Restatement of Financial Statements for the three months ended March 31, 2016 and 2015

The Company is restating its financial statements for the three months ended March 31, 2016 and 2015 to correct various account balances as summarized below.

The restatements are being made in accordance with ASC 250, “Accounting Changes and Error Corrections.” The disclosure provision of ASC 250 requires a company that corrects an error to disclose that its previously issued financial statements have been restated, a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings (deficit) in the statement of financial position as of the beginning of each period presented.

The effects of the adjustments on the Company’s previously issued unaudited financial statements are summarized as follows:

Selected Unaudited Consolidated Balance Sheets Information as of March 31, 2016

Selected Unaudited Consolidated Statements of Operations and Comprehensive Loss information for the three months ended March 31, 2016 and 2015

Selected Unaudited Consolidated Statements of Cash Flows information for the three months ended March 31, 2016 and 2015

The Company uses the full cost method of accounting for its oil and gas properties, which requires a capitalized cost limitation test (“ceiling test”) at each report date. This analysis utilizes information included in an annual reserve report. The report originally used did not contemplate the pricing requirements for proved reserves promulgated by the Securities and Exchange Commission (“SEC”). The Company obtained a revised reserve report in October 2016, which met the SEC pricing requirements for proved reserves. Based on this report, the Company determined that an impairment of $210,032 should be recorded for the year ended December 31, 2015, consequently reducing the balances carried forward to 2016 and impacting the calculations for depletion. The Company also reevaluated the methodology originally used to estimate the derivative liabilities associated with the conversion features of certain debt instruments, and the impact on additional paid in capital associated with these transactions. The Company determined that the accounting for these transactions understated the derivative liability at March 31, 2016 by $2,377,823. The change in the estimated fair value of these derivatives resulted in a loss of $1,655,536 for the three months ended March 31, 2016 as compared to previously recording a loss of $527,303.