.3 million).

F-16

EMPIRE ENERGY CORPORATION INTERNATIONAL

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and December 31, 2007


	Page
Reports of Independent Registered Public Accounting Firms	F-18
Consolidated Balance Sheets	F-20
Consolidated Statements of Operations	F-21
Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)	F-22
Consolidated Statements of Cash Flows	F-27
Notes to Consolidated Financial Statements	F-29

F-17

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Empire Energy Corporation International

(An Exploration Stage Company)

Leawood, Kansas

We have audited the accompanying consolidated balance sheet of Empire Energy Corporation International and its subsidiaries (the “Company”) (an exploration stage company) as of December 31, 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the year ended December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The Company’s consolidated financial statements for the cumulative period from March 15, 1995 (date of inception) to December 31, 2008 are unaudited.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Empire Energy Corporation International and its subsidiaries as of December 31, 2008 and the consolidated results of their operations and their consolidated cash flows for the year ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has a working capital deficiency, has incurred net losses in recent years, and has a significant accumulated deficit. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to those matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 15 to the consolidated financial statements, subsequent to December 31, 2008 the Company settled loans from directors of the Company, raised additional capital by selling marketable securities and a note receivable, extended the maturity date of a convertible debenture and the expiration dates on certain warrants, adjusted the conversion price of the convertible debenture, issued additional warrants that adjusted the price of certain warrants and issued shares to acquire services and a business.

/s/ GBH CPAs, PC

www.gbhcpas.com

Houston, Texas

April 15, 2009, except as to Note 15, which is July 21, 2009

F-18

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Empire Energy Corporation International

Leawood, Kansas

We have audited the accompanying consolidated balance sheets of Empire Energy Corporation International and its subsidiaries (the “Company”) (an exploration stage company) as of December 31, 2007, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the year ended December 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The Company’s consolidated financial statements for the cumulative period from March 15, 1995 (date of inception) to December 31, 2007 are unaudited.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Empire Energy Corporation International and its subsidiaries as of December 31, 2007 and the consolidated results of their operations and their consolidated cash flows for the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ M. D. Nicholaeff

M. D. Nicholaeff

UHY Haines Norton

Partner

Chartered Accountants

March 26, 2009

F-19

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED BALANCE SHEETS

December 31, 2008 and 2007


	December 31, 2008		December 31, 2007
ASSETS	$		$
CURRENT ASSETS
Cash and cash equivalents	53,885		1,228,903
Receivables net of allowance of $0 and $183,700	12,785		4,345
Prepayments and other current assets	2,123,416		45,894

TOTAL CURRENT ASSETS	2,190,086		1,279,142
MARKETABLE SECURITIES	1,152,638		143,666
NOTE RECEIVABLE	523,821		—
INVESTMENT IN CHINA FOOD BRANDS-discontinued operation	—		80,000
OIL AND GAS PROPERTIES UNDER DEVELOPMENT	4,441,716		—
PROPERTY AND EQUIPMENT, NET	170,427		248,786

TOTAL ASSETS	8,478,688		1,751,594

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Trade and other payables	2,348,354		2,196,051
Trade and other payables – related party	570,419		542,942
Short term debt	44,437		22,073
Short term debt – related party	2,305,502		779,115
Accrued interest payable	247,500		157,500

TOTAL CURRENT LIABILITIES	5,516,212		3,697,681
LONG TERM TRADE AND OTHER PAYABLES
Trade and other payables	—		—
Long term debt	—		—
Notes payable	4,183,910		873,372

TOTAL LIABILITIES	9,700,122		4,571,053

COMMITMENTS AND CONTINGENCIES	—		—
MINORITY INTEREST, PACIFIC RIM FOODS	—		819,689

STOCKHOLDERS’ EQUITY (DEFICIT)
Class A Common stock, (599,000,000 authorized) issued with a par value of $0.001, 267,215,423 and 198,546,456 shares issued and outstanding respectively	267,215		198,546
Class B Common stock, (1,000,000 authorized) issued with a par value of $0.001, 100,874 and 100,917 shares respectively	101		101
Additional paid-in capital	33,108,372		24,387,671
Accumulated deficit during the development stage	(33,015,864	)	(28,108,940	)
Accumulated other comprehensive income (loss)	(1,581,258	)	(116,526	)

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)	(1,221,434	)	(3,639,148	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	8,478,688		1,751,594

See summary of significant accounting policies and notes to financial statements

F-20

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2008 and 2007


							(Unaudited)
	2008			2007			March 15, 1995 (Inception) to December 31, 2008
TOTAL REVENUES	$	—		$	—		$	—

COSTS AND EXPENSES
Selling, general & administrative		5,285,870			4,745,634			21,057,651
Exploration		112,046			3,298,256			9,258,917

TOTAL COSTS AND EXPENSES		5,397,916			8,043,890			30,316,568

LOSS FROM OPERATIONS		(5,397,916	)		(8,043,890	)		(30,316,568	)
OTHER INCOME (EXPENSE)
Gain on sale of Zeehan shares		—			1,226,844			(669	)
Gain on sale of Mach One Shares		53,056			—			53,056
Gain on currency fluctuations		926,604			—			926,604
Other income		—			3,703			156,807
Loss on Zeehan equity investment		—			—			(729,000	)
Interest (expense)		(1,357,638	)		(1,001,857	)		(3,085,618	)

LOSS BEFORE INCOME TAXES		(5,775,894	)		(7,815,200	)		(32,995,388	)
INCOME TAXES		—			—			—

NET LOSS FROM CONTINUING OPERATIONS	$	(5,775,894	)	$	(7,815,200	)	$	(32,995,388	)

GAIN (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES		868,970			(346,862	)		(20,476	)
NET LOSS		(4,906,924	)		(8,162,062	)		(33,015,864	)
NET LOSS PER COMMON SHARE:
Basic and diluted from continued operations	$	(0.0253	)	$	(0.0370	)
Basic and diluted from discontinued operations	$	0.0038		$	(0.0052	)
Basic and diluted	$	(0.0215	)	$	(0.0422	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic and diluted		228,047,453			193,262,942

See summary of significant accounting policies and notes to financial statements

F-21

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Period From March 1995 (inception) Through December 31, 2008

(Unaudited from March 15, 1995 through December 31, 2005)


	Common No	Stock - A $	Common No	Stock - B $	Additional Paid-In Capital $	Accumulated Other Comprehensive Gain (Loss) $		Deficit Accumulated during the Exploration Stage $		Total Stockholders’ Equity (Deficit) $
Balance at March 15, 1995	—	—	—	—	—	—		—		—

Issuance of common stock: cash	1,000	1	—	—	745	—		—		746
Net loss	—	—	—	—	—	—		—		—

Balance at June 30, 1996	1,000	1	—	—	745	—		—		746
Issuance of common stock: cash	59,000	59	—	—	53,977	—		—		54,036
Issuance of common stock: share premium	—	—	—	—	391,761	—		—		391,761
Net loss	—	—	—	—	—	—		(477,078	)	(477,078	)
Foreign currency translations	—	—	—	—	—	24,122		—		24,122

Balance at June 30, 1997	60,000	60	—	—	446,483	24,122		(477,078	)	(6,413	)
Issuance of common stock: cash	138,688	139	—	—	86,318	—		—		86,457
Issuance of common stock: share premium	—	—	—	—	857,737	—		—		857,737
Net loss	—	—	—	—	—	—		(1,247,314	)	(1,247,314	)
Foreign currency translations	—	—	—	—	—	185,864		—		185,864

Balance at June 30, 1998	198,688	199	—	—	1,390,538	209,986		(1,724,392	)	(123,669	)
Issuance of common stock: cash	69,581	70	—	—	328,899	—		—		328,969
Net loss	—	—	—	—	—	—		(267,403	)	(267,403	)
Foreign currency translations	—	—	—	—	—	(106,064	)	—		(106,064	)

Balance at June 30, 1999	268,269	269	—	—	1,719,437	103,922		(1,991,795	)	(168,167	)
Issuance of common stock: cash	35,971	36	—	—	137,205	—		—		137,241
Issuance of common stock: services	23,214	23	—	—	151,099	—		—		151,122
Net loss	—	—	—	—	—	—		(186,666	)	(186,666	)
Foreign currency translations	—	—	—	—	—	22,585		—		22,585

Balance at June 30, 2000	327,454	328	—	—	2,007,741	126,507		(2,178,461	)	(43,885	)

See summary of significant accounting policies and notes to financial statements

F-22

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

Period From March 1995 (inception) Through December 31, 2008

(Unaudited from March 15, 1995 through December 31, 2005)


	Common No	Stock - A $	Common No	Stock - B $	Additional Paid-In Capital $		Accumulated Other Comprehensive Gain (Loss) $		Deficit Accumulated during the Exploration Stage $			Total Stockholders’ Equity (Deficit) $
Balance at July 1, 2000	327,454	328	—	—	2,007,741		126,507		(2,178,461	)		(43,885	)
Issuance of common stock: cash	348,214	348	—	—	1,174,477		—		—			1,174,825
Issuance of common stock: services	23,317	23	—	—	67,863		—		—			67,886
Issuance of common stock: bonus issue	51,911,055	51,911	—	—	(51,911	)	—		—			—
Net loss	—	—	—	—			—		(1,767,759	)		(1,767,759	)
Foreign currency translations	—	—	—	—	—		73,133		—			73,133

Balance at June 30, 2001	52,610,040	52,610	—	—	3,198,170		199,640		(3,946,220	)		(495,800	)
Issuance of common stock: cash	609,000	609	—	—	590,642		—		—			591,251
Issuance of common stock: services	3,955,125	3,955	—	—	530,778		—		—			534,733
Stock issuance costs	—	—	—	—	(44,109	)	—		—			(44,109	)
Net loss	—	—	—	—	—		—		(1,382,217	)		(1,382,217	)
Foreign currency translations	—	—	—	—	—		(83,949	)	—			(83,949	)
											&nb sp;
Balance at June 30, 2002	57,174,165	57,174	—	—	4,275,481		115,691		(5,328,437	)		(880,091	)
Issuance of common stock: cash	1,028,764	1,029	—	—	607,613		—		—			608,642
Issuance of common stock: services	3,955,125	3,955	—	—	2,119,156		—		—			2,123,111
Stock issuance costs	—	—	—	—	(286,040	)	—		—			(286,040	)
Net loss	—	—	—	—			—		(2,901,629	)		(2,901,629	)
Foreign currency translations	—	—	—	—	—		(233,528	)	—			(233,528	)

Balance at June 30, 2003	62,158,054	62,158	—	—	6,716,210		(117,837	)	(8,230,066	)		(1,569,535	)
Issuance of common stock: cash	246,800	247	—	—	159,926		—		—			160,173
Issuance of common stock: services	21,928	22	—	—	16,238		—		—			16,260
Stock issuance costs	—	—	—	—	2,007		—		—			2,007
Net loss	—	—	—	—	—		—		(599,870	)		(599,870	)
Foreign currency translations	—	—	—	—	—		(24,630	)	—			(24,630	)
											&nb sp;
Balance at June 30, 2004	62,426,782	62,427	—	—	6,894,381		(142,467	)	(8,829,936	)		(2,015,595	)

See summary of significant accounting policies and notes to financial statements

F-23

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

Period From March 1995 (inception) Through December 31, 2008

(Unaudited from March 15, 1995 through December 31, 2005)


	Common No	Stock-A $	Common No		Stock-B $		Additional Paid-In Capital $		Accumulated Other Comprehensive Gain (Loss) $		Deficit Accumulated during the Exploration Stage $		Total Stockholders’ Equity (Deficit) $
Balance at July 1, 2004	62,426,782	62,427	—		—		6,894,381		(142,467	)	(8,829,936	)	(2,015,595	)
Net loss for 6 months	—	—	—		—		—		—		(188,615	)	(188,615	)
Foreign currency translations for 6 months	—	—	—		—		—		(274,088	)	—		(274,088	)

Balance at December 31, 2004	62,426,782	62,427	—		—		6,894,381		(416,555	)	(9,018,551	)	(2,478,298	)
Issuance of common stock: debt	29,458	29	—		—		(29	)	—		—		—
Issuance of common stock: services	2,634,319	2,634	—		—		(2,634	)	—		—		—
Conversion of Class B stock into Class A	2,471	3	(2,471	)	(3	)	—		—		—		—
Reverse Acquisition of GSLM	8,747,012	8,747	105,857		106		(222,102	)	—		—		(213,249	)
Issuance of common stock: contingency	2,490,000	2,490	—		—		(2,490	)	—		—		—
Issuance of common stock: Acquisition of Cyber Finance	37,500,000	37,500	—		—		5,962,500		—		—		6,000,000
Issuance of common stock: services	830,000	830	—		—		98,770		—		—		99,600
Net loss for year	—	—	—		—		—		—		(1,897,847	)	(1,897,847	)
Foreign currency translations	—	—	—		—		—		159,086		—		159,086

Balance at December 31, 2005	114,660,042	114,660	103,386		103		12,728,396		(257,469	)	(10,916,398	)	1,669,292

See summary of significant accounting policies and notes to financial statements

F-24

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

Period From March 1995 (inception) Through December 31, 2008

(Unaudited from March 15, 1995 through December 31, 2005)


	Common No	Stock-A $	Common No		Stock-B $		Additional Paid-In Capital $	Accumulated Other Comprehensive Gain (Loss) $		Deficit Accumulated during the Exploration Stage $		Total Stockholders’ Equity (Deficit) $
Balance at December 31, 2005	114,660,042	114,660	103,386		103		12,728,396	(257,469	)	(10,916,398	)	1,669,292
Issuance of common stock: HEM convertible debenture	6,222,675	6,223	—		—		498,500	—		—		504,723
Issuance of common stock: services	21,185,493	21,186	—		—		2,398,121	—		—		2,419,307
Conversion of Class B stock into Class A	1,604	1	(1,604	)	(1	)	—	—		—		—
Issuance of common stock: Exchange for debt	19,360,774	19,361	—		—		1,895,665	—		—		1,915,026
Issuance of common stock: Cash	17,933,333	17,933	—		—		2,013,067	—		—		2,031,000
Issuance of common stock: Libertas, less stock fees of $359,400	4,065,000	4,065	—		—		205,935	—		—		210,000
Issuance of common stock: exercise of options	450,000	450	—		—		2,835	—		—		3,285
Issuance of common stock: License	15,000,000	15,000	—		—		2,985,000	—		—		3,000,000
Beneficial conversion feature; convertible debenture	—	—	—		—		837,173	—		—		837,173
Vesting of Common Stock Options	—	—	—		—		323,640	—		—		323,640
Note Payable Interest Assumed	—	—	—		—		250,000	—		—		250,000
Net loss for year	—	—	—		—		—	—		(9,030,480	)	(9,030,480	)
Marketable securities, unrealized loss	—	—	—		—		—	(15,006	)	—		(15,006	)
Foreign currency translations	—	—	—		—		—	(201,086	)	—		(201,086	)

Balance at December 31, 2006	198,878,921	198,879	101,782		102		24,138,322	(473,561	)	(19,946,878	)	3,916,874

See summary of significant accounting policies and notes to financial statements

F-25

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

Period From March 1995 (inception) Through December 31, 2008

(Unaudited from March 15, 1995 through December 31, 2005)


	Common No		Stock-A $		Common No		Stock-B $		Additional Paid-In Capital $		Accumulated Other Comprehensive Gain (Loss) $		Deficit Accumulated during the Exploration Stage $		Total Stockholders’ Equity (Deficit) $
Balance at December 31, 2006	198,878,921		198,879		101,782		102		24,138,332		(473,561	)	(19,946,878	)	3,916,874
Conversion of Exchangeco shares for common stock	865		1		(865	)	(1	)	—		—		—		—
Restricted shares issued in exchange for services	14,666,670		14,667		—		—		1,845,334		—		—		1,860,001
Stock options issued in exchange for services	—		—		—		—		456,506		—		—		456,506
Return of shares in recession of Batego license agreement	(15,000,000	)	(15,000	)	—		—		(2,052,500	)	—		—		(2,067,500	)
Foreign currency translations	—		—		—		—		—		386,399		—		386,399
Marketable securities, unrealized loss											(29,364	)	—		(29,364	)
Net loss for year,	—		—		—		—		—		—		(8,162,062	)	(8,162,062	)

Balance at December 31, 2007	198,546,456		198,546		100,917		101		24,387,671		(116,526	)	(28,108,940	)	(3,639,148	)
Conversion of Exchangeco shares for common stock	43		—		(43	)	—		—		—		—		—
Restricted shares issued in exchange for services	38,395,800		38,396		—		—		5,050,200		—		—		5,088,596
Restricted shares issued in exchange for debt	6,998,732		6,999		—		—		835,811		—		—		842,810
Restricted shares issued in exchange for marketable security	8,511,111		8,511		—		—		1,268,156		—		—		1,276,667
Release of shares in sale of Pacific Rim	7,500,000		7,500		—		—		1,117,500		—		—		1,125,000
Restricted shares issued in exchange for cash	7,263,281		7,263		—		—		554,500		—		—		561,763
Unrealized effect of the change in foreign currency exchange rates	—		—		—		—		—		(850,365	)	—		(850,365	)
Value of stock options vested	—		—		—		—		(105,466	)	—				(105,466	)
Securities mark to market	—		—		—		—		—		(614,367	)	—		(614,367	)
Net loss for the period ended December 31, 2008	—		—		—		—		—		—		(4,906,924	)	(4,906,924	)
Balance at December 31, 2008	267,215,423		267,215		100,874		101		33,108,372		(1,581,258	)	(33,015,864	)	(1,221,434	)
Comprehensive Loss 2007	—		—		—		—		—		—		(7,805,027	)	—
Comprehensive Loss 2008	—		—		—		—		—		—		(6,371,662	)	—

See summary of significant accounting policies and notes to financial statements

F-26

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2008 and 2007


					(Unaudited)
	2008		2007		March 15, 1995 (Inception) to December 31, 2008
	$		$		$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	(4,906,924	)	(8,162,062	)	(33,015,864	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and impairment	61,694		20,450		151,464
Book value of equipment retired	—		—		207
Share-based payment agreements	2,088,597		1,860,000		9,360,615
Discontinued operations	(868,970	)	(391,141	)	(1,090,022	)
Stock options vested	(105,466	)	456,506		674,680
Unrealized foreign currency reserve	(926,607	)	—		(926,607	)
Loss (gain) on disposition of investments	—		(1,226,844	)	668
Loss on unconsolidated subsidiary	—		—		729,000
Changes in operating assets and liabilities:
(Increase) Decrease in receivables	(8,439	)	90,260		(117,254	)
(Increase) Decrease in prepaid expenses and other assets	922,478		2,425,305		981,052
Increase (Decrease) in payables	2,328,464		(844,983	)	6,657,186

NET CASH USED IN OPERATING ACTIVITIES	(1,415,173	)	(5,772,509	)	(16,594,875	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds of Zeehan Zinc, Ltd. stock sales	—		7,413,552		7,519,084
Purchase of property and equipment	(3,349	)	(652,648	)	(2,032,224	)
Investment in brands	—		—		(80,000	)
Oil and gas properties under development	(4,441,716	)	—		(4,441,716	)
Proceeds of sale of property and equipment	—		1,741,967		1,741,967
Proceeds of note receivable	320,178		—		320,178
Deconsolidation of subsidiary	(210,116	)	—		(210,116	)
Investment in Marketable Securities	—		(15,353	)	(188,036	)

NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES	(4,335,003	)	8,487,518		2,629,137

CASH FLOWS FROM FINANCING ACTIVITIES
Capital raising costs	—		—		(328,142	)
Proceeds from the sale of minority interests	—		259,000		1,140,741
Proceeds from issuance of notes payable	5,063,641		518,013		11,551,610
Principal payments on notes payable	(199,880	)	(4,106,785	)	(4,306,665	)
Proceeds from the sale of common stock	561,763		—		6,984,601

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	5,425,524		(3,329,772	)	14,942,145

EFFECT OF EXCHANGE RATE CHANGES ON CASH	(850,366	)	386,399		(922,522	)
					—
NET CHANGE IN CASH AND CASH EQUIVALENTS	(1,175,018	)	(228,364	)	53,885
CASH AND CASH EQUIVALENTS – beginning of period	1,228,903		1,457,267		—
CASH AND CASH EQUIVALENTS – end of period	53,885		1,228,903		—

See summary of significant accounting policies and notes to financial statements

F-27

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Years Ended December 31, 2008 and 2007


	2008	2007		(Unaudited) March 15, 1995 (Inception) to December 31, 2008
CASH PAID FOR:
Taxes	—	—		—
Interest	19,755	369,509		534,747

	$	$
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Prepaid well development expense paid with Empire stock	3,000,000	—
Acquisition of marketable securities with Empire stock	1,276,667	—
Acquisition of marketable securities in Pacific Rim Sale	826,179	—
Acquisition of note receivable in Pacific Rim Sale	523,821	—
Batego license acquired (returned) with Empire stock	—	(2,067,500	)
Batego license acquired (returned) with Zeehan stock	—	(1,857,500	)
Borrowing fees paid with Empire stock	—	572,000
Debt settled with Empire stock	842,810	—

See summary of significant accounting policies and notes to financial statements

F-28

EMPIRE ENERGY CORPORATION INTERNATIONAL

(an exploration stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 1—ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization:Empire Energy Corporation International (“EEGC” or “the Company”) was incorporated in Utah on November 10, 1983. EEGC commenced commercial activity in the oil and gas industry on May 17, 1999. The primary prospect was in Nicaragua. EEGC also participated in an exploration program in Tennessee in 1999 and continuing until 2002. During 2000 and 2001, EEGC acquired additional production and/or prospects in Texas, Oklahoma and Wyoming.

During 2002, EEGC sold most of its oil and gas properties and entered into an agreement to acquire Great South Land Minerals (“GSLM”). Effective April 12, 2004, EEGC changed its name from Empire Energy Corporation to Empire Energy Corporation International, reincorporated in the state of Nevada, increased the authorized shares from 50 million to 100 million and affected a 1 for 10 reverse stock split. During 2003 and 2004, EEGC sold all properties, settled some debts and pursued the acquisition of GSLM, which was completed April 7, 2005.

Reverse Acquisition:On April 7, 2005 (acquisition date) Empire Energy received 96.4% acceptances for its bid to acquire all the common stock in GSLM and on June 15, 2005 Empire Energy compulsorily acquired the remaining common stock of GSLM. All of the outstanding shares of GSLM were exchanged for 62,426,782 shares of Empire Energy common stock in a one for one scrip issue.

Pursuant to the guidance in Appendix B of SEC Accounting Disclosure Rules and Practices Official Text, the merger of a private operating company into a non-operating public shell corporation with nominal net assets typically results in the owners and management of the private company having actual or effective operating control of the combined company after the transaction, with the shareholders of the former public shell continuing only as passive investors. These transactions are considered by the staff to be capital transactions in substance, rather than business combinations. That is, the transaction is equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation, accompanied by a recapitalization. Accordingly, the reverse acquisition has been accounted for as a recapitalization. For accounting purposes, GSLM is considered the acquirer in the reverse acquisition and all history presented is that of GSLM. Operating resu lts of EEGC are included in these consolidated financial statements from the date of the reverse acquisition, April 7, 2005. References to EEGC in the remainder of these notes will refer to the consolidated company including the operating history of GSLM unless otherwise specified.

The costs of the reverse acquisition (transaction costs) have been charged to expense.

The accompanying consolidated financial statements of the Company reflect the historical results of GSLM, and the consolidated results of operations of the Company and GSLM subsequent to the date of acquisition.

Principles of Consolidation:The consolidated financial statements include the accounts of EEGC (the “Parent” entity) and its wholly owned or controlled subsidiaries. All significant inter-company balances and transactions have been eliminated on consolidation. Equity of non-controlling shareholders of subsidiaries, other than the Company, is included on the financial statements as Minority interest on the balance sheet. Change in minority interest is included in the statement of operations.

We currently have four wholly-owned subsidiaries, Great South Land Minerals Limited, Cyber Finance Group Limited, Bob Owen & Co., and Expedia International. The substantial minority shareholder of Pacific Rim Foods is a management company that is controlled by an individual that is a director of Empire and a de facto agent for Empire. In addition, Empire owned a 35% interest in Pacific Rim Foods, at the time Pacific Rim was sold in December 2008. Pacific Rim had been consolidated with Empire until 2008, when it was reclassified and presented as discontinued operations.

Equity Investment:In November 2005, EEGC acquired a British Virgin Islands Company, Cyber Finance, Ltd. (Cyber) in exchange for 37.5 million shares of newly issued EEGC common stock. The sole asset of Cyber was an investment of 12,745,407 shares of common stock in Zeehan Zinc Limited (Zeehan), representing at the time approximately 37.5% of the total outstanding shares of Zeehan. This investment was accounted for using the equity method. Under this method the investment is recorded at cost on a single line on the balance sheet when the investment is made and the company records its proportional share of the results of operations on a single line on the statement of operations. After third quarter 2006, EEGC ownership of Zeehan dropped below 20% and the cost method was used to account for this investment. Under this method, no income or loss is reported from the investment unless a transaction is involved. The remaining investment in Zeehan common stock was sold in 2007.

F-29

Going Concern and Liquidity:EEGC is in the development stage, devoting substantially all of its efforts to exploration and raising financing. EEGC has substantially funded its operations with proceeds from the issuance of common stock. In the course of its exploration activities, EEGC has sustained operating losses and expects such losses to continue for the foreseeable future. EEGC will finance its operations primarily through cash and cash equivalents on hand, future financing from the issuance of debt or equity instruments and through the generation of revenues once commercial operations get underway. However, the Company has yet to generate any significant revenues and has no assurance of future revenues. To management’s knowledge, no company has yet successfully developed sub-surface hydrocarbons in commercial quantities in Tasmania. Even if development efforts are successful, substantial time may pass before revenues are realized.

The financial statements are prepared on a going concern basis. However, significant uncertainties exist in relation to conditions that cast doubt upon the Company’s ability to continue as a going concern. These are:


	•		Substantial losses incurred through supporting the ongoing exploration expenditure during the period since the inception of the Company.


	•		Uncertainties in terms of the ability to generate cash flows in the future considering that production operations have not yet commenced.


	•		Extensive commitments for expenditure under the Company’s key mineral exploration license.


	•		Current liabilities of $5,516,000 and current assets of $2,190,000 including cash or cash equivalents of $54,000at December 31, 2008.

The exploration license SEL 13/98 has been renewed effective 1 October 2004, and has strict mandatory cumulative expenditure requirements of US$3,371,239 by 30 September 2005, $5,277,463 by 30 September 2006, $8,306,592 by 30 September 2007, $12,428,328 by 30 September 2008 and $13,570,800 by 30 September 2009 without which the license may be revoked at the discretion of Mineral Resources Tasmania.

In November 2006, the Minister for Economic Development and Resources wrote to Great South Land Minerals noting their intention to revoke Special Exploration License 13/98 on the grounds of the failure of the company to comply with the mandatory cumulative expenditure requirements. The letter stated that as of 30 September 2006, Mineral Resources Tasmania acknowledged an expenditure of $2,260,895, which is $3,016,052 short of the mandatory expenditure required by the end of the second year of the license.

In November 2006, the company responded to the Minister with a submission requesting the withdrawal of the notice of intention to revoke the license and submitted numerous reasons why the license should not be revoked. As a consequence of the submission, in January 2007 the Director of Mines responded and advised that subject to an agreement being reached on the on-ground work program, he will be prepared to recommend to the Minister that the revocation of the license not proceed. In March 2007, Great South Land Minerals Limited responded and confirmed the company’s exploration work program, notwithstanding the fact the company believes it had met the license conditions, having prepaid seismic and secured additional resources such as a new GEFCO Drill Rig from the United States to engage in an extensive ongoing seismic and drilling program during 2007.

A contract was entered into with Terex Seismic and an amount of $1,842,381 (AUD2,332,128) was made available to Terrex as a prepayment in 2006. This prepayment was used to organize seismic trucks, permits and make preliminary arrangements for the seismic testing program to begin in 2007. The total contract for $3,160,000 (AUD4,000,000) with Terrex Seismic was completed in 2007. The Company reported an additional $7,857,046 (AUD8,961,762) in license expenditures to Mineral Resources Tasmania in 2007.

The company has initiated the following activities to address the going concern issue.


	•		In order to ensure sufficient funds for on-going exploration, Great South Land Minerals Limited entered into a Convertible Note Agreement dated 27 January 2009 with a former director for a value of USD 300,000.


	•		Empire and Great South Land Minerals entered negotiations to arrange significant financing for the continued exploration and development of the licensed property, including drilling of wells on evaluated and selected sites.


	•		Obtained approval to increase authorized shares to allow additional acquisitions and fund-raising activity


	•		Working on refinancing opportunities and using the additional shares to pursue development activities.

F-30

The accompanying consolidated financial statements for the year ended December 31, 2008 have been prepared assuming that the Company will continue as a going concern. As discussed above the Company has a working capital deficiency, has incurred net losses in recent years, and has a significant accumulated deficit. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Marketable securities:Investment securities that are held for resale are classified as trading securities and carried at fair value. Debt securities that management has the ability and intent to hold to maturity are classified as held-to-maturity and carried at cost, adjusted for amortization of premium and accretion of discounts using methods approximating the interest method. Other marketable securities are classified as available-for-sale and are carried at fair value, based on quoted market prices. Unrealized gains and losses on securities available-for-sale are reported as a net amount in accumulated other comprehensive loss, net of applicable income taxes. Costs of securities sold are recognized using the specific identification method.

Property and Equipment:The Company evaluates its long-lived assets for indicators of possible impairment by comparison of the carrying amounts to future net undiscounted cash flows expected to be generated by such assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value or discounted estimates of future cash flows.

The successful efforts method of accounting is followed for costs incurred in oil and gas exploration and production operations:

Capitalization of Oil and Gas Expenditures:Acquisitions costs for proved and unproved properties are capitalized when incurred. Costs of unproved properties are transferred to proved properties when proved reserves are found. Exploration costs, including geological and geophysical costs and costs of carrying and retaining unproved properties, are charged against income as incurred. Exploratory drilling costs are capitalized initially; however, if it is determined that an exploratory well does not contain proved reserves, the capitalized costs are charged to expense, as dry hole costs, at that time. Development costs are capitalized. Costs incurred to operate and maintain wells and equipment and to lift oil and gas to the surface are generally expensed.

Leasehold Impairment and Depreciation, Depletion and Amortization:Unproved properties whose costs are individually significant are evaluated for impairment by management. Costs of such properties surrendered or abandoned are charged to exploration expense.

The acquisition costs of proved properties are depleted by the unit of production method based on proved reserves. Capitalized exploratory drilling costs which result in the discovery of proved reserves and development costs are amortized/depreciated by the unit of production method based on proved developed reserves. The unit determination is by field.

Other Property and Equipment:Other property and equipment is depreciated under the straight-line method over the useful lives of the assets ranging from 2 to 9 years.

Dismantlement, Restoration and Abandonment Costs:In accordance with SFAS No. 143,“Accounting for Asset Retirement Obligations”, (which became effective for fiscal years beginning January 1, 2003), which addresses financial accounting and reporting for liabilities associated with the retirement of long-lived assets, the Company recognizes the fair value of a liability for asset retirement obligations associated with the retirement of tangible long lived assets and the associated retirement costs in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset as part of depreciation, depletion, and amortization. The effect of the passage of time on the amount of the liability is recognized as accretion expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement.

The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures which increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of properties sold, or otherwise disposed of, and the related accumulated depreciation or amortization is removed from the accounts and any gains or losses are reflected in current operations.

Income Taxes:The Company provides for income taxes using the asset and liability method pursuant to SFAS No. 109,Accounting for Income Taxes(“Statement 109”). Under the asset and liability method of Statement 109, 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 taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets when future realization is uncertain.

Receivables:The collectability of receivables is assessed and an allowance is made for any doubtful accounts.

F-31

Cash and Cash Equivalents:Cash and cash equivalents include all highly liquid investments with original maturities of three months or less.

Concentration of Credit Risk:Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. Cash and cash equivalents are deposited in demand in two financial institutions in Australia. Deposits held with financial institutions may exceed the amount of insurance provided on such deposits. The Company has not experienced any material losses on its deposits of cash and cash equivalents.

Use of Estimates:The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company’s financial statements are based on a number of significant estimates including the selection of the useful lives for property, equipment, and oil and gas reserve quantities which are the basis for the calculation of depreciation, depletion and amortization of oil and gas properties. Management emphasizes that reserve estimates are inherently imprecise and that estimates of more recent discoveries are more imprecise than those for properties with long production histories. Accordingly, the Company’s estimates are expected to change as future information becomes available and such changes could be material.

As mandated under Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company is required under certain circumstances to evaluate the possible impairment of the carrying value of its long-lived assets. In addition to the uncertainties inherent in the estimation process, these amounts are affected by historical and projected prices for oil and natural gas which have typically been volatile. It is reasonably possible that the Company’s oil and gas reserve estimates will materially change in the forthcoming year.

Foreign Currency Translation:The functional currency of GSLM is the Australian dollar. Financial statements for GSLM are translated into United States dollars at year-end exchange rates as to assets and liabilities and weighted average exchange rates as to revenues and expenses. Equity accounts are translated at their historical exchange rates when capital transactions occurred.

Foreign-currency transactions are translated into the Company's functional currency using the exchange rate at the transaction date. At each subsequent balance-sheet date, any related outstanding monetary assets or liabilities should be translated using the current exchange rate on the balance-sheet date. Transaction gains or losses arise when the Company has monetary assets or liabilities denominated in a foreign currency on a date when the exchange rate changes. Transaction gains or losses arise due to changes in the exchange rate among the transaction date and the settlement date, the transaction date and a subsequent balance-sheet date, ora subsequent balance-sheet date and the settlement date. Transaction gains or losses are reported in other income or expense in the period that the exchange rate changes.

Stock Issuance Costs:These costs consist primarily of placement fees and expenses and professional fees. These expenses are charged against the related proceeds from the sale of Company stock in the periods in which they occur or are charged to expense in the event of a terminated stock issuance.

Comprehensive Income (Loss):the Company accounts for comprehensive income (loss) under Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” (“SFAS 130”). SFAS 130 establishes standards for reporting and display of comprehensive income and its components. The foreign currency translation gains (losses) resulting from the translation of the financial statements of GSLM, expressed in Australian dollars, to United States dollars and, changes in the value of marketable securities that have not been realized are reported as other comprehensive income (loss) and as accumulated other comprehensive income (loss) in the Statement of Stockholders’ Equity Deficit.

Net Loss Per Share:The Company has presented the basic and diluted net loss per share pursuant to Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. In accordance with SFAS No. 128, basic and diluted net loss per share has been computed using the weighted average number of shares of common stock outstanding during the period. Dilutive net loss per share would give affect to the dilutive effect of common stock equivalents consisting of option and warrants. Potentially dilutive securities have been excluded from the net loss per common share calculation as the effects would be antidilutive.

Basic and diluted net loss per share calculations are presented in accordance with Financial Accounting Standards Statement 128, and are calculated on the basis of the weighted average number of common shares outstanding during the year. They include the dilutive effect of common stock equivalents in years with net income.

F-32

Stock Options:The Company and its subsidiaries have issued options to Directors, Director-related entities and Officers. The Company measures compensation cost as prescribed by FAS 123R, “Accounting for Share Based Payments”. Compensation cost relating to the granting options has been included in the financial statements as option grants are vested.

Recently Issued Accounting Pronouncement:

In February 2007, the FASB issued Statement No. 159,“The Fair Value Option for Financial Assets and Financial Liabilities”(“SFAS No. 159”), an amendment of FASB Statement No. 115. SFAS No. 159 addresses how companies should measure many financial instruments and certain other items at fair value. The objective is to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management believes there will be no significant impact of the financial statements from the adoption of SFAS No. 159.

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51(SFAS No. 160): SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. The adoption of this statement will not have material impact on our financial statements.

In December 2007, the FASB issued SFAS No. 141R (revised 2007),“Business Combinations.”Although this statement amends and replaces SFAS No. 141, it retains the fundamental requirements in SFAS No. 141 that (i) the purchase method of accounting be used for all business combinations; and (ii) an acquirer be identified for each business combination. SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This Statement applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree), including combinations achieved without the transfer of consideration; however, this Statement does not apply to a combination between entities or businesses under common control. Significant provisions of SFAS No. 141R conc ern principles and requirements for how an acquirer (i)recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 with early adoption not permitted. Management is assessing the impact of the adoption of SFAS No. 141R.

In December 2007, the FASB issued FAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51" ("FAS No. 160"). FAS No.160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. FAS No. 160 is effective for the Company in its fiscal year beginning January 1, 2009. The Company does not believe this statement will have a material impact on its financial position and results of operations upon adoption.

In December 2007, the FASB issued FAS No. 141 R "Business Combinations"("FAS No. 141R"). FAS No. 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. FAS No. 141R also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FAS No. 141R is effective for the Company’s fiscal year beginning January 1, 2009. The Company does not believe this statement will have a material impact on its financial position and results of operations upon adoption.

In March 2008, FASB issued Statement of Financial Accounting Standard (SFAS) No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” This standard is intended to improve financial reporting by requiring more disclosure about the location and amounts of derivative instruments in an entity’s financial statements; how derivative instruments and related hedged items are accounted for under SFAS No 133; and how derivative instruments and related hedged items affect its financial position, financial performance and cash flows. SFAS No. 161 is effective for the Company’s first quarter of 2009. As this pronouncement is only disclosure related, it will not have an impact on the Company’s financial position and results of operations.

F-33

In April 2008, the FASB issued Staff Position (FSP) No. FAS 142-3, “Determination of the Useful Life of Intangible Assets”. FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years and should be applied prospectively to intangible assets acquired after the effective date. Early adoption is not permitted. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives for intangible assets and should be applied to all intangible asset recognized as of, and subsequent to the effective date. The impact of FSP FAS 142-3 will depend on the size and nature of acquisitions on or after January 1, 2009.

In June 2008, the FASB issued Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” (FSP EITF 03-6-1). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, on a retrospective basis and will be adopted by the Company in the first quarter of 2009. The Company is currently evaluating the potential impact, if any; the adoption of FSP EITF 03-6-1 could have on its calculation of EPS. The Company does not expect EITF 03-6-1 to impact the financial statements.

NOTE 2—TAXATION

In assessing the realisability of deferred tax assets, the Company applies SFAS No. 109 to determine whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As a result, the Company’s valuation allowance at December 31, 2008 and 2007 reduces the net deferred tax assets to $0.

Deferred tax assets consist of:


	2008	2007
	$	$
Net operating losses	10,151,492	8,118,716
Valuation allowance	10,151,492	8,118,716

	—	—

At December 31, 2008, the Company has net operating loss carry forwards of approximately $32,909,626 that will expire through to the year 2028. The benefit of tax losses will be available provided the following are met:

The Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realized;

The Company continues to comply with the conditions for deductibility imposed by the law; and

No changes in tax legislation adversely affect the Company in realizing the benefit from the deductions for the losses.

The increase in the valuation allowance was $2,032,776 and $2,232,192 during 2008 and 2007, respectively.

NOTE 3—RELATED PARTY TRANSACTIONS

Transactions with related parties are as follows:

Directors and Director Related Transaction

A number of directors of the Company or their director related entities hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.

F-34

The aggregate amounts recognized during the year relating to directors and their director related entities were as follows:


Directors	Transactions	2008	2007
		$	$
M. R. Bendall	Rental	28,986	28,986
M. R. Bendall	Consulting	216,000	216,000
J. C. Garrison	Consulting	240,000	174,000
M.W. Roberts	Consulting	42,000	70,000

Consultancy Agreement

Effective April 1, 2002, GSLM signed a consultancy agreement with Bass Gas and Oil Pty Ltd to provide the services of M.R. Bendall. The agreement continues until April 1, 2007. This agreement was renewed in 2007 for a further 5 years, then was cancelled in August 2007 when replaced by a separation agreement entered in conjunction with Mr. Bendall’s resignation. Under the separation agreement, M.R. Bendall is to provide the company with professional guidance, advice and assistance in the general area of oil and gas exploration. These services are expected to require an average commitment of 12 days per month. In return for providing these services, Mr. Bendall is entitled to receive $18,000 per month from the Company. In addition, the separation agreement settled approximately $840,000 in accrued fees and expenses by issuing 5,600,000 common shares.

Guarantees

The Company provides an environmental Bond in the form of guarantee in favor of Mineral Resources Tasmania (“MRT”) totaling $54,758, and relates to future rehabilitation costs that may arise in respect of the license.

Working Capital Facility &Share settlement

From time to time the Company requires funding for short term needs which are supplied by an entity associated with a director. In December 2006, the company issued 26,000,000 shares of its common stock to M.R. Bendall and related entities in settlement of loans to the company that had accumulated over several years in the amount of $1.4 million and as bonus compensation of $939,000 for his services over many years in completing the Empire GSLM merger, acquiring the license property, arranging technical evaluation and negotiating financing. The transaction was valued at the market price of the common stock on the date of the issuance.

Share Settlement

In 2007, the Company issued 1.8 million shares of common stock to Terralinna, a company controlled by Phil Simpson, to settle a matter from a prior year.

Share and Options

From January 1, 2006 to December 31, 2006 the Company did not issue any shares or options to Directors, Director Related entities or officers of the company. In August 2007, the Company issued options for 18,574,079 shares to a newly hired Chief Executive Officer. One-third of these options were immediately vested, one-third were vested after one year and the remaining one-third were vested after two years. These options were forfeited when the executive resigned in February 2008.

License Option Agreement

On October 12, 2007, the Company entered into a Put and Call Option Agreement with MR Associates, a sole trader wholly-owned by the then Chairman of the Board of Directors, Michael Roberts, regarding the proposed transfer to the Company of exploration rights to approximately 13,336 sq. km. of real property in exchange for the issuance of 19,500,000 shares of our Class A Common Stock. As initial consideration for entering into the agreement, the Company has issued 2,500,000 shares to MR Associates recorded as a share based exploration expense of $375,000. Payment of the remaining 17,000,000 shares, and completion of this agreement, were contingent on several matters. This agreement was allowed to lapse unexercised when the Chairman resigned his position in February 2008.

F-35

Stock Option Grant

On August 15, 2007 the Company entered into an employment agreement with Mr. Sehsuvaroglu whereby Mr. Sehsuvaroglu agreed to serve as our Chief Executive Officer and President. Among other provisions, Mr. Sehsuvaroglu’s Employment Agreement calls for the Company to issue Mr. Sehsuvaroglu options to acquire, in the aggregate, 18,574,103 shares of the Company’s Class A Common Stock, valued at $1,053,000, of which $456,506 was recorded as share based expense in 2007. These options were forfeited when Mr. Sehsuvaroglu resigned his position in February 2008 and $105,466 unvested expense reported in 2007 was reversed in 2008.

Zeehan share sale

In December 2007, the company sold its interest of 7,641,403 common shares in Zeehan Zinc Limited. Proceeds of this sale were used to repay the $4,000,000 floating rate note payable to Wind City, Inc. that had been called for early redemption by the lender. This sale transaction was completed under significant time restraints that did not allow the company to meet the buyers share escrow requirements by delivering the Zeehan share certificates held by the company. To comply with the timing required to complete the sale transaction, the company arranged transfer of Zeehan shares to the buyer from other Zeehan shareholders and immediately arranged transfer of the share certificates held by the company to those shareholders in repayment. In total, Empire borrowed 9,000,000 shares of Zeehan stock from two entities. A current director is a beneficiary of one entity and the current CEO and director could be a control person of the other entity. Empire agreed to pay a total of 7, 000,000 Empire shares as compensation for this loan of Zeehan shares. The 7,000,000 Empire shares were issued to one entity in 2008 and were valued at the market price at the time of the loan was made. The value of 5,000,000 Empire shares, $600,000, was accrued as a long term payable at the time of the sale of the Zeehan shares and recorded as a cost of the sale of those shares. The remaining 2,000,000 Empire shares, valued at $240,000, were issued as compensation for unexpected processing delays in the return of the borrowed Zeehan shares and were recorded as an expense when the settlement agreement was made with the lender and the shares issued in 2008. Further Empire issued a note payable to the other entity for $518,013, the proceeds of the sale of the remaining 1,359,597 Zeehan shares borrowed in excess of the shares owned by Empire. In addition to the $600,000 cost of borrowing shares mentioned above, the company recorded $784,088 additional costs to intermediaries for a total transaction cost of $1,38 4,088. The additional costs were paid by transferring 140,000 Zeehan shares, issuing 4,766,667 Empire shares in 2007, issuing 1,000,000 Empire shares, valued at $120,000, in 2008 and paying $167,254 in cash in 2008.

The following conditional offers of share options were made in earlier periods to Directors, Director Related Entities and officers of the company. The issue of these options was conditional and the conditions were achieved in 2006.

These options will have a term of three years and an exercise price of AUD $0.20. The exercise price of each option at December 31, 2008 in US$ is $0.138.


				December 31, 2008
Name	Position	Exercise Prices		Number outstanding	Intrinsic Value
					$
M.R. Bendall	Chairman	$	0.138	6,000,000	—
C. Burrett	Director	$	0.138	600,000	—
S. Powell	Former Director	$	0.138	400,000	—
P. Simpson	Former Director	$	0.138	400,000	—
D. Tanner	Former Director	$	0.138	400,000	—
R. Watson	Former Director	$	0.138	400,000	—
K. Gumley	Former Company Secretary	$	0.138	400,000	—
R. Tabor	Former Chief Executive Officer	$	0.138	400,000	—
				9,000,000	—

NOTE 4—COMMITMENTS

Environmental Remediation Liabilities

Great South Land Minerals Limited provides an environmental bond to the State Government department to cover any potential environmental liabilities. As of December 31, 2008, the Company is not aware of any issues that would give rise to any environmental remediation liabilities.

F-36

Exploration Expenditure Commitments

In order to maintain current rights of tenure to exploration tenements, the Company is required to perform minimum exploration work to meet the minimum expenditure requirements specified by the Tasmanian State Government. These obligations are subject to renegotiation when application for a mining lease is made and at other times. At December 31, 2008, these obligations, expressed at exchange rates of the balance date (0.69070), are as follows:


	2008	2008
Expenditure required by MRT Report Year: (September 30^theach year)	USD	AUD
September 30, 2009	1,250,167	1,810,000

As of September 30, 2006, Mineral Resources Tasmania acknowledged an expenditure of $2,260,895, which is $3,016,052 short of the mandatory expenditure required by the end of the second year of the license. The shortfall of $3,016,052 is not included in the table above.

The company claims to have met its cumulative expenditure commitments, and is currently in discussions with Mineral Resources Tasmania on the issue of the recognition of exploration expenditures that form part of the license conditions.

Drilling Contract

In December 2007, the company entered into a drilling contract that required a payment of AU$1.3 million (US$900,000) to activate. Over $3 million (US$2.1 million) has been paid to the drilling contractor to date that has been reported as a deferred cost until success of the well is determined. The drilling equipment is on site and accruing delay and standby costs while awaiting funding to complete the drilling program.

Operating Lease Commitments

Future operating lease rentals at December 31, 2008 and 2007 not provided for in the financial statements are as follows:


Expenditure required by year ended:		2008
		$
December 31, 2009		39,452

		39,452

Rental expense was $102,000 and $117,949 during the year ended December 31, 2008 and 2007, respectively.

From December 31 2006, the rental on the Murray Street Hobart Seismic centre is USD$39,452 pa, which is currently a 1 year lease, renewable at the Boards discretion. The Kansas offices cost USD $10,200 pa renewable monthly at the boards’ discretion. There is an additional USD $5,169 of computer equipment rentals.

NOTE 5—CONTINGENT LIABILITIES

Litigation

On March 31, 2009 are wholly-owned subsidiary, Great Southland Minerals Ltd., was served with a Form 509H, Creditor’s Statutory Demand relating to a claim by Hunt Energy & Mineral Company -- Australia Ltd. PTY for payment of approximately $441,000 claimed due pursuant to our drilling contract with Hunt. The statutory demand notice has been filed with the [Tasmanian District Court]. The company has 21 days to respond to the Statutory Demand notice. If we should fail to respond or should the court determined in favor of Hunt and the demand is not paid, the procedure for Statutory Demand could result in the court ordering the business of Great Southland Minerals to be wound up. Management believes that it has substantial defenses to the claim including the defense that the contract provides for all disputes to be submitted to the dispute resolution process contained in the contract and that substantial sums have been deposited with the claimant, which sums exceed the amount being claimed.

F-37

Put and Call Option

On October 15, 2007, the Company entered into a Put and Call Option Agreement with MR Associates, a sole trader that is wholly owned by the chairman of Empire’s board of directors, Mr. Michael Roberts. The option agreement relates to MR Associates’ rights under a special exploration license SEL 5/2005 granted by the Tasmanian government to conduct exploration for oil and natural gas on a plot of land adjacent to the license area held by our subsidiary Great South Land Minerals Limited (“GSLM”). The Exploration License was granted on September 8, 2005 for a term of five years and provides exploration rights for hydrocarbons, (excluding oil shale and coal bed methane) in an area of approximately 13,336 sq. km., covering the majority of the sedimentary basin in the northern part of the island of Tasmania. As consideration to MR Associates for entering into the option agreement, Empire issued 2.5 million shares of our class A common stock, valued at $375,000 to Mr. Roberts.

Pursuant to the option agreement, each party has an option to require the other party to close the underlying transaction (described below) within the option exercise period of 180 days. The option period is extendable for an additional 180 days at Empire’s discretion upon payment of AUD $500,000 from Empire to MR Associates. Exercise of an option is contingent upon several conditions, each of which is waivable by the party for whose benefit the condition operates.

Exercise of the put option by MR Associates or the call option by Empire would result in the transfer of all title and interest in the exploration license to Empire and the issue of 17 million shares of class A common stock by Empire to MR Associates. Empire would also agree to include two MR Associates designated wells as part of the first eight exploratory wells that are drilled by GSLM. If the option is exercised, MR Associates will also cancel a certain farm-in agreement to which Empire was a party and which was fully described in and attached as an exhibit to Empire’s registration statement on Form SB-2, filed with the Securities and Exchange Commission on August 2, 2006.

In February 2008, Mr. Roberts and the Company agreed that neither party would exercise their option under this agreement, allowing the agreement to expire with no additional liability and Mr. Roberts resigned his position as chairman of the board of directors.

NOTE 6—PROPERTY AND EQUIPMENT

Property and equipment at cost, less accumulated depreciation, is as follows:


	2008		2007
	$		$
Property and equipment	328,149		344,131
Less: accumulated depreciation	(157,722	)	(95,345	)

Written down value	170,427		248,786

The expense for depreciation and impairment for year ended December 31, 2008 and 2007 was $61,694 and $20,450 accordingly.

NOTE 7—LONG-TERM DEBT

Long-term debt consists of the following:


	2008		2007
	$		$
RAB Loan	1,500,000		819,700
Terralinna Loan	1,695,489		—
Decker Loan	—		100,000
Bendall Trust Loan	400,013		657,042
Garrison Loan	210,000		—
SmartWin Loan	2,683,910		—
Asset Purchase loan for vehicle, due monthly to 2011	44,437		75,745

	6,533,849		1,652,487
Less: current portion	(2,349,939	)	(779,115	)

Long term debt	4,183,910		873,372

F-38

The maturities of the Company’s long-term debts consist of the following:


Year Ending December 31,		2008
		$
2009		2,349,939
2010		—
2011		4,183,910
2012		—

		6,533,849

NOTE 8—CONVERTIBLE DEBENTURES AND NOTES PAYABLE

In March 21, 2006, pursuant to a subscription agreement with RAB Special Situations (Master) Fund Limited, a British investment fund, the Company issued 17,100,000 shares of our Class A Common Stock, together with warrants entitling the holder to acquire an additional 8,550,000 shares, in exchange for $1,881,000, which the Company is using for general corporate purposes. The warrants are exercisable at a price of $0.13 over an exercise period of three years. The Company covenanted in the subscription agreement to register the issued shares as well as the shares underlying the warrants. On the same date, the Company sold $1.5 million of our 6% convertible debenture and a Class B Warrant offering up to 5 million shares exercisable at $.18 per share for 3 years. The initial conversion price for the debenture is $0.18 per share. RAB Special Situations also purchased this offering. RAB Special Situation (Master) Fund Limited represented itself as a non U.S. perso n. The Company was represented in the offerings by Libertas Capital Corporate Ventures Limited, a U.K. investment banking firm received 4,065,000 shares of our Class A common stock (equal to 10% of the RAB shares issuable) as their fees for those services. Shares issued to Libertas that are related to the sale of stock, valued at $359,100 have been charged to capital and the shares related to the convertible debenture, valued at $210,000 have been charged to the debenture and will be amortized to income over the term of the debenture. The Company relied on Regulation S as the exemption from registration as the offering was conducted entirely overseas and the investor is a non-U.S. person.

The notes have been discounted to record the fair value of the included warrants issued, the beneficial conversion feature imbedded in the debenture and the transaction costs. As of December 31, 2007 and 2008 no shares of common stock had been issued in conversion of the debenture and no warrants had been exercised. The discounts will be amortized over the term of the debenture.


	2008		2007
	$		$
Notes payable:
Gross proceeds from notes	1,500,000		1,500,000
Less: beneficial conversion feature	(420,181	)	(420,181	)
Less: fair value of warrants included	(416,991	)	(416,991	)
Less: shares issued as transaction costs	(210,000	)	(210,000	)
Add: fair value of stock converted for debt	—		—
Add: amortization discounts	1,047,172		366,872

Book value of note on December 31, 2008 and 2007	1,500,000		819,700

The terms and exercise prices of the warrants are set out in the table below.


Number of shares	Exercise price	Warrant expiration date
8,550,000	$0.07	March 24, 2009
5,000,000	$0.07	March 24, 2009

In December 2006, the Company closed a financing transaction with Wind City, Inc., a Delaware corporation pursuant to a Note and Warrant Purchase Agreement and related documents. Under the Purchase Agreement, Empire issued warrants in two tranches for a total of 60,000,000 shares of common stock, Great South Land issued a floating rate note and Wind City loaned $4,000,000 to Great South Land and Wind City agreed to buy 4,500,000 shares of Zeehan Zinc common stock in 2007 for a total price of $4,500,000. Great South Land used the proceeds from the loan to fund seismic services by Terrex Seismic, to purchase the new mobile oil drill rig and related support equipment and for general corporate purposes.

F-39

In January 2007, the Company exercised the put option and Wind City purchased the 4,500,000 shares of Zeehan Zinc common stock. In November 2007, the warrants to purchase 60,000,000 shares of Zeehan stock expired. In December 2007, the Company repaid the $4,000,000 floating rate note and obtained release of property held as collateral. The note was repaid with proceeds from the sale of the remainder of the Zeehan stock owned by the Company and proceeds from the sale of the mobile oil drill rig.

Under the terms of the Purchase Agreement (i) Wind City acquired and the Company sold a warrant to acquire 26,666,667 shares of the Company’s class A common stock and a second warrant to acquire 33,333,333 shares of the Company’s class A common stock, exercisable in each case prior to November 30, 2007 at a price of $0.15; and (ii) Wind City acquired and Great South Land issued a floating rate note. If the floating rate note is still outstanding at the time of exercise of the warrant relating to the 26,666,667 shares, the note will be tendered as consideration for the shares in lieu of cash payment. The Note carries interest at 4% over the prime rate and is repayable on or before May 31, 2008. After exercise of either warrant, the Purchase Agreement requires Empire within thirty days to file with the Securities and Exchange Commission a registration statement with respect to the issued shares of common stock underlying the warrant. Empire guar anteed payment of all amounts owing by Great South Land under the Floating Rate Note. The net cash proceeds received by the Company from any exercise of the warrants (after repayment of the loan) would be used by the Company to fund continuing exploration of the petroleum license held by Great South Land. The Purchase Agreement permits Wind City to name one member to the registrant’s board of directors for so long as Wind City, its affiliates and funds managed by Wind City or its affiliates hold in the aggregate at least 10% of the registrant’s common stock. The Company pledged as security for performance of both its and Great South Land’s obligations under the Purchase Agreement, its equity interest in Pacific Rim Foods Limited including any future-acquired securities issued by Pacific Rim. As additional security, the Company granted Wind City a security interest in the form of an Equitable Mortgage of Shares over 7,281,407 ordinary shares of Zeehan Zinc, Ltd., an Australian zinc mining conce rn. The Mortgage, governed by Australian law, serves as a security interest in the Zeehan Zinc shares and allows direct enforcement by the mortgagee in the event of default as well as restricting transfer of, sale of and encumbrances over the collateral except in certain limited circumstances. The Mortgage permits disposal of the subject shares in any of the following circumstances: (a) if counsel to the registrant provides an opinion to Wind City that such a sale is necessary to avoid the registrant being required to register as an investment company under the Investment Company Act of 1940; (b) a sale made at arms length for fair market value; or (c) pursuant to the put option described below. With respect to disposals other than through exercise of the put option, the proceeds from any such disposal shall be placed in an escrow account and shall serve as continuing security for Wind City.

Wind City granted the Company a put option with an exercise period of January 1, 2007 to January 15, 2007 to require Wind City to purchase 4,500,000 ordinary shares of Zeehan Zinc at a price of $1.00 per share. On January 5, 2007, the Company exercised the put option and Empire received $4,500,000 in consideration of the 4,500,000 ordinary shares of Zeehan Zinc, Ltd. Proceeds from the exercise will be used to cover certain costs of closing and for general corporate purposes, including development of Great South Land’s license area.

This multipart financing arrangement was recorded in the financial statements in three components. The note payable was recorded as long-term debt of $4,000,000, payable in May 2008, discounted by $250,000 for the allocated value of related warrants. The discount will be amortized to expense over the life of the note. The note accrues interest payable quarterly at the rate of four percent over the Wall Street Journal prime rate. The put option was recorded when exercised in January 2007 recognizing a gain of $2,655,000 based on the proceeds of $4,500,000 received in January less the carrying cost of the shares of Zeehan stock sold under the put of $1,845,000. The warrants were recorded as a credit to capital in the allocated amount of $250,000, based on the $270,000 calculated value of the warrants to purchase 60 million shares of Empire Common Stock at US$ 0.15 per share. The value was calculated using the Black Scholes method with an expected life of one year, volatility of 68%, dividend rate of 0% and a risk-free yield rate of 4.8%. In December 2007, the note payable to Wind City was fully paid and the warrants held by Wind City expired.

In December 2007, the Company sold 9,000,000 shares of Zeehan stock, including 1,359,597 Zeehan shares provided by an entity related to an officer and director. The entity agreed to loan the proceeds of the sale of the shares, $518,013, to the Company for a period of three months at an interest rate of 10% per annum.

Beginning in February 2008, entities related to two directors loaned up to $1.7 million to the company for working capital. These loans were due on demand at December 31, 2008 and secured by Pacific Rim assets. Both were repaid in 2009 by sale of Mach One shares and transfer of the note receivable from Mach One.

F-40

Senior Secured Note

In conjunction with the MOU, on July 17, 2008, Empire Energy, along with GSLM, signed a Senior Secured Note with Smart Win, under which the company may borrow up to AUD$5,000,000.(US$3.45 million) Proceeds from the Note will be utilized to commence drilling for oil and gas on GSLM’s Tasmanian Basin license area SEL 13/98 and to fund GSLM operating costs in support of the exploration and drilling activity. The Note provides Smart Win the right to jointly agree that expenditures of proceeds of the Note apply to SEL 13/98. As stated in the MOU, Smart Win has agreed at signing to certain initial disbursements required to mobilize the drill rig, support GSLM operations and facilitate operation of the drilling program. Prepayments of AUD$2.3 million (US$1.6 million) were made in July 2008 to the drilling contractors to transport equipment to Tasmania and begin work on the first well.

The Note earns no interest and is secured by a pledge by Empire of 32 million newly issued shares of Empire common stock held in trust and the personal guarantee of Malcolm Bendall, Chief Executive Officer of Empire. The Note matures with the decision by Smart Win of its option to enter the joint venture agreement with GSLM regarding SEL 13/98. If Smart Win executes the joint venture agreement, the Note is cancelled and becomes part of their investment in the joint venture. If Smart Win does not execute the joint venture agreement, the note begins to accrue interest at a rate of libor plus one percent, not to exceed 6% per annum, and becomes repayable in quarterly installments over a period of two years. If necessary, the Note can be repaid by Empire, GSLM, the guarantor, transfer of the collateral shares or any combination.

NOTE 9—STOCKHOLDERS’ DEFICIT


	2008		2007
	No.		No.
Issue of Class A common stock:
2007 conversion of shares from B stock	—		868
Shares issued to Bass Resources for services	—		5,600,000
Shares issued to MR Associates for Option Agreement	—		2,500,000
Shares issued to Terralinna to settle dispute	—		1,800,000
Shares issued to Libertas related to Wind City finance	—		4,766,667
Shares recovered from Batego in cancellation of technology license	—		(15,000,000	)
2008 conversion of shares from B stock	43		—
Shares issued to S.A. Sehsuvaroglu in contract settlement	6,315,800		—
Shares issued to World Technology and Trade Inc. for services	1,000,000		—
Shares issued to Kingdom Securities for share loan fee and penalty.	7,000,000		—
Shares issued to Attorney in contract settlement	450,000		—
Shares issued to Public/Investor Relations funding	10,080,000		—
Shares issued to settle Trade Debt	548,732		—
Shares issued for Construction and legal services	20,000,000		—
Shares issued to acquire Libertas Capital Ltd common stock	8,511,111		—
Shares issued for cash	7,263,281		—

	61,168,967		(332,465	)

Issue of Class B Common stock:
2007 conversion of B shares into A shares	—		(868	)
2008 conversion of B shares into A shares	(43	)	—

	(43	)	(868	)

In March 2008, we issued 7,000,000 shares to an entity controlled by a Director, Kingdom Securities Ltd in payment of a fee for the loan of common shares of Zeehan Zinc Ltd. The loan was required to meet timing requirements of a sale of like shares owned by the company.

In May 2008, we sold 666,667 shares of common stock to an individual for cash to meet operating expenses.

During 2008, we issued 12,429,000 shares of common stock to individuals as compensation for services provided to the Company.

In August 2008, we issued 32,000,000 shares into escrow to secure a AU$5,000,000 loan from Smart Win Limited. The shares will be returned to treasury when the loan is repaid or converted to a joint venture interest.

F-41

In October 2008, we issued 23,000,000 shares of common stock to contractors as collateral to secure payment for services provided or to be provided to the company. These shares can be converted to pay current billings at a rate of $.15 per share or returned as work is completed and payment received.

In November 2008, we sold 6,596,614 shares of common stock to an unrelated individual for cash required to maintain drilling operations.

In August 2008, we issued 8,511,111 shares of common stock to a company, Libertas Capital in exchange for 7,660,000 shares of their common stock.

NOTE 10—OPTIONS/WARRANTS

The following table summarizes the movements in warrants in the year to December 31, 2008:


	2008			2007
	Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Warrants outstanding:
Beginning of period	15,800,000	$	0.15	75,800,000		$	0.15
Warrants granted	—		—	—			—
Warrants exercised	—		—	—			—
Warrants expired	(1,500,000		0.10	(60,000,000	)		0.15

End of period	14,300,000	$	0.09	15,800,000		$	0.15

Warrants exercisable	14,300,000	$	0.09	15,800,000		$	0.15

The warrants have a weighted average remaining contractual life of 0.25 years, are fully vested and have a weighted average exercise price of $0.09. Exercise price of warrants to RAB was reset in 2009 as part of an extension agreement.

The following table summarizes information about warrants outstanding at December 31, 2008:


			2008
	Exercise Prices		Number outstanding	Average remaining life in years

Avalor Capital LLC and Frank W Bachinsky, III Common Stock, rights expiring October 10, 2009		0.50	750,000	0.78
RAB Special Situations (Master) Fund Limited Common Stock, rights expiring March 31, 2009		0.07	8,550,000	0.25
RAB Special Situations (Master) Fund Limited Common Stock, rights expiring March 31, 2009		0.07	5,000,000	0.25

			14,300,000

F-42

The following table summarizes the movements in options in the year to December 31, 2008 and 2007:


	2008				2007
	Shares		Weighted Average Price		Shares	Weighted Average Price
Options outstanding:
Beginning of period	27,574,079		$	0.349	9,000,000	$	0.175
Options granted	—			—	18,574,079		0.433
Options vested	—			—	—		—
Options exercised	—			—	—		—
Options expired	(18,574,079	)		0.433	—		—

End of period	9,000,000		$	0.138	27,574,079	$	0.349

Options exercisable	9,000,000		$	0.138	15,191,393	$	0.212

The following table summarizes information about stock options outstanding at December 31, 2008.


			2008
	Exercise Prices		Number outstanding	Average remaining life in years
Issued to directors and officers of GSLM in October 2003, as detailed in Related Parties Note to the Accounts:	$	0.138	9,000,000	1.00

			9,000,000

With regard to the 9,000,000 options issued to Directors and Officers of Great South Land Minerals, the Company recorded this stock-based compensation in December 2006 at the fair value of the equity instruments granted on the measurement date, which is the date on which the final condition was achieved. The fair value of the equity instrument is determined using the Black-Scholes option-pricing model, using 89% volatility, no dividends, 4.5% discount rate and a three year term.

In August 2007, the Company issued options to issue 18,574,079 common shares to a newly hired CEO. The Company recorded this stock-based compensation in 2007 at the fair value of the equity instruments granted on the measurement date, which is the date of the agreement. The fair value of the equity instrument is determined to be $983,835 using the Black-Scholes option-pricing model, using 91% volatility, no dividends, 4.3% discount rate and a 3.8 year term. One third of the options were immediately vested, another one-third vest after one year and the remainder vest after two years. Expense reported in 2007 represents the portion vested in 2007 and a prorated portion of the value to vest in the future. These options were forfeited when the executive resigned in February 2008.

The fair value of option’s vested and included in expense in the year to December 31, 2008 and December 31, 2007 were $(105,466) and $456,506, respectively. Expense totaling $105,466 was accrued in 2007 for unvested options that were forfeited in 2008.

NOTE 11—DISCONTINUED OPERATIONS

In March 2006, Empire issued 9 million shares of common stock to acquire a 51% interest in Pacific Rim Foods, Ltd., a company newly created to develop food production and canning operations in China.

In December 2008, Pacific Rim was sold to Mach One Corporation (www.machonecorp.com), a global wellness company that provides biotechnology based solutions to help address one of the world's most pressing and costly needs -- positive, long-term health and longevity benefits for humans and disease-threatened animals of commercial operations. While animal wellness, organic and sustainable products are the initial primary focus, Mach One intends in the near future to add Nutraceuticals to their growing list of operating groups. Mach One is publicly traded. The merger reduced our ownership percentage and increased the liquidity of the investment. Accordingly, our financial statements have been restated to report the investment in Pacific Rim as discontinued operations. We were able to benefit from the increased liquidity and value for this investment to pay expenses and reduce Company debt in 2009.

F-43

In November 2008, the Company determined to discontinue operations at its Pacific Rim Foods, Ltd. subsidiary to fully focus Company resources on exploration of its oil and gas license property in Tasmania. The subsidiary was sold to Mach One Corporation in a stock for stock transaction that was completed on December 31, 2008. The buyer is a publicly traded (pink sheet) company in the food research and manufacturing business. The common stock of Pacific Rim was exchanged for 28 million shares of common stock of Mach One Corporation and a convertible note receivable from Mach One in the amount of $1.5 million, representing approximately one third ownership in Mach One. The exchange of Empire's 35% ownership of Pacific Rim results in an approximate 10% ownership in Mach One, the shares will be reported as available for sale and reported on the Balance sheet at fair market value.

In 2008, Empire recognized a gain on the sale of Pacific Rim in the amount of $868,970, including a loss from operations in 2008 of $112,964. In 2007, Empire recognized a loss from operations of $346,862.

The following is a summary of the net assets sold as at December 31, 2008 and 2007


	2008	2007
Cash	210,116	308,128
Accounts receivable	-	183,700
Prepaid expense	210,000	240,000
Inventory advances	520,020	520,020
Marketable securities	754,697	743,666
Investment in Brands	80,000	80,000
PPE	2,228	2,682

Total assets	1,777,061	2,078,196
Accounts payable	17,578	39,370
Notes Payable	100,000	400,000
Accrued liabilities	-	-
Total liabilities	117,578	439,370
Net assets of discontinued operations	1,659,483	1,638,826

TECHNOLOGY LICENSE

In June 2006, Empire acquired 100% of Expedia International Limited. This subsidiary entered into an agreement to license and promote certain nano-key technology. Cost of the license agreement was the issuance of fifteen million Empire common shares and transfer of five million Zeehan Zinc shares, valued at a total of $3,925,000. Expedia intended to negotiate a development agreement with Zeehan Zinc to employ this technology at the mine sites. This technology is still under development and is yet to be commercialized. In June 2007, the license agreement was cancelled to allow the company to refocus its resources and efforts on the oil and gas activities. The fee paid in 2006 was returned to the Company in 2007 and the Company recognized no gain or loss on the cancellation of the agreement and return of shares to the Company. The fifteen million Empire common shares were returned to the treasury and cancelled. The five million Zeehan Zinc shares were restored to investment at the market value when returned and were sold in December 2007.

NOTE 12—MORTGAGE GUARANTEE

Terrex Seismic (formerly Trace Energy Services Pty Ltd) holds a registered mortgage debenture charge over all the assets and undertakings of GSLM, to a maximum prospective liability of $876,730. The charge is both fixed and floating.

NOTE 13 –JOINT VENTURE

Memorandum of Understanding for Joint Venture and Prepayment of Well Drilling Contractor

On July 17, 2008, Empire Energy Corporation International, along with its wholly owned subsidiary Great South Land Minerals Ltd. (GSLM), signed a Memorandum of Understanding relating to the creation of a joint venture with Hong Kong-based Smart Win International Limited for the exploration and development of the oil, gas and helium resources of the Tasmania Basin within Special Exploration License (SEL 13/98). Smart Win is a joint venture between Genesis Energy Holdings Limited and New Times Group Holdings Limited, both listed on the Stock Exchange of Hong Kong Limited, created with an aim to explore business opportunities in oil, gas and energy exploration and exploitation in international markets.

F-44

The terms of the MOU further provide that Smart Win will have the option during drilling of one well or until approximately October 15, 2008 to enter into a joint venture with Empire Energy and GSLM for up to 50% ownership of the exploration and development rights within SEL 13/98 for an investment of up to AUD$45 million. The parties agreed to negotiate in good faith to complete the terms of a definitive joint venture and operating documents as soon as reasonably practicable, but no later than October 15th 2008. During the period of negotiation of the definitive JV agreement, Empire will not raise capital to use for the project under SEL 13/98.

Should Smart Win elect to execute the joint venture, the Note described in Note 8 would be cancelled as part of the AUD$45 million investment. Should Smart Win elect to opt out of the joint venture, the Note would be repayable by Empire or the Guarantor in quarterly payments over a period of two years.

Smart Win has the right to conduct, at its own expense, full due diligence on the Project, GSLM, Empire Energy and such other companies and matters as far as they are related to GSLM and the Project. Empire will have the right to receive unequivocal proof that Smart Win has the contracted support of its JV partners, giving it the capacity and means to fulfill its obligations under the Joint Venture.

NOTE 14 –INVESTMENT VALUATION

The Company’s investments are available for sale securities that are carried at fair value. If available, quoted market prices are used to value investments. In general, securities traded on the national securities exchanges are valued at the last reported sale price on the last day of the reporting period. Purchases and sales of securities are reported on a trade date basis.

The Company held the following investments at December 31, 2008 and 2007:


		Fair Market Value		Unrealized Gain (Loss)
Total Investments December 31, 2007	$	143,666	$	( 44,370)
Change in other comprehensive income		1,008,972		(614,374)
Total Investments December 31, 2008	$	1,152,638	$	(658,744)

NOTE 15—SUBSEQUENT EVENTS

In February 2009, the Company settled loans provided in 2008 by Directors of the Company in the original amounts of $1,565,000 and raised an additional $200,000 by selling the remaining marketable securities and a note receivable.

Subsequent to December 31, 2008, the Company has incurred additional contracted standby charges for its well drilling program and continues to incur costs under its drilling program in excess of $10,000 per day.

In February 2009, the Company entered into consulting and promotion arrangements with two parties at a cost of five million common shares reported at a value of $275,000.

In March 2009, the convertible debenture in the face amount of $1,500,000 was extended to mature March 21, 2011 and the conversion price was adjusted to $.07 per share. Additionally, the expiration dates on the Class A and Class B warrants were extended to March 21, 2014. In conjunction with this extension, the Company issued to RAB a warrant to purchase 7.5 million additional Empire shares for a period of five years and adjusted the price of all warrants to $.07 per share.

In April 2009 we acquired a 100% ownership interest in Grand Monarch Holdings, Ltd., a publicly reporting company at a cost of 2.5 million Empire shares valued at $150,000 on the date of issuance. This company was acquired to facilitate an acquisition that was subsequently not completed. It remained inactive, recorded no revenue, nominal expense, had no substantial assets or liabilities and was subsequently sold in June 2009. The acquisition has been recorded in accordance with Statements of Financial Accounting Standards (SFAS) 141(R),: “Business Combinations” which became effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company has initially recognized goodwill of approximately $150,000 arising from the acquisition as a result of the synergies that were expected from the aforementioned acquisition that was not completed. None of the g oodwill recognized is expected to be currently deductible for income tax purposes. There were no significant acquisition-related costs incurred. Additional disclosures required by SFAS 141(R) are not presented as the acquired entity’s financial position, results of operations or cash flows would not materially impact either the historical consolidated financial statements or the supplemental pro forma information for the Company. Since the planned acquisition was not completed, there was no business purpose to hold and maintain the inactive wholly owned subsidiary. It was sold in June 2009 for a cash price of $25,000, resulting in a loss on sale of $125,000 and was deconsolidated on the date of disposal.

F-45

In April 2009, statutory claims issued by Hunt Energy were withdrawn. In July 2009, GSLM was served by Hunt Energy with a Statutory Demand claiming balance due of AU$173,678 of the original debt and a separate additional Statutory Demand in an amount of AU$1,509,200.00. The Company believes it has significant defenses and continues to negotiate with Hunt Energy.

In April 2009, we issued 10,177,500 common shares to establish a borrowing facility. We received an immediate advance of $200,000 from this arrangement for working capital. Future funding will be advanced based on market value of the shares held and will depend on market conditions.

F-46

Through and including October 16, 2009, (the 25^th day after the date of this prospectus), all dealers that effect transitions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.

164,865,365 Shares

EMPIRE ENERGY CORPORATION INTERNATIONAL

Common Stock

Prospectus

September 22, 2009

TABLE OF CONTENTS


	Page
SUMMARY	3
THE OFFERING	4
RISK FACTORS	4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	8
USE OF PROCEEDS	8
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	8
MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS	9
DESCRIPTION OF BUSINESS	15
DESCRIPTION OF PROPERTY	19
MANAGEMENT	24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	29
DESCRIPTION OF SECURITIES	31
SELLING SECURITY HOLDERS	32
PLAN OF DISTRIBUTION	34
LEGAL PROCEEDINGS	35
LEGAL MATTERS	36
EXPERTS	36
ADDITIONAL INFORMATION	36
FINANCIAL STATEMENTS	F-1

Empire Energy Group Limited (EEGUF) Inactive 424B3Prospectus supplement