UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
	For the fiscal year ended December 31, 2015
	The fiscal year ended December 31, 2016
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-53923

CARDINAL ENERGY GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

~~500~~14902 ~~Chestnut~~Preston ~~Street~~Rd #404-505 Dallas, ~~Suite~~TX ~~1615~~75254

Abilene, TX 79602

(Address of Principal Executive Offices, including zip code)

(325) 762-2112

(Issuer’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:		Securities registered pursuant to section 12(g) of the Act:
None		Common Stock, par value $0.00001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [ ] NO [X]

Indicate by check mark if the registrant is required to file reports pursuant to Section 13 or Section 15(d) of the Act: YES [X] NO [ ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X ] NO [ X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X ] NO NO [ X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller ~~reporting~~ reporting company~~. See the definitions of “large accelerated filer~~,” ~~“accelerated~~or ~~filer”~~emerging ~~and~~growth ~~“smaller reporting~~ company~~” in Rule 12b-2 of the Exchange Act~~.

[ ] Large ~~Accelerated~~accelerated ~~Filer~~filer [ ] Accelerated ~~Filer~~filer [ ] Non-accelerated ~~Filer~~filer [ X] Smaller ~~Reporting~~reporting ~~Company~~company [X ] ~~(Do~~Emerging ~~not~~growth ~~check if a smaller reporting~~ company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] NO [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity,. ~~as of June 30, 2015,~~ $38,~~165~~850,~~558~~388

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of ~~March~~April 2825, ~~2016~~2019, 83983,~~379~~376,~~557~~ 477 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

		Page
	PART I
Forward Looking Statements		3
Item 1 and Item 2.	Business and Properties.	4
Item 1A.	Risk Factors.	16
Item 1B.	Unresolved Staff Comments.	16
Item 3.	Legal Proceedings.	16
Item 4.	Mine Safety Disclosures.	19
	PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities.	1920
Item 6.	Selected Financial Data.	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation.	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	2627
Item 8.	Financial Statements and Supplementary Data.	2728
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	2829
Item 9A.	Controls and Procedures.	2829
Item 9B.	Other Information.	2930
	PART III
Item 10.	Directors and Executive Officers, Promoters and Corporate Governance.	2931
Item 11.	Executive Compensation.	3235
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	3336
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	3437
Item 14.	Principal Accounting Fees and Services.	3437
	PART IV
Item 15.	Exhibits and Financial Statement Schedules.	3539
Signatures		3740

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.

We caution that the factors described herein, and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

PART I

ITEMS 1 & 2. BUSINESS and PROPERTIES.

We were incorporated in the State of Nevada on June 19, 2007. On September 28, 2012, we changed the focus of our business when we acquired all of the ownership interests of Cardinal Energy Group, LLC, an Ohio Limited Liability Company which was engaged in the business of exploring, purchasing, developing and operating oil and gas leases.Overview

We ~~are~~were ~~engaged~~incorporated in the State of Nevada on June 19, 2007. On September 28, 2012, we changed the focus of our business when we acquired all ownership interests of ~~acquiring~~Cardinal Energy Group, LLC, an Ohio Limited Liability Company, which was engaged in the business of exploring, purchasing, developing and operating oil and gas leases. ~~These~~During ~~operations~~the ~~are~~fiscal ~~primarily~~year ~~focused~~December 31, 2016, Cardinal was onconfronted ~~properties~~with financial reversals arising from the precipitous decline in ~~which~~the weprice ~~hold~~of oil. The decline started during the last quarter of the calendar year 2014 and led to a ~~leasehold~~collapse ~~interest.~~in Wethe ~~may~~price ~~however,~~of oil from ~~time~~about to$100 ~~time,~~per ~~offer~~barrel ~~our~~in ~~drilling~~September ~~and~~2014 ~~field~~to ~~development~~less ~~and~~than ~~production~~$40 ~~services~~per tobarrel ~~third~~at ~~parties~~the end of December 2015. WeThe ~~may~~price ~~offer~~of ~~these~~crude ~~services~~oil didn’t successfully move above $50 per barrel until mid-2017. During the first six months of the 2014 fiscal year, Cardinal raised $4,500,000 of capital through a convertible debt offering. Management has proceeded to ~~other~~locate and invest in oil and gas ~~companies~~properties onlocated ain ~~fee~~Texas. ~~basis~~While orour weinvestment ~~may~~might ~~offer~~have ~~such~~been ~~services~~profitable at the price oil was selling for in ~~connection~~the ~~with~~first half of 2014, it became unsustainable during the ~~offering~~second half of ~~participation~~2014 ~~interests~~and induring ~~Development~~2015 ~~Drilling~~and ~~Programs~~2016 as the price did not recover from the 2014 decline, continuing to ~~accredited private~~fall ~~investors~~eventually to $26.21 in 2016.

WeThe ~~are~~following ~~focused~~chart onfollows ~~growth via~~ the ~~development~~price of ~~shallow~~crude ~~proven~~oil ~~undeveloped~~over ~~reserves in or adjacent to currently producing fields, exploiting untapped “behind~~ the ~~pipe”~~past ~~reserves~~five by recompleting existing well bores in zones overlying currently producing formations and by the selected application of water flood and other secondary recovery techniques to mature but marginally producing fields throughout north-central Texasyears. We may enter into agreements with mid-sized and independent oil and natural gas companies to drill wells and own interests in oil and natural gas properties. We also may drill and own interests without such strategic partners.

~~The~~On ~~Company~~August ~~differentiates~~1, ~~itself~~2017, in the ~~marketplace~~Company byappointed ~~focusing~~a onnew ~~smaller~~management ~~older~~team, ~~oil~~under ~~and~~whose ~~gas~~direction ~~properties~~we ~~that~~ have been ~~allowed~~working diligently to ~~deplete~~ ~~because~~bring ofthe company ~~either~~back ~~multiple~~into ~~changes~~compliance inwith ~~ownership~~the orSecurities ~~due~~and toExchange aAct ~~lack~~ of ~~capital required to maintain production rates~~1934. ~~We have~~This ~~focused~~Annual ~~our~~Report ~~operations~~for inthe ~~north-central~~year ~~Texas.~~ended ~~These properties generally feature simple vertical well completions which~~December ~~typically produce from relatively shallow (in most cases from 400 ft. to 2~~31,~~000~~ ~~ft.~~2016 ~~below~~is the ~~surface)~~first ~~reservoirs.~~step Inin ~~most~~preparing ~~instances these~~delinquent ~~properties~~filings ~~have~~required ~~been overlooked~~ by the ~~“major”~~Securities and ~~“mid-major”~~Exchange ~~players~~Commission, inincluding ~~the~~Forms 10-Q ~~industry~~for ~~due~~the toquarters ~~their geographic~~ended ~~location~~March, ~~relative~~June toand ~~other~~September ~~existing~~of ~~oil~~2017 and ~~gas~~2018; ~~properties~~the ~~(absence~~Form of10-Q ~~potential~~for ~~operating~~the ~~synergies)~~quarter ~~and/or~~ended ~~because the~~March ~~required~~31, ~~costs~~2019; and toalso, ~~optimize~~the ~~production~~Forms ~~levels~~10-K isfor ~~not~~the ~~compatible~~fiscal ~~with~~years’ ~~their~~ended ~~internal~~December ~~cost~~2017 ~~structures~~and 2018.

We also intend to acquire additional oil and gas fields that are producing normally in a proven reserve, as well as, non-producing oil and gas fields with proven reserves in known formations for development in the future. Future acquisitions may also include assets that are being divested from overleveraged companies with weak or weakened balance sheets due to the present downturn in the oil and gas industry.

We have no plans to change our core business activities. We may however elect to combine with one or more privately held oil and gas companies in order to exploit acquisition opportunities during the current downturn in the oil and gas industry.

Acquisition and Drilling of Undeveloped Prospects

We are concentrating on acquiring producing and non-producing properties in the United States. We currently own interests in oil and gas leases located in the north-central section of Texas.

We have developed a two-fold growth plan to develop oil and gas reserves: 1) Acquire producing fields with significant, proven un-developed reservoirs that provide growth opportunities through in-field drilling programs; and 2) Re-work marginal, neglected, abandoned, and low producing oil and gas wells located in mature fields with economically efficient secondary recovery methods or recomplete existing wells by perforating new pay zones. New drilling and fracturing methods utilizing today’s technology make it economically possible to re-enter and recover stranded reserves from older wells. In addition to remediating and reworking existing wells, we also continue field development by drilling new producing, injection and disposal wells.

Utilizing the latest drilling methods and equipment, together with new fracturing and recovery technologies such as water, sand, and chemical dilution we have the ability to access previously cost prohibitive oil and natural gas reserve formations.

It is anticipated that all prospects will be evaluated utilizing data provided to us, including well logs, production records, seismic, geological and geophysical information, and such other information as may be available and useful. In addition, prospects will be evaluated by petroleum engineers, geophysicists, geologists and other technical consultants retained by us.

~~Regardless~~During of2014, ~~drilling~~the ~~location,~~Company wereceived ~~will~~the ~~evaluate~~proceeds ~~all~~from ~~prospective~~a ~~acquisitions~~12%, on$4.5 ~~the~~million ~~basis~~loan ofwhich ~~their~~was ~~oil~~provided ~~and~~by ~~natural~~an ~~gas~~unrelated ~~producing~~third ~~potential~~party. We ~~will~~utilized the ~~target~~proceeds ~~properties~~of ~~that~~the weloan ~~believe~~to ~~have~~acquire, ~~multi-pay~~develop ~~horizons,~~and ~~predictable~~operate ~~costs~~oil leases. During 2014, we acquired and ~~quick~~managed ~~pipeline~~development ~~hookups~~of several leasehold interests in Texas. WeAdditionally, ~~seek~~CEGX ~~properties that~~of ~~are~~Texas ~~within~~(a orwholly ~~offsetting~~owned ~~proven~~subsidiary ~~producing~~of ~~oil~~Cardinal) ~~and~~was ~~natural~~contracted ~~gas~~to ~~fields~~provide general drilling, field development, and ~~that~~production ~~have~~services. In connection with the ~~potential,~~drilling ifand ~~successful~~development services, towe ~~generate~~also ~~revenue~~provided management of lease operations on monthly basis to the ~~company~~owner of the leasehold property.

~~Prospects~~The ~~will~~Company’s beoperations ~~acquired~~were ~~pursuant~~primarily tofocused anon ~~arrangement~~properties in which ~~we will acquire part or all of~~ the ~~working~~Company ~~interest.~~held ~~For~~an ~~purposes~~operating ~~of this report, a working interest includes any interest, which is subject to some portion of the costs of development, operation~~ or ~~maintenance. This~~non-operating ~~working interest will be subject to landowners’ royalty interests and other royalty interests payable to unaffiliated~~leasehold ~~third parties in varying amounts~~interest. We ~~may~~offered ~~acquire~~drilling ~~less~~and ~~than~~field ~~100%~~development ofservices ~~the working interest~~ in ~~each~~connection ~~prospect~~with ~~in which we participate. Depending on~~ the ~~location~~offering of ~~the~~participation ~~property~~interests in ~~question~~a weDevelopment Drilling ~~may~~Program ~~elect~~ to beaccredited ~~the~~private ~~operator~~investors of(Bradford ~~record~~Joint ~~or we may elect to allow another company to be operator~~Venture). ~~Generally speaking we will act as the operator in those instances where the Company acts as operator for adjoining properties and we can thereby achieve operating efficiencies.~~ We ~~may~~also ~~sell~~received ~~all~~an oragreed-to aprice ~~portion~~per ofwell ~~our prospect interests~~drilled oreither ~~may~~in ~~retain~~cash ~~a working~~ or ~~“carried” interest~~ in ~~the~~equity ~~prospects and participate~~ in the ~~drilling and development of the properties~~Program.

InWe ~~acquiring~~were ~~interests~~focused inon ~~leases,~~growth wevia ~~may~~the ~~pay~~development ~~such~~of ~~consideration~~shallow, ~~and~~proven ~~make~~undeveloped ~~such~~reserves ~~contractual~~in ~~commitments~~or ~~and~~adjacent ~~agreements~~to ascurrently weproducing ~~deem fair,~~fields; ~~reasonable~~exploiting ~~and~~untapped ~~appropriate.~~“behind ~~For~~the ~~purposes~~pipe” ofreserves ~~this~~by ~~report,~~recompleting the ~~term~~existing ~~“lease”~~well ~~means~~bores ~~any~~in ~~full~~zones oroverlying ~~partial~~currently producing ~~interest~~formations ~~in:~~and selected application of water flood techniques to mature but marginally producing fields.

●The Company ~~undeveloped~~attempted ~~oil~~to ~~and~~differentiate ~~natural~~itself ~~gas~~in ~~leases;~~the ●marketplace by focusing on smaller, older oil and ~~natural~~ gas ~~mineral~~properties ~~rights;~~that ●had ~~licenses;~~either multiple ●changes ~~concessions;~~in ●ownership ~~contracts;~~or ●lack ~~fee~~of ~~rights;~~capital orrequired ●to maintain production rates. We focused our operations in north-central Texas. The properties generally featured simple vertical well completions which typically produce from relatively shallow reservoirs. In most instances these properties have been overlooked by the “major” and “mid-major” players in the industry due to their geographic location relative to other ~~rights~~existing ~~authorizing~~oil and gas properties, the ~~owner~~absence of potential operating synergies and/or because the required costs to ~~drill~~optimize ~~for~~production levels is not compatible with their internal cost structures. By the end of 2016, ~~reduce~~we had terminated our attempts to ~~possession~~locate and ~~produce~~rework the oil and ~~natural~~ gas operations.

We ~~will~~also ~~acquire~~intended ~~the~~to ~~leases~~locate and ~~interests~~to inacquire ~~the~~additional ~~leases~~oil toand begas ~~developed~~fields bythat ~~the~~were ~~Company~~producing ornormally ~~third~~in ~~party~~a ~~operators.~~proven ~~The~~reserve, ~~actual~~as ~~number,~~well ~~identity~~as, ~~and~~non-producing ~~percentage~~oil ofand ~~working~~gas ~~interests~~fields orwith ~~other~~proven ~~interests~~reserves in ~~prospects~~known toformations befor ~~acquired~~development ~~will~~in ~~depend~~the ~~upon,~~future. ~~among~~Due ~~other~~to ~~things,~~ the ~~total~~restrictions arising ~~amount~~from oflimited ~~capital~~resources ~~contributions,~~and the ~~latest~~declining ~~geological and geophysical data, potential title or spacing problems, availability and~~ price of ~~drilling services~~oil, ~~tubular~~we ~~goods~~have ~~and~~been ~~services,~~forced ~~approvals~~to byterminate ~~federal and state departments or agencies, agreements with other working interest owners in~~ the ~~prospects,~~oil ~~farm-ins,~~ and ~~continuing~~gas ~~review of other prospects that may be available~~operations.

~~Title~~We have revised our planned operations, including disposing of oil and gas leasehold interests acquired prior to ~~Properties~~2016. We have disposed of several of our fixed assets, including transportation equipment, real estate and leasehold interests. At the end of 2016, the Company had two trucks, which were ultimately returned to leasing companies in 2017.

WeAs ~~will~~of ~~own~~ the ~~leasehold~~end ~~interest~~of in2016, the ~~lease.~~Company ~~Shareholders~~was ~~must~~hoping ~~rely~~to onlocate usand toacquire ~~use~~producing ~~our~~and/or ~~best~~non-producing ~~judgment~~properties toin ~~obtain~~the ~~appropriate title~~mid-continent tosection ~~leases.~~of Wethe ~~will~~United ~~take such steps as we deem necessary to assure that title to leases is acceptable for our purposes~~States. We ~~are free,~~had ~~however,~~impaired toor ~~use~~disposed ~~our~~of ~~judgment~~all interests in ~~waiving~~oil ~~title~~and ~~requirements~~gas ifleases itreflecting ~~is in our~~ management’s best ~~interests.~~estimate ~~Further,~~of wethe ~~will~~oil ~~not~~and ~~make~~gas ~~any warranties~~lease asvalues toat the ~~validity~~end ~~or merchantability~~ of ~~titles to any leases to be acquired by the Company~~2016.

~~Drilling~~At the end of 2016, we were looking into developing a two-fold growth plan to develop oil and ~~Completion~~gas ~~Phase~~reserves: 1) Acquire producing fields with significant, proven un-developed reservoirs that provide growth opportunities through in-field drilling programs; and 2) Re-work neglected, abandoned, and low producing oil and gas wells located in mature fields with economically efficient secondary recovery methods or recomplete existing wells by perforating new pay zones. New drilling and fracturing methods utilizing today’s technology make it economically possible to re-enter and recover stranded reserves from older wells. In addition to remediating and reworking existing wells, we also planned to continued field development by drilling new producing, injection and disposal wells. The growth plan did not materialize, and we did not successfully develop any oil and gas reserves during or after 2016, primarily due to the price of oil and funding constraints.

WeAll ~~will~~prospects ~~enter~~were ~~into~~to ~~agreements~~be ~~with~~evaluated ~~drilling~~utilizing ~~contractors~~data ~~and/or~~provided ~~operators~~ to ~~complete~~us, ~~and~~including ~~drill~~well ~~wells~~logs, onproduction ~~our~~records, ~~existing~~seismic, ~~and~~geological ~~acquired~~and ~~leases.~~geophysical ~~Assuming~~information, weand ~~are~~such ~~successful~~other ~~and~~information ~~complete~~as amay ~~producing~~be ~~oil~~available and~~/or~~ ~~gas~~useful. ~~well~~In addition, weprospects ~~may~~were ~~retain~~evaluated anby ~~operator~~petroleum engineers, togeophysicists, ~~conduct~~geologists ~~operations on~~and ~~the~~other ~~lease~~technical ~~after~~consultants ~~completion~~retained ofby ~~the well~~us. ADue ~~completed~~to ~~well~~financing isconstraints ~~one~~the ~~that~~Company was isunable ~~producing~~to ~~oil~~secure ~~and~~the ~~gas~~services inof ~~paying~~the ~~quantities.~~necessary Weprofessionals ~~also may~~and ~~act~~was asunable ~~our~~to ~~own~~successfully ~~operator~~institute the plan.

~~The~~We ~~operator’s~~currently ~~duties~~have ~~include~~no ~~testing~~oil ~~formations~~or ~~during~~gas ~~drilling,~~properties. ~~and~~During ~~completing~~2016 the ~~wells~~Company byimpaired ~~installing~~or ~~such~~disposed ~~surface~~of all oil and ~~well equipment,~~gas ~~gathering~~operating ~~pipelines,~~assets. ~~heaters~~Following 2016, ~~separators,~~the ~~etc.,~~Company asis ~~are~~completing ~~necessary~~a ~~and~~revised ~~normal~~business inplan ~~the~~to ~~area~~be ininstituted ~~which~~after ~~the~~December ~~prospect~~31, 2019. It is ~~located.~~anticipated that Wefinancing will ~~pay~~be ~~the~~secured ~~drilling~~through ~~and~~sales ~~completion~~of ~~costs~~common ofand ~~the~~preferred ~~operator~~equity asand/or ~~incurred,~~“equity ~~except~~units” ~~that~~(providing weconversion and ~~are~~dividend ~~permitted~~preferences) toand ~~make~~negotiating ~~advance~~improved ~~payments to~~terms ~~the~~with ~~operator~~our ~~where~~creditors. ~~necessary~~Management currently plans to secure ~~drilling~~funding ~~rigs,~~to ~~drilling~~support development ~~equipment~~of ~~and~~a ~~for~~revised ~~other~~business ~~similar~~plan ~~purposes~~and inadequate ~~connection~~resources ~~with the~~to ~~drilling~~institute ~~operations. If~~ the ~~operator~~plan. ~~determines~~There ~~that~~is ~~the~~no ~~well~~assurance ismanagement ~~not~~will ~~likely~~be successful toin ~~produce~~raising ~~oil~~adequate ~~and/~~capital or ~~natural gas~~ in ~~commercial quantities,~~successfully ~~the~~identifying ~~operator~~properties ~~will~~with ~~plug~~energy ~~and~~resources ~~abandon~~to successfully complete the ~~well~~plan inas ~~accordance~~currently ~~with applicable regulations~~projected.

After drilling, the operator will complete each well deemed by it to be capable of production of oil or natural gas in commercial quantities. The depths and formations to be encountered in each well are unknown. We will monitor the performance and activities of the operator.

~~Production~~History ~~Phase~~ of ~~Operations~~Our Ownership Interests

~~General.~~Our ~~Once~~oil aand ~~well~~gas isleases ~~“completed”~~were ~~such~~classified ~~that~~as ~~all~~unproved ~~surface~~properties ~~equipment~~at ~~necessary~~December to31, ~~control~~2016 ~~the~~and ~~flow~~2015 ofdue or to ~~shut down, a well has been installed, including~~ the ~~gathering~~limited ~~pipeline,~~quantities ~~production~~of ~~operations~~oil ~~will~~and gas ~~commence.~~produced Weduring ~~will be responsible for selling~~ the ~~oil~~2014 ~~and~~through ~~natural gas production~~2016-time-frame. WeIn ~~will~~light ~~attempt~~of ~~to sell~~ the ~~oil~~precipitous ~~and~~fall ~~natural~~in ~~gas~~crude ~~produced~~oil ~~from~~prices aduring ~~prospect~~the onlatter ~~a competitive~~half ~~basis~~of at2014 ~~the~~and ~~best~~through ~~available~~2017 ~~terms~~ and ~~prices.~~the ~~Domestic~~relatively ~~sales~~small ofproduction ~~oil~~volumes ~~will~~from beour atleases, ~~fair~~we ~~market~~elected ~~prices.~~to Wereduce ~~will~~the ~~not~~carrying ~~make any commitment~~value of ~~future~~our ~~production~~oil ~~that~~and ~~does~~gas ~~not~~properties ~~primarily~~as ~~benefit~~of ~~us.~~December We31, ~~will~~2016 ~~sell~~and ~~natural~~2015. ~~gas~~This ~~discovered~~reduction atto ~~spot~~the ~~market~~estimated ornet ~~negotiated~~recoverable ~~prices domestically,~~values ~~based~~of ~~upon~~our oil aand ~~number~~gas ofproperties ~~factors,~~is ~~such~~reflected asin the ~~quality~~financial ofstatements ~~the~~as ~~natural~~impairment ~~gas,~~charges ~~well~~of ~~pressure~~$250,000 ~~estimated~~and ~~reserves~~$2,654,824 ~~prevailing supply~~for ~~conditions and any applicable price regulations promulgated by~~ the years ~~Federal~~ended ~~Energy~~December ~~Regulatory~~31, ~~Commission~~2016 ~~(“FERC~~and “)2015, respectively.

WeThe ~~may~~following ~~sell~~is ~~oil~~a ~~and/or~~summary ~~natural~~of ~~gas~~our ~~production~~oil ~~to marketers, refineries, foreign governmental agencies, industrial users, interstate pipelines or local utilities. Revenues from production will be received directly from these parties~~ and ~~paid~~gas ~~to the Company.~~interests:

~~Oil~~In ~~and~~July ~~natural~~of ~~gas~~2013, ~~production~~we acquired an 85% working interest (75% net revenue interest) in the Dawson-Conway leases located in Shackelford County, Texas. ~~and~~The ~~other~~Company ~~areas~~issued a two-year Secured Promissory Note in ~~which~~the weamount ~~may~~of ~~conduct~~$400,000 ~~drilling~~to finance the purchase. The property is comprised of 41 wells on 618 acres. We began reworking the existing wells in the fourth quarter of 2013. During the first quarter of 2014, we focused our activities on the acidizing of wells and the repair and replacement of down-hole and surface equipment on the Dawson-Conway leases. In March of 2014 we successfully negotiated a $60,000 isreduction in the principal amount due to the holder of the note and purchased the remaining 15% working interest in this property for a ~~mature~~cash ~~industry~~payment of $30,000. During the second quarter of 2014 we suspended our operations at Dawson-Conway due to outstanding issues with ~~numerous~~the Texas Railroad Commission ~~pipeline~~(“RRC”). ~~companies~~These issues ranged from incomplete or missing production and/or ~~potential~~injection ~~purchasers~~reports to well integrity tests as well as incomplete or missing reports as to the status of ~~oil~~idle ~~and~~wells ~~natural~~which ~~gas~~were inherited by us from previous operators of the leases. ~~Because~~In the third quarter of ~~competition~~2014 ~~among~~we ~~these~~successfully ~~purchasers~~resolved the outstanding issues with the RRC and negotiated new lease terms for ~~output~~all ~~from~~but one of the leases comprising the Dawson-Conway property. Under the new lease terms the Company’s net revenue ~~oil~~interest was increased to 77.5% and ~~natural~~we ~~gas~~secured ~~producers~~the right of first refusal on all lands contiguous with our leases. On June 30, 2015 wethe ~~generally~~Company ~~will~~announced ~~not~~that it had settled the dispute with Concho Oilfield Services over services provided by Concho. As a part of the settlement Concho agreed to re-enter ~~into~~the ~~long~~#5B ~~term~~well ~~contracts~~on the Dawson-Conway 195B lease to repair damage to the wellbore and production string and to return the well to production. In July 2015 Concho did return to the #5B well and commenced jarring and fishing operations in an attempt to repair the well. These operations did not result in success and the well remains shut-in at this time. In June 2015 the Company filed suit in the District Court for Shackelford County against HLA Interests, LLC and SEDCO (a former operator of the ~~purchase~~Dawson-Conway leases) alleging misrepresentation and fraud concerning title to the leases and compliance with regard to various regulations and “permitting” requirements of ~~production~~the Texas Railroad Commission (please refer to Part I, Item 3- Legal Proceedings in this report for additional details). In light of these developments all operations at the Dawson-Conway leases have been suspended pending the outcome of the litigation. On August 5, 2015, the Company was granted a Partial Default Judgment. This case is still on-going.

AsOn March 5, 2014, we acquired a ~~result~~100% ofworking ~~effects~~interest of(80% ~~weather~~net onrevenue ~~costs~~interest) in the Powers-Sanders lease located in Shackelford County, ~~results~~Texas ~~may~~from beSabor ~~affected~~X byEnergy ~~seasonal~~Services, ~~factors~~Inc. Infor ~~addition~~$600,000. ~~both~~The ~~sales~~property ~~volumes~~consisted of 385 acres and ~~prices~~5 producing oil ~~tend~~wells. We reworked several of these wells to beincrease ~~affected~~their byproduction ~~demand~~rates. ~~factors~~On ~~with~~March 2, 2015, Borets filed a ~~significant~~lawsuit against ~~seasonal~~the ~~component~~Company. As of the date of this report, discovery is ongoing. Refer to Item 3, Legal Proceedings.

~~Expenditure~~On ofMarch ~~Production~~6, ~~Revenues.~~2014, ~~Our~~we ~~share~~acquired ofa ~~production~~100% ~~revenue~~working interest in the Strobel-Broyles leases located in Eastland County, Texas from Hunting Dog Capital, LLC for $75,000. We held a ~~given~~76.0% ~~well~~net ~~will~~revenue beinterest ~~burdened~~in bythe Broyles lease and~~/or~~ ~~subject~~a to78.0% ~~royalties~~net revenue interest in the Stroebel lease. The property consisted of 235 acres and 32 wells. The Company assigned its interests in the leases to two ~~overriding~~local ~~royalties,~~companies ~~monthly~~in ~~operating~~exchange ~~charges,~~for the assumption of the plugging and ~~other~~abandonment ~~operating~~liability ~~costs~~associated with the thirty-two wells located on the properties. ~~These~~The ~~items~~disposition ofwas ~~expenditure~~in ~~involve~~keeping ~~amounts~~with ~~payable~~the Company’s decision to focus its drilling and development ~~solely~~activities ~~out~~in ofand adjacent to its properties in Shackelford County, orTexas. ~~expenses~~The ~~incurred~~sale ~~solely~~was byaccounted ~~reason~~for as a reduction of, ~~production~~the oil ~~operations~~and gas property in the Company’s financial statements. WeIn ~~intend~~May to2015, ~~deduct~~the ~~operating~~Company ~~expenses~~filed ~~from~~suit in the District ~~production~~Court ~~revenue~~for Eastland County seeking disgorgement of the $30,000 in sales proceeds received by the defendants for the ~~corresponding~~sale ~~period~~of the leases (please refer to Part I, Item 3 - Legal Proceedings of this report for additional details).

~~Competition~~On June 16, 2014, we acquired a 93.75% working interest in the Bradford “A” and Bradford “B” leases located in Shackelford County, Texas for $225,000 pursuant to the terms of Purchase & Sale and Farmout agreements. At the time of the acquisition the property consisted of 320 acres with 7 producing wells. Under the terms of the Farmout Agreement the Company’s wholly-owned subsidiary, CEGX of Texas, LLC (“CEGX”), was obligated to spud the initial “Earning Well” by September 15, 2014. The initial well was part of a “continuous drilling program” which afforded us the opportunity to earn additional 2-acre producing units on the Bradford leases by drilling and completing injection and production wells. The property, which heretofore had never been water flooded, had two tank batteries. On September 2, 2014 the Company sold its interests in the Bradford “A” and Bradford “B” leases to the Bradford Joint Venture Partnership (“Bradford JV”). At the time of the sale, neither Cardinal Energy Group, Inc. (“Cardinal”) nor CEGX held any ownership in Bradford JV, however, the Company’s wholly-owned subsidiary, CEGX, was engaged by Bradford JV as an operator under a Contract Operating Agreement to provide turn-key drilling and production services. In late December 2014, Cardinal Energy Group, Inc. purchased 20 Equity Units in Bradford JV on the same terms as offered to the general public and initial investors, valued at $25,000 per Equity Unit, for a total of $500,000.

~~There~~On ~~are~~June a12, ~~large~~2015 ~~number~~the ofCompany ~~oil~~transferred ~~and~~its ~~natural~~20 ~~gas~~Equity ~~companies~~Units in the ~~United~~Bradford ~~States~~JV into an escrow account, in connection with a 365-day option granted to Keystone Energy, LLC. ~~Competition~~(“Keystone”). isThe ~~strong~~terms ~~among~~of ~~persons~~the ~~and~~option ~~companies~~included Cardinal ~~involved~~receiving (on June 16, 2015) a non-refundable cash payment of $250,000 from the sale of 10 of the 20 Equity Units held by Cardinal into an escrow which was held pending the purchase of the additional 63 Bradford Equity Units by Keystone. Cardinal and Keystone also placed a refundable 5% equity interest in Keystone in the ~~exploration~~escrow ~~for~~account and ~~production~~a refundable right to the additional 10 Equity Units of ~~oil~~Bradford ~~and~~held ~~natural~~by ~~gas~~Cardinal. WeThe ~~expect~~PIPA totransactions ~~encounter~~resulted ~~strong~~in ~~competition~~Keystone atsecuring a ~~every~~commitment ~~phase~~for a line of ~~business. We~~credit ~~will~~to be ~~competing~~used ~~with~~by ~~entities~~Keystone ~~having~~to ~~financial~~further ~~resources~~develop the Bradford “A” and ~~staffs~~Bradford ~~substantially~~“B” leases. ~~larger~~Cardinal ~~than~~recognized ~~those~~the ~~available~~$250,000 topayment usas revenue from a related party during the second quarter of 2015.

The Company differentiates itself in the marketplace by focusing on smaller older oil and gas properties that have been allowed to deplete because of either multiple changes in ownership or due to a lack of capital required to maintain production rates. The Company has focused its operations in Shackelford and Eastland counties in north-central Texas. These properties feature simple well completions which typically produce from relatively shallow (in most cases from 400 ft. to 2,000 ft. below the surface) reservoirs. In most instances these properties have been overlooked by the “major” and “mid-major” players in the industry due to their geographic location relative to other existing oil and gas properties (absence of potential operating synergies) and/or because the required costs to optimize production levels is not compatible with their internal cost structure.

The national supply of natural gas is widely diversified, with no one entity controlling over 5%. As a result of deregulation of the natural gas industry by Congress and FERC, competitive forces generally determine natural gas prices. Prices of crude oil, condensate and natural gas liquids are not currently regulated and are generally determined by competitive forces.

There will be competition among operators for drilling equipment, goods, and drilling crews. Such competition may affect our ability to acquire leases suitable for development and to expeditiously develop such leases once they are acquired.

Geological and Geophysical Techniques

We may engage detailed geological interpretation combined with advanced seismic exploration techniques to identify the most promising leases.

Geological interpretation is based upon data recovered from existing oil and gas wells in an area and other sources. Such information is either purchased from the company that drilled the wells or becomes public knowledge through state agencies after a period of years. Through analysis of rock types, fossils and the electrical and chemical characteristics of rocks from existing wells, we can construct a picture of rock layers in the area. We will have access to the well logs and decline curves from existing operating wells. Well logs allow us to calculate an original oil or gas volume in place while decline curves from production history allow us to calculate remaining proved producing reserves. We have not purchased, leased, or entered into any agreements to purchase or lease any of the equipment necessary to conduct the geological or geophysical testing referred to herein and will only be able to do so upon raising additional capital.

~~Market~~Keystone, utilizing the line of credit secured via the Option agreement, initiated a plan to test the effectiveness of applying water flood techniques to the Bradford Property. Bradford had heretofore never been tested for ~~Oil~~enhanced recovery applications and ~~Gas~~therefore a ~~Production~~pilot project to test the effectiveness of water flooding (a form of enhanced production) was planned for the Bradford joint venture operations with the hope of an increase in production from the existing BJV wells.

~~The~~On ~~market~~June ~~for~~12, ~~oil~~2016 ~~and gas production is regulated by both~~ the ~~state~~365-day ~~and~~“Escrow ~~federal~~Period” ~~governments.~~expired ~~The~~(per ~~overall market is mature and with~~ the ~~exception~~terms of ~~gas, all producers in a producing region will receive~~ the ~~same~~Participation ~~price.~~Interest ~~The~~Purchase ~~major oil companies will purchase all~~Agreement ~~crude~~(“PIPA”) ~~oil~~between ~~offered~~and ~~for~~among ~~sale at posted field prices. There are price adjustments for quality difference from~~ the ~~Benchmark.~~Bradford ~~Benchmark is~~JV ~~Saudi~~participation ~~Arabian~~interests, ~~light crude oil employed as~~ the ~~standard~~Keystone onEnergy, ~~which~~LLC ~~OPEC~~and ~~price changes have been based. Quality variances from~~CEGX Benchmark crude results in lower prices being paid for the variant oil. Oil sales are normally contracted with a purchaser or gatherer as it is known in the industry who will pick-up the oil at the well site. In some instances there may be deductions for transportation from the well head to the sales point. At this time the majority of ~~crude oil purchasers do not charge transportation fees~~Texas, ~~unless the well is outside their service area~~LLC. ~~The~~Upon ~~service~~Cardinal’s ~~area~~payment is(on aSeptember ~~geographical~~21, ~~area~~2016) ~~in which the purchaser~~ of ~~crude~~$100 ~~oil will~~to ~~not~~Keystone ~~charge a fee for picking upon the oil. The purchaser or oil gatherer as it is called within the oil industry~~Energy, ~~will~~LLC ~~usually handle all check disbursements to both the working interest and royalty owners. We will be a working interest owner. By being a working interest owner~~, ~~we are responsible for~~ the ~~payment~~control of ~~our proportionate share of~~ the ~~operating expenses of the well.~~escrowed ~~Royalty~~20 ~~owners~~participation ~~and~~interests ~~over-riding~~in ~~royalty owners receive a percentage of gross oil production for~~ the ~~particular~~Bradford ~~lease~~JV ~~and~~reverted ~~are not obligated in any manner whatsoever~~ to ~~pay~~Cardinal ~~for~~and the ~~costs~~5% ofinterest ~~operating the lease. Therefore, we,~~ in ~~most~~Keystone ~~instances,~~reverted ~~will be paying the expenses for the oil and gas revenues paid~~ to ~~the royalty and over-riding royalty interests~~Keystone.

~~Gas~~During ~~sales are by contract. The gas purchaser will pay~~ the ~~well~~third ~~operator~~quarter ~~100%~~ of 2016, the ~~sales~~Company ~~proceeds~~exchanged ona orCEGX ~~about~~receivable ~~the 25th~~ of ~~each~~$123,924 ~~and every month~~ for the ~~previous~~final ~~month’s~~27 ~~sales.~~unsold ~~The~~joint ~~operator~~venture ~~is responsible for all checks and distributions to the working~~Equity ~~interest~~Units ~~and~~of ~~royalty~~Bradford ~~owners~~JV. ~~There~~The isCEGX noreceivable ~~standard~~represented ~~price~~obligations ~~for~~of ~~gas.~~Bradford ~~Prices~~JV ~~will~~arising ~~fluctuate~~from ~~with~~services ~~the seasons and the general market~~performed ~~conditions.~~by ItCEGX isfor ~~our~~Bradford ~~intention to utilize this market whenever possible in order to maximize revenues~~JV. WeThe doservices ~~not~~represented ~~anticipate~~un-reimbursed ~~any significant~~charges ~~change~~for indrilling, ~~the manner~~ production isand ~~purchased,~~development ~~however,~~work ~~no assurance can be given~~ performed at ~~this~~the ~~time~~Bradford ~~that~~A ~~such~~and ~~changes~~B ~~will not occur~~properties.

~~The~~Following ~~marketing~~the transaction, Cardinal attempted to find a source of ~~any~~outside ~~oil~~funding to complete of the water flood project on the Bradford property. The Company was unsuccessful in obtaining additional capital and ~~natural~~Bradford ~~gas~~JV ~~produced~~was bynot usable ~~will~~to bemeet ~~affected~~contractual obligations byfor aproduction ~~number~~(under ofthe ~~factors~~lease ~~that~~terms ~~are~~with ~~beyond~~the ~~our~~lessor). ~~control~~During ~~and~~February, ~~whose~~2017, the lease owner of the Bradford ~~exact~~properties ~~effect~~initiated ~~cannot~~legal beproceedings ~~accurately~~seeking ~~predicted~~to cancel the Bradford JV rights under the farm-out leases. ~~These~~Refer ~~factors~~to ~~include:~~Item 3, Legal Proceedings.

●In conjunction with the ~~amount~~litigation ofthe ~~crude~~Bradford ~~oil~~Leases ~~and~~were ~~natural~~subdivided between ~~gas~~CEGX ~~imports;~~of ●Texas ~~the availability, proximity~~ and ~~cost~~the oflessor ~~adequate~~in ~~pipeline~~February ~~and other transportation facilities~~2018; ●in ~~the~~April ~~success~~ of ~~efforts~~2018 toCEGX ~~market competitive fuels, such as coal and nuclear energy and the growth and/or success~~ of ~~alternative~~Texas ~~energy~~transferred ~~sources such as wind power; ●~~ the ~~effect~~remaining ofleases ~~United States~~ and wells ~~state~~to ~~regulation~~an ofoperator ~~production,~~in ~~refining,~~good ~~transportation~~standing ~~and~~with ~~sales; ●~~ the ~~laws~~Railroad Commission of ~~foreign~~Texas. ~~jurisdictions~~After ~~and~~ the ~~laws~~transfer ~~and~~(which ~~regulations~~relieved ~~affecting~~CEGX ~~foreign markets; ● other matters affecting the availability~~ of remediation responsibilities) a ~~ready market~~$50,000 ~~such~~cash asperformance ~~fluctuating~~bond ~~supply~~was ~~and~~refunded ~~demand;~~to ~~and~~CEGX ●of ~~general~~Texas ~~economic~~from ~~conditions in~~ the ~~United~~Texas ~~States~~Railroad ~~and around the world~~Commission.

The supply and demand balance of crude oil and natural gas in world markets has caused significant variations in the prices of these products over recent years. The North American Free Trade Agreement eliminated trade and investment barriers between the United States, Canada, and Mexico, resulting in increased foreign competition for domestic natural gas production. New pipeline projects recently approved by, or presently pending before, FERC as well as nondiscriminatory access requirements could further substantially increase the availability of natural gas imports to certain U.S. markets. Such imports could have an adverse effect on both the price and volume of natural gas sales from wells.

Members of the Organization of Petroleum Exporting Countries establish prices and production quotas for petroleum products from time to time with the intent of affecting the current global supply of crude oil and maintaining, lowering or increasing certain price levels. A drastic reduction in crude oil prices and related products from $100 per barrel at mid-year 2014 to approximately $32 per barrel on January 7, 2016 has impacted the oil and gas industry. We are unable to predict what effect, if any, such actions in the future will have on both the price and volume of crude oil sales from our wells.

However, since the Company has relatively low lifting costs its vulnerability due to a prolonged period of lower oil prices is less than those competitors of similar size.

In several initiatives, FERC has required pipeline transportation companies to develop electronic communication and to provide standardized access via the Internet to information concerning capacity and prices on a nationwide basis, so as to create a national market. Parallel developments toward an electronic marketplace for electric power, mandated by FERC, are serving to create multi-national markets for energy products generally. These systems will allow rapid consummation of natural gas transactions. Although this system may initially lower prices due to increased competition, it is anticipated to expand natural gas markets and to improve their reliability.

Regulation

Our operations will be affected from time to time in varying degrees by domestic and foreign political developments, federal and state laws.

~~Production~~On September 2, 2014, we acquired a 43.75% working interest (32.375% net revenue interest) in the Fortune prospect located in Shackelford InCounty, ~~most~~Texas ~~areas~~for a cash payment of ~~operations~~$80,000. ~~within~~P.I.D. Drilling, Inc. (“PID”) served as the ~~United~~operator ~~States~~for the ~~production~~property. The prospect consisted of ~~oil~~leasehold interests in five tracts of land aggregating just over 310 acres. At the time of purchase the property had one uncompleted plugged well. Activity commenced during September 2014 and in October the plugged well was re-drilled and completed in the prolific Caddo limestone formation. During the fourth quarter of 2014 two new wells were drilled and completed in the Cooke sandstone formation. The remote location of the lease caused some delays in getting electricity to the location, obtaining approval for hook-up to a natural gas ispipeline ~~regulated~~and bythe ~~state~~delivery ~~agencies~~and ~~that~~installation of tank batteries and associated production ~~set~~equipment. ~~allowable~~The ~~rates~~lease ofcame on production in January 2015 and ~~otherwise~~production ~~control~~peaked ~~the~~at ~~conduct~~just under 25 barrels of oil equivalent (“BOE”) per day. Production from the three wells steadily declined from its peak to approximately 13 BOE per day for the first quarter of 2015 to just under 7 BOE per day during the second quarter of 2015 and ~~natural~~approximately ~~gas~~3 ~~operations~~BOE per day during the third quarter of 2015. ~~Among~~Following the ~~ways~~initial ~~that~~completion ~~states~~of the three producers the Company asked for a full accounting of the ~~control~~drilling ~~production~~costs isand ~~through~~requested ~~regulations~~a ~~that~~refund ~~establish~~for excess charges billed by the ~~spacing~~operator. ofIn ~~wells~~March or2015 the Company voted to remove the operator and in ~~some~~June ~~instances~~2015 ~~may~~filed ~~limit~~suit in the ~~number~~District Court for Shackelford County seeking recovery of ~~days~~damages. Future development activities for the prospect were placed on hold pending the outcome of the litigation. Final Summary Judgement was awarded to PID in aNovember ~~given~~2017. ~~month~~(Please ~~during~~refer ~~which~~to aItem ~~well~~3 ~~can~~- ~~produce~~Legal Proceedings of this report for additional details).

~~Environmental.~~On ~~Our~~December ~~drilling~~31, ~~and~~2014, ~~production~~the ~~operations~~Company ~~will~~acquired ~~also~~a be100% ~~subject~~working tointerest ~~environmental~~(77% ~~protection~~net ~~regulations~~revenue ~~established~~interest) byin ~~federal,~~the ~~state,~~Bradford West lease for ~~and~~a ~~local~~cash ~~agencies~~payment ~~that~~of in$20,000. ~~turn~~The ~~may~~prospect ~~necessitate~~was ~~significant~~comprised ~~capital~~of ~~outlays~~200 ~~that~~acres ~~would~~and ~~materially~~was ~~affect~~located ~~our~~adjacent ~~financial~~and ~~position~~to the west of the ~~and~~existing ~~our~~Bradford ~~business~~“A” ~~operations~~and “B” leases. ~~These~~During ~~regulations~~the second quarter of 2015, ~~enacted~~the toCompany ~~protect~~drilled ~~against~~the ~~waste,~~initial well ~~conserve~~(Bradford ~~natural~~West ~~resources~~#1). We perforated and ~~prevent~~treated ~~pollution~~the well, ran the production tubing and set the pump jack. The results from ~~could~~this ~~necessitate~~well ~~spending~~were ~~funds~~disappointing onand ~~environmental~~the ~~protection~~Company ~~measures,~~elected ~~rather~~not ~~than~~to oncontinue the drilling ~~operations.~~program Ifcalled ~~any~~for ~~penalties~~under orthe Asset Sale & ~~prohibitions~~Purchase, and Farm-In agreements. The well was suspended and the lease and well were ~~imposed~~subsequently ~~for~~transferred ~~violating~~to ~~such~~an ~~regulations,~~operator ~~our~~in good ~~operations~~standing ~~could~~with bethe ~~adversely~~Railroad ~~affected~~Commission of Texas in April of 2018.

~~Natural~~In ~~Gas~~June ~~Transportation~~of ~~and~~2014 ~~Pricing~~we acquired a half-acre site in Albany, Texas. ~~FERC~~The ~~regulates~~complex ~~the~~contained ~~rates~~offices, a shop area for ~~interstate~~repairing ~~transportation~~and ofreconditioning oilfield ~~natural~~equipment ~~gas~~and asa ~~well~~secure asyard for the ~~terms~~storage ~~for access~~of torolling ~~natural~~stock ~~gas~~and ~~pipeline~~oilfield ~~capacity~~equipment and materials. ~~Pursuant~~The Company spent approximately $127,000 to acquire and update the ~~Wellhead~~facilities ~~Decontrol~~which ~~Act~~served ofas ~~1989,~~the ~~however,~~Company’s ~~FERC~~regional ~~may~~operations ~~not~~office ~~regulate~~in north-central Texas through the ~~price~~ end of ~~natural gas~~2015. ~~Such~~On ~~deregulated~~February ~~natural~~12, ~~gas~~2016, ~~production~~the ~~may~~Company be sold atthe ~~market~~facilities ~~prices~~to ~~determined~~a bylocal ~~supply~~oil and ~~demand,~~gas ~~Btu content,~~well ~~pressure,~~plugging ~~location~~and ofabandonment ~~wells,~~services ~~and~~company ~~other~~for ~~factors~~a total consideration of $130,000. WeIn ~~anticipate~~connection ~~that~~with ~~all~~the ofsale the ~~natural~~Company ~~gas~~took back ~~produced~~a by$30,000 ~~our~~5% ~~wells~~note ~~will~~with bean ~~considered price~~original ~~decontrolled~~maturity ~~natural~~date ~~gas~~of ~~and~~February ~~that~~12, ~~each~~2019 ~~natural~~from ~~gas~~the ~~will~~buyer. beThe ~~sold~~note atwas ~~fair~~paid ~~market~~off ~~value~~in full, net of unpaid interest in March 2017.

Proposed Regulation. Various legislative proposals are being considered in Congress and in the legislatures of various states, which, if enacted, may significantly and adversely affect the petroleum and natural gas industries. Such proposals involve, among other things, the imposition of price controls on all categories of natural gas production, the imposition of land use controls, such as prohibiting drilling activities on certain federal and state lands in protected areas, as well as other measures. At the present time, it is impossible to predict what proposals, if any, will actually be enacted by Congress or the various state legislatures and what effect, if any, such proposals will have on our operations. On December 19, 2007, President Bush signed into law the Energy Independence and Security Act (“EISA”), a law targeted at reducing national demand for oil and increasing the supply of alternative fuel sources. While EISA does not appear to directly impact on our operations or cost of doing business, its impact on the oil and gas industry in general is uncertain. No prediction can be made as to what additional legislation may be proposed, if any, affecting the competitive status of an oil and gas producer, restricting the prices at which a producer may sell its oil and gas or the market demand for oil and gas nor can it be predicted which proposals, including those presently under consideration, if any, might be enacted, nor when any such proposals, if enacted, might become effective.

The Kyoto Protocol to the United Nations Framework Convention on Climate Change became effective in February 2005 (the “Protocol”). Under the Protocol, participating nations are required to implement programs to reduce emissions of certain gases, generally referred to as greenhouse gases that are suspected of contributing to global warming. The United States is not currently a participant in the Protocol. However, the U.S. Congress is considering proposed legislation directed at reducing greenhouse gas emissions. In addition, there has been support in various regions of the country for legislation that requires reductions in greenhouse gas emissions, and some states have already adopted legislation addressing greenhouse gas emissions from various sources, primarily power plants. The natural gas and oil industry is a direct source of certain greenhouse gas emissions, namely carbon dioxide and methane, and future restrictions on such emissions could impact our operations. At this time, it is not possible to accurately estimate how potential future laws or regulations addressing greenhouse gas emissions would impact our business.

Acquisition of Future Leases

Our principal activity in the future will be the acquisition, development and operation of producing oil and gas leases. The acquisition process may be lengthy because of the amount of investigation which will be required prior to submitting a bid to the current operator of a property. Verification of each property and the overall acquisition process can be divided into three phases, as follows:

Phase 1. Field identification. In some instances the seller will have a formal divestiture department that will provide a sales catalog of leases which will be available for sale. Review of the technical filings made to the states along with a review of the regional geological relationships, released well data and the production history for each lease will be utilized. In addition a review of the proprietary technical data in the sellers office will be made and calculation of a bid price for the field.

Phase 2. Submission of the Bid. Each bid will be made subject to further verification of production capacity, equipment condition and status, and title.

Phase 3. Closing. Final price negotiation will take place. Cash transfer and issuance of title opinions. Tank gauging and execution of transfer orders.

After closing has occurred, the newly acquired property will be turned over to us. We may operate the wells in an as-is condition when production is found at acceptable levels, or may elect to re-work wells, perforate new zones, or institute operational changes which will in our estimation increase each well’s production.

In connection with the acquisition of oil and gas leases we will seek to acquire up to a 100% ownership of the working-interest and no less than a 75% net revenue interest along with the surface production equipment facilities with only minor expenses. In exchange for an assignment of the lease, we intend to assume the obligation to plug and abandon the wells in the event we determine that continued operations are either too expensive or will not result in production in paying quantities.

WeOil ~~have initiated searches for additional leases~~ and ~~have~~Gas identified different capital sources for the acquisition of such properties. We intend to the raise the additional capital required to acquire such additional producing assets through specific debt financings.Production

AtThe ~~the~~production ~~present~~amounts ~~time,~~shown wein ~~intend~~the tofollowing ~~concentrate~~tables onreflect ~~oil~~our ~~exploration and~~ production ~~rather~~from ~~than~~the ~~gas~~oil ~~production~~leases ~~and~~in toTexas ~~focus~~for ~~our~~the ~~efforts~~years onended ~~leases~~December ~~located~~31, in2016 ~~Texas.~~and 2015, respectively:

Our Ownership Interests

	For the Year Ended
	December 31, 2016		December 31, 2015
Oil and Gas Production Data:
Oil (Bbls)		32		1,381
Total		32		1,381

~~Currently~~Oil ~~we own numerous working interests in oil~~ and gas ~~wells~~sales ~~located~~revenue in Texas. All acreage is held pursuant to leases that have been extended as long as the properties produce a minimum quantity of crude oil and natural gas, a term referred to in the industry as “held by production”.summary

~~Our~~The oil and gas ~~leases~~sales ~~were~~revenue ~~classified~~shown ~~as unproved properties at December 31, 2015 and 2014 due to the limited quantities of oil and gas produced during the 2013 through 2015 time frame. In light of the precipitous fall~~ in ~~crude oil prices during~~ the ~~last~~ 20table ~~months~~below ~~and~~is ~~the relatively small production volumes from the Company’s leases we elected to reduce the carrying value of~~ our ~~oil~~net ~~and~~share ~~gas properties during the fourth quarter~~ of ~~2015.~~annual ~~This~~revenue ~~reduction~~for to the ~~estimated~~years ~~net~~ended ~~recoverable~~December ~~values of our~~31, ~~oil~~2016 and ~~gas properties is reflected in the financial statements as an impairment charge of $2~~2015,~~654,824~~ ~~on the income statement~~respectively.

The following is a summary of our oil and gas interests:

	For the Year Ended
	December 31, 2016		December 31, 2015
Oil and Gas Revenue:
Texas	$	1,416	$	47,057
Total	$	1,416	$	47,057

In July of 2013, we acquired an 85% working interest (75% net revenue interest) in the Dawson-Conway leases located in Shackelford County, Texas. The Company issued a two-year Secured Promissory Note in the amount of $400,000 to finance the purchase. The property is comprised of 41 wells on 618 acres. We began reworking the existing wells in the fourth quarter of 2013. During the first quarter of 2014 we focused our activities on the acidizing of wells and the repair and replacement of down-hole and surface equipment on the Dawson-Conway leases. In March of 2014 we successfully negotiated a $60,000 reduction in the principal amount due to the holder of the note and purchased the remaining 15% working interest in this property for a cash payment of $30,000. During the second quarter of 2014 we suspended our operations at Dawson-Conway due to outstanding issues with the Texas Railroad Commission (“RRC”). These issues ranged from incomplete or missing production and/or injection reports to well integrity tests as well as incomplete or missing reports as to the status of idle wells which were inherited by us from previous operators of the leases. In the third quarter of 2014 we successfully resolved the outstanding issues with the RRC and negotiated new lease terms for all but one of the leases comprising the Dawson-Conway property. Under the new lease terms the Company’s net revenue interest was increased to 77.5% and we secured the right of first refusal on all lands contiguous with our leases. On June 30, 2015 the Company announced that it had settled the dispute with Concho Oilfield Services over services provided by Concho. As a part of the settlement Concho agreed to re-enter the #5B well on the Dawson-Conway 195B lease to repair damage to the wellbore and production string and to return the well to production. In July 2015 Concho did return to the #5B well and commenced jarring and fishing operations in an attempt to repair the well. These operations did not result in success and the well remains shut-in at this time. In June 2015 the Company filed suit in the District Court for Shackelford County against HLA Interests, LLC and Sedco (a former operator of the Dawson-Conway leases) alleging misrepresentation and fraud concerning title to the leases and compliance in regards to various regulations and permitting requirements of the Texas Railroad Commission (please refer to Part I, Item 3- Legal Proceedings in this report for additional details). In light of these developments all operations at the Dawson-Conway leases have been suspended pending the outcome of the litigation.

On March 5, 2014, we acquired a 100% working interest (80% net revenue interest) in the Powers-Sanders lease located in Shackelford County, Texas from Sabor X Energy Services, Inc. for $600,000. The property consists of 385 acres and 5 producing oil wells. We have reworked several of these wells to increase their production rates.

On March 6, 2014, we acquired a 100% working interest in the Stroebel-Broyles leases located in Eastland County, Texas from Hunting Dog Capital, LLC for $75,000. We hold a 76.0% net revenue interest in the Broyles lease and a 78.0% net revenue interest in the Stroebel lease. The property consists of 235 acres and 32 wells.

OnThe ~~June~~Company ~~16,~~realized ~~2014,~~average weprices ~~acquired~~of ~~a 93~~$44.~~75%~~25 ~~working interest in the Bradford “A”~~ and ~~Bradford “B” leases located in Shackelford County, Texas for~~ $~~225,000 pursuant to the terms of Purchase & Sale and Farmout agreements~~43.37 Atper ~~the~~barrel ~~time~~for ~~of the~~crude ~~acquisition~~oil ~~the~~sales ~~property~~from ~~consisted~~its ~~of 320 acres with 7 producing wells. Under the terms of the Farmout Agreement our wholly-owned subsidiary, CEGX of~~ Texas, ~~LLC,~~properties ~~was~~during ~~obligated to spud the initial “Earning Well” by September 15, 2014. The initial~~2016 ~~well was part of a “continuous drilling program” which afforded Cardinal the opportunity to earn additional 2-acre producing units on the Bradford leases by drilling~~ and completing injection and production wells. The property, which heretofore had never been water flooded, had a two tank batteries. On September 2, 2014 the Company sold its interests in the Bradford “A” and Bradford “B” leases to the Bradford Joint Venture Partnership (“Bradford JV”). At the time of the sale neither the parent company nor CEGX held any ownership in Bradford JV. In late December 2014, Cardinal Energy (the “parent company”) purchased a 20% interest in Bradford JV on the same terms as offered to the general public. On June 12, 2015 ~~the Company transferred its 20% interest in the Bradford JV to Keystone Energy~~, LLC (“Keystone”) in a series of transactions which resulted in Keystone securing a line of credit to be used to further develop the Bradford “A” and Bradford “B” leases, Keystone acquiring an option (exercisable within 365 days) to purchase all of the interests in the Bradford JV and Cardinal Energy exchanging 10 of its ownership interests in the Bradford JV for a 5% equity interest in Keystonerespectively.

OnPlan ~~September 2, 2014, we acquired a 43.75% working interest (32.375% net revenue interest) in the Fortune prospect located in Shackelford County, Texas~~ for a cash payment of $80,000. P.I.D. Drilling, Inc. serves as the operator for the property. The prospect consists of leasehold interests in five tracts of land aggregating just over 310 acres. At the time of purchase the property had one uncompleted plugged well. Activity commenced during September, 2014 and in October the plugged well was re-drilled and completed in the prolific Caddo limestone formation. During the fourth quarter of 2014 two new wells were drilled and completed in the Cooke sandstone formation. The remote location of the lease caused some delays in getting electricity to the location, obtaining approval for hook-up to a natural gas pipeline and the delivery and installation of tank batteries and associated production equipment. The lease came on production in January 2015 and production peaked at just under 25 barrels of oil equivalent (“BOE”) per day. Production from the three wells has steadily declined from its peak to approximately 13 BOE/d for the first quarter of 2015 to just under 7 BOE per day during the second quarter of 2015 and approximately 3 BOE/d during the third quarter of 2015. Following the initial completion of the three producers the Company asked for a full accounting of the drilling costs and requested a refund for excess charges billed by the operator. In March 2015 the Company voted to remove the operator and in June 2015 filed suit in the District Court for Shackelford County seeking recovery of damages (please refer to Part I, Item 3 - Legal Proceedings of this report for additional details). Future ~~development~~Oil ~~activities~~& ~~for~~Gas ~~the prospect have been placed on hold pending the outcome of the litigation.~~Properties

OnOur ~~December~~principal ~~31,~~activity ~~2014 the Company acquired a 100% working interest (77% net revenue interest)~~ in the ~~Bradford~~future ~~West~~will ~~lease~~be ~~for a cash payment of $20,000. The prospect is comprised of 200 acres and is located adjacent and to~~ the ~~west~~acquisition of ~~the~~producing ~~existing~~oil ~~Bradford “A”~~ and ~~“B”~~gas ~~leases~~properties. ~~During~~The ~~the~~acquisition ~~second~~process ~~quarter~~can ofbe ~~2015, the Company drilled the initial well (Bradford West #1). We perforated~~lengthy ~~and~~because ~~treated~~of the ~~well,~~amount ~~ran~~of ~~the~~due-diligence ~~production~~which ~~tubing~~will ~~and~~be ~~set~~required ~~the~~prior ~~pump~~to ~~jack.~~submitting ~~The~~a ~~results~~bid ~~from this well were disappointing and the Company elected not~~ to ~~continue~~ the ~~drilling~~current ~~program~~owner ~~called~~of ~~for~~a ~~under the Asset Sale & Purchase, and Farm-In agreements~~property. ~~The well~~Verification ~~was~~of ~~suspended~~each property and the ~~lease~~overall ~~and~~acquisition ~~well~~process ~~were~~can ~~subsequently~~be ~~transferred~~divided tointo ~~the~~multiple ~~previous~~phases, ~~owners~~as ~~during the fourth quarter of 2015.~~follows:

~~The~~Property ~~aforementioned~~Identification ~~Powers~~-~~Sanders,~~ ~~Stroebel-Broyles~~In some instances, ~~Bradford~~the ~~“A”~~seller ~~and~~will ~~“B”~~have ~~and~~a ~~Fortune~~formal ~~acquisitions~~divestiture ~~and~~department ~~the~~that will provide a sales catalog ~~additional~~of ~~15%~~properties ~~working~~which ~~interest~~will inbe ~~the~~available ~~Dawson-Conway~~for ~~leases~~sale. ~~were~~Review ~~financed~~of ~~from~~the technical filings made to the ~~proceeds~~states ofalong with a $4review of the regional geological relationships,~~500~~ released well data and the production history for each property will be utilized. In addition,~~000~~ a ~~offering~~review of ~~12%~~the ~~Senior Secured~~proprietary ~~Convertible~~technical ~~Notes~~data will be made, and calculation of a bid price submitted for the property.

Submission of the Bid - Each bid will be made subject to further verification of production capacity, status, and title amongst other items.

Closing - Final price negotiation will take place. Cash transfer and issuance of title opinions as well as execution of transfer orders.

Post-Closing - After closing has occurred, the newly acquired property will be turned over to the Company.

We also intend to acquire non-operating interests in properties operated by larger oil and gas companies in the Oklahoma and Texas area. Such interests are designed to provide the Company with the opportunity to leverage off the operating expertise and financial resources of major oil and gas firms and to provide a steady stream of operating cash flows. We have initiated a search for properties and have identified different capital sources for the acquisition of such properties. We intend to raise the additional capital required to acquire such additional producing assets through a combination of equity and debt financings.

In 2016, we intended to concentrate on oil exploration and production rather than natural gas production, and to focus our efforts on leases located in Oklahoma and Texas. In 2019, the Company has changed focus to non-operating royalty interests in oil and gas wells operated by major oil and gas companies.

Geological and Geophysical Techniques

We may engage detailed geological interpretation combined with advanced seismic exploration techniques to identify the most promising properties.

~~The~~Geological ~~following~~interpretation ~~tables~~is ~~reflect~~based upon data recovered from existing oil and gas wells in an area and other sources. Such information is either purchased from the company that drilled the wells or becomes public knowledge through state agencies after a ~~summary~~period of years. ~~our~~Through analysis of rock types, fossils and the electrical and chemical characteristics of rocks from existing wells, we can construct a picture of rock layers in the area. We will have access to the well logs and ~~leases~~decline curves from existing operating wells. Well logs allow us to calculate an original oil or gas volume in ~~Texas:~~place while decline curves from production history allow us to calculate remaining proved producing reserves. We have not purchased, leased, or entered into any agreements to purchase or lease any of the equipment necessary to conduct the geological or geophysical testing referred to herein.

Operator	Well Name	County	State	Working Interest		Net Revenue Interest
Section 183 Lease
Cardinal Energy	Conway #1G	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #2A	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #2G	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #2	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #3	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #9	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #10	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #11	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #13	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #14	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #16	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #17	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Conway #18	Shackelford	Texas	100	%		77.5	%
Section 195 “B” Lease
Cardinal Energy	Dawson-Conway #1	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #1A	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #2	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #6	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #7	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #8	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #3B	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #1B	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #2C	Shackelford	Texas	100	%		75.00	%
Cardinal Energy	Dawson-Conway #1C	Shackelford	Texas	100	%		75.00	%
Section 195 Lease
Cardinal Energy	Dawson-Conway #9A	Shackelford	Texas	100	%		77.5	%
Cardinal Energy	Dawson-Conway #12	Shackelford	Texas	100	%		77.5	%
Section 196 “M” Lease
Cardinal Energy	Dawson-Conway #1	Shackelford	Texas	100	%		77.5	%

Market for Oil and Gas Production

Cardinal Energy	Dawson-Conway #3	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #4	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #5	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #10	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #11	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #12	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #13	Shackelford	Texas	100	%	77.5	%
Section 195 “S” Lease
Cardinal Energy	Dawson-Conway #1J	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #2J	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #3J	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #4J	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #5J	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #6J	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #7	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Dawson-Conway #8	Shackelford	Texas	100	%	77.5	%
Cardinal Energy	Powers-Sanders	Shackelford	Texas	100	%	80.00	%
P.I.D. Drilling, Inc.	Fortune Prospect	Shackelford	Texas	43.75	%	32.375	%

The market for oil and gas production is regulated by both the state and federal governments. The overall market is mature and except for gas, all producers in a producing region will receive the same price. The major oil companies may purchase all crude oil offered for sale at posted field prices. There are price adjustments for quality difference from the Benchmark. Benchmark is Saudi Arabian light crude oil employed as the standard on which OPEC price changes have been based. Quality variances from Benchmark crude results in lower prices being paid for the variant oil. Oil sales are normally contracted with a purchaser or gatherer as it is known in the industry who will pick-up the oil at the well site. In some instances, there may be deductions for transportation from the well head to the sales point. Currently most crude oil purchasers may not charge transportation fees, unless the well is outside their service area. The service area is a geographical area in which the purchaser of crude oil will not charge a fee for picking upon the oil. The purchaser or oil gatherer will usually handle all check disbursements to both the working interest and royalty owners. We have been working interest owners. We are currently planning to become royalty owners. By being a royalty owner, we are not responsible for the payment of the operating expenses of the well. Royalty owners and over-riding royalty owners receive a percentage of gross oil production for the lease and are not obligated in any manner whatsoever to pay for the costs of operating the lease. Therefore, we, in most instances, will not be paying the expenses for the oil and gas revenues paid to the royalty and over-riding royalty interests.

InGas ~~addition~~sales toare ~~the~~by ~~properties~~contract. ~~listed~~The ingas ~~the~~purchaser ~~above~~will ~~table~~pay the ~~Company,~~well byoperator ~~virtue~~100% of anthe ~~equity~~sales ~~investment~~proceeds inon or about the ~~Bradford~~25th ~~JV,~~of ~~held~~each anand ~~effective~~every 18month for the previous months’ sale.~~75%~~ ~~working~~The ~~interest~~operator is responsible for all checks and andistributions ~~effective~~to 15the working interest and royalty owners.0% ~~net~~There ~~revenue~~is ~~interest~~no instandard price for natural gas which can fluctuate with the ~~Bradford~~seasons, ~~“A”~~general ~~and~~market ~~Bradford~~conditions along ~~“B”~~with many other factors. It is our intention to utilize this market whenever possible to maximize revenues. We do not anticipate ~~leases~~any ~~located~~significant change in ~~Shackelford~~the ~~County,~~manner ~~Texas~~production ~~from~~is ~~December~~purchased, 31however, ~~2014~~no ~~through~~assurance ~~June~~can ~~11,~~be ~~2015~~given at this time that such changes will not occur.

~~Other~~The ~~Properties~~marketing of any oil or natural gas produced by the Company’s properties may be affected by several factors that are beyond our control and whose exact effect cannot be accurately predicted. These factors include:

~~In June~~● the amount of ~~2014~~crude weoil ~~acquired~~and anatural ~~half-acre~~gas ~~site~~imports; in● ~~Albany~~the availability, ~~Texas.~~proximity ~~The~~and ~~complex~~cost ~~contains~~of ~~offices~~adequate pipeline and other transportation facilities; ● the success of efforts to market competitive fuels, asuch ~~shop~~as ~~area~~coal ~~for~~and ~~repairing~~nuclear energy and ~~reconditioning oilfield~~the ~~equipment~~growth and/or asuccess ~~secure~~of ~~yard~~alternative ~~for~~energy sources such as wind power; ● the ~~storage~~effect of ~~rolling~~Federal ~~stock~~ and ~~oilfield~~State ~~equipment~~regulations of production, refining, transportation and ~~materials.~~sales; ~~The~~● ~~Company~~the ~~spent approximately~~laws ~~$127,000~~of toforeign ~~acquire~~jurisdictions and ~~update~~the laws and regulations affecting foreign markets; ● other matters affecting the ~~facilities~~availability ~~which~~of ~~served~~a ready market, such as ~~the~~fluctuating ~~Company’s~~supply ~~regional~~and ~~operations~~demand; ~~office~~and ~~in north-central~~● ~~Texas~~general ~~through~~economic conditions in the ~~end~~United ofStates ~~2015~~and around the world.

The supply and demand balance of crude oil and natural gas in world markets has caused significant volatility in the prices of these products over recent years. The North American Free Trade Agreement eliminated trade and investment barriers between the United States, Canada, and Mexico, resulting in increased foreign competition for domestic natural gas production. New pipeline projects recently approved by, or presently pending before, the Federal Energy Regulatory Commission [“FERC”] as well as nondiscriminatory access requirements could further substantially increase the availability of natural gas imports to certain U.S. markets. Such imports could have an adverse effect on both the price and volume of natural gas sales from wells.

Members of the Organization of Petroleum Exporting Countries establish prices and production quotas for petroleum products from time to time with the intent of affecting the current global supply of crude oil and maintaining, lowering or increasing certain price levels. A drastic reduction in crude oil prices from $100 per barrel at mid-year 2014 to approximately $32 per barrel on January 7, 2016 has occurred. Due to the inherent volatility of crude oil prices we are unable to predict what effect, if any, such price changes in the future will have on either the price or quantity of crude oil sales from our properties.

In several initiatives, Federal Energy Regulatory Commission [“FERC”] has required pipeline transportation companies to develop electronic communication and to provide standardized access via the Internet to information concerning capacity and prices on a nationwide basis, so as to create a national market. Parallel developments toward an electronic marketplace for electric power, mandated by Federal Energy Regulatory Commission [“FERC”], are serving to create multi-national markets for energy products generally. These systems will allow rapid consummation of natural gas transactions. Although this system may initially lower prices due to increased competition, it is anticipated to expand natural gas markets and to improve their reliability.

Dispositions

On April 1, 2014, we sold all of our interests in the Armstrong gas lease covering 651.84 lease acres in Colusa County, California including one producing and one non-producing gas well related to the lease that we acquired in October 2011 plus working interests in oil and gas leases in Licking and Knox counties in Ohio in exchange for the return of 3,000,000 shares of our common stock valued at $2,010,000 that we issued as partial consideration for the acquisition of these properties.

On November 24, 2014 we released our shallow drilling rights on the 2,200 acre lease in Wayne County, Ohio in exchange for the return and cancellation of the 15,000 shares of our common stock we issued to Chase Energy Group, LLC when we acquired these rights in February 2013.

During the three months ended March 31, 2015, the Company completed the disposition of its working interests in the Stroebel-Broyles leases (235 gross acres) in Eastland County, Texas. The Company assigned its interests in the leases to two local companies in exchange for the assumption of the plugging and abandonment liability associated with the thirty-two wells located on the properties. The disposition is in keeping with the Company’s decision to focus its drilling and development activities in and adjacent to its properties in Shackelford County, Texas. In May 2015, the Company filed suit in the District Court for Eastland County seeking disgorgement of the $30,000 in sales proceeds received by the defendants for the sale of the leases (please refer to Part I, Item 3 - Legal Proceedings of this report for additional details).

On February 12, 2016 the Company sold its regional operating complex located in Albany, Texas to a local oil and gas well plugging and abandonment services company for a total consideration of $130,000. In connection with the sale the Company took back a $30,000 note which draws interest at 5% per annum and which matures on February 12, 2019 from the buyer.

Oil and Gas Production

The production amounts shown in the following tables reflect our production for the periods ended December 31, 2015 and 2014, respectively:

	For the Period Ended
	December 31, 2015		December 31, 2014
Oil and Gas Production Data:
Gas (Mcf)
Ohio		0		15
California		0		1,500
Texas		0		0
Subtotal		0		1,515
Oil (Bbls)
Ohio		0		1
California		0		0
Texas		1,381		1,722
Subtotal				1,723
Total (BOE*)
Ohio		0		4
California		0		250
Texas		1,381		1,722
Total		1,381		1,976

* Barrels of oil equivalent in which six Mcf of natural gas equals one Bbl of oil.

Oil and gas sales revenue summary

The oil and gas sales revenue shown in the table below is our net share of annual revenue in each project for the periods ended December 31, 2015 and 2014, respectively.

	For the Periods Ended
	December 31, 2015		December 31, 2014
Oil and Gas Revenue:
Ohio	$	0	$	111
California		0		5,678
Texas		47,057		143,066
Total	$	47,057	$	148,855

The Company realized an average price of $3.79 per MCF from actual gas sales in 2014 from its California properties; crude oil and natural gas sales revenues from the Company’s Ohio properties were immaterial in 2014. The Company sold its oil and gas properties located in California and Ohio effective April 1, 2014. The Company realized average prices of $43.37 and $82.00 per barrel for crude oil sales from its Texas properties during 2015 and 2014, respectively.

The table below shows the developed and undeveloped oil and gas acreage held by the Company as of December 31, 2015. Undeveloped acres are on lease acreage that wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas. Gross acres are the number of acres in which we have an interest. Net acres are the sum of our fractional interests owned in the gross acres.

	Developed				Undeveloped				Total
	Gross Acres		Net Acres		Gross Acres		Net Acres		Gross Acres		Net Acres
Texas		-		-		1,313		887		1,313		887
Total		-		-		1,313		887		1,313		887

Competition

~~The~~There are many oil and natural gas ~~industry~~companies isin ~~highly~~the ~~competitive~~United States. ~~Our~~Competition ~~competitors~~is ~~and~~strong ~~potential~~among ~~competitors~~persons ~~include~~and ~~major oil~~ companies ~~and~~involved ~~independent producers of varying sizes of which are engaged~~ in the acquisition, ofexploration ~~producing~~for ~~properties~~ and ~~the~~production ~~exploration~~of oil and ~~development of~~natural ~~prospects~~gas. ~~Most~~We ofexpected ~~our~~to ~~competitors~~encounter ~~have~~strong ~~greater~~competition ~~financial,~~at ~~personnel~~every ~~capabilities and other resources than we do and therefore~~phase ~~have~~of ~~greater~~business. ~~leverage~~We towill ~~use~~be incompeting ~~acquiring~~with ~~prospects,~~entities ~~hiring~~having ~~personnel~~financial ~~and~~resources ~~marketing oil~~ and ~~gas.~~staffs ~~Accordingly,~~substantially alarger ~~high~~than ~~degree~~those ofavailable ~~competition in these areas is expected~~ to ~~continue~~us.

~~Governmental~~The ~~Regulation~~national supply of natural gas is widely diversified, with no one entity controlling over 5%. As a result of deregulation of the natural gas industry by Congress and FERC, competitive forces generally determine natural gas prices. Prices of crude oil, condensate and natural gas liquids are not currently regulated and are generally determined by competitive forces.

Competition among operators for drilling equipment, goods, services and personnel may affect our ability to acquire leases suitable for development.

Regulations

Our operations can be affected from time to time in varying degrees by domestic and foreign political developments, federal and state laws.

Production. In most areas of operations within the United States the production of oil and natural gas is regulated by state agencies that set allowable rates of production and otherwise control the conduct of oil and natural gas operations. Among the ways that states control production is through regulations that establish the spacing of wells or in some instances may limit the number of days in a given month during which a well can produce.

Environmental. Our drilling and production operations were subject to environmental protection regulations established by federal, state, and local agencies that in turn may necessitate significant capital outlays that would materially affect our financial position and our business operations. These regulations, enacted to protect against waste, conserve natural resources and prevent pollution, could necessitate spending funds on environmental protection measures, rather than on drilling operations. If any penalties or prohibitions were imposed for violating such regulations, our operations could be adversely affected.

Natural Gas Transportation and Pricing. FERC regulates the rates for interstate transportation of natural gas as well as the terms for access to natural gas pipeline capacity. Pursuant to the Wellhead Decontrol Act of 1989, however, FERC may not regulate the price of natural gas. Such deregulated natural gas production may be sold at market prices determined by supply and demand, Btu content, pressure, location of wells, and other factors. We anticipate that all of the natural gas produced by our wells will be considered price decontrolled natural gas and that each natural gas will be sold at fair market value.

Proposed Regulation. Various legislative proposals are being considered in Congress and in the legislatures of various states, which, if enacted, may significantly and adversely affect the petroleum and natural gas industries. Such proposals involve, among other things, the imposition of price controls on all categories of natural gas production, the imposition of land use controls, such as prohibiting drilling activities on certain federal and state lands in protected areas, as well as other measures. Presently, it is impossible to predict what proposals, if any, will actually be enacted by Congress or the various state legislatures and what effect, if any, such proposals will have on our operations. On December 19, 2007, President Bush signed into law the Energy Independence and Security Act (“EISA”), a law targeted at reducing national demand for oil and increasing the supply of alternative fuel sources. While EISA does not appear to directly impact on our operations or cost of doing business, its impact on the oil and gas industry in general is uncertain. No prediction can be made as to what additional legislation may be proposed, if any, affecting the competitive status of an oil and gas producer, restricting the prices at which a producer may sell its oil and gas or the market demand for oil and gas nor can it be predicted which proposals, including those presently under consideration, if any, might be enacted, nor when any such proposals, if enacted, might become effective.

Production

The production and sale of oil and gas is subject to regulation by state, federal and local authorities. In most areas there are statutory provisions regulating the production of oil and natural gas under which administrative agencies may set allowable rates of production and promulgate rules in connection with the operation and production of such wells, ascertain and determine the reasonable market demand of oil and gas, and adjust allowable rates with respect thereto.

The sale of liquid hydrocarbons was subject to federal regulation under the Energy Policy and Conservation Act of 1975 which amended various acts, including the Emergency Petroleum Allocation Act of 1973. These regulations and controls included mandatory restrictions upon the prices at which most domestic crude oil and various petroleum products could be sold. All price controls and restrictions on the sale of crude oil at the wellhead have been withdrawn. It is possible, however, that such controls may be ~~reimposed~~re-imposed in the future but when, if ever, such ~~reimposition~~re-imposition might occur and the effect thereof, cannot be predicted.

The sale of certain categories of natural gas in interstate commerce is subject to regulation under the Natural Gas Act and the Natural Gas Policy Act of 1978 (“NGPA”). Under the NGPA, a comprehensive set of statutory ceiling prices applies to all first sales of natural gas unless the gas is specifically exempt from regulation (i.e., unless the gas is “deregulated”). Administration and enforcement of the NGPA ceiling prices are delegated to the FERC. In June 1986, the FERC issued Order No. 451, which, in general, is designed to provide a higher NGPA ceiling price for certain vintages of old gas. It is possible, though unlikely, that we may in the future acquire significant amounts of natural gas subject to NGPA price regulations and/or FERC Order No. 451.

13Our operations are subject to extensive and continually changing regulation because legislation affecting the oil and natural gas industry is under constant review for amendment and expansion. Many departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations binding on the oil and natural gas industry and its individual participants. The failure to comply with such rules and regulations can result in large penalties. The regulatory burden on this industry could increase our cost of doing business and, therefore, affects our profitability. However, we do not believe that we are affected in a significantly different way by these regulations than our competitors.

Our operations are subject to extensive and continually changing regulation because legislation affecting the oil and natural gas industry is under constant review for amendment and expansion. Many departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations binding on the oil and natural gas industry and its individual participants. The failure to comply with such rules and regulations can result in large penalties. The regulatory burden on this industry increases our cost of doing business and, therefore, affects our profitability. However, we do not believe that we are affected in a significantly different way by these regulations than our competitors are affected.Transportation

~~Transportation~~We can make sales of oil, natural gas and ~~Production~~condensate at market prices which are not subject to price controls. The price that we receive from the sale of these products is affected by our ability to transport and the cost of transporting these products to market. Under applicable laws, the Federal Energy Regulatory Commission (“FERC”) regulates:

Transportation and Sale of Oil and Natural Gas. We can make sales of oil, natural gas and condensate at market prices which are not subject to price controls at this time. The price that we receive from the sale of these products is affected by our ability to transport and the cost of transporting these products to market. Under applicable laws, the Federal Energy Regulatory Commission (“FERC”) regulates:

	●	the construction of natural gas pipeline facilities, and
	●	the rates for transportation of these products in interstate commerce.

Our possible future sales of natural gas ~~are~~will be affected by the availability, terms and cost of pipeline transportation. The price ~~and~~ and terms for access to pipeline transportation remain subject to extensive federal and state regulation. Several major regulatory changes have been implemented by Congress and the FERC from 1985 to the present. These changes affect the economics of natural gas production, transportation and sales. In addition, the FERC is continually proposing and implementing new rules and regulations affecting these segments of the natural gas industry that remain subject to the FERC’s jurisdiction. The most notable of these are natural gas transmission companies.

The FERC’s more recent proposals may affect the availability of interruptible transportation service on interstate pipelines. These initiatives may also affect the intrastate transportation of gas in some cases. The stated purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry. These initiatives generally reflect more light-handed regulation of the natural gas industry. The ultimate impact of the complex rules and regulations issued by the FERC since 1985 cannot be predicted. In addition, some aspects of these regulatory developments have not become final but are still pending judicial and FERC final decisions. We cannot predict what further action the FERC will take on these matters. However, we do not believe that any action taken will affect it much differently than it will affect other natural gas producers, gatherers and marketers with which we might compete against.

Effective as of January 1, 1995, the FERC implemented regulations establishing an indexing system for transportation rates for oil. These regulations could increase the cost of transporting oil to the purchaser. We do not believe that these regulations will affect it any differently than other oil producers and marketers with which it competes with.

~~Regulation of~~ Drilling ~~and Production. Our proposed drilling and production operations are subject to regulation under a wide range of state~~ and ~~federal statutes, rules, orders and regulations. Among other matters, these statutes and regulations govern:~~Production

Prior to 2017, our proposed drilling and production operations were subject to regulation under a wide range of state and federal statutes, rules, orders and regulations. Among other matters, these statutes and regulations govern:

	●	the amounts and types of substances and materials that may be released into the environment,
	●	the discharge and disposition of waste materials,
	●	the reclamation and abandonment of wells and facility sites, and
	●	the remediation of contaminated sites,

and require:

	●	permits for drilling operations,
	●	drilling bonds, and
	●	reports concerning operations.

State laws contain:

	●	provisions for the unitization or pooling of oil and natural gas properties,
	●	the establishment of maximum rates of production from oil and natural gas wells, and
	●	the regulation of the spacing, plugging and abandonment of wells.

Environmental Regulations

Our operations ~~are~~were affected by the various state, local and federal environmental laws and regulations, including the:

	●	Clean Air Act,
	●	Oil Pollution Act of 1990,
	●	Federal Water Pollution Control Act,
	●	Resource Conservation and Recovery Act (“RCRA”),
	●	Toxic Substances Control Act, and
	●	Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”).

These laws and regulations govern the discharge of materials into the environment or the disposal of waste materials, or otherwise relate to the protection of the environment. In particular, the following activities are subject to stringent environmental regulations:

	●	drilling,
	●	development and production operations,
	●	activities in connection with storage and transportation of oil and other liquid hydrocarbons, and
	●	use of facilities for treating, processing or otherwise handling hydrocarbons and wastes.

Violations are subject to reporting requirements, civil penalties and criminal sanctions. As with the industry generally, compliance with existing regulations increases our overall cost of business. The increased costs cannot be easily determined. Such areas affected include:

	●	unit production expenses primarily related to the control and limitation of air emissions and the disposal of produced water,
	●	capital costs to drill exploration and development wells resulting from expenses primarily related to the management and disposal of drilling fluids and other oil and natural gas exploration wastes, and
	●	capital costs to construct, maintain and upgrade equipment and facilities and remediate, plug and abandon inactive well sites and pits.

Environmental regulations historically have been subject to frequent change by regulatory authorities. Therefore, we are unable to predict the ongoing cost of compliance with these laws and regulations or the future impact of such regulations on its operations. However, we do not believe that changes to these regulations will have a significant negative effect on ~~its~~the Company’s operations.

A discharge of hydrocarbons or hazardous substances into the environment could subject us to substantial expense, including both the cost to comply with applicable regulations pertaining to the clean-up of releases of hazardous substances into the environment and claims by neighboring landowners and other third parties for personal injury and property damage. We do not maintain insurance for protection against certain types of environmental liabilities.

The Clean Air Act requires or will require most industrial operations in the United States to incur capital expenditures in order to meet air emission control standards developed by the EPA and state environmental agencies. Although no assurances can be given, we believe the Clean Air Act requirements will not have a material adverse effect on our financial condition or results of operations.

RCRA is the principal federal statute governing the treatment, storage and disposal of hazardous wastes. RCRA imposes stringent operating requirements, and liability for failure to meet such requirements, on a person who is either:

	●	a “generator” or “transporter” of hazardous waste, or

	●	an “owner” or “operator” of a hazardous waste treatment, storage or disposal facility.

At present, RCRA includes a statutory exemption that allows oil and natural gas exploration and production wastes to be classified as non-hazardous waste. As a result, we will not be subject to many of RCRA’s requirements because its operations will probably generate minimal quantities of hazardous wastes.

CERCLA, also known as “Superfund”, imposes liability, without regard to fault or the legality of the original act, on certain classes of persons that contributed to the release of a “hazardous substance” into the environment. These persons include:

	●	the “owner” or “operator” of the site where hazardous substances have been released, and

	●	companies that disposed or arranged for the disposal of the hazardous substances found at the site.

CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. In the course of our ordinary operations, we could generate waste that may fall within CERCLA’s definition of a “hazardous substance”. As a result, Wewe may be liable under CERCLA or under analogous state laws for all or part of the costs required to clean up sites at which ~~such~~ such wastes have been disposed.

Under such law we could be required to:

	●	remove or remediate previously disposed wastes, including wastes disposed of or released by prior owners or operators,

	●	clean up contaminated property, including contaminated groundwater, or

	●	perform remedial plugging operations to prevent future contamination.

We could also be subject to other damage claims by governmental authorities or third parties related to such contamination.

While the foregoing regulations appear extensive, we believe that because we ~~will~~plan ~~initially~~to be ~~drilling~~acquiring ~~and~~royalty ~~operating~~interest ~~one~~of ~~oil~~Mineral ~~or gas~~Rights ~~well,~~and ~~compliance~~because ~~with~~ the ~~foregoing~~generation ~~regulations~~of ~~will~~any ~~not~~potentially ~~have~~“hazardous ~~any~~substances” ~~material~~are ~~adverse~~most ~~affect~~likely ~~upon~~to ~~us.~~be ~~Further,~~the weresponsibility ~~believe~~of ~~we will~~the ~~only~~operator ~~spend~~to ~~minimal~~dispose ~~amounts~~ of ~~money~~on the lease and/or transported to ~~comply~~a ~~therewith~~qualifying insite, ~~connection~~that compliance with ~~its~~the ~~one~~foregoing ~~proposed~~regulations ~~well~~will not have any material adverse effect upon the Company.

Company’s Office

On June 10, 2015 we moved our executive offices from Dublin, Ohio to 500 Chestnut Street, Suite 1615 in Abilene, TX 79602. In January 2016 we closed our executive office in Abilene, Texas and moved our office to 2665 Fairfax Drive, Upper Arlington, OH 43220. ~~Our~~In October 2017 we opened a temporary executive office in Dallas, Texas. The temporary home office in Dallas was closed December 28, 2018 and replaced by employees and consultants working from their homes or offices. Our telephone number is (325) 762-2112.

Employees

At December 31, ~~2015~~2016 the Company had 4one full-time ~~employees~~employee and one part-time employee. ~~Following the closing of our Albany. Texas and Abilene, Texas offices our employees work out of home offices.~~

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 3. LEGAL PROCEEDINGS.

We are currently a party to ~~law~~lawsuits ~~suits~~ arising out of the normal course of business. The current status of each of the proceedings is summarized below.

~~Borets~~Power ~~USA,~~Up ~~Inc.~~Lending ~~f/k/a Borets-Weatherford US~~Group, ~~Inc~~Ltd. v. Cardinal Energy Group, Inc. (~~Case~~Civil Action No.: ~~2015~~16-~~028~~cv-1545-DRH, ~~259th~~United ~~Judicial~~States District ~~Shackelford~~ ~~County~~Court Eastern, District ~~Texas)~~Of New York).

On March 230, ~~2015~~2016 ~~Borets~~Power ~~filed~~Up Lending Group, Ltd. Filed a lawsuit against the Company claiming damages totaling ~~$90,615~~ in ~~damages~~excess ~~for~~of ~~unpaid~~$152,000 exclusive ~~invoices~~of ~~for services~~attorney’s ~~rendered~~fees, topre-judgment ~~the~~interest ~~Company~~and costs. On ~~March~~June ~~18th 2015~~4, 2018 the Company filed anDefendants ~~Original~~Memorandum ~~Answer~~of Law ~~and~~in ~~Counterclaim~~Opposition ~~against~~to ~~Borets.~~Plaintiff’s ~~The original~~Motion ~~answer~~Seeking ~~set~~Summary ~~forth~~Judgement. aOn ~~general~~April ~~denial~~3, ~~certain~~2019 ~~specific~~the ~~denials,~~Court aopined ~~verified denial denying~~ the ~~account amount and affirmative~~Plaintiff’s ~~defenses~~motion offor ~~failure~~summary ofjudgment ~~consideration~~pursuant ~~and~~to ~~offset.~~Rule ~~The~~56 ~~counterclaim~~against ~~contains~~the aCompany ~~cause~~was ofgranted ~~action~~as ~~for~~to the breach of contract ~~and~~claim ~~seeks~~regarding the ~~$150,000~~outstanding indebt ~~damages~~of $152,211. ~~Borets~~As ~~has filed a Motion for Summary Judgment seeking to dispose~~ of ~~the~~December ~~counterclaim~~31, on2016 ~~behalf of~~ the Company~~. No~~ ~~hearing~~ has ~~been~~recorded ~~set~~an onoutstanding ~~the~~loan ~~motion~~payable ~~and~~to ~~the~~Power ~~Company~~Up ~~will prepare a response if~~ in ~~fact a hearing date is obtained. As of~~ the ~~date~~amount of ~~this Report~~$178, ~~discovery is ongoing~~727.

John Robinson v. CEGX of Texas LLC, Cardinal Energy Group, Inc. Et al (Case No. 16 CV 008923 Franklin County Common Pleas Court)

John Robinson, a participant in the Bradford Joint Venture, filed litigation in Franklin County, Columbus, Ohio against CEGX of Texas and seven others on September 20, 2016, claiming he was fraudulently induced to enter into a transaction, amongst other claims. The Company filed an answer on October 24, 2016, asserting a right to arbitration as a defense, and moved for stay of proceedings on November 29, 2016. The court granted a motion and the case was stayed for arbitration on January 26, 2017. The Franklin County Clerk of Courts records show the case remains closed.

Borets USA, Inc. f/k/a Borets-Weatherford US, Inc. v. Cardinal Energy Group, Inc. (Case No. 2015-028, 259th Judicial District Shackelford County, Texas).

On March 2, 2015 Borets filed a lawsuit against the Company claiming damages totaling $90,615 in damages for unpaid invoices for services rendered to the Company. On March 18, 2015, the Company filed an Original Answer and Counterclaim against Borets. The original answer set forth a general denial, certain specific denials, a verified denial denying the account amount and affirmative defenses of failure of consideration and offset. The counterclaim contains a cause of action for breach of contract and seeks $150,000 in damages. On February 12, 2016 Borets filed a Motion for Summary Judgment seeking to dispose of the counterclaim on behalf of the Company. No hearing has been set on the motion, therefore, while the Company planned to prepare a response when the hearing date was obtained, because no further action was taken no response was prepared. As of the date of this report the Company has not been in contact with Borets. Should the Company be contacted regarding this issue they plan to work diligently to resolve the issue.

CEGX of Texas, LLC v. Scott Miller, Miller Energy Services, Inc. and US Fuels, Inc. (Case No. CV1543707 91st Judicial Court Eastland County, Texas).

~~The~~On ~~lawsuit was filed on~~ May ~~22nd~~22, 2015. ~~The~~the ~~lawsuit~~Company ~~alleges~~filed a lawsuit alleging cause of action against the above -named defendants for breach of contract, breach of fiduciary duty and fraud. This lawsuit concerns the sale of the Company’s property (the Stroebel-Broyles leases in Eastland County, Texas) by Mr. Miller. Mr. Miller indicated that no one would pay anything for the property, and we agreed to assign the property for no cash consideration. We subsequently determined that Mr. Miller sold the property for $30,000 and pocketed all of the funds from the sale. Answers have been filed by each of the defendants. The Company is ~~now~~considering ~~in the process of~~ filing a ~~Motion~~motion for ~~Summary~~summary ~~Judgment in favor of the Company~~judgment.

CEGX of Texas, LLC v. P.I.D. Drilling, Inc. (Case No. 2015-062 259th Judicial District Shackelford County, Texas).

~~This~~On ~~lawsuit~~June ~~was~~10, ~~filed~~2015 by the Company onfiled ~~June~~a 10lawsuit against P.I.D. Drilling, ~~2015~~Inc. ~~and~~The lawsuit contains causes of action for breach of contract and also requests an accounting. The lawsuit iswas claiming damages for overcharges by PID and also asking that PID be removed as operator after a vote by the non-operating working interest owners. AsA Final Judgment was awarded to PID on November 08, 2017 and, on December 19, 2017, the Judge signed an Amended Order of Sale to satisfy the ~~date~~Judgment, which resulted in the Company having to give up its working interest and rights to specific properties to settle amounts owed. The value of ~~this~~the ~~Report~~working aninterests ~~answer~~and ~~has~~rights ~~been~~sold ~~filed~~were onin ~~behalf~~excess of ~~PID~~the judgment amount therefore no cash payments had to be made by the Company. Further, such working interests and ~~discovery~~rights ishad ~~ongoing~~no value assigned to them in the Company’s financial statements, therefore the judgment and order had no financial reporting impact.

Cardinal Energy Group, Inc. v. HLA Interests, LLC, Phillip Allen, SEDCO Operating, LLC (“SEDCO”) , ERCO Holdings, Ltd, (“ERCO”),Caleb David Elks, and Michael Cies D/B/A Terlingua Oil Associates, Case No. 2015-059 (District Court of Shackelford County, Texas, 259th Judicial District) .

The Company filed this lawsuit against the corporate defendants and the individual members in their personal capacity on June 3, 2015. The lawsuit stems from a Working Interest Purchase Agreement that the Company entered into on July 3, 2013 with Defendant HLA Interests (an oil and gas management company that owns and controls existing oil fields in Texas), pursuant to which the Company agreed to purchase from HLA Interests its 85% working interest in 5 oil and gas leases known as the Dawson-Conway Leases (the “Leases”) in Shackelford County, Texas (the “Agreement”). The Company was fraudulently induced to enter into the Agreement by the defendants, who knew that 3 of the 5 leases had expired prior to executing the Agreement. The Company agreed to pay $400,000 to HLA Interests for its complete working interest in the 5 Leases, which HLA Interests represented to be 85%. The Company executed a Note for payment of the $400,000 purchase price, pursuant to which the entire principal balance was to be paid within 24 months of the date that the Agreement was executed. HLA Interests acquired title to the 5 Leases by Assignment of Oil and Gas Leases dated December 1, 2011 from Defendant ERCO, as Assignor, to HLA Interests recorded in Volume 552, Page 343 of the Official Records of Shackelford County, Texas (the “ERCO Assignment”). The ERCO Assignment purported to convey to HLA Interests 85% of 75% net revenue interest on the 5 Leases. Defendant SEDCO was the operator of the 5 Leases.

The Company agreed to pay $400,000 to HLA Interests for its complete working interest in the 5 Leases, which HLA Interests represented to be 85%. The Company executed a Note for payment of the $400,000 purchase price, pursuant to which the entire principal balance is to be paid within 24 months of the date that the Agreement was executed. HLA Interests acquired title to the 5 Leases by Assignment of Oil and Gas Leases dated December 1, 2011 from Defendant ERCO, as Assignor, to HLA Interests recorded in Volume 552, Page 343 of the Official Records of Shackelford County, Texas (the “ERCO Assignment”). The ERCO Assignment purported to convey to HLA Interests 85% of 75% net revenue interest on the 5 Leases. Defendant SEDCO was the operator of the 5 Leases.16

Defendants HLA, its Managing Member, Allen, SEDCO, ERCO and Elks all made false representations with the intent to fraudulently induce the Company into entering into the Agreement. Specifically, prior to entering into the Agreement with the Company, Defendants HLA Interests and Allen knew that at least 3 of the 5 Leases had expired and that the Company would only be purchasing 2 active Leases. Defendants SEDCO, as the Operator of the 5 Leases, ERCO, as an assignor of the remaining 15% working interest in the 5 Leases, and Elks (SEDCO’s Chief Operating Officer and the Managing Member of ERCO) also all knew that 3 of the Leases had expired and that Defendant HLA did not own a working interest in them free and clear as represented to the Company. All of the Defendants intentionally failed to disclose this material information to the Company so as to fraudulently induce the Company into entering into the Agreement.

As a direct result of relying upon Defendants HLA, Allen, SEDCO, ERCO and Elk’s intentional and material misrepresentations and intentional failures to disclose the material facts, the Company suffered damages for which it seeks recovery in this lawsuit. Further, the false, misleading, and deceptive acts of these Defendants in misrepresenting the true legal status of title to the 5 Leases and the actual working interests prior to the execution of the Agreement, the Operating Agreement, and the March 11, 2014 Assignment are violations of Texas’ Deceptive Trade Practices Act.

Finally, Defendant Terlingua entered into a Master Land Services Contract with the Company in or about June 2013, whereby Terlingua agree to provide due diligence services to the Company in furtherance of the Company entering into the Agreement with Defendants HLA Interests, SEDCO, and ERCO. Pursuant to the Master Land Services Contract, Terlingua agreed to investigate titles and the oil and gas records to determine the actual legal status of the ownership interests in the 5 Leases, and advise the Company of same. Terlingua breached its obligations under the Master Land Services Agreement by failing to perform its due diligence investigation of the titles and working interests in the 5 Leases in a good and workmanlike manner, and failing to discover that at least 3 of of the 5 Leases had expired and that the Company would only be purchasing 2 active Leases.

As a result of all of this, the Company filed a lawsuit asserting claims for breach of contract against Defendants HLA, SEDCO, ERCO, and Cies/Terlingua; Money had and Received against Defendants HLA, SEDCO, and Cies/Terlingua; Fraud and Fraud by Non-Disclosure against Defendants HLA, Allen, SEDCO, ERCO, and Elks; and Deceptive Trade Practices against Defendants HLA, SEDCO, and ERCO.

OnAs of August 5, 2015, ~~the~~The Company ~~was~~obtained ~~granted~~service aon ~~Partial~~Elks, ~~Default~~Cies, ~~Judgment~~Erco ~~for~~and ~~the~~SEDCO ~~following:~~with all having filed answers. A hearing and/or trial will be required to obtain damages against SEDCO and Erco.

~~HLA~~On August 5, 2015 the Company was awarded a Partial Default Judgement against HLA Interests, LLC: ~~Judgment~~ on our causes of action for breach of contract, money had and received, fraud, fraud by non-disclosure and deceptive trade practices;.

~~Phillip~~The ~~Allen:~~Company ~~Judgment~~plans onto ~~our~~also ~~causes~~obtain ofa ~~action~~damages ~~for~~judgment ~~fraud,~~against Phillip Allen individually and ~~fraud~~as byHLA ~~non-disclosure;~~Interests, LLC.

Sedco Operating, LLC: Judgment on our causes of action for breach of contract, money had and received, fraud, fraud by non-disclosure and deceptive trade practices; and

Judgment against Erco Holdings, Ltd. for causes of action for breach of contract, fraud, fraud by non-disclosure and deceptive trade practices.

The Company’s out-of-pocket damages as a result of the claims asserted in this lawsuit have been calculated at $1,735,765. Adding the claims for attorneys’ fees, and other damages, including punitive damages as a result of the intentional fraudulent conduct, the Company’s damages exceed $2,000,000.

The Company was finally able to obtain service on Elks. As of now, Elks, Cies, Erco and Sedco have now filed answers. A hearing and/or trial will be required to obtain damages against Sedco and Erco. ,At present, we are in the process of attempting to obtain a damages judgment against Philip Allen, individually, and as HLA Interests, LLC..17

The Company has reached out to all of the parties involved requesting they contact us to enter into settlement discussions on this matter. In addition, we have forwarded discovery to the various defendants and are awaiting responses to same. As of the date of this report we have received no responses from any of the defendants in regardsto settlement and the Company’s attorneys are now working with the trial court’s coordinator to set a date for trial.

Edward A. Mitchell v. Cardinal Energy Group, Inc. and Timothy W. Crawford (Case No. 15CV-04-3538, Franklin County Common Pleas Court)

Mr. Mitchell filed suit on April 27, 2015, claiming to be owed 200,000 shares of stock that he earned during his brief tenure as Controller of the Company, as well as additional compensation to which he claims he’s entitled. The Company denies the claims, and ~~filed~~ filed a counterclaim to recover damages caused by Mitchell during his tenure for failure to perform his duties and to recover ~~unauthorized~~ unauthorized reimbursements he improperly issued. Trial iswas ~~currently~~originally scheduled for April 24, 2016. The parties have held settlement ~~discussions~~ discussions in this matter but thus far have failed to reach a satisfactory agreement. AsThe Company recorded $5,500 in accrued expenses during the fourth quarter of 2015 which represents the amount most likely the Company would pay to settle this lawsuit. The original trial date of ~~this~~April ~~report~~26, ~~discovery~~2016 has been officially continued, and a new date had been set for late June 2017. Counsel for the Company isscheduled ~~continuing~~depositions of Mr. WeMitchell ~~have~~and ~~accrued~~Cardinal $5personnel in July and August of 2016,~~500~~ asIn anJune ~~expense~~2017 the parties agreed in principle to ~~cover~~enter ~~this~~into ~~liability~~a settlement agreement under which the Company would pay Mr. Mitchell and his attorney $20,000 to settle all outstanding claims. The Final Settlement Agreement and Release were executed by both parties and filed with the Court in July 2017. As of December 31, 2016, the Company had recorded the $20,000 obligation in accounts payable and accrued expenses on the balance sheet, which was paid in full during 2017.

Terrance J. Dunne v. Cardinal Energy Group, Inc. (Case No. 14-02-04417-2, Spokane County Superior Court of Washington)

On November 10, 2014, Mr. Dunne filed a suit in Spokane County Superior Court of Washington and alleged the Company ~~owes~~owed him $6,000 for services rendered plus an additional $27,480 for the difference in value of stock that was given to him as compensation. The Company filed an Answer and a Motion to dismiss based on lack of jurisdiction and subsequently the hearing was cancelled. Thereafter ~~Management~~plaintiff’s ~~still~~counsel ~~intends~~did nothing to ~~defend~~move this matter forward and a month before the original trial date indicated ~~vigorously.~~that ~~There~~if ~~was~~the noCompany ~~ongoing~~agreed ~~activity~~to ina ~~connection~~continuance ~~with~~plaintiff ~~this~~would ~~case~~agree ~~for~~to ~~almost~~arbitrate. A continuance was entered, and a ~~year~~new trial date established for March 27, 2017. ~~The~~Plaintiff’s ~~Company~~counsel ~~believes~~did ~~that~~not ~~there~~move isthe amatter to arbitration and, yet again, did nothing ~~remote~~to ~~likelihood~~forward ~~that~~Mr. ~~this~~Dunne’s ~~lawsuit~~case ~~will~~and ~~prevail~~in the process missed several key dates in the Court’s scheduling order.

~~Iconic~~On ~~Holdings~~January v26, 2017 the Company moved for an order to show cause as to why plaintiff’s case should not be dismissed. On February 17, 2017 the Court granted the Company’s motion and issued an order to show cause. The Court also ordered plaintiff and his counsel to pay Cardinal ~~Energy~~for ~~Group~~the costs associated with the show cause motion. On March 10, ~~Inc~~2017 the Court heard countervailing arguments regarding dismissal. ~~(San~~The ~~Diego~~Court ~~County~~determined ~~Superior~~that dismissal was too harsh, ordered the parties to arbitrate and awarded monetary sanctions against plaintiff and his counsel in the Company’s favor. On May 17, 2017 the Court ~~(Case~~dismissed Nothe case with prejudice and ordered the plaintiff to pay the Company an additional $5,000 in attorney’s fees and costs no later than June 1, 2017 plus $1,780 in additional attorney’s fees if the Company was not paid by June 1, 2017. ~~37-2016-00006021-CU-BC-CTL)~~As of the date of this filing the amount remains unpaid, however, no receivable has been recorded by the Company due to the uncertainty of collecting the amount. Because the Company has no record of any payments, they are researching this ruling for possible other income and are considering starting collection efforts.

OnIconic ~~March 1~~Holdings, ~~2016~~LLC ~~Iconic~~v. ~~Holdings~~Cardinal ~~filed~~Energy ~~suit in San Diego County Superior Court alleging that the Company was in default on a convertible promissory note and claiming that the Company owes $167~~Group,~~478~~ ~~in unpaid principal and interest~~Inc. ~~The~~(Case ~~Company believes that remaining outstanding principal under the note is $35,000~~No. As37-2016-00006021-CU-BC-CTL ofSan ~~the~~Diego ~~filing~~County ~~date~~Superior ~~of this report the Company has yet to retain counsel or answer the claims.~~Court)

On February 23, 2016 Iconic Holdings, LLC filed a complaint in San Diego County Superior Court alleging that the Company was in default on a convertible promissory note. The Note Purchase Agreement called for arbitration and following arbitration in December of 2016 the parties entered into a Settlement Agreement where the Company agreed to pay Iconic $60,000. As of December 31, 2016, the $60,000 liability was recorded as a convertible note on the balance sheet and subsequent to December 31, 2016 the liability was paid in conjunction with a debt arrangement with Rockwell Capital. On April 17, 2017 a request for dismissal was filed with the Court by the Plaintiff’s attorneys and subsequently granted by the Court.

Tonaquint Arbitration

~~After~~On ~~conducting~~September ~~discovery~~11, ~~the~~2015 ~~parties~~Tonaquint, ~~agreed~~Inc. to(“Tonaquint”) ~~settle~~filed ~~the~~for ~~issues~~arbitration ~~outstanding~~under ~~prior~~a toSecurities ~~the~~Purchase ~~scheduled~~Agreement ~~arbitration~~and ~~hearing. On February~~Convertible 4Promissory Note, ~~2016~~claiming that the Company ~~agreed~~was ~~to judgment~~ in ~~the~~default ~~amount~~for offailing ~~$432,674.41~~to ~~plus~~deliver ~~interest~~all atearned ~~22%~~shares, ~~per~~failing ~~year and agreed~~ to satisfy the ~~entry~~remaining balance of ~~summary judgment~~the innote ~~Tonaquint’s~~and ~~favor~~failing asto ~~requested~~maintain inadequate ~~Tonaquint’s~~stock ~~motion~~reserves. ~~Tonaquint~~The ~~agreed to accept payment from the~~ Company in ~~the amount of $250~~answered,~~000~~ asdenying ~~full and complete satisfaction of~~ the ~~arbitration~~claims ~~award~~and asserting ~~but~~that ~~only so long as~~ the Company ~~paid~~had ~~the settlement~~satisfied ~~amount~~its onobligations orwith ~~before~~respect to the ~~settlement~~Tonaquint ~~payment due date of March 12, 2016~~Note. ~~The~~Arbitration ~~Company~~was ~~failed to make the required~~ scheduled ~~payment~~for ~~and~~February as2016 ofin ~~the~~Salt ~~date~~Lake ofCity, ~~the filing of this report the parties are still holding discussions on the matter~~Utah.

After conducting discovery, the parties agreed to settle the issues outstanding prior to the scheduled arbitration hearing. On February 4, 2016 the Company agreed to judgment in the amount of $432,674 plus interest at 22% per year and agreed to the entry of summary judgment in Tonaquint’s favor as requested in Tonaquint’s motion. Tonaquint agreed to accept payment from the Company in the amount of $250,000 as full and complete satisfaction of the arbitration award but only so long as the Company paid the settlement amount on or before the settlement payment due date of March 12, 2016. The Company failed to make the required scheduled payment and on March 24, 2016 the Third Judicial District Court of Salt Lake County, Utah issued judgment in favor of Tonaquint, Inc. in the aforementioned $432,674 amount. During the year ended December 31, 2016 the Company accrued interest at 22%, recording interest expense of $84,775, resulting in a total liability of $515,867 as of December 31, 2016. On February 15, 2017 the parties entered into a Settlement Agreement to extinguish the outstanding liability on that date of $528,673 in exchange for shares of common stock of the Company. As of the date of this report no shares have been issued and the Company continues to accrue default interest on the liability.

LG Capital Funding, LLC. v. Cardinal Energy Group, Inc. (Case 1:17-cv-09181-AKH, United States District Court Southern District Of New York)

On November 22, 2017 LG Capital Funding, LLC (“LG”) filed a law suit against the Company claiming the Company had defaulted under two convertible notes payable agreements, requesting the Company pay amounts in excess of $600,000. On September 14, 2018 the Company filed a Declaration of the CEO, in Opposition. On December 10, 2019, the Court granted LG’s motion for summary judgment in the amount of $115,230.

On January 1, 2019 the Company filed a Notice of Appeal with the Court for the Southern District of New York. The Company requested the lower Court of Appeals to forward a question of law to the upper Court of Appeals. On January 31, 2019 the Company filed a Motion to Certify Questions of unsettled usury law. That motion was opposed by LG on February 11, 2019. To date, the Court has not issued any order with regards to the remaining claims or with regard to the Motion to Certify.

Guy McCain. v. CEGX of Texas, LLC, Stephen Hannan and Bradford Joint Venture Partnership (Case No. 2017-015, District Court of Shackelford County Texas) and Bluff Creek Petroleum, LLC v. EOI Eagle Operating Inc. and CEGX of Texas, LLC (Case No. 2017-018, District Court of Shackelford County, Texas)

~~General~~In February of 2017 Guy McCain, the owner and lessor of the Bradford “A” and Bradford “B” leases, located in Shackelford County, Texas, filed a petition against CEGX of Texas, LLC, Stephen Hannan and Bradford Joint Venture Partnership for lack of production requesting that the defendants would have no future interest in the leases. A judgment was filed on June 15, 2017 confirming the expiration and termination of the lease and awarding the plaintiff $10,000 plus post judgment interest at a rate of 5% per annum and all costs of court.

~~The~~In ~~Company~~March ~~believes~~of ~~that~~2017 ~~its~~Bluff ~~claims~~Creek ~~and~~Petroleum, ~~defenses~~LLC, ~~in the above cases where it is~~ a ~~defendant~~contractor ~~are~~engaged ~~substantial~~by ~~for~~CEGX ~~the~~of ~~reasons discussed above. Litigation is~~Texas, ~~however~~LLC, ~~inherently unpredictable. The outcome of lawsuits is subject~~ to ~~significant~~work ~~uncertainties~~on ~~and, therefore, determining~~ the ~~likelihood~~Bradford ~~of a loss~~ “A” and~~/or~~ ~~the~~Bradford ~~measurement~~“B” ~~of any loss is complex. Consequently~~leases, wefiled ~~are~~a ~~unable~~petition ~~to estimate~~against ~~the~~CEGX ~~range~~for ofamounts ~~reasonably~~not ~~possible loss~~paid. ~~Our~~In ~~assessments~~August ~~are~~of ~~based~~2017 ona ~~estimates~~Default ~~and assumptions that have been deemed reasonable~~Judgment bywas ~~management,~~awarded ~~but~~to the ~~assessment~~plaintiff ~~process~~in ~~relies~~the ~~heavily~~amount onof ~~estimates and assumptions that may prove to be incomplete or inaccurate~~$43, ~~and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions~~637.

~~The~~In ~~Company~~conjunction ~~has~~with ~~potential~~the ~~contingent~~above, ~~liabilities arising~~ in ~~the~~August ~~ordinary course~~ of ~~business.~~2017, ~~Matters~~a ~~that~~Request ~~are~~to ~~probable~~Subdivide ofthe ~~unfavorable outcomes~~Bradford toA ~~the~~& ~~Company~~B ~~and~~leases ~~which~~were ~~can~~submitted beto ~~reasonably~~the ~~estimated~~Railroad Commission ~~are~~of ~~accrued.~~Texas ~~Such~~and ~~accruals~~was ~~are~~approved ~~based~~on ~~the~~February ~~Company’s~~13, ~~estimates of~~2018. ~~the~~This ~~outcomes~~left ofBradford ~~such~~Joint ~~matters~~Venture ~~and~~with ~~its~~7 ~~experience~~wells inon ~~contesting,~~the ~~litigating~~Bradford ~~and~~A ~~settling~~& B ~~similar~~leases ~~matters~~combined. ToThe ~~date~~Bradford noJoint ~~litigation has~~Venture ~~been~~was ~~filed~~not inable ~~connection~~to ~~with~~raise ~~any~~additional ofcapital ~~these~~to ~~matters.~~place ~~The~~these ~~Company’s~~wells ~~counsel~~into ~~believes~~production. ~~that~~To eliminate the ~~claims~~plugging ~~against~~liabilities, ~~the~~these ~~Company are~~wells ~~groundless~~were ~~and~~transferred ~~any~~to ~~damages~~another ~~which~~operator ~~may~~in ~~arise~~good ~~from~~standing ~~these~~with ~~matters~~the ~~will~~Railroad ~~not~~Commission of beTexas ~~material.~~in ~~Thus~~April ~~there~~of ~~are~~2018. noAs ~~contingencies~~of orthe ~~additional litigation~~date ~~that~~of ~~require~~this ~~accrual~~filing orno ~~disclosure~~judgment asamounts ofhave ~~December~~been ~~31,~~paid ~~2015~~by the Company.

Ally Bank v. Cardinal Energy Group, Inc. and Timothy W. Crawford (Case No. 17CV-02-001370, Franklin County, Ohio Court of Common Pleas)

On November 29, 2017 Ally Bank filed a case against the Company to enforce a Retail Installment Sale Contract regarding the lease of a truck. The bank received possession of the truck and Ally Bank received a judgment for the deficiency resulting from the sale of the vehicle in the amount of $11,531. To date, the judgment amount has not been paid by the Company.

SEC Complaint (No. 2:19-CV-1022)

On March 19, 2019, United States Securities and Exchange Commission (“SEC”) filed a complaint against Timothy Crawford, former CEO, and Cardinal Energy Group, Inc. The SEC alleges that the Company and Crawford filed two inaccurate quarterly reports, made false and misleading representations about the Company’s ownership interest in certain leases and the future revenue the Company expected to receive from the leases, failed to disclose known litigation, concealed business setbacks while raising money from investors, misreported Crawford’s stock ownership and failed to make the required disclosures that he sold millions of shares of the Company’s common stock. In related proceedings the SEC also instituted administrative proceedings against the Company based on the Company’s failure to file its latest six quarterly reports and latest two annual reports. The SEC has requested the Company file a response to their allegations and the SEC will conduct a prehearing event within 14 days of Service of the answer.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is quoted on the ~~OTCQB~~OTC Markets and is traded under the symbol “CEGX”. There is currently a trading suspension and OTC Markets has affixed a skull and cross bones on our symbol.

The following table reflects the range of high and low bid information for our common stock for the period indicated. The bid information was obtained from the OTC Markets Group, Inc. and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

Fiscal Year - 2016	High Bid		Low Bid
Fourth Quarter: 10/1/16 to 12/31/16	$	0.0110	$	0.0010
Third Quarter: 7/1/16 to 9/30/16	$	0.0120	$	0.0041
Second Quarter: 4/1/16 to 6/30/16	$	0.0074	$	0.0020
First Quarter: 1/1/16 to 3/31/16	$	0.0170	$	0.0025
Fiscal Year - 2015	High Bid		Low Bid
Fourth Quarter: 10/1/15 to 12/31/15	$	0.028	$	0.0026
Third Quarter: 7/1/15 to 9/30/15	$	0.18	$	0.0052
Second Quarter: 4/1/15 to 6/30/15	$	0.40	$	0.13
First Quarter: 1/1/15 to 3/31/15	$	0.50	$	0.26

Fiscal Year - 2014		High Bid		Low Bid
Fourth Quarter: 10/1/14 to 12/31/14	$	0.85	$	0.38
Third Quarter: 7/1/14 to 9/30/14	$	0.90	$	0.32
Second Quarter: 4/1/14 to 6/30/14	$	0.76	$	0.34
First Quarter: 1/1/14 to 3/31/14	$	1.03	$	0.37

Holders

On March 2814, ~~2016~~2019, 2017 we had approximately 127 ~~non-objecting beneficial~~ shareholders of record for our common stock plus an unknown number of ~~additional~~ additional holders whose stock is held in “street name”. As of March 2814, ~~2016~~2019, there were a total of 83983,~~379~~376,~~557~~ 477 shares of common stock outstanding.

Dividend Policy

We have never paid cash dividends on our ~~capital~~common stock. We currently intend to retain any profits we earn to finance the growth and development of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Recent Sales of Unregistered Securities

OnDuring ~~or about November 24, 2015,~~ the ~~Company~~year ~~issued~~ended toDecember ~~our CEO~~31, ~~Timothy Crawford~~2016, ~~1,000,000 shares of~~ the Company’s restricted Series A Preferred Stock, valued at approximately $100,000 as deferred compensation to Mr. Crawford in recognition for his previous and continued contributions of valuable service and governance to the Company. The issuance of such shares was exempt from registration under the Securities Act of 1933, Section 4(a)(2) thereof.:

19● Issued 2,154,596 shares of common stock valued at $11,365 for the conversion of convertible notes payable and accrued interest of $6,924, reducing debt discount by $3,668, reducing derivative liability by $16,542, and recording a gain on conversion of $8,432. ● Issued an aggregate of 254,508,000 shares of common stock valued at $1,119,835 to extinguish $123,980 of the Company’s payables, resulting in a loss on debt extinguishment of $995,855. The fair value of the shares of common stock were based on the quoted trading price on the date the payables were assumed. ● Issued an aggregate of 50,000,000 shares of common stock, valued at $160,000 as payment for services. The fair value of the shares of common stock was based on the quoted trading price on the date the shares were issued.

As of December 31, 2016, the Company had 387,937,557 shares of common stock outstanding.

In January 2017 the Company issued 326,838,920 shares of the Company’s common stock for the payment of $158,419 worth of liabilities. In February 2017 the Company issued 268,600,000 shares of the Company’s common stock for the payment of $125,938 worth of liabilities.

In 2017 the Company increase the Series Preferred A shares from 1,000,000 to 10,000,000 and issued 9,000,000 additional shares to an officer of the Company.

In 2017 the Company increased the Series B Preferred shares from 1,000,000 to 5,000,000 and issued the 4,000,000 additional shares as part of the compensation component for two acquisition agreements.

During 2017 and 2018 the Company sold 4.26 Preferred Series D units to investors and raising a total of $1,064,150. Each unit is comprised of (i) 250,000 shares of Series D Preferred Stock, par value $0.00001 per share; and, (ii) 0.8925% of the Net Revenue Interest received by the Company per Unit on certain oil and gas fractional ownership interests, along with other oil and gas assets to be acquired with a portion of the proceeds from the Offering.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

ITEM 6. SELECTED FINANCIAL DATA.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, and notes thereto, included elsewhere in this report. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.

WeThe ~~are~~accompanying ~~engaged~~financial instatements represent the ~~business~~operations of ~~acquiring,~~the ~~developing~~Company ~~and~~during ~~operating~~the ~~oil~~period ~~and~~ending ~~gas~~December ~~leases~~31, 2016. ~~These~~The ~~operations~~reader should ~~are~~read ~~primarily~~all ~~focused on~~of ~~properties~~the indisclosures ~~which~~regarding wethe ~~hold~~proposed aoperations ~~leasehold~~of ~~interest.~~the WeCompany, ~~may~~which ~~however,~~will ~~from~~be ~~time~~included tosubsequent ~~time~~SEC reports, which ~~offer~~management ~~our~~is ~~drilling~~researching, recording and ~~field~~planning ~~development and~~to ~~production~~file ~~services~~in tothe ~~third~~next ~~parties~~several months. WeThe ~~may~~plan ~~offer~~going ~~these~~forward ~~services~~into to2018 ~~other~~and 2019 ~~oil~~is ~~and~~discussed ~~gas~~in ~~companies~~the onsucceeding aparagraphs; ~~fee~~however, ~~basis~~the plans have not been financed or weconcluded ~~may offer~~and ~~such~~any ~~services~~results are not included in ~~connection~~the information that we are providing with this Form 10K. While management is optimistic that the ~~offering~~change in direction of ~~participation~~the ~~interests~~Company inwill ~~Development~~provide ~~Drilling~~a ~~Programs~~more tosuccessful ~~accredited~~operation, there are several constraints, including financial, managerial and competition ~~private~~issues ~~investors~~which may be too great for the Company to overcome.

We are focused on growth via the development of shallow proven undeveloped reserves in or adjacent to currently producing fields, exploiting untapped “behind the pipe” reserves by recompleting existing well bores in zones overlying currently producing formations and by the selected application of water flood and other secondary recovery techniques to mature but marginally producing fields throughout north-central Texas. We may enter into agreements with mid-sized and independent oil and natural gas companies to drill wells and own interests in oil and natural gas properties. We also may drill and own interests without such strategic partners.

Recent Developments

The Fortune Prospect came on production in January 2015 and production peaked at just under 25 barrels of oil equivalent (“BOE”) per day. Production from the three wells has steadily declined from its peak to approximately 13 BOE/d for the first quarter of 2015 to just under 7 BOE per day during the second quarter of 2015 and approximately 3 BOE/d during the third quarter of 2015. Following the initial completion of the three producers the Company asked for a full accounting of the drilling costs and requested a refund for excess charges billed by the operator. In March 2015 the Company voted to remove the operator and in June 2015 filed suit in the District Court for Shackelford County seeking recovery of damages (please refer to Part I, Item 3 - Legal Proceedings of this report for additional details). Future development activities for the prospect have been placed on hold pending the outcome of the litigation.

On June 30, 2015 the Company announced that it had settled the dispute with Concho Oilfield Services over services provided by Concho. As a part of the settlement Concho agreed to re-enter the #5B well on the Dawson-Conway 195B lease to repair damage to the wellbore and production string and to return the well to production. In July 2015 Concho did return to the #5B well and commenced jarring and fishing operations in an attempt to repair the well. These operations did not result in success and the well remains shut-in at this time. In June 2015 the Company filed suit in the District Court for Shackelford County against HLA Interests, LLC and Sedco (a former operator of the Dawson-Conway leases) alleging misrepresentation and fraud concerning title to the leases and compliance in regards to various regulations and permitting requirements of the Texas Railroad Commission (please refer to Part I, Item 3- Legal Proceedings in this report for additional details). In light of these developments all operations at the Dawson-Conway leases have been suspended pending the outcome of the litigation.

On June 12, 2015, the Company, and each of the other beneficial owners of seventy-three (73) participation interests (“Participation Interests”) in the Bradford JV (collectively, the “Sellers”) sold to a third party their Participation Interests in certain oil and gas leases, along with the associated contracts and real property interests necessary and useful in the ownership and operation thereof, all situated in Shackelford County, Texas (the “Oil and Gas Leasehold”), (ii) the oil and gas wells located on the Oil and Gas Leasehold, along with the associated fixtures and personal property, including hydrocarbons produced therefrom (the “Wells”), and (iii) the rights to that certain Farmout Agreement between CEGX and Bluff Creed Petroleum, LLC for a total consideration of $1,825,000. Concurrent with the sale of the Participation Interests, the purchaser entered into an Operating Agreement with CEGX to conduct the drilling operations and related activities necessary to develop the properties. See Financial Statement Notes, Note 13 – Commitments and Contingencies included in Part I, Item 8 of this report for additional details.

We ~~anticipate~~were ~~that~~engaged in the ~~Bradford~~business ~~“A”~~of acquiring, developing and ~~Bradford~~operating ~~“B”~~oil ~~leases~~and ~~will~~gas ~~become~~leases. ~~important~~These ~~producing~~operations ~~properties~~were asprimarily focused weon ~~complete~~properties ~~the~~in ~~full~~which ~~implementation~~we ofheld ~~the~~an ~~water~~operating ~~flood~~or ~~enhanced~~non-operating ~~oil~~leasehold ~~recovery project~~interest. We ~~currently~~have ~~estimate~~offered ~~that~~these itservices ~~will~~to ~~require an~~a ~~additional~~related ~~$650~~party,~~000~~ operating inas ~~2016~~a joint venture, to ~~complete~~develop ~~the~~and ~~drilling~~sell oil and ~~completion~~gas. ofWe ~~producing~~provided drilling, ~~injector~~maintenance and ~~source~~management ~~water~~services ~~wells~~as a registered Texas oil and togas ~~finish the~~operating ~~acidizing~~company. ~~and~~Our ~~down-hole~~services ~~pump~~were ~~repairs~~provided ~~required~~on toa ~~fully~~fee ~~implement~~basis and in exchange for an interest in the subject ~~water~~property. ~~flood~~The ~~program~~related joint venture provided a Private Placement offering of participation interests in a Development Drilling Program to accredited private investors.

~~During~~Prior ~~the~~to ~~second~~2017, ~~quarter~~we ofwere ~~2015,~~focused ~~the~~on ~~Company~~growth ~~drilled~~via the ~~initial~~development ~~well~~of ~~(Bradford~~shallow, ~~West~~proven ~~#1).~~undeveloped Wereserves ~~perforated~~in ~~and~~or ~~treated~~adjacent ~~the~~to ~~well,~~currently ~~ran the~~producing ~~production~~fields; ~~tubing~~exploiting ~~and~~untapped ~~set~~“behind the ~~pump~~pipe” ~~jack.~~reserves ~~The~~by ~~results~~recompleting ~~from~~the ~~this~~existing well ~~were~~bores ~~disappointing~~in ~~and~~zones ~~the Company elected not to continue~~overlying ~~the~~currently ~~drilling~~producing ~~program~~formations ~~called for under the Asset Sale & Purchase,~~ and ~~Farm-In~~selected ~~agreements.~~application ~~The~~of ~~well~~water ~~was~~flood ~~suspended~~techniques ~~and the lease and well were subsequently transferred~~ to ~~the~~mature ~~previous~~but ~~owners~~marginally ~~during~~producing ~~the fourth quarter of 2015~~fields.

OnThe orCompany ~~about~~attempted ~~November~~to ~~24,~~differentiate ~~2015,~~itself in the ~~Company~~marketplace ~~issued~~by tofocusing ~~our~~on ~~CEO~~smaller, ~~Timothy~~older ~~Crawford,~~oil ~~1,000,000~~and ~~shares~~gas ofproperties ~~the~~that ~~Company’s~~had ~~restricted~~either ~~Series~~multiple Achanges ~~Preferred~~in ~~Stock,~~ownership ~~valued~~or atlack ~~approximately~~of ~~$100,000~~capital asrequired ~~deferred~~to ~~compensation~~maintain toproduction Mrrates. ~~Crawford~~We infocused ~~recognition~~our ~~for~~operations ~~his~~in ~~previous~~north-central ~~and continued contributions of valuable service and governance to the Company~~Texas. The ~~issuance~~properties ofgenerally ~~such~~featured ~~shares~~simple ~~was~~vertical ~~exempt~~well ~~from~~completions ~~registration under~~which ~~the~~typically ~~Securities~~produce ~~Act~~from ofrelatively ~~1933,~~shallow ~~Section 4(a)(2) thereof~~reservoirs. In ~~The~~most ~~issuance~~instances tothese ~~Mr.~~properties ~~Crawford~~have ofbeen ~~the~~overlooked ~~1,000,000~~by ~~shares of~~ the ~~Series A~~“major” ~~Preferred~~and ~~Stock~~“mid-major” ~~resulted~~players in ~~Mr.~~the industry ~~Crawford~~due ~~acquiring~~to ~~approximately~~their ~~65%~~geographic oflocation ~~the~~relative ~~voting~~to ~~securities~~other ofexisting ~~the~~oil ~~Company.~~and ~~Effective~~gas ~~November 24~~properties, ~~2015,~~ the ~~Company~~absence ~~filed with the Nevada Secretary~~ of ~~State~~potential aoperating synergies ~~Certificate~~and/or ofbecause ~~Designation~~the inrequired ~~which~~costs ~~the~~to ~~Company~~optimize ~~authorized~~production ~~the creation~~levels ofis ~~1,000,000~~not ~~shares~~compatible ofwith ~~Series~~their Ainternal ~~Preferred~~cost ~~Stock~~structures. By ~~Each~~the ~~shares~~end of ~~Series~~2016, Awe ~~Preferred~~have ~~stock~~terminated ~~entitles~~our ~~the~~attempts ~~holder thereof~~ to ~~110~~locate ~~votes per share~~ and ~~otherwise~~rework ~~has~~ the ~~same~~oil ~~rights~~ and ~~privileges~~gas asoperations ~~the~~described ~~Company’s~~in ~~common~~this ~~stock~~paragraph.

InWe ~~December~~also ofintended ~~2015~~to ~~the~~locate ~~Company~~and ~~employed~~to ~~the~~acquire ~~services~~additional ofoil ~~Bullet~~and ~~Development,~~gas afields ~~respected~~that ~~oil~~were ~~and~~producing ~~gas~~normally ~~development~~in ~~firm~~a ~~headquartered in~~proven ~~Abilene~~reserve, ~~Texas~~as well as, tonon-producing ~~assess~~oil ~~the value~~ and ~~potential~~gas ~~development~~fields ~~options~~with ~~for~~proven ~~its~~reserves ~~remaining~~in ~~oil~~known ~~and~~formations ~~gas~~for ~~properties~~development in ~~north-central Texas, namely~~ the ~~Powers-Sanders and Dawson-Conway leases~~future. ~~Based~~Due onto the ~~results~~restrictions arising offrom ~~the~~limited ~~study~~resources and the ~~recommendations~~declining ~~from~~price ~~Bullet Development~~of ~~the~~oil, ~~Company~~we ~~has~~have ~~determined~~been ~~that~~forced ~~the~~to ~~best~~terminate ~~course~~the ofoil ~~action~~and ~~would~~gas beoperations, toincluding those ~~sell~~discussed ~~the~~in ~~leases~~this ~~to interested local parties~~paragraph.

~~Accordingly,~~We ~~the~~have ~~Company~~revised ~~has~~our ~~held~~planned ~~discussions~~operations, ~~with~~including ~~several~~disposing ~~parties who are interested in acquiring the properties. In the case~~ of ~~the Powers-Sanders leases at least one~~ oil and gas ~~company~~leasehold ~~has~~interests ~~expressed~~acquired anprior ~~interest in acquiring the leases in order~~ to ~~exploit~~2016. ~~some~~We ~~shallow~~have ~~oil~~disposed ~~reservoirs~~of ~~believed~~several ~~to be present under the properties. In the case~~ of ~~the~~our ~~Dawson-Conway~~fixed ~~leases~~assets, ~~initial~~including ~~discussions~~transportation ~~have~~equipment, ~~occurred between~~real ~~the~~estate ~~Company~~ and ~~two~~leasehold ~~interested parties~~interests. ~~One~~At of the ~~parties~~end ~~is the operator~~ of ~~adjoining~~2016, ~~leases and is interested in acquiring~~the ~~one~~Company orhad ~~more~~two oftrucks, ~~the~~which ~~leases~~were inultimately ~~order~~returned to ~~include~~leasing ~~the~~companies ~~Dawson-Conway~~in ~~leases into a “master water flood project” for all of the surrounding leases~~2017. ~~Negotiations between the parties are continuing.~~

OnIn ~~February~~the ~~12,~~fourth ~~2016~~quarter of 2017 management determined that the Company ~~sold~~would ~~its~~be ~~regional~~better ~~operating~~served ~~complex~~to ~~located~~specialize in ~~Albany~~locating, ~~Texas~~researching and tonegotiating ainterest ~~local~~in mineral royalty opportunities. The Company has disposed of the oil and gas ~~well~~leaseholds ~~plugging~~previously acquired ~~and~~to ~~abandonment~~explore, ~~services~~drill ~~company~~and ~~for~~develop. aThe ~~total~~targeted ~~consideration~~properties ofare ~~$130,000.~~not Inexpected ~~connection~~to ~~with~~entail the ~~sale~~overhead ~~the~~and ~~Company~~infrastructure ~~took~~which ~~back~~requires the aCompany ~~$30,000 note~~to ~~which~~invest ~~draws~~and ~~interest~~maintain atlarge 5%financial ~~per~~commitments ~~annum~~for exploring and ~~which~~developing ~~matures~~working oninterests ~~February~~associated ~~12,~~with oil ~~2019~~and ~~from~~gas ~~the~~leasehold ~~buyer~~properties.

We have nominal revenues, have recorded losses since inception, have been issued a going concern opinion by our auditors and currently rely upon the sale of our debt and equity securities to fund operations. We may enter into agreements with major and independent oil and natural gas companies and other investees to drill and own interests in oil and natural gas properties. We also may drill and own interests without such strategic partners. We may sell all or a portion of our prospect interests or may retain a working or “carried” interest in the prospects and participate in the drilling and development of the properties. We have no current plans to change our core business activities. We may however elect to combine with one or more privately held oil and gas companies in order to exploit acquisition opportunities during the current downturn in the oil and gas industry.

Financial Overview

The following reflects how we intend to spend our capital over the next twelve months:

Acquisition of Leases	$	1,025,000
Drilling, Well Workovers and Facilities	$	3,575,000
Lease and Facility Operating Costs	$	400,000

The above referenced costs do not include approximately $1,500,000 of general and administrative expenses we expect to incur over the next twelve months.

Currently, we do not have sufficient capital on hand or expected cash flows from currently producing properties to fully fund our proposed budget and maintain operations for the upcoming year. Accordingly, we will have to raise additional capital through either the sale of interests in selected oil and gas properties, accessing bank financing facilities, the sale of debt and/or equity securities in both public and private transactions or via a combination of these and other sources.

We have nominal revenues, have recorded losses since inception, have been issued a going concern opinion by our auditors and currently rely upon the sale of our debt and equity securities to fund operations. We have no oil or gas properties, nor do we have any interest in oil & gas mineral properties with royalty interests (as mentioned in our press release January 23, 2019). Going forward, we may enter into agreements with major and independent oil and natural gas companies and other investees to drill and own interests in oil and natural gas properties. We also may drill and own interests without such strategic partners. We may sell all or a portion of our prospect interests or may retain a working or “carried” interest in the prospects and participate in the drilling and development of the properties. We also intend to acquire a significant number of non-operating interests in wells and facilities operated by larger oil and gas companies in the Oklahoma and Texas area. Such interests are designed to provide the Company with the opportunity to leverage off the operating expertise and financial resources of major oil and gas firms and to provide a steady stream of operating cash flows to augment the cash flows from Company-owned properties and from our oil and gas service and development activities. At the present time, we intend to concentrate on oil exploration and production rather than gas production and to focus our efforts on leases located in Oklahoma and Texas. We have no current plans to change our core business activities. We may however elect to combine with one or more privately held oil and gas companies in order to exploit present and future acquisition and development opportunities in the oil and gas industry.

Financial Overview

Currently, we do not have sufficient capital on hand or expected cash flows from currently producing properties to fund our proposed budget and maintain operations for the upcoming year. Accordingly, we will have to raise additional capital through either the sale of interests in selected oil and gas properties, accessing bank financing facilities, the sale of debt and/or equity securities in both public and private transactions or via a combination of these and other sources. We have no arrangements to raise capital and there is no assurances that we will be able to do so. If we are unable to locate suitable financing, we will go out of business.

Results of Operations

The following comparative analysis on results of operations was based ~~primarily~~ on the comparative audited consolidated financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the consolidated ~~financial~~ financial statements and the notes to those statements that are included elsewhere in this report.

~~Years~~Year Ended December 31, ~~2015~~2016 and ~~2014~~2015

Oil and Gas and Other Operating Revenues

For the year ending December 31, ~~2015~~2016 oil and gas revenues decreased to $471,~~057~~416 from $~~148~~47,~~855~~057 for the year ending December 31, ~~2014~~2015 primarily as a result of lower ~~crude oil prices in 2015 and lower~~ production volumes ~~due~~from to the ~~sale of the Company’s interest in the Bradford “A” and Bradford “B” leases, the disposition of the Stroebel-Broyles leases in March of 2015, down-hole mechanical problems at the~~ Powers-Sanders leases ~~during 2015~~ and the ~~cessation~~Fortune ofprospect ~~operating~~in ~~activities at the Dawson~~north-~~Conway~~central ~~leases due to compliance and legal issues~~Texas. We sold our California natural gas property effective April 1, 2014, hence natural gas sales revenues which accounted for approximately 30% of our first quarter 2014 sales revenues are not expected to significantly contribute to our over-all operating revenues on a going forward basis.

In accordance with the sale, on September 2, 2014 of the Bradford A&B properties, the Company recognized net operating revenues (revenues from services less associated costs) of $1,023,876 during the third and fourth quarters of 2014 for services performed pursuant to the drilling, development and production services agreement between the Company and the Bradford JV. During the year ended December 31, 2015 the Company recognized net operating revenues (revenues from services net of associated costs) of $290,498 for drilling, development and production services provided to the Bradford JV and Keystone. This lower level of net operating revenues from contract development operations in 2015 reflects the timing and funding of development activities. In addition, the Company recorded a one-time fee of $250,000 during 2015 related to the placement of a portion of its working interest share in the Bradford JV into an escrow account for Keystone’s beneficial enjoyment thereof.22

~~Operating~~The Company recognized revenues from contract development operations totaling $0 during the year ended December 31, 2016 versus $621,508 during 2015 for services performed pursuant to the drilling, development and ~~Production~~production ~~Expenses~~services agreement between the Company and the Bradford Joint Venture (“BJV”). The decrease reflects the lower level of development activity at the Bradford “A” and Bradford “B” leases due in part to the timing of the drilling of wells in relation to the depressed price of oil, hook-up of production facilities and due partially to the lack of funding from the purchaser of the participation interests in the Bradford JV.

~~For~~In ~~the year ending December 31~~addition, ~~2015~~the ~~operating~~Company ~~and~~recorded ~~production~~a ~~expenses~~one-time ~~decreased~~fee toof $74250,~~281~~000 ~~compared~~during to2015 ~~$402,863~~related ~~for~~to the ~~year~~placement ~~ending December~~of ~~31, 2014. The decrease was primarily due to~~ a ~~shift~~portion ~~in company focus from the remediation~~ of ~~older~~its ~~wells~~working ~~to development~~interest ~~drilling~~share onin ~~our~~the ~~recently~~Bradford ~~acquired~~JV ~~oil~~into ~~and~~an ~~gas~~escrow ~~leases~~account infor ~~Texas~~Keystone’s benefit.

Operating and Production Costs

For the year ending December 31, 2016 operating, production and contract development costs decreased to $35,767 compared to $74,281 for the year ending December 31, 2015. The decrease was primarily due to a shift in Company focus from the remediation of older wells to development drilling on our recently acquired oil and gas leases and a slow-down in contract development operations at the Bradford “A” and Bradford “B” leases due to reduced development activity and a lack of funding.

Impairment Expense

The Company reviewed the carrying value of its oil and gas properties in December 2015 and determined that there was sufficient evidence that the costs for its oil and gas properties would not be fully recovered in the course of normal operations. Accordingly, the Company took a $2,654,824 charge to earnings to reduce the value of its oil and gas properties to their estimated fair values at December 31, 2015. During the year ended December 31, 2016, the Company determined that the existing leasehold interests were not economically recoverable and an additional charge to impairment expense of $250,000 was recorded during the fourth quarter of 2016. Also during the fourth quarter of 2016 the Company recorded an other than temporary loss in their equity investments of $122,513 as impairment expense.

General and Administrative Expenses

For the year ending December 31, ~~2015~~2016 general and administrative expenses decreased to $1856,~~568,506~~654 compared to $21,~~113~~568,~~983~~506 for the year ending December 31, ~~2014~~2015. The decrease reflects lower consulting and professional fees ($536,055 in the current period versus $804,251 in the prior year) incurred in connection with our efforts to locate additional sources of financing and oil and gas investment opportunities, lower compensation expense ~~($751,445 in 2015 versus $970,507 in 2014)~~ as the ~~company~~Company reduced the number of full-time employees required to administer our portfolio of operating assets and lower head office expenses ~~($281,007 in the current period compared to $339,225 for 2014)~~ as we reduced home office staff levels, mothballed our executive offices in Abilene and reduced travel related costs required to manage our investor relations, marketing and SEC reporting activities.

Depreciation and Amortization

For the year ending December 31, ~~2015~~2016 depreciation and amortization expense ~~increased~~decreased to $6349,~~294~~760 compared to $4063,~~092~~294 for the year ending December 31, ~~2014~~2015. The ~~increase~~decrease was due ~~mainly~~primarily to areductions ~~full~~in ~~year~~expense ~~of depreciation~~ related to ~~2014~~fixed ~~purchases~~assets ofthat ~~new~~were ~~vehicles~~sold, trucks ~~and~~that ~~other~~were ~~pieces~~sold ofor ~~rolling-stock~~returned ~~plus~~per ~~the~~capital ~~purchase~~lease ofobligations ~~well testing, shop equipment~~ and ~~additional~~the ~~information~~full ~~technology~~depreciation ~~assets required~~of tooffice ~~support the Company’s operations~~equipment.

22Cost of Contract Development Operations

~~Accretion~~For onthe ~~Asset~~year ~~Retirement~~ended ~~Obligation~~December 31, 2016, the cost of contract development operations decreased to $853 compared to $331,010 for the year ending December 31, 2015. The decrease of $330,157 is a result of the Company changing their focus during 2016 to promoting and marketing as it relates to engaging with potential exploration and operating companies versus the prior year focus on mining operations.

For the twelve months ended December 31, 2015 the Company accreted $14,987 to the ARO versus $19,985 in 2014. The decrease reflects adjustments to the estimated costs to abandon wells based on operating experience and adoption of Texas Railroad Commission guidelines and the removal of wells from the Company’s inventory of wells subject to future plugging and abandonment liability due to the sale of the Company’s California and Ohio wells effective April 1, 2014 and the sale of the Stroebel-Broyles leases in March 2015.

Other Income (Expenses)

~~Interest~~Other ~~related~~ expenses ~~(interest,~~for ~~amortization~~the ofyear ~~debt~~ended ~~discount~~December ~~and~~31, ~~changes~~2016 totaled $24,547,926 compared to $4,840,012 in 2015. The Company recorded a loss on the change in the fair value of ~~debt related~~ derivative liabilities~~) increased~~ toof $421,~~880~~377,~~687~~793 induring ~~2015~~2016 ~~from~~compared ~~$1,125,284~~to ~~recorded~~a ingain ~~2014.~~on the ~~The~~change ~~increase~~in ~~primarily reflects~~ the ~~higher~~fair ~~level~~value of ~~debt outstanding~~derivative ~~during~~liabilities ~~the~~of ~~current~~$709,219 ~~year~~during 2015. ~~Previous~~Additionally, ~~year~~interest ~~2014~~expense ~~also~~decreased to ~~includes~~ $762,~~581~~033,474 ofin ~~“premium”~~2016 ~~costs~~from ~~associated~~$4,287,205 ~~with the~~in ~~early~~2015 ~~extinguishment~~and amortization of debt discount decreased to $207,052 in ~~the~~2016 from ~~first~~$1,302,701 ~~quarter~~in 2015. During the year ended December 31, ~~2015~~2016 the Company ~~recorded~~recognized a ~~gain~~loss on ~~derivative~~ ~~liabilities~~extinguishment ~~related~~of ~~to convertible~~ debt ~~issues~~ of $~~709~~987,~~219~~422 versus ~~while 2014 included~~ a gain ~~of $321,254~~ on ~~such~~extinguishment ~~derivative liabilities.~~of ~~The~~debt ~~Company also reported a gain in 2014~~ of $9327,~~414~~373 ~~resulting~~during ~~from~~ the ~~sale~~year ofended ~~its~~December ~~leasehold~~31, ~~interests in the Bradford properties~~2015.

Net Loss

For the year ending December 31, ~~2015~~2016 our net loss was $825,~~613~~862,~~362~~057 compared to a net loss of $28,~~491~~613,~~393~~362 for the year ending December 31, ~~2014~~2015. The increase was ~~mainly~~primarily due to higher interest related costs (due primarily to increased losses related to the ~~increased~~change in ~~level~~the fair value of debt ~~outstanding~~related ~~required to~~derivative ~~fund~~liabilities), ~~the~~partially ~~Company’s~~offset by decreased operating loss and ~~development~~translates ~~activities~~into to a loss of $0.25 per share (basic and ~~the~~diluted) ~~aforementioned~~in 2016 compared to a loss of $~~2,654,824~~0.18 ~~impairment~~per ~~expense~~share ~~recorded~~ (basic and diluted) in 2015. ~~These~~The ~~negative~~loss per ~~factors~~share ~~were~~in ~~partially~~2016 ~~offset~~also byreflects ~~lower~~the ~~administrative~~dilutive ~~and~~impact ~~general~~of ~~expenses~~the ~~discussed~~increased ~~earlier~~number inof ~~this~~common ~~section~~shares outstanding during the year.

Comprehensive Loss

For the year ending December 31, 2015 our comprehensive loss was $8,651,862 compared to a comprehensive loss of $2,445,928 for the year ending December 31, 2014. During the years ended December 31, 2015 and 2014, the Company recorded an unrealized (loss) gain on available for sale securities of ($38,500) and $45,465, respectively.

Financial Condition, Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of December 31, 2015 our current assets were $256,441 and our current liabilities were $8,958,676 resulting in negative working capital of $8,702,235 compared to a working capital deficit of $5,070,943 at December 31, 2014. At December 31, 2015, we had cash on hand of $24,155 which is not sufficient to meet our operating needs for the next twelve months. Because we operate in a cash intensive industry we anticipate the need to raise additional capital on a continuous basis. As previously noted in the “Recent Developments” discussion earlier in this report, the Company expects to utilize the proceeds from the sale of its Albany, Texas regional operations office plus the proceeds from the anticipated sales of the Dawson-Conway and Powers-Sanders leases and proceeds from the sale of surplus rolling stock and support equipment to replenish working capital. The Company has reduced the number of full-time employees and closed its corporate headquarters in Abilene, Texas in order to conserve cash. The Company is in discussions with several of its current creditors seeking to restructure the payment terms of its various debt obligations. Such negotiations among other items include the lowering of applicable interest rates, extensions to the maturity dates and the conversion of the outstanding principal and interest balances in to equity (common and or preferred) securities of the Company. The Company has also approached other lenders seeking to secure new sources of capital to either retire existing debt or to provide additional capital to support operations. We have also held initial discussions with several privately held oil and gas companies exploring strategic alliances including potential mergers which would allow us to reorganize our capital structure and position the Company for future profitability and growth. Our current level of negative working capital when coupled with the timing of proceeds from asset sales and debt offerings may result in short-term liquidity imbalances until cash flows from operating activities turn consistently positive.

We used cash in operations of $922,367 during the year ended December 31, 2015 compared to $1,875,297 during the year ended December 31, 2014. The improvement was due primarily to the decreased cash basis losses from operations, a net decrease in operating assets and liabilities, partially offset by gains on change in fair value of derivative liabilities and stock based compensation paid to employees and consultants.

We generated $30,025 from investing activities during the year ended December 31, 2015 compared to net cash used in investing activities of $2,243,419 during the year ended December 31, 2014. In 2015, we used $3,511 to purchase property and equipment while we reduced our costs associated to acquire and develop oil and gas properties leases by $33,536. In 2014 we used $2,047,603 to acquire and develop oil and gas properties, $217,816 to purchase other property and equipment and received $22,000 from the sale of property and equipment.

We were provided $801,099 of net cash from financing activities during the year ended December 31, 2015 compared to $4,215,420 during 2014. The funds in 2015 came primarily from the proceeds from the sale of convertible short-term and long-term notes and loans payable in the amounts aggregating to $1,084,568 partially offset by the repayment of convertible notes payable totaling $270,167. In addition, the Company paid-off equipment notes payable totaling $13,302. The funds in 2014 came primarily from the sales of the 12% senior secured convertible notes for $4,345,000 (net of debt issuance costs), proceeds from the sale of short-term notes of $296,000, $195,975 from the sale of stock for cash offset by net repayment of convertible notes payable of $621,555.

~~There~~Financial ~~can be no assurance that additional capital will be available to us. We currently have no agreements~~Condition, ~~arrangements~~Liquidity orand ~~understandings with~~Capital any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no other such arrangements or plans currently in effect, our inability to raise funds for the above purposes could have a severe negative impact on our ability to remain a viable company.Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its operational requirements. As of December 31, 2016, our current assets were $34,673 and our current liabilities were $33,027,841 resulting in a working capital deficit of $32,993,168 compared to a working capital deficit of $8,702,235 at December 31, 2015. At December 31, 2016, we had cash on hand of $1,193 which is not sufficient to meet our operating needs for the next twelve months. Because we operate in a cash intensive industry we anticipate the need to raise additional capital on a continuous basis. As previously noted in this report, the Company utilized the proceeds from the sale of its Albany, Texas regional operations office and the proceeds from the sale of surplus rolling stock and support equipment to replenish working capital. The Company has reduced the number of full-time employees and closed its corporate headquarters in Abilene, Texas to conserve cash. The Company is in discussions with several of its current creditors seeking to restructure the payment terms of its various debt obligations. Such negotiations among other items include the lowering of applicable interest rates, extensions to the maturity dates and the conversion of the outstanding principal and interest balances into equity (common and or preferred) securities of the Company. The Company has also approached other lenders seeking to secure new sources of capital to either retire existing debt or to provide additional capital to support operations.

In 2017 we entered into two agreements to acquire oil and gas leases and operating equipment, from related parties. The acquisitions included related wells and production facilities, plus two oil and gas service rigs and related equipment from privately held oil and gas companies operating in north-central Texas . The acquisition was terminated in 2018 due to the Company’s inability to raise the necessary cash required under the terms of the agreements.

We are also looking to acquire non-operating revenue interests in oil and gas wells operated by major oil and gas companies and plan to use the cash flows from such properties to augment the operating cash flows from our properties and contract drilling and development activities.

Our current level of negative working capital when coupled with the timing of proceeds from asset sales and debt offerings will likely result in short-term liquidity imbalances until cash flows from operating activities turn consistently positive.

We used cash in operations of $241,547 during the year ended December 31, 2016 compared to $922,367 during the year ended December 31, 2015. The improvement was due primarily to a smaller loss from operations as a result of lower lease operating, production and development expenses, and lower administrative and general expenses due to staff reductions and lower stock based compensation to employees and consultants partially offset by lower oil and gas sales revenues due primarily to lower production volumes.

We generated $145,900 from investing activities during the year ended December 31, 2016 compared to $30,025 generated during the year ended December 31, 2015. In 2016, the cash was generated from the sale of our regional operations office in Albany, Texas and the sale of surplus equipment. In 2015 we generated cash from the sale of oil and gas properties and other property and equipment.

We were provided $72,685 of net cash from financing activities during the year ended December 31, 2016 compared to $801,099 during 2015. Funds provided in 2016 came primarily from the issuance of $91,000 in notes and loans payable, offset by repayments of $13,257 on notes and loans payable and repayments of $5,058 on equipment purchase contracts payable. The funds in 2015 came primarily from the proceeds from the sale of convertible short-term and long-term notes and loans payable in amounts aggregating to $1,084,568 partially offset by the repayment of notes and loans payable totaling $270,167. In addition, the Company paid off equipment purchase contracts payable totaling $13,302.

Going Concern Consideration

As of December 31, ~~2015~~2016, we have incurred aan ~~cumulative~~accumulative deficit of $1339,~~955~~817,~~074~~131, incurred a net loss of $825,~~613~~862,~~362~~057 for the year ended December 31, ~~2015~~2016, while using $~~922~~241,~~367~~547 in cash in operating activities, ~~while~~ generating $30145,~~025~~900 from investing activities and $~~801~~72,~~099~~685 was provided by financing activities. This raises substantial doubt about our ability to continue as a ~~going concern.~~ ~~Our ability to continue as a~~ going concern ~~is dependent our ability to raise additional capital and generate additional revenues and profits from our business plan~~.

In the opinion of our independent registered public accounting firm for our fiscal year end December 31, ~~2015~~2016, our auditor included a statement that as a result of our negative cash flows from operations, working capital deficit, and our projected cost of capital improvements of the oil and gas wells there is a substantial doubt as our ability to continue as a going concern. ~~The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.~~

~~Related~~Management’s ~~Party~~plans ~~Transactions~~to continue as a going concern include the filing of financial documents required by government agencies and by public markets where their stock will be traded, raising additional capital through the procuring of debt and the sale of equity securities (including both common and preferred stock) in both public and private transactions. Management plans to utilize the expertise of more experienced consultants to evaluate opportunities which the Company may consider regarding future operations. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described above, restructuring its current debt and eventually securing additional sources of financing and attaining consistent profitable operations. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. Our audited financial statements at December 31, 2016 do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

On June 1, 2014, the Company, through its wholly owned subsidiary, CEGX of Texas, LLC entered into a Contract Operating Agreement with Bradford JV. Under the terms of this agreement, the Company agreed to perform routine and major operations, marketing services, accounting services, reporting services and other administrative services on behalf of Bradford JV as necessary to operate Bradford JV’s oil and gas lease operations on the Bradford oil and gas leases located in Shackelford County, Texas. Bradford JV agreed to pay the Company an administrative and pumping fee of $500 per well per month, 93.7% of the actual cost of electricity, taxes and ongoing maintenance and repairs to operate Bradford JV’s assets. The agreement is for a term of three years and automatically renews for one year periods until one of the parties notifies the other party not later than 60 days prior to commencement of a renewal term of its desire to not renew the agreement.

During the last week of December 2014, the Company obtained 20 units (out of 100 total units) in the Bradford Joint Venture exploration and drilling program located in Shackelford County, Texas. The operation is accounted for as an investment as of December 31, 2014.

On June 12, 2015 the Company transferred its 20% interest in the Bradford JV to Keystone Energy, LLC (“Keystone”) in a series of transactions which resulted in Keystone securing a line of credit to be used to further develop the Bradford “A” and Bradford “B” leases, Keystone acquiring an option (exercisable within 365 days) to purchase all of the interests in the Bradford JV and Cardinal Energy exchanging 10 of its ownership interests in the Bradford JV for a 5% equity interest in Keystone. In June 2015, the Company received $250,000 for the Company’s ten (10) Participation Interests for Keystone’s right to beneficial enjoyment which is not subject to forfeiture by the Company under any circumstances. For financial reporting purposes the Company has recognized this amount as a component of related party operating revenues during the year ended December 31, 2015.

The Company has determined that these agreements create a related party relationship and as such has reported the billed revenues of $621,508 and $1,716,771 and the unpaid accounts receivable of $180,712 and $225,000 at December 31, 2015 and December 31, 2014, respectively as related party transactions in the financial statements.

During 2014, the Company transferred the oil and gas producing properties located in Ohio and California to a third party in exchange for 3,000,000 shares of common stock which have been designated “Treasury Stock”. Also, as part of the transaction, the Company returned the $20,000 bond they had received earlier.

Various general and administrative expenses of the Company as well as loans for operating purposes have been historically paid for or made by related parties of the Company. Related party payables totaled $nil at December 31, 2015 and 2014. These amounts payable bear no interest, are uncollateralized and due on demand.

Off-Balance Sheet Arrangements

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. As of December 31, ~~2015~~2016, we have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

We prepared our financial statements and the accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect the reported amounts in the financial statements and the accompanying notes. We identified certain accounting policies as critical based on, among other things, their impact on the portrayal of our financial condition, results of operations, or liquidity and the degree of difficulty, subjectivity, and complexity in their deployment. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown. Management routinely discusses the development, selection, and disclosure of each of the critical accounting policies. The following is a discussion of our most critical accounting policies.

Oil and Gas Properties

WeThe ~~follow~~Company has elected to apply the full cost method of accounting for ~~our~~ oil and natural gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves ~~are~~were capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities ~~and~~plus asset retirement costs. ~~Disposition~~In applying the full cost method, the Company performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of oil and gas ~~properties~~property ~~are~~and ~~accounted~~equipment is ~~for~~limited asto athe ~~reduction~~“estimated present value” of ~~capitalized~~the ~~costs,~~future ~~with~~net norevenues ~~gain~~from orits ~~loss~~proved ~~recognized~~reserves, ~~unless~~discounted ~~such~~at ~~adjustment~~a 10-percent ~~would~~interest ~~significantly~~rate ~~alter~~and ~~the~~based ~~relationship~~on ~~between~~current ~~capital~~economic ~~costs~~ and ~~proved~~operating ~~reserves~~conditions, plus the cost of ~~oil~~properties ~~and~~not ~~gas~~being amortized, plus the lower of cost or fair market value of unproved properties included in ~~which~~costs ~~case~~being amortized, less the ~~gain~~income ortax effects related ~~loss~~to isany ~~recognized~~book toand ~~income~~tax basis differences of the properties.

~~Depletion~~Disposition ~~and depreciation~~ of ~~proved~~ oil and gas properties isare ~~calculated~~accounted onfor ~~the~~as ~~units-of-production~~a ~~method~~reduction ~~based upon estimates~~ of ~~proved reserves.~~capitalized ~~Such calculations include the estimated future~~ costs, towith ~~develop~~no ~~proved~~gain ~~reserves.~~or ~~Oil~~loss ~~and~~recognized ~~gas~~unless ~~reserves~~such ~~are converted~~adjustment towould asignificantly ~~common~~alter ~~unit~~the ofrelationship ~~measure~~between ~~based~~capital oncosts ~~the~~and ~~energy~~proved ~~content~~reserves of ~~6,000~~oil ~~cubic~~and ~~feet of~~ gas, toin ~~one~~which ~~barrel~~case ofthe ~~oil.~~gain ~~Costs of unevaluated~~or ~~properties~~loss ~~are~~is ~~not~~recognized ~~included in the costs subject~~ to ~~depletion~~income. ~~These costs are assessed periodically for impairment.~~

InUnder ~~applying~~ the full cost method, weof ~~performed~~accounting anfor ~~impairment~~oil ~~test~~and ~~(ceiling~~natural ~~test) at each reporting date~~gas, ~~whereby the carrying value~~depletion ~~of oil~~ and ~~gas~~depreciation ~~property and equipment~~ is ~~limited~~applied to ~~the~~proven ~~“estimated present value” of the future net revenues from its proved~~ reserves, ~~discounted~~as atportion ~~a 10-percent interest rate and based on current economic and operating conditions, plus the cost~~ of ~~properties not being amortized, plus~~ the ~~lower of~~ cost ~~or fair market value~~ of ~~unproved properties included in costs being amortized, less the income tax effects related to any book and tax basis differences of the properties~~production.

Calculations included in estimating the future value of oil and gas properties include the anticipated costs of developing any proved reserves. Oil and gas reserves are converted to a common unit of measure based on the energy content of 6,000 cubic feet of gas to one barrel of oil. Costs of unevaluated properties are not included in the costs subject to depletion. These costs are assessed periodically for impairment. As of December 31, 2016, and 2015 there were no proved reserves.

Asset Retirement Obligation

WeThe ~~follow~~Company follows FASB ASC 410, Asset Retirement and Environmental Obligations, which requires entities to record the fair value of a liability for asset retirement obligations (“ARO”) and ~~recorded~~record a corresponding increase in the carrying amount of the related long-lived asset. The asset retirement obligation primarily relates to the abandonment of oil and gas properties. The present value of the estimated asset retirement cost is capitalized as part of the carrying amount of oil and gas properties and is depleted over the useful life of the asset. The settlement date fair value is discounted at our credit adjusted risk-free rate in determining the abandonment liability. The abandonment liability is accreted with the passage of time to its expected settlement fair value. Revisions to such estimates are recorded as adjustments to ARO ~~are charged to operations in the period in which they become known~~. At the time the abandonment cost is incurred, the Company is required to recognize a gain or loss if the actual costs do not equal the estimated costs included in ARO. The ARO is based upon numerous estimates and assumptions, including future abandonment costs, future recoverable quantities of oil and gas, future inflation rates, and the credit -adjusted risk -free interest rate. Different, but equally valid, assumptions and judgments could lead to significantly different results. Future geopolitical, regulatory, technological, contractual, legal and environmental changes could also impact future ARO cost estimates. Because of the intrinsic ~~uncertainties~~ uncertainties present when estimating asset retirement costs as well as asset retirement settlement dates, our ARO estimates are subject to ongoing volatility.

~~Also,~~Derivative ~~refer Note 1 - Nature of Operations and Summary of Significant Accounting Policies in the consolidated financial statements that are included in this Report.~~Liabilities

~~Recently~~The ~~Issued~~Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Accounting ~~Pronouncements~~Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.

~~There~~The ~~were~~result ~~various~~of ~~updates~~this ~~recently~~accounting ~~issued,~~treatment ~~most~~is that the fair value of ~~which~~the ~~represented~~embedded ~~technical~~derivative ~~corrections~~is marked-to-market each balance sheet date and recorded as either an asset or a liability. If the ~~accounting~~fair ~~literature~~value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or ~~application~~expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to ~~specific~~fair ~~industries~~value at the date of conversion, exercise or cancellation and ~~are~~then ~~not~~that ~~expected~~the related fair value is reclassified to aequity. ~~have~~The aclassification ~~material~~of ~~impact~~derivative oninstruments, ~~the~~including ~~Company’s~~whether ~~financial~~such ~~position~~instruments should be recorded as liabilities or as equity, ~~results~~is re-assessed at the end of each reporting period. Equity instruments that ~~operations~~are orinitially ~~cash~~classified ~~flows~~as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date.

~~Management does not believe that any other recently issued but not yet effective accounting pronouncements, if adopted, would have an effect on the accompanying consolidated financial statements.~~26

25ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional.

~~Inflation~~The Company marks to market the fair value of the embedded derivative convertible notes and derivative warrants at each balance sheet date and records the change in the fair value of the embedded derivative convertible notes and derivative warrants as other income or expense in the consolidated statements of operations.

The Company estimates fair values of derivative financial instruments using the Black-Scholes model, adjusted for the effect of ~~inflation~~dilution, because onit ~~our~~embodies ~~revenue~~all of the requisite assumptions (including trading volatility, estimated terms, dilution and ~~operating~~risk-free ~~results~~rates) necessary ~~was~~to ~~not~~fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock.

Recent Accounting Pronouncements

In January, 2016, the FASB issued ASU 2016-01 which requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in OCI the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of AFS debt securities in combination with other deferred tax assets. The Update provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes. The Update also requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The new standard takes effect in 2018 for public companies. Early adoption is only permitted for the provision related to instrument-specific credit risk and the fair value disclosure exemption provided to nonpublic entities. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. Early adoption is permitted. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

In April, 2016, the FASB issued ASU 2016-09 to simplify accounting for stock compensation. It focuses on income tax accounting, award classification, estimating forfeitures, and cash flow presentation. The ASU also provides certain accounting policy alternatives to nonpublic entities. The ASU becomes effective in 2017 for public companies and in 2018 for all other entities. Early adoption is permitted. Certain disclosures and detailed transition provisions apply. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

On June 20, 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, as part of its ongoing Simplification Initiative to expand the scope of Topic 718 to include share-based payments issued to nonemployees. This ASU supersedes Subtopic 505-50 by expanding the scope of Topic 718 to include nonemployee awards and generally aligning the accounting for nonemployee awards with the accounting for employee awards. The effective date for public companies is for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

There were no other new accounting pronouncements issued during the years ended December 31, 2016 and 2015, and through the date of filing of this report that the Company believes are applicable to or would have a material impact on the consolidated financial statements of the Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

2627

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-1
Reports of Independent Registered Public Accounting Firms	F-1, F-2
Consolidated Balance Sheets as of December 31, 2015 and 2014	F-2
Consolidated Balance Sheets as of December 31, 2016 and 2015	F-3
Consolidated Statements of Operations and Other Comprehensive Loss for the years ended December 31, 2015 and 2014	F-3
Consolidated Statements of Operations and Other Comprehensive Loss for the years ended December 31, 2016 and 2015	F-4
Consolidated Statements of Stockholders’ Deficit for the two years ended December 31, 2015	F-4
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2016 and 2015	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015	F-6
Notes to Consolidated Financial Statements	F-67

2728

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Cardinal Energy Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Cardinal Energy Group, Inc. and subsidiaries (the Company) as of December 31, 2016, the related consolidated statements of operations and other comprehensive loss, stockholders’ deficit and cash flows, for the year then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and its total liabilities exceed its total assets. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company’s auditor since 2017.

Midvale, Utah

June 24, 2019

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Cardinal Energy Group, Inc.

We have audited the accompanying consolidated balance ~~sheets~~sheet of Cardinal Energy Group, Inc. (the “Company”), as of December 31, 2015 and ~~2014 and~~ the related statement of ~~operations~~operation, comprehensive loss, stockholders’ deficit and cash flows for ~~the~~ ~~two years in~~ the ~~period~~ year ended December 31, 2015. 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 ~~audits~~audit.

We have conducted our ~~audits~~audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial ~~statements~~ 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 audits 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, ~~assessing~~ assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial ~~statement~~ statement presentation. We believe that our ~~audits~~audit provide a reasonable basis for our opinion.

In our opinion, the consolidated financial ~~statements~~statement referred to above present fairly, in all material respects, the financial position of Cardinal Energy Group, Inc. as of December 31, 2015 ~~and 2014~~, and the results of their ~~operations~~operation and their cash ~~flows~~flow for ~~the~~ ~~two years in~~ the ~~period~~ year ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the accompanying consolidated financial statements, the Company has negative cash flows from operations, and working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ RBSM LLP

New York, New York

March 30, 2016

~~F-1~~New York, New York

F-2

Cardinal Energy Group, Inc.

Consolidated Balance Sheets

	December 31, 2015			December 31, 2014
	December 31, 2016			December 31, 2015
ASSETS
CURRENT ASSETS
Cash	$	241,~~155~~193		$	~~115~~24,~~398~~155
Accounts receivable		-			10,453
Accounts receivable - related party		-			180,712
Accounts receivable - related party		180,712			225,000
Notes receivable - short term		15,000			-
Marketable securities		30,800			69,300
Investments in marketable securities		18,480			30,800
Prepaid expenses - debt issuance costs, net		20,774			331,664
Total Current Assets		34,673			235,667
Total Current Assets		256,441			751,815
PROPERTY AND EQUIPMENT, net		47,275			244,078
PROPERTY AND EQUIPMENT, net		244,078			339,753
OIL AND GAS PROPERTIES (full cost method)
Unproved properties		~~310,226~~-			3310,~~449,487~~226
OTHER ASSETS
Non-current - prepaid debt issuance costs, net		5,501			-
Deposits and deferred charges		50,000			56,100
Deposits and deferred charges		56,100			73,755
TOTAL ASSETS	$	131,948		$	846,071
TOTAL ASSETS	$	872,346		$	4,614,810
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	~~908~~635,~~066~~701		$	~~448~~908,~~133~~066
Accrued legal settlement		-			100,000
Current portion of long term senior secured convertible promissory notes, net of debt discount of $-0- and $-0-, respectively		5,580,000			4,500,000
Current portion of long term senior secured convertible promissory note, net of debt discount of $0 and $295,128, respectively		4,500,000			4,204,872
Convertible notes, net of unamortized debt discount and debt issuance costs of $6,201 and $148,036, respectively		2,772,434			1,040,951
Convertible notes, net of debt discount of $127,262 and $303,106, respectively		1,061,725			329,894
Loan payable, net of debt discount of $0 and $36,759, respectively		271,707			119,584
Note payable		-			340,000
Derivative liability		23,716,831			2,355,580
Loan payable, net of debt discount of $36,759 and $0, respectively		119,584			-
Equipment purchase contracts payable - current portion		51,168			13,721
Derivative liability		2,355,580			382,836
Total Current Liabilities		33,027,841			8,937,902
Equipment purchase contracts payable - current portion		13,721			17,023
Total Current Liabilities		8,958,676			5,822,758
LONG-TERM LIABILITIES
Convertible notes, net of debt discount of $52,902 and $0, respectively		87,818			-
Convertible notes, net of unamortized debt discount and debt issuance costs of $-0- and $58,403 respectively		-			82,317
Equipment purchase contracts payable - long term portion		~~42,505~~-			7742,~~608~~505
Asset retirement obligation		~~96,063~~-			~~162~~96,~~321~~063
Total Long-Term Liabilities		~~226,386~~-			~~239~~220,~~929~~885
TOTAL LIABILITIES		933,~~185~~027,~~062~~841			69,~~062~~158,~~687~~787
Commitments and contingencies		-			-
STOCKHOLDERS’ DEFICIT
Series A Preferred stock, 1,000,000 shares authorized at par value of $0.00001; 1,000,000 and none shares issued and outstanding, respectively		10			-
Series A Preferred stock, 1,000,000 shares authorized at par value of $0.00001; 1,000,000 shares issued and outstanding.		10			10
Common stock, 100,000,000 shares authorized at par value of $0.00001; 84,374,961 and 38,040,046 shares issued; and 81,274,961 and 34,940,046 shares outstanding, respectively		813			350
Common stock, 1,000,000,000 and 100,000,000 shares authorized at par value of $0.00001, respectively; 391,037,557 and 84,374,961 shares issued; 387,937,557 and 81,274,961 shares outstanding, respectively		3,880			813
Additional paid-in capital		911,~~841~~129,~~715~~848			89,~~058~~841,~~665~~715
Stock subscription receivable		-			(3,500	)
Treasury stock		(2,013,380	)		(2,013,380	)
Accumulated other comprehensive loss		(2,~~186~~199,~~800~~120	)		(2,~~148~~186,~~300~~800	)
Accumulated deficit		(1339,~~955~~817,~~074~~131	)		(513,~~341~~955,~~712~~074	)
TOTAL STOCKHOLDERS’ DEFICIT		(832,~~312~~895,~~716~~893	)		(18,~~447~~312,~~877~~716	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	~~872~~131,~~346~~948		$	4846,~~614,810~~071

The accompanying notes are in integral part of these consolidated financial statements.

F-23

Cardinal Energy Group, Inc.

Consolidated Statements of Operations and Other Comprehensive Loss

	For the Years Ended
	December 31,
	2015			2014
	2016			2015
REVENUES
Oil and gas revenues	$	471,~~057~~416		$	~~148~~47,~~855~~057
Operating income from escrowed property - related party		~~250,000~~-			-250,000
Related party income from contract development operations		~~621,508~~-			1621,~~716,771~~508
Total Revenues from Operations		~~918~~1,~~565~~416			1918,~~865,626~~565
COSTS & OPERATING EXPENSES
Operating and production costs		7435,~~281~~767			~~402~~74,~~863~~281
Costs of contract development operations		~~331,010~~853			~~692~~331,~~895~~010
Depreciation and amortization		63,294			40,092
Depreciation		49,760			63,294
Impairment expense		2,654,824			-
Impairment		372,513			2,654,824
General and administrative		1856,~~568,506~~654			21,~~113~~568,~~983~~506
Total Operating Expenses		41,~~691~~315,~~915~~547			34,~~249~~691,~~833~~915
OPERATING LOSS		(31,~~773~~314,~~350~~131	)		(13,~~384~~773,~~207~~350	)
OTHER INCOME (EXPENSES)
Other income		208,~~076~~138			-20,076
Gain (loss) on extinguishment of debt		27(987,~~373~~422	)		~~(76~~27,~~581~~373	)
Gain on sale of lease		-			93,414
Gain (loss) on retirement of assets		51,188			(6,774	)
(Loss) gain on sale of property and equipment		(6,774	)		1,265
Gain (loss) from equity investment		(1,511	)		-
Amortization of debt discount		(1207,~~302,701~~052	)		(~~401~~1,~~892~~302,701	)
Interest expense, net		(42,~~287~~033,~~205~~474	)		(14,~~044~~287,~~646~~205	)
Gain on change in the fair value of derivative liability		709,219			321,254
Gain (loss) on change in the fair value of derivative liability		(21,377,793	)		709,219
Total Other Expenses		(424,~~840~~547,~~012~~926	)		(14,~~107~~840,~~186~~012	)
NET LOSS	$	(825,~~613~~862,~~362~~057	)	$	(28,~~491~~613,~~393~~362	)
OTHER COMPREHENSIVE LOSS
Change in value of investments		(3812,~~500~~320	)		45(38,~~465~~500	)
NET COMPREHENSIVE LOSS	$	(825,~~651~~874,~~862~~377	)	$	(28,~~445~~651,~~928~~862	)
Loss per share of common stock (basic and diluted)	$	(0.1825	)	$	(0.0718	)
Weighted average shares outstanding		48104,~~059~~139,~~554~~831			3548,~~825~~059,~~479~~554

The accompanying notes are in integral part of these consolidated financial statements.

F-34

Cardinal Energy Group, Inc.

Consolidated Statements of Stockholders’ Deficit

																							Accumulated
	Preferred Stock - Series A				Common Stock						Additional Paid-In			Stock Subscription			Treasury			Accumulated			Other Comprehensive
	Preferred Stock -										Additional			Stock									Other
	Series A				Common Stock						Paid-In			Subscription			Treasury			Accumulated			Comprehensive
	Shares		Amount		Shares			Amount			Capital			Receivable			Stock			Deficit			Loss			Total
Balance at December 31, 2013		-	$	-		35,944,750		$	359		$	5,293,772		$	(3,500	)	$	-		$	(2,850,319	)	$	(2,193,765	)	$	246,547
Balance at December 31, 2014		-	$	-		34,940,046		$	350		$	8,058,664		$	(3,500	)	$	(2,013,380	)	$	(5,341,712	)	$	(2,148,300	)	$	(1,447,878	)
Common stock issued for cash		-		-		699,929			7			195,968			-			-			-			-			195,975
Common stock issued for services		-		-		922,867			9			415,211			-			-			-			-			415,220
Common stock issued for settlement of accounts payable		-		-		100,000			1			29,999			-			-			-			-			30,000
Common stock issued for purchase of oil and gas properties		-		-		50,000			1			34,999			-			-			-			-			35,000
Common stock issued for conversion of debt		-		-		437,500			4			174,803			-			-			-			-			174,807
Common stock cancelled		-		-		(150,000	)		(1	)		1			-			-			-			-			-
Extinguishment of derivative liability on conversion of debt		-		-		-			-			22,068			-			-			-			-			22,068
Beneficial conversion feature on warrants issued concurrent with convertible notes		-		-		-			-			519,286			-			-			-			-			519,286
Treasury stock received for assets transferred to related party		-		-		(3,100,000	)		(31	)		1,356,308			-			(2,013,380	)		-			-			(657,103	)
Common stock issued to pay interest on debt		-		-		50,000			1			34,999			-			-			-			-			35,000
Common stock cancelled upon lease expiration		-		-		(15,000	)		-			(18,750	)		-			-			-			-			(18,750	)
Unrealized holding gain on available-for-sale-securities		-		-		-			-			-			-			-			-			45,465			45,465
Net loss for the year ended December 31, 2014		-		-		-			-			-			-			-			(2,491,393	)		-			(2,491,393	)
Balance at December 31, 2014		-		-		34,940,046			350			8,058,664			(3,500	)		(2,013,380	)		(5,341,712	)		(2,148,300	)		(1,447,878	)
Common stock issued for services		-		-		248,874			2			92,181			-			-			-			-			92,183
Common stock issued employee bonus		-		-		100,000			1			39,999			-			-			-			-			40,000
Common stock issued for payment of short-term note payable interest and notes payable extension		-		-		530,000			5			119,495			-			-			-			-			119,500
Common stock cancelled		-		-		(33,333	)		-			(15,667	)		-			-			-			-			(15,667	)
Common stock issued to convert convertible notes payable		-		-		45,489,374			455			620,152			-			-			-			-			620,607
Issuance of preferred stock for services		1,000,000		10		-			-			99,990			-			-			-			-			100,000
Unrealized holding gain on available-for-sale-securities		-		-		-			-			-			-			-			-			(38,500	)		(38,500	)
Unrealized holding loss on available-for-sale-securities		-		-		-			-			-			-			-			-			(38,500	)		(38,500	)
Extinguishment of derivative liability on conversion of debt		-		-		-			-			826,901			-			-			-			-			826,901
Uncollectible stock subscription receivable charged to expense		-		-		-			-			-			3,500			-			-			-			3,500
Net loss for the year ended December 31, 2015		-		-		-			-			-			-			-			(8,613,362	)		-			(8,613,362	)
Balance at December 31, 2015		1,000,000	$	10		81,274,961		$	813		$	9,841,715		$	-		$	(2,013,380	)	$	(13,955,074	)	$	(2,186,800	)	$	(8,312,716	)
Common stock issued to convert note payable		-		-		2,154,596			22			11,343			-			-			-			-			11,365
Unrealized holding loss on available-for-sale-securities		-		-		-			-			-			-			-			-			(12,320	)		(12,320	)
Common stock issued for services		-		-		50,000,000			500			159,500			-			-			-			-			160,000
Common stock issued for debt		-		-		254,508,000			2,545			1,117,290			-			-			-			-			1,119,835
Net loss for the year ended December 31, 2016		-		-		-			-			-			-			-			(25,862,057	)		-			(25,862,057	)
Balance December 31, 2016		1,000,000	$	10		387,937,557		$	3,880		$	11,129,848		$	-		$	(2,013,380	)	$	(39,817,131	)	$	(2,199,120	)	$	(32,895,893	)

The accompanying notes are in integral part of these consolidated financial statements.

F-45

Cardinal Energy Group, Inc.

Consolidated Statements of Cash Flows

	For the Years Ended
	December 31,
	2015			2014
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(825,~~613~~862,~~362~~057	)	$	(28,~~491~~613,~~393~~362	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		63,294			40,093
Depreciation of property and equipment		49,760			63,294
Write off of subscription receivable		~~3,500~~-			-3,500
Accretion expense		14,987			19,985
Accretion/depreciation of ARO liabilility/asset		16,394			14,987
Amortization of debt discount		1207,~~302,701~~052			~~401~~1,~~892~~302,701
Impairment expense		2,654,824			-
Impairment		372,513			2,654,824
Stock based compensation		~~216~~160,~~516~~000			~~453~~216,~~945~~516
Amortization of prepaid debt issuance costs		~~429~~26,~~826~~275			~~280~~429,~~726~~826
(Gain) loss on extinguishment of debt		~~(27~~995,~~373~~855	)		76(27,~~581~~373	)
Gain on change in fair value of derivative liability		(709,219	)		(321,254	)
(Gain) loss from equity investment		1,511			-
Non-cash interest expense related to derivative liability		2,577,683			243,630
(Gain) loss on change in fair value of derivative liability		21,377,793			(709,219	)
Non-cash interest expense, defaults fees and charges included in principal amount of notes		578,141			-
Non-cash interest expense related to derivative liability		-			2,577,683
Gain on sale of lease		-			(93,414	)
Non-cash interest expense, defaults fees and charges included in principal amount of notes		-			578,141
Loss (gain) on sale of property and equipment		6,774			(1,265	)
(Gain) loss on sale of property and equipment		1,043			6,774
Stock issued for interest expense		119,500			-
(Gain) loss on debt conversion		(8,433	)		-
(Gain) loss on derecognition of ARO		(52,231	)		-
Stock issued for interest expense		-			119,500
Changes in operating assets and liabilities:
Accounts receivable - related party		4456,~~288~~788			~~(720~~44,~~367~~288	)
Accounts receivable		10,453			(10,453	)
Receivables		(15,000	)		10,453
Prepaid expenses		~~(6,157~~-	)		27(6,~~611~~157	)
Other assets		176,~~655~~100			~~(44~~17,~~553~~655	)
Accounts payable and accrued expenses		493,602			262,939
Accounts payable and accrued liabilities		391,615			493,602
Accrued legal settlement		(100,000	)		-
Accrued interest		2,033,475			-
Net Cash used in Operating Activities		(922,367	)		(1,875,297	)
Accrued legal settlement		-			(100,000	)
Net Cash used in Operating Activities		(241,547	)		(922,367	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment		-146,000			~~22,000~~-
Purchase of property and equipment		(3,511	)		(217,816	)
Cash paid for equity investment		(100	)		-
Purchase of oil and gas properties		(16,464	)		(2,047,603	)
Purchase of property and equipment		-			(3,511	)
Credit refunds against purchases of oil and gas properties		50,000			-
Purchase of oil and gas properties		-			(16,464	)
Net Cash Provided by (Used in) Investing Activities		30,025			(2,243,419	)
Credit refunds against purchases of oil and gas properties		-			50,000
Net Cash Provided by Investing Activities		145,900			30,025
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable -equipment		(13,302	)		-
Repayments of equipment purchase contracts payable		(5,058	)		(13,302	)
Stock issued for cash		-			195,975
Net proceeds from issuance of convertible notes and loans payable		91,000			1,084,568
Net proceeds from issuance of convertible notes and loans payable		1,084,568			4,860,000
Repayment of convertible notes and loan payable		(13,257	)		(270,167	)
Repayment of convertible notes and loan payable		(270,167	)		(621,555	)
Net Cash Provided by Financing Activities		72,685			801,099
Proceeds from issuance of notes payable		-			296,000
NET DECREASE IN CASH		(22,962	)		(91,243	)
Payment of deferred financing costs		-			(515,000	)
CASH AT BEGINNING OF YEAR		24,155			115,398
Net Cash Provided by Financing Activities		801,099			4,215,420
CASH AT END OF YEAR	$	1,193		$	24,155
NET (DECREASE) INCREASE IN CASH		(91,243	)		96,704
CASH AT BEGINNING OF YEAR		115,398			18,694
CASH AT END OF YEAR	$	24,155		$	115,398
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID FOR:
Interest	$	2213,~~295~~257		$	~~289~~22,~~708~~295
Income Taxes	$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized (loss) gain on available-for-sale-securities	$	~~(38~~12,~~500~~320	)	$	45(38,~~465~~500	)
Reduction in note payable for reduction in purchase price of oil properties	$	~~340,000~~-		$	60340,000
Derivative liability on convertible notes payable and warrants at inception	$	~~3,508,864~~-		$	~~693~~3,~~630~~508,864
ARO estimate on assets purchased (reduction for sale of oil and gas properties)	$	~~(78,152~~-	)	$	~~142~~(78,~~336~~152	)
Common stock issued for prepaid services	$	-		$	438,600
Extinguishment of derivative liability	$	-		$	826,901
Beneficial conversion feature on warrants issued concurrent with convertible note	$	-		$	519,289
Common stock issued for conversion and extinguishment of debt	$	143,778		$	620,607
Common stock issued for settlement of accounts payable	$	-		$	30,000
Original issue discount on convertible note payable	$	-		$	118,280
Common stock issued for oil and gas properties	$	-		$	35,000
Settlement of equipment purchase payable upon sale of asset	$	-		$	28,000
Extinguishment of derivative liability	$	826,901		$	22,068
Receivable exchanged for investment	$	123,924		$	-
Common stock cancelled for assets transferred to related party	$	-		$	657,103
Purchase of fixed assets through financing	$	-		$	126,686
Common stock issued for conversion of debt	$	620,607		$	174,807
Common stock returned reflecting employment agreement changes	$	-		$	207,302
Purchase of investment in Bradford joint venture against accounts receivable, included in Oil and Gas Properties	$	-		$	500,000
Common stock issued for prepaid interest	$	-		$	35,000
Cancellation of shares upon lease expiration	$	-		$	18,750
Original issue discount on convertible note payable	$	118,280		$	90,000
Settlement of equipment purchase payable upon sale of asset	$	28,000		$	-

The accompanying notes are in integral part of these consolidated financial statements

F-56

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, ~~2015~~2016 and ~~2014~~2015

NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Organization

Cardinal Energy Group, Inc. (the “Company”) was incorporated in the State of Nevada on June 19, 2007 under the name Koko, Ltd., for the purpose of developing, manufacturing and selling a steak timer. On September 28, 2012, the Company changed the focus of its business when it acquired all of the ownership interests of Cardinal Energy Group, LLC, an Ohio limited liability company which was engaged in the business of ~~exploring~~acquiring, ~~purchasing~~exploring, developing and operating oil and gas leases. The Company changed its name from Koko, Ltd. to Cardinal Energy Group, Inc. on October 10, 2012 in connection with this acquisition. On June 10, 2015 the Company moved its executive offices from Dublin, Ohio to Abilene, Texas. In February 2016, the Company closed its Abilene, Texas office and relocated their executive offices to Upper Arlington, Ohio.

~~The~~Following ~~Company~~the ~~has~~acquisition ~~been~~of the oil and gas operations on September 28, 2012, the Company engaged in the exploration, development, exploitation and production of oil and natural gas. ~~The~~in ~~Company~~the ~~sells~~states ~~its~~of ~~oil~~Ohio, California and ~~gas~~ ~~products~~Texas. toOn ~~domestic~~November ~~purchasers~~11, of2013, ~~oil~~the ~~and~~Company ~~gas~~organized a ~~production.~~wholly ~~Its~~owned ~~operations~~subsidiary ~~were~~corporation, ~~focused~~CEGX inof ~~the~~Texas, ~~states~~LLC (“CEGX of ~~California,~~Texas”) ~~Ohio~~to ~~and Texas~~conduct ~~during~~all ~~2012~~oil and ~~2013~~gas activities. During In 2014 ~~and 2015,~~ management decided to focus ~~its~~ oil and gas operations ~~entirely~~exclusively within the ~~state~~ State of Texas. ~~The~~and ~~Company~~on ~~established~~June ~~a regional operations office in Albany~~10, ~~Texas~~2015 ~~and retained~~ the ~~services of operating personnel~~ ~~with~~Company ~~ties~~moved toits ~~the~~executive ~~exploration~~offices ~~and~~from ~~development~~Dublin, ofOhio ~~oil~~to ~~and~~Abilene, ~~gas fields in~~ Texas. InThe ~~February 2016, the~~ Company ~~sold~~has moved its ~~operations facility~~headquarters into ~~Albany~~Dallas, Texas ~~(see Note 14)~~.

On April 30, 2015 the Company formed High Performance Energy Fund Corporation, a Delaware corporation (“High Performance”), for the purposes of identifying, developing and financing new prospective oil and gas properties. High Performance is a wholly-owned subsidiary of the Company.” During the years ended December 31, 2016 and 2015 High Performance had no operations. The corporation is currently inactive, and it is unable to be active until delinquent taxes have been filed. High Performance Energy Fuel Corporation has been designated as “Void/delinquent” as of March 7, 2017.

The Company closed Continental Energy, LLC, a Limited Liability Company organized in Ohio, on October 4, 2018. The LLC had no historical operations and filed no tax returns prior to being closed.

During 2015, the Company closed and liquidated Red Bird Social, LLC. The entity was organized in Florida on August 28, 2013. The LLC never had any operations and was liquidated by the Company on April 8, 2015.

In 2016 the Company was pursuing oil and gas acquisition and development operations primarily focusing on properties in which we held an operating or non-operating leasehold interest. In February 2016, the Company closed its Abilene, Texas office and relocated its executive offices to Upper Arlington, Ohio. In October 2017 new management determined that the Company could not continue to pursue oil and gas operations based upon the financial results realized during the periods ending in 2014 through 2016.

Our previous operations, undertaken during the period including the third quarter of 2014 to the second quarter of 2016, were focused on growth via the development of shallow proven undeveloped reserves in or adjacent to currently producing fields, exploiting untapped “behind the pipe” reserves by recompleting existing well bores in zones overlying currently producing formations and by the selected application of water flood and other secondary recovery techniques to mature but marginally producing fields throughout north-central Texas. The Company differentiated itself in the marketplace by focusing on smaller older oil and gas properties that have been allowed to deplete because of multiple changes in ownership or due to a lack of capital required to maintain production rates. These properties generally feature simple vertical well completions which typically produce from relatively shallow (in most cases from 400 ft. to 2,000 ft. below the surface) reservoirs. Through the October of 2016 we sold our crude oil through the efforts of CEGX of Texas.

Subsequent to the October 2016 the Company initiated a major change in the planned operations. The change included a new management team. The management has focused upon filing current and delinquent reports, required to allow the common stock to trade freely. Additionally, management has refined the business strategy with a plan to move from developing and operating in the energy industry. Management plans to focus on obtaining minerals in place and relying on other organizations to provide development and operating support.

Basis of Presentation and Use of Estimates

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in United States of America which ~~require~~requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosures of revenues and expenses for the reported year. Actual results may differ from those estimates. Included in these estimates are assumptions about collection of accounts receivable, impairment of oil and gas properties, useful life of property and equipment, amounts and timing of closure obligations, assumptions used to calculate fair value of stocks and warrants granted, stock based compensation, beneficial conversion of convertible notes payable, deferred income tax asset valuation allowances, and valuation of derivative liabilities.

Revenues and direct operating expenses of the California and Ohio properties represent members’ interest in the properties acquired for the periods prior to the closing date and are presented on the accrual basis of accounting and in accordance with generally accepted accounting principles. The financial statements presented herein include the revenues and operating expenses of the California and Ohio properties for the period of January 1, 2014 through the sale date of the properties on April 1, 2014.F-7

Principles of Consolidation

Our consolidated financial statements include the accounts of Cardinal Energy Group, Inc. and our wholly owned subsidiaries, inCEGX of ~~which~~Texas, aInc. ~~controlling~~and ~~interest~~High isPerformance ~~held~~Energy Fund Corporation. All intercompany transactions have been eliminated. Undivided interests in oil and gas exploration and production joint ventures are consolidated on a proportionate basis. Investments in entities without a controlling interest are accounted for by the equity method or cost basis. The equity method is used to account for investments in non-controlled entities when ~~the~~Cardinal ~~Company~~can ~~has the ability to~~ exercise significant influence over operating and financial policies. In applying the equity method of accounting, the investments are initially recognized at cost, and subsequently adjusted for the Company’s proportionate share of earnings, losses and distributions. The cost method is used when ~~the~~we ~~Company~~do ~~does~~ not have the ability to exert significant influence.

Cash and Cash Equivalents

~~The~~Cash ~~Company~~and ~~considers~~cash equivalents are all highly liquid ~~debt instruments and other short-term~~ investments with ~~maturities~~an original maturity of three months or less, at the time of purchase ~~when~~and ~~purchased~~are recorded at cost, towhich beapproximates ~~cash~~fair ~~equivalents~~value. The Company places its cash with a high credit quality financial institution. The Company’s accounts at this institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, ~~2015~~2016, the Company had not reached bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

F-6

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Allowance for Doubtful Accounts

~~Uncollectible~~Historically the Company’s accounts receivable ~~are~~have ~~charged~~been ~~directly~~recorded ~~against~~using ~~earnings~~the direct write-off method. Generally accepted accounting principles (GAAP) require that companies use the allowance method when ~~they~~preparing financial statements, therefore we have adopted the allowance method as of December 31, 2016. Under the allowance method, open accounts receivable are ~~determined~~analyzed by management to beestimate the likelihood that there are uncollectible accounts within the receivable balance. ~~Use~~The estimate of ~~this~~what ~~method~~the ~~does~~uncollectible amount ~~not~~would ~~result~~be inis ashown ~~material~~as ~~difference~~a ~~from~~contra ~~the~~account ~~valuation~~offsetting ~~method~~gross ~~required~~accounts byreceivable. ~~generally~~The ~~accepted~~changes in accounting ~~principles.~~policy Athad ~~December~~no effect ~~31,~~on ~~2015~~the ~~and~~Company’s ~~2014~~financial reporting, as no ~~reserve~~amounts ~~for~~were written off during the year ended December 31, 2016 and 2015 and the allowance for doubtful accounts was ~~needed~~$0 as of December 31, 2016 and 2015.

Oil and Gas Properties

The Company ~~follows~~has elected to apply the full cost method of accounting for ~~its~~ oil and natural gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves ~~are~~were capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities ~~and~~plus asset retirement costs. In ~~Disposition~~applying the full cost method, the Company performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of oil and gas ~~properties~~property ~~are~~and ~~accounted~~equipment ~~for~~is aslimited ato ~~reduction~~the “estimated present value” of ~~capitalized~~the ~~costs~~future net revenues from its proved reserves, ~~with~~discounted noat ~~gain~~a or10-percent ~~loss~~interest ~~recognized~~rate ~~unless~~and ~~such~~based ~~adjustment~~on current economic and operating conditions, plus ~~would~~the ~~significantly~~cost ~~alter~~of properties not being amortized, plus the ~~relationship~~lower ~~between~~of ~~capital~~cost ~~costs~~or ~~and~~fair ~~proved~~market ~~reserves~~value of ~~oil~~unproved ~~and~~properties ~~gas,~~included in ~~which~~costs being ~~case~~amortized, less the ~~gain~~income ~~or loss~~tax iseffects ~~recognized~~related to ~~income~~any book and tax basis differences of the properties.

~~Depletion~~Disposition ~~and depreciation~~ of ~~proved~~ oil and gas properties isare ~~calculated~~accounted onfor ~~the~~as ~~units-of-production~~a ~~method~~reduction ~~based upon estimates~~ of ~~proved reserves.~~capitalized ~~Such calculations include the estimated future~~ costs, towith ~~develop~~no ~~proved~~gain ~~reserves.~~or ~~Oil~~loss ~~and~~recognized ~~gas~~unless ~~reserves~~such ~~are converted~~adjustment towould asignificantly ~~common~~alter ~~unit of measure based on~~ the ~~energy~~relationship ~~content~~between ofcapital ~~6,000~~costs ~~cubic~~and ~~feet~~proved ofreserves ~~gas to one barrel~~ of oil. ~~Costs~~and ofgas, ~~unevaluated properties~~in ~~are~~which ~~not~~case ~~included in~~ the ~~costs~~gain ~~subject to depletion. These costs are assessed periodically for impairment. As of December~~or ~~31,~~loss ~~2015~~is ~~and~~recognized ~~2014~~to ~~there were no proved reserves~~income.

~~During~~Under ~~year ended December 31, 2014,~~ the ~~Company~~full ~~completed~~cost ~~the~~method ~~acquisition~~ of ~~100%~~accounting working interests in the Powers-Sanders and Stroebel-Broyles leases, a 93.75% working interest in the Bradford “A” and “B” leases, a 43.75% working interest in the Fortune lease and the remaining 15% working interest in the Dawson-Conway leases for aoil ~~combined cash consideration of $1,010,000. These properties are located in Shackelford~~ and ~~Eastland~~natural counties in north-central Texas. The cash for these acquisitions was sourced from a portion of the proceeds of a private offering of Senior Secured Convertible Promissory Notes. The acquisition cost for these properties was capitalized. Alsogas, ~~during~~depletion ~~the same period, the Company sold its interests in oil~~ and ~~gas~~depreciation ~~properties~~is ~~located in~~applied ~~California and Ohio~~ to ~~California~~proven ~~Hydrocarbons,~~reserves ~~Inc.~~as ~~in exchange for the return of 3,000,000 shares of the Company’s~~portion ~~common stock valued at $2,010,000. The Company has recorded the return~~ of the ~~shares as the acquisition of Treasury Stock at~~ cost ~~and~~ ~~relieved the balance sheet~~ of ~~the affected assets and liabilities~~production. During the year ended December 31, 2015, the Company disposed of its working interests in the Stroebel-Broyles leases in Eastland County, Texas. The Company assigned its interests in the leases to two local companies in exchange for the assumption of the plugging and abandonment liability associated with the thirty-two wells located on the properties. The disposition is in keeping with the Company’s decision to focus its drilling and development activities in and adjacent to its properties in Shackelford County, Texas.

OnCalculations ~~September~~included 2,in ~~2014~~estimating the ~~Company~~future ~~sold~~value ~~its~~of ~~interests~~oil ~~in the Bradford “A”~~ and ~~“B”~~gas ~~leases~~properties toinclude the ~~Bradford~~anticipated ~~Joint Venture~~costs ~~Partnership (“Bradford JV”) for $325,000. The Company’s wholly-owned subsidiary CEGX~~ of ~~Texas, LLC provides drilling and production services to Bradford JV. The additional cost for~~ developing ~~the~~any ~~leases~~proved ~~is $2,175,000 to include infrastructure~~reserves. ~~development,~~Oil ~~drilling~~ and ~~completion~~gas ofreserves 14are ~~new~~converted ~~wells, remediation of 6 existing wells, and conversion of 1 existing producing well~~ to ~~an injector. The Company acquired~~ a ~~20%~~common ~~equity~~unit ~~interest in participating units~~ of ~~the~~measure ~~Bradford~~based ~~JV during December 2014~~ on the ~~same~~energy ~~terms~~content asof ~~the original investors~~6, ~~being valued at $25,~~000 ~~per~~cubic 1%feet ~~unit~~ of ~~the~~gas ~~JV.~~to Inone ~~connection with the acquisition,~~barrel ~~the~~of ~~Company~~oil. ~~received~~Costs ~~$16,608~~of ~~cash~~unevaluated ~~representing~~properties ~~cash~~are ~~distributions~~not ~~which~~included ~~had been reserved by the Joint Venture~~ in ~~connection with~~ the ~~units~~costs ~~the~~subject ~~Company~~to ~~acquired~~depletion. InThese ~~June~~costs ~~2015,~~are ~~the~~assessed ~~Company~~periodically for ~~transferred~~impairment. ~~its~~As ~~20%~~of ~~interests~~December in31, ~~the~~2016, ~~Bradford “A”~~ and ~~Bradford “B”~~2015 ~~leases~~there towere ~~Keystone~~no ~~Energy,~~proved ~~LLC pursuant to a Participation Interest Purchase Agreement (see Note 13)~~reserves.

Our oil and gas leases were classified as unproved properties at December 31, 2015 and 2014 due to the limited quantities of oil and gas produced during the 2013 through 2015 time frame. In light of the precipitous fall in crude oil prices during the last 20 months and the relatively small production volumes from the Company’s leases we elected to reduce the carrying value of our oil and gas properties during the fourth quarter of 2015. This reduction to the estimated net recoverable values of our oil and gas properties is reflected in the financial statements as an impairment charge of $2,654,824 on the income statement.F-8

F-7

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property and Equipment

~~Support~~Property ~~equipment~~ and ~~other property and~~ equipment are valued at cost and depreciated over their estimated useful lives, generally 3 to 5 years, using the straight-line method ~~over estimated useful lives of 3 to 5 years~~. Additions are capitalized, and maintenance and repairs are charged to expense as incurred. When assets are ~~retired~~sold, retired, or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or losses, ~~are~~after any proceeds, are included in the consolidated statement of operations. As of December 31, 2016, the Company had disposed of or completely depreciated all fixed assets, including furniture, equipment, leasehold improvements and building assets except for 2 pickup trucks on hand at December 31, 2016 (see Note 5).

Valuation of Long-Lived Assets

The Company follows ASC 360 regarding the valuations and carrying values of its long-lived assets. Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses an estimate of undiscounted future net cash flows of the assets over the remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the expected future cash flows of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their estimated fair values. The Company recorded impairment losses in the amounts of $372,513 and $2,654,824 ~~and $0~~ during the years ended December 31, ~~2015~~2016 and ~~2014~~2015, respectively.

Stock-based Compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation” (“ASC 718”), which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Pursuant to ASC Topic 505-50, “Equity Based Payments to Non-employees”, for share-based payments to consultants and other third-parties, compensation expense is determined at the measurement date. The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

Earnings (Loss) per Share

Basic earnings (loss) per share (“EPS”) is calculated by dividing the Company’s net earnings (loss) applicable to common stockholders by the weighted average number of common shares during the period. Diluted EPS assumes the exercise of stock option and warrants and the conversion of convertible debt, provided the effect is not antidilutive. The effect of computing diluted loss per share is anti-dilutive and, as such, basic and diluted ~~losses~~loss per share ~~are~~is the same for the years ended December 31, ~~2015~~ 2016 and ~~2014~~2015.

Asset Retirement Obligation

The Company follows FASB ASC 410, Asset Retirement and Environmental Obligations, which requires entities to record the fair value of a liability for asset retirement obligations (“ARO”) and to record a corresponding increase in the carrying amount of the related long-lived asset. The asset retirement obligation primarily relates to the abandonment of oil and gas properties. The present value of the estimated asset retirement cost is capitalized as part of the carrying amount of oil and gas properties and is depleted over the useful life of the asset. The settlement date fair value is discounted at our credit adjusted risk-free rate in determining the abandonment liability. The abandonment liability is accreted with the passage of time to its expected settlement fair value. Revisions to such estimates are recorded as adjustments to ARO ~~and are charged to operations in the period in which they become known~~. At the time the abandonment cost is incurred, the Company is required to recognize a gain or loss if the actual costs do not equal the estimated costs included in ARO. The ARO is based upon numerous estimates and assumptions, including future abandonment costs, future recoverable quantities of oil and gas, future inflation rates, and the credit -adjusted risk -free interest rate. Different, but equally valid, assumptions and judgments could lead to significantly different results. Future geopolitical, regulatory, technological, contractual, legal and environmental changes could also impact future ARO cost estimates. Because of the intrinsic uncertainties present when estimating asset retirement costs as well as asset retirement settlement dates, our ARO estimates are subject to ongoing volatility. ~~The ARO is $96,063 and $162,321 as of December 31, 2015 and 2014, respectively. The~~See ~~reduction~~Notes in4 ~~the ARO at December 31, 2015 reflects the aforementioned sale of the Stroebel-Broyles leases in March of 2015. The Company accreted $14,987~~ and ~~$19,985 to ARO during the years ended December, 2015 and 2014, respectively~~11.

FInvestments – Short-8term

~~Cardinal~~The ~~Energy~~Company’s ~~Group~~available-for-sale securities consist of investments in marketable securities. The Company carries its investment at fair value based upon quoted market prices. Unrealized holding gains (losses) on available-for-sale securities are excluded from earnings and reported as accumulated other comprehensive gain (loss), ~~Inc~~a separate component of stockholders’ equity (deficit), until realized. The Company recorded unrealized gains (losses) of $(12,320) and $(38,500) during the years ended December 31, 2016 and 2015, respectively. Accumulated Other Comprehensive Losses were $2,199,120 and $2,186,800, as of December 31, 2016 and 2015, respectively.

~~Notes~~Equity ~~to the Consolidated Financial Statements~~Investments

~~December~~The 31Company accounts for its investments in companies subject to significant influence using the equity method of accounting, ~~2015~~under which, the Company’s pro-rata share of the net income (loss) of the affiliate is recognized as income (loss) in the Company’s income statement. The Company also records its share of the change in equity of the affiliate in the Company’s income statement and ~~2014~~is added to the investment on the balance sheet. Distributions received from the affiliate are treated as a return of capital and are deducted from the carrying value of the investment.

~~NOTE~~During 1the -year ~~SUMMARY~~ended OFMarch ~~SIGNIFICANT~~31, ~~ACCOUNTING~~2016 ~~POLICIES~~the Company obtained a 20% interest in the Bradford Joint Venture in exchange for $100 and obtained an additional 27% interest in the Bradford Joint Venture in exchange for the extinguishment of a $123,924 related party receivable (~~continued~~see Note 4). Under the equity method, the Company recorded their pro-rata share of the Bradford Joint Venture net loss, resulting in a loss from equity investment of $1,511 being recognized in the statement of operations for the year ended December 31, 2016. Additionally, as of December 31, 2016 the Company determined they would not be able to recover the carrying amount of the investment, therefore there was a decrease in value that was other than temporary. This loss in investment value of $122,513 was recorded as impairment expense in the statement of operations for the year ended December 31, 2016.

~~Available~~F-~~for-Sale Securities~~9

The Company’s available-for-sale securities consist of investments in marketable securities. The Company carries its investment at fair value based upon quoted market prices which amounted to $30,800 and $69,300 at December 31, 2015 and 2014, respectively. Unrealized holding gains (losses) on available-for-sale securities are excluded from earnings and reported as accumulated other comprehensive gain (loss), a separate component of stockholders’ equity (deficit), until realized. The Company recorded unrealized loss of $38,500 and gain of $45,465 during the years ended December 31, 2015 and 2014, respectively. Accumulated Other Comprehensive Losses were $2,186,800 and $2,148,300 as of December 31, 2015 and 2014, respectively.

Income Taxes

The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Income Taxes” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

The Company also follows the provisions of ASC 740-10 related to accounting for uncertain income tax positions. When tax returns are filed, some positions taken may be sustained upon examination by the taxing authorities, while others may be subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. As of December 31, ~~2015~~2016, and ~~2014~~2015, the Company has had no uncertain tax positions. The Company recognizes interest ~~and~~ and penalties, if any, related to uncertain tax positions as general and administrative expenses. The Company currently has no ~~federal~~ federal or state tax examinations nor has it had any federal or state examinations since its inception. The Company’s 2016, 2015, 2014, and 2013 tax years may still be subject to federal and state tax examination.

Concentration

During the year ended December 31, ~~2015~~2016 sales to ~~two~~one ~~customers~~customer represented ~~approximately 92~~100% of the Company’s net revenues. During the year ended December 31, ~~2014~~2015 sales to ~~one~~two ~~customer~~customers represented approximately 9592% of the Company’s net revenues. As of ~~December~~ December 31, ~~2015 and 2014~~2016, the Company had ~~one~~no ~~customer~~accounts ~~representing~~receivable ~~100%~~balance and as of ~~accounts~~December ~~receivable~~31, ~~and~~2015, the Company had one customer representing ~~approximately 77~~100% of the accounts receivable, ~~respectively~~– related party balance.

Revenue and Cost Recognition

The Company uses the sales method to account for ~~the~~ sales of crude oil and natural gas. Under this method, revenues are recognized ~~based~~ based on ~~the~~ actual volumes of oil and gas sold to purchasers. The volumes sold may differ from the volumes to which the Company is entitled based on ~~its~~the interest in the properties. These differences create imbalances which are recognized as a liability or as an asset only when the imbalance exceeds the estimate of remaining reserves. For the ~~years~~periods ~~ending~~ended December 31, ~~2015~~2016 and ~~2014~~ 2015 there were no such differences.

~~The~~CEGX of Texas, LLC, the Company’s subsidiary, has agreed with the Bradford JV ~~and Keystone Energy, LLC~~ to provide drilling, infrastructure and work-over services to support the development of ~~certain~~ oil leases in Texas. The revenue and costs arising from the drilling and other services are matched and recorded as income and expense as each project is completed in accordance with their ~~agreements~~agreement, effectively recognizing ~~income~~ income on the percentage of completion ~~basis~~.

Costs associated with the production of oil and gas (sometimes referred to as “lifting costs”) are expensed in the period incurred.

F-9

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Derivative Liabilities

The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretations of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, considering all of the rights and obligations of each instrument.

The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. InIf the ~~event that the~~ fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity. The classification of derivative instruments, including whether such instruments ~~should~~ should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are ~~initially~~ initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the ~~instrument~~ instrument on the reclassification date.

F-10

ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional.

The Company marks to market the fair value of the embedded derivative convertible notes and derivative warrants at each balance sheet date and records the change in the fair value of the embedded derivative convertible notes and derivative warrants as other income or expense in the consolidated statements of operations.

The Company estimates fair values of derivative financial instruments using the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk -free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock.

Recent Accounting Pronouncements

In August 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial Statements—Going Concern” (“ASU No. 2014-15”). The provisions of ASU No. 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently assessing the impact of this ASU on the Company’s consolidated financial statements.

F-10

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In November 2014, FASB issued ASU No. 2014-17, “Business Combinations: Pushdown Accounting” (“ASU No. 2014-17”). This ASU amended the Business Combination Accounting Standards Codification to provide guidance on whether and at what threshold an acquired entity that is a business or nonprofit activity can apply pushdown accounting in its separate financial statements. The Company’s adoption of ASU No. 2014-17 effective November 14, 2014 did not have an impact on the Company’s consolidated results of operations, financial position and related disclosures.

In April 2015, FASB issued ASU 2015-03, “Interest – Imputation of Interest” (Subtopic 835-30) which focuses on simplifying the presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The ASU will be effective for periods beginning after December 15, 2015 for public companies. Early adoption is permitted, including adoption in an interim period. The Company is currently assessing the impact of this ASU on the Company’s consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”), which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU simplifies the current guidance in ASC Topic 740, “Income Taxes”, which requires entities to separately present deferred tax assets and liabilities as current and noncurrent in a classified balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. The Company does not expect the impact of ASU 2015-17 to be material on the Company’s consolidated financial statements.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. Early adoption is permitted. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

Reclassifications

Certain ~~items~~amounts infrom prior ~~year~~periods ~~financial statements~~ have been reclassified toin ~~conform~~these tofinancial ~~the~~statements ~~2015~~to ~~presentation.~~conform ~~These~~the ~~reclassifications~~prior ~~had no~~period ~~effect~~data onto the ~~reported~~current year ~~results~~classification and presentation.

~~NOTE~~During 2the year ended December 31, 2016 the Company retroactively adopted the provisions of ASU 2015-03, ~~GOING~~“Interest ~~CONCERN~~– Imputation of Interest” (Subtopic 835-30) which focuses on simplifying the presentation of debt issuance costs. The amendments in this update required that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs were not affected by the amendments in this update. As a result of the Company’s adoption of ASU 2015-03, during the year ending December 31, 2016 the following prior period balances were retroactively adjusted:

The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and the liquidation of liabilities in the normal course of business. The Company currently utilizes revenues from the sale of crude oil and natural gas and contract drilling and operating services plus the proceeds from the private sales of common stock and/or convertible debt instruments to fund its operating expenses. The Company’s minimal cash flows from operations, working capital deficit and the projected cost of capital improvements of its oil and gas wells raise substantial doubt about its ability to continue as a going concern. The Company has not yet established an adequate ongoing source of operating revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.

	As of December 31, 2015
	As Originally Presented			Adjustment			As Adjusted

Prepaid expenses - debt issuance costs, net – current portion	$	20,774		$	(20,774	)	$	-
Non-current – prepaid debt issuance costs, net	$	5,501		$	(5,501	)		-
Convertible notes, net – current portion	$	(1,061,725	)	$	20,774		$	(1,040,951	)
Convertible notes, net	$	(87,818	)	$	5,501		$	(82,317	)

Recent Accounting Pronouncements

F-11

~~Cardinal~~In ~~Energy~~February ~~Group~~2016, ~~Inc~~FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new guidance will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period and is applied retrospectively. Early adoption is permitted. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

~~Notes~~In April, 2016, the FASB issued ASU 2016-09 to simplify accounting for stock compensation. It focuses on income tax accounting, award classification, estimating forfeitures, and cash flow presentation. The ASU also provides certain accounting policy alternatives to nonpublic entities. The ASU becomes effective in 2017 for public companies and in 2018 for all other entities. Early adoption is permitted. Certain disclosures and detailed transition provisions apply. The Company is currently in the ~~Consolidated~~process ~~Financial~~of ~~Statements~~assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

~~December~~On 31June 20, ~~2015~~2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, as part of its ongoing Simplification Initiative to expand the scope of Topic 718 to include share-based payments issued to nonemployees. This ASU supersedes Subtopic 505-50 by expanding the scope of Topic 718 to include nonemployee awards and ~~2014~~generally aligning the accounting for nonemployee awards with the accounting for employee awards. The effective date for public companies is for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently in the process of assessing the impact the adoption of this guidance will have on the Company’s consolidated financial statements.

~~NOTE~~There 2were -no ~~GOING~~other ~~CONCERN~~new ~~(continued)~~accounting pronouncements issued during the years ended December 31, 2016 and 2015, and through the date of filing of this report that the Company believes are applicable to or would have a material impact on the consolidated financial statements of the Company.

~~The~~NOTE ~~Company’s~~2 ~~consolidated~~- ~~financial~~GOING statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the consolidated financial statements, the Company had an accumulated deficit of $13,955,074 at December 31, 2015, a net loss of $8,613,362 and net cash used in operating activities of $922,367 for the year ended December 31, 2015. These factors raise substantial doubt about the Company’s ability to continue as a going concern.CONCERN

~~Management~~The Company’s ~~plans~~ toconsolidated ~~continue~~financial asstatements aare ~~going~~prepared ~~concern~~using ~~include~~accounting ~~raising~~principles ~~additional~~generally ~~capital~~accepted ~~through~~in ~~increased~~the ~~sales~~United States of ~~oil~~America ~~and~~applicable ~~gas~~to a going concern, ~~providing~~which ~~additional contract~~contemplate ~~drilling~~the realization of assets and ~~operating~~the ~~services~~liquidation ~~for~~of liabilities in the normal ~~development~~course of ~~proven~~business. ~~undeveloped~~The ~~shallow~~Company ~~oil~~has ~~projects~~historically ~~and~~utilized byrevenues from the sale of ~~debt~~crude oil and natural gas, contract drilling and ~~equity~~operating ~~securities~~services, inthe ~~both~~proceeds ~~public~~from ~~and~~the private ~~transactions.~~sales ~~However,~~of ~~management~~common ~~cannot~~stock ~~provide~~and/or ~~any~~convertible ~~assurances~~debt ~~that~~instruments ~~the~~to ~~Company~~fund ~~will~~its beoperating ~~successful~~expenses. Currently, with the decline in ~~accomplishing~~the ~~any~~price of ~~its~~oil ~~plans.~~since ~~The~~2014, ~~ability~~the loss through foreclosure of the ~~Company~~Bradford leaseholds toand ~~continue~~the asdisposition aof ~~going~~fixed ~~concern~~real isand ~~dependent~~personal ~~upon its~~assets ~~ability~~management is planning to ~~successfully~~reduce ~~accomplish~~all unnecessary overhead expenses while the ~~plans~~Company ~~described~~attempts ~~above~~to recapitalize. To this end, ~~restructuring~~management ~~its~~is ~~current~~seeking ~~debt~~operating ~~and~~capital ~~eventually~~infusions ~~securing~~through ~~additional sources~~the sale of preferred ~~financing~~stock. ~~and~~Additionally, ~~attaining~~management ~~consistent~~is ~~profitable~~negotiating ~~operations.~~with ~~These~~major ~~consolidated~~creditors ~~financial~~with ~~statements~~the dohope ~~not~~of ~~include~~exchanging ~~any~~liabilities for equity ~~adjustments~~and ~~that~~in ~~might~~some becases ~~necessary~~seeking ~~should~~legal relief from contracts that the Company behas ~~unable~~alleged toare ~~continue~~usurious. asThe asuccess ~~going~~of ~~concern~~any of the undertakings is not assured.

Management is engaging legal counsel to advise them on approaches to the convertible obligations.

Currently, the Company’s lack of cash flows from operations, the substantial working capital deficit and the projected cost of capital investments in oil and gas exploration and development raise substantial doubt about its ability to continue as a going concern. The Company has not yet established an adequate ongoing source of operating revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

The Company’s consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the consolidated financial statements, the Company had an accumulated deficit of $39,817,131 at December 31, 2016, a net loss of $25,862,057 and net cash used in operating activities of $241,547 for the year ended December 31, 2016. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, substantial additional capital resources.

Management’s plans to continue as a going concern include the filing of financial documents required by government agencies and by public markets where their stock will be traded, raising additional capital through the procuring of debt and the sale of equity securities (including both common and preferred stock) in both public and private transactions. Management plans to utilize the expertise of more experienced consultants to evaluate opportunities which the Company may consider regarding future operations. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described above, restructuring its current debt and eventually securing additional sources of financing and attaining consistent profitable operations. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. Our audited financial statements at December 31, 2016 do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

F-12

NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs.

~~The~~U.S. ~~following~~generally ~~tables~~accepted ~~set~~accounting ~~forth~~principles byprovide ~~level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted~~ for ~~at fair value as of December 31, 2015 and 2014. As required by ASC 820,~~ a ~~financial instrument’s~~ three-level ~~within~~ ~~the fair value~~ hierarchy ~~is based on the lowest level~~ of ~~input~~inputs ~~that is significant~~ to ~~the~~valuation ~~fair~~techniques ~~value~~used ~~measurement. The Company’s assessment of the significance of a particular input~~ to ~~the~~ measure fair value ~~measurement requires judgment~~, ~~and~~defined ~~may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. There were no transfers between fair value hierarchy levels~~ as ~~of December 31, 2015 and 2014.~~follows:

The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2015 and 2014, on a recurring basis:

	Level 1:	Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.

	Level 2:	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:

	-	quoted prices for similar assets or liabilities in active markets;
	-	quoted prices for identical or similar assets or liabilities in markets that are not active;
	-	inputs other than quoted prices that are observable for the asset or liability; and
	-	inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3:

Inputs that are unobservable and reflect management’s own assumptions about the inputs market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows).

The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of December 31, 2016 and 2015. As required by ASC 820, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of an input, or even a particular input, to the fair value measurement requires judgment and may affect the valuation of fair value assets, liabilities and their placement within the fair value hierarchy levels. There were no transfers between fair value hierarchy levels as of December 31, 2016 and 2015.

The Company has determined that financial instruments that are of a short-term nature (cash, accounts receivable, accounts payable, notes payable, etc.) have a book value that approximates fair value. The following table presents assets and liabilities that are measured and recognized at fair value as of December 31, 2016 and 2015, on a recurring basis:

Assets and liabilities at fair value on a recurring basis at December 31, 2016:

	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	18,480	$	-	$	-	$	18,480
Total	$	18,480	$	-	$	-	$	18,480
Liabilities
Derivative liability		-		-	$	23,716,831	$	23,716,831
Total	$	-	$	-	$	23,716,831	$	23,716,831

Assets and liabilities at fair value on a recurring basis at December 31, 2015:

	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	30,800	$	-	$	-	$	30,800
Total	$	30,800	$	-	$	-	$	30,800
Liabilities
Derivative liability	$	-	$	-	$	2,355,580	$	2,355,580
Total	$	-	$	-	$	2,355,580	$	2,355,580

~~Assets and liabilities at fair value on a recurring basis at December 31, 2014:~~F-13

	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	69,300	$	-	$	-	$	69,300
Total	$	69,300	$	-	$	-	$	69,300
Liabilities
Derivative liability		-		-	$	382,836	$	382,836
Total	$	-	$	-	$	382,836	$	382,836

F-12

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31:

	2015			2014
	2016			2015
Balance, beginning of year	$	~~382~~2,~~836~~355,580		$	32382,~~528~~836
Excess of fair value over debt discount		~~2,577,683~~-			-2,577,683
Debt discount in connection with conversion option of Debentures and detachable warrants		931,181			693,630
Debt discount in connection with conversion option of debentures and detachable warrants		-			931,181
Extinguished derivative liability		(~~826~~16,~~901~~542	)		(22826,~~068~~901	)
Change in fair value of derivative liabilities		~~(709~~21,~~219~~377,793	)		(~~321~~709,~~254~~219	)
Balance, end of year	$	223,~~355~~716,~~580~~831		$	~~382~~2,~~836~~355,580
Net gain for the period included in earnings relating to the liabilities held at December 31, 2015	$	709,219		$	321,254

The carrying value of short -term financial instruments including cash, accounts receivable, prepaid expense, loans payable, accounts payable, accrued expenses and short-term borrowings approximate fair value due to the short period of maturity for these instruments. The long-term debentures payable approximates fair value since the related rates of interest approximate current market rates.

NOTE 4 - OIL AND GAS PROPERTIES

The Company ~~holds~~has held and explored oil and gas leases in Texas. The oil and gas leases were classified as unproved properties at December 31, ~~2015~~ 2016 and ~~2014~~2015 due to the absence of sustained commercial levels of oil and gas production from the properties.

~~In July 2013, the Company purchased an 85% working interest and 75% net revenue interest in certain oil and gas leases (~~Dawson-Conway ~~leases)~~& for a purchase price of $400,000. The Company initially issued a promissory note in the amount of $400,000 to finance the purchase, that amount was initially reduced to $340,000 during March of 2014 and subsequently reduced to zero as the result of litigation filed by the Company in 2015 (see Note 7 for additional details). The Company has reflected these actions as adjustments to the cost basis of the leases. On March 11, 2014 the Company purchased the remaining 15% working interest in Dawson Conway Leases property for a cash payment of $30,000. On June 30, 2015 the Company announced that it had settled the dispute with Concho Oilfield Services (“Concho”) over services provided by Concho. As a part of the settlement Concho agreed to rePowers-~~enter~~Sanders the #5B well on the Dawson-Conway 195B lease to repair damage to the wellbore and production string and to return the well to production. In July 2015 Concho did return to the #5B well and commenced jarring and fishing operations in an attempt to repair the well. These operations did not result in success and the well remains shut-in at this time. In June 2015 the Company filed suit in the District Court for Shackelford County against HLA Interests, LLC and Sedco (a former operator of the Dawson-Conway leases) alleging misrepresentation and fraud concerning title to the leases and compliance in regards to various regulations and permitting requirements of the Texas Railroad Commission. During December 2015, the Company accessed the potential development options for the Dawson-Conway leases and the Company decided that all operations at the Dawson-Conway leases should be suspended pending eventual sale of the property.Leases

OnIn ~~March~~July 52013, ~~2014,~~ the Company ~~acquired~~purchased aan ~~100~~85% working interest ~~(80~~and 75% net revenue interest) in the ~~Powers~~Dawson-~~Sanders~~Conway ~~lease~~leases located in ~~Shackelford~~ Shackelford County, Texas, ~~from~~for ~~Sabor~~a Xpurchase ~~Energy~~price ~~Services,~~of ~~Inc. for~~ $~~600~~400,000. The ~~property~~Company ~~consists~~initially issued a promissory note in the amount of ~~385~~$400,000 ~~acres~~to finance the purchase, that amount was initially reduced to $340,000 during March of 2014 and 5subsequently ~~producing~~reduced to zero as the result ~~oil~~of ~~wells~~litigation filed by the Company in 2015 (see Note 7 for additional details). The ~~property~~Company has ~~been~~reflected ~~shut-in~~these ~~since~~actions ~~August~~as adjustments (reductions) to the cost basis of ~~2015~~the ~~due~~leases to(Oil ~~mechanical~~and ~~downhole~~gas ~~issues~~properties). InOn ~~December~~March ~~2015~~11, 2014 the Company ~~accessed~~ purchased the ~~potential~~remaining ~~development~~15% working ~~options~~interest in Dawson Conway Leases property for a cash payment of $30,000. On June 30, 2015 the ~~Powers~~Company announced that it had settled the dispute with Concho Oilfield Services (“Concho”) over services provided by Concho. As a part of the settlement Concho agreed to re-~~Sanders~~enter the #5B well on the Dawson-Conway 195B lease to repair damage to the wellbore and production string and to return the ~~Company~~well ~~decided~~to ~~that~~production. ~~all~~In July 2015 Concho did return to the #5B well and commenced jarring and fishing operations atin an attempt to repair the ~~Powers~~well. These operations did not result in success and the well remains shut-~~Sanders~~in at this time. In June 2015 the Company filed suit in the District Court for Shackelford County against HLA Interests, LLC and SEDCO (a former operator of the Dawson-Conway leases) ~~should~~alleging bemisrepresentation ~~suspended~~and ~~pending~~fraud concerning title to the ~~eventual~~leases ~~sale~~and non-compliance regarding regulations and permitting requirements of the ~~property~~Texas Railroad Commission (the department tasked with administering and regulating oil and gas development in the State of Texas).

On March 65, 2014, the Company acquired a 100% working interest (80% net revenue interest) in the ~~Stroebel~~Powers-~~Broyles~~Sanders ~~leases~~lease located in Shackelford ~~Eastland~~ County, Texas ~~from Hunting Dog Capital, LLC~~ for $75600,000. WeThe ~~held~~property aconsists ~~76.0%~~of ~~net~~385 ~~revenue~~acres ~~interest~~and in5 ~~the~~producing ~~Broyles~~oil ~~lease~~wells. ~~and~~The aproperty ~~78.0%~~has ~~net~~been ~~revenue interest~~ shut-in since ~~the~~August ~~Stroebel~~of ~~lease.~~2015 ~~The~~due ~~property~~to ~~consisted~~mechanical ofdownhole ~~235~~issues. ~~acres~~In ~~and~~December 322015, ~~wells.~~the ~~The~~ Company ~~disposed~~assessed ofthe ~~its~~potential ~~working~~development ~~interests~~options for in the ~~Stroebel~~ Powers-~~Broyles~~Sanders ~~leases~~lease inand ~~Eastland~~decided ~~County,~~to ~~Texas~~suspend ~~during~~operations at the ~~first~~Powers-Sanders ~~quarter~~leases pending the eventual sale of ~~2015~~the property.

OnIn ~~June~~December ~~16,~~of ~~2014,~~2015 wethe ~~acquired~~Company aemployed ~~93.75%~~the ~~working~~services ~~interest~~of inBullet ~~the~~Development, ~~Bradford~~a ~~“A”~~respected oil and ~~Bradford~~gas ~~“B”~~development ~~leases~~firm ~~located~~headquartered in ~~Shackelford County~~Abilene, Texas ~~for $225~~,~~000~~ ~~pursuant~~ to assess the ~~terms~~value ofand ~~Purchase~~potential &development ~~Sale~~options ~~and~~for ~~Farmout~~its ~~agreements.~~remaining Atoil ~~the~~and ~~time~~gas ofproperties in north-central ~~the~~Texas, ~~acquisition~~namely the ~~property~~Company-operated ~~consisted~~Powers-Sanders ofand ~~320~~Dawson-Conway ~~acres~~leases ~~with~~and 7our ~~producing~~non-operating ~~wells~~working interest in the Fortune Prospect. ~~Under~~Based on the ~~terms~~results of the ~~Farmout~~study ~~Agreement~~and ~~our~~the ~~wholly-owned subsidiary,~~recommendations ~~CEGX~~from ofBullet ~~Texas,~~Development ~~LLC,~~we ~~was~~determined ~~obligated~~that the best course of action would be to ~~spud~~sell our interests in the ~~initial~~leases ~~“Earning~~to ~~Well”~~interested bylocal ~~September~~parties. 15Accordingly, ~~2014.~~the ~~The~~Company ~~initial~~held discussions ~~well~~with ~~was~~multiple ~~part~~parties ofinterested ain ~~“continuous~~acquiring ~~drilling~~the ~~program”~~properties; ~~which~~however, ~~afforded~~no ~~Cardinal~~agreements ~~the~~were ~~opportunity~~reached. toThe ~~earn~~talks ~~additional~~stalled ~~2-acre producing~~and, ~~units~~to on relieve the ~~Bradford~~Company ~~leases~~of byremediation ~~drilling~~responsibilities, the Powers-Sanders and ~~completing~~Dawson-Conway ~~injection~~leases ~~and~~were ~~production~~transferred ~~wells.~~to ~~The~~an ~~property,~~operator ~~which~~in ~~heretofore~~good ~~had~~standing ~~never~~with ~~been~~the ~~water~~Railroad ~~flooded,~~Commission ~~had~~of aTexas ~~two~~in ~~tank~~August ~~batteries.~~2017 On(see Note 14).

FStroebel-13Broyles Leases

~~Cardinal~~On ~~Energy~~March ~~Group~~6, ~~Inc~~2014, the Company acquired a 100% working interest in the Stroebel-Broyles leases located in Eastland County, Texas for $75,000. We held a 76.0% net revenue interest in the Broyles lease and a 78.0% net revenue interest in the Stroebel lease. The property consisted of 235 acres and 32 wells. The Company disposed of its working interests in the Stroebel-Broyles leases during the first quarter of 2015. The Company assigned its interests in the leases to two local companies in exchange for the assumption of the plugging and abandonment liability associated with the thirty-two wells located on the properties. The disposition was in keeping with the Company’s decision to focus its drilling and development activities in other areas of north-central Texas.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 4 - OIL AND GAS PROPERTIES (continued)

September 2, 2014 the Company sold its interests in the Bradford “A” and Bradford “B” leases to the Bradford Joint Venture Partnership (“Bradford JV”). At the time of the sale neither the parent company nor CEGX held any ownership in Bradford JV. In late December 2014, Cardinal Energy (the “parent company”) purchased a 20% interest in Bradford JV on the same terms as offered to the general public. On June 12, 2015 the Company transferred its 20% interest in the Bradford JV to Keystone Energy, LLC (“Keystone”) in a series of transactions which resulted in Keystone securing a line of credit to be used to further develop the Bradford “A” and Bradford “B” leases, Keystone acquiring an option (exercisable within 365 days) to purchase all of the interests in the Bradford JV and Cardinal Energy exchanging 10 units of its ownership interests in the Bradford JV for a 5% equity interest in Keystone.

On September 2, 2014, we acquired a 43.75% working interest (32.375% net revenue interest) in the Fortune prospect located in Shackelford County, Texas for a cash payment of $80,000. P.I.D. Drilling, Inc. serves as the operator for the property. The prospect consists of leasehold interests in five tracts of land aggregating just over 310 acres. During the fourth quarter of 2014 the plugged well on the Fortune Prospect was re-drilled and completed in the prolific Caddo limestone formation and two new wells were drilled and completed in the Cooke sandstone formation. The remote location of the lease caused some delays in getting electricity to the location, obtaining approval for hook-up to a natural gas pipeline and the delivery and installation of tank batteries and associated production equipment. The lease came on production in January 2015 and production peaked at just under 25 barrels of oil equivalent (“BOE”) per day. Production from the three wells has steadily declined from its peak to approximately 13 BOE per day for the first quarter of 2015 to just under 7 BOE per day during the second quarter of 2015 and approximately 3 BOE per day during the third quarter of 2015.

Following the initial completion of the three producers, the Company asked for a full accounting of the drilling costs and requested a refund for excess charges billed by the operator. In March 2015 the Company received refunds totaling $40,000 from the operator voted to remove the operator. The refunds were treated as a reduction in our cost basis of the property. In June 2015 the Company filed suit in the District Court for Shackelford County seeking recovery of damages. Future development activities for the prospect have been placed on hold pending the outcome of the litigation.

On December 31, 2014 the Company acquired a 100% working interest (77% net revenue interest) in the Bradford West lease for a cash payment of $20,000. The prospect comprising 200 acres is located adjacent to and just to the west of the existing Bradford “A” and “B” leases. During the second quarter of 2015, the Company drilled the initial well (Bradford West #1). We perforated and treated the well, ran the production tubing and set the pump jack. The results from this well were disappointing and the Company elected not to continue the drilling program called for under the Asset Sale & Purchase, and Farm-In agreements. The well was suspended and the lease and well were subsequently transferred to the previous owners during the fourth quarter of 2015.

The aforementioned Powers-Sanders, Stroebel-Broyles, Bradford “A” and “B” and Fortune acquisitions and the additional 15% working interest in the Dawson-Conway leases were financed from the proceeds of a $4,500,000 offering of 12% Senior Secured Convertible Notes which matured in December 2015 (see Note 6 for additional details).

As of December 31, 2015, based on management’s review of the carrying value of oil and gas properties, management determined that there is evidence that the cost of these acquired oil and gas properties will not be fully recovered and accordingly, the Company has determined that an adjustment to the carrying value of these properties was required. The Company determined and recognized an impairment expense of $2,654,824 during the year ended December 31, 2015. The impairment expense equals to the difference between the carrying values of the oil and gas properties and their estimated fair values. As of the date of these consolidated financial statements, the carrying values for oil and gas properties amounted to $310,226 and $3,449,487 at December 31, 2015 and 2014, respectively.

F-14

~~Cardinal~~Bradford ~~Energy Group, Inc.~~Leases

~~Notes~~On June 16, 2014, we acquired a 93.75% working interest in the Bradford “A” and Bradford “B” leases (“Bradford Leases”) located in Shackelford County, Texas for $225,000 pursuant to the ~~Consolidated~~terms ~~Financial~~of ~~Statements~~Purchase & Sale and Farmout agreements. At the time of the acquisition the property consisted of 320 acres with 7 producing wells. Under the terms of the Farmout Agreement our wholly-owned subsidiary, CEGX of Texas, LLC, was obligated to spud the initial “Earning Well” by September 15, 2014. The initial well was part of a “continuous drilling program” which afforded the Company the opportunity to earn additional 2-acre producing units on the Bradford leases by drilling and completing injection and production wells. The property, which heretofore had never been water flooded, had two tank batteries. On September 2, 2014 the Company sold its interests in the Bradford “A” and Bradford “B” leases to the Bradford Joint Venture Partnership (“Bradford JV”) for $325,000. At the time of the sale neither the parent company nor CEGX of Texas, LLC held any ownership in Bradford JV, however, the Company’s wholly-owned subsidiary, CEGX of Texas, LLC, was engaged by Bradford JV as an operator under a Contract Operating Agreement to provide turn-key drilling and production services.

~~December~~In 31late December 2014, ~~2015~~the Company purchased 20 participation interests (“Equity Units”) in Bradford JV on the same terms as offered to the public and ~~2014~~initial investors, valued at $25,000 per Equity Unit, for a total of $500,000.

On June 12, 2015, the Company entered into a Participation Interest Purchase Agreement with Keystone Energy, LLC (“Keystone”). In June 2015, the Company received $250,000 for the Company’s ten (10) Equity Units providing for Keystone’s right to beneficial enjoyment which is not subject to forfeiture by the Company under any circumstances. For financial reporting purposes the Company recognized this amount as a component of related party operating revenues during the year ended December 31, 2015. The Company also transferred ten (10) Equity Units for a 5% equity interest in Keystone.

Throughout 2015 and into the second quarter of 2016 the Company worked with representatives of the purchaser to design and install a pilot water flood program on the Bradford “A” and Bradford “B” leases. Due to delays in receiving funding from Keystone, work was sporadic and finally ground to a halt in the second half of 2016. On June 12, 2016 the Company re-acquired its 20 Equity Units in the Bradford JV for $100 following the expiration of the 365-day “Escrow Period” per the terms of the Participation Interest Purchase Agreement between Bradford JV participation interests and Keystone Energy, LLC and CEGX of Texas, LLC. Additionally, during the third quarter of 2016, the balance of $123,924 in related party receivables (representing un-reimbursed drilling, development and production costs incurred by the Company on behalf of the Bradford JV) was extinguished in exchange for 27 Equity Units in the Bradford JV, representing the remaining un-sold interests of the Bradford JV. (See Note 1).

In February of 2017 the lessor of the Bradford Leases filed a lawsuit to have the leases returned for lack of production greater than 90 days. As a result of a judgment the lessor was able to subdivide the Bradford Leases and thirteen were leased to another operator. The Bradford JV remained responsible for seven Bradford Leases, which were not transferred until they were reassigned to another operator in April 2018 (see Note 14).

Fortune Prospect

On September 2, 2014, we acquired a 43.75% working interest (32.375% net revenue interest) in the Fortune prospect located in Shackelford County, Texas for a cash payment of $80,000. P.I.D. Drilling, Inc. (“PID”) served as the operator for the property. The prospect consists of leasehold interests in five tracts of land aggregating just over 310 acres. During the fourth quarter of 2014 a plugged well on the Fortune Prospect was re-drilled and completed in the Caddo limestone formation. Additionally, two new wells were drilled in the Cooke sandstone formation. The remote location of the lease caused delays in getting electricity to the location, obtaining approval for hook-up to a natural gas pipeline and the delivery and installation of tank batteries and associated production equipment. The lease came on production in January 2015 and production peaked at just under 25 barrels of oil equivalent (“BOE”) per day. Production from the three wells has steadily declined from its peak to approximately 3 BOE per day during the third quarter of 2015.

Following the initial completion of the three producers, the Company asked for a full accounting of the drilling costs and requested a refund for excess charges billed by the operator. In March 2015 the Company received refunds totaling $40,000 from the operator. The refunds were treated as a reduction in our cost basis of the property. In June 2015 the Company filed suit against PID in the District Court for Shackelford County seeking recovery of damages, however, a final judgment was awarded to PID on November 8, 2017 and, on December 19, 2017, the Judge signed an Amended Order of Sale to satisfy the Judgment, which resulted in the Company having to give up its working interest and rights to the Fortune prospect to settle amounts owed (see Note 13 and 14).

F-15

Bradford West Lease

On December 31, 2014 the Company acquired a 100% working interest (77% net revenue interest) in the Bradford West lease for a cash payment of $20,000. The prospect comprising 200 acres is located adjacent to and just to the west of the existing Bradford “A” and “B” leases. During the second quarter of 2015, the Company drilled the initial well (Bradford West #1). The results from this well were disappointing and the Company elected not to continue the drilling program. The well was suspended and the lease and well were subsequently transferred to the previous owners during the fourth quarter of 2015.

Impairment

The Company considered the fall in crude oil prices over time and the relatively small production volumes, if any, from the Company’s leases and based on management’s review of the carrying value of oil and gas properties, management determined that there was sufficient evidence that the cost of their acquired oil and gas properties would not be fully recovered as of December 31, 2016 and 2015. Accordingly, the Company determined that an adjustment to the carrying value of these properties was required and recognized an impairment expense of $250,000 and $2,654,824 during the years ended December 31, 2016 and 2015, respectively. The impairment expense equals the difference between the carrying values of the oil and gas properties and their estimated recoverable fair values.

ARO Asset

In accordance with ASC 410, Asset Retirement and Environmental Obligations, the Company capitalizes an asset retirement cost (“ARO Asset”) by increasing their oil and gas asset by the same amount as their asset retirement obligation (“ARO”) upon the initial recognition of the ARO. The ARO asset is allocated to expense ratably over its estimated useful life. During the years ended December 31, 2016 and 2015 the Company allocated $11,248 and $3,093 to expense.

The Company regularly evaluates the retirement activities that are required to be performed to reclaim their oil and gas properties. Management concluded, as of December 31, 2016, that no such requirements existed, therefore they reduced their ARO Asset and ARO liability (see Note 11) to zero and recognized a loss of $48,978 in the Gain (Loss) on Retirement of Assets in their Statement of Operations related to the ARO Asset.

Summary

Activity for the Company’s oil and gas assets during the year ending December 31, 2016 can be summarized as follows:

	Unproven Properties			ARO Asset			Total Oil and Gas Properties
Balance December 31, 2015	$	250,000		$	60,226		$	310,226
Depreciation		-			(11,248	)		(11,248	)
Impairment		(250,000	)		-			(250,000	)
Loss on derecognition		-			(48,978	)		(48,978	)
Balance December 31, 2016	$	-		$	-		$	-

NOTE 5 - PROPERTY AND EQUIPMENT

The following is a summary of property and equipment - at cost, less accumulated depreciation, as of December 31, ~~2015~~2016 and ~~2014~~2015:

	December 31, 2015			December 31, 2014
	December 31, 2016			December 31, 2015
Office equipment	$	~~63,235~~-		$	63,~~128~~235
Computer hardware and software		~~26,652~~-			2326,~~527~~652
Leasehold improvements		~~25,453~~-			25,~~270~~453
Transportation equipment		~~132~~90,~~622~~018			~~180~~132,~~485~~622
Building		~~110,699~~-			110,~~595~~699
		358,661			403,005
		90,018			358,661
Less: accumulated depreciation		(~~114~~42,~~583~~743	)		(63114,~~252~~583	)
	$	~~244~~47,~~078~~275		$	~~339~~244,~~753~~078

Depreciation expense for the years ended December 31, ~~2015~~2016 and ~~2014~~2015 amounted to $6349,~~294~~760 and $4063,~~093~~294, respectively.

During ~~2015~~2016, the Company sold aits ~~truck~~regional operations facility in Abilene, Texas with a net book value ~~worth~~of ~~approximately~~ $35123,~~000~~325 to a third ~~parties~~party for a sales price of ~~approximately~~ $28130,000. ~~and~~The ~~settled~~Company ~~the~~sold various pieces of transportation equipment ~~purchase~~with ~~contract~~a ~~payable~~net book value of $285,~~000,~~026 ~~realizing~~to a ~~loss~~third party onfor ~~sale~~a ofsales ~~assets~~price of approximately $716,000. The ~~depreciation~~Company ~~expense~~also ~~related~~disposed toof ~~the~~additional ~~sold~~property ~~truck~~and ~~amounted~~equipment towith ~~approximately~~net ~~$7,000~~book values ~~which~~totaling ~~is included in the~~ $6318,~~294 above~~692. ~~During 2014~~As a result, the Company ~~sold~~realized a ~~truck~~loss, ~~that~~net ~~had~~of ~~been~~recording, ~~purchased~~legal inand ~~2014.~~other Notransaction ~~depreciation~~costs, ~~was recognized~~ on the sale ~~truck~~of property and aequipment ~~minor gain~~ of ~~approximately~~ $1,~~000~~043 ~~was~~in ~~realized~~2016.

F-16

During 2015, the Company sold a truck with a net book value worth approximately $35,000 to third parties for a sales price of approximately $28,000 and settled the equipment purchase contract payable of $28,000, realizing a loss on sale of assets of approximately $7,000. The depreciation expense related to the sold truck amounted to approximately $7,000 which is included in the $63,294 above.

NOTE 6 - SENIOR SECURED CONVERTIBLE PROMISSORY NOTES PAYABLE

Senior secured convertible notes payable consisted of the following:

	December 31, 2016		December 31, 2015

12% Senior Secured Convertible Promissory Notes Principal, in default, net of $0 debt discount	$	4,500,000	$	4,500,000
Accrued Interest		1,080,000		540,000
	$	5,580,000	$	5,040,000

	December 31, 2015			December 31, 2014
12% Senior secured convertible promissory notes	$	4,500,000		$	4,500,000
Discount		(519,286	)		(519,286	)
Accumulated amortization of discount		519,286			224,158
Remaining discount		-			(295,128	)
12% Senior secured convertible notes payable, net	$	4,500,000		$	4,204,872

During the fiscal year ended December 31, 2014, the Company issued senior secured convertible promissory notes in an aggregate principal amount of $4,500,000 (the “Senior Secured Convertible Notes”) together with common stock purchase warrants (the “Warrants”) to purchase an aggregate of 1,800,000 shares of the Company’s common stock at an exercise price of $1.00 per share as part of a private placement offering. The Senior Secured Convertible Notes bear interest at a rate of 12.0% per annum until they matured on December 15, 2015 or were converted. The note was secured by senior secured interest in the assets of the Company’s working interests in the Dawson-Conway Lease, Powers-Sanders Lease, and Stroebel-Broyles Lease and a pledge of a number of shares of restricted Stock (the “Stock Coverage”) whose value based on the bid price of the Stock is twice (or 200%) the amount in outstanding and unpaid principal and interest of the Notes.

In March 2014, the Company issued senior secured convertible promissory notes in an aggregate principal amount of $3,225,000 (the “Senior Secured Convertible Notes”) together with common stock purchase warrants (the “Warrants”) to purchase an aggregate of 1,290,000 shares of the Company’s common stock at an exercise price of $1.00 per share as part of a private placement offering. The Senior Secured Convertible Notes bear interest at a rate of 12.0% per annum until they mature on December 15, 2015 or are converted. The note is secured by senior secured interest in the assets of the Company’s working interest in the Dawson-Conway Lease, Powers-Sanders Lease, and Stroebel-Broyles Lease and a pledge of a number of shares of restricted Stock (the “Stock Coverage”) whose value based on the bid price of the Stock is twice (or 200%) the amount in outstanding and unpaid principal and interest of the Notes.

During fiscal 2014, the Company issued additional Senior Secured Convertible Notes in an aggregate principal amount of $1,275,000 together with common stock purchase warrants (the “Warrants”) to purchase an aggregate of 510,000 shares of the Company’s common stock at an exercise price of $1.00 per share as part of the same private placement offering. The remaining $500,000 of principal available under the facility was not secured during the fourth quarter of 2014 and the offering of units was closed during February 2015.

In accordance with ASC 470-20, the Company recognized an embedded beneficial conversion feature in the notes. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of nil of the proceeds, which is equal to the intrinsic value of the embedded beneficial conversion feature.

FIn connection with the issuance of the convertible promissory notes, the Company issued detachable warrants granting the holders the right to acquire an aggregate of 1,800,000 shares of the Company’s common stock for $1.00 per share. The warrants expire on December 31, 2019. In accordance with ASC 470-1520, the Company recognized the value attributable to the warrants in the amount of $519,286 to additional paid-in capital and as a discount against the notes. The Company valued the warrants in accordance with ASC 470-20 using the Black-Scholes pricing model and the following assumptions: contractual terms of 2 years, an average risk-free interest rate of 0.69%, a dividend yield of 0% and volatility of 238.45%. The debt discount attributed to the value of the warrants issued was amortized over the notes’ maturity and recorded to amortization of debt discount.

~~Cardinal~~During ~~Energy~~the ~~Group~~year ended December 31, ~~Inc~~2016 and 2015 the Company amortized $0 and $295,128, respectively, to current operations as amortization of debt discount under other expenses.

~~Notes~~Through the end of December 2014, the Company had prepaid $515,000 in commissions and fees related to the ~~Consolidated~~financing. ~~Financial~~During ~~Statements~~the years ended December 31, 2016 and 2015, the Company amortized prepaid debt issuance cost of $0 and $294,163, respectively, to interest expense.

~~December~~The Company failed to make the $270,000 semi-annual interest payments due to the noteholders for 2016 and 2015 and failed to pay off the loan at the December 31, 2015 maturity date, as such the notes are in default. The Company has held several telephone conference calls with the noteholders and ~~2014~~has been in continuous contact with Syndicated Capital, the placement agent for the Notes, to discuss plans to either bring the notes to a current status or to restructure the unpaid interest and principal outstanding into common and or preferred equity securities of the Company. To date, the noteholders have elected not to exercise their rights to trigger certain default provisions under the senior secured promissory notes.

~~NOTE~~The 6net -proceeds ~~SENIOR~~from ~~SECURED~~the ~~CONVERTIBLE~~borrowing ~~PROMISSORY~~were ~~NOTES~~used ~~PAYABLE~~primarily ~~(continued)~~to acquire selected oil and gas properties in Texas, to fund the Company’s well workover and drilling programs, to purchase and equip a regional office, to purchase various well testing and production equipment, to fund lease operating expenses and to retire short-term debt.

In ~~connection~~July ~~with~~2015 the ~~issuance of the convertible promissory notes, the~~ Company ~~issued~~identified ~~detachable~~embedded ~~warrants~~derivatives ~~granting the holders the right~~ to ~~acquire~~be anreported ~~aggregate~~as ofa ~~1,800,000~~theoretical ~~shares~~default of the ~~Company’s~~Senior ~~common~~Secured ~~stock~~Convertible Promissory ~~for $1~~Notes.00 ~~per~~These ~~share.~~embedded ~~The~~derivatives ~~warrants~~included ~~expire on~~conversion ~~December~~features. ~~31,~~The ~~2019.~~accounting Intreatment ~~accordance~~of ~~with~~derivative ~~ASC~~financial ~~470-20,~~instruments requires the Company ~~recognized the value attributable~~ to record the ~~warrants~~fair invalue ~~the amount~~ of ~~$519,286~~the toderivatives ~~additional paid-in capital and~~ as aof ~~discount against~~ the ~~notes.~~inception ~~The~~date ~~Company~~of ~~valued~~ the ~~warrants~~Senior inSecured ~~accordance~~Convertible ~~with~~Promissory ~~ASC~~Note ~~470-20 using the Black-Scholes pricing model~~ and ~~the following assumptions: contractual terms of 2 years, an average risk free interest rate of 0.69%, a dividend yield of 0% and volatility of 238.45%. The debt discount attributed~~ to ~~the~~adjust ~~value of~~ the ~~warrants~~ ~~issued~~fair ~~was~~value ~~amortized~~as ~~over~~of ~~the~~each ~~notes’~~subsequent ~~maturity~~balance ~~and~~sheet ~~recorded~~date to(see ~~amortization~~Note ~~of debt discount~~8).

The Company amortized debt discount $224,158 to current operations as a component of interest expense for the year ended December 31, 2014. During the year ended December 31, 2015 the Company amortized an additional $295,128 to current operations as amortization of debt discount under other expenses.F-17

~~Through~~NOTE ~~the~~7 ~~end~~– ofLOAN ~~December 2014~~PAYABLE, ~~the~~EQUIPMENT ~~Company~~PURCHASE ~~had~~CONTRACTS ~~prepaid $515~~PAYABLE,~~000~~ inNOTES ~~commissions and fees related to the financing. During the year ended December 31~~PAYABLE, ~~2015~~AND ~~and~~CONVERTIBLE ~~2014,~~NOTES the Company amortized prepaid debt issuance cost of $294,163 and $220,837, respectively, of the commissions and fees to interest expense. As of December 31, 2015, accrued interest amounted to $540,000 and was included in accounts payable and accrued expenses as reflected in the consolidated balance sheet.PAYABLE

The Company failed to make the $270,000 semi-annual interest payment that was due to the noteholders on July 31, 2015 and the final semi-annual interest and principal payments due on December 15, 2015 remain outstanding at December 31, 2015. The Company has held several telephone conference calls with the noteholders and has been in continuous contact with Syndicated Capital, the placement agent for the Notes, to discuss plans to either bring the interest payments to a current status or to restructure the unpaid interest and principal outstanding into common and or preferred equity securities of the Company. To date, the noteholders have elected not to exercise their rights to trigger certain default provisions under the senior secured promissory notes.

The net proceeds from the borrowing were used primarily to acquire selected oil and gas properties in Texas, to fund the Company’s well work-over and drilling programs, to purchase and equip a regional office, to purchase various well testing and production equipment, to fund lease operating expenses and to retire short-term debt.

In July 2015 the Company identified embedded derivatives related to the theoretical default of the Senior Secured Convertible Promissory Notes. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company to record the fair value of the derivatives as of the inception date of the Senior Secured Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date (see Note 8).

NOTE 7 – LOAN PAYABLE, NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

Loan Payable

Loan payable outstanding at December 31, ~~2015~~2016 and ~~2014~~2015 consisted the following:

	December 31, 2015		December 31, 2014
	December 31, 2016		December 31, 2015
Loan payable obtained in November 2015 of $172,800, net of debt discount of $36,759, payable over 273 days beginning on November 18, 2015 with daily payments of $633.	$	119,584	$	-
Principal and interest due on loan payable obtained in November 2015 of $172,800, net of debt discount of $0 and $36,759, respectively, payable over 273 days, beginning on November 18, 2015 with daily payments of $633 [1]	$	178,727	$	119,584
Principal and interest due on loan payable, obtained on August 16, 2016 for $25,000, due on August 16, 2017, with simple interest accrual of 8% [2]		25,751		-
Principal and interest due on loan payable obtained on September 16, 2016 for $50,000; due on September 15, 2017, with simple interest accrual of 8% [3]		51,173
Principal and interest due on loan payable, obtained on December 15, 2016 for $25,000, due in 12 months (August 16, 2017), with simple interest accrual of 8% [4]		16,056		-
Total Loans Payable	$	271,707	$	119,584

~~Such~~[1] The loan of $172,800 was obtained in connection with a Revenue Based Factoring Agreement executed in November 2015 whereby the Company sells, assigns, and transfers all of the Company’s future receipts, accounts and contract rights and other obligations ~~arising~~ arising from or relating to payment of monies from customers in the ordinary course of the Company’s business, until such time the loan amount has been paid off by the Company. During the year ended December 31, 2016 the Company recorded $35,642 of interest expense on this note and made payments of $13,257. In March 2016, the Company received a default notice from the lender, Power Up Lending Group, and the lender filed a lawsuit against the Company (see Note 1413).

~~F-16~~[2] During the year ended December 31, 2016 the Company received proceeds of $25,000 from this unsecured loan, recorded interest of $751, and made no payments on the borrowing.

~~Cardinal~~[3] ~~Energy~~During ~~Group~~the year ended December 31, ~~Inc~~2016 the Company received proceeds of $50,000 from this unsecured loan, recorded interest of $1,173, and made no payments on the borrowing.

~~Notes~~[4] toDuring the ~~Consolidated~~year ~~Financial~~ended ~~Statements~~December 31, 2016 the Company received proceeds of $16,000 from this unsecured loan, recorded interest of $56, and made no payments on the borrowing. The Company obtained the remaining proceeds of $9,000 from this unsecured loan in April of 2017.

~~December~~Equipment ~~31,~~Purchase ~~2015~~Contracts ~~and 2014~~Payable

~~NOTE~~Between 7June -2014 ~~LOAN~~and ~~PAYABLE~~September 2014, ~~NOTES~~the ~~PAYABLE~~Company ~~AND~~entered ~~CONVERTIBLE~~into ~~NOTES~~equipment ~~PAYABLE~~purchase ~~(continued)~~contracts in the aggregate amount of $100,285 in connection with the acquisition of three pieces of transportation equipment. The contracts bear interest ranging approximately from 9% to 10% per annum and are secured by a lien on the transportation equipment. Each of the contracts require 60 equal monthly payments. During the year ended December 31, 2015, the Company sold one piece of transportation equipment and they used the sales proceeds to pay off the remaining balance due of approximately $25,000. During the year ending December 31, 2016 the Company made payments of $5,058 on their contracts payable.

Notes Payable

Equipment purchase contracts payable

Between June 2014 and September 2014, the Company issued notes payable in the aggregate amount of $100,285 in connection with the acquisition of three pieces of transportation equipment. The notes payable bear interest ranging approximately from 9% to 10% per annum and are secured by a lien on the transportation equipment. The notes are payable in 60 equal monthly payments. During fiscal 2015, the Company sold one piece of transportation equipment. The Company used the sales proceeds to pay off the remaining balance of the note of approximately $25,000.

Notes payable — short and long term portion consisted of the following:

	December 31, 2015			December 31, 2014
	December 31, 2016			December 31, 2015
Total notes payable	$	56,226		$	94,631
Total equipment purchase contract payable	$	51,168		$	56,226
Less: current portion – equipment purchase contract payable		(13,721	)		(17,023	)
Less: current portion – equipment purchase contract payable, in default		(51,168	)		(13,721	)
Long term portion – equipment purchase contract payable	$	~~42,505~~-		$	7742,~~608~~505

~~Note payable outstanding at December 31, 2015 and 2014 consisted the following:~~F-18

		December 31, 2015				December 31, 2014
Promissory note of $340,000 bearing 6% interest per annum		$	-			$	340,000

Notes Payable

Note issued in July 2013:

In July 2013, the Company purchased an 85% working interest and 75% net revenue interest in certain oil and gas leases covering 618 acres of land located in Shackelford County, Texas (the “Dawson-Conway Leases”) for a purchase price of $400,000. The Company issued a promissory note in the amount of $400,000 to finance the purchase (the “HLA Note”). The promissory note ~~accrues~~ interest at 6% per annum, iswas due two years from issuance and iswas secured by the Dawson-Conway Leases. During ~~March~~ March of 2014, pursuant to property title related issues, the note was reduced to $340,000. ~~All~~but ofall other terms of the note agreement ~~remain~~remained unchanged. The ~~Company~~reduction ~~has~~was treated ~~the reduction~~ as an adjustment to the purchase price of the properties. On August 5, 2015, a partial default judgement was awarded in favor of the Company relieving the Company of any responsibility for repayment of the HLA Note. Accordingly, the Company removed the HLA Note from the liability section of the balance sheet and treated the outstanding balance of $340,000 as a reduction to the carrying value of the properties as of December 31, 2015.

At December 31, 2014, the $340,000 balance of the HLA Note remained outstanding. Pursuant to a partial default judgement awarded in favor of the Company on August 5, 2015, the Company was relieved of any responsibility for repayment of the HLA Note. Accordingly, the Company has removed the HLA Note from the liability section of the balance sheet and has treated the previously outstanding balance of $340,000 as a reduction to the carrying value of the properties as of December 31, 2015 (see Note 13).

Note issued on September 11, 2014:

On September 11, 2014, the Company issued a 90 -day promissory note to an unrelated entity in the amount of $120,000. The Company received $120,000 in cash. Under the terms of the note, the Company issued 50,000 shares of restricted common stock as a prepayment of interest and agreed to pay an additional $15,000 of interest on maturity of the note. The stock that was issued was valued at $0.70 per share based upon the trading value of the stock when issued, resulting in a credit to common stock of $35,000 ~~which~~ which was amortized over the 90 days to maturity of the note. During ~~December 2014 the Company repaid the note principal in cash and during~~ January 2015, the Company paid the interest by issuing 30,000 shares of common stock valued at $12,000.

~~F-17~~Convertible Notes Payable

~~Cardinal~~Convertible ~~Energy~~notes ~~Group~~payable outstanding at December 31, ~~Inc.~~2016 and 2015 are summarized in the following table:

Notes to the Consolidated Financial Statements

	December 31, 2016			December 31, 2015
Principal and interest due on $145,000 convertible note, in default, net of debt discount of $0 and $24,031 at December 31, 2016 and 2015, respectively [1]	$	967,692		$	155,619
Principal and interest due on $340,000 convertible note, in default, net of debt discount of $0 at December 31, 2016 and 2015 [2]		515,867			431,092
Principal and interest due on $110,000 convertible note, in default, net of debt discount of $0 at December 31, 2016 and 2015 [3]		13,171			4,521
Principal and interest due on $100,000 convertible note, in default, net of debt discount of $0 and $1,277 at December 31, 2016 and 2015, respectively [4]		60,000			38,190
Principal and interest due on $55,000 convertible note, net of debt discount of $1,168 and $15,351 at December 31, 2016 and 2015, respectively [5]		53,027			24,861
Principal and interest due on $55,500 convertible note, net of debt discount of $1,240 and $16,279 at December 31, 2016 and 2015, respectively [6]		58,361			36,954
Principal and interest due on $85,000 convertible note, net of debt discount of $3,793 and $21,272 at December 31, 2016 and 2015, respectively [7]		43,483			26,004
Principal and interest due on $60,000 convertible note, in default, net of debt discount of $0 and $1,333 at December 31, 2016 and 2015, respectively [8]		257,760			57,679
Principal and interest due on $110,000 convertible note, in default, net of debt discount of $0 and $12,469 at December 31, 2016 and 2015, respectively [9]		546,447			279,057
Principal and interest due on $121,000 convertible note, in default, net of debt discount of $0 and $48,812 at December 31, 2016 and 2015, respectively [10]		154,567			75,271
Principal and interest due on $57,750 convertible note, in default, net of debt discount of $0 and $39,340 at December 31, 2016 and 2015, respectively [11]		102,059			20,295
Reclassification adjustment for debt issuance costs (see Note 1)		-			(26,275	)
Total principal and interest including default interest and penalties		2,772,434			1,123,268
Less: Current portion of convertible notes		(2,772,434	)		(1,040,951	)
Total long-term portion of convertible notes	$	-		$	82,317

~~December~~[1] ~~31,~~Convertible ~~2015~~Note originally issued during fiscal 2013 and ~~2014~~replaced on May 8, 2015:

~~NOTE~~On 7May 8, 2015, a convertible debenture offering issued during fiscal 2013 was converted into a 10-month, ~~LOAN~~12% ~~PAYABLE~~convertible note payable of $145,000. ~~NOTES~~The ~~PAYABLE~~Company ~~AND~~analyzed ~~CONVERTIBLE~~the ~~NOTES~~convertible ~~PAYABLE~~debts ~~(continued)~~for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting was not applicable at inception. During the year ended December 31, 2015, the Company repaid by cash $15,000 of these convertible notes payable and issued 69,697 shares of common stock to convert an additional $23,000 of principal.

~~Convertible~~During the year ended December 31, 2015, noteholders of the remaining balance of these convertible notes payable entered into an assignment agreement and assigned their debts to another noteholder. On May 8, 2015, the Company issued a ten-month 12% convertible promissory note payable of $145,000 to a new unrelated entity. The repayment of the note was due on or before March 8, 2016, ten months after the issue date of the note. The repayment is subject to the convertible features of the note. The creditor has a conversion obligation allowing it to convert the notes during the pendency of the note , but repayment in cash is not expected. At the option of the note holder, the Company may repay the note by issuing restricted common stock, based upon a valuation formula, which includes a calculation based upon lesser of a) $0.40; or, b) 70% of the lowest volume weighted average price (“VWAP”) during the immediate 10 days prior to the date of the conversion notice. On November 25, 2015, the conversion price was changed to lesser of a) $0.40 or b) 60% of the lowest trading value during the 20 days immediately preceding the conversion. Due to the variable conversion price, the embedded conversion feature was accounted for as a derivative as of December 31, 2016. (See Note 8 ).

Convertible notes payable outstanding at December 31, 2015 and 2014 are summarized in the following table:

	December 31, 2015			December 31, 2014
Amount of principal and interest under the various 8% convertible promissory notes net of debt discount of $0 and $14,353 at December 31, 2015 and 2014, respectively, issued during fiscal 2013	$	-		$	168,647
Amount of principal and interest including default interest and penalties under the 6% convertible promissory notes net of debt discount of $0 and $181,465 at December 31, 2015 and 2014, respectively, issued during fiscal 2014		431,092			158,535
Amount of principal and interest including default interest and penalties under the various 8% convertible promissory notes net of debt discount of $0 and $107,288 at December 31, 2015 and 2014, respectively, issued during fiscal 2014		4,521			2,712
Amount of principal and interest including default interest and penalties under the various 8% convertible promissory notes net of debt discount of $39,340 and $0 at December 31, 2015 and 2014, respectively, issued during fiscal 2015		20,295			-
Amount of principal and interest including default interest and penalties under the various 10% convertible promissory notes net of debt discount of $2,610 and $0 at December 31, 2015 and 2014, respectively, issued during fiscal 2015		95,869			-
Amount of principal and interest including default interest and penalties under the various 12% convertible promissory notes net of debt discount of $138,214 and $0 at December 31, 2015 and 2014, respectively, issued during fiscal 2015		597,766			-
Total principal and interest including default interest and penalties		1,149,543			329,894
Less : Current portion of convertible notes		(1,061,725	)		(329,894	)
Total long-term portion of convertible notes	$	87,818		$	-

Convertible Note issued during fiscal 2013:

As of December 31, 2015 and 2014, there was a total remaining balance of $0 and $183,000, respectively, pursuant to convertible debentures offering issued during fiscal 2013. The convertible notes bore interest at 8% per annum, with principal and interest due two years from issuance. The notes carried a default interest rate of 12% per annum. The notes were convertible for two years from the issue date into shares of the Company’s common stock at a price of $1.00 per share. The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. During the year ended December 31, 2015, the Company repaid by cash $15,000 of these convertible notes payable and issued 69,697 shares of common stock to convert $23,000 principal convertible notes issued in 2013. During the year ended December 31, 2015, noteholders of the remaining balance of these $145,000 principal convertible notes payable entered into an assignment agreement and assigned their debts to another note holder. The Company issued a 10 month 12% convertible note payable of $145,000 on May 8, 2015 - see below.

F-18

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 7 - LOAN PAYABLE, NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE (continued)

Convertible Note issued on September 22, 2014:

On September 22, 2014, the Company issued a 6% short term convertible promissory note payable of $340,000 to an unrelated entity. Under the terms of the note, the Company received $250,000. The Company paid $10,000 as a commission related to this credit facility. The repayment of the note is due 180 days after the funds were received. The repayment is subject to the convertible features of the note. The creditor has a conversion option allowing it to choose to receive repayment of the stated principal either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, the Company is required to pay principal of $340,000.

At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon a valuation formula, which includes a calculation based upon 75% of an average of the lowest 3-day closing price during the immediate 20 days prior to the date of the conversion notice. The note was issued with an original issue discount of $90,000 and the Company recorded it as prepaid debt issuance cost which was amortized over the term of the note. In conjunction with the issuance of this convertible promissory note, the Company issued an aggregate of 250,000 Class C detachable warrants exercisable three years from the date of issuance with an initial exercise price of $1.00 per share.

During the year ended December 31, 2015, the Company extended the repayment date on three occasions and issued common stock to the note holder as consideration for the extension concessions. The Company issued 250,000 shares on May 5, 2015 and an additional 250,000 shares on May 28, 2015. The shares were valued based upon an agreed formula consistent with the conversion terms applied to the embedded derivative. The 500,000 shares of common stock was valued at $107,500 which was charged to interest during the year ended December 31, 2015. The Company has completed a third extension, for which it paid $5,000 for legal fees incurred by the note holder. The note is currently in default and the Company and the note holder have agreed to arbitration in 2016.

Convertible Note issued on December 23, 2014:

On December 23, 2014, the Company issued an 8% short term convertible promissory note payable of $110,000 to an unrelated entity. Under the terms of the note, the Company received $95,000. The Company paid $5,000 as a legal fees related to this credit facility. The repayment of the note is due one year after the funds were received. The repayment is subject to the convertible features of the note. The creditor has a conversion option allowing it to choose to receive repayment of the stated principal either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, the Company is required to pay principal of $120,000 on or before 180 days from the execution of the agreement. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion term, which includes a calculation based upon a 40% discount to the lowest closing price during the immediate 20 days prior to the date of the conversion notice.

Convertible Note issued on January 12, 2015:

On January 12, 2015, the Company issued a 10% one year promissory note payable of $100,000, due January 12, 2016, with an unrelated entity. Under the terms of the note, the Company received $90,000 and was charged an original issue discount of $5,000. The Company was also charged $5,000 as legal fees related to this credit facility. The repayment, if not completed within 180 days may, at the option of the note holder, be repaid in common stock of the Company. After 180 days, the creditor will have a conversion option allowing it to choose to receive repayment of the stated principal and interest either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, during the 180 day prepayment period, the repayment will be $120% of the principal and any accrued interest. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion term, which includes a calculation based upon a 35% discount to the lowest closing price during the immediate 15 days prior to the date of the conversion notice.

F-19

~~Cardinal~~[2] ~~Energy~~Convertible ~~Group~~Note issued on September 22, ~~Inc.~~2014:

~~Notes~~On September 22, 2014, the Company issued a 6% short term convertible promissory note payable of $340,000 to an unrelated entity. Under the ~~Consolidated~~terms ~~Financial~~of ~~Statements~~the note, the Company received $250,000. The Company paid $10,000 as a commission related to this credit facility. The repayment of the note was due 180 days after the funds were received. The repayment was subject to the convertible features of the note. The creditor had a conversion option allowing it to choose to receive repayment of the stated principal either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, the Company is required to pay principal of $340,000.

~~December~~At 31the option of the note holder, ~~2015~~the ~~and~~Company ~~2014~~may repay the note by issuing restricted common stock based upon a valuation formula, including a calculation based upon 75% of an average of the Company’s common stock, based upon the lowest 3-day closing price during the immediate 20 days prior to the date of the conversion notice. The note was issued with an original issue discount of $90,000 which the Company recorded as prepaid debt issuance cost. The prepaid debt issuance cost has been amortized over the term of the note. In conjunction with the issuance of this convertible promissory note, the Company issued an aggregate of 250,000 Class C detachable warrants exercisable three years from the date of issuance with an initial exercise price of $1.00 per share. The warrants will expire on September 29, 2017.

~~NOTE~~During 7the year ended December 31, 2015, the Company extended the repayment date on three occasions and issued common stock to the note holder as consideration for the extension concessions. The Company issued 250,000 shares on May 5, 2015 and an additional 250,000 shares on May 28, 2015. The shares were valued based upon an agreed formula consistent with the conversion terms applied to the embedded derivative. The 500,000 shares of common stock were valued at $107,500 which was charged to interest during the year ended December 31, 2015. The Company completed a third extension, for which it paid $5,000 for legal fees incurred by the note holder. Because the note was in default the Company and the note holder agreed to arbitration in 2016. On February 16, 2016 the Company and the note-holder, ~~LOAN~~following ~~PAYABLE~~arbitration, ~~NOTES~~agreed ~~PAYABLE~~to ~~AND~~binding ~~CONVERTIBLE~~award ~~NOTES~~of ~~PAYABLE~~$432,675 to be paid (~~continued~~with interest) to the note-holder, Tonaquint, Inc. (see Note 13). As of December 31, 2016, the award is unpaid and the Company has accrued interest based upon the interest rate included in the arbitration award of 22%.

~~Convertible~~[3] Convertible Note issued on ~~January~~December 1623, ~~2015~~2014:

On ~~January~~December 1623, ~~2015~~2014, the Company issued an 8% short- term convertible promissory note payable of $~~114~~110,000, ~~due~~to ~~October~~an ~~13,~~unrelated ~~2015~~entity, LG ~~with~~Capital anFunding, ~~unrelated entity~~LLC. Under the terms of the note, the Company received $~~110~~95,000. ~~and~~The ~~was~~Company ~~charged~~paid an$5,000 ~~original~~as ~~issue~~legal ~~discount~~fees related ofto ~~$4,000~~this credit facility. The repayment~~, if~~ ~~not~~of ~~completed~~the ~~within~~note ~~180~~was ~~days~~due ~~may,~~one atyear after the ~~option~~funds ofwere ~~the~~received. ~~note~~The ~~holder,~~repayment beis ~~repaid~~subject to inthe ~~common~~convertible ~~stock~~features of the ~~Company~~note. ~~After~~The ~~180 days, the~~ creditor ~~will~~has ~~have~~ a conversion option allowing it to choose to receive repayment of the stated principal ~~and interest~~ either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, ~~during~~ the ~~180~~Company ~~day prepayment~~was ~~period~~required to pay principal of $120,000 ~~the~~on ~~repayment~~or ~~will~~before be180 ~~130%~~days offrom the ~~principal~~execution ~~and~~of ~~any~~the ~~accrued interest~~agreement. At the option of the note holder, the Company ~~may~~could repay the note by issuing restricted common stock based upon the conversion ~~term~~terms, including ~~which includes~~ a calculation based upon a 3540% discount ofto the ~~average of the~~ lowest ~~three~~closing ~~trading~~ price during the 10immediate 20 days prior to the date of the conversion notice. In 2017 the note-holder filed a lawsuit against the Company and was awarded a judgment in December 2018. The full amount of the judgment has been accrued here as of December 31, 2016 (see Note 14).

~~Convertible~~[4] Convertible Note issued on January 2212, 2015:

On January 2212, 2015, the Company issued a ~~two~~10% one-year ~~12% convertible~~ promissory note payable of $55100,000, ~~with~~due January 12, 2016, to an unrelated entity, Iconic Holdings, LLC (“Iconic”). Under the terms of the note, the Company received $5090,000. ~~The~~and ~~repayment~~was charged ofan ~~the~~original ~~note~~issue isdiscount ~~due~~of on$5,000. orThe ~~before~~Company ~~January~~was ~~28,~~also ~~2017~~charged $5,000 2as ~~years~~legal ~~after the~~fees ~~funds~~related ~~were~~to ~~received.~~this credit facility. The repayment, isif ~~subject~~not tocompleted ~~the~~within ~~convertible~~180 ~~features~~days, may, at the option of the note holder, be repaid in common stock of the Company. After ~~The~~180 days, the creditor ~~has~~will have a conversion option allowing it to choose to receive repayment of the stated principal and interest either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, during the 180-day prepayment period, the repayment would have been 120% of the principal and any accrued interest. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon athe conversion ~~term~~terms, ~~which includes~~ including a calculation based upon 6035% ofdiscount to the lowest closing price during the immediate 2515 days prior to the ~~calculation~~date of the conversion notice. ~~The~~In ~~note~~February ~~was issued with an original issue discount~~ of $52016,~~000~~ ~~and the Company recorded it~~ as ~~prepaid~~a ~~debt~~result ~~issuance~~of ~~cost~~the ~~which~~note isgoing ~~amortized~~into ~~over~~default, the ~~term of the~~ note. ~~Conversion~~holder ~~price~~filed ofa ~~this~~complaint ~~convertible~~against ~~note~~the ~~shall~~Company. ~~equal~~Following toarbitration ~~the~~in ~~lesser~~December of ~~(a)~~2016 ~~$0.50~~the orparties ~~(b)~~entered ~~60%~~into ofa ~~the~~Settlement ~~lowest~~Agreement ~~trade~~wherein ~~occurring during~~ the 25Company ~~consecutive~~agreed ~~trading~~to ~~days~~pay ~~immediately preceding~~Iconic ~~the~~$60,000 ~~applicable~~(see ~~conversion~~Note ~~date~~13). onThe ~~which~~liability ~~the~~was ~~holder~~paid ~~elects~~subsequent to ~~convert~~December ~~all~~31, ~~or part of this note~~2016.

Convertible Note issued on January 28, 2015:

On January 28, 2015, the Company issued a two-year 12% convertible promissory note payable of $55,000, due January 28, 2017 with an unrelated entity. Under the terms of the note, the Company received $50,000 and was charged an original issue discount of $5,000. The repayment, if not completed within 180 days may, at the option of the note holder, be repaid in common stock of the Company. After 180 days, the creditor will have a conversion option allowing it to choose to receive repayment of the stated principal and interest either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, during the initial 90 days, the repayment will be 120% of the principal and any accrued interest. During the succeeding 90 day prepayment period, the repayment will be 130% of the principal and any accrued interest. Conversion price of this convertible note shall equal the lesser of (a) $0.365 or (b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the applicable conversion date on which the note holder elects to convert all or part of this note.

Convertible Note issued on March 18, 2015:

On March 18, 2015, the Company issued a two-year 8% convertible promissory note payable of $60,000, due March 18, 2017 with an unrelated entity. Under the terms of the note, the Company received $54,000 and was charged an original issue discount of $6,000. The repayment, if not completed within 180 days may, at the option of the note holder, be repaid in common stock of the Company. After 180 days, the creditor will have a conversion option allowing it to choose to receive repayment of the stated principal and interest either in cash or, at the creditor’s option, in the Company’s common stock. If paid in cash, during the initial 90 days, the repayment will be 115% of the principal and accrued interest. During the succeeding 90 day prepayment period, the repayment will be $130% of the principal and any accrued interest. If the creditor elects to convert the note to common stock, the conversion feature allows for a valuation of the stock based upon a 35% discount to the average of the lowest three trading prices during the 10 days preceding the conversion date.

Convertible Note issued on March 18, 2015 and August 27, 2015:

Between March 18, 2015 and August 27, 2015, the Company issued two year 12% convertible promissory notes payable for a total of $85,000 with an unrelated entity. Under the terms of the note, the Company received $72,500. The repayment of the notes are both due on or before March 18, 2017, two years after the funds were received. The repayment is subject to the convertible features of the note. The creditor has a conversion option allowing it to choose to receive repayment of the stated principal with accrued interest.

F-20

~~Cardinal~~[5] ~~Energy~~Convertible ~~Group~~Note issued on January 22, ~~Inc.~~2015:

~~Notes~~On January 22, 2015, the Company issued a two-year, 12%, convertible promissory note payable of $55,000 to an unrelated entity. Under the ~~Consolidated~~terms ~~Financial~~of ~~Statements~~the note, the Company received $50,000. The repayment of the note is due on or before January 28, 2017, two years after the funds were received. The repayment is subject to the convertible features of the note. The creditor has an option to choose to receive repayment of the stated principal either in cash or, at the creditor’s option, in the Company’s restricted common stock. At the option of the note holder, the Company may convert the repayment of the note by issuing restricted common. The note was issued with an original issue discount of $5,000 and the Company recorded it as prepaid debt issuance cost which is amortized over the term of the note. Conversion price of this convertible note is equal to the lesser of a) $0.50 or b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the applicable conversion date on which the holder elects to convert all or part of this note.

~~December~~[6] ~~31,~~Convertible ~~2015~~Note ~~and~~issued ~~2014~~on January 28, 2015:

~~NOTE~~On 7January 28, 2015, the Company issued a two-year ~~LOAN~~12% ~~PAYABLE~~convertible promissory note payable of $55,500, ~~NOTES~~due ~~PAYABLE~~January ~~AND~~28, ~~CONVERTIBLE~~2017 ~~NOTES~~to ~~PAYABLE~~an unrelated ~~(continued~~entity. Under the terms of the note, the Company received $50,000 and was charged an original issue discount of $5,500. The repayment, if not completed within 180 days may, at the option of the note holder, be repaid in common stock of the Company. After 180 days, the creditor will have a conversion option allowing it to choose to receive repayment of the stated principal and interest either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, during the initial 90 days, the repayment will be 120% of the principal and any accrued interest. During the succeeding 90-day prepayment period, the repayment will be 130% of the principal and any accrued interest. If payment is made in common stock of the Company, the conversion price assigned to the common stock is to be the lesser of a) $0.365 or b) 60% of the lowest trade occurring during the 25 consecutive trading days immediately preceding the applicable conversion date on which the note holder elects to convert all or part of this note.

At[7] ~~the~~Convertible ~~option~~Note of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion term, which includes a calculation based upon the lesser of a) $0.30 or b) 60% of the lowest closing price during the immediate 25 days prior to the date of the conversion notice. The note was issued ~~with~~on anMarch ~~original issue discount of $8~~18,~~500~~ 2015 and aAugust ~~charge for legal fees of $4~~27,~~000.~~ ~~The Company recorded the costs as prepaid debt issuance cost which is amortized over the term of the note.~~2015:

~~Convertible~~On ~~Note~~March 18, 2015, the Company issued ona ~~April~~two-year 612% convertible promissory note payable of up to $250,000 to an unrelated entity. On March 18, 2015: and August 27, 2015, the Company received funding under the note of $60,000 and $25,000, respectively, for a total of $85,000. The repayment of the notes are both due two years after the funds were received. Under the terms of the note, the Company received $72,500 and the difference between the consideration received and the funded amount was made up of an original issue discount of $8,500 and a charge for legal fees of $4,000. The Company recorded the costs as prepaid debt issuance cost which is amortized over the term of the note. The repayment is subject to the convertible features of the note. The creditor has a conversion option allowing it to choose to receive repayment of the stated principal with accrued interest .At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion term, which includes a calculation based upon the lesser of a) $0.30 or b) 60% of the lowest closing price during the immediate 25 days prior to the date of the conversion notice.

On[8] ~~April~~Convertible 6,Note ~~2015, the Company~~ issued aon ~~nine-month~~April ~~10% convertible promissory note payable of $60,000, due January~~ 6, ~~2016~~2015: with an unrelated entity. Under the terms of the note, the Company received $54,750 and was charged an original issue discount of $5,250. The repayment, if not completed within 180 days may, at the option of the note holder, be repaid in common stock of the Company. After 180 days, the creditor will have a conversion option allowing it to choose to receive repayment of the stated principal and interest either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, during the initial 180 days, the repayment will be calculated based upon the period paid, with prepayment terms requiring 125% to 150% of the principal and any accrued interest. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion term, which includes a calculation based upon 55% of the lowest two closing price during the immediate 25 days prior to the date of the conversion notice.

~~Convertible~~On ~~Note~~April 6, 2015, the Company issued ona ~~May~~nine-month 110% convertible promissory note payable of $60,000, ~~2015:~~due January 6, 2016 to an unrelated entity. Under the terms of the note, the Company received $54,750 and was charged an original issue discount of $5,250. After 180 days, the creditor will have a conversion option allowing it to choose to receive repayment of the stated principal and interest either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, during the initial 180 days, the repayment will be calculated based upon the date paid, with prepayment terms requiring 125% to 150% of the principal and any accrued interest. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion term, which includes a calculation of a discount based upon 55% of the lowest two closing price during the immediate 25 days prior to the date of the conversion notice.

On[9] ~~May~~Convertible 1,Note ~~2015, the Company~~ issued aMay ~~nine-month 8% convertible promissory note payable of $59~~21,~~000,~~ due February 6, 2016 with an unrelated entity. Under the terms of the note, the Company received $55,000 and was charged prepaid loan costs of $4,000. The repayment, if not completed within 180 days may, at the option of the note holder, be repaid in common stock of the Company. After 180 days, the creditor will have a conversion option allowing it to choose to receive repayment of the stated principal and interest either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, during the initial 180 days, the repayment will be calculated based upon the period paid, with prepayment terms requiring 115% to 130% of the principal and any accrued interest. If the creditor elects to convert the note to common stock, the conversion feature allows for a valuation of the stock based upon a 35% discount to the average of the lowest three trading prices during the 10 days preceding the conversion date.2015:

~~Convertible~~On ~~Note~~May 21, 2015, the Company issued a ten-month 12% convertible promissory note payable of $110,000 to an unrelated entity. Under the terms of the note, the Company received $100,000. The repayment of the note is due on ~~May~~or before March 8, 2016, ten months after the issue date of the note. The repayment is subject to the convertible features of the note. The creditor has a conversion option allowing it to choose to receive repayment of the stated principal with accrued interest. The note is to be repaid either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash the principal repayment is to be $110,000 (including an original issue discount of $10,000) and the interest after the initial 90 days calculated at 12%. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion terms, which includes a calculation based upon lesser of a) $0.40 or b) 70% of the lowest volume weighted average price (“VWAP”) during the immediate 10 days prior to the date of the conversion notice. The original issue discount of $10,000 has been recorded as prepaid debt issuance cost along with legal and commission expenses of $11,350. The prepaid debt issuance costs was amortized over the term of the note. On November 25, 2015:, the conversion price was changed to lesser of a) $0.40 or b) 60% of the lowest trading value during the 20 days immediately preceding the conversion.

On May 8, 2015, the Company issued a ten-month 12 % convertible promissory note payable of $145,000 to an unrelated entity upon the assignment of a total of $145,000 of 8% convertible notes issued in fiscal 2013 whereby the previous noteholders entered into an assignment agreement and assigned their debts to this unrelated entity. The repayment of the note is due on or before March 8, 2016, ten months after the issue date of the note. The repayment is subject to the convertible features of the note. The creditor has a conversion obligation allowing it to convert the notes during the pendency of the note, but repayment in cash is not expected. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon a valuation formula, which includes a calculation based upon lesser of a) $0.40 or b) 70% of the lowest volume weighted average price (“VWAP”) during the immediate 10 days prior to the date of the conversion notice. On November 25, 2015, the conversion price was changed to lesser of a) $0.40 or b) 60% of the lowest trading value during the 20 days immediately preceding the conversion.

Convertible Note issued on May 21, 2015:

On May 21, 2015, the Company issued a ten-month 12% convertible promissory note payable of $110,000 with an unrelated entity. Under the terms of the note, the Company received $100,000. The repayment of the note is due on or before March 8, 2016, ten months after the issue date of the note. The repayment is subject to the convertible features of the note. The creditor has a conversion option allowing it to choose to receive repayment of the stated principal with accrued interest. The note is to be repaid either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash the principal repayment is to be $110,000 (including an original issue discount of $10,000) and the interest after the initial 90 days is to be 12%. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion terms, which includes a calculation based upon lesser of a) $0.40 or b) 70% of the lowest volume weighted average price (“VWAP”) during the immediate 10 days prior to the date of the conversion notice. The original issue discount of $10,000 has been recorded as prepaid debt issuance cost along with legal and commission expenses of $11,350. On November 25, 2015, the conversion price was changed to lesser of a) $0.40 or b) 60% of the lowest trading value during the 20 days immediately preceding the conversion.

F-21

~~Cardinal~~[10] ~~Energy~~Convertible ~~Group~~Note issued on June 2, ~~Inc.~~2015:

~~Notes~~On June 2, 2015, the Company issued a twelve-month 12% convertible promissory note payable of $121,000 with an unrelated entity. Under the terms of the note, the Company received $100,000. The repayment of the note is due on or before June 2, 2016, one year after the issue date of the note. The repayment is subject to the ~~Consolidated~~convertible ~~Financial~~features ~~Statements~~of the note. The creditor has a conversion option allowing it to choose to receive repayment of the stated principal with accrued interest. The note is to be repaid either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash the principal repayment is to be $121,000 (including an original issue discount of $10,000 and professional fees of $11,000) and the interest after the initial 90 days is to be 12%. At the option of the note holder, the Company may repay the note by issuing common stock based upon the conversion terms, which includes a calculation based upon 70% of the lowest trade price during the immediate 15 days prior to the date of the conversion notice. The original issue discount of $10,000 and the $11,000 legal fees have been recorded as prepaid debt issuance cost which is amortized over the term of the note.

~~December~~[11] ~~31,~~Convertible ~~2015~~Note ~~and~~issued ~~2014~~on July 17, 2015

~~NOTE~~On 7July 17, 2015, the Company issued a twelve-month ~~LOAN~~an ~~PAYABLE~~8% convertible note to an unrelated party, ~~NOTES~~LG ~~PAYABLE~~Capital ~~AND~~Funding, ~~CONVERTIBLE~~LLC, with ~~NOTES~~a ~~PAYABLE~~face amount of $57,750. The note contains an original issue discount of $5,000 and bears interest on the face amount at the rate of 8% per annum. The loan is due on July 17, 2016 and includes a convertible feature that allows the note holder to be paid in common stock of the Company. Any shares converted by the note holder will be valued at 60% of the lowest trading value during the 20 days immediately preceding the conversion. The note may be prepaid within 90 days of issuance at 110% of the principal amount plus accrued interest, and at 120% of principal plus accrued interest if prepaid after 90 days from the date of issuance but before 180 days of such date. The note may not be prepaid after 180 days. In the event of a default under the note, interest accrues at the rate of 24% per annum. In the event the Company fails to deliver shares of its common stock upon conversion within the time frames provided for in the note, the Company is subject to a $250 penalty per day increasing to $500 per day beginning on the 10th day after the prescribed delivery date. Further, in the event the Company is no longer current in its SEC filings for a period of six months or more, the conversion price shall be the lowest closing bid price during the delinquency period. In 2017 the noteholder filed a lawsuit against the Company and was awarded a judgment in December 2018. The full amount of the judgment has been accrued here as of December 31, 2016 (~~continued~~see Note 14).

~~The~~Convertible ~~prepaid~~Notes ~~debt~~Excluded ~~issuance~~from ~~costs will be amortized over the term of the note.~~Table:

Convertible Note issued onJanuary ~~June 2~~16, 2015:

On ~~June~~January 216, 2015, the Company issued aan ~~twelve-month 12~~8% ~~convertible~~short-term promissory note payable of $~~121~~114,000, due October 13, 2015, with an unrelated entity. Under the terms of the note, the Company received $~~100~~110,000. ~~The~~and ~~repayment~~was ofcharged ~~the~~an ~~note~~original isissue ~~due~~discount onof or$4,000. ~~before~~The ~~June 2~~repayment, if ~~2016,~~not ~~one~~completed ~~year after~~within ~~the~~180 ~~issue~~days ~~date~~may, ofat the ~~note.~~option ~~The~~of ~~repayment~~the isnote ~~subject~~holder, tobe ~~the~~repaid ~~convertible~~in ~~features~~common stock of the ~~note~~Company. ~~The~~After 180 days, the creditor ~~has~~will have a conversion option allowing it to choose to receive repayment of the stated principal ~~with~~and ~~accrued~~ interest ~~(12%). The note is to be repaid~~ either in cash or, at the creditor’s option, in the Company’s restricted common stock. If paid in cash, during the ~~principal~~180-day ~~repayment~~prepayment ~~is to be $121~~period,~~000~~ ~~(including~~the anrepayment ~~original~~will ~~issue~~be ~~discount~~130% of ~~$10,000~~the ~~and~~principal ~~professional fees of $11,000)~~ and ~~the~~any ~~interest after~~accrued ~~the initial 90 days is to be 12%~~interest. At the option of the note holder, the Company may repay the note by issuing restricted common stock based upon the conversion ~~terms~~term, which includes a calculation based upon 70a 35% discount of the average of the lowest ~~trade~~three trading price during the ~~immediate~~10 15 days prior to the date of the conversion notice. During ~~The~~the ~~original~~year ~~issue~~ended ~~discount~~December of31, ~~$10~~2015,~~000~~ ~~and~~this ~~the~~note ~~$11,000~~was ~~legal~~fully ~~fees~~converted ~~have~~into ~~been~~shares ~~recorded as~~of ~~prepaid~~the ~~debt~~Company’s ~~issuance~~common ~~cost~~stock, ~~which~~resulting in isa ~~amortized~~$-0- ~~over~~balance ~~the~~as ~~term~~ of ~~the~~December ~~note~~31, 2015.

Convertible Note issued on ~~July~~May 171, 2015:

On ~~July~~May 171, 2015, the Company issued a ~~twelve~~nine-month an 8% convertible promissory note topayable anof ~~unrelated~~$59,000, ~~party~~due ~~with~~February a6, ~~face~~2016 ~~amount~~with ofan ~~$57,500~~unrelated entity. ~~The note~~Under ~~contains~~the anterms ~~original~~of ~~issue~~the ~~discount~~note, ofthe Company received $555,000 and ~~bears~~was ~~interest~~charged onprepaid loan costs ~~the face amount at the rate~~ of ~~8% per annum~~$4,000. The ~~loan is~~repayment, ~~due~~if onnot ~~July~~completed ~~17,~~within ~~2016~~180 ~~and~~days ~~includes~~may, aat ~~convertible~~the ~~feature~~option ~~that~~of ~~allows~~ the note holder, to be ~~paid~~repaid in common stock of the Company. ~~Any~~ ~~shares~~After ~~converted~~180 bydays, the ~~note~~creditor ~~holder~~ will behave ~~valued~~a atconversion ~~60%~~option ofallowing ~~the~~it ~~lowest~~to ~~trading~~choose ~~value~~to ~~during~~receive ~~the~~repayment 20of ~~days~~the ~~immediately preceding~~stated ~~the~~principal ~~conversion.~~and ~~The~~interest ~~note~~either ~~may~~in becash ~~prepaid~~or, ~~within 90 days of issuance~~ at ~~110% of~~ the ~~principal~~creditor’s ~~amount plus accrued interest~~option, ~~and at~~in ~~120%~~the ofCompany’s ~~principal~~restricted ~~plus~~common ~~accrued~~stock. ~~interest~~If ifpaid in ~~prepaid~~cash, ~~after~~during ~~90 days from~~ the ~~date~~initial ~~of issuance but before~~ 180 days, ofthe ~~such~~repayment ~~date. The~~will ~~note may not~~ be ~~prepaid~~calculated ~~after~~based ~~180~~upon ~~days. In~~ the ~~event~~period ofpaid, awith ~~default~~prepayment ~~under~~terms ~~the~~requiring 115% ~~note,~~to ~~interest~~130% ~~accrues~~of at the ~~rate~~principal ofand ~~24%~~any ~~per annum~~accrued interest. InIf the ~~event~~creditor ~~the~~elects ~~Company fails~~ to ~~deliver~~convert ~~shares~~the ofnote ~~its~~to common stock, ~~upon~~the conversion feature ~~within~~allows ~~the~~for ~~time~~a ~~frames~~valuation ~~provided~~of ~~for in~~ the ~~note,~~stock ~~the~~based ~~Company~~upon ~~is subject to~~ a ~~$250~~35% ~~penalty~~discount ~~per~~to ~~day~~the ~~increasing~~average toof ~~$500~~the ~~per~~lowest ~~day~~three ~~beginning~~trading onprices during the ~~10th~~10 ~~day~~days ~~after~~preceding the ~~prescribed delivery~~conversion date. ~~Further,~~During in the ~~event~~year ~~the~~ended ~~Company~~December is31, no2015, ~~longer~~this ~~current~~note inwas ~~its~~partially ~~SEC~~converted ~~filings~~into ~~for~~shares of athe ~~period~~Company’s ofcommon ~~six~~stock ~~months~~and orthe ~~more,~~remainder of the ~~conversion~~ ~~price~~balance ~~shall~~was bepaid ~~the~~in ~~lowest~~cash, ~~closing~~resulting ~~bid~~in ~~price~~a ~~during~~$-0- ~~the~~balance ~~delinquency~~as ~~period~~of December 31, 2015.

Common stock issued to convert convertible notes payable

During ~~fiscal~~the ~~2014~~year ended December 31, 2016, the Company issued an aggregate of ~~437~~2,~~500~~154,596 shares of common stock to various noteholders upon the conversion of a total of principal and interest of $~~174~~6,~~807~~924. (See Note 9)

During ~~fiscal~~the year ended December 31, 2015, the Company issued an aggregate of 45,489,374 shares of common stock to various noteholders upon the conversion of a total of principal and interest of $620,607. (See Note 9)

Debt Discounts

In connection with the convertible promissory notes issued in fiscal 2015, the convertible notes were considered to have an embedded beneficial conversion feature ~~(BCF)~~ because the effective conversion price was less than the fair value of the Company’s ~~common~~ common stock in accordance with ASC 470-20-25. Therefore, the portion of proceeds allocated to the convertible notes of $931,181 ~~was~~ was determined to be the value of the beneficial conversion feature and was recorded as a debt discount and is being amortized ~~over~~ over the term of the notes.

For the year ended December 31, ~~2015~~2016 and ~~2014~~2015 the Company recognized $1207,~~007,573~~052 and $~~177~~1,~~734~~007,573, respectively of amortization of debt discount. For the year ended December 31, ~~2015~~2016 and ~~2014~~2015, the Company recognized $~~135~~26,~~663~~275 and $59135,~~889~~663 of amortization of prepaid debt issuance cost, respectively, ~~and~~which ~~were~~was recorded in interest expense.

F-22

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 8 – DERIVATIVE LIABILITIES

The Company evaluated whether ~~or not~~ the convertible promissory notes contain embedded conversion features, which meet the definition of of derivatives under ASC 815 and related interpretations. The Company determined that the terms of the convertible notes issued in fiscal ~~2014~~ 2016 and ~~2015~~earlier (see Note 7) include a variable conversion price based on the closing bid prices of the Company’s common stock which cause the embedded conversion options to be accounted for as derivative liabilities. Additionally, the Company ~~determined~~ determined that the terms of the warrants granted on September 22, 2014 in connection with the issuance of a convertible note and warrants granted on February 25, 2015 to the note holder of the Senior Secured convertible note (see Note 96) include a down-round provision under which the conversion price and exercise price could be affected by future equity offerings undertaken by the Company under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Stock”, the embedded conversion options and the warrants were accounted for as derivative liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date. In accordance with ASC 815, the Company has bifurcated the conversion feature of the convertible notes, along with the free-standing warrant derivative instruments and recorded derivative liabilities on their issuance date. The Company uses the Black-Scholes option pricing model to value the derivative liabilities.

The notes issued in fiscal 2015 were discounted in an aggregate amount of $931,181 based on the valuations and the Company recognized an additional derivative expense included in interest expense of $2,577,683 upon initial recording of the derivative liabilities. The total debt discount of $931,181 from the valuation of the derivatives are being amortized over the terms of the note. These derivative liabilities are then revalued on each reporting date. The gain resulting from the decrease in fair value of these convertible instruments was $709,219 for the year ended December 31, 2015. During the year ended December 31, 2015 and 2014, the Company reclassified $826,901 and $22,068, respectively, to paidF-in capital due to the conversion of convertible notes into common stock. At December 31, 2015, the Company had recorded warrant derivative liability of $1,722 and note derivative liability of $2,353,858.22

The notes issued in fiscal 2015 were discounted in an aggregate amount of $931,181 based on the valuations and the Company recognized an additional derivative expense included in interest expense of $2,577,683 upon initial recording of the derivative liabilities. The total debt discount of $931,181 from the valuation of the derivatives are being amortized over the terms of the note. These derivative liabilities are then revalued on each reporting date. The gain (loss) resulting from the decrease in fair value of these convertible instruments was $(21,377,793) and $709,219 for the year ended December 31, 2016 and 2015, respectively. During the year ended December 31, 2016 and 2015, the Company reclassified $16,542 and $826,901, respectively, to paid-in capital due to the conversion of convertible notes into common stock. At December 31, 2016, the Company had recorded warrant derivative liability of $6,577 and note derivative liability of $23,710,254. At December 31, 2015, the Company had recorded warrant derivative liability of $1,722 and note derivative liability of $2,353,858.

The following table summarizes the values of certain assumptions used by the Company’s custom model to estimate the fair value of the derivative liabilities as of December 31:

	2015			2014
	2016			2015
Stock price	$	0.003		$	0.42003
Strike price ranging from		0.001 to 0.50			0.24 to 0.33
Strike price	$	0.003		$	0.001 to 0.50
Remaining contractual term (years)		0.25 to 4.00 years			0.95 to 0.98 years
Remaining contractual term		0.08 to 3 years			0.25 to 4 years
Volatility		~~292~~254% to 426	%		~~160~~292	%
Risk-free rate		0.0544% to 1.7647	%		0.0405% to 1.1076	%
Dividend yield		0.0	%		0.0	%

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31:

	2015			2014
	2016			2015
Balance, beginning of year	$	~~382~~2,~~836~~355,580		$	32382,~~528~~836
Excess of fair value over debt discount		~~2,577,683~~-			-2,577,683
Debt discount in connection with conversion option of Debentures and detachable warrants		931,181			693,630
Debt discount in connection with conversion option of debentures and detachable warrants		-			931,181
Extinguished derivative liability		(~~826~~16,~~901~~542	)		(22826,~~068~~901	)
Change in fair value of derivative liabilities		~~(709~~21,~~219~~377,793	)		(~~321~~709,~~254~~219	)
Balance, end of year	$	223,~~355~~716,~~580~~831		$	~~382~~2,~~836~~355,580

FNOTE 9 – STOCKHOLDERS-23 DEFECIT

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 9 – STOCKHOLDERS’ DEFICIT

Common Stock

As of December 31, ~~2015~~2016, the Company ~~has~~had ~~100~~1,000,000,000 shares of common stock authorized.

During the year ended December 31, ~~2014~~2016, the Company:

Issued ~~699~~2,~~929~~154,596 shares of common stock valued at $11,365 for ~~cash~~the ~~proceeds~~conversion of convertible notes payable and accrued interest of $~~195~~6,~~975;~~924 (see Note 7), reducing debt discount by $3,668, reducing derivative liability by $16,542, and recording a gain on conversion of $8,433. The fair value of the shares of common stock were based on the quoted trading price on the date of conversion.

Issued ~~922~~an aggregate of 254,~~867~~508,000 shares of common stock valued at $1,119,835 to ~~contractors~~extinguish ~~and~~$123,980 ~~employees~~of asthe ~~payment~~Company’s ~~for~~payables, resulting ~~services~~in a loss on debt extinguishment of $995,855. The fair value of the shares of common stock ~~was~~were ~~valued~~based aton ~~its~~the ~~fair~~quoted trading ~~market~~price ~~value~~on ofthe ~~$415,220;~~date the payables were extinguished.

Issued ~~100~~an aggregate of 50,000,000 shares of common stock, valued at ~~fair~~$160,000 ~~market~~ as payment for ~~accounts payable~~services. The fair value of the shares of common stock was ~~valued~~based aton ~~$30,000;~~the quoted trading price on the date the shares were issued.

~~Issued~~As ~~50,000~~of ~~shares~~December in31, ~~exchange~~2016, ~~for~~the ~~oil~~Company ~~and~~had ~~gas properties~~387,937,557 ~~valued~~shares atof ~~fair~~common ~~market~~stock ~~value of $35,000;~~outstanding.

Issued 437,500 shares to convert debt, valued at $196,875, the excess of $22,068 over the nominal amount of the note was credited to additional paid in capital as the extinguishment of derivative liability;

Cancelled 150,000 shares at no value;

Received 3,000,000 shares of treasury stock of the Company in exchange for transferring oil and gas producing properties in Ohio and California and 100,000 shares in settlement of litigation with Charles A. Koenig. The 3,000,000 shares associated with the asset sale were valued at a fair market value of $2,010,000 and the 100,000 shares associated with the legal settlement were valued at original cost of $3,380. The Company treated both of these transactions as the acquisition of Treasury Stock.;

Issued 50,000 shares of common stock to pay interest on a note payable valued at $35,000;

Cancelled 15,000 shares of common stock upon expiration of lease and was valued at $18,750.

As of December 31, 2014, the Company reported 34,940,046 shares outstanding.

During the year ended December 31, 2015, the Company:

Issued an aggregate of 248,874 shares of common stock for services to various consultants valued at fair market value of $92,183. The fair value of the shares of the common stock were based on the quoted trading price on the date of grant.

F-23

Issued 100,000 shares of common stock valued at $40,000 in connection with an employment agreement with an officer of the Company. The fair value of the shares of the common stock were based on the quoted trading price on the date of grant.

Issued 30,000 shares of common stock valued at fair market value of $12,000 as payment for interest under a short-term note payable issued in 2014. The fair value of the shares of the common stock were based on the quoted trading price on the date of grant.

Issued an aggregate of 500,000 shares of common stock, valued at fair market value of $107,500 as consideration for the extension of a convertible note and the interest payable thereon. The fair value of the shares of the common stock were based on the quoted trading price on the date of grant (see Note 7 for additional details).

Cancelled 33,333 shares of common stock valued at $15,667. The fair value of the shares of the common stock were based on the quoted trading price on the date of cancellation.

Issued an aggregate of 45,489,374 shares of common stock, valued at $620,607 for the conversion of various convertible notes payable and accrued interest pursuant to the conversion terms of the respective convertible notes. The Company reclassified $826,901 of derivative liabilities in connection with the extinguishment of derivative liabilities upon conversion of the convertible notes payable into common stock (see Note ~~8 for additional details~~7).

~~F-24~~As of December 31, 2015, the Company had 81,274,961 shares of common stock outstanding.

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 9 – STOCKHOLDERS’ DEFICIT (continued)

As of December 31, 2015 the Company had 81,274,961 shares of common stock outstanding.

Preferred Stock

Effective November 24, 2015, the Company filed with the Nevada Secretary of State a Certificate of Designation in which the Company authorized the creation of 1,000,000 shares of Series A preferred ~~Stock~~stock. Each ~~shares~~share of Series A preferred stock entitles the holder thereof to 110 votes per share and otherwise has the same rights and privileges as the Company’s common stock. The holders of shares of Series A preferred stock are not entitled to dividends or distributions. The holders of the Series A preferred stock do not have any conversion rights and the shares are non-transferrable.

On November 24, 2015, the Company issued to the Company’s CEO, Timothy Crawford, 1,000,000 shares of the Company’s restricted Series A preferred stock, valued at approximately $100,000. In connection with the issuance of these Series A preferred shares, the Company recorded stock -based compensation of $100,000 for the year ended December 31, 2015.

The issuance to Mr. Crawford of the 1,000,000 shares of the Series A Preferred Stock resulted in Mr. Crawford acquiring approximately 65% of the voting securities of the Company on the date of grant.

As of December 31, ~~2015~~2016, the Company had 1,000,000 shares of Series A preferred stock outstanding.

~~Common~~On March 7, 2017 the Company filed an Amended and Restated Certificate of Designation of Preferences, Rights and Limitations for the Preferred Series A stock ~~Warrants~~and the Company designated new classes of Preferred Stock, including Series B, Series C and Series D (see Note 14).

OnCommon ~~September~~Stock 22, 2014, the Company issued 250,000 Class C warrants in connection with a short term credit facility. Each of the 250,000 warrants is exercisable into one share of the Company’s common stock at $1.00 per share. The warrants were immediately exercisable. The warrants will expire if not converted into stock by September 29, 2017. After September 29, 2015, the shares are callable by the Company.Warrants

On September 22, 2014, the Company issued 250,000 Class C warrants in connection with a short-term credit facility. Each of the 250,000 warrants is exercisable into one share of the Company’s common stock at $1.00 per share. The warrants were immediately exercisable. The warrants will expire if not converted into stock by September 29, 2017. After September 29, 2015, the shares are callable by the Company.

During the year ended December 31, 2014, the Company issued common stock purchase warrants to purchase an aggregate of 1,800,000 shares of the Company’s common stock at an exercise price of $1.00 per share in connection with the issuance of its Senior Secured Convertible Notes (see Note 7). The warrants expire on December 31, 2019.

On February 25, 2015, the Company entered into an agreement with Syndicated Capital, Inc. (the “Holder”) granting Syndicated Capital, Inc. the right to subscribe for and purchase 450,000 shares of the Company’s common stock at an initial purchase price of $1.00 per share. This right will expire, if not terminated earlier in accordance with the provisions of the agreement, on December 31, 2019. The Warrant was issued as compensation to the Holder for services rendered as placement agent in connection with the Company’s private offering of units of the Company’s securities which occurred in December 2014. The Company identified embedded derivatives related to the warrants issued February 25, 2015. These embedded derivatives included certain reset provisions (see Note 8 for additional details). The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date and to adjust the fair value as of each subsequent balance sheet date.

~~Changes in stock purchase warrants during the periods ended December 31, 2015 and 2014 are as follows:~~F-24

			Weighted Average		Aggregate				Weighted Average
	Number of		Exercise		Intrinsic				Remaining
	Warrants		Price		Value		Exercisable		Life
Outstanding, December 31, 2013		-	$	-	$	-		-	$	-
Exercisable, December 31, 2013		-		-		-		-		-
Issued		2,050,000		1.00		-		-		-
Exercised		-		-		-		-		-
Cancelled										-
Outstanding, December 31, 2014		2,050,000		1.00		-		2,050,000		4.75 years
Issued		450,000		1.00		-		-		-
Exercised		-		-		-		-		-
Cancelled		-		-		-		-		-
Outstanding, December 31, 2015		2,500,000	$	1.00	$	-		2,500,000		3.60 years
Exercisable, December 31, 2015		2,500,000	$	1.00	$	-		2,500,000		3.60 years

Changes in stock purchase warrants during the periods ended December 31, 2016 and 2015 are as follows:

F-25

			Weighted Average		Aggregate		Weighted Average
	Number of		Exercise		Intrinsic		Remaining
	Warrants		Price		Value		Life
Outstanding, December 31, 2014		2,050,000	$	1.00	$	-		4.75 years
Issued		450,000	$	1.00				-
Exercised		-	$	-				-
Cancelled		-	$	-				-
Outstanding, December 31, 2015		2,500,000	$	1.00	$	-		3.60 years
Issued		-	$	-				-
Exercised		-	$	-				-
Cancelled		-	$	-				-
Outstanding, December 31, 2016		2,500,000	$	1.00	$	-		2.60 years

Exercisable, December 31, 2015		2,500,000	$	1.00	$	-		3.60 years
Exercisable, December 31, 2016		2,500,000	$	1.00	$	-		2.60 years

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 10 - RELATED PARTY TRANSACTIONS

Parties are ~~considered to be~~ related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company may deal where one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions shall be recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending on the transaction.

~~During~~On ~~the~~occasion, ~~last~~members ~~week~~of Company management will advance funds or make payments on behalf of the Company, to be reimbursed as funds become available. During the year ended December 31, 2016 the Company’s ~~obtained~~CEO 20at ~~units~~the ~~(out~~time, ofTimothy ~~100~~Crawford, ~~total~~whom ~~units)~~ resigned in ~~the~~July ~~Bradford~~2017, ~~Joint~~advanced ~~Venture~~funds ~~exploration~~to the Company of $4,400 and the Company made repayments on those advances of $3,400. As of December ~~drilling~~31, ~~program~~2016, ~~located~~the inCompany ~~Shackelford~~owed ~~County~~Mr. Crawford $1,000 ~~Texas~~for unreimbursed advances. ~~The~~During ~~operation~~the isyear ~~accounted~~ended December 31, 2016 the Company recorded $300,000 of salary expense for asMr. anCrawford, ~~investment~~paid ~~included~~him in$119,800 ~~Oil~~for accrued salary amounts, and ~~Gas~~owed him $305,200 for ~~Properties~~accrued payroll as of December 31, ~~2014~~2016. ~~The~~Both ~~Company~~unreimbursed ~~purchased~~expenses ~~their~~and ~~interest~~the ~~for~~accrued ~~$25,000~~payroll ~~per~~are ~~unit~~included onin the Accounts Payable and Accrued Expenses in the Company’s financial statements as of December 31, ~~2014~~2016.

~~The~~Bradford ~~Company~~Joint has determined that the agreement and the Company’s participation in the joint venture at December 31, 2014 created a related party relationship and as such has reported the billed revenue of $621,508 and $1,716,771 during the year ended December 31, 2015 and 2014, respectively and the unpaid accounts receivable of $180,712 and $225,000 at December 31, 2015 and 2014, respectively as related party transactions in the consolidated financial statements.Venture

~~During~~On June 1, 2014, the Company ~~transferred the oil and gas producing properties located in Ohio and California to a third party in exchange for 3~~,~~000,000~~ ~~shares~~through ofits ~~common~~wholly ~~stock~~owned ~~which have been designated “Treasury Stock”. Also~~subsidiary, asCEGX ~~part~~ of ~~the transaction~~Texas, ~~the~~ ~~Company~~LLC ~~returned~~entered ~~the~~into ~~$20,000~~a ~~bond~~Contract ~~they~~Operating ~~had received earlier. The third party involved in this transaction was previously a~~Agreement ~~senior~~with ~~executive~~Bradford ofJV ~~the~~(see ~~Company~~Note ~~and was considered a related party when the properties in question were originally acquired by the Company~~13).

OnEffective ~~June~~December ~~12,~~2014 ~~2015,~~ the Company, ~~and~~obtained ~~each~~20 ofparticipation ~~the~~interests ~~other~~(out ~~beneficial owners~~ of ~~seventy-three~~100 ~~(73)~~total ~~participation~~ interests) in the Bradford JV ~~entered~~and ~~into~~in aJune ~~Participation~~2015 the ~~Interest~~Company ~~Purchase~~sold ~~Agreement~~its ~~with~~20 participation interests to Keystone Energy, LLC ~~(see~~in ~~Note~~exchange ~~13)~~for $250,000 and a 5% equity interest in Keystone. In June ~~2015,~~2016 the Company ~~received~~ paid $~~250~~100,~~000~~ ~~for~~returned the ~~Company’s~~5% ~~ten~~interest ~~(10)~~in ~~Participation~~Keystone ~~Interests~~and ~~for~~reacquired the ~~Keystone’s~~20 ~~right~~participation tointerests ~~beneficial~~from ~~enjoyment which~~Keystone isEnergy, ~~not~~LLC. ~~subject~~In tothe ~~forfeiture~~third byquarter of 2016 the Company ~~under~~exchanged ~~any~~a ~~circumstances~~$123,924 receivable balance for the final 27 unsold Bradford JV participation interests. ~~For~~As ~~financial~~such, ~~reporting~~as ~~purposes~~of December 31, 2014, 2015, and 2016, the Company held ~~has~~20, ~~recognized this~~0, ~~amount~~and as47 aparticipation ~~component~~interest of ~~related~~the ~~party~~total ~~operating~~100 ~~revenues~~participation ~~during~~interests in the ~~year~~Bradford ~~ended~~JV. ~~December~~(See ~~31,~~Note ~~2015.~~4)

The Company has determined that the Contract Operating Agreement and the Company’s participation in the joint venture created a related party relationship. Accordingly, during the year ended December 31, 2016 and 2015 the Company reported related party revenue from contract development operations of $0 and $621,508, respectively, and reported related party operating income from escrowed property of $0 and $250,000, respectively. Accounts receivable – related party from the Bradford JV was $0 and $180,712 at December 31, 2016, and 2015, respectively.

F-25

NOTE 11 - ASSET RETIREMENT OBLIGATION

The following table sets forth the principal sources of change of the asset retirement obligation (“ARO”) for the years ended December 31, ~~2015~~ 2016 and ~~2014~~2015:

	2015			2014
	2016			2015
Asset retirement obligations, beginning of period	$	~~162~~96,~~321~~063		$	8162,~~639~~321
Additions and changes in estimated liabilities		(81,245	)		(8,639	)
Revisions in estimated liabilities		-			(81,245	)
Asset retirement obligations assumed		-			~~142,336~~-
Accretion expense		145,~~987~~146			1914,~~985~~987
Asset retirement obligations, end of period	$	96,063		$	162,321
Gain on derecognition		(101,209	)		-
Asset retirement obligations, end of period	$	-		$	96,063

AsThe Company regularly evaluates the retirement activities that are required to be performed to reclaim their oil and gas properties. Management concluded, as of December 31, ~~2015~~2016, that no such requirements existed due to the Company ~~does~~subsequently ~~not~~transferring all ~~maintain~~of antheir ~~escrow~~oil ~~agreement~~and orgas ~~performance~~properties ~~bond~~to other operating companies in exchange for relief from any remediation obligations (see Note 14). As such, they reduced their ARO liability and ARO Asset (see Note 4) to ~~assure~~zero ~~the~~and ~~administration~~recorded a gain on derecognition of $101,209 in the ~~plugging~~ ~~and~~Gain ~~abandonment~~(Loss) ~~obligations~~on ~~assumed~~Retirement of Assets in their Statement of Operations related to the ARO liability.

F-26

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 12 - INCOME TAXES

The Company’s provision for income taxes was $-0- for the years ended December 31, ~~2015~~2016 and ~~2014~~2015, respectively, since the Company has accumulated taxable losses from operations. ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a full valuation allowance equal to the deferred tax asset has been recorded.

The total deferred tax asset is calculated by multiplying a 3940 percent marginal tax rate by the cumulative Net Operating Loss (“NOL”). At December 31, ~~2015~~2016, the Company has available approximately $511,~~737~~455,~~631~~000 of NOL’s which expire in various years beginning in ~~2031~~2028 and carrying forward through ~~2035~~2036. ~~The tax effects of significant items comprising the Company’s net deferred taxes as of December 31, 2015 and 2014 were as follows:~~

The ~~provision~~tax ~~for~~effects ~~income~~of ~~taxes~~significant ~~differs~~items ~~from~~comprising the ~~amounts~~Company’s ~~which~~net ~~would~~deferred betaxes ~~provided~~as ~~by applying the statutory federal income tax rate~~ of 39December ~~percent~~31, to2016 ~~net~~and ~~loss~~2015 ~~before~~were ~~provision~~as ~~for income taxes for the following reasons~~follows:

	December 31,
	2015			2014
	2016			2015
Cumulative NOL	$	5,737,631		$	4,294,241
Deferred tax assets:
Deferred Tax Assets:
NOL Carryover	$	4,582,000		$	2,237,676
Net operating loss carry forwards		2,237,676			1,674,754
Related party accrual		122,100			-
Valuation allowance		(24, ~~237~~704,~~676)~~100	)		(12,~~674~~237,~~754~~676	)
	$	-		$	-
Net deferred tax asset	$	-		$	-

The Company files federal and Ohio income tax returns subject to statutes of limitations. The years ended December 31, 2015, 2014, 2013, 2012, 2011, and 2010 are subject to examination by federal and state tax authorities. After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at December 31, 2015, due to the uncertainty of realizing the deferred income tax assets. The valuation allowance was increased by $562,922.F-26

The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 40 percent to net loss before provision for income taxes for the following reasons:

	December 31,
	2016

Book loss	$	(10,344,800	)
Related party accrual		72,100
Amortization of debt discount		82,800
(Gain) loss on fair value of derivative liability		8,551,100
(Gain) loss on debt extinguishment		395,000
Non-cash interest expense for derivative obligation liabilities		-
Non-cash interest expense included in principal amount of notes		-
Stock issued for compensation and interest expense		-
Accretion expense		-
Valuation allowance		1,243,800
	$	-

The Company files federal and Ohio income tax returns subject to statutes of limitations. The years ended December 31, 2016, 2015, 2014, and 2013 are subject to examination by federal and state tax authorities. After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at December 31, 2016, due to the uncertainty of realizing the deferred income tax assets. The valuation allowance was increased by $563,100.

The provisions of ASC 740 require companies to recognize in their financial statements the impact of a tax position if that position is more likely than not to be sustained upon audit, based upon the technical merits of the position. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure.

Management does not believe that the Company has any material uncertain tax positions requiring recognition or measurement in accordance with the provisions of ASC 740. Accordingly, the adoption of these provisions of ASC 740 did not have a material effect on the Company’s financial statements. The Company’s policy is to record interest and penalties on uncertain tax positions, if any, as income tax expense.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

Contract Operating Agreement

On June 1, 2014, the Company, through its wholly owned subsidiary, CEGX of Texas, LLC entered into a Contract Operating Agreement with Bradford JV. Under the terms of this agreement, the Company agreed to perform routine and major operations, marketing services, accounting services, reporting services and other administrative services on behalf of Bradford JV as necessary to operate Bradford JV’s oil and gas lease operations on the Bradford oil and gas leases located in Shackelford County, Texas. Bradford JV agreed to pay the Company an administrative and pumping fee of $500 per well per month, 93.7% of the actual cost of electricity, taxes and ongoing maintenance and repairs to operate Bradford JV’s assets. The agreement is for a term of three years and automatically renews for one -year periods until one of the parties notifies the other party not later than 60 days prior to commencement of a renewal term of its desire to not renew the agreement. (See Note 7).

F-27

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 13 - COMMITMENTS AND CONTINGENCIES (continued)

Participation Interest Purchase Agreement

Pursuant to the terms of the Purchase Agreement, Keystone Energy agreed to purchase, and the Sellers agreed to sell, all of the Participation Interests representing 100% of the beneficial ownership of (i) those certain oil and gas leases, along with the associated contracts and real property interests necessary and useful in the ownership and operation thereof, all situated in Shackelford County, Texas (the “Oil and Gas Leasehold”), (ii) the oil and gas wells located on the Oil and Gas Leasehold, along with the associated fixtures and personal property, including hydrocarbons produced therefrom (the “Wells”), and (iii) the rights in and to that certain Farmout Agreement between CEGX and Bluff Creed Petroleum, LLC for a total consideration of $1,825,000.

As payment in full for the Participation Interests and the Oil and Gas Properties, Keystone Energy agreed to, within 365 days following execution of the Purchase Agreement, pay to the Sellers the aggregate cash amount of $1,575,000 (the “Cash Purchase Price”). As to the Company’s twenty (20) Participation Interests, the Purchase Agreement additionally provided that Cardinal would (i) be presently paid the amount of $250,000 included in the cash purchase amount in consideration of the Company’s assignment thereunder to Keystone Energy of the beneficial interest in ten (10) of its twenty (20) Participation Interests and (ii) as to the other ten (10) of the Company’s Participation Interests, exchange the Company’s rights therein to Keystone for a five (5%) percent equity ownership interest in Keystone Energy. The Participation Interests of all Sellers acquired under the Purchase Agreement were designated to be and are being held in escrow pending the acquisition of all of the Sellers Participation Interests or the expiration of the 365 day period, whichever occurs first. As of December 31, 2015, the balance of the cash purchase amount was $1,075,000 reflecting the balance of the 43 remaining Participation Interests which Keystone Energy remains obligated to purchase under the terms of the Purchase Agreement.

The $250,000 received by the Company for the Company’s ten (10) Participation Interests for Keystone’s right to beneficial enjoyment thereof is not subject to forfeiture by the Company under any circumstances. For financial reporting purposes the Company has recognized this amount as a component of related party operating revenues during the year ended December 31, 2015.

The exchange of the other ten (10) Cardinal Participation Interests for a 5% equity interest in Keystone Energy has been reported as an income tax neutral, tax-deferred, property for property exchange in accordance with applicable provisions of federal income tax law and was initially recorded as an investment in oil and gas properties valued at it’s fair market value of $250,000.

The Purchase Agreement further provided that Keystone would deliver to CEGX of Texas, as irrevocable consideration, an initial advance in an amount of $250,000 for improvements to be made to the Oil and Gas Properties. The amount is not subject to refund or forfeiture and has been included in related party operating revenues from contract operations during the year ended December 31, 2015.

Finally, in accordance with the terms of the Purchase Agreement and as of the date thereof, Keystone Energy entered into a Master Loan Agreement with Maximilian Bradford, LLC (“Maximilian”), a Keystone Energy related party, providing for the loan by Maximilian to Keystone Energy of the amount of $2,600,000. The proceeds under this loan are to be used for the purchase of the Participation Interests and the development of the underlying interests in the Bradford “A” and “B” leases. Upon full repayment by Keystone Energy of the loan, the Company is granted an option to convert its 5% interest in Keystone Energy into either (i) an undivided 50% of the working interest owned by Keystone Energy in the Oil and Gas Properties, or (ii) a 50% equity interest in Keystone Energy.

Concurrent with the Participation Interest Purchase Agreement, Keystone Energy entered into an Operating Agreement with the Company’s wholly- owned subsidiary, CEGX of Texas, LLC authorizing CEGX of Texas to conduct the drilling operations and related activities necessary to develop the properties.

FThroughout 2015 and into the second quarter of 2016 the Company worked with representatives of the purchaser to design and install a pilot water flood program on the Bradford “A” and Bradford “B” leases. Due to delays in receiving funding from Keystone, work was sporadic and finally ground to a halt in the second half of 2016, effectively terminating the Purchase Agreement. On June 12, 2016 the Company re-28acquired its 20 Equity Units in the Bradford JV for $100 following the expiration of the 365-day “Escrow Period” per the terms of the Participation Interest Purchase Agreement between Bradford JV participation interests and Keystone Energy, LLC and CEGX of Texas, LLC. Additionally, during the third quarter of 2016, the balance of $123,924 in related party receivables (representing un-reimbursed drilling, development and production costs incurred by the Company on behalf of the Bradford JV) was extinguished in exchange for 27 Equity Units in the Bradford JV, representing the remaining un-sold interests of the Bradford JV. (See Note 1)

~~Cardinal~~Litigation ~~Energy Group, Inc.~~

~~Notes~~Power toUp ~~the~~Lending ~~Consolidated~~Group, ~~Financial~~Ltd. ~~Statements~~v. Cardinal Energy Group, Inc. (Civil Action No.: 16-cv-1545-DRH, United States District Court Eastern, District Of New York).

~~December~~On 31March 30, ~~2015~~2016 Power Up Lending Group, Ltd. Filed a lawsuit against the Company claiming damages totaling in excess of $152,000 exclusive of attorney’s fees, pre-judgment interest and ~~2014~~costs. On June 4, 2018 the Company filed Defendants Memorandum of Law in Opposition to Plaintiff’s Motion Seeking Summary Judgement. On April 3, 2019 the Court opined the Plaintiff’s motion for summary judgment pursuant to Rule 56 against the Company was granted as to the breach of contract claim regarding the outstanding debt of $152,211. As of December 31, 2016, the Company has recorded an outstanding loan payable to Power Up in the amount of $178,727. (See Note 7).

~~NOTE 13~~ F- ~~COMMITMENTS AND CONTINGENCIES (continued)~~27

~~Borets~~John ~~USA,~~Robinson ~~Inc~~v. ~~f/k/a~~CEGX ~~Borets-Weatherford~~of USTexas LLC, ~~Inc. v.~~ Cardinal Energy Group, Inc. Et al (Case No. ~~2015-028,~~16 ~~259th~~CV ~~Judicial~~008923 ~~District Shackelford~~Franklin County, ~~Texas)~~Common .Pleas Court)

OnJohn ~~March 2~~Robinson, ~~2015 Borets filed~~ a ~~lawsuit~~participant in ~~against~~ the ~~Company~~Bradford ~~claiming~~Joint ~~damages~~Venture, ~~totaling~~filed ~~$90,615~~litigation in ~~damages~~Franklin ~~for~~County, ~~unpaid invoices for services rendered to the Company. On March 18th 2015~~Columbus, ~~the~~Ohio ~~Company~~against ~~filed~~CEGX anof ~~Original~~Texas ~~Answer~~ and ~~Counterclaim~~seven ~~against Borets. The~~others ~~original~~on ~~answer~~September ~~set forth a general denial~~20, ~~certain specific denials~~2016, aclaiming ~~verified~~he ~~denial~~was ~~denying~~fraudulently ~~the~~induced ~~account~~to ~~amount~~enter ~~and~~into ~~affirmative defenses~~a oftransaction, ~~failure~~amongst ofother ~~consideration and offset~~claims. The ~~counterclaim~~Company ~~contains~~filed an aanswer ~~cause~~on ofOctober ~~action~~24, ~~for~~2016, ~~breach~~asserting ofa ~~contract~~right ~~and~~to ~~seeks $150,000~~arbitration inas ~~damages.~~a ~~Borets~~defense, ~~has~~and ~~filed~~moved ~~a Motion~~ for ~~Summary~~stay ~~Judgment seeking to dispose~~ of ~~the~~proceedings ~~counterclaim~~ on ~~behalf~~November ~~of the Company.~~29, No2016. ~~hearing~~The ~~has~~court ~~been~~granted ~~set~~a ~~on the~~ motion and the ~~Company~~case ~~will~~was ~~prepare~~stayed afor ~~response~~arbitration ifon inJanuary ~~fact~~26, a2017. ~~hearing~~The ~~date~~Franklin isCounty ~~obtained. As~~ Clerk of ~~the date~~Courts ofrecords ~~this~~show ~~report,~~the ~~discovery~~case isremains ~~ongoing~~closed.

Borets USA, Inc. f/k/a Borets-Weatherford US, Inc. v. Cardinal Energy Group, Inc. (Case No. 2015-028, 259th Judicial District Shackelford County, Texas).

CEGX of Texas, LLC v. Scott Miller, Miller Energy Services, Inc. and US Fuels, Inc. (Case No. CV1543707 91st Judicial Court Eastland County, Texas).

~~The~~On ~~lawsuit was filed on~~ May 22, 2015. ~~The~~the ~~lawsuit~~Company ~~alleges~~filed a lawsuit alleging cause of action against the above -named defendants for breach of contract, ~~breach~~ breach of fiduciary duty and fraud. This lawsuit concerns the sale of the Company’s property (the Stroebel-Broyles leases in Eastland County, Texas) by Mr. Miller. Mr. Miller indicated that no one would pay anything for the property, and we agreed to assign the property for no cash consideration. We subsequently determined that Mr. Miller sold the property for $30,000 and pocketed all of the funds from the sale. Answers have been filed by each of the defendants. The Company is ~~now~~considering ~~in the process of~~ filing a ~~Motion~~motion for summary ~~Summary Judgment in favor of the Company~~judgment.

CEGX of Texas, LLC v. P.I.D. Drilling, Inc. (Case No. 2015-062 259th Judicial District Shackelford County, Texas).

~~This~~On ~~lawsuit~~June ~~was~~10, ~~filed~~2015 by the Company onfiled ~~June~~a 10lawsuit against P.I.D. Drilling, ~~2015~~Inc. ~~and~~The lawsuit contains causes of action for breach of contract and also requests an accounting. The lawsuit iswas claiming damages for overcharges by PID and also asking that PID be removed as operator after a vote by the non-operating working interest owners. AsA ofFinal Judgment was awarded to PID on November 8, 2017 and, on December 19, 2017, the ~~date~~Judge signed an Amended Order of ~~this~~Sale ~~report~~to ansatisfy ~~answer~~the ~~has~~Judgment, which ~~been~~resulted ~~filed~~in onthe ~~behalf~~Company having to give up its working interest and rights to specific properties to settle amounts owed. The value of ~~PID~~the working interests and rights sold were in excess of the ~~parties~~judgment ~~have~~amount ~~entered~~therefore no cash payments had to be ~~into~~made ~~settlement~~by ~~discussions~~the Company. IfFurther, ~~the~~such ~~settlement~~working ~~discussions~~interests ~~fail~~and rights were had no value assigned to them in the Company’s isfinancial statements, ~~prepared~~therefore tothe ~~request~~judgment aand ~~trial~~order ~~date~~had no financial reporting impact.

Cardinal Energy Group, Inc. v. HLA Interests, LLC, Phillip Allen, SEDCO Operating, LLC (“SEDCO”) , ERCO Holdings, Ltd (“ERCO”), Caleb David Elks, and Michael Cies D/B/A Terlingua Oil Associates, Case No. 2015-059 (District Court of Shackelford County, Texas, ~~259th~~ 259th Judicial District) .

F-29

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 13 - COMMITMENTS AND CONTINGENCIES (continued)

Sedco Operating, LLC: Judgment on our causes of action for breach of contract, money had and received, fraud, fraud by non-disclosure and deceptive trade practices; and

Judgment against Erco Holdings, Ltd. for causes of action for breach of contract, fraud, fraud by non-disclosure and deceptive trade practices.

The Company was finally able to obtain service on Elks. As of now, Elks, Cies, Erco and Sedco have now filed answers. A hearing and/or trial will be required to obtain damages against Sedco and Erco.

At present, we are in the process of attempting to obtain a damages judgment as against Phillip Allen individually and as HLA Interests, LLC.

The Company has reached out to all of the parties involved requesting they contact us to enter into settlement discussions on this matter. In addition, we have forwarded discovery to the various defendants and are awaiting responses to same. As of the date of this report we have received no responses from any of the defendants in regards to settlement and the Company’s attorneys are now working with the trial court’s coordinator to set a date for trial.

Edward A. Mitchell v. Cardinal Energy Group, Inc. and Timothy W. Crawford (Case No. 15CV-04-3538, Franklin County Common Pleas Court)

Mr. Mitchell filed suit on April 27, 2015, claiming to be owed 200,000 shares of stock that he earned during his brief tenure as Controller of the Company, as well as additional compensation to which he ~~claims~~claimed he’s was entitled. The Company ~~denies~~denied the claims~~, and~~ and filed a counterclaim to recover damages caused by Mitchell during his tenure for failure to perform his duties and to recover unauthorized reimbursements he improperly issued. Trial iswas ~~currently~~originally scheduled for April 24, 2016. The parties ~~have~~ held settlement discussions in this matter but ~~thus~~did ~~far~~not ~~have failed to~~ reach a satisfactory agreement. AsThe Company recorded $5,500 in accrued expenses during the fourth quarter of 2015 which represented the amount most likely the Company would pay to settle this lawsuit. The original trial date of ~~this~~April ~~report~~26, ~~discovery is~~2016 ~~continuing~~was officially continued, and a new date was set for late June 2017. ~~The~~Counsel for the Company ~~has~~scheduled ~~recorded~~depositions ~~$5,500~~of Mr. Mitchell and Cardinal personnel in ~~accrued~~July ~~expenses~~and ~~which~~August ~~represents~~of 2016. In June 2017 the parties ~~amount~~agreed ~~most~~in ~~likely~~principle to enter into a settlement agreement under which the Company would pay Mr. Mitchell and his attorney $20,000 to settle ~~this~~all ~~lawsuit~~outstanding claims. The Final Settlement Agreement and Release were executed by both parties and filed with the Court in July 2017. As of December 31, 2016 the Company had recorded the $20,000 obligation in accounts payable and accrued expenses on the balance sheet, which was paid in full during 2017.

Terrance J. Dunne v. Cardinal Energy Group, Inc. (Case No. 14-02-04417-2, Spokane County Superior Court of Washington)

On November 10, 2014, Mr. Dunne filed a suit in Spokane County Superior Court of Washington and alleged the Company ~~owes~~owed him $6,000 for services rendered plus an additional $27,480 for the difference in value of stock that was given to him as compensation. The Company filed an Answer and a Motion to dismiss based on lack of jurisdiction and subsequently the hearing was cancelled. ~~Management~~Thereafter plaintiff’s ~~still~~counsel ~~intends~~did nothing to ~~defend~~move this matter forward and a month before the original trial date indicated that if ~~vigorously.~~the ~~There~~Company ~~was~~agreed noto ~~ongoing~~a ~~activity~~continuance inplaintiff ~~connection~~would ~~with~~agree ~~this~~to ~~case~~arbitrate. ~~for~~A ~~almost~~continuance was entered and a ~~year~~new trial date established for March 27, 2017. ~~The~~Plaintiff’s ~~Company~~counsel ~~believes~~did ~~that~~not ~~there~~move isthe amatter to arbitration and, yet again, did nothing to forward Mr. ~~remote~~Dunne’s ~~likelihood~~case ~~that~~and ~~this~~in ~~lawsuit~~the ~~will~~process ~~prevail~~missed several key dates in the Court’s scheduling order.

F-29

On January 26, 2017 the Company moved for an order to show cause as to why plaintiff’s case should not be dismissed. On February 17, 2017 the Court granted the Company’s motion and issued an order to show cause. The Court also ordered plaintiff and his counsel to pay Cardinal for the costs associated with the show cause motion. On March 10, 2017 the Court heard countervailing arguments regarding dismissal. The Court determined that dismissal was too harsh, ordered the parties to arbitrate and awarded monetary sanctions against plaintiff and his counsel in the Company’s favor. On May 17, 2017 the Court dismissed the case with prejudice and ordered the plaintiff to pay the Company an additional $5,000 in attorney’s fees and costs no later than June 1, 2017 plus $1,780 in additional attorney’s fees if the Company was not paid by June 1, 2017. As of the date of this filing the amount remains unpaid, however, no receivable has been recorded by the Company due to the uncertainty of collecting the amount. Because the Company has no record of any payments they are researching this ruling for possible other income and are considering starting collection efforts.

Iconic Holdings, LLC v. Cardinal Energy Group, Inc. (Case No. 37-2016-00006021-CU-BC-CTL San Diego County Superior Court)

On February 23, 2016 Iconic Holdings, LLC filed a complaint in San Diego County Superior Court alleging that the Company was in default on a convertible promissory note. The matter was stayed in May of 2016 pursuant to an arbitration provision in the operative Note Purchase Agreement. Following arbitration in December of 2016 the parties entered into a Settlement Agreement wherein the Company agreed to pay Iconic $60,000. As of December 31, 2016, the $60,000 liability was recorded as a convertible note on the balance sheet (see Note 7) and subsequent to December 31, 2016 the liability was paid in conjunction with a debt arrangement with Rockwell Capital (see Note 14). On April 17, 2017 a request for dismissal was filed with the Court by the Plaintiff’s attorneys and subsequently granted by the Court.

Tonaquint Arbitration

On September 11, 2015 Tonaquint, Inc. (“Tonaquint”) filed for arbitration under a Securities Purchase Agreement and Convertible Promissory Note, claiming that the Company was in default for failing to deliver all earned shares, failing to satisfy the remaining balance of the note and failing to maintain adequate stock reserves. The Company answered, denying the claims and asserting that the Company had satisfied its obligations with respect to the Tonaquint Note. Arbitration was scheduled for February 2016 in Salt Lake City, Utah.

After conducting discovery, the parties agreed to settle the issues outstanding prior to the scheduled arbitration hearing. On February 4, 2016 the Company agreed to judgment in the amount of $432,674 plus interest at 22% per year and agreed to the entry of summary judgment in Tonaquint’s favor as requested in Tonaquint’s motion. Tonaquint agreed to accept payment from the Company in the amount of $250,000 as full and complete satisfaction of the arbitration award but only so long as the Company paid the settlement amount on or before the settlement payment due date of March 12, 2016. The Company failed to make the required scheduled payment and on March 24, 2016 the Third Judicial District Court of Salt Lake County, Utah issued judgment in favor of Tonaquint, Inc. in the aforementioned $432,674 amount. During the year ended December 31, 2016 the Company accrued interest at 22%, recording interest expense of $84,775, resulting in a total liability of $515,867 as of December 31, 2016 (see Note 7). On February 15, 2017 the parties entered into a Settlement Agreement to extinguish the outstanding liability on that date of $528,673 in exchange for shares of common stock of the Company. As of the date of this report no shares have been issued and the Company continues to accrue default interest on the liability.

General Disclosure

Litigation is inherently unpredictable. The outcome of lawsuits is subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss is complex. Consequently, we are unable to estimate the range of reasonably possible loss. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies heavily on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.

The Company has potential contingent liabilities arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which, when they can be reasonably estimated, are accrued. Such accruals are based the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. The Company has attempted to estimate the potential damages which may arise from these matters and to the extent they could be estimated they are included in our financial statements.

F-30

Cardinal Energy Group, Inc.

Notes to the Consolidated Financial Statements

December 31, 2015 and 2014

NOTE 13 - COMMITMENTS AND CONTINGENCIES (continued)

Other

On September 11, 2015 Tonaquint, Inc. (“Tonaquint”) filed for arbitration under a Securities Purchase Agreement and Convertible Promissory Note, claiming that the Company is in default for failing to deliver all earned shares, failing to satisfy the remaining balance of the note and failing to maintain adequate stock reserves. The Company has answered, denying the claims and asserting that Company has satisfied its obligations with respect to the Tonaquint Note. Arbitration was scheduled for February 2016 in Salt Lake City, Utah.

General

The Company believes that its claims and defenses in the above cases where it is a defendant are substantial for the reasons discussed above. Litigation is, however, inherently unpredictable. The outcome of lawsuits is subject to significant uncertainties and, therefore, determining the likelihood of a loss and/or the measurement of any loss is complex. Consequently, we are unable to estimate the range of reasonably possible loss. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but the assessment process relies heavily on estimates and assumptions that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.

The Company has potential contingent liabilities arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. To date no litigation has been filed in connection with any of these matters. The Company’s counsel believes that the claims against the Company are groundless and any damages which may arise from these matters will not be material. Thus there are no contingencies or additional litigation that require accrual or disclosure as of December 31, 2015.

NOTE 14 - SUBSEQUENT EVENTS

~~Tonaquint~~Legal ~~Arbitration~~Matters

~~After~~LG ~~conducting~~Capital ~~discovery~~Funding, ~~the parties agreed to settle the issues outstanding prior to the scheduled arbitration hearing~~LLC. ~~On February 4, 2016 the Company agreed to judgment in the amount of $432,674~~v.41 ~~plus~~Cardinal ~~interest~~Energy ~~at 22% per year (included in convertible notes payable as of December 31~~Group, ~~2015) and agreed to the entry of summary judgment in Tonaquint’s favor as requested in Tonaquint’s motion~~Inc. ~~Tonaquint~~(Case ~~agreed to accept payment from the Company in the amount of $250~~1:17-cv-09181-AKH,~~000~~ asUnited ~~full~~States ~~and~~District ~~complete satisfaction~~Court ofSouthern ~~the~~District ~~arbitration award but only so long as the Company paid the settlement amount on or before the settlement payment~~Of ~~due~~New ~~date of March 12, 2016. The Company failed to make the required scheduled payment and as of the date of the filing of this report the parties are still holding discussions on the matter.~~York)

~~Asset~~On ~~Sale~~November 22, 2017 LG Capital Funding, LLC (“LG”) filed a lawsuit against the Company claiming the Company had defaulted under two convertible notes payable agreements, requesting the Company pay amounts in excess of $600,000. On September 14, 2018 the Company filed a Declaration of the CEO, in Opposition. On December 10, 2019 the Court granted LG’s motion for summary judgment in the amount of $115,230.

On ~~February~~January 123, ~~2016,~~2019 the Company ~~sold~~filed ~~its~~a ~~facility~~Notice inof ~~Albany,~~Appeal ~~Texas~~with tothe anCourt ~~unrelated party~~ for athe ~~sales~~Southern ~~price~~District of ~~$130,000~~New York. InThe ~~connection~~Company requested tothe ~~this~~lower ~~sale,~~Court ~~the~~of ~~Company~~Appeals ~~received~~to ~~net~~forward ~~proceeds~~a question of ~~approximately~~law ~~$98,000,~~to ~~net~~the upper court of ~~closing~~appeals. ~~costs,~~On ~~and~~January ~~additionally~~31, 2019 the ~~buyer~~Company ~~issued~~ filed a Motion 5%to ~~secured~~Certify ~~promissory~~Questions ~~note~~ of ~~$30,000~~unsettled tousury ~~the Company~~law. ~~The~~That ~~principal~~motion ~~amount~~was isopposed ~~due~~by LG on ~~March~~February 1211, 2019. ~~and~~To ~~accrued~~date, ~~unpaid~~the ~~interest~~Court has isnot ~~due~~issued ~~monthly~~any order with regards to the remaining claims or with regard to the Motion to Certify.

~~Litigation~~Guy McCain. v. CEGX of Texas, LLC, Stephen Hannan and Bradford Joint Venture Partnership (Case No. 2017-015, District Court of Shackelford County Texas) and Bluff Creek Petroleum, LLC v. EOI Eagle Operating Inc. and CEGX of Texas, LLC (Case No. 2017-018, District Court of Shackelford County, Texas)

OnIn ~~March~~February 1of 2017 Guy McCain, ~~2016~~the ~~Iconic~~owner ~~Holdings~~and ~~filed~~lessor ~~suit~~of inthe ~~San~~Bradford ~~Diego~~“A” and Bradford “B” leases, located in Shackelford County, ~~Superior~~Texas, ~~Court~~filed ~~alleging~~a ~~that~~petition ~~the~~against ~~Company~~CEGX ~~was~~of inTexas, ~~default~~LLC, onStephen aHannan ~~convertible~~and Bradford Joint Venture Partnership ~~promissory~~for ~~note~~lack ~~and~~of ~~claiming~~production requesting that the ~~Company~~defendants ~~owes~~would ~~$167,478~~have inno ~~unpaid~~future ~~principal~~interest ~~and~~in ~~interest~~the leases. ~~The~~A ~~Company~~judgment ~~believes~~was ~~that~~filed ~~remaining~~on June ~~outstanding~~15, ~~principal~~2017 ~~under~~confirming the ~~note~~expiration isand ~~$35,000.~~termination As of the ~~filing~~lease ~~date~~and ofawarding ~~this~~the ~~report~~plaintiff ~~the~~$10,000 ~~Company~~plus ~~has~~post ~~yet~~judgment tointerest at ~~retain~~a ~~counsel~~rate ~~or answer~~of ~~the~~5% ~~claims~~per annum and all costs of court.

~~Loan~~In March of 2017 Bluff Creek Petroleum, LLC, a contractor engaged by CEGX of Texas, LLC, to work on the Bradford “A” and Bradford “B” leases, filed a petition against CEGX for amounts not paid. In August of 2017 a Default Judgment was awarded to the plaintiff in the amount of $43,637.

OnIn ~~March~~conjunction 18with the above, ~~2016~~in August of 2017, a Request to Subdivide the ~~Company~~Bradford ~~received~~A ~~notice~~& ~~from~~B ~~counsel~~leases ~~representing~~were ~~Power~~submitted Upto ~~Lending~~the ~~Group~~Railroad Commission of Texas and was approved on February 13, ~~Ltd~~2018. ~~that~~This itleft ~~was~~Bradford inJoint ~~default~~Venture ~~under the~~with ~~terms~~7 ofwells on the ~~November~~Bradford ~~12,~~A ~~2015~~& B ~~Revenue~~leases ~~Based~~combined. ~~Factoring~~The ~~Agreement~~Bradford Joint Venture was not able to raise additional capital to place these wells into production. ~~(Please~~To eliminate ~~refer~~the plugging liabilities, these wells were transferred to ~~“Loan~~another ~~Payable”~~operator in ~~Note~~good 7standing ~~for~~with the Railroad Commission ~~additional~~of ~~details~~Texas in April of 2018.) As of the date of this filing no judgment amounts have been paid by the Company.

Ally Bank v. Cardinal Energy Group, Inc. and Timothy W. Crawford (Case No. 17CV-02-001370, Franklin County, Ohio Court of Common Pleas)

SEC Complaint (No. 2:19-CV-1022)

On March 19, 2019, United States Securities and Exchange Commission (“SEC”) filed a complaint against Timothy Crawford, former CEO, and Cardinal Energy Group, Inc. The SEC alleged that the Company and Crawford filed two inaccurate quarterly reports, made false and misleading representations about the Company’s ownership interest in certain leases and the future revenue the Company expected to receive from the leases, failed to disclose known litigation, concealed business setbacks while raising money from investors, misreported Crawford’s stock ownership and failed to make the required disclosures that he sold millions of shares of the Company’s common stock. In related proceedings the SEC also instituted administrative proceedings against the Company based on the Company’s failure to file its latest six quarterly reports and latest two annual reports. The SEC has requested the Company file a response to their allegations and the SEC will conduct a prehearing event within 14 days of Service of the answer.

Additional Legal Settlements

During 2017 the Company was able to settle and resolve the legal issues relating to Edward Mitchell, Terrance Dunne, Iconic Holdings, LLC, and Tonaquint, Inc. (see Note 13).

Debt Arrangements

On January 24, 2017, the Company entered into a Second Settlement Agreement and Stipulation (“Second Settlement Agreement”) with Rockwell Capital Partners (“Rockwell”). Under the Second Settlement Agreement, Rockwell acquired outstanding liabilities of the Company in the principal amount of $158,419. The Company issued shares of the Company’s common stock in one or more tranches subject to adjustment and ownership limitations as defined in the Second Settlement Agreement, sufficient to satisfy the claim amount at a 50% discount of the lowest trading price during the 45 consecutive days starting on the day of the share request. Between January 2017 and February 2017, in connection with the Second Settlement Agreement, the Company issued an aggregate of 326,838,920 shares of the Company’s common stock to Rockwell for the payment of the $158,419 claim amount.

On February 21, 2017, the Company entered into a Third Settlement Agreement and Stipulation (“Third Settlement Agreement”) with Rockwell. Under the Third Settlement Agreement, Rockwell acquired outstanding liabilities of the Company in the principal amount of $125,938. The Company issued shares of the Company’s common stock in one or more tranches subject to adjustment and ownership limitations as defined in the Third Settlement Agreement, sufficient to satisfy the claim amount at a 50% discount of the lowest trading price during the 60 consecutive days starting on the day of the share request. Between February 2017 and March 2017, in connection with the Third Settlement Agreement, the Company issued an aggregate of 268,600,000 shares of the Company’s common stock to Rockwell for the payment of the $125,938 claim amount.

As of February 21, 2017, following the completion of the third of three settlement tranches financed by Rockwell, the Company has issued a majority of the total issued common shares to Rockwell Capital having issued 849,946,920 shares or 86% of outstanding common shares.

Transfer of Property

In August of 2017 the Company transferred the Power-Sanders and Dawson-Conway leases to an operator in good standing with the Railroad Commission of Texas. On December 19, 2017 the Company transferred its rights to the Fortune prospect in conjunction with a judgment granted in favor of P.I.D. Drilling, Inc. During 2018 the Company transferred the Bradford Leases to operators in good standing with the Railroad Commission of Texas in accordance with a judgment granted in favor of Guy McCain and to eliminate plugging liabilities.

Return of Performance Bond

During November 2018, the Company received cash of $50,000 arising from the cancelation of a performance bond that had been posted with the Texas Railroad Commission [“RRC”]. The bond was posted, as a RRC requirement by CEGX, to allow CEGX to be registered as an operating company. The bond had been held as collateral to assure that CEGX had the resources to provide any necessary remediation to wells that they operated. Because all leases and wells had been transferred in accordance with judgments or to relieve plugging obligations, which was the case with the Bradford Wells on Lease A and B which were the only operating properties held at the end of 2016, the transfers resulted in other operating companies assuming the remediation obligations in conjunction with the properties. When all transfers were complete, the Texas Railroad Commission returned the CEGX performance bond and recorded the future obligation against the transferee of the operating bond.

Series A Preferred Stock

On March 30, 2017, the Company filed, with the Nevada Secretary of State, an Amendment to the Certificate of Designation for the Company’s Series A Preferred Stock (the “Amendment”) pursuant to which (i) the number of shares of authorized Series A Preferred Stock was increased from 1,000,000 shares to 10,000,000 shares, (ii) the capital raise required by the Company prior to the Series A Preferred Stock being automatically converted was increased from $5,000,000 to $10,000,000; (iii) the percentage of common stock of the Company into which the Series A Preferred Stock is convertible was reduced from 15% to 10% and (iv) the time in which the Series A Preferred Stock can be converted was changed from being at any time during the three years after issuance to any time from the date that is six months after issuance until three years after issuance.

F-31

~~Cardinal~~On ~~Energy~~October ~~Group~~31, ~~Inc~~2017 10,000,000 shares of Preferred A shares were issued to Timothy Crawford, a former officer of the Corporation. in exchange for the 1,000,000 Preferred A shares that had been issued to Mr. Crawford during November 2015.

~~Notes~~Series toB ~~the~~Preferred ~~Consolidated Financial Statements~~Stock

~~December~~On 31March 30, ~~2015~~2017, the Company filed a Certificate of Designation with the Nevada Secretary of State to designate and ~~2014~~define the rights and preferences of the Series B Preferred Stock, of which 1,000,000 was designated as Series B. On August 1, 2017 the Company filed an amendment to increase the Series B Preferred Stock authorized to 5,000,000 shares. All terms and conditions remained.

~~NOTE~~There 14are 5,000,000 shares of Series B Preferred Stock authorized. No dividends are payable on the shares of Series B Preferred Stock. The Series B Preferred Stock has no right to vote on any matter submitted to the shareholders of the Company for a vote, provided, however, that as long as any shares of Series B Preferred Stock are outstanding, the vote of at least 51% of the then-outstanding shares ~~SUBSEQUENT~~of ~~EVENTS~~the Series B Preferred Stock is required to (~~continued~~a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock or to amend the Certificate of Designation for the Series B Preferred Stock, (b) amend the Articles of Incorporation of the Company (the “Articles”) or other charter documents in any manner that adversely affects any rights of the holders of the Series B Preferred Stock, (c) increase the number of authorized shares of Series B Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

~~Equity~~All ~~Issued~~of the shares of Series B Preferred Stock issued and outstanding at any time are convertible from time to time at the option of each holder thereof, at any time from six months after the date of issuance of the applicable shares of Series B Preferred Stock until the three year anniversary thereof, for no consideration to be paid, into shares of Common Stock equal to 15% of the issued and outstanding shares of Common Stock as of the date of conversion, with any debt or equity of the Company that is convertible into shares of Common Stock being included in such calculation on an as-converted basis, with any other any debt or equity of the Corporation which is convertible into a percentage of the Common Stock being deemed converted immediately prior to the conversion of the Series B Preferred Stock, with each share of Series B Preferred Stock being convertible into a pro-rata portion of the total 10% of Common Stock.

~~Subsequent~~All toshares ~~the~~of ~~year~~Series ~~ended~~B ~~December~~Preferred ~~31,~~Stock ~~2015~~will be automatically converted into Common Stock on the date that is six months after the Company ~~issued~~has ~~2,104,596~~completed ~~shares~~one ofor ~~common~~more ~~stock,~~raises ~~valued~~of atcapital ~~$6,924~~following ~~for~~the date that the ~~conversion~~Certificate of Designation was filed with the aSecretary ~~convertible~~of ~~note~~State ~~payable~~of ~~and~~the ~~accrued~~State ~~interest~~of ~~pursuant~~Nevada to(through the ~~conversion~~issuance ~~terms~~of any equity securities of the ~~note~~Company) ~~payable~~which collectively result in total capital raised and received by the Company of at least $10,000,000.

The conversion of the Series B Preferred Stock is subject to a limitation that the holder does not have the right to convert any portion of the Series B Preferred Stock to the extent that after giving effect to such conversion, the holder (together with the holder’s affiliates and any persons acting as a group together with such parties) would beneficially own in excess of the 4.99% of the Common Stock, provided, however, that this limitation may be waived by the holder.

Series C Preferred Stock

On March 30, 2017, the Company filed a Certificate of Designation with the Nevada Secretary of State to designate and define the rights and preferences of the Series C Preferred Stock.

There are 4,500,000 shares of Series C Preferred Stock authorized. The Series C Preferred Stock has a “Stated Value” of $1.00 per share. Each share of Series C Preferred Stock is entitled to receive an annual dividend, payable semi-annually in arrears, in an amount equal to 10% of the Stated Value, prior and in preference to any declaration or payment of any dividend on the Common Stock (the “Series C Dividend”). The Series C Dividend is cumulative and may be paid or accrued by the Company, in its sole discretion. Any holder of the Series C Preferred Stock may elect to have all accrued but unpaid Series C Dividends be paid to them in cash prior to any conversion of the applicable shares of Series C Preferred Stock, as discussed below. At the option of the Company, the Series C Dividend may be deferred until the expiration of the 36-month period commencing on the issuance date of the applicable share(s) of Series C Preferred Stock, at which time all accrued but unpaid Dividends on such shares will be paid on a cumulative basis.

The Series C Preferred Stock has no right to vote on any matter submitted to the shareholders of the Company for a vote, provided, however, that as long as any shares of Series C Preferred Stock are outstanding, the vote of at least 51% of the then-outstanding shares of the Series C Preferred Stock is required to (a) alter or change adversely the powers, preferences or rights given to the Series C Preferred Stock or to amend the Certificate of Designation for the Series C Preferred Stock, (b) amend the Articles or other charter documents in any manner that adversely affects any rights of the holders of the Series C Preferred Stock, (c) increase the number of authorized shares of Series C Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

F-32

All of the shares of Series C Preferred Stock issued and outstanding at any time are convertible from time to time at the option of each holder thereof, at any time from six months after the date of issuance of the applicable shares of Series C Preferred Stock until the three year anniversary thereof, for no consideration to be paid, into shares of Common Stock equal to 10% of the issued and outstanding shares of Common Stock as of the date of conversion, with any debt or equity of the Company that is convertible into shares of Common Stock being included in such calculation on an as-converted basis, with any other any debt or equity of the Corporation which is convertible into a percentage of the Common Stock being deemed converted immediately prior to the conversion of the Series C Preferred Stock, with each share of Series C Preferred Stock being convertible into a pro-rata portion of the total 10% of Common Stock.

The conversion of the Series C Preferred Stock is subject to a limitation that the holder does not have the right to convert any portion of the Series C Preferred Stock to the extent that after giving effect to such conversion, the holder (together with the holder’s affiliates and any persons acting as a group together with such parties) would beneficially own in excess of the 4.99% of the Common Stock, provided, however, that this limitation may be waived by the holder.

At any time that is six months following the earlier of (i) the date that the Company has completed one or more raises of capital following the date of issuance of the applicable shares of Series C Preferred Stock (through the issuance of any equity securities of the Company) which collectively result in total capital raised and received by the Company of at least $10,000,000 and (ii) the date that the Company’s securities have been listed for trading on the New York Stock Exchange or the NASDAQ exchange, the Company has the right to require the holders of the Series C Preferred Stock to elect to either (A) convert their shares of Series C Preferred Stock into shares of Common Stock, or (B) cause the Company to redeem such holder’s shares of Series C Preferred Stock (and if the holder does not make an election then option (A) is deemed to be elected). The redemption price per share is the Stated Value increased by 10% for each full year from the issuance date to the date of redemption (and a proportionate amount of 10% for any partial years).

Series D Preferred Stock

On March 30, 2017, the Company filed a Certificate of Designation with the Nevada Secretary of State to designate and define the rights and preferences of the Series D Preferred Stock. In August 2017 the Company filed an amendment to the Series D Preferred Stock. The amended terms are described below.

There are 7,000,000 shares of Series D Preferred Stock authorized. The Series D Preferred Stock has a “Stated Value” of $1.00 per share. Each share of Series D Preferred Stock was initially entitled to receive an annual dividend, payable semi-annually in arrears, in an amount equal to 5% of the Stated Value, prior and in preference to any declaration or payment of any dividend on the Common Stock (the “Series D Dividend”). In September 2018 this policy was modified, and the Company agreed to issue all the Series D investors who invested prior to September 30, 2018 additional Series D Units equal to 33% of your subscribed Units purchased as compensation for the proposed dividend.

The Series D Preferred Stock has no right to vote on any matter submitted to the shareholders of the Company for a vote, provided, however, that as long as any shares of Series D Preferred Stock are outstanding, the vote of at least 51% of the then-outstanding shares of the Series D Preferred Stock is required to (a) alter or change adversely the powers, preferences or rights given to the Series D Preferred Stock or to amend the Certificate of Designation for the Series D Preferred Stock, (b) amend the Articles or other charter documents in any manner that adversely affects any rights of the holders of the Series D Preferred Stock, (c) increase the number of authorized shares of Series D Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

All of the shares of Series D Preferred Stock issued and outstanding at any time are convertible from time to time at the option of each holder thereof, at any time from six months after the date of issuance of the applicable shares of Series D Preferred Stock until the three year anniversary thereof, for no consideration to be paid, into shares of Common Stock equal to 50% of the issued and outstanding shares of Common Stock as of the date of conversion, with any debt or equity of the Company that is convertible into shares of Common Stock being included in such calculation on an as-converted basis, with any other any debt or equity of the Corporation which is convertible into a percentage of the Common Stock being deemed converted immediately prior to the conversion of the Series D Preferred Stock, with each share of Series D Preferred Stock being convertible into a pro-rata portion of the total 50% of Common Stock.

The conversion of the Series D Preferred Stock is subject to a limitation that the holder does not have the right to convert any portion of the Series D Preferred Stock to the extent that after giving effect to such conversion, the holder (together with the holder’s affiliates and any persons acting as a group together with such parties) would beneficially own in excess of the 4.99% of the Common Stock, provided, however, that this limitation may be waived by the holder.

F-33

Additionally, for any unit holders that have not converted their units to Series D Preferred shares, at any time that is six months following the earlier of (i) the date that the Company has completed one or more raises of capital following the date of issuance of the applicable shares of Series D Preferred Stock (through the issuance of any equity securities of the Company) which collectively result in total capital raised and received by the Company of at least $10,000,000 and (ii) the date that the Company’s securities have been listed for trading on the New York Stock Exchange or the NASDAQ exchange, the Company has the right to require the holders of the Series D Preferred Stock to elect to either (A) convert their shares of Series D Preferred Stock into shares of Common Stock, or (B) cause the Company to redeem such holder’s shares of Series D Preferred Stock (and if the holder does not make an election then option (A) is deemed to be elected). The redemption price per share is the Stated Value plus any accrued and unpaid Series D Dividends. To date the Preferred Series D Units have not converted into Series D shares.

During 2017 and 2018, the Company sold 4.26 Preferred Series D units to investors and raised a total of $1,04,150. Each unit is comprised of (i) 250,000 shares of Series D Preferred Stock, par value $0.00001 per share; and (ii) 0.8925% of the Net Revenue Interest received by the Company per Unit on certain oil and gas fractional ownership interest along with other oil and gas assets to be acquired with a portion of the proceeds from the Offering.

Material Agreements

On April 18, 2017, the Company and EOI Eagle Operating, Inc. (“Eagle”) executed an agreement to acquire the assets of Eagle. The Company issued 2,000,000 shares of Series B preferred stock and a note for $250,000 to acquire the assets which include two service rigs, leasehold interests in several oil and gas leases in central Texas, miscellaneous oil field equipment and an operating yard and facility located in Graham, Texas.

On May 18, 2018 the Company and Eagle terminated the agreement due to the inability of Cardinal to pay the note payable of $250,000. The Series B preferred stock was not returned.

On July 24, 2017, the Company entered into an agreement with Rig Services Corporation (“Rig”) of Dallas, Texas to acquire five oil and gas leases and the related wells and production facilities located in Archer County, Texas. The Company agreed to issue 2,000,000 shares of Series B preferred stock and a note for $250,000 to acquire the assets.

On May 18, 2018 the Company and Rig terminated the agreement due to the inability of Cardinal to pay the note payable of $250,000. The Series B preferred stock was not returned.

Management Changes and Employment Agreements

Subsequent to December 31, 2016, the Company made several changes in management and director positions. On July 31, 2017, Timothy W. Crawford resigned as the Chief Executive Officer, President and Director and was replaced by Stanley Ford. On January 17, 2017 John Jordan resigned as Chief Financial Officer and Director. On August 1, 2017, Paul Carlisle was appointed as Chief Operating Officer and Director. Mr. Carlisle subsequently resigned on May 18, 2018. On September 22, 2017, Dayton Royce was appointed as a Director. On May 16, 2018, Daniel Hardwick was appointed as Chief Operating Officer, Secretary and Director. On January 17, 2018, Richard Iler was appointed as Chief Operating Officer. Mr. Iler subsequently resigned on July 31, 2018.

In connection with the above changes in management, we entered into employment and or consulting agreements, all of which terminated on the date of resignation, as applicable. Effective August 1, 2017, we entered into a consulting agreement with Stanley Ford to pay him a monthly retainer fee of $8,000 plus an additional $240 per month for maintaining and supplying an office for each month that he serves as the Company’s Chief Executive Officer. Mr. Ford was to receive a one-time signing bonus consisting of 50,000 shares of the Company’s Series B Preferred Stock from the past CEO; however, to date that has not happened. Effective August 1, 2017, we signed an employment agreement with Daniel Hardwick to serve as the Company’s Executive Vice President. The agreement is month to month and pays $2,000 per month. On January 17, 2018, we signed a consulting agreement with Richard Iler to serve as Chief Financial Officer for a monthly retainer of $2,500.

F-34

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

~~None~~In May 2017, RBSM, LLP, the certified public accounting firm serving as Cardinal’s auditors resigned and a new certified public accounting firm, Pinaki & Associates was engaged by our Board of Directors to serve as our auditors. The information required by this Item 9 is hereby incorporated by reference to Cardinal’s Current Report on Form 8-K filed with the SEC on May 5, 2017.

Pinaki & Associates, LLC was censured by the Public Accounting Oversight Board that manages the professional requirements to practice public accounting and on October 26, 2017, the firm registration was revoked, an officer of the firm was censured and as a result we were required to find a replacement for the audit of our 2016 financial statements.

On December 1, 2017, the Company approved the engagement of MAC Accounting Group, LLP as the Company’s independent public accountants for its fiscal year ended December 31, 2016 and the fiscal year ending December 31, 2017. During the fiscal years ended December 31, 2016 and 2015 and through the date Company engaged Pinaki, and subsequently MAC Accounting Group, LLP, neither Company, nor anyone acting on its behalf, consulted with the outside accounting firms regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on Company’s financial statements, and no written report or oral advice was provided to Company that either Pinaki or MAC Accounting Group, LLP concluded was an important factor considered by Company in reaching a decision as to the accounting, auditing or financial reporting issue, or (ii) any matters that were either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

There were no disagreements with any of our independent registered public accounting firms during the fiscal years ended December 31, 2016 and December 31, 2015.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

Our management conducted an evaluation, with the participation of our Chief Executive Officer who is our principal executive officer ~~and our Chief Financial Officer who is our principal financial and accounting officer,~~ of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, our Chief Executive ~~Officer~~ ~~and Chief Financial~~ Officer concluded that as a result of the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective, as of December 31, ~~2015~~ 2016.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for the preparation of our financial statements and related information. Management uses its best judgment to ensure that the financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally accepted accounting principles.

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, even an effective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Under the supervision of management, including our Chief Executive Officer, ~~and~~who is also our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal ~~Control~~ Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission published in 1992 and subsequent guidance prepared by the Commission specifically for smaller public companies. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, ~~2015~~2016 for the reasons discussed below.

A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Management identified the following material weakness in its assessment of the effectiveness of internal control over financial reporting as of December 31, ~~2015~~2016:

- Insufficient number of qualified accounting personnel governing the financial close and reporting process ~~- Lack of proper segregation of duties~~;

~~Until~~-Lack ~~such time as we have an adequate number~~ of ~~qualified~~proper ~~accounting~~segregation personnel with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of ~~those financial statements.~~duties;

~~Our~~-Inefficient management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control ~~system,~~over noprimary ~~matter~~record how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.originals;

28-Lack of formal procedures to assure that timely reports are completed;

-Incomplete policy and procedures, including review policies for related parties.

Until we have an adequate number of qualified accounting personnel with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.

Our management, including our Chief Executive Officer, who is also our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s Report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only Management’s Report in this annual report.

Changes in Internal Controls ~~over~~Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, ~~2015~~2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE.

Officers and Directors

Set forth below are the names and ages of our directors and executive officers and their principal occupations at present and for at least the past five years.

Name and Address	Age	Position(s)
Timothy W. Crawford	59	Chief Executive Officer, President and Director
Timothy W. Crawford (1)	60	Chief Executive Officer, President and Director
John Jordan(1)	68	Chief Financial Officer, Director
Stanley R. Ford (1)	75	Chief Executive Officer, President and Director
Gary B. Peterson(1)	68	Chief Financial Officer
John R. Jordan (6)	70	Chief Finance Officer, Director
John C. May	60	Senior Vice President, Secretary and Director
Paul Carlisle (2)(4)	42	Chief Operating Officer, President, Director
Dow Eric Bowman(2)	61	Chief Operating Officer
R. Dayton Royse, MD (3)	87	Director
Daniel Hardwick (5)	50	Director, Secretary and Chief Operating Officer
Richard Krantz (8)(9)	73	Vice President of Oil & Gas Compliance
Richard Iler (7)(10)	66	Chief Financial Officer

(1) On ~~May~~On 27July 31, ~~2015~~2017, ~~the~~Mr. ~~Board~~Crawford ofresigned ~~Directors~~as ~~appointed~~the ~~John Jordan its~~ Chief ~~Financial~~Executive Officer and a ~~member~~Director of the Company’s ~~Board, effective~~and ~~June~~on 1,the ~~2015.~~same Ondate the Board ~~same~~of ~~date,~~Directors ~~Gary~~appointed ~~Peterson~~Stanley ~~stepped~~R. ~~down~~Ford asits Chief ~~Financial~~Executive Officer and ~~was~~a ~~appointed~~member of the Company’s ~~Controller~~ Board, effective August ~~June~~ 1, ~~2015~~2017. ~~Mr. Jordan will also serve as the Chairman of the Company’s Audit Committee.~~

(2) ~~Effective~~ ~~December~~On August 1, ~~2015~~2017 ~~Mr.~~the ~~Bowman~~Board ~~took a leave~~ of ~~absence~~Directors ~~from~~appointed ~~his~~Paul ~~duties~~Carlisle asits ~~the~~ Chief Operating Officer and a member of the Company’s Board.

(3) On September 22, 2017 the Board of Directors named R. Dayton Royse, MD as a member of the Company’s Board.

(4) On May 18, 2018 Mr. Carlisle resigned as an officer, President and member of the Cardinal’s Board.

(5) On May 18, 2018 Daniel Hardwick was appointed as Chief Operating Officer, Secretary and a member of Company’s Board

(6) On January 17, 2018 John Jordan resigned as Chief Financial Officer and Director

(7) On January 17, 2018 Richard Iler was appointed Chief Financial Officer

(8) On March 31, 2016 the Board of Directors named Richard Krantz as Vice President of Oil & Gas Compliance.

(9) On January 3, 2017 Richard Krantz resigned as Vice President of Oil & Gas Compliance.

(10) On July 31, 2018 Richard Iler resigned as Chief Financial Officer.

Our directors are appointed for a one-year term to hold office until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. Our Board of Directors appoints officers annually and each Executive Officer serves at the discretion of our Board of Directors.

Background of officers and directors

Timothy W. Crawford

~~Since~~From September 30, 2012 through July 31, 2017 Mr. Crawford ~~has~~was ~~been~~the ~~our~~ CEO, member of the board of directors and in January 2013, Mr. Crawford was elected President. Since 2011 Mr. Crawford has been CEO/Director of Cardinal Energy Group, LLC, an Ohio Limited Liability Company engaged in the production of oil and gas which we acquired. Since 2012, Mr. Crawford has been Managing Partner orof ~~Northstar~~ NorthStar Capital, Columbus, Ohio. ~~Northstar~~NorthStar Capital is a private corporation engaged in business consulting. From 2009 to 2011, Mr. Crawford has been Executive Vice President / Co-Founder of Manx Energy, Inc. a private company located in Overland Park, Kansas. Manx Energy is engaged in the business of oil and gas production. Mr. Crawford was responsible for investor relations, business development, and acquisitions. From 2009 to 2011, Mr. Crawford was a Co-Founder / Director of Continental Energy, LLC, a private company located in Columbus, Ohio. Continental Energy was engaged in the business of oil and gas production. Continental merged with Cardinal Energy Group, LLC. From 2007 to 2009, Mr. Crawford was CEO / Chairman of the Board / Co-Founder of Capital City Energy Group Inc., a public company traded on the OTCBB under the symbol CETG. Capital City Energy Group Inc. was engaged in the business of oil and gas production and an oil and gas fund manager. Mr. Crawford oversaw day to day operations, investor relations, capital raises, and acquisitions. From 2003 to 2007, Mr. Crawford was CEO and Co-Founder of Capital City Partners Inc., a private company located in Columbus, Ohio. Capital City Partners Inc. was engaged in the business of providing regional financial services with a Wealth Management Division / Investment Banking Division / General Insurance Agency. Mr. Crawford oversaw day to day operations and continued to work as a registered representative and investment banker with select institutional clients.

29As the Chief Executive Officer of our company, Mr. Crawford brought to our board his considerable experience in the strategic planning and growth of oil and gas companies.

As the Chief Executive Officer of our company, Mr. Crawford brings our board his considerable experience in the strategic planning and growth of oil and gas companies and qualifies him to continue to serve as a director or our company.31

~~John~~Mr. ~~Jordan~~Crawford resigned as the President, Chief Executive Officer and Director effective July 31, 2017.

~~Mr.~~Stanley ~~Jordan served as the Company’s Chief Financial Officer from January 2014 until September 2014, when he retired to pursue community service work~~R. Mr. Jordan served in various positions with Unocal Corporation and its successor, Chevron Corporation, from 1970 to 2006, most recently serving as Accounting Manager and Division Comptroller. Mr. Jordan has over 40 years’ experience as an accounting and financial services professional, with an extensive background in oil and gas and geothermal energy industries both in the United States and overseas. Mr. Jordan holds a Bachelor of Science in Accounting and Business Management from Pepperdine University (1970) and an MBA from the George Graziadio School of Business and Management, Pepperdine University (1977). In connection with Mr. Jordan’s appointment, the Company agreed to pay Mr. Jordan $2,000 per month, to be adjusted monthly or quarterly through mutual agreement.Ford

~~Gary B~~Mr. Ford ~~Peterson~~was named as the Company’s Chief Executive Officer and a member of the Company’s Board effective August 1, 2017.

Mr. ~~Gary~~Ford, B.age ~~Peterson~~73, was ~~named~~a ~~our~~professional ~~interim~~engineer ~~Chief~~registered ~~Financial~~in ~~Officer~~the onProvince ~~September~~of ~~30,~~British ~~2014.~~Columbia ~~Concurrent~~for ~~with~~44 Mryears. ~~Jordan~~He ~~returning~~was ~~to the~~granted ~~Company~~an asMBA ~~its~~in Finance ~~Chief~~from ~~Financial~~Simon ~~Officer~~Fraser ~~effective~~University ~~June~~in 1,1983. ~~2015,~~ Mr. ~~Peterson~~Ford ~~became~~previously ~~the~~received ~~Company’s~~a ~~Controller~~BAp.Sc. ~~and served~~ in ~~that~~Civil ~~capacity~~Engineering ~~through~~in ~~December~~1967 ~~31,~~from ~~2015.~~the ~~Since~~University of ~~June~~British ~~2007,~~Columbia. Mr. ~~Peterson~~Ford has ~~acted~~managed asprofessionals ~~a consultant and provided financial, tax, and accounting services to numerous companies~~ in ~~the energy (~~oil and gas exploration and ~~extraction),~~minerals ~~software~~exploration ~~and hardware development, and mining industries. Peterson has experience as an audit partner~~ for ~~public~~a ~~oil~~period ~~and gas companies, and has developed an expertise in the financial compliance requirements~~ of ~~public companies~~18 years.

~~Mr.~~In ~~Peterson~~prior ~~has~~years, ~~held~~he ~~positions~~worked inon ~~various~~major ~~companies~~civil and ~~accounting~~structural ~~firms,~~projects ~~including~~in ~~positions~~Canada ~~with~~for ~~Digitran~~the ~~Systems,~~international ~~Inc.,~~consulting ~~from~~engineering ~~1994 to~~firm ~~1996,~~of asDelcan. In ~~Chief~~the ~~Financial~~early ~~Officer,~~1970’s ~~World Wireless Communications, Inc~~Mr., ~~from~~Ford ~~1995~~was tolocated ~~1997,~~in ~~as Chief Executive Officer~~London, ~~SmithPeterson, LC,~~England ~~from~~and ~~1997~~managed tocivil ~~2001,~~and asstructural ~~Certified~~projects ~~Public~~in ~~Accountant,~~Europe ~~Tarallax~~and ~~Wireless, Inc~~Africa.~~, from 1999 to 2005, as Chief Executive Officer~~ ~~and~~In ~~Chairman of~~ the ~~Board,~~late ~~Winsonic~~1960’s ~~Digital Media Group, Inc~~Mr., ~~from~~Ford ~~2005~~was tostationed ~~2007,~~in asSydney ~~Vice~~Australia ~~President of Accounting, Compliance,~~ and ~~Disclosure.~~was ~~Peterson has also previously been~~ a ~~Senior~~senior ~~Tax~~structural ~~Accountant~~design atengineer ~~PriceWaterhouseCoopers, Manager~~ in ~~the~~charge ~~Tax~~of ~~Department~~a atlarge ~~Deloitte~~design ~~Touche, and Audit Partner at Peterson, Siler, & Stevenson~~team.

~~John~~In CJuly of 2007 Mr. ~~May~~Ford was appointed director of TMM, Inc., a position in which he still serves, and where Mr. Ford was responsible for reviving the company from bankruptcy proceedings in 1998. TTM, Inc. is a company listed on the OTC Markets, and was initially involved in fractal digital compression. He has been responsible for all Corporate filings and raising capital for the company.

~~Since September 30, 2012,~~ Mr. ~~May has been our senior vice president, secretary and a director. Since March 2012, Mr. May has been Managing~~ ~~Partner~~Ford ofwas ~~Northstar~~appointed ~~Capital,~~to ~~Columbus~~

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