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NOTE 1 - ORGANIZATION AND DESCRIPTION OF OPERATIONS Description of Business We are an oil and gas exploration, development and production company. Our oil and gas property interests are located in Western Canada (in Berwyn, Medicine River, Boundary Lake, Swan Hills and Wildmere in Alberta, and Clarke Lake and Inga in British Columbia) and in the United States (in the Piqua region of the State of Kansas and in the Bakken and Three Forks formations in Divide County, North Dakota). Subsequent to the quarter ended September 30, 2012, we entered into an agreement for the sale of our oil and gas property interests located in the Swan Hills area of Alberta, Canada and the Divide County lands in North Dakota. See “Note 7 – Subsequent Events” below. The Company was incorporated under the laws of the State of Colorado on November 27, 2000 under the name “SIN Holdings, Inc.” From inception until June 2010, we pursued our original business plan of developing a web portal listing senior resources across the United States through our former wholly-owned subsidiary Senior-Inet, Inc. On July 29, 2010, Senior-Inet, Inc. was dissolved and we changed our business to the acquisition, exploration, development and production of oil and gas reserves. To align our name with our new business, on November 29, 2010, we changed our name to Legend Oil and Gas, Ltd. On July 28, 2011, we formed a wholly owned subsidiary named Legend Energy Canada, Ltd. (“Legend Canada”), which is a corporation registered under the laws of Alberta, Canada. Legend Canada was formed to acquire, own and manage certain oil and gas properties and assets located in Canada. Legend Canada completed the acquisition of significant oil and gas reserves located in Canada on October 20, 2011.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiary, Legend Canada. Intercompany transactions and balances have been eliminated in consolidation. We account for our undivided interest in oil and gas properties using the proportionate consolidation method, whereby our share of assets, liabilities, revenues and expenses are included in the financial statements. Interim Reporting The unaudited financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of Legend Oil & Gas Ltd. and the results of its operations for the periods presented. This report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2011. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in the Company’s Form 10-K for the fiscal year ended December 31, 2011 has been omitted. The results of operations for the interim periods presented are not necessarily indicative of results for the entire year ending December 31, 2012. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Management’s judgments and estimates in these areas are to be based on information available from both internal and external sources, including engineers, geologists, consultants and historical experience in similar matters. The more significant reporting areas impacted by management’s judgments and estimates are accruals related to oil and gas sales and expenses, estimates of future oil and gas reserves, estimates used in the impairment of oil and gas properties, and the estimated future timing and cost of asset retirement obligations.   Actual results could differ from the estimates as additional information becomes known. The carrying values of oil and gas properties are particularly susceptible to change in the near term. Changes in the future estimated oil and gas reserves or the estimated future cash flows attributable to the reserves that are utilized for impairment analysis could have a significant impact on the future results of operations. Cash and Cash Equivalents We consider all highly liquid short-term investments with original maturities of three months or less to be cash equivalents. Accounts Receivable Accounts receivable are due under normal trade terms and are presented on the consolidated balance sheets net of allowances for doubtful accounts. We establish provisions for losses on accounts receivable for estimated uncollectible accounts and regularly review collectability and establish or adjust the allowance as necessary using the specific identification method. Account balances that are deemed uncollectible are charged off against the allowance. No allowance for doubtful accounts was necessary as of September 30, 2012 and December 31, 2011. Comprehensive Income For operations outside of the U.S. that prepare financial statements in currencies other than U.S. dollars, we translate the financial statements into U.S. dollars. Results of operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are translated at end of period exchange rates, except for equity transactions and advances not expected to be repaid in the foreseeable future, which are translated at historical costs. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are accumulated as a separate component in other comprehensive income (loss). Accumulated other comprehensive income (loss) consists entirely of foreign currency translation adjustments at September 30, 2012 and December 31, 2011. Liquidity We have incurred net operating losses and operating cash flow deficits over the last two years, continuing through the third quarter of 2012. We are in the early stages of acquisition and development of oil and gas leaseholds, and we have been funded primarily by a combination of equity issuances and bank debt, and to a lesser extent by operating cash flows, to execute on our business plan of acquiring working interests in oil and gas properties and for working capital for production. At September 30, 2012, we had cash and cash equivalents totalling approximately $24,000. In October 2011, we established a revolving demand loan with National Bank of Canada through our wholly-owned subsidiary, Legend Canada. The credit facility had a maximum borrowing base of CA$6.0 million. On March 25, 2012, we received notification from the Bank of its decision to reduce and restructure our credit facility, following their interim review in the first quarter of 2012. The Bank advised us that it decided to reduce the maximum borrowing base under the credit facility due to decreases in the market prices of natural gas and the resulting decrease in the value of our reserves securing the credit facility. On March 27, 2012, we entered into an Amending Offering Letter with the Bank to amend the credit facility on the following terms: (a) the revolving demand loan was reduced from CA$6.0 million to CA$4.0 million, which is payable in full at any time upon demand by the Bank; (b) the Bank provided a new CA$1.5 million bridge demand loan, which was payable in full at any time upon demand by the Bank, and in any event no later than May 31, 2012; and (c) we were required to provide an unlimited guarantee of the credit facility for Legend Canada. Outstanding principal under the bridge demand loan bears interest at the Bank’s prime rate of interest plus 2.0% (the Bank’s current prime rate is 3.0%). In connection with the Amending Offering Letter, on March 27, 2012, Legend Canada entered into a CA$1.5 million variable rate demand note to the Bank, and we paid CA$15,000 to the Bank as a non-refundable bridge fee. In May 2012, we entered into an unlimited guarantee of the credit facility in favor of the Bank, and we also entered into a blanket security agreement, granting to the Bank a security interest in all of our personal property assets to secure the guarantee. On June 5, 2012, we entered an Amending agreement that extended the repayment of the bridge demand loan to December 1, 2012, with CA$250,000 monthly payments being made beginning July 15, 2012 and last payment on December 1, 2012. On June 13, 2012, we received notification that as a result of our May 31, 2012 bank review, our revolving credit facility would remain at CA$4.0 million and that our next scheduled review would be December 1, 2012. In October of 2012, we received notification that our next scheduled review would be January 1, 2013.   In August of 2012, Legend Canada sold its oil and gas interests in the Red Earth, Alberta property for CA$750,000 in gross proceeds. The revolving bank line borrowing base was reduced by CA$150,000 as a result of this sale. Subsequent to September 30, and discussed in Note 7, the Company has agreed to multiple asset sales. On October 29, 2012, the Company closed the sale of the Divide County assets in North Dakota for gross proceeds of $436,183. On November 1, 2012, Legend Canada sold a significant portion of its interests in the Swan Hills area of Alberta for gross proceeds of CA$1,000,000, accompanied by a reduction in the revolving bank line of CA$350,000. As of the date of this Report, we have an outstanding balance under the revolving demand loan with the Bank in the amount of approximately $3,229,292 (CA$3,125,000) and approximately $406,840 (CA$400,000) under the bridge demand loan. The Bank may demand repayment of all amounts owed by Legend Canada to it at any time. There is no assurance that any portion of this credit facility will be available to Legend Canada in the future. The March 27, 2012 Amending Offering Letter with the Bank originally required that we complete an equity financing of at least CA$1.5 million on or before May 31, 2012, the proceeds of which were required to be used to pay off the bridge demand loan. In conjunction with June 5, 2012, Amending agreement, the Company agreed to enter into an equity financing, the proceeds of which would be used as required to make the periodic CA$250,000 payments. Subsequently on May 22, 2012, the Company entered into an agreement with Lincoln Park Capital (“Lincoln Park”) to sell up to $10.2 million in common stock during a three year term. This agreement permits the Company to sell stock to Lincoln Park at increments as defined, with timing based on the Company’s discretion. There is a $0.10 per share floor price that would prohibit the Company from any sales below that price. At the date of this Report, the Company has sold and issued 3,527,508 common shares to Lincoln Park, and received $422,000 in proceeds. We believe that the combination of revenue from our on-going operations, proceeds from potential future asset sales, and our equity financing arrangement with Lincoln Park provide us the ability to make our scheduled monthly bridge loan payments. However, in the event we are unable to meet a bridge loan scheduled payment or the repayment of the revolving demand loan at any time upon demand by the Bank, we will be in default of our obligations to the Bank. The Bank has a first priority security interest in all of our assets and can exercise its rights and remedies against us as a secured creditor. Any such default by us or action by the Bank will have a material adverse effect on us and our business. If we are unable to negotiate favorably with the Bank, or if we are unable to secure additional financing, whether from equity, debt, or alternative funding sources, this could have a material adverse effect on us and we may be required to sell some or all of our properties, sell or merge our business, or file a petition for bankruptcy. In addition, International Sovereign Corp. (“Sovereign”) and the holders of our convertible preferred stock have “put” rights to require us to repurchase their shares at a price of $2.00 per share. These put rights became exercisable on April 1, 2012. As of March 30, 2012, we received signed waivers from the holders of our convertible preferred stock of their put rights; however, these waivers are contingent on Sovereign also agreeing to waive its rights. In addition, as of March 31, 2012, Sovereign executed a stand-still agreement agreeing not to exercise its put rights prior to June 15, 2012, and Sovereign has subsequently verbally agreed to extend the stand-still agreement for an unspecified period of time. We currently do not have sufficient cash assets available to repurchase the shares of convertible preferred stock or the shares of common stock issued to Sovereign in the event that the put rights are exercised, in which case we will be in default of our obligations under our purchase agreement with Sovereign and the terms of the convertible preferred stock in our Articles of Incorporation. The exercise of any of these put rights would have a material adverse effect on our business and financial condition. In the event that we are able to resolve our obligations to the Bank and the put rights, we anticipate needing additional financing to fund our drilling and development plans in 2012. As described above, we have entered into an agreement with Lincoln Park to sell up to $10.2 million in common stock. However, the timing for closing on funds is variable and there is no guarantee on the amount of proceeds we will receive. We may seek financing from other sources, which may also include the sale of certain of our oil and gas properties. Our ability to obtain financing or to sell our properties on favorable terms may be impaired by many factors outside of our control, including the capital markets (both generally and in the crude oil and natural gas industry in particular), our limited operating history, the location of our crude oil and natural gas properties and prices of crude oil and natural gas on the commodities markets (which will impact the amount of asset-based financing available to us) and other factors. Further, if crude oil or natural gas prices on the commodities markets decline, our revenues will likely decrease and such decreased revenues may increase our requirements for capital.   Any new debt or equity financing arrangements may not be available to us, or may be available only on unfavorable terms. Additionally, these alternatives could be highly dilutive to our existing shareholders, and may not provide us with sufficient funds to meet our long-term capital requirements. We have and may continue to incur substantial costs in the future in connection with raising capital to fund our business, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, which may adversely impact our financial condition. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), we will be required to reduce operating costs, which could jeopardize our future strategic initiatives and business plans, and we may be required to sell some or all of our properties (which could be on unfavorable terms), seek joint ventures with one or more strategic partners, strategic acquisitions and other strategic alternatives, cease our operations, sell or merge our business, or file a petition for bankruptcy. Our financial statements for the quarter ended September 30, 2012 were prepared assuming we would continue as a going concern, which contemplates that we will continue in operation for the foreseeable future and will be able to realize assets and settle liabilities and commitments in the normal course of business. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that could result should we be unable to continue as a going concern. Fair Value Measurements Certain financial instruments and nonfinancial assets and liabilities, whether measured on a recurring or non-recurring basis, are recorded at fair value. A fair value hierarchy, established by U.S. GAAP, prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Our financial instruments include cash and cash equivalents, trade receivables, trade payables, and notes payable to bank, all of which are considered to be representative of their fair market value, due to the short-term and highly liquid nature of these instruments. As discussed in Note 4, we have incurred asset retirement obligations of $1,693,623, the value of which was determined using unobservable pricing inputs (or Level 3 inputs). We use the income valuation technique to estimate the fair value of the obligation using several assumptions and judgments about the ultimate settlement amounts, inflation factors, credit adjusted discount rates, and timing of settlement. Our contingent consideration liability (incurred in connection with the Sovereign acquisition on October 20, 2011) was also estimated using unobservable pricing inputs (or Level 3 inputs). We used a model to simulate the value of our future stock based on the historical mean of the stock price to estimate the fair value of the contingent consideration liability. We incurred the contingent consideration liability on October 20, 2011, in connection with the acquisition of assets from Sovereign and on that date the estimated value of the contingent consideration liability was nil. Subsequent changes in fair value resulted in a non-cash charge to operations amounting to $1,404,059 during 2011. During the period ended September 30, 2012, the change in value of the contingent consideration liability resulted in a non-cash loss amounting to $4,147,005 and the obligation was settled by issuing 21,350,247 shares of common stock to Sovereign on May 17, 2012. Full Cost Method of Accounting for Oil and Gas Properties We have elected to utilize the full cost method of accounting for our oil and gas activities. In accordance with the full cost method of accounting, all costs associated with acquisition, exploration, and development of oil and gas reserves, including directly related overhead costs and related asset retirement costs, are capitalized into a cost center. Our cost centers consist of the Canadian cost center and the United States cost center. All capitalized costs of oil and gas properties within each cost center, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Excluded from this amortization are costs associated with unevaluated properties, including capitalized interest on such costs. Unevaluated property costs are transferred to evaluated property costs at such time as wells are completed on the properties or management determines that these costs have been impaired.   Oil and gas properties without estimated proved reserves are not amortized until proved reserves associated with the properties can be determined or until impairment occurs. The cost of these properties is assessed quarterly, on a field-by-field basis, to determine whether the properties are recorded at the lower of cost or fair market value. Sales of oil and gas properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income. Full Cost Ceiling Test At the end of each quarterly reporting period, the cost of oil and gas properties in each cost center are subject to a “ceiling test” which basically limits capitalized costs to the sum of the estimated future net revenues from proved reserves, discounted at 10% per annum to present value, based on current economic and operating conditions, at the end of the period, 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 book and tax basis differences of the properties. If the cost of oil and gas properties exceeds the ceiling, the excess is reflected as a non-cash impairment charge to earnings. The impairment charge is permanent and not reversible in future periods, even though higher oil and gas prices in the future may subsequently and significantly increase the ceiling amount. No impairment charges were incurred during the periods ended September 30, 2012 and 2011. Asset Retirement Obligation We record the fair value of a liability for an asset retirement obligation in the period in which the asset is acquired and a corresponding increase in the carrying amount of the related long-lived asset if a reasonable estimate of fair value can be made. The associated asset retirement cost capitalized as part of the related asset is allocated to expense over the asset’s useful life. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. The asset retirement obligation is recorded at its estimated fair value and accretion is recognized over time as the discounted liability is accreted to its expected settlement value. Fair value is determined by using the expected future cash outflows discounted at our credit-adjusted risk-free interest rate. Oil and Gas Revenue Recognition We use the sales method of accounting for oil and gas revenues. Under this method, revenues are recognized based on the actual volumes of gas and oil sold to purchasers at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is probable. Delivery occurs and title is transferred when production has been delivered to a purchaser’s pipeline or truck. The volume sold may differ from the volumes we are entitled to, based on our individual interest in the property. We utilize a third-party marketer to sell oil and gas production in the open market. As a result of the requirements necessary to gather information from purchasers or various measurement locations, calculate volumes produced, perform field and wellhead allocations and distribute and disburse funds to various working interest partners and royalty owners, the collection of revenues from oil and gas production may take up to 45 days following the month of production. Therefore, we may make accruals for revenues and accounts receivable based on estimates of our share of production. Since the settlement process may take 30 to 60 days following the month of actual production, our financial results may include estimates of production and revenues for the related time period. We will record any differences between the actual amounts ultimately received and the original estimates in the period they become finalized. Stock-based compensation We measure compensation cost for stock-based payment awards at fair value and recognizes it as compensation expense over the service period for awards expected to vest. Compensation cost is recorded as a component of general and administrative expenses in the consolidated statements of operations, net of an estimated forfeiture rate, and amounted to $1,047,348 for the period ended September 30, 2012. Compensation cost is only recognized for those awards expected to vest on a straight-line basis over the requisite service period of the award. Our policy is to issue new shares to fulfill the requirements for options that are exercised.   Earnings (Loss) Per Share The computation of basic net loss per common share is based on the weighted average number of shares that were outstanding during the period, including contingently redeemable common stock. The computation of diluted net loss per common share is based on the weighted average number of shares used in the basic net loss per share calculation plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding. As of September 30, 2012, potentially dilutive common shares include warrants to purchase 4,150,000 shares of common stock, options to purchase 2,840,000 shares of common stock, and preferred stock convertible into 1,700,000 shares of common stock. During the periods ended September 30, 2012 and 2011 potentially dilutive common shares were not included in the computation of diluted loss per shares as to do so would be anti-dilutive. Income Taxes We recognize income taxes on an accrual basis based on tax position taken or expected to be taken in its tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized. Should they occur, our policy is to classify interest and penalties related to tax positions as interest expense. Since our inception, no such interest or penalties have been incurred. Concentration During the nine months ended September 30, 2012, sales of oil and gas to four customers individually exceeded 10% of the total oil and gas revenue. Sales to Husky Energy Marketing, BP Canada Energy, Kelly Maclaskey Oilfield Service Inc., and Gibson Petroleum accounted for approximately 30%, 15%, 14% and 12% of total oil and gas sales, respectively. We believe that the loss of any of the significant customers would not result in a material adverse effect on our ability to market future oil and natural gas production.

NOTE 3 - OIL AND GAS PROPERTIES The amount of capitalized costs related to oil and gas property and the amount of related accumulated depletion, depreciation, and amortization are as follows:   <table cellspacing="0" cellpadding="0" width="76%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="72%"> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="4%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">September 30, 2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">December 31, 2011</td> <td valign="bottom"> </td> </tr>   <tr bgcolor="#cceeff"> <td valign="top"> Proven property, net of impairment </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">8,757,850</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">8,992,793</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Accumulated depletion, depreciation, and amortization </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(1,660,078</td> <td nowrap="nowrap" valign="bottom">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">(493,594</td> <td nowrap="nowrap" valign="bottom">) </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">7,097,772</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8,499,199</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Unproven property </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8,660,214</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">8,335,380</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">15,757,986</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">16,834,579</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr>  </table>

NOTE 4 – ASSET RETIREMENT OBLIGATION The following table reconciles the value of the asset retirement obligation for the periods ended September 30, 2012 and September 30, 2011:   <table cellspacing="0" cellpadding="0" width="76%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="72%"> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="8%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">September 30, 2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">September 30, 2011</td> <td valign="bottom"> </td> </tr>   <tr bgcolor="#cceeff"> <td valign="top"> Opening balance, January 1 </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,601,423</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Liabilities incurred </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Liabilities settled </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> Foreign currency translation adjustment </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">46,411</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> Accretion expense </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">45,789</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr> <tr> <td valign="top"> Ending balance, September 30 </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,693,623</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> </tr>  </table>

NOTE 5 - STOCKHOLDERS’ EQUITY On February 2, 2011, we completed a private placement for 300,000 units at $0.50 per unit, for a total of $150,000 in gross proceeds, to one foreign investor residing outside of the United States. Each unit consisted of one share of restricted common stock and one warrant to purchase an additional share of common stock of the Company at $0.50 per share with a term of three years. This offering was exempt from registration pursuant to Regulation S under the Securities Act of 1933, as amended (rules governing offers and sales of securities made outside of the United States without registration). At the time of the sale of the units, the relative fair value of the common stock and the warrants was estimated to be $140,200 and $9,800, respectively, as determined based on the relative fair value allocation of the proceeds. In April 2011, in order to attract additional investment capital, our two executive officers (Mr. Vandeberg and Mr. Diamond-Goldberg) and Mr. Wayne Gruden, a significant shareholder of the Company, surrendered a total of 15,890,000 shares of common stock owned by them to us, which shares were immediately cancelled. On April 28, 2011, we completed a private placement for 250,000 units at $1.00 per unit, for a total of $250,000 in gross proceeds, to one foreign investor residing outside of the United States. Each unit consisted of one share of restricted common stock and one warrant to purchase an additional share of common stock at $1.00 per share with a term of three years. This offering was exempt from registration pursuant to Regulation S under the Securities Act of 1933, as amended. At the time of the sale of the units, the relative fair value of the common stock and the warrants was estimated to be $140,700 and $109,300, respectively, as determined based on the relative fair value allocation of the proceeds. On August 10, 2011, we completed a private placement for 2,300,000 units at $2.00 per unit, for a total of $4,600,000 in gross proceeds. Each unit consists of one share of restricted convertible preferred stock and a warrant to purchase one share of restricted common stock. The convertible preferred stock is convertible into one share of restricted common stock, subject to customary adjustment for stock splits or similar events. The warrants are exercisable at $2.00 per share over a period of three years from the date of issuance. The offering was conducted under the exemption from registration provided pursuant to Regulation S under the U.S. Securities Act of 1933, as amended. The holders of shares of convertible preferred stock have a put right to require us to repurchase such shares for a price of $2.00 per share. The amount allocated to the convertible redeemable preferred stock is presented as mezzanine equity in the consolidated financial statements rather than as permanent equity. We allocated the gross proceeds of $4,600,000 from the private placement between the convertible preferred stock and the warrants issued proportionately based on their estimated fair values as of the closing date of the private placement. The relative fair value of the convertible preferred stock and the warrants was estimated to be $2,766,733 and $1,833,267, respectively. The effective conversion price was used to measure the intrinsic value of the embedded conversion option which amounted to $2,270,266. As a result, the carrying value of the convertible preferred stock presented as mezzanine equity in the consolidated financial statements (net of the impact of the conversion of 600,000 shares on convertible preferred stock described below) is $366,953. As of December 31, 2011 and September 30, 2012, no adjustment to the carrying value of the convertible preferred stock to its redemption value was necessary as it was not considered probable that the convertible preferred stock would become redeemable (as described below, the holders of the convertible preferred stock conditionally agreed to waive their put rights). At September 30, 2012, the aggregate redemption value is $3.4 million.   On September 28, 2011, we entered into a retainer letter agreement with Midsouth Capital Inc., an investment banking firm, for investment banking services. As part of the compensation to Midsouth, we issued 10,000 shares of restricted common stock to Midsouth. On October 21, 2011, we issued 3,552,516 common shares to Sovereign in connection with our acquisition of the Canadian oil and gas properties. Sovereign has a put right to require us to repurchase such shares for a price of $2.00 per share. Sovereign executed a stand-still agreement that nullified their put rights until various conditions could be met, most significantly the joint effort by the Company and Sovereign to dispose, by sale to unrelated parties, of the 3,552,516 shares issued to Sovereign on the closing of the asset acquisition. In connection with the acquisition of assets from Sovereign, the Company agreed to a mechanism of staggered payments to maintain the value of the stock component of the purchase at the original amount of $2.00 per share through a series of Variable Weighted Average Price (“VWAP”) calculations. Under the purchase agreement, Sovereign could not own more than 10% of the Company’s common stock, unless they chose to waive that condition. On May 17, 2012, in conjunction with the final VWAP calculation, Sovereign waived the 10% ownership limitation and the Company issued 21,350,247 shares of restricted common stock to Sovereign. The contingent consideration obligation was settled and a loss of $4,147,005 was recognized to reflect the difference between the contingent consideration and the fair value of the final VWAP shares. The 21,350,247 shares of common stock issued to Sovereign on May 17, 2012, also include a put right, whereby Sovereign may require us to repurchase the shares for a price of $2.00 per share. Therefore, the redemption amount of the common stock is recorded as mezzanine equity. On January 12, 2012, we issued 60,000 shares of common stock with a fair value of $60,000 to a consultant in exchange for services. The fair value of the common shares was recorded as a component of general administrative expenses during the period ended March 31, 2012. On March 26, 2012 the holders of convertible preferred stock agreed to waive their put option, with the condition that Sovereign also waives its put option. In connection with the waiver by the holders of the convertible preferred stock, the Company agreed to issue 2,772,728 shares of common stock to the convertible preferred stock holders as consideration for the waivers and only following a similar waiver by Sovereign. No such shares have been issued to date. Sovereign chose not to waive its put option rights, but rather executed a stand-still agreement that nullified their put rights until various conditions could be met, most significantly the joint effort by the Company and Sovereign to dispose, by sale to unrelated parties, of the 3,552,516 shares issued to Sovereign on the closing of the asset acquisition. The stand-still agreement was effective through June 15, 2012, and the Company and Sovereign have reached a verbal agreement to extend the stand-still agreement while the parties continue their joint efforts to dispose of the shares. Upon achieving the sale of these original shares, the Company expects that Sovereign will then permanently waive its put option rights. On March 30, 2012, a preferred stock holder elected to convert its preferred shares to common stock. Accordingly, the Company issued 600,000 shares of common stock and retired 600,000 preferred shares. Mezzanine equity was reduced by $129,514, and then transferred to common shares and additional paid-in capital accordingly. On May 22, 2012, the Company commenced an agreement with Lincoln Park Capital to sell up to $10.2 million in common stock during a term of three years. Upon signing the agreements, Lincoln Park made an initial purchase of 192,308 shares of common stock for $50,000 at a price of $0.26 per share. Upon filing the registration statement, Lincoln Park purchased another $50,000 at a price of $0.23 per share. On June 29, 2012 the SEC declared effective the registration statement related to the transaction, at which time Lincoln Park purchased an additional $100,000 in common stock at $0.165 per share. In consideration for entering into the Purchase Agreement, the Company issued 723,592 shares of common stock to Lincoln Park as an initial commitment fee. The fair value of these 723,592 commitment shares were recorded as a reduction to additional paid-in capital and amounted to $208,311. Up to 1,072,183 of additional shares of common stock may be issued on a pro rata basis to LPC as an additional commitment fee as Lincoln Park purchases additional shares of common stock under the Purchase Agreement. To date, the Company has issued 3,527,508 shares to Lincoln Park and has received a total of $422,000 in proceeds. There is a $0.10 floor price that would prohibit the Company from any sales below that price.   Warrants The following table summarizes outstanding warrants to purchase shares of our common stock as of December 31, 2011 and September 30, 2012, as described above:   <table cellspacing="0" cellpadding="0" width="92%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="58%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="6" align="center">Shares of Common Stock Issuable from Warrants Outstanding as of</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td colspan="2" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td colspan="2" valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom" nowrap="nowrap"> Date of Issue </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">September 30, 2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">December 31, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Exercise Price</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Expiration</td> <td valign="bottom"> </td> </tr>   <tr bgcolor="#cceeff"> <td valign="top"> October 2010 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.50</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">October 2013</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> February 2011 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.50</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">February 2014</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> April 2011 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">250,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">250,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.00</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">April 2014</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> August 2011 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2.00</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">August 2014</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,150,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,150,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr>  </table> As of September 30, 2012, none of the outstanding warrants had been exercised. Stock Incentive Plan On May 3, 2011, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2011 Stock Incentive Plan (“Plan”). The Plan provides for the grant of options to purchase shares of our common stock, and stock awards consisting of shares of our common stock, to eligible participants, including directors, executive officers, employees and consultants of the Company. We have reserved 4,500,000 shares of common stock for issuance under the Plan. In November 2011, our Board approved the grant of stock options for a total of 1,400,000 shares to two Directors and two employees at an exercise price of $2.17 per share. The fair value of the option grant was estimated at the date of the grant using the Black-Scholes option pricing model with the following assumptions: expected volatility of 94.18%, a risk free rate of 2.03%, and an expected life of 10 years. In December 2011, the Board approved the grant of stock options for a total of 1,400,000 shares to two directors and two employees at an exercise price of $0.99 per share. The fair value of the option grant was estimated at the date of the grant using the Black-Scholes option pricing model with the following assumptions: expected volatility of 92.9%, a risk free rate of 1.92%, and an expected life of 10 years. In February 2012, the Board approved the grant of stock options for a total of 40,000 shares to two directors at an exercise price of $0.87 per share. The fair value of the option grant was estimated at the date of the grant using the Black-Scholes option pricing model with the following assumptions: expected volatility of 92.9%, a risk free rate of 2.00%, and an expected life of 10 years. At September 30, 2012, there were 1,660,000 shares of common stock available under the Plan, and there were options to purchase 953,333 shares of stock exercisable, with a remaining contractual term of 9.3 years. The weighted average exercise price of stock options granted and exercisable at September 30, 2012 was $1.57. During the third quarter of 2012, 20,000 options were forfeited. There were no stock options exercised or expired. At September 30, 2012, the aggregate intrinsic value of outstanding stock options was $0. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on September 30, 2012 and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options as of September 30, 2012. This amount changes based on the fair market value of the Company’s stock. At September 30, 2012, the Company had $1.5 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of 1.2 years.

NOTE 6 – NOTE PAYABLE TO BANK Under a series of agreements with National Bank of Canada (the “Bank”), as of September 30, 2012, we had a revolving credit facility with a maximum borrowing base of $3,915,450 (CA$3,850,000) through our wholly-owned subsidiary, Legend Canada. Outstanding principal under the loan bears interest at a rate equal to the Bank’s prime rate of interest (currently 3%) plus 1%. We are obligated to pay a monthly fee of 0.25% of any undrawn portion of the credit facility. The borrowings under the credit facility are payable upon demand at any time. Borrowings under the agreements are collateralized by a Fixed and Floating Charge Demand Debenture (the “Debenture”) to the Bank in the face amount of CA$25 million, to secure payment of all debts and liabilities owed by Legend Canada to the Bank. The interest rate on amounts drawn under the Debenture, as well as interest that is past due, is the prime rate, plus 7% per annum. As further collateral, Legend Canada also executed an Assignment of Book Debts on October 19, 2011, that grants, transfers and assigns to the Bank a continuing and specific security interest in specific collateral of Legend Canada, including all debts, proceeds, accounts, claims, money and chooses in action which currently or in the future are owing to Legend Canada. Under the agreements, we must maintain a working capital ratio, exclusive of bank indebtedness, of at least 1 to 1. For purposes of this calculation, the undrawn availability under the revolving credit facility is added to current assets. At September 30, 2012 the Company was in breach of the working capital covenant provision of its Revolving Operating Demand Loan Facility for which a waiver is being sought. There is no certainty that a waiver will be granted by the Company’s bank for the breach or should the Company be in violation of the covenant in the future. The revolving credit facility is subject to review by the Bank at future dates as determined by the Bank, and the Bank may increase or lower the maximum borrowing base subject to their review. The Company also had a bridge demand loan in place through Legend Canada that was fully drawn on September 30, 2012 for $762,825 (CA$750,000). This bridge facility bears interest at a rate equal to the Bank’s prime rate of interest (currently 3%) plus 2%. On June 5, 2012, the Company entered into an agreement with National Bank to repay this bridge demand loan with 6 monthly payments of CA$250,000 commencing July 15, 2012, with final repayment on December 1, 2012. The Company has made $750,000 in payments as at September 30, 2012. As of September 30, 2012, there was $4,626,449 (CA$4,548,666) in total indebtedness with National Bank outstanding on a combination of the revolving credit facility and bridge facility. Legend Canada also has a CA$20,000 ($20,000USD) letter of guarantee outstanding, related to a company that provides third party processing to the Company.

NOTE 7 – SUBSEQUENT EVENT On October 29, 2012, the Company closed the sale of the Divide County assets in North Dakota for gross proceeds of $436,183. On November 1, 2012, Legend Canada sold a significant portion of its interests in the Swan Hills area of Alberta for gross proceeds of CA$1,000,000, accompanied by a reduction in the revolving bank line of CA$350,000. At December 31, 2011 the discounted future cash flows associated with the Swan Hills interest amounted to approximately $1,725,000. In conjunction with the Swan Hills asset sale, the next scheduled review date of the revolving credit facility was changed from December 1, 2012 to January 1, 2013.

Liquidity We have incurred net operating losses and operating cash flow deficits over the last two years, continuing through the third quarter of 2012. We are in the early stages of acquisition and development of oil and gas leaseholds, and we have been funded primarily by a combination of equity issuances and bank debt, and to a lesser extent by operating cash flows, to execute on our business plan of acquiring working interests in oil and gas properties and for working capital for production. At September 30, 2012, we had cash and cash equivalents totalling approximately $24,000. In October 2011, we established a revolving demand loan with National Bank of Canada through our wholly-owned subsidiary, Legend Canada. The credit facility had a maximum borrowing base of CA$6.0 million. On March 25, 2012, we received notification from the Bank of its decision to reduce and restructure our credit facility, following their interim review in the first quarter of 2012. The Bank advised us that it decided to reduce the maximum borrowing base under the credit facility due to decreases in the market prices of natural gas and the resulting decrease in the value of our reserves securing the credit facility. On March 27, 2012, we entered into an Amending Offering Letter with the Bank to amend the credit facility on the following terms: (a) the revolving demand loan was reduced from CA$6.0 million to CA$4.0 million, which is payable in full at any time upon demand by the Bank; (b) the Bank provided a new CA$1.5 million bridge demand loan, which was payable in full at any time upon demand by the Bank, and in any event no later than May 31, 2012; and (c) we were required to provide an unlimited guarantee of the credit facility for Legend Canada. Outstanding principal under the bridge demand loan bears interest at the Bank’s prime rate of interest plus 2.0% (the Bank’s current prime rate is 3.0%). In connection with the Amending Offering Letter, on March 27, 2012, Legend Canada entered into a CA$1.5 million variable rate demand note to the Bank, and we paid CA$15,000 to the Bank as a non-refundable bridge fee. In May 2012, we entered into an unlimited guarantee of the credit facility in favor of the Bank, and we also entered into a blanket security agreement, granting to the Bank a security interest in all of our personal property assets to secure the guarantee. On June 5, 2012, we entered an Amending agreement that extended the repayment of the bridge demand loan to December 1, 2012, with CA$250,000 monthly payments being made beginning July 15, 2012 and last payment on December 1, 2012. On June 13, 2012, we received notification that as a result of our May 31, 2012 bank review, our revolving credit facility would remain at CA$4.0 million and that our next scheduled review would be December 1, 2012. In October of 2012, we received notification that our next scheduled review would be January 1, 2013.   In August of 2012, Legend Canada sold its oil and gas interests in the Red Earth, Alberta property for CA$750,000 in gross proceeds. The revolving bank line borrowing base was reduced by CA$150,000 as a result of this sale. Subsequent to September 30, and discussed in Note 7, the Company has agreed to multiple asset sales. On October 29, 2012, the Company closed the sale of the Divide County assets in North Dakota for gross proceeds of $436,183. On November 1, 2012, Legend Canada sold a significant portion of its interests in the Swan Hills area of Alberta for gross proceeds of CA$1,000,000, accompanied by a reduction in the revolving bank line of CA$350,000. As of the date of this Report, we have an outstanding balance under the revolving demand loan with the Bank in the amount of approximately $3,229,292 (CA$3,125,000) and approximately $406,840 (CA$400,000) under the bridge demand loan. The Bank may demand repayment of all amounts owed by Legend Canada to it at any time. There is no assurance that any portion of this credit facility will be available to Legend Canada in the future. The March 27, 2012 Amending Offering Letter with the Bank originally required that we complete an equity financing of at least CA$1.5 million on or before May 31, 2012, the proceeds of which were required to be used to pay off the bridge demand loan. In conjunction with June 5, 2012, Amending agreement, the Company agreed to enter into an equity financing, the proceeds of which would be used as required to make the periodic CA$250,000 payments. Subsequently on May 22, 2012, the Company entered into an agreement with Lincoln Park Capital (“Lincoln Park”) to sell up to $10.2 million in common stock during a three year term. This agreement permits the Company to sell stock to Lincoln Park at increments as defined, with timing based on the Company’s discretion. There is a $0.10 per share floor price that would prohibit the Company from any sales below that price. At the date of this Report, the Company has sold and issued 3,527,508 common shares to Lincoln Park, and received $422,000 in proceeds. We believe that the combination of revenue from our on-going operations, proceeds from potential future asset sales, and our equity financing arrangement with Lincoln Park provide us the ability to make our scheduled monthly bridge loan payments. However, in the event we are unable to meet a bridge loan scheduled payment or the repayment of the revolving demand loan at any time upon demand by the Bank, we will be in default of our obligations to the Bank. The Bank has a first priority security interest in all of our assets and can exercise its rights and remedies against us as a secured creditor. Any such default by us or action by the Bank will have a material adverse effect on us and our business. If we are unable to negotiate favorably with the Bank, or if we are unable to secure additional financing, whether from equity, debt, or alternative funding sources, this could have a material adverse effect on us and we may be required to sell some or all of our properties, sell or merge our business, or file a petition for bankruptcy. In addition, International Sovereign Corp. (“Sovereign”) and the holders of our convertible preferred stock have “put” rights to require us to repurchase their shares at a price of $2.00 per share. These put rights became exercisable on April 1, 2012. As of March 30, 2012, we received signed waivers from the holders of our convertible preferred stock of their put rights; however, these waivers are contingent on Sovereign also agreeing to waive its rights. In addition, as of March 31, 2012, Sovereign executed a stand-still agreement agreeing not to exercise its put rights prior to June 15, 2012, and Sovereign has subsequently verbally agreed to extend the stand-still agreement for an unspecified period of time. We currently do not have sufficient cash assets available to repurchase the shares of convertible preferred stock or the shares of common stock issued to Sovereign in the event that the put rights are exercised, in which case we will be in default of our obligations under our purchase agreement with Sovereign and the terms of the convertible preferred stock in our Articles of Incorporation. The exercise of any of these put rights would have a material adverse effect on our business and financial condition. In the event that we are able to resolve our obligations to the Bank and the put rights, we anticipate needing additional financing to fund our drilling and development plans in 2012. As described above, we have entered into an agreement with Lincoln Park to sell up to $10.2 million in common stock. However, the timing for closing on funds is variable and there is no guarantee on the amount of proceeds we will receive. We may seek financing from other sources, which may also include the sale of certain of our oil and gas properties. Our ability to obtain financing or to sell our properties on favorable terms may be impaired by many factors outside of our control, including the capital markets (both generally and in the crude oil and natural gas industry in particular), our limited operating history, the location of our crude oil and natural gas properties and prices of crude oil and natural gas on the commodities markets (which will impact the amount of asset-based financing available to us) and other factors. Further, if crude oil or natural gas prices on the commodities markets decline, our revenues will likely decrease and such decreased revenues may increase our requirements for capital.   Any new debt or equity financing arrangements may not be available to us, or may be available only on unfavorable terms. Additionally, these alternatives could be highly dilutive to our existing shareholders, and may not provide us with sufficient funds to meet our long-term capital requirements. We have and may continue to incur substantial costs in the future in connection with raising capital to fund our business, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, which may adversely impact our financial condition. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), we will be required to reduce operating costs, which could jeopardize our future strategic initiatives and business plans, and we may be required to sell some or all of our properties (which could be on unfavorable terms), seek joint ventures with one or more strategic partners, strategic acquisitions and other strategic alternatives, cease our operations, sell or merge our business, or file a petition for bankruptcy. Our financial statements for the quarter ended September 30, 2012 were prepared assuming we would continue as a going concern, which contemplates that we will continue in operation for the foreseeable future and will be able to realize assets and settle liabilities and commitments in the normal course of business. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that could result should we be unable to continue as a going concern.

Full Cost Method of Accounting for Oil and Gas Properties We have elected to utilize the full cost method of accounting for our oil and gas activities. In accordance with the full cost method of accounting, all costs associated with acquisition, exploration, and development of oil and gas reserves, including directly related overhead costs and related asset retirement costs, are capitalized into a cost center. Our cost centers consist of the Canadian cost center and the United States cost center. All capitalized costs of oil and gas properties within each cost center, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Excluded from this amortization are costs associated with unevaluated properties, including capitalized interest on such costs. Unevaluated property costs are transferred to evaluated property costs at such time as wells are completed on the properties or management determines that these costs have been impaired.   Oil and gas properties without estimated proved reserves are not amortized until proved reserves associated with the properties can be determined or until impairment occurs. The cost of these properties is assessed quarterly, on a field-by-field basis, to determine whether the properties are recorded at the lower of cost or fair market value. Sales of oil and gas properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income.   Full Cost Ceiling Test At the end of each quarterly reporting period, the cost of oil and gas properties in each cost center are subject to a “ceiling test” which basically limits capitalized costs to the sum of the estimated future net revenues from proved reserves, discounted at 10% per annum to present value, based on current economic and operating conditions, at the end of the period, 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 book and tax basis differences of the properties. If the cost of oil and gas properties exceeds the ceiling, the excess is reflected as a non-cash impairment charge to earnings. The impairment charge is permanent and not reversible in future periods, even though higher oil and gas prices in the future may subsequently and significantly increase the ceiling amount. No impairment charges were incurred during the periods ended September 30, 2012 and 2011.

<table cellspacing="0" cellpadding="0" width="92%" border="0" style="border-collapse:collapse; text-align: left" align="center">  <tr> <td width="58%"> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="3%"> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="6" align="center">Shares of Common Stock Issuable from Warrants Outstanding as of</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td colspan="2" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td colspan="2" valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom" nowrap="nowrap"> Date of Issue </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">September 30, 2012</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">December 31, 2011</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Exercise Price</td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" colspan="2" align="center" style="border-bottom:1px solid #000000">Expiration</td> <td valign="bottom"> </td> </tr>   <tr bgcolor="#cceeff"> <td valign="top"> October 2010 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.50</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">October 2013</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> February 2011 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">0.50</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">February 2014</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> April 2011 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">250,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">250,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1.00</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">April 2014</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr> <td valign="top"> August 2011 </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,300,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2.00</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">August 2014</td> <td nowrap="nowrap" valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr bgcolor="#cceeff"> <td valign="top"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,150,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4,150,000</td> <td nowrap="nowrap" valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr> <tr style="font-size:1px"> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom">   </td> <td valign="bottom">   </td> <td> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> </tr>  </table>

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