10-K 1 logl-10k_123114.htm ANNUAL REPORT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 000-49752


LEGEND OIL AND GAS, LTD.
(Exact name of registrant as specified in its charter)

555 North Point Center East, Suite 410,

Alpharetta, Georgia, 30022

(Address of principal executive offices)

(678) 366-4587

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value per share

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by checkmark 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 ☒ No ☐

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, 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 ☒ No ☐

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 company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☐		Accelerated filer	☐

Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting common stock held by non-affiliates of the Company as of December 31, 2014, was approximately $193,000 based upon 96,299,769 shares held by such persons and the closing price of $0.002 per share on that date. Shares of common stock held by each officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded because these people may be deemed to be affiliates. The determination of affiliate status is not necessarily a conclusive determination of any other purpose.

The registrant does not have any non-voting common stock outstanding.

As of March 31, 2015, the Company had 187,583,273 shares of common stock issued and outstanding and 600 shares of preferred stock issued and outstanding.

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

None.

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K (“Report”) and the documents incorporated herein by reference contain forward-looking statements. Specifically, all statements other than statements of historical facts included in this Report regarding our financial position, business strategy and plans and objectives of management for future operations are forward-looking statements. These forward-looking statements are based on the beliefs of management, as well as assumptions made by and information currently available to management. When used in this Report, the words “anticipate,” “believe,” “estimate,” “expect,” “may,” “will,” “plan,” “assume,” “anticipate,” “continue” and “intend,” and words or phrases of similar import, as they relate to our financial position, business strategy and plans, or objectives of management, are intended to identify forward-looking statements.

These statements reflect our current view with respect to future events and are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from those expressed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We have no duty to update or revise any forward-looking statements after the date of this Report and any documents incorporated herein by reference or to conform them to actual results, new information, future events or otherwise.

Various risk factors, including the risks outlined under the section herein entitled “ITEM 1A – RISK FACTORS” and the matters described in this Report generally, are important factors of which we are currently aware that could cause actual results, performance or achievements to differ materially from those expressed in any of the forward looking statements. We operate in a continually changing business environment and new risk factors emerge from time to time. Other unknown or unpredictable factors could have material adverse effects on our future results, performance or achievements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report may not occur.

Readers are urged to carefully review and consider the various disclosures made by us in this Report and in our other reports previously filed with the Securities and Exchange Commission, including our periodic reports on Forms 10-Q and 8-K, and those described from time to time in our press releases and other communications, which attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations.

CURRENCY

Unless otherwise indicated, references herein to “$” or “dollars” are to United States dollars. All references in this Report to “CA$” are to Canadian dollars. All of our financial information has been presented in United States dollars in accordance with U.S. generally accepted accounting principles.

OIL AND GAS VOLUMES

Unless otherwise indicated in this Report, natural gas volumes are stated at the legal pressure base of the state or geographic area in which the reserves are located at 60 degrees Fahrenheit. Crude oil and natural gas equivalents are determined using the ratio of six Mcf of natural gas to one barrel of crude oil, condensate or natural gas liquids.

GLOSSARY OF INDUSTRY TERMS

Terms used to describe quantities of crude oil and natural gas:

“Bbl” – barrel or barrels.

“BOE” – barrels of crude oil equivalent.

“Boepd” – barrels of crude oil equivalent per day.

“MBbl” – thousand barrels.

“MBoe” – thousand barrels of crude oil equivalent.

“Mcf” – thousand cubic feet of gas.

“MMcf” – million cubic feet of gas.

Terms used to describe our interests in wells and acreage:

“developed acreage” means acreage consisting of leased acres spaced or assignable to productive wells. Acreage included in spacing units of infill wells is classified as developed acreage at the time production commences from the initial well in the spacing unit. As such, the addition of an infill well does not have any impact on a company’s amount of developed acreage.

“development well” is a well drilled within the proved area of a crude oil or natural gas reservoir to the depth of stratigraphic horizon (rock layer or formation) known to be productive for the purpose of extracting proved crude oil or natural gas reserves.

“dry hole” is an exploratory or development well found to be incapable of producing either crude oil or natural gas in sufficient quantities to justify completion as a crude oil or natural gas well.

“exploratory well” is a well drilled to find and produce crude oil or natural gas in an unproved area, to find a new reservoir in a field previously found to be producing crude oil or natural gas in another reservoir, or to extend a known reservoir.

“gross acres” refer to the number of acres in which we own a gross working interest.

“gross well” is a well in which we own a working interest.

“Infill well” is a subsequent well drilled in an established spacing unit to the addition of an already established productive well in the spacing unit. Acreage on which infill wells are drilled is considered developed commencing with the initial productive well established in the spacing unit. As such, the addition of an infill well does not have any impact on a company’s amount of developed acreage.

“net acres” represent our percentage ownership of gross acreage. Net acres are deemed to exist when the sum of fractional ownership working interests in gross acres equals one (e.g., a 10% working interest in a lease covering 640 gross acres is equivalent to 64 net acres).

“net well” is deemed to exist when the sum of fractional ownership working interests in gross wells equals one.

“productive well” is an exploratory or a development well that is not a dry hole.

“undeveloped acreage” means those leased acres on which wells have not been drilled or completed to a point that would permit the production of economic quantities of crude oil and natural gas, regardless of whether or not such acreage contains proved reserves. Undeveloped acreage includes net acres under the bit until a productive well is established in the spacing unit.

“working interest” – refers to the gross operating interest including royalties, in a particular lease or well.

Terms used to assign a present value to or to classify our reserves:

“proved reserves” or “reserves” – Proved crude oil and natural gas reserves are those quantities of crude oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

“proved developed reserves (PDP’s)” – Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional crude oil and natural gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery are included in “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.

“proved developed non-producing reserves (PDNP’s)” – Proved crude oil and natural gas reserves that are developed behind pipe, shut-in or that can be recovered through improved recovery only after the necessary equipment has been installed, or when the costs to do so are relatively minor. Shut-in reserves are expected to be recovered from (1) completion intervals which are open at the time of the estimate but which have not started producing, (2) wells that were shut-in for market conditions or pipeline connections, or (3) wells not capable of production for mechanical reasons. Behind-pipe reserves are expected to be recovered from zones in existing wells that will require additional completion work or future recompletion prior to the start of production.

“proved undeveloped reserves (PUDs)” – Proved crude oil and natural gas reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for development. Reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units are claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Estimates for proved undeveloped reserves are not attributed to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proven effective by actual tests in the area and in the same reservoir.

“probable reserves” – are those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than proved reserves but which together with proved reserves, are as likely as not to be recovered.

“possible reserves” – are those additional reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than probable reserves.

“Standardized Measure” – means estimated future net revenue, discounted at a rate of 10% per annum, after income taxes and with no price or cost escalation, calculated in accordance with Accounting Standards Codification 932, formerly Statement of Financial Accounting Standards No. 69 “Disclosures About Oil and Gas Producing Activities.”

LEGEND OIL AND GAS, LTD.

Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2014

Table of Contents


		Page
Cautionary Notice Regarding Forward-Looking Statements		1

Currency		1

Oil and Gas Volumes		1

Glossary of Industry Terms		2

PART I

Item 1.	Business	6

Item 1A.	Risk Factors	16

Item 1B.	Unresolved Staff Comments	24

Item 2.	Oil and Gas Properties	24

Item 3.	Legal Proceedings	30

Item 4.	Mine Safety Disclosures	30

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31

Item 6.	Selected Financial Data	32

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	32

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42

Item 8.	Financial Statements and Supplementary Data	43

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	81

Item 9A.	Controls and Procedures	81

Item 9B.	Other Information	82

PART III

Item 10.	Directors, Executives Officers and Corporate Governance	83

Item 11.	Executive Compensation	85

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	88

Item 13.	Certain Relationships and Related Transactions, and Director Independence	89

Item 14.	Principal Accountant Fees and Services	90

PART IV

Item 15.	Exhibits and Financial Statements	92

PART I

ITEM 1.

BUSINESS

Overview

We are an oil and gas exploration, development and production company. Our oil and gas property interests are located in the United States (State of Kansas and Oklahoma). Our business focus is to acquire producing and non-producing oil and gas interests and develop oil and gas properties that we own or in which we have a leasehold interest. We also anticipate pursuing the acquisition of leaseholds and sites within other geographic areas that meet our general investment guidelines and targets. The majority of our operational duties are outsourced to consultants and independent contractors, including for drilling, maintaining and operating our wells, and we maintain a limited in-house employee base.

We are a publicly traded company and our shares of common stock (“Common Shares”) are quoted for trading on the Over-the-Counter Bulletin Board (“OTCBB”). We were incorporated under the laws of the State of Colorado on November 27, 2000 under the name “SIN Holdings, Inc.” On November 29, 2010, we changed our name to Legend Oil and Gas, Ltd. Our only subsidiary is Legend Energy Canada, Ltd. (“Legend Canada”), which was formed in Alberta, Canada on July 28, 2011. Legend Canada was formed to acquire, own and manage certain oil and gas properties and assets located in Canada held by Wi2Wi, Inc., formerly known as, International Sovereign Energy Corp. (the “Wi2Wi Assets”). Legend Canada completed the acquisition of the Wi2Wi Assets on October 20, 2011. Neither we nor Legend Canada are reporting issuers in any province of Canada.

Our principal offices are located at 555 North Point Center East, Suite 410, Alpharetta, Georgia, 30022, USA, and our registered office is located at 555 North Point Center East, Suite 410, Alpharetta, Georgia, 30022.

Background

From our inception until June 2010, we pursued our original business plan of developing a web portal listing senior resources across the United States through our then wholly-owned subsidiary, Senior-Inet, Inc. On May 18, 2010, Desert Bloom Investments, Inc., a company wholly-owned by Mr. Steve Sinohui, divested its majority interest in us, which consisted of 6,000,000 Common Shares, representing 82.4% of our issued and outstanding Common Shares, and 100,000 shares of our preferred stock, $0.001 par value per share (“Preferred Shares”), representing 100% of our issued and outstanding Preferred Shares. This transfer of ownership was accomplished by a private transaction between Desert Bloom Investments, Inc. and Mr. James Vandeberg, whereby Mr. Vandeberg acquired a total of 5,849,000 Common Shares from Desert Bloom Investments, of which he voluntarily surrendered and cancelled 4,250,000 Common Shares. The 151,000 remaining Common Shares originally owned by Desert Bloom Investments were granted to another party. The 100,000 Preferred Shares relinquished by Desert Bloom Investments were also surrendered and cancelled. Prior to this change of control, our Board of Directors and our majority shareholder, Desert Bloom Investments, Inc., approved the transaction by written consent. An information statement was sent to all of our shareholders of record informing them of the change of control.

Prior to the change of control, Mr. Sinohui served as our sole executive officer and director. Immediately after the change of control, Mr. Vandeberg became our sole executive officer and director. In September 2010, Mr. Marshall Diamond-Goldberg was appointed as our President and was also appointed to our Board to serve as a director. Mr. Vandeberg became our Vice President and remained our Chief Financial Officer, Secretary and a director. With the change of control, our Board of Directors decided to explore new business opportunities that it believed would be more beneficial to our shareholders than the Senior-Inet web portal business plan. Accordingly, we dissolved Senior-Inet, Inc., our former subsidiary, on July 29, 2010.

On September 1, 2010, we entered into a Consulting Services Agreement with Marlin Consulting Corp., a company wholly-owned by Marshall Diamond-Goldberg. Pursuant to this Consulting Agreement, Mr. Diamond-Goldberg serves as our President. Under the Consulting Agreement, we were obligated to issue 20% of our outstanding Common Shares to Marlin Consulting. On October 1, 2010, in lieu of us issuing equity and causing dilution to our shareholders, and in order to attract investment capital to fund our new business plan, Mr. Vandeberg transferred 605,600 Common Shares held by him to Marlin Consulting Corp., representing 20% of the then-outstanding shares. Mr. Vandeberg also gifted a total of 397,800 Common Shares to two other persons. As a result of these transactions, Mr. Vandeberg’s ownership decreased to 595,600 Common Shares, an approximate 19.7% interest.

Also to accommodate additional investment capital to fund our new business plan, and in furtherance of our change in business, on October 4, 2010, the Board of Directors approved a 20:1 stock split for each Common Share outstanding on October 5, 2010, and an amendment to our Articles of Incorporation to change our name from “SIN Holdings, Inc.” to “Legend Oil and Gas, Ltd.” These actions were approved by written consent of shareholders owning a majority of our issued and outstanding Common Shares.

Effective November 29, 2010, our name was changed to Legend Oil and Gas, Ltd. and we completed the 20:1 stock split, which resulted in a total of 60,560,000 Common Shares issued and outstanding. Our post-split authorized Common Shares remained at 400,000,000 Common Shares with a par value of $0.001 per share. All per share information presented in this Report is reflective of the forward stock split (except for the foregoing paragraphs). Additionally our post-split authorized Preferred Shares remained at 100,000,000 shares, par value $0.001 per share.

Purchase of Canadian Assets in 2011

On October 20, 2011, our wholly-owned subsidiary, Legend Canada completed the acquisition of petroleum and natural gas leases, lands and facilities held by Wi2Wi, located in Canada.

The assets acquired consisted of substantially all of Wi2Wi’s assets, including interests in producing oil and gas leasehold properties in Western Canada that have been maintained through the drilling of internally generated low to medium risk exploration and development sites. The principal natural gas leasehold properties were located in Medicine River and Berwyn in Alberta, and Clarke Lake in British Columbia. The assets also included an interest in various light oil properties located in Red Earth and Swan Hills in Alberta, and in Inga in British Columbia. Schedule 1 of the Asset Purchase Agreement contains a detailed description of the Wi2Wi Assets sold to Legend Canada. In summary, the Wi2Wi Assets consist of the Petroleum and Natural Gas Rights, the Tangibles and Miscellaneous Interests, excluding the Excluded Assets, as those terms are defined in the Asset Purchase Agreement.

The purchase of the Wi2Wi Assets was pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) that we entered into on September 13, 2011, with Legend Canada and Wi2Wi. The Asset Purchase Agreement set a base purchase price of CA$9,500,000 (US $13.2 million) in cash and 3,750,000 Common Shares. The sale of the Wi2Wi Assets was approved by Wi2Wi’s shareholders and the Toronto Stock Exchange. The Asset Purchase Agreement has an effective date of July 1, 2011 for purposes of adjustments. A copy of the Asset Purchase Agreement is attached as Exhibit 10.1 to our current report on Form 8-K dated September 12, 2011, filed with the SEC on September 16, 2011, and is incorporated herein by reference.

The net purchase price for the Wi2Wi Assets paid at closing was CA$8,905,031 (US $12.4 million) in cash and 3,552,516 Common Shares. At closing, the purchase price was adjusted, on a pro-rata basis, for each Boepd (barrel of crude oil equivalent per day) that Wi2Wi’s monthly average Boepd production during the month of August 2011 was below the threshold production level of 300 Boepd, as provided in further detail in Article 4 of the Asset Purchase Agreement. This resulted in a downward adjustment to the purchase price at closing, reducing the cash portion to CA$9,105,031 (US $12.7 million) and reducing the number of Common Shares to 3,552,516 shares. Also at closing, Wi2Wi made a working capital adjustment payment in the amount of CA$200,000 (US $278,500) to Legend Canada in accordance with the Asset Purchase Agreement, which reduced the net cash portion of the purchase price to CA$8,905,031 (US $12.4 million).

On October 20, 2011, Legend Canada borrowed CA$5.2 million (US $7.2 million) through its CA$6.0 million (US $8.35 million) revolving credit facility with National Bank of Canada to pay a portion of the purchase price. The remainder of the cash portion of the purchase price in the amount of CA$3,754,390 (US $5.2 million) was paid using our cash on hand.

An additional working capital adjustment in the amount of approximately CA$220,000 (US $306,000) was made within 45 days after the closing date. This working capital adjustment payment was based on the schedule of revenues generated and expenses incurred by Wi2Wi from production operations during the period from July 1, 2011, through the closing date.

Pursuant to the Asset Purchase Agreement, we filed a registration statement with the SEC for the resale of the Common Shares we issued to Wi2Wi on the closing date. The registration statement was declared effective by the SEC on March 15, 2012. We also agreed to use our reasonable best efforts to maintain the effectiveness of the registration statement until the earlier of (i) the date on which all of shares have been sold by Wi2Wi and (ii) November 23, 2012 (the date that is 12 months after the date that we filed our current report on Form 8-K with the SEC containing Form 10 information).

Under the Asset Purchase Agreement, we were required to issue additional Common Shares to Wi2Wi if the volume weighted average trading price (VWAP) of our Common Shares falls below threshold amounts during certain specified 10-day periods upon the registration statement being declared effective, as provided in further detail in Article 4 of the Asset Purchase Agreement, and as described below:


	(i)	The first VWAP period was 10 days consisting of the five trading days prior to and the five trading days following the effectiveness of the registration statement. During this first VWAP period (March 8 through March 21, 2012), the volume weighted average trading price of our Common Shares was $0.8992.

	(ii)	The second VWAP period was 10 days immediately following the end of the first VWAP period (March 22 through April 4, 2012).

	(iii)	The third VWAP period was 10 days immediately following the end of the second VWAP period (April 5 through April 18, 2012). If the volume weighted average trading price of our Common Shares was less than the VWAP for either the first VWAP period or the second VWAP period, we would be required to issue additional Common Shares to Wi2Wi. We may be subject to two additional VWAP periods if the VWAP for our Common Shares is less than $1.00 per share during the 10 days following the expiration of the third VWAP period.

Under the purchase agreement, Wi2Wi 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 calculations outlined above, Wi2Wi waived the 10% ownership limitation and we issued 21,350,247 shares of restricted common stock to Wi2Wi.

Under the Asset Purchase Agreement, we also granted to Wi2Wi a “put” option to require us to redeem the Common Shares if we fail to obtain listing for our Common Shares on the NYSE, Amex, NASDAQ, or any other stock market more senior than the OTCBB on or before March 31, 2012. The redemption price is $2.00 per share payable in cash. This put option existed on the original 3,552,516 common shares, of which Wi2Wi has disposed of 1,020,300, as well as the 21,350,247 shares of common stock issued to Wi2Wi on May 17, 2012. This put was terminated on May 1, 2013.

During the quarter ended September 30, 2014, we placed our wholly owned subsidiary, Legend Canada, into the Canadian bankruptcy system. The bankruptcy estate of Legend Canada owned oil and gas properties in Western Canada (Berwyn, Medicine River, Boundary Lake, and Wildmere in Alberta, and Clarke Lake and Inga in British Columbia). Legend Canada was placed under the control of KPMG Inc., as Trustee, in the bankruptcy proceedings. We have written off all assets and liabilities of Legend Canada, resulting in income from discontinued operations at the parent level of Legend Oil and Gas, Ltd. as it no longer controls, nor has responsibility for any operations or asset dispositions of Legend Canada.

Oil and Gas Properties

We have interests in oil and gas properties located in the United States (States of Kansas and Oklahoma). Under the Asset Purchase Agreement discussed above, Legend Canada acquired a widespread and diverse property base within Western Canada from Wi2Wi. Some of the principal natural gas properties include Berwyn and Medicine River in Alberta, and Clarke Lake in British Columbia. Legend Canada also has an interest in a light oil property at Inga in British Columbia. In the United States, we have property interests in Piqua, Kansas.

On November 12, 2013, the Company entered into an Agreement for Purchase and Sale with Black Oak Oil and Gas, LLC, to purchase certain oil and gas producing assets held by Black Oak for $250,000 and 100,000 shares of restricted common stock of the Company. The oil and gas assets are located in McCune, Kansas and consist of (i) Black Oil’s petroleum and natural gas rights, (ii) land and land leases totaling approximately 1,097 acres, and (iii) various vehicles and equipment used on the land.

We will continue to focus on acquiring producing and non-producing oil and gas right interests and developing oil and gas properties that we own or in which we have a leasehold interest. We also anticipate pursuing the acquisition of leaseholds and sites within other geographic areas that meet our general investment guidelines and targets.

Subsequent to December 31, 2014, we sold two properties in Kansas, leaving one remaining oil and gas property in Kansas (Landers/Volunteer lease) and one oil and gas property in Oklahoma (Van Pelt lease).

Reserves

In March 2015, we obtained a report from an independent licensed petroleum engineering firm, KLH Consulting located in Wichita, Kansas (“KLH”), on the reserves and value of our Piqua, Kansas, leasehold properties as of December 31, 2014. These Piqua properties have been producing oil since our acquisition of the leasehold interests in October 2010. A copy of the KLH reserve report is attached as Exhibit 99.1 and is incorporated by reference.

Operations

We have structured our operations in such a way as to mitigate operating expenses by maintaining a limited in-house employee base outside of our executive team. The majority of our operational duties have been, and are planned to be, outsourced to consultants and independent contractors, including drilling, maintaining and operating our wells.

Andrew S. Reckles is the Chairman and Chief Executive Officer (CEO), Warren S. Binderman is Executive Vice President, Chief Financial Officer and Principal Accounting Officer, and Marshall Diamond-Goldberg is the President and Chief Operating Officer of the Company.

Production

For all of Legend’s oil and gas properties, we have a majority or operational working interest. We review the lands technically and propose the drilling of new exploratory or development wells as we see fit. These wells are internally approved by us for producing an Authority for Expenditures (AFE) as an estimate of full drilling, completion, and equipping costs for the particular drilling program. If we have working interest partners in these properties, the AFE for the work to be performed would be circulated for approval and a “cash call” would be issued to the approving parties. We have no working interest parties on any of our oil and gas properties.

Markets for Oil and Gas

We utilize third-party marketers to sell our oil and gas production in the open market. As of the date of this Report, approximately 100% of our U.S. production is sold through third party marketers through a contractual relationship between Legend and the marketer. These contracts are generally evergreen contracts with termination rights by written notice of 30 days, which we believe to be standard to the industry.

The market for crude oil and natural gas that we will produce depends on factors beyond our control, including the extent of domestic production and imports of crude oil and natural gas, the proximity and capacity of natural gas pipelines and other transportation facilities, demand for crude oil and natural gas, the marketing of competitive fuels and the effects of state and federal regulation. The crude oil and natural gas industry also competes with other industries in supplying the energy and fuel requirements of industrial, commercial and individual consumers.

Our crude oil production is expected to be sold at prices tied to the spot crude oil markets. Our natural gas production is expected to be sold under short-term contracts and priced based on first of the month index prices or on daily spot market prices. We rely on our operating partners to market and sell our production. Our operating partners involve a variety of exploration and production companies, from large publicly-traded companies to small, privately-owned companies. We do not believe the loss of any single operator would have a material adverse effect on our company as a whole.

Historically, the prices received for oil and natural gas have fluctuated widely. Among the factors that can cause these fluctuations are:


	●	changes in global supply and demand for oil and natural gas;

	●	the actions of the Organization of Petroleum Exporting Countries, or OPEC;

	●	the price and quantity of imports of foreign oil and natural gas;

	●	acts of war or terrorism;

	●	political conditions and events, including embargoes, affecting oil-producing activity;

	●	the level of global oil and natural gas exploration and production activity;


	●	the level of global oil and natural gas inventories;

	●	weather conditions;

	●	technological advances affecting energy consumption; and

	●	the price and availability of alternative fuels.

We have not entered into any derivative contracts; however, in the future we may enter into derivative contracts from time to time. These contracts are intended to hedge economic exposure to decreases in the prices of oil and natural gas. Hedging arrangements may expose us to risk of significant financial loss in some circumstances including circumstances where:


	●	our production or sales of natural gas are less than expected;

	●	payments owed under derivative hedging contracts come due prior to receipt of the hedged month’s production revenue; or

	●	the counter party to the hedging contract defaults on its contract obligations.

In addition, hedging arrangements may limit the benefit we would receive from increases in the prices for oil and natural gas. We cannot assure you that any hedging transactions we may enter into will adequately protect us from declines in the prices of oil and natural gas. On the other hand, where we choose not to engage in hedging transactions in the future, we may be more adversely affected by changes in oil and natural gas prices than our competitors who engage in hedging transactions.

Seasonality

Generally, but not always, the demand and price levels for natural gas increase during colder winter months and decrease during warmer summer months. To lessen seasonal demand fluctuations, pipelines, utilities, local distribution companies, and industrial users utilize natural gas storage facilities and forward purchase some of their anticipated winter requirements during the summer. However, increased summertime demand for electricity has placed increased demand on storage volumes. Demand for crude oil and heating oil is also generally higher in the winter and the summer driving season — although oil prices are much more driven by global supply and demand. Seasonal anomalies, such as mild winters, sometimes lessen these fluctuations. The impact of seasonality on crude oil has been somewhat magnified by overall supply and demand economics attributable to the narrow margin of production capacity in excess of existing worldwide demand for crude oil.

Competition

Competition in the oil and natural gas industry is intense and most of our competitors have greater financial, technological and other resources than we have. We operate in the highly competitive areas of oil and natural gas exploitation, exploration, development and production. The oil and natural gas industry is characterized by rapid and significant technological advancements and introductions of new products and services using new technologies. We face intense competition from independent, technology-driven companies as well as from both major and independent oil and natural gas companies in each of the following areas:


	●	seeking to acquire desirable producing properties of new leases for future exploration;

	●	marketing our oil and natural gas production;


	●	integrating new technologies; and

	●	seeking to acquire the equipment and expertise necessary to develop and operate our properties.

Some of our competitors are fully integrated oil companies and may be able to pay more for development, prospects and productive oil and natural gas properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. Further, our competitors may enjoy technological advantages and may be able to implement new technologies more rapidly than we can. Our ability to acquire, develop and exploit oil and natural gas properties will depend on our and our operators’ ability to successfully conduct operations, implement advanced technologies, evaluate and select suitable properties and consummate transactions in this highly competitive environment.

If we prove unable to secure additional capital sufficient to fund current exploration, and possible future production capacity, we will be at a competitive disadvantage in the marketplace, which would have a material adverse effect on our operations and potential profitability. We believe that the acquisition of the Wi2Wi Assets will assist in our efforts to compete in the oil and gas market place, but does not ensure that our endeavors to compete will be successful.

Governmental Regulation

Our oil and gas exploration and future production operations are subject to various federal, state, provincial and local laws and regulations governing prospecting, exploration, development, production, labor standards, occupational health and safety, control of toxic substances and emissions into the environment, storage and disposition of hazardous wastes and other matters involving environmental protection and employment. Environmental protection laws in the United States and Canada address the maintenance of air and water quality standards, the preservation of threatened and endangered species of wildlife and vegetation, the preservation of certain archaeological sites, reclamation, and limitations on the generation, transportation, storage, and disposal of solid and hazardous wastes, among other things. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuation of a given operation. There can be no assurance that all the required permits and governmental approvals necessary for any oil and gas exploration project with which we may be associated can be obtained on a timely basis, or maintained. Delays in obtaining or failure to obtain government permits and approvals may adversely impact our operations. The regulatory environment in which we operate could change in ways that would substantially increase costs to achieve compliance. In addition, significant changes in regulation could have a material adverse effect on our operations or financial position.

We do not believe that our environmental risks are or will be materially different from those of comparable companies in our industry. We believe our present activities substantially comply, in all material respects, with existing environmental, health and safety laws and regulations. However, our relative size compared to our competitors may make the impact of any environmental risk more significant to us than it would to our competitors. Compliance with environmental laws and our exposure to environmental risks could adversely affect our financial condition and results of operations, including by curtailment of production or material increases in the cost of production, development or exploration or otherwise.

In addition, because we have acquired and may acquire interests in properties that have been operated in the past by others, we may be liable for environmental damage, including historical contamination, caused by such former operators. Additional liabilities could also arise from continuing violations or contamination not discovered during our assessment of the acquired properties.

Regulation of Production

The production of oil and natural gas is subject to regulation under a wide range of federal, state, provincial and local statutes, rules, orders and regulations. Federal, state, provincial and local statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. Such regulations govern conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum allowable rates of production from oil and natural gas wells, the regulation of well spacing, and plugging and abandonment of wells. The effect of these regulations is to limit the amount of oil and natural gas that we can produce from our wells and to limit the number of wells or the locations at which we can drill, although we can apply for exceptions to such regulations or to have reductions in well spacing. Moreover, we may be subject to state, provincial or local production or severance taxes with respect to the production and sale of oil, natural gas and natural gas liquids within its jurisdiction.

The failure to comply with these laws and regulations can result in substantial penalties. Our competitors in the oil and natural gas industry are subject to the same regulatory requirements and restrictions that affect our operations.

Environmental, Health and Safety Regulation

There are numerous federal, state, provincial and local laws and regulations in the states and provinces in which we operate governing environmental protection, health and safety, including the discharge of materials into the environment. These laws and regulations generally relate to requirements to remediate spills of deleterious substances associated with oil and gas activities, the conduct of salt water disposal operations, and the methods of plugging and abandonment of oil and gas wells which have been unproductive, as well as to air and water quality.

These laws and regulations may, among other things:


	•	require the acquisition of various permits before drilling commences;

	•	restrict the types, quantities and concentration of various substances that can be released into the environment in connection with oil and natural gas drilling, production and transportation activities;

	•	limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas; and

	•	require remedial measures to mitigate pollution from former and ongoing operations, such as requirements to close pits and plug abandoned wells.

These laws and regulations may also restrict the rate of oil and natural gas production below the rate that would otherwise be possible. This regulatory burden increases the cost of doing business in our industry and consequently affects profitability.

Laws and Regulations in the United States

The following is a summary of some of the material existing environmental, health and safety laws and regulations in the United States to which our business operations are subject.

Waste handling. The Resource Conservation and Recovery Act, or “RCRA”, and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the federal Environmental Protection Agency, or “EPA”, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced waters and most of the other wastes associated with the exploration, development and production of crude oil or natural gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain oil and natural gas exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change could result in an increase in our costs to manage and dispose of wastes, which could have a material adverse effect on our results of operations and financial position.

Comprehensive Environmental Response, Compensation and Liability Act. The Comprehensive Environmental Response, Compensation and Liability Act, or “CERCLA”, also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, in connection with the release of a hazardous substance into the environment. Persons potentially liable under CERCLA include the current or former owner or operator of the site where the release occurred and anyone who disposed or arranged for the disposal of a hazardous substance to the site where the release occurred. Under CERCLA, such persons may be subject to joint and several liabilities for the costs of cleaning up the hazardous substances that have been released into the environment, damages to natural resources and the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.

We lease and operate numerous properties that have been used for oil and natural gas exploration and production for many years. Hazardous substances may have previously been released on, at or under the properties owned, leased or operated by us, or on, at or under other locations, including off-site locations, where such substances have been taken for disposal. In addition, some of our properties have been or are operated by third parties or by previous owners or operators whose handling, treatment and disposal of hazardous substances were not under our control. These properties and the substances disposed or released on, at or under them may be subject to CERCLA, RCRA and analogous state laws. In certain circumstances, we could be responsible for the removal of previously disposed substances and wastes, to remediate contaminated property or to perform remedial plugging or pit closure operations to prevent future contamination. In addition, federal and state trustees can also seek substantial compensation for damages to natural resources resulting from spills or releases.

Water Discharges. The Federal Water Pollution Control Act, or the “Clean Water Act”, and analogous state laws, impose restrictions and strict controls with respect to the discharge of pollutants, including oil and other substances generated by our operations, into waters of the United States or state waters. Under these laws, the discharge of pollutants into regulated waters is prohibited except in accordance with the terms of a permit issued by EPA or an analogous state agency. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations.

The Safe Drinking Water Act, or “SDWA”, and analogous state laws impose requirements relating to underground injection activities. Under these laws, the EPA and state environmental agencies have adopted regulations relating to permitting, testing, monitoring, record keeping and reporting of injection well activities, as well as prohibitions against the migration of injected fluids into underground sources of drinking water.

Air Emission. The Federal Clean Air Act and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. In addition, EPA and certain states have developed and continue to develop stringent regulations governing emissions of toxic air pollutants at specified sources. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the Federal Clean Air Act and analogous state laws and regulations.

The Kyoto Protocol to the United Nations Framework Convention on Climate Change became effective in February 2005. 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, and Congress has not acted upon recent proposed legislation directed at reducing greenhouse gas emissions. However, 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 oil and natural gas industry is a direct source of certain greenhouse gas emissions, namely carbon dioxide and methane, and future restrictions on such emissions could impact our future operations.

Health Safety and Disclosure Regulation. We are subject to the requirements of the federal Occupational Safety and Health Act, or “OSHA” and comparable state statutes. The OSHA hazard communication standard, the Emergency Planning and Community Right to Know Act and similar state statutes require that we organize and disclose information about hazardous materials stored, used or produced in our operations.

Other Laws and Regulations. Various laws and regulations often require permits for drilling wells and also cover spacing of wells, the prevention of waste of natural gas and oil including maintenance of certain gas/oil ratios, rates of production and other matters. The effect of these laws and regulations, as well as other regulations that could be promulgated by the jurisdictions in which we have production, could be to limit the number of wells that could be drilled on our properties and to limit the allowable production from the successful wells completed on our properties, thereby limiting our revenues.

Canadian Laws and Regulations

Applicable Canadian federal and provincial environmental laws require that well and facility sites be abandoned and reclaimed, to the satisfaction of provincial authorities, in order to remediate these sites to near natural conditions. Also, environmental laws may impose upon “persons responsible” remediation obligations on contaminated sites. Persons responsible include persons responsible for the substance causing the contamination, persons who caused the release of the substance and any present or past owner, tenant or other person in possession of the site. Compliance with such legislation can require significant expenditures. A breach of environmental laws may result in the imposition of fines and penalties and suspension of production, in addition to the costs of abandonment and reclamation.

In December 2002, the Canadian government ratified the Kyoto Protocol. The Kyoto Protocol calls for Canada to reduce its emissions of greenhouse gases to 6% below 1990 “business as usual” levels between 2008 and 2012. It remains uncertain whether the Kyoto target of 6% below the 1990 emission levels will be enforced in Canada. On April 26, 2007, the Canadian government released “Turning the Corner: An Action Plan to Reduce Greenhouse Gases and Air Pollution”, which set forth a plan for regulations to address both greenhouse gases and air pollution. On March 10, 2008, the Canadian government released an update to this action plan, “Turning the Corner: Regulatory Framework for Industrial Greenhouse Gas Emissions”. Regulations for the implementation of the updated action plan were originally intended to be in force by January 1, 2010. However, Canada recently stated its intent to withdraw from the Kyoto Protocol. To date, no such regulations have been proposed.

Environmental legislation in the Province of Alberta involving oil and natural gas operations has been consolidated into the Environmental Protection and Enhancement Act (Alberta), the Water Act (Alberta) and the Oil and Gas Conservation Act (Alberta). These statutes impose environmental standards, require compliance, reporting and monitoring obligations and impose penalties. In addition, greenhouse gas emission reduction requirements are set out in the Climate Change and Emissions Management Act (Alberta) and came into effect on July 1, 2007. Under this legislation, Alberta facilities emitting more than 100,000 tons of greenhouse gases a year must reduce their emissions intensity by 12% from their respective baseline emissions. Companies have four options to choose from in order to meet the reduction requirements outlined in this legislation, including: (i) making improvements to operations that result in reductions; (ii) purchasing emission credits from other sectors or facilities that have reduced their emissions below the required emission intensity reduction levels; (iii) purchasing off-set credits from other sectors or facilities that have emissions below the 100,000 ton threshold and are voluntarily reducing their emissions in Alberta; or (iv) contributing to the Climate Change and Emissions Management Fund. Companies can choose one of these options or a combination thereof to meet their Alberta emissions reduction requirements.

Employees

As of December 31, 2014, we had no full-time employees. We have a management team that includes three executive officers who handle all day-to-day management responsibilities for Legend. We retain engineers, landmen, pumpers, and other personnel on a contractor fee basis as necessary for our field operations.

Principal Offices

Our principal offices are located at 555 North Point Center East, Suite 410, Alpharetta, Georgia 30022. Our lease is on a month-to-month basis of approximately $1,500 per month We anticipate using our current space until it is no longer suitable for our operations or circumstances demand otherwise.

ITEM 1A.

RISK FACTORS.

You should carefully consider the risks described below together with all of the other information included in this Report. Many of the statements contained in or incorporated herein that are not historic facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose a portion or all of your investment.

Risks Relating to Our Business

We are highly dependent on Andrew S. Reckles, CEO, Warren S. Binderman, CFO, and Marshall Diamond-Goldberg, our Chief Operating Officer. The loss of either of them, upon whose knowledge, leadership and technical expertise we rely, could harm our ability to execute our business plan.

Our success depends heavily upon the continued contributions of Mssrs. Reckles, Binderman and Diamond-Goldberg, whose knowledge, leadership and technical expertise would be difficult to replace, and on our ability to retain and attract experienced engineers, geoscientists and other technical and professional contract staff. If we were to lose the services of either the above executives and Board members, our ability to execute our business plan could be harmed and we may be forced to cease or limit operations until such time as we are able to attract suitable replacements. We do not maintain key person life insurance on these members of our management team.

We may be unable to obtain additional capital required to implement our business plan, which could restrict our ability to grow.

We will need additional capital to continue to grow our business via acquisitions and to further expand our exploration and development programs. We may be unable to obtain additional capital if and when required.

Future acquisitions and future exploration, development, production and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of capital and cash flow.

We may pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing or other means. We may not be successful in identifying suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, our resources will not be sufficient to fund our planned expansion of operations in the future.

Any additional capital raised through the sale of equity may dilute the ownership percentage of our shareholders. Raising any such capital could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of other derivative securities. In addition, we have granted and will continue to grant equity incentive awards under our equity incentive plans, which may have a further dilutive effect.

Our ability to obtain financing, if and when necessary, may be impaired by such factors as the state of 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 the strength of our key employees. 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. 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 may be required to cease or limit our operations, divest our assets at unattractive prices or obtain financing on unattractive terms.

We may incur substantial costs in pursuing future capital financing, 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.

Our estimates of crude oil and natural gas reserves may be inaccurate and our actual revenues may be lower than our financial projections.

Determining the amount of oil and gas recoverable from various formations where we have exploration and production activities involves great uncertainty. The process of estimating oil and natural gas reserves is complex and requires us to make significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each property. As a result, reserve estimates are inherently imprecise. Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves may vary substantially from the estimates.

Projecting our expenditures on developing newly discovered oil or natural gas reserves in commercially viable quantities is difficult due to the inherent uncertainties of drilling in less known formations, the costs associated with encountering various drilling conditions, such as over-pressured zones and lost equipment, and changes in drilling plans and locations as a result of prior exploratory wells or additional seismic data and interpretations thereof.

If actual production results vary substantially from reserve estimates or our costs of development are significantly higher than projected, we will not meet our projections, which could result in a net loss and the impairment of our oil and natural gas properties.

We have a limited operating history, and may not be successful in achieving or sustaining profitable business operations.

We have a limited operating history and have not generated a sustained profit. Our business operations must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in the crude oil and natural gas industry. We first generated revenues from operations in the quarter ended December 31, 2010. There can be no assurance that our business operations will prove to be successful in the long-term. Our future operating results will depend on many factors, including:


	•	our ability to raise adequate working capital;

	•	success of our development and exploration;

	•	demand for and pricing of natural gas and crude oil;

	•	the level of our competition;

	•	our ability to attract and maintain key management and employees; and

	•	our ability to efficiently explore, develop and produce sufficient quantities of marketable natural gas or crude oil in a highly competitive and speculative environment while maintaining quality and controlling costs.

To achieve and sustain profitability in the future, we must, alone or with others, successfully manage the factors stated above, as well as continue to develop ways to enhance our production efforts. Despite our best efforts, we may not be successful in our exploration or development efforts, or obtain required regulatory approvals. There is a possibility that some of our wells may never produce natural gas or crude oil. Our failure to successfully address the obstacles that may arise, including those discussed above, could have a material adverse effect on our business.

We rely on third-party contractors in performing all of our field operations.

The majority of our operational duties are outsourced to consultants and independent contractors, including for drilling, maintaining and operating our wells, and we do not maintain an in-house employee base. Our executive team all serve as independent contractors to Legend, and as such, have agreements with Legend, as disclosed in various Form 8-K filings. We may not be able to hire or retain the services of qualified third-parties as and when needed, or on commercially acceptable terms. In such a case, we may be required to curtail or significantly reduce operations, or expand our personnel to perform operations. In addition, we may not be able to properly control the timing and quality of work conducted by these third parties with respect to our projects. Our operating expenses may significantly increase. Any of these actions would have a material adverse effect on our results of operations, financial condition and business.

Strategic relationships upon which we may rely are subject to change, which may diminish our ability to conduct our operations.

Our ability to successfully acquire additional properties, to increase our oil and natural gas reserves, to participate in drilling opportunities and to identify and enter into commercial arrangements with customers will depend on developing and maintaining close working relationships with strategic partners, vendors, distributors and other industry participants. To continue to develop our business, we will endeavor to use the business relationships of our management to enter into strategic relationships, which may take the form of joint ventures or contractual arrangements with other oil and gas companies, including those that supply equipment and other resources which we may use in our business. We may not be able to establish these strategic relationships, or if established, we may not be able to adequately maintain them. In addition, the dynamics of our relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to in order to fulfill our obligations to these partners or maintain relationships. If our strategic relationships are not established or maintained, our business, prospects, financial condition and results of operations may be materially adversely affected.

Challenges to title to our properties may impact our financial condition.

Title to oil and gas properties, including those purchased from Wi2Wi, is often not capable of conclusive determination without incurring substantial expense. Although we perform title work on all properties and other development rights we acquire, title defected may exist. In addition, we are generally unable to obtain adequate insurance for title defects, on a commercially reasonable basis or at all. If title defects do exist, it is possible that we may lose all or a portion of our right, title and interests in and to the properties to which the title defects relate. To mitigate title problems, common industry practice is to obtain a “title opinion” from a qualified oil and gas attorney prior to the drilling operations of a well. Although we intend to follow industry practice, if our property rights are reduced, our ability to conduct our exploration, development and production activities may be impaired, which would have a material adverse effect on our business.

The possibility of a global financial crisis may significantly impact our business and financial condition for the foreseeable future.

The credit crisis and related turmoil in the global financial system may adversely impact our business and our financial condition, and we may face challenges if conditions in the financial markets do not improve. Our ability to access the capital markets may be restricted at a time when we would like, or need, to raise financing, which could have a material negative impact on our flexibility to react to changing economic and business conditions. The economic situation could have a material negative impact on contracted operators upon whom we are dependent for drilling our wells, our lenders or customers, causing them to fail to meet their obligations to us. Additional capital will be required in the event that we accelerate our drilling program or that crude oil prices decline substantially resulting in significantly lower revenues. Additionally, market conditions could have a material negative impact on any crude oil hedging arrangements we may employ in the future if our counterparties are unable to perform their obligations or seek bankruptcy protection.

Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could impact the economic viability of our leasehold interests and properties.

Our future success will depend on the success of our exploration, development, and production activities, all of which are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable oil or natural gas production. Our decision to purchase, explore, develop or otherwise exploit prospects or properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. The cost of drilling, completing and operating wells is often uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. Further, many factors may curtail, delay or cancel drilling, including the following:


	•	delays imposed by or resulting from compliance with regulatory requirements;

	•	pressure or irregularities in geological formations;

	•	shortages of or delays in obtaining qualified personnel, equipment or supplies, including drilling rigs and CO2;

	•	equipment failures or accidents; and

	•	adverse weather conditions, such as freezing temperatures and storms.

The presence of one or a combination of these factors at our properties could adversely affect our business, financial condition and results of operations.

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

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

Decommissioning costs are unknown, may be substantial and could divert resources from other projects.

We may become responsible for costs associated with abandoning and reclaiming wells, facilities and pipelines which we use for production of oil and natural gas reserves. Abandonment and reclamation of these facilities and the associated costs are often referred to as “decommissioning”. We have not established any cash reserve account for these potential costs in respect of any of our properties. If decommissioning is required before economic depletion of our properties or if our estimates of the costs of decommissioning exceed the value of the reserves remaining at any particular time to cover such decommissioning costs, we may have to draw on funds from other sources to satisfy such costs. The use of other funds to satisfy such decommissioning costs could impair our ability to focus capital investment in other areas of our business and may dilute the ownership interests of our shareholders.

We may be prevented from conducting our business if we cannot obtain or maintain necessary licenses.

Our operations require licenses, permits and in some cases renewals of licenses and permits from various governmental authorities. Our ability to obtain, sustain or renew such licenses and permits on acceptable terms is subject to changes in regulations and policies and to the discretion of the applicable governments, among other factors. Our inability to obtain, or the loss of or denial of extension of, any of these licenses or permits could hamper or prevent us from operating our business.

We may have difficulty distributing our production, which could harm our financial condition.

In order to sell oil and natural gas that we are able to produce, we will have to make arrangements for storage and distribution to the market. We rely on local infrastructure and the availability of transportation for storage and shipment of our products, but infrastructure development and storage and transportation facilities may be insufficient for our needs at commercially acceptable terms in the localities in which we operate. This situation could be particularly problematic to the extent that our operations are conducted in remote areas that are difficult to access, such as areas that are distant from shipping or pipeline facilities. These factors may affect our ability to explore and develop properties and to store and transport our oil and natural gas production and may increase our operating expenses.

Fluctuations in exchange rates could adversely affect our business.

With our acquisition of the Wi2Wi Assets, consisting of producing properties in Alberta and British Columbia, Canada, most of our operations will be in Canada and most of our sales will be in Canadian dollars. Our cash flows will be impacted by the foreign exchange rate between the U.S. dollar and the Canadian dollar. Appreciation or depreciation in the value of the Canadian dollar relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. We have not entered into any currency hedging transactions to protect us against this risk, and while we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to satisfactorily hedge our exposure.

Risks Related to Our Industry

Environmental risks may adversely affect our business.

All phases of the oil and gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, state, provincial and municipal laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil and gas operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. Compliance with such legislation can require significant expenditures, and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner that we expect may result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. The discharge of oil, natural gas or other pollutants into the air, soil or water may give rise to liabilities to governments and third parties and may require us to incur costs to remedy such discharge. Compliance with environmental laws applicable to our business may cause us to curtail our future production or increase the costs of our production, development or exploration activities. If substantial enough, the costs could cause us to cease operations.

Government regulations and legal uncertainties could affect our ability to profitably explore and develop oil or gas resources.

Legislative and regulatory actions by governments may lead to changes in laws or regulations that negatively affect various aspects of oil and natural gas exploration and production, including within the primary geographic areas in which we have interests in oil and gas properties. The adoption of new laws or regulations, or the application of existing laws may decrease the growth in the demand or alter the cost of exploring for and developing natural resources which could in turn decrease the usage and demand for our production or increase our costs of doing business. Any of these restrictions could have a material adverse effect on our financial position.

Companies operating in the oil and gas industry are subject to substantial competition.

The oil and gas industry is highly competitive. Other oil and gas companies may seek to acquire oil and gas leases and other properties and services that we require to operate our business in the planned areas. This competition is increasingly intense as prices of oil and natural gas have risen in recent years. Additionally, other companies engaged in our line of business may compete with us in obtaining capital from investors. Competitors include larger companies that may have access to greater resources, may be more successful in the recruitment and retention of qualified employees and may conduct their own refining and petroleum marketing operations, which may give them a competitive advantage in the industry. If we are unable to compete effectively or respond adequately to competitive pressures, our results of operation and financial condition may be materially adversely affected.

The domestic prices at which oil and natural gas trade in the open market have experienced significant volatility, which can significantly negatively impact our business, revenues and reserve valuations.

The prices we will receive for our oil and natural gas production heavily influences our revenue, profitability, access to capital and future rate of growth. For example, due to recent decreases in the market prices of natural gas and the resulting decrease in the value of our reserves securing our credit facility with National Bank of Canada, the Bank reduced the maximum borrowing base under our credit facility. Future declines in market prices will adversely affect our revenues, forecasting and valuation. Especially in recent years, the domestic prices at which oil and natural gas trade in the open market have experienced significant volatility, and we believe will likely continue to fluctuate in the foreseeable future due to a variety of influences beyond our reasonable control, including without limitation the following:


	•	the price and quantity of imports of foreign oil and gas;

	•	political and economic conditions, including embargoes, in oil-producing countries or affecting other oil-producing activity;

	•	the level of global and domestic oil and gas exploration and production activity and inventories;

	•	technological advances affecting the level of oil and gas consumption;

	•	domestic and foreign governmental regulations;

	•	proximity and capacity of oil and gas pipelines and other transportation facilities;

	•	the price and availability of competitors’ supplies of oil and gas in captive market areas;

	•	the introduction, price and availability of alternative forms of fuel to replace or compete with oil and natural gas;

	•	domestic and foreign demand for oil and natural gas by both refineries and end users;

	•	competitive measures implemented by competitors in the oil and gas industry;

	•	political climates in nations that traditionally produce and export significant quantities of oil and natural gas and regulations and tariffs imposed by exporting and importing nations, including actions taken by the Organization of Petroleum Exporting Countries; and

	•	adverse weather conditions, including freezing temperatures and severe storms.

Advanced technologies available in the industry cannot eliminate exploration risks.

Even when used and properly interpreted, three-dimensional (3-D) seismic data and visualization techniques only assist geoscientists in identifying subsurface structures and hydrocarbon indicators. Such data and techniques do not allow the interpreter to know conclusively if hydrocarbons are present or economically producible. In addition, three-dimensional (3-D) seismic data becomes less reliable when used at increasing depths. We could incur losses as a result of expenditures on unsuccessful wells. If exploration costs exceed our estimates, or if exploration efforts do not produce results which meet our expectations, our exploration efforts may not be commercially successful, which could adversely impact our ability to generate revenues from operations.

Risks Associated with Our Securities

Our Board of Directors’ ability to issue undesignated Preferred Shares and the existence of anti-takeover provisions may depress the value of our Common Shares.

Our authorized capital includes 100,000,000 Preferred Shares, all of which are blank check Preferred Shares available for issuance. Our Board of Directors has the power to issue any or all of the Preferred Shares, including the authority to establish one or more series and to fix the powers, preferences, rights and limitations of such class or series, without shareholder approval. Our Board may, in the future, consider adopting additional anti-takeover measures. The authority of our Board to issue undesignated stock and the anti-takeover provisions of Colorado law, as well as any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of us that are not approved by our Board. As a result, our shareholders may lose opportunities to dispose of their Common Shares at favorable prices generally available in takeover attempts or that may be available under a merger proposal and the market price, voting and other rights of the holders of Common Shares may also be affected.

Our Common Shares are quoted on the Over-the-Counter Bulletin Board, which may have an unfavorable impact on our stock price and liquidity.

Our Common Shares are quoted on the Over-the-Counter Bulletin Board. The OTCBB is a significantly more limited market than the New York Stock Exchange, the American Stock Exchange or NASDAQ system. The OTCBB market is an inter-dealer market much less regulated than the major exchanges and the Common Shares are subject to abuses, volatility and shorting. There is currently no broadly followed and established trading market for our Common Shares. An established trading market may never develop or be maintained. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the level of liquidity available to the holders of our Common Shares.

It may not be possible for a shareholder to sell its Common Shares within any particular time period, for an acceptable price, or at all. There is no certainty that a holder of Common Shares will be able to identify a buyer for Common Shares or realize any monetary value whatsoever from a sale thereof.

Our Common Shares are considered highly speculative and there is no certainty that Common Shares will continue to be quoted for trading on the OTCBB or on any other form of quotation system or stock exchange, and even if the Common Shares were to be listed on a quotation system or stock exchange senior to the OTCBB, the Common Shares would continue to be subject to the resale restrictions and other limitations described above.

Our Common Shares are thinly traded, so you may be unable to sell at or near asking prices or at all.

Currently, our Common Shares are quoted in the OTCBB and the trading volume in our Common Shares may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in OTCBB stocks and certain major brokerage firms restrict their brokers from recommending OTCBB stocks because they are considered speculative, volatile and thinly traded. The market price of our Common Shares could fluctuate substantially due to a variety of factors, including market perception of its ability to achieve its planned growth, quarterly operating results of other companies in the same industry, trading volume in the Common Shares, changes in general conditions in the economy and the financial markets or other developments affecting us or our competitors. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our Common Shares.

The trading volume of our Common Shares has been and may continue to be limited and sporadic. As a result of such trading activity, the quoted price for our Common Shares on the OTCBB may not necessarily be a reliable indicator of its fair market value. When fewer shares of a security are being traded on the OTCBB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information. Due to lower trading volumes in the Common Shares, there may be a lower likelihood of one’s orders for Common Shares being executed, and current prices may differ significantly from the price one was quoted at the time of one’s order entry.

Further, if our Common Shares cease to be quoted, holders would find it more difficult to dispose of their Common Shares or to obtain accurate quotations as to the market value of the Common Shares and as a result, the market value of the Common Shares likely would decline.

Our Common Shares may not become listed or quoted on stock market senior to the OTCBB.

In the future, we may seek to apply for listing on another market or exchange within the United States, such as Nasdaq or the New York Stock Exchange. We currently do not meet all of the initial listing standards for any of these exchanges, particularly the corporate governance requirements and director independence. There are no assurances that we will satisfy the applicable listing standards of any such market that we apply to, or that we will be able to obtain or maintain a more senior listing for our Common Shares.

We are subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to its customers prior to executing trades in penny stocks. These disclosure requirements may make it difficult for our shareholders to sell their shares.

Our common stock is subject to the SEC regulations for “penny stock.” Penny stock includes any non-NASDAQ or other exchange listed equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The regulations require that prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule set forth by the SEC relating to the penny stock market must be delivered to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for the common stock. The regulations also require that monthly statements be sent to holders of penny stock which disclose recent price information for the penny stock and information of the limited market for penny stocks. These requirements adversely affect the market liquidity of our common stock.

In addition, our common stock is subject to Rule 15g-1 through 15g-9 under the Exchange Act, which imposes certain sales practice requirements on broker-dealers who sell our common stock to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 (exclusive of the value of their primary residence) or annual incomes exceeding $200,000 individually, or $300,000 together with their spouse)). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to sell our common stock and purchasers of our common stock to sell their shares of such common stock.

If we raise capital through the sale of equity securities, existing shareholders will be diluted.

Any additional capital we raise through the sale of our equity securities will dilute the ownership percentage of our shareholders. Raising any such capital could also result in a decrease in the nominal fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities that we issue in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of other derivative securities, and issuances of incentive awards under equity employee incentive plans, all of which may have a dilutive effect to existing investors.

The elimination of monetary liability against our directors, officers and employees under Colorado law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees.

Our organizational documents contain provisions that limit the liability of our directors for monetary damages and provide for indemnification of our executive officers and directors. These provisions may discourage shareholders from bringing a lawsuit against our officers and directors for breaches of fiduciary duty and may also reduce the likelihood of derivative litigation against its officers and directors even though such action, if successful, might otherwise have benefited the shareholders. We may also have contractual indemnification obligations under our agreements with our officers. In addition, to the extent that costs of settlement and damage awards against our officers or directors are paid by us pursuant to the indemnification provisions in our governing documents, this actually may have the effect of deterring the shareholder from bringing suit against our officers or directors. We have been advised that the SEC takes the position that these types of indemnification provisions are unenforceable under applicable federal and state securities laws. However, management has obtained Directors and Officers liability insurance coverage to mitigate exposure should any events occur.

Restricted securities may not be resold outside of a registered offer and sale

Securities that we sell and issue and that have not been registered under the Securities Act are “restricted securities” within the meaning of Rule 144. As a result, such restricted securities may not be offered, sold, pledged or otherwise transferred by the holders of such shares, directly or indirectly, unless the shares are registered under the Act and all applicable states securities laws, or unless there is an available exemption or exclusion from such registration requirements.

Unless certain conditions are met, Rule 144 is not available for the resale of securities of issuers that are, or have ever previously been, issuers with (i) no or nominal operations and (ii) no or nominal assets other than cash and cash equivalents (a “shell company”). The Asset Purchase Agreement with Wi2Wi concluded that we may have been at one time a “shell company” in the past. We believe that we were never a shell company and that, even if we were deemed to have been a shell, we ceased to be a shell company in October 2010, when we acquired our first oil and gas producing properties, and that the filing of our Annual Report on Form 10-K for the year ended December 31, 2010 satisfied the Form 10 disclosure requirements. However, if it is deemed that we did not satisfy the conditions for use of Rule 144, our shareholders would not be able to use Rule 144 for resales of restricted securities.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.

Oil and Gas Properties

We have built our asset base through leasehold interest acquisitions that are geographically focused in in the United States (Kansas and Oklahoma).

Canadian Oil and Gas Properties

On October 20, 2011, Legend Canada completed the acquisition of the majority of the petroleum and natural gas leases, lands and facilities held by Wi2Wi, Inc., formerly known as, International Sovereign Energy Corp. The acquisition of the Wi2Wi Assets is discussed in more detail in Item 1 of this Report entitled “BUSINESS Purchase of Canadian Assets.” The purchase price was CA$8,905,031 ($12.4 million USD) in cash and 3,552,516 Common Shares. The Wi2Wi Assets included producing oil and gas leasehold properties in Western Canada that have been maintained through the drilling of internally generated low to medium risk exploration and development sites. The principal natural gas leasehold properties are located in Medicine River and Berwyn in Alberta, and Clarke Lake in British Columbia. The Wi2Wi Assets also included an interest in various light oil properties consisting of Red Earth and Swan Hills in Alberta, both of which were sold in 2012, and Inga in British Columbia. Schedule 1 of the Asset Purchase Agreement contains a detailed description of the Wi2Wi Assets sold to Legend Canada.

During the quarter ended September 30, 2014, we placed our wholly owned subsidiary, Legend Canada, into the Canadian bankruptcy system. The bankruptcy estate of Legend Canada owns oil and gas properties in Western Canada (principally Berwyn and Medicine Riverin Alberta, and Clarke Lake British Columbia). Legend Canada was placed under the control of KPMG Inc., as Trustee, in the bankruptcy proceedings. We have written off all assets and liabilities of Legend Canada, resulting in income from discontinued operations at the parent level of Legend Oil and Gas, Ltd. as it no longer controls, nor has responsibility for any operations or asset dispositions of Legend Canada.

U.S. Oil and Gas Properties

All of our oil and gas property interests were located in the State of Kansas at December 31, 2014. Subsequent to year end, we purchased the Van pelt lease, which is located in the State of Oklahoma. Further, subsequent to year end, and prior to the release of this Form 10-K, we sold two assets, comprised of the McCune and Piqua assets. A summary discussion of these U.S. properties follows:

Disclosure of Reserves

Our proved crude oil and natural gas reserves are located in the United States.

The estimated reserves for our U.S. oil and gas properties as of December 31, 2014, are based upon a reserves report prepared by the independent licensed petroleum engineering firm of KLH Consulting, located in Wichita, Kansas. The KLH reserve report is attached hereto as Exhibit 99.1. KLH is a member of the Society of Petroleum Engineers and the Kansas Independent Oil and Gas Association, and its professionals have over 35 years of experience in the oil and gas industry. KLH has served companies with oil and gas properties located in several states throughout the south and midwest regions of the United States, including the Kansas formations, and, as such, we believe KLH has sufficient experience to appropriately assess our reserves.

The reserve data set forth in the reports and in this Report represents only estimates, and should not be construed as being exact quantities. They may or may not be actually recovered, and if recovered, the actual revenues and costs could be more or less than the estimated amounts. Moreover, estimates of reserves may increase or decrease as a result of future operations.

KLH used all assumptions, data, methods and procedures it considered necessary and appropriate under the circumstances to prepare their estimates. The reserves set forth in their reports for the properties are estimated by performance methods or analogy. In general, reserves attributable to producing wells and reservoirs are estimated by performance methods such as decline curve analysis which utilizes extrapolations of historical production data. Reserves attributable to non-producing and undeveloped reserves included in the reports are estimated by analogy. The estimates of the reserves, future production, and income attributable to properties are prepared based on the reserve definitions set out in Rule 4-10(a) in SEC Regulation S-X and, in the case of KLH, using the economic software package Aries for Windows, a copyrighted program of Halliburton.

The KLH report summarizes conclusions made by them with respect to the reserve estimates. To estimate economically recoverable crude oil and natural gas reserves, many factors and assumptions were considered, including the use of reservoir parameters derived from geological, geophysical and engineering data which cannot be measured directly, economic criteria based on current costs and SEC pricing requirements, and forecasts of future of production rates. Under applicable SEC regulations, proved reserves must be demonstrated to be economically producible based on existing economic conditions including the prices and costs at which economic production from a reservoir is to be determined as of the effective date of the report. With respect to the property interests we own, production and well tests from examined wells, normal direct costs of operating the wells or leases, other costs such as transportation and processing fees, production taxes, recompletion and development costs and product prices are based on SEC regulations, geological maps, well logs, core analyses, and pressure measurements.

Reservoir engineering is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner. There are numerous uncertainties inherent in estimating crude oil and natural gas reserves and their estimated values, including many factors beyond our control. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geologic interpretation and judgment. As a result, estimates of different engineers, including those used by us, may vary. In addition, estimates of reserves are subject to revision based upon actual production, results of future development and exploration activities, prevailing crude oil and natural gas prices, operating costs and other factors. The revisions may be material. Accordingly, reserve estimates are often different from the quantities of crude oil and natural gas that are ultimately recovered and are highly dependent upon the accuracy of the assumptions upon which they are based. Our estimated net proved reserves, included in our SEC filings, have not been filed with or included in reports to any other federal agency. See Item 1A of this Report above entitled “RISK FACTORS estimates of crude oil and natural gas reserves may be inaccurate and our actual revenues may be lower than our financial projections.”

Federal, state and provincial regulations governing protection of the environment may prevent the Company from recovering the estimated reserves disclosed in this section of the Report. For a discussion of the main federal laws and regulations in the United States and Canada in place to protect the environment, see the subsection of this Annual Report above entitled “DESCRIPTION OF BUSINESS - Governmental Regulation,” which disclosure is incorporated herein by reference.

Summary of Oil and Gas Reserves as of December 31, 2014

The following table sets forth certain information relating to our estimated net reserves as of December 31, 2014. The information with respect to our U.S. properties is based on the KLH reserve report as of December 31, 2014.


	Oil		Natural Gas		NGLs + Cond
Proved Reserves	(Mbbls)		(Mmcf)		(Mbbls)

Proved Developed Reserves		201.1		—	—
Proved Undeveloped Reserves		244.6		—	—
Total Proved Reserves		445.7		—	—

Probable Reserves
Probable Developed Reserves		—		—	—
Probable Undeveloped Reserves		—		—	—
Total Probable Reserves		—		—	—

Probable Reserves

Estimates of probable reserves are inherently imprecise. When producing an estimate of the amount of oil and gas that is recoverable from a particular reservoir, an estimated quantity of probable reserves is an estimate of those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered. Estimates of probable reserves are also continually subject to revisions based on production history, results of additional exploration and development, price changes and other factors.

When deterministic methods are used, it is as likely as not that actual remaining quantities recovered will exceed the sum of estimated proved plus probable reserves. When probabilistic methods are used, there should be at least a 50% probability that the actual quantities recovered will equal or exceed the proved plus probable reserves estimates. Probable reserves may be assigned to areas of a reservoir adjacent to proved reserves where data control or interpretations of available data are less certain, even if the interpreted reservoir continuity of structure or productivity does not meet the reasonable certainty criterion. Probable reserves may be assigned to areas that are structurally higher than the proved area if these areas are in communication with the proved reservoir. Probable reserves estimates also include potential incremental quantities associated with a greater percentage recovery of the hydrocarbons in place than assumed for proved reserves.

Controls Over Reserve Estimates

Compliance as it relates to reporting both our Canadian reserves and our U.S. reserves is the responsibility of Mr. Diamond-Goldberg, our President and principal technical representative, who has over 30 years of industry experience. In addition to his years of experience, Mr. Diamond-Goldberg holds a degree in petroleum geology with a strong background in asset evaluation and management.

With respect to our U.S. properties, our control over reserves estimates included retaining KLH as our independent petroleum and geological firm. The engineer responsible for overseeing the reserve study at KLH is a licensed petroleum engineer in both Kansas and Missouri. Further professional qualifications include a degree in petroleum engineering and being a member of the Society of Petroleum Engineers and Kansas Independent Oil and Gas Association. We provided KLH with information about our oil and gas properties, including production profiles, prices and costs, and KLH prepared its own estimates of the reserves attributable to the Piqua properties. All of the information regarding reserves on our Piqua properties in this Report is derived from KLH’s report.

Proved Undeveloped Reserves

At December 31, 2014, we estimated that we had proved undeveloped reserves (PUDs) of 45.1 MBOE for our U.S. properties, which accounted for 42% of our total estimated proved oil and gas reserves. The following table discloses our PUDs during 2014.


	Oil and Natural Gas
	Reserves (MBOE)
PUDs beginning of year 2013		45.1
Revisions of previous estimates		—
Conversions to proved developed reserves		(45.1	)
Additional PUDs added		244.6
PUDs end of year 2014		244.6

Production Volumes

The following table sets forth certain information regarding our United States production volumes of oil and natural gas for the periods indicated.


U.S. Properties	Years Ended December 31,
	2014		2013		2012
Production volumes:
Oil production (MBbls)		8.76		4.70		5.21
Average daily production (BOED)		24.00		12.85		14.23

Drilling and Development Activity

The following table sets forth wells drilled and completed during the periods indicated on our U.S. oil and gas properties.


	Year Ended December 31,
	2014				2013				2012
	Gross		Net		Gross		Net		Gross		Net
Development
Oil wells		31		31		6.00		6.00		4.00		3.50
Dry wells		0.00		0.00		0.00		0.00		0.00		0.00

Total		31		31		6.00		6.00		4.00		3.50

Exploration
Oil wells		0.00		0.00		0.00		0.00		0.00		0.00

Dry wells		0.00		0.00		0.00		0.00		0.00		0.00

Total						0.00		0.00		0.00		0.00

Productive Wells and Acreage

The following tables summarize our total oil wells by type and gross and net productive hydrocarbon wells by country as of December 31, 2014. A net well represents our percentage ownership of a gross well. The following table does not include wells which were awaiting completion, in the process of completion or awaiting flowback subsequent to fracture stimulation.


	Producing Wells				Non-Producing Wells
	Gross		Net		Gross		Net
United States
Oil		146		124.3		104		87.9
Gas		—		—		—		—

Total		146		124.3		104		87.9

The following table sets forth our undeveloped and developed gross and net leasehold acreage at December 31, 2014. Undeveloped acreage includes leased acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas, regardless of whether or not such acreage contains proved reserves.

Developed

Undeveloped

Gross

Net

Gross

Net

United States (acres)

860

727.6

2060

1829.6

Title to Properties

We believe that we have satisfactory title to all of our U.S. and Canadian properties in accordance with standards generally accepted in the oil and gas industry. Our properties are subject to customary royalty interests, liens for current taxes and other burdens, which we believe do not materially interfere with the use of or affect the value of such properties. Prior to acquiring undeveloped properties, we perform a title investigation that is thorough but less vigorous than that conducted prior to drilling, which is consistent with standard practice in the oil and gas industry. Before we commence drilling operations, we conduct a thorough title examination and perform curative work with respect to significant defects before proceeding with operations. We have performed a thorough title examination with respect to substantially all of our active properties.

Delivery Commitments

We currently have no delivery commitments for product obtained from our wells.

Dry Holes

We have not experienced any dry holes.

ITEM 3.

LEGAL PROCEEDINGS

On October 28, 2013, RR Donnelly & Sons Company filed a complaint against the Company seeking to collect approximately $68,913.21, plus interest for services rendered on or before November 30, 2012. This claim has been satisfactorily resolved between the parties, and Legend is remitting approximately $2,500 per month in settlement of this claim, until such balance is fully repaid.

As of the date of this Report, there are no other claims, proceedings, actions or lawsuits in existence, or to our knowledge threatened or asserted, against us or with respect to any of our assets that would materially adversely affect our business, property or financial condition, including environmental actions or claims. In addition, there are no outstanding judgments against us or any consent decrees or injunctions to which we are subject or by which our assets are bound. However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

We do not know of any proceedings to which any of our directors, executive officers, or affiliates, any owner of record of the beneficially or more than five percent of its common stock, or any associate of any such director, officer, affiliate, or security holder is a party adverse or has a material interest adverse to us.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM 5.

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

Market Information

Our Common Shares have been quoted for trading on the Over-the-Counter Bulletin Board under the trading symbol “LOGL” since March 15, 2011. Prior to March 15, 2011, our Common Shares were quoted on the OTCBB under the trading symbol “SNHI”, although there was no active trading in the shares.

Although our Common Shares are quoted on the OTCBB, there is no assurance that an active, liquid market for our Common Shares will develop or that a trading market will continue. The OTCBB is a significantly more limited market than the New York Stock Exchange, American Stock Exchange or NASDAQ system. The quotation of our Common Shares on the OTCBB may result in a less liquid market available for our shareholders to trade Common Shares, could depress the trading price of the Common Shares and could have a long-term adverse impact on its ability to raise capital in the future.

The following table sets forth, for the period indicated, the average high and low closing prices for our Common Shares on the OTCBB as reported by various OTCBB market makers. The quotations reflect inter-dealer prices without adjustments for retail mark-ups, mark-downs, or commissions and may not necessarily reflect actual transactions.


	High		Low
Fiscal 2013:
Fourth quarter, ended December 31, 2013	$	0.05	$	0.04
Third quarter, ended September 30, 2013		0.09		0.07
Second quarter, ended June 30, 2013		0.05		0.05
First quarter, ended March 31, 2013		0.07		0.06

Fiscal 2014:
Fourth quarter, ended December 31, 2014	$	0.01		0.01
Third quarter, ended September 30, 2014		0.03		0.01
Second quarter, ended June 30, 2014		0.05		0.01
First quarter, ended March 31, 2014		0.08		0.04

As of April 1, 2015, the closing sales price for our Common Shares on the OTCBB was $0.0057.

Holders

As of the latest practical date before filing this annual report, there were 188,183,273 Common Shares issued and outstanding, with 31 holders of record.

Transfer Agent and Registrar

VStock Transfer, LLC, located at 18 Lafayette Place, Woodmere, New York 11598 is currently the transfer agent and registrar for our Common Shares. Its phone number is (212) 828-8436.

Dividend Policy

We have never declared or paid dividends on our capital stock. We intend to retain earnings, if any, to support the development of our business and therefore do not anticipate paying cash dividends for the foreseeable future. Payment of future dividends, if any, will be at the discretion of the Board of Directors after taking into account various factors, including current financial condition, operating results and current and anticipated cash needs.

There are no dividend restrictions that limit our ability to pay dividends on our common stock in our Articles of Incorporation, as amended, or Bylaws.

ITEM 6.

SELECTED FINANCIAL DATA

Not Applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, and should be read in conjunction with our financial statements and related notes. We incorporate by reference into this Report our audited consolidated financial statements for the years ended December 31, 2014 and 2013. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In addition, the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, including, but not limited to, those discussed in “Forward Looking Statements,” and elsewhere in this Report.

The following management’s discussion and analysis is intended to assist in understanding the principal factors affecting our results of operations, liquidity, capital resources and contractual cash obligations. This discussion should be read in conjunction with our consolidated financial statements which are incorporated by reference herein, information about our business practices, significant accounting policies, risk factors, and the transactions that underlie our financial results, which are included in various parts of this filing.

For ease of presentation in the following discussions of “Comparison of Results” and “Liquidity and Capital Resources”, we round dollar amounts to the nearest thousand dollars (other than average prices per barrel and per share amounts).

Overview of Business

We are an oil and gas exploration, development and production company. Our oil and gas property interests are located in the United States (States of Kansas and Oklahoma).

Our business focus is to acquire producing and non-producing oil and gas right interests and develop oil and gas properties that we own or in which we have a leasehold interest. We also anticipate pursuing the acquisition of leaseholds and sites within other geographic areas that meet our general investment guidelines and targets. The majority of our operational duties are outsourced to consultants and independent contractors, including for drilling, maintaining and operating our wells, and we maintain a limited in-house employee base.

Our Company was incorporated under the laws of the State of Colorado on November 27, 2000 under the name “SIN Holdings, Inc.” On November 29, 2010, we changed our name to Legend Oil and Gas, Ltd. Our only subsidiary is Legend Canada, which was formed in Alberta, Canada on July 28, 2011 to acquire the Wi2Wi assets. Neither we nor Legend Canada are reporting issuers in any province of Canada.

Results of Operations

The following is a discussion of our consolidated results of operations, financial condition and capital resources. You should read this discussion in conjunction with our Consolidated Financial Statements and the Notes thereto contained elsewhere in this report. Comparative results of operations for the periods indicated are discussed below.

The following table sets forth certain of our United States oil and gas operating information for the years ended December 31, 2014, and December 31, 2013, respectively.


	Year Ended December 31,

	2014		2013		Change			% Change
Production Data :
Oil production (bbls)		8,760		4,700		4,060			86
Average daily oil production (bbl/d)		24.00		12.85		11.15			87
Total BOE		8,760		—		8,760			N/
Total BOE/d		24		12.85		11.15			87
Revenue Data :
Oil revenue ($)	$	691,593	$	416,536	$	275,057			66
Average realized oil sales price ($/bbl)	$	78.95	$	78.89	$	0.06			—
Operating expenses :
Production expenses	$	443,413	$	208,885	$	234,528			112
Average operating expenses ($/boe)	$	50.62	$	44.44	$	6.18			14
Operating Margin ($/boe)	$	28.33	$	34.45	$	(6.12	)		(18	)
Depreciation, depletion, and amortization	$	69,285	$	73,964	$	(4,679	)		(6	)

* Oil and natural gas were combined by converting natural gas to oil equivalent on the basis of 6 mcf of gas = 1 boe.

The above information does not reflect any data related to discontinued operations, as further discussed in the Notes to the Consolidated Financial Statements.

Production and Revenue

The increase in oil volumes and revenues is due to the Company shifting its focus on producing in the United States. The Company drilled and completed 31 wells during the year ended December 31, 2014 as well as we acquired the Landers and Volunteer leases which was a producing property at the time of acquisition.

Pricing

The Company received an average price per barrel of oil during the year ended December 31, 2014 marginally higher than the year ended December 31, 2013, reflective of the pricing environment that the Company is participating in.

Production Expenses

Production expenses for the year ended December 31, 2014 totaled $443,413, compared to $208,885 in 2013. On a per barrel basis, the production expense increased from $44.44/boe in 2013 compared to $50.62/boe in the corresponding period of 2014. The production expenses increase noted above consists of higher day-to-day operational expenses for production of oil and maintenance and repair expenses for the wells and property.

General and Administrative Expenses

General and administrative expenses include: professional fees; management fees; travel expenses; office and administrative expenses; and marketing and SEC filing expenses. General and administrative expenses decreased at December 31, 2014 to $3,635,247, as compared to $3,955,000 for the same period in 2013. The decrease in professional fees and salaries reflects cost cutting efforts by the Company.


	Year Ended December 31,

	2014		2013		Change			Change

General and administrative expenses									%
Professional fees	$	164,471	$	—	$	164,471			N/A
Salaries and benefits		1,326,275		1,029,000		297,275			29
Office and administration		1,333,199		253,075		1,080,124			427
Stock-based compensation		811,302		1,468,000		(656,698	)		(45	)
Total	$	3,635,247	$	2,750,075	$	(885,172	)		(33	)

Depletion, depreciation, amortization and impairment

The Company incurred $80,910 for depreciation, depletion, amortization for the year ended December 31, 2014 ($73,442 for 2013), the increase is reflective of the additional capitalized costs of the Company and an increase of production. The Company has incurred $0 in impairment charges for the year ended December 31, 2014, and 2013.

Accretion expense

For year ended December 31, 2014 the Company had accretion expense of $15,803 ($9,765 for 2013). Accretion expense increased due to the Company bringing more wells into production.

Interest expense

Interest expense was $4,720,857 for the year ended December 31, 2014 compared to $696,966 in 2013 for the similar period. Interest expense increased due to the debt discounts which have been expensed in the current period.

Debt Extinguishment

For year ended December 31, 2014 the Company had a loss on debt extinguishment of $5,013,957 compared to $0 in the year ended December 31, 2013. The Company recorded loss on extinguishing of debt with Hillair related to amendments to conversion features and warrants embedded in the Company’s debentures issued to Hillair during the year ended December 31, 2014.

Discontinued Operations

For year ended December 31, 2014 the Company had gain on discontinued operations of $2,894,643 compared to a loss of $9,220,217 during the year ended December 31, 2013. The gain recorded in the year ended December 31, 2014, is due to Legend Canada declaring bankruptcy and having net liabilities at the time of the bankruptcy. During the year ended December 31, 2013, Legend Canada had net losses from operations which were primarily driven by an impairment of oil and gas properties of $7,916,993.

Change in Fair Value of Derivatives

The Company had a gain of $7,968,322 and $211,458 due to the change in the fair value of the derivative liabilities for the years ended December 31, 2014 and 2013, respectively. These gains were related to derivative warrants and conversions features in the Company’ debentures and were reflective of the change in fair value due to the Company’ stock price decreasing each year.

Net loss

The Company recorded a net loss of $2,355,629 for the year ended December 31, 2014, as compared to the net loss of $13,022,506 in 2013. The decrease in the net loss was attributable to the factors described above.

Liquidity and Capital Resources

Liquidity

We have incurred net operating losses and operating cash flow deficits over the last two years, continuing through 2014. 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 borrowing under loan agreements and to a lesser extent by operating cash flows, to execute on our business plan for the acquisition, exploration, development and production of oil and gas reserves. At December 31, 2014, we had cash and cash equivalents totaling approximately $701,848.

Management’s plans and intentions regarding our liquidity include but are not limited to working with our primary capital provider. We have been in discussions with this provider and we believe they are committed to the longevity and growth of Legend. Further, we expect to close on the acquisition of Maxxon, LLC with financing from the provider, which will include a $1.5 million infusion of capital for closing plus approximately $250,000 of transaction costs through a debenture.

Lastly, we believe the provider will continue financing certain of our general and administrative costs, totaling approximately $120,000 per month, as well as oil and gas property acquisitions and a drilling program on existing properties as well as new properties. We are currently in budgeting discussions with the provider as to the extent of the oil and gas property acquisition needs as well as costs to cover a drilling program.

Wi2Wi, formerly International Sovereign Energy Corp., and the holders of our convertible preferred stock had “put” rights to require us to repurchase their shares at a price of $2.00 per share. On May 1, 2013, the Company and Wi2Wi entered into a Settlement and Termination Agreement, of which a key component is the elimination of the put right associated with all of the common stock held by Wi2Wi. On May 28, 2013, all of the Company’s preferred shareholders converted their preferred stock to common stock and the Company issued additional shares of common stock to the preferred shareholders as consideration for forfeiting their put rights. As of December 31, 2013, the Company has no capital stock issued and outstanding with put rights.

JMJ Capital

During 2013, the Company received proceeds of $125,000 under a note payable agreement with JMJ Capital. The note provides for borrowing of up to $300,000, is repayable beginning April 2014, and carries an original issue discount of 10%. No interest accrues on the note principal if borrowings are repaid within 90 days from the date advanced. If repaid within 90 days, a one-time interest charge of 12% accrues. The conversion price of the note is the lesser of $0.05 or 60% of the lowest trade price of the Company’s common stock for 25 days prior to the conversion. On the day of issuance, the note was convertible into 5,339,558 shares of common stock. The intrinsic value of the beneficial conversion feature was determined to be $124,430. As a result, the discount of the note, including original issue discount, totaled $136,930 and is being amortized over the term of the note. During 2013, JMJ Capital elected to convert principal amounting to $50,000 plus accrued interest and original issue discount into 2,772,407 shares of common stock. At December 31, 2013, the principal outstanding under the note payable to JMJ Capital during 2014 amounted to $82,500. The recorded amount of $27,496 is reported net of the debt discount amounting to $55,004 at December 31, 2013.

During the year ended December 31, 2014, the Company borrowed an additional $30,000 from JMJ under the above note payable agreement. The Company received net proceeds of $26,500.

During the year ended December 31, 2014, JMJ converted $100,000 of the outstanding principal and $7,520 in accrued interest into 20,755,608 shares of the Company’s common stock. The Company also paid $12,500 of the outstanding principal balance. As of December 31, 2014, the balance on the JMJ note payable was $0.

Hillair Capital Investments

On July 10, 2013, the Company received $900,000 in net proceeds from issuing an 8% Original Issue Discount Senior Secured Convertible Debenture to Hillair Capital Investments L.P. (“Hillair”) in the amount of $1,008,000, initially convertible at a rate of $0.0561, and payable on or before December 1, 2014. On November 22, 2013, the Company received $550,000 in net proceeds from issuing an 8% Original Issue Discount Senior Secured Convertible debenture to Hillair in the amount of $616,000, initially convertible at a rate of $0.0561, and payable on or before December 1, 2014. The July 10, 2013 debenture is secured by the property in Woodson County, Kansas, while the November 22, 2013 debenture is secured by the McCune property in Crawford County, Kansas. The July 10, 2013 debenture was convertible into 17,967,914 shares of common stock at the date of issuance. The November 22, 2013 debenture was convertible into 10,980,392 shares of common stock at the date of issuance.

In conjunction with the July 10, 2013 transaction, the Company issued 3,000,000 shares of common stock with a fair value of approximately $150,000 to Hillair as consideration for executing the agreement in advance of the Bank waiving certain security agreements on select assets. In connection with each of the debentures, the Company issued warrants to purchase shares of common stock with a term of 5 years and an exercise price of $0.0673, subject to further adjustments. The number of warrants issued in connection with the July 10, 2013 debenture was 19,764,706 and the number of warrants issued in connection with the November 22, 2013 debenture was 10,098,361. The Company recorded a discount to the notes of $1,372,742 for the original issue discount and beneficial conversion feature.

On May 1, 2014, the Company received a default notice from Hillair, for failure to make its principal payments by the required dates in the debentures.

On May 29, 2014, the Company restructured the defaulted debt with Hillair whereby it amended the two 8% Original Issue Discount Senior Secured Convertible Debentures to Hillair (the “Amended Debentures”) The Amended Debentures carry an 8% interest rate per annum and are convertible into the Company’s common stock at an exercise price of $0.01 per share, subject to anti-dilution provisions. The Amended Debentures are payable on or before August 1, 2016. The Amended Debentures increased the face value of the amounts owed from $1,624,000 to $1,720,283. The increase was related to the outstanding accrued interest on the original debentures of $96,283.

Also on May 29, 2014 The Company and Hillair entered into an additional debenture (the “Additional Debentures”), whereby the Company received $335,758 in net proceeds and issued a new debenture with a face value of $448,000. The debenture carries an 8% interest rate per annum and is convertible into the Company’s common stock at an exercise price of $0.01 per share, subject to anti-dilution provisions. The Additional Debenture is payable on or before August 1, 2016.

In conjunction with the Amended Debentures and the Additional Debenture, the Company entered into a Securities Purchase Agreement (“SPA”) with Hillair to replace the existing warrants held by Hillair, for new common stock purchase warrants (the “Amended Warrants”) to purchase 200,979,441 shares of common stock and issued warrants with the additional debenture (the “Additional Warrants”) to purchase 117,600,000 shares of common stock. All of the warrants have an exercise price equal to $0.01, subject to anti-dilution provisions therein, and a 5 year term.

Hillair and the Company have also entered into a forbearance agreement, on May 29, 2014, whereby Hillair shall refrain and forebear from exercising its rights and remedies to foreclose on the Company’s assets, afforded under the July and November 2013 Agreements.

On June 23, 2014 , the Company issued an 8% Original Issue Discount Senior Secured Convertible Debenture to Hillair in the aggregate amount of $364,000 payable on April 1, 2016. After taking into account the original issue discount and legal fees of $39,000 reimbursed to Hillair, the net proceeds received by the Company was $325,000. The debenture carries an 8% interest rate per annum, and is convertible into the Company’s Common Stock at an exercise price of $0.01 per share subject to anti-dilution provisions.

On August 1, 2014, the Company issued 8% Original Issue Discount Senior Secured Convertible Debenture to Hillair in the aggregate amount of $364,000 payable on April 1, 2016. After taking into account the original issue discount and legal fees of $39,000 reimbursed to Hillair, the net proceeds received by the Company was $325,000. The debenture carries an 8% interest rate per annum, and is convertible into the Company’s Common Stock at an exercise price of $0.01 per share subject to anti-dilution provisions.

On September 4, 2014, the Company entered into a Debenture Purchase Agreement with Hillair whereby Legend assumed an 8% Original Issue Discount Senior, Secured Convertible Debenture in the original principal amount of $1,232,000, as originally executed on November 6, 2013 by NWTR. In accordance with the debenture, NWTR executed Financing Statements and Mortgages to Hillair covering certain NWTR oil and gas properties (the “Secured Properties”), which also included the right, title and interest in certain oil and gas leases known as the Lander Lease and Volunteer Unit (the “Assumed Leases”). Simultaneous with the execution of the Debenture Purchase Agreement, the Company entered into a Loan Release Agreement with NWTR (the “Agreement”), in which (i) NWTR assigned and transferred to Legend, all of its right, title, and interest in the Assumed Leases and (ii) Legend assumed the Debenture and released NWTR from any further obligations or payments relating to the Debenture, which, upon assumption, had a balance of $1,040,000, due and payable in April 2016.

In connection with the above assumption of debt, on September 4, 2014, the Company entered into an eighteen month debenture, with similar terms to the assumed debenture, in the principal amount of $500,000 with Hillair, with the Company receiving $460,000 in net proceeds after original issue discount. The debenture carries a 10% interest rate per annum, and is convertible into the Company’s Common Stock at an exercise price of $0.01 per share subject to anti-dilution provisions.

On September 29, 2014, the Company issued an 8% Original Issue Discount Senior Secured Convertible Debenture to Hillair in the aggregate amount of $1,556,800 payable (a) $389,200 on or before October 1, 2015, (b) $389,200 on or before January 1, 2016, and (c) $778,400 on or before April 1, 2016, plus at each periodic redemption date, all accrued but unpaid interest or other amounts owing on each such date. After taking into account the original issue discount and legal fees of $256,800 reimbursed to Hillair, the net proceeds received by the Company were $1,300,000.

In conjunction with the debenture and in consideration of Hillair’s entering into this agreement with the Company, the Company entered into an SPA with Hillair for a common stock purchase warrant to purchase up to 155,680,000 shares of common stock with an exercise price equal to $0.01, subject to anti-dilution provisions.

The Company agreed to prepare and file a mortgage, security agreement and financing statement in Kansas granting a lien in certain oil and gas mining leases and leasehold estates and any other applicable property of the Company in Kansas to secure the obligations of the Company to the Purchasers evidenced by the debenture.

On November 13, 2014, the Company and Hillair entered into a debt and warrant restructuring agreement. All of the existing debt outstanding and accrued interest owed to Hillair was restructured and consolidated into one new debenture (the “Restructured Debenture”). The Restructured Debenture has a face value of $6,060,000, with an original issue discount of $60,000, carries an interest rate of 8.5% per annum and is due and payable in one payment on March 1, 2016. Further, in exchange for warrants to purchase and aggregate of 474,258,441 shares of the Company’s common stock currently held by Hillair; Hillair agreed to purchase 600 shares of convertible perpetual preferred stock with at a price of $1,000 per share, for a total amount of $600,000 in cash proceeds. This convertible, perpetual preferred stock has a 0% dividend rate. The shares of preferred stock are convertible into 600 million shares of the Company¹s common stock at $0.001 per share, and has a non-dilution provision, that the Company determined was a derivative liability with a fair value of $2,324,184 on the date of issuance.

Under a series of agreements with the Bank of Canada (the “Bank”), as of December 31, 2013, Legend Canada had a revolving credit facility with a maximum borrowing base of $2,018,951. Outstanding principal under the loan bears interest at a rate equal to the Bank’s prime rate of interest (currently 3%) plus 1%. The Company is 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 CAD$25 million ($33 million USD), 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. On August 22, 2013 the Company entered into a Forbearance agreement with the Bank, which conveyed the Bank additional control over the assets of Legend Canada, increased the interest payments to prime rate of interest plus 4%, and indicated through sale of assets or other means full repayment of the existing credit facility in full by November 29, 2013. In the year ended December 31, 2014, the Bank agreed to enter into a Forbearance agreement due to the contemplated merger with NWTR. At December 31, 2013, the Company had closed a series of asset sales in efforts to work with the Bank to meet the terms of the Forbearance agreement as of the end of the year December 31, 2013. At December 31, 2013, CA$2,018,951 ($2.7 million USD) was outstanding.

We will require additional financing to fund our drilling and development plans in 2015, as discussed above. 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 cash flow 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.

The uncertainties relating to our ability to repay our revolving demand loan and to successfully execute our business plan, combined with the difficult financing environment, continue to raise substantial doubt about our ability to continue as a going concern. Our financial statements 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.

The following table summarizes our cash flows for the periods ended December 31, 2014 and December 31, 2013, respectively:


		For the year ended December 31,
		2014			2013
Net cash flows from in operating activities	$	(1,822,529	)	$	(1,415,599	)
Net cash flows from investing activities		(984,444	)		1,129,638
Net cash flows from financing activities		3,444,538			(108,328	)
Effect of exchange rate changes		—			445,583
Net change in cash during period	$	637,565		$	51,294

Cash from Operating Activities

Cash used by operating activities was $1,822,529 for the year ended December 31, 2014, as compared to cash used by operating activities of $1,415,599 in the year ended December 31, 2013. The increase in cash used is due to the costs of additional senior executive personnel, specifically a new Chief Executive Officer and Chief Financial Officer.

Cash from Investing Activities

Cash used for investing activities for the year ended December 31, 2014 was $984,444 as compared to cash provided by investing activities of $1,129,638 during the year ended December 31, 2013. During the year ended December 31, 2014 we incurred an increase in drilling costs and acquisition costs related to our buildup of activity in Kansas. During the year ended December 31, 2013, the Company received cash proceeds of $2,059,954 on the sale of oil and gas properties held by our discontinued operation in Canada.

Cash from Financing Activities

Total net cash provided by financing activities was $3,444,538 for the year ended December 31, 2014. Total net cash used by financing activities in the year ended December 31, 2013 was $108,328. The change relates to borrowings on convertible debt during the year ended December 31, 2014.

Off Balance Sheet Arrangements

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Disclosure under this item is not required because we are a smaller reporting company.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page

Report Of Independent Registered Public Accounting Firm – 2014		44

Report Of Independent Registered Public Accounting Firm – 2013		45

Consolidated Financial Statements:

Consolidated balance sheets as of December 31, 2014 and 2013		46

Consolidated statements of operations for the years ended December 31, 2014 and 2013		47

Consolidated statements of comprehensive loss for the years ended December 31, 2014 and 2013		48

Consolidated statements of shareholders’ equity for the years ended December 31, 2014 and 2013		49

Consolidated statements of cash flows for the years ended December 31, 2014 and 2013		50

Notes to consolidated financial statements		51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Legend Oil and Gas, Ltd.
Alpharetta, Georgia

We have audited the accompanying consolidated balance sheet of Legend Oil and Gas, Ltd. as of December 31, 2014, and the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for the year then ended. Legend Oil and Gas, Ltd.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Legend Oil and Gas, Ltd. as of December 31, 2013 and the year then ended were audited by other auditors whose report, which included an explanatory paragraph as to the Company’s ability to continue as a going concern, dated April 15, 2014 expressed an unqualified opinion on those statements before the adjustments to retrospectively apply discontinued operations as discussed in note 12 to the consolidated financial statements.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Legend Oil and Gas, Ltd. as of December 31, 2014, 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.

We have also audited the adjustments to the 2013 consolidated financial statements to retrospectively apply discontinued operations as discussed in Note 12 to the consolidated financial statements. Our procedures included auditing the adjustments to reclassify assets, liabilities, operations, and cash flows of the Company’s discontinued operations. In our opinion, such adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2013 consolidated financial statements of the Company other than with respect to the adjustments and accordingly, we do not express an opinion or any other form of assurance on the 2013 consolidated financial statements of the Company, taken as whole.

The accompanying consolidated financial statements have been prepared assuming that Legend Oil and Gas, Ltd. will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, Legend Oil and Gas Ltd. has suffered recurring losses from operations and has a net working capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GBH CPAs, PC

GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
April 3, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Legend Oil and Gas, Ltd.

Alpharetta, Georgia

We have audited, before the effects of the adjustments to retrospectively apply discontinued operations as discussed in Note 12 to the consolidated financial statements, the consolidated balance sheet of Legend Oil and Gas, Ltd. and subsidiary (“the Company”) as of December 31, 2013, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ deficit, and cash flows for the year then ended (the 2013 consolidated financial statements before the effects of the adjustments to retrospectively apply discontinued operations discussed in Note 12 to the consolidated financial statements are not presented herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2013 consolidated financial statements, before the effects of the adjustments to retrospectively apply discontinued operations as discussed in Note 12 to the consolidated financial statements, present fairly, in all material respects, the financial position of Legend Oil and Gas, Ltd. and subsidiary as of December 31, 2013, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply discontinued operations as discussed in Note 12 to the consolidated financial statements and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has experienced recurring losses from operations and negative cash flows from operating activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/S/ PETERSON SULLIVAN LLP

Seattle, Washington

April 15, 2014

Legend Oil and Gas, Ltd.
CONSOLIDATED BALANCE SHEETS

As of December 31, 2014 and 2013

	2014		2013

ASSETS
Current Assets
Cash and cash equivalents	$	701,848	$	64,283
Restricted cash		85,000		—
Accounts receivable		72,406		54,770
Prepaid expenses		—		45,877
Total current assets		859,254		164,930

Deposits		—		3,740
Property, plant and equipment - net		453,375		—
Oil and gas properties – net (full cost method)		3,639,916		1,479,423
Net assets attributable to discontinued operations		—		2,568,883
Total assets	$	4,952,545	$	4,216,976

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	$	52,413	$	220,771
Accounts payable-related party		577,000		—
Accrued interest		50,427		24,069
Current portion of long term debt		409,856		27,496
Convertible debt, net of debt discount of $0 and $1,066,477, respectively		—		612,527
Net liabilities of discontinued operations		—		4,767,413

Embedded derivative liabilities		—			1,161,284
Total current liabilities		1,089,696			6,813,560

Embedded derivative liabilities		1,128,667			—
Long term debt, net of debt discount of $53,924 and $0, respectively		6,119,245			—
Asset retirement obligations		202,586			196,767
Total liabilities		8,540,194			7,010,327

Stockholders’ Deficit
Series A Convertible Preferred Stock - 600 shares authorized; $0.001 par value; 600 and 0 shares issued and outstanding, respectively		—			—
Preferred stock – 99,999,400 shares authorized; $0.001 par value; 0 shares issued and outstanding		—			—
Common stock – 1,000,000,000 shares authorized; $0.001 par value;187,583,273 and 109,343,534 shares issued and outstanding, respectively		187,583			109,343
Additional paid-in capital		27,227,181			25,726,902
Accumulated other comprehensive loss		—			17,188
Accumulated deficit		(31,002,413	)		(28,646,784	)
Total stockholders’ deficit		(3,587,649	)		(2,793,351	)
Total liabilities and stockholders’ deficit	$	4,952,545		$	4,216,976

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

Legend Oil and Gas, Ltd.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years ended December 31, 2014 and 2013

	2014			2013
Oil and gas revenue	$	691,593		$	416,536

Operating expenses:
General and administrative		3,635,247			2,750,075
Production expenses		443,413			208,885
Depletion, depreciation, and amortization		80,910			73,442
Accretion of asset retirement obligation		15,803			9,765
Total operating expenses		4,175,373			3,042,167

Operating loss		(3,483,780	)		(2,625,631	)

Other income (expense)
Interest expense		(4,720,857	)		(696,966	)
Loss on debt extinguishment		(5,013,957	)		—
Change in fair value of embedded derivative liabilities		7,968,322			211,458
Total other income (expense)		(1,766,492	)		(485,508	)
Loss from continuing operations		(5,250,272	)		(3,111,139	)
Gain (loss) from discontinued operations		2,894,643			(9,220,217	)
Net loss		(2,355,629	)		(12,331,356	)
Preferred stock dividends		—			(691,150	)
Net loss applicable to common stock	$	(2,355,629	)	$	(13,022,506	)

Basic and diluted weighted average number of common shares outstanding		149,333,365			91,919,764

Net income (loss) per common share – basic and diluted Continuing operations	$	(0.04	)	$	(0.03	)

Discontinued operations	$	0.02		$	(0.11	)

Total	$	(0.02	)	$	(0.14	)

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

Legend Oil and Gas, Ltd.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Years ended December 31, 2014 and 2013

		2014			2013
Net loss	$	(2,355,629	)	$	(12,331,356	)
Other comprehensive loss:
Foreign currency translation adjustment		110,586			(135,446	)
Deconsolidation of foreign subsidiary		(127,774	)
Comprehensive loss	$	(2,372,817	)		(12,466,802	)

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

Legend Oil and Gas, Ltd.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY (DEFICIT)
For the Years ended December 31, 2014 and 2013

	Preferred Stock				Common Stock
	Shares		Amount		Shares		Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2012		—		—		77,220,271		77,220		(25,353,942	)		152,634			(15,624,278	)		(40,748,366	)
Common stock issued for services		—		—		7,700,000		7,700		482,300			—			—			490,000
Stock–based compensation		—		—		—		—		1,206,994			—			—			1,206,994
Foreign currency translation adjustment		—		—		—		—		—			(135,446	)		—			(135,446	)
Conversion of note payable		—		—		2,772,407		2,772		59,761			—			—			62,533
Discount on short term note payable		—		—		—		—		124,430			—			—			124,430
Conversion of convertible preferred stock to common stock		—		—		1,700,000		1,700		365,253			—			—			366,953
Dividends on preferred stock		—		—		13,823,000		13,823		677,327			—			(691,150	)		—
Reclassification out of contingently redeemable common stock		—		—		—		—		47,764,926			—			—			47,764,926
Stock issued for interest payment		—		—		955,128		955		30,405			—			—			31,360
Stock issued to employees for services		—		—		2,900,000		2,900		258,100			—			—			261,000
Stock issued for property		—		—		2,272,728		2,273		111,348			—			—			113,621
Net loss		—		—		—		—		—			—			(12,331,356	)		(12,331,356	)

Balance, December 31, 2013		—		—		109,343,534		109,343		25,726,902			17,188			(28,646,784	)		(2,793,351	)
Stock issued for services						56,263,333		56,264		755,039			—			—			811,303

Stock issued for debt and interest payments		—		—		21,976,406		21,976		145,241			—			—			167,217

Foreigh currency translation		—		—		—		—		—			110,586			—			110,586
Deconsolidation of Canadian subsidiary		—		—		—		—		—			(127,774	)		—			(127,774	)

Issuance of convertible preferred stock		600		1		—		—		599,999			—			—			600,000


Net loss		—		—		—		—		—			—			(2,355,629	)		(2,355,629	)

Balance, December 31, 2014		600		1		187,583,273		187,583		27,227,181			—			(31,002,413	)		(3,587,649	)

Legend Oil and Gas, Ltd.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years ended December 31, 2014 and 2013

	2014			2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss	$	(2,355,629	)	$	(12,331,356	)
(Gain) loss from discontinued operations		(2,894,643	)		9,220,217
Loss from continuing operations		(5,250,272	)		(3,111,139	)

Adjustments to reconcile net loss from continuing operations to cash flows used in operating activities:
Stock-based compensation		811,302			1,467,994
Issuance of common stock for services		—			521,360
Depletion, depreciation, amortization and impairment		80,910			73,442
Accretion of asset retirement obligation		15,803			9,765
Amortization of debt discounts		1,267,867			617,195
Fair value of derivative liabilities in excess of face value of convertible debt		3,158,334			—
Loss on debt extinguishment		5,013,957			—
Change in fair value of derivative liabilities		(7,968,322	)		(211,458	)
Changes in operating assets and liabilities:
Accounts receivable		256,717			(42,780	)
Prepaid expenses and other assets		48,400			(39,802	)
Accounts payable		(89,643	)		70,689
Accounts payable – Related party		577,000			—
Accrued Interest		255,418			31,569
Net cash flows used in operating activities – continuing operations		(1,822,529	)		(613,165	)
Net cash flows used in operating activities – discontinued operations		—			(802,434	)
Net cash flows used in operating activities		(1,822,529	)		(1,415,599	)

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of oil and gas properties		450,318			—
Cash paid for certificate of deposit		(85,000	)		—
Cash paid for purchase of equipment		(150,000	)		—
Cash paid for oil and gas properties drilling costs		(1,199,762	)		(430,478	)
Net cash flows used in investing activities – continuing operations		(984,444	)		(430,478	)
Net cash flows provided by investing activities – discontinued operations		—			1,560,116
Net cash flows used in investing activities		(984,444	)		1,129,638

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from sale of preferred stock		600,000			—
Proceeds from debt		160,100			1,201,957
Proceeds from short term convertible debt, net		2,772,258			—
Payments on debt		(12,500	)		—
Payments on convertible debt		(75,320	)		—
Payments on note payable to bank		—			—
Net cash flows provided by financing activities – continuing operations		3,444,538			1,201,957
Net cash flows used in financing activities – discontinued operations		—			(1,310,285	)
		3,444,538			(108,328	)

Change in cash and cash equivalents before effect of exchange rate changes		637,565			(394,289	)

Effect of exchange rate changes		—			445,583
Net change in cash and cash equivalents		637,565			51,294
Cash and cash equivalents, beginning of year		64,283			12,989
Cash and cash equivalents, end of year	$	701,848		$	64,283

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the year for:
Interest	$	20,694		$	124,151
Taxes	$	—		$	—

NON-CASH INVESTING AND FINANCING ACTIVITIES


Debt discount on short term note payable	$	—	$	74,810
Debt assumed in acquisition of oil and gas properties		1,040,000		—
Debt discount on convertible debt		4,314,169		—
Change in estimate of asset retirement obligation		9,984		—
Common stock issued for conversion of convertible debt		158,997		—
Debt issued for the purchase of equipment		315,000		—
Issuance of a note payable for accrued expenses		123,245
Conversion of convertible preferred stock to common stock		—		366,953
Common stock reclassified from contingently redeemable		—		47,764,926
Preferred stock dividend		—		691,150
Stock issued for purchase of oil and gas property		—		113,621
Exchange of note payable to bank for convertible notes payable		—		373,043

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

Legend Oil and Gas, Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND DESCRIPTION OF OPERATIONS

Description of Business

Legend Oil and Gas, Ltd. (the “Company” or “Legend”) is an oil and gas exploration, development and production company that focuses on conventional oil and gas plays in the United States. The Company’s principal operating properties are located in Wilson, Crawford, and Woodson counties, Kansas. The Company owns 100% working interests and is the operator of all of its oil and gas properties.

On July 28, 2011, the Company 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. As of December 31, 2014, Legend Canada was considered a discontinued operation as described in Note 12.

During the year ended December 31, 2014, we placed our wholly owned subsidiary, Legend Canada, into the Canadian bankruptcy system. The bankruptcy estate of Legend Canada owns oil and gas properties in Western Canada (Berwyn, Medicine River, Boundary Lake, and Wildmere in Alberta, and Clarke Lake and Inga in British Columbia). Legend Canada was placed under the control of KPMG Inc. as Trustee in the bankruptcy proceedings. The Company has written off all assets and liabilities of Legend Canada, resulting in income from discontinued operations as it no longer controls, or has responsibility for any operations or asset dispositions of Legend Canada as described in Note 7.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”).

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.

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, the fair value of financial instruments, stock-based compensation 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 typically consist of oil and gas receivables, 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 December 31, 2014 and 2013.

Concentrations

During the years ended December 31, 2014 and 2013, sales of oil and gas to certain customers individually exceeded 10% of the total oil and gas revenue. For the year ended December 31, 2014, sales to Kelly Maclaskey Oilfield Service Inc and Coffeyville Resources accounted for approximately 86% and 24%, of total oil and gas sales, respectively. For the year ended December 31, 2013, sales to Husky Energy Marketing, Kelly Maclaskey Oilfield Service Inc., BP Canada Energy, Gibson Petroleum and Suncor Energy accounted for approximately 27%, 21%, 17%, 7% and 13% 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.

Financial instruments which potentially subject the Company to concentrations of credit risk include cash deposits placed with financial institutions. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2014, $451,848 of the Company’s cash balances were uninsured. The Company has not experienced any losses on such accounts.

Comprehensive Income

For operations outside of the U.S. that prepare financial statements in currencies other than U.S. dollars, the Company translates 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 December 31, 2014 and 2013.

Liquidity

The Company has incurred net operating losses and operating cash flow deficits over the last two years, continuing through the year ended December 31, 2014. The Company is in the early stages of acquisition and development of oil and gas leaseholds, and the Company have been funded primarily by a combination of equity issuances and borrowing under loan agreements and to a lesser extent by operating cash flows, to execute our business plan for the acquisition, exploration, development and production of oil and gas reserves. At December 31, 2014, the Company had cash and cash equivalents totaling approximately $701,848

Equipment

Equipment is stated at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to expense as incurred. Renewals and betterments which extend the life or improve existing equipment are capitalized. Upon disposition or retirement of equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are 7 years.

Full Cost Method of Accounting for Oil and Gas Properties

The Company has 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. Legend’s cost centers consist of the Canadian cost center and the United States cost center. Oil and gas properties are presented as discontinued operations when an entire cost center is to be disposed.

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 attributable to a cost center, in which case the gain or loss is recognized in income. In determining whether adjustments to capitalized costs result in a significant alteration, capitalized costs within the cost center are allocated between the reserves sold and reserves retained on the same basis used to compute amortization, unless there are substantial economic differences between the properties sold and those retained. When economic differences between properties sold and those retained exist, capitalized costs within the cost center are allocated on the basis of the relative fair values of the properties in determining whether adjustments to capitalized costs result in a significant alteration.

Full Cost Ceiling Test

At the end of each 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. Impairment charges amounted to $0 and $7,916,993 for the years ended December 31, 2014 and 2013, respectively. The impairment recorded for the year ended December 31, 2013 was related to oil and gas properties held by the Company’s Canadian subsidiary. Accordingly, the impairment has been reclassified to discontinued operations in the statement of operations for the year ended December 31, 2013.

Asset Retirement Obligation

The Company records 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 is the sales method of accounting for our oil and gas revenue recognition. Revenue from production on properties in which the Company shares an economic interest with other owners is recognized on the basis of our interest. Revenues are reported on a gross basis for the amounts received before taking into account production taxes, royalties, and transportation costs, which are reported as production expenses. Under the sales 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 the Company are entitled to, based on our individual interest in the property. The Company utilizes 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, the Company 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. The Company will record any differences between the actual amounts ultimately received and the original estimates in the period they become finalized.

Stock-based compensation

The Company measures 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. Legend’s policy is to issue new shares when options are exercised. Compensation cost from the issuance of stock options and stock grants is recorded as a component of general and administrative expenses in the consolidated statements of operations, and amounted to $811,303 and $1,467,994 for the years ended December 31, 2014 and 2013, respectively.

The Black-Scholes option pricing model is used to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.

The Company estimates volatility by considering the historical stock volatility. The Company has opted to use the simplified method for estimating expected term, which is generally equal to the midpoint between the vesting period and the contractual term.

Net Loss Per Common 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 income per common share is based on the weighted average number of shares used in the basic net income per share calculation plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding. Potentially dilutive common shares include warrants to purchase shares of common stock (0 shares for 2014 and 32,713,067 shares for 2013), notes payable convertible into common stock (0 shares for 2014 and 31,515,457 and shares for 2013), options to purchase shares of common stock (0 shares for 2014 and 600,000 shares for 2013), and preferred stock convertible into shares of common stock (600,000,000 shares for 2014 and 0 shares for 2013). During the years ended December 31, 2014 and 2013 potentially dilutive common shares were not included in the computation of diluted loss per share as to do so would be anti-dilutive.

Income Taxes

The Company recognizes income taxes on an accrual basis based on a 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 or 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 likely than not be realized. A valuation allowance for the full amount of the net deferred tax asset was recorded for the years ended December 31, 2014 and 2013. Should they occur, interest and penalties related to tax positions are recorded as interest expense. No such interest or penalties have been incurred as of December 31, 2014 and 2013. The Company is no longer subject to federal examination for years before 2007.

Derivative Financial Instruments

The Company evaluates financial instruments for freestanding or embedded derivatives. Derivative instruments that do not qualify for permanent equity classification as the instruments have been determined not to be indexed to the Company’s stock are recorded as liabilities at fair value, with changes in value recognized as other income (expense) in the consolidated statements of operations in the period of change. Derivative liabilities are categorized as either short-term or long-term based upon management’s estimates as to when the derivative instrument may be realized or based upon the holder’s ability to realize the instrument.

Fair Value Measurements

The Company follows FASB ASC 820, Fair Value Measurement (“ASC 820”), which clarifies fair value as an exit price, establishes a hierarchal disclosure framework for measuring fair value, and requires extended disclosures about fair value measurements. The provisions of ASC 820 apply to all financial assets and liabilities measured at fair value.

As defined in ASC 820, fair value, clarified as an exit price, represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

Level 1: Observable market inputs such as quoted prices in active markets;

Level 2: Observable market inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs where there is little or no market data, which require the reporting entity to develop its own assumptions.

Recently Issued Accounting Pronouncements

There were various accounting standards and interpretations issued during 2014 and 2013, none of which are expected to have a material impact on the Company’s financial position, operations or cash flows.

Subsequent Events

The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

NOTE 3 – GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred a loss from continuing operations of $5,250,272 for the year ended December 31, 2014 and had negative working capital of $176,801 and an accumulated deficit of $31,002,413 at December 31, 2014. Additionally, the Company is dependent on obtaining additional debt and/or equity financing to roll-out and scale its planned principal business operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters consist principally of seeking additional debt and/or equity financing combined with expected cash flows from current oil and gas assets held and additional oil and gas assets that it may acquire. There can be no assurance that the Company’s efforts will be successful. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

NOTE 4 - OIL AND GAS PROPERTIES AND EQUIPMENT

The amount of capitalized costs related to oil and gas property and the amount of related accumulated depletion, depreciation, and amortization are as follows:

	December 31,
	2014			2013
Proved leasehold costs	$	2,028,621		$	1,131,003
Costs of wells and development		1,749,041			406,897
Capitalized asset retirement costs		171,017			181,001
Total proved oil and gas properties		3,948,679			1,718,901
Accumulated depletion, depreciation, and amortization		(308,763	)		(239,478	)
Net capitalized proved oil and gas properties		3,639,916			1,479,423
Unproven property		—			—
Total oil and gas properties	$	3,639,916		$	1,479,423

The Company recorded depletion expense of oil and gas properties of $69,285 and $73,442 during the years ended December 31, 2014 and 2013, respectively.

Rig Purchase

During the year ended December 31, 2014, the Company purchased a drilling rig at a purchase price of $465,000, for both its own use and to provide potential additional revenue sources to the Company. This asset purchase was financed through a down payment of $150,000, and a note payable of $315,000, at 6%, per annum, with monthly payments of $18,343, including principal and interest, through April 2016. The useful life of the rig is expected to be seven years. During the year ended December 31, 2014, the Company recorded $11,625 of depreciation on the rig. The net book value at December 31, 2014 was $453,375.

2014 Property Sales and Acquisitions

During the year ended December 31, 2014, the Company acquired the Landers and Volunteer leases from New Western Energy Corporation (“NWTR”). The Company entered into a Loan Release Agreement with NWTR, in which (i) NWTR assigned and transferred to Legend, all of its right, title, and interest in the assumed leases and (ii) Legend assumed a debenture and released NWTR from any further obligations or payments relating to the debenture, which, upon assumption, had a balance of $1,040,000, due and payable as of April 2016 (subsequently amended see Note 8).

During the year ended December 31, 2014, the Company incurred development costs of $1,749,041 related to the completion of the Piqua, McCune, Landers, and Volunteer wells.

2013 Property Sales and Acquisitions

On November 28, 2013, the Company acquired oil and gas producing assets located near McCune, Kansas. The net assets acquired had a fair value of $363,621 on the acquisition date and consisted of proven property. The consideration transferred was $363,621, resulting in no goodwill or bargain purchase gain. The consideration consisted of $250,000 in cash and 2,272,728 shares of restricted common stock with a fair value of $113,621. The fair value of the common stock on the date transferred was determined on the basis of the closing market price of the Company’s common shares on the acquisition date. The results of the acquisition are included in the accompanying consolidated financial statements since the date of purchase.

NOTE 5 – ASSET RETIREMENT OBLIGATION

The following table reconciles the value of the asset retirement obligation for the years ended December 31, 2014 and 2013:

	December 31,
	2014			2013
Opening balance, January 1	$	196,767		$	114,402
Liabilities incurred		21,644			72,600
Liabilities settled		—			—
Accretion expense		15,803			9,765
Revisions		(31,628	)		—
Ending balance, December 31	$	202,586		$	196,767

NOTE 6 – RELATED PARTY TRANSACTIONS

During the year ended December 31, 2014, the Company was billed approximately $162,000 of investment banking fees by North Point Energy Partners, which our CEO is an owner. As of December 31, 2014, we owe North Point Energy Partners and our CEO approximately $577,000, for unpaid compensation and investment banking fees.

NOTE 7 – NOTE PAYABLE TO BANK

Under a series of agreements with the Bank of Canada (the “Bank”), as of December 31, 2013, Legend Canada had a revolving credit facility with a maximum borrowing base of $2,018,951. Outstanding principal under the loan bears interest at a rate equal to the Bank’s prime rate of interest (currently 3%) plus 1%. The Company is 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 CAD$25 million approximately (US $33 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. On August 22, 2013, the Company entered into a Forbearance agreement with the Bank, which conveyed the Bank additional control over the assets of Legend Canada, increased the interest payments to prime rate of interest plus 4%, and indicated through sale of assets or other means full repayment of the existing credit facility in full by November 29, 2013. In the year ended December 31, 2014, the Bank agreed to enter into a Forbearance agreement due to the contemplated merger with NWTR. At December 31, 2013, the Company had closed a series of asset sales in efforts to work with the Bank to meet the terms of the Forbearance agreement as of the end of the year December 31, 2013. At December 31, 2013, CA$2,018,951 (US $2.7 million) was outstanding.

NOTE 8 – NOTES PAYABLE

NWTR

On January 23, 2014, the Company entered into an Agreement and Plan of Merger with NWTR. On April 1, 2014, the Company issued a note payable for cash proceeds of $75,000 to NWTR. The significant terms of the agreement were that if the planned merger was terminated, or the merger did not occur by December 31, 2014, the Company was obligated to repay the $75,000 within 60 days of such termination, or on February 28, 2015, whichever came first. There was no interest due and payable on this note.

In May 2014, the merger was terminated by mutual consent. As a result, the Company became obligated to repay the $75,000 to NWTR. During the year ended December 31, 2014, the Company repaid $10,000 of this amount, and had a balance of $65,000 outstanding as of December 31, 2014.

On January 6, 2015, the Company and NWTR entered into a settlement agreement whereby the Company agreed to repay NWTR $10,000 on or before January 7, 2015, with the remainder payable commencing February 15, 2015, in five (5) monthly installments of $9,168. This note has no interest provision.

RIG PURCHASE AGREEMENT

The Company purchased a drilling rig at a purchase price of $465,000. This asset purchase was financed through a down payment of $150,000, and a note payable of $315,000, at 6%, per annum, with monthly payments of $18,343, including principal and interest, through April 2016. The balance due on this note is $281,380 at December 31, 2014.

COMMUNITY TRUST BANK

In October 2014, the Company entered into an agreement with Community Trust Bank, for a loan in the amount of $85,100 at 2.4% per annum with regular monthly payments of $1,508 of principal and interest through September 2015 and one balloon payment of $70,400 in October 2015. This note is secured by a certificate of deposit in the amount of $85,000 currently classified as restricted cash.

NOTE 9 – CONVERTIBLE DEBT

JMJ Capital

During the year ended December 31, 2014, the Company borrowed an additional $30,000 from JMJ under the above note payable agreement. The Company received net proceeds of $26,500.

Hillair Capital Investments

The Company accounts for warrants and conversion features as either equity instruments or derivative liabilities depending on the specific terms of the agreements. Conversion features and warrants are accounted for as derivative financial instruments if they contain down-round protection, which preclude them from being considered indexed to the Company’s stock. The conversion feature and the warrants issued to Hillair, in the July 10, 2013 and November 22, 2013 debentures, contained such down-round protection, and were bifurcated from the host debt contract and recorded at fair value. The embedded features were subsequently adjusted to fair value at each reporting date, with the corresponding adjustment reflected as non-operating unrealized income or loss in the consolidated statement of operations.

On May 1, 2014, the Company received a default notice from Hillair, for failure to make its principal payments by the required dates in the debentures.

Also on May 29, 2014, The Company and Hillair entered into an additional debenture (the “Additional Debentures”), whereby the Company received $335,758 in net proceeds and issued a new debenture with a face value of $448,000. The debenture carries an 8% interest rate per annum and is convertible into the Company’s common stock at an exercise price of $0.01 per share, subject to anti-dilution provisions. The Additional Debenture is payable on or before August 1, 2016.

The Company analyzed the fair value of the Amended Debentures and Amended Warrants as compared to the debentures and warrants originally issued, and noted a change of greater than 10% in fair value, resulting in an extinguishment of the debt. The Company recorded a loss on extinguishment of $1,881,015.

The Company determined that the adjustments to the exercise price of the Amended Debentures and Amended Warrants contained ratchet provisions that were not indexed to the Company’s stock and, accordingly, recorded a derivative liability for each instrument. The fair value of the embedded derivatives on the date of issuance was $1,338,487 and $1,912,920 for the Amended Debentures and Amended Warrants, respectively. The Company recorded $1,720,283 as a debt discount for the full face value of the debt and the remaining amount was included in the loss on extinguishment of debt.

The Company determined that the adjustments to the exercise price of the Additional Debenture and Additional Warrants contained ratchet provisions that were not indexed to the Company’s stock and accordingly recorded a derivative liability. The fair value of the embedded derivatives on the date of issuance was $348,572 and $1,144,061 for the Additional Debenture and Additional Warrants, respectively. The Company recorded $335,758 as a debt discount for the remaining face value of the debt and recorded $1,156,875 as interest expense.

The Company determined that the adjustments to the exercise price of the June 2014 and August 2014 debentures contained ratchet provisions that were not indexed to the Company’s stock and accordingly recorded a derivative liability for each instrument. The fair value of the embedded derivatives on the dates of issuance were $233,158 and $934,366, respectively. The fair value of the derivative on the June 2014 debenture was recorded as a debt discount. The Company recorded $325,000 as additional debt discount for the August debenture and recorded the remaining fair value of $609,366 as interest expense.

The Company determined that the adjustments to the exercise price of the September 4, 2014 debenture contained a ratchet provision that was not indexed to the Company’s stock. Accordingly, the Company recorded a derivative liability. The fair value of the embedded derivative on the date of issuance was $399,970 which was recorded as a debt discount.

The Company determined that the adjustments to the exercise price of the debt and warrants were not indexed to the Company’s stock and, accordingly, recorded a derivative liability. The fair value of the embedded derivatives in the debt and new warrants on the date of issuance was $1,248,527 and $1,443,565, respectively. The Company recorded $1,300,000 as a debt discount for the remaining face value of the debt and recorded $1,392,092 as interest expense.

The Company analyzed the above transaction and noted that the conversion features of the debentures was eliminated resulting in extinguishment accounting. The Company compared the carrying value of the convertible debentures, accrued interest, and fair value of the warrants to the fair value of the Restructured Debenture, the $600,000 in cash proceeds received and the fair value of the convertible perpetual preferred stock. As a result, the Company recorded a loss on extinguishment of $3,124,722.

During the year ended December 31, 2014 and 2013, the Company recorded $1,267,867 and $617,195 respectively, in interest expense related to the amortization of debt discounts on the Company’s outstanding debt.

NOTE 10 – EMBEDDED DERIVATIVE LIABILITIES

The following table is a reconciliation of embedded derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2014 and 2013:

	Embedded Derivative Liabilities
Balance as of December 31, 2012		—
Fair value of warrants issued		1,372,742
Change in fair value		(211,458	)
Balance as of December 31, 2013	$	1,161,284
Fair value of warrants issued		4,500,546
Fair value of debt issued		4,503,080
Fair value of Series A Convertible Preferred Stock issued		2,324,184
Dispositions at fair value		(3.392,105	)
Changes in fair value		(7,968,322	)
Balance as of December 31, 2014	$	1,128,667

The Company valued the embedded derivative liabilities using a Black-Scholes model. A summary of quantitative information with respect to valuation methodology, estimated using a Black-Scholes model, and significant unobservable inputs used for the Company’s embedded derivative liabilities for the year ended December 31, 2014 is as follows:

Expected dividend yield		—
Strike price	$	0.001 – 0.01
Expected stock price volatility		196.27 - 218.76	%
Risk-free interest rate		1.52 - 1.78	%
Expected term (in years)		4 - 5 years

In the year ended December 31, 2013, the Company valued the embedded derivative liabilities using a lattice model using Level 3 inputs. The lattice model was selected because this technique embodies all of the types of inputs that the Company expect market participants would consider in determining the fair value of equity linked derivatives embedded in hybrid debt agreements. A summary of quantitative information with respect to valuation methodology, estimated using a lattice model, and significant unobservable inputs used for the Company’s embedded derivative liabilities for the year ended December 31, 2013 is as follows:

Expected dividend yield		—
Strike price	$	0.04
Expected stock price volatility		100.0	%
Risk-free interest rate		0.13	%
Expected term (in years)		0.92 years

NOTE 11 – STOCKHOLDERS’ DEFICIT

On July 25, 2014, the Company obtained stockholder approval to amend the Company’s Articles of Incorporation to effect an increase in the amount of authorized shares of from 500,000,000 to 1,100,000,000. The Company increased the number of authorized shares of common stock from 400 million shares, with a par value of $0.001, to 1 billion shares, with a par value of $0.001 and 100 million shares are designated as blank check preferred stock.

On November 3, 2014, the Company’s board of directors amended the Company’s Articles of Incorporation to designate 600 shares of Series A Convertible Preferred Stock with a par value of $0.001 and convertible into shares of the Company’s common stock at a rate of 1 share of Series A Convertible Preferred Stock for 1,000 shares of common stock at the holder’s option.

Issuance of Common Stock

2014 Issuances

During the year ended December 31, 2014, the Company issued 21,976,406 shares of common stock for the conversion of $107,520 of convertible debt held by JMJ and $51,477 of interest for notes held by Hillair Capital Investments, resulting in a loss on extinguishment of $8,220.

The Company also issued 56,263,333 shares of common stock to various employees and directors. The value of the stock ranged from $0.01 - $0.07 per share based on the market value on the date of grant, with an aggregate value of $811,303.

2013 Issuances

In 2012, under an asset purchase agreement, we granted Wi2Wi a “put” option to require us to redeem the Common Shares if we fail to obtain listing for our Common Shares on the NYSE, Amex, NASDAQ, or any other stock market more senior than the OTCBB on or before March 31, 2012. The redemption price is $2.00 per share payable in cash. This put option existed on the original 3,552,516 common shares, of which Wi2Wi has disposed of 1,020,300 shares, as well as the 21,350,247 shares of common stock issued to Wi2Wi on May 17, 2012.

On May 1, 2013, the Company and Wi2Wi entered into an agreement to eliminate the put right. For accounting purposes, the carrying amount of the contingently redeemable common stock amounting to $47,764,926 was transferred to additional paid-in capital in the consolidated financial statements. On March 26, 2012 the holders of convertible preferred stock agreed to waive their put right with the condition that Wi2Wi also waive their put option. As a result of the agreement with Wi2Wi and the election to convert to common stock by preferred shareholders, on June 20, 2013, the Company issued 1,700,000 shares of common stock related to the 1:1 conversion of the preferred stock to common stock, and 13,823,000 shares of common stock as consideration for forfeiting their put rights. The fair value of the consideration shares determined from the closing price of the shares on the date transferred amounting to $691,150 was recorded as a dividend to the preferred stock holders. In addition, the carrying amount of the contingently redeemable convertible preferred stock amounting to $366,953 was transferred to common stock and additional paid-in capital in the consolidated financial statements.

During 2013, the Company issued 1,700,000 shares of common stock with a fair value of $85,000 in exchange for services. The fair value of the common stock was determined using the closing price of the shares on the date transferred.

In July 2013, we issued 3,000,000 shares of common stock with a fair value of $240,000 to Hillair in connection with issuing the Senior Secured Convertible Debenture. The 3,000,000 shares of common stock were issued as consideration for Hillair executing the agreement in advance of the Bank’s waiver of certain security agreements. The Company also issued 1,500,000 shares of common stock with a fair value of $105,000 in exchange for services rendered related to the Hillair financing. The fair value of the common stock was determined from the closing price of the share on the dates transferred.

During July 2013, the Company issued 2,900,000 in stock as compensation to employees. The shares of stock issued had a fair value of $261,000 determined from the closing price of the shares on the date transferred.

During 2013, the Company issued JMJ Capital 2,772,407 shares of common stock as a result of the conversion of a note payable with a face value of $50,000 plus accrued interest and original issue discount that was issued during April 2013.

During November 2013, the Company issued 1,500,000 shares of common stock to Northpoint Capital in exchange for services rendered. The fair value of the common stock had a fair value of $60,000 determined from the closing price of the shares on the date transferred.

During December 2013, the Company issued 2,272,728 shares of common stock as partial consideration for the purchase of oil and gas property in Kansas.

During December 2013, the Company issued 955,128 shares of common stock to Hillair in payment of accrued interest on convertible debt agreements.

Convertible Preferred Stock

In exchange for the 474,258,441 warrants to purchase shares of the Company’s common stock held by Hillair; Hillair purchased 600 shares of convertible perpetual preferred stock, for a total amount of $600,000 in cash proceeds. This convertible, perpetual preferred stock has a 0% dividend rate. The shares of preferred stock are convertible into 600 million shares of the Company¹s common stock at $0.001 per share, and has a non-dilution provision.

Warrants

Warrant activity during the year ended December 31, 2014 was:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract Term (# years)
Outstanding at January 1, 2014		32,713,067		$	0.21		4.3
Granted		474,258,441		$	0.01		5.0
Exercised		—		$	0.00		—
Forfeited and cancelled		(506,971,508	)	$	0.01		5.0

Outstanding at December 31, 2014		—		$	—		—

Exercisable at December 31, 2014		—		$	—		—

Warrant activity during the year ended December 31, 2013 was:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract Term (# years)
Outstanding at January 1, 2013		4,150,000		$	1.36		1.3
Granted		29,863,067		$	0.07		5.0
Exercised		—		$	—		—
Forfeited and cancelled		(1,300,000	)	$	0.50		—

Outstanding at December 31, 2013		32,713,067		$	0.21		4.3

Exercisable at December 31, 2013		32,713,067		$	0.21		4.3

The intrinsic value of outstanding and exercisable warrants at December 31, 2014 and 2013 was $0 and $0, respectively.

2014 Warrant Activity

During the year ended December 31, 2014, the Company issued to Hillair an aggregate of 474,258,441 warrants to purchase shares of the Company’s common stock. The warrants have an exercise price of $0.01 per share and a term of 5 years. The fair value of these warrants using the Black-Scholes model was $4,500,546. These warrants were issued in conjunction with various debentures to Hillair. Accordingly, the Company recorded $3,020,283 in debt discounts against the debentures and $1,480,263 as interest expense on the dates of issuance. Variables used in the Black-Scholes option-pricing model for the warrants issued include: (1) a discount rate 1.78 %, (2) expected term of 5 years, (3) expected volatility between 196.27 - 201.35% and (4) zero expected dividends.

During the year ended December 31, 2014, 2,850,000 warrants outstanding expired unexercised.

In November 2014, as part of the Restructuring Agreement, Hillair agreed to cancel 474,258,441 warrants to purchase shares of the Company’s stock. See Note 9. As a result of this cancellation, the Company had no warrants outstanding as of December 31, 2014.

2013 Warrant Activity

During the year ended December 31, 2013, the Company issued to Hillair 29,863,067 warrants to purchase shares of the Company’s common stock. The warrants had an exercise price of $0.0673 per share and a term of 5 years. The fair value of the warrants was $1,372,742 which was recorded as debt discount against the debentures issued to Hillair in the year ended December 31, 2013. These warrants were cancelled in as part of the May 29, 2014 amendment to the convertible debentures held by Hillair. See footnote 9.

Stock Incentive Plan

The Company has a 2011 Stock Incentive Plan which provides for the grant of options to purchase shares of the Company’s 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. There are 4,500,000 shares of common stock reserved for issuance under the 2011 Stock Incentive Plan. The Company also has a 2013 Stock Incentive Plan which provides for similar grants and has 10,000,000 shares of common stock reserved.

A summary of stock option activity is as follows:

	Outstanding Options
	Number of Shares			Weighted Average Exercise Price
Balance at January 1, 2014		600,000		$	0.07
Options granted		—		$	—
Options cancelled		(600,000	)	$	0.07
Balance at December 31, 2014		—		$	—
Exercisable, December 31, 2014		—		$	—
Vested and expected to vest		—		$	—

	Outstanding Options
	Number of Shares			Weighted Average Exercise Price
Balance at January 1, 2013		2,800,000		$	1.58
Options granted		600,000		$	0.07
Options cancelled		(2,800,000	)	$	1.58
Balance at December 31, 2013		600,000		$	0.07
Exercisable, December 31, 2013		200,000		$	0.07
Vested and expected to vest		600,000		$	0.07

During the year ended December 31, 2013, 2,800,000 stock options originally granted during 2011 were cancelled, and the remaining compensation expense amounting to $1,190,340 was accelerated and recognized during 2013. The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2013 was nil. The intrinsic value of outstanding and exercisable stock options is calculated as the quoted market price of the stock at the balance sheet date less the exercise price of the option. There were no stock options exercised during the periods presented. At December 31, 2013, the Company had unrecognized compensation expense related to stock options of $22,600 to be recognized over a weighted-average period of 1.75 years.

The following weighted-average assumptions were used in determining the fair value of stock options using the Black-Scholes option pricing model:

	Year Ended December 31,
	2014			2013
Expected dividend yield		—			—
Expected stock price volatility		217.7	%		98.2	%
Risk-free interest rate		1.8	%		2.5	%
Expected term (in years)		5 years			10 years
Weighted-average grant date fair-value	$	—		$	0.07

NOTE 12 – DISCONTINUED OPERATIONS

On April 25, 2014, the Company received a Notice of Intention to Enforce Security from the Bank. Under the notice, the Bank stated that it intended to enforce its rights against Legend Canada under the CAD$6,000,000 (US $8.36 million) Acknowledgement of Debt Revolving Demand Credit Agreement, dated August 15, 2011; the General Assignment of Book Debts, dated October 19, 2011; the CA$25,000,000 (US $33.2 million) Fixed and Floating Charge Demand Debenture; the Pledge Agreement dated October 19, 2011; and the Negative Pledge and Undertaking dated October 19, 2011. On April 28, 2014 the Company received a Notice of Intention to Enforce Security from the Bank. Under the Company Notice, the Bank states that it intends to enforce its rights against the Company under the Letter of Guarantee, dated May 11, 2012; the General Security Agreement dated May 11, 2012; the Securities Pledge Agreement; the Subordination Agreement dated July 10, 2013; and the Set-off and Security Agreement dated July 10, 2013. The bank claims the Company is in default under the Legend Canada Security and the Company Security agreements. The Bank demanded payment in full of all amounts owing under the Legend Canada Security Agreements and the Company Security Agreements. The Bank claimed that the total amount due was $1,657,385 plus accrued interest, costs, expenses and fees including, without limitation, attorney’s fees.

On May 9, 2014, the Bank was granted a Consent Receivership Order in Canada, whereby the Bank appointed a receiver to take all legally appropriate means to recover the amounts Legend Canada defaulted on, including the managing of its assets, potential sales of its assets and other strategic measures to appropriately remediate the amounts due the Bank.

In August 2014, the Company and Bank signed a Mutual Release and Discharge. The Company paid the Bank $250,000 and obtained a release which, among other things, stipulated that the Bank immediately release the guaranty of the Bank’s debt by Legend US, and the Uniform Commercial Code (“UCC”) filing placed by the Bank on Legend US (the parent company guarantee). All such releases were obtained as of December 31, 2014.

The amounts of net assets and liabilities related to the discontinued operations of Legend Canada are as follows:

	December 31, 2014			December 31, 2013
Assets:
Receivables	$	—		$	274,353
Prepaid expenses		57,531			56,314
Oil and gas property – subject to amortization		1,033,874			1,013,905
Oil and gas property – not subject to amortization		773,993			1,224,311
Total assets	$	1,865,398		$	2,568,883

Liabilities:
Accounts payable	$	(1,367,580	)	$	(1,412,108	)
Short-term debt		(2,018,951	)		(2,018,951	)
Asset retirement obligation		(1,356,322	)		(1,336,354	)
Total liabilities	$	(4,742,853	)	$	(4,767,413	)

Equity:
Accumulated other comprehensive income	$	(17,188	)	$	(17,188	)

Income (loss) from discontinued operations	$	2,894,643		$	(9,220,217	)

The amounts of income and expenses related to the discontinued operations of Legend Canada are as follows:

	Years ended
	December 31, 2014		December 31 , 2013
Oil and gas revenue	$	—	$	1,592,600

Cost and Expenses:
General and Administrative				1,204,739
Production expenses		—		1,250,077
Depletion, depreciation, and amortization		—		216,525
Impairment on oil and gas assets		—		7,916,993
Accretion on asset retirement obligation				53,103
Total costs and expenses		—		10,641,437
Operating loss		—		(9,048,837	)

Other Expenses:
Interest expense		—		171,380
Loss from discontinued operations	$	—	$	(9,220,217	)

NOTE 13 – COMMITMENTS AND CONTINGENCIES

The Company leases office space on a month-to-month basis, with monthly rental payments due of approximately $1,500.

The Company is not aware of any pending or threatened legal proceedings, nor is the Company aware of any pending or threatened legal proceedings, effecting any current officer, director or control shareholder, or their affiliates.

As part of its regular operations, the Company may become party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its’ commercial operations, products, employees and other matters. Although the Company can give no assurance about the outcome of these or any other pending legal and administrative proceedings and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on the Company’s financial condition or results of operations.

The Company owes approximately $13,266 in property taxes, penalties, and interest to the state of North Dakota from operations during the year 2012. We entered into a payment plan with the state of North Dakota whereby we pay them $500 per month until the above balance is fully repaid.

NOTE 14 – INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the deferred tax asset as of December 31, 2014 and 2013 are as follows:

	2014			2013
Net operating loss carryforwards	$	5,539,128		$	4,567,466
Oil and gas property		(1,007,171	)		(510,171	)
Asset retirement obligation		406,520			400,989
Total deferred tax asset		4,938,477			4,458,284
Less valuation allowance		(4,938,477	)		(4,458,284	)
Net deferred tax asset	$	—		$	—

The items accounting for the difference between income taxes computed at the statutory rates and the provisions for income taxes are as follows for the years ended December 31, 2014 and 2013:

	2014			2013
Net loss	$	2,261,383		$	(12,331,356	)
Tax rate		35	%		27.54	%
Tax benefit at statutory rate		(971,484	)		(3,395,411	)
Stock-based compensation		283,956			499,118
Loss on debt conversion		1,754,885			—
Gain on discontinued operations		(1,013,125	)		—
Gain on embedded derivatives		(2,788,913	)		—
Timing differences in interest expense		141,331			—
Other		1,009			—
Change in valuation allowance and other		2,592,341			2,896,293
Provision for income taxes	$	—		$	—

The Company established a valuation allowance for the full amount of the net deferred tax asset as management currently does not believe that it is more likely than not that these assets will be recovered in the foreseeable future. The increase in the valuation allowance was $480,193 for 2014 and $677,787 for 2013. The net operating loss at December 31, 2014 is approximately $20 million, and fully expires in 2034.

NOTE 15 – SUBSEQUENT EVENTS

On January 8, 2015, the Company purchased oil and gas properties located in Rogers County Oklahoma for $99,735.

On January 13, 2015, the Company sold its McCune Lease for cash proceeds of $175,000.

On January 21, 2015, the Company entered into a note agreement with Hillair Capital Investments for $400,000. The note is payable on March 1, 2016 and bears an 8.5% interest rate. The Company received $360,000 of cash proceeds from this note.

On March 31, 2015, the Company sold its Piqua leases for cash proceeds of approximately $1.5 million, which were immediately disbursed to Hillair as both repayment of a portion of the November 13, 2014 debenture and accrued interest to date.

NOTE 16 – SUPPLEMENTAL OIL AND GAS INFORMATION (unaudited)

All information set forth herein relating to our proved reserves, estimated future net cash flows and present values is taken or derived from reports prepared by Insite Petroleum Consultants Ltd and KLH Consulting. All of the information designated as Canada below relates to Legend Canada’s operations. The estimates of these engineers were based upon their review of production histories and other geological, economic, ownership and engineering data provided by and relating to us. No reports on our reserves have been filed with any federal agency. In accordance with the Securities and Exchange Commission’s (“SEC”) guidelines, our estimates of proved reserves and the future net revenues from which present values are derived are based on an unweighted 12-month average of the first-day-of-the-month price for the period January through December for that year held constant throughout the life of the properties. Operating costs, development costs and certain production-related taxes were deducted in arriving at estimated future net revenues, but such costs do not include debt service, general and administrative expenses and income taxes.

Capitalized Costs relating to Oil and Gas Producing Activities

Capitalized costs relating to oil and gas producing activities are as follows:

	Canada			United States				Total
December 31, 2014:
Proved	$	—		$	3,948,679		$	3,948,679
Unproven		—			—			—
Total capitalized costs		—			3,948,679			3,948,679
Accumulated depreciation, depletion, amortization, and impairment		—			(309,763	)		(309,763	)
Net capitalized costs	$	—		$	3,638,916			$3,638,916

December 31, 2013:
Proved	$	12,883,154		$	1,718,901		$	14,602,055
Unproven		1,224,311			—			1,224,311
Total capitalized costs		14,107,465			1,718,901			15,826,366
Accumulated depreciation, depletion, amortization, and impairment		(11,869,249	)		(239,478	)		(12,108,727	)
Net capitalized costs	$	2,238,216		$	1,479,423		$	3,717,639

Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities

Cost incurred in oil and gas property acquisition and development activities are as follows:

	Canada		United States		Total
Year Ended December 31, 2014:
Acquisition of properties:
Proved	$	—	$	1,040,000	$	1,040,000
Unproved		—		—		—
Exploration costs		—		—		—
Development costs		—		1,199,762		1,199,762
Total acquisition and development costs	$	—	$	2,239,762	$	2,239,762

Year Ended December 31, 2013:
Acquisition of properties:
Proved	$	—	$	363,616	$	363,616
Unproved		—		—		—
Exploration costs		—		179,601		179,601
Development costs		387,098		110,000		497,098
Total acquisition and development costs	$	387,098	$	653,217	$	1,040,315

Results of Operations for Oil and Gas Producing Activities

The following table shows the results from operations for the periods ended December 31, 2014 and 2013:

	Canada			United States		Total
Year Ended December 31, 2014:
Revenue	$	—		$	691,593	$	691,593
Production expenses		—			443,413		443,413
Depletion, depreciation, and amortization		—			69,284		69,284
Accretion		—			15,803		15,803
Results of activities	$	—		$	163,093	$	163,093

Year Ended December 31, 2013:
Revenue	$	1,592,600		$	416,536	$	2,009,136
Production expenses		1,250,076			208,886		1,458,962
Depletion, depreciation, and amortization		216,525			73,442		289,967
Accretion		53,103			9,765		62,868
Impairment of oil and gas properties		7,916,993			—		7,916,993
Results of activities	$	(7,844,097	)	$	124,443	$	(7,719,654	)

Oil and Gas Reserves

	Canada							United States			Total
		Oil (MBbls)		Gas (Mmcf)		NGL (MBbls)			Oil (MBbls)			Oil (MBbls)		Gas (Mmcf)		NGL (Bbls)		Total (MBoe)
Proved reserves at December 31, 2013		38.5		1,068.8		3.5			107.1			145.6		1,068.8		3.5		327.2
Production		—		—		—			(8.8	)		(8.8	)	—		—		(8.8	)
Purchases/sales of reserves		(38.5	)	(1,068.8	)	(3.5	)		231.7			193.2		(1,068.8	)	(3.5	)	11.6
Revisions of previous estimates		—		—		—			115.7			115.7		—		—		115.7
Proved reserves at December 31, 2014		—		—		—			445.7			445.7		—		—		445.7

	Canada						United States		Total
	Oil (MBbls)		Gas (Mmcf)		NGL (MBbls)		Oil (MBbls)		Oil (MBbls)		Gas (Mmcf)		NGL (Bbls)		Total (MBoe)
PROVED DEVELOPED RESERVES:
December 31, 2013		38.5		1068.8		3.5		62.0		100.5		1068.8		3.5		282.1
December 31, 2014		—		—		—		201.1		201.1		—		—		201.1

PROVED UNDEVELOPED RESERVES:
December 31, 2013		—		—		—		45.1		45.1		—		—		45.1
December 31, 2014		—		—		—		244.6		244.6		—		—		244.6

TOTAL PROVED:
December 31, 2013		38.5		1068.8		3.5		107.1		145.6		1068.8		3.5		327.2
December 31, 2014		—		—		—		445.7		445.7		—		—		445.7

Standardized Measure of Discounted Future Net Cash Flows

The following table sets forth as of December 31, 2014 and 2013, the estimated future net cash flow from and Standardized Measure of Discounted Future Net Cash Flows (“Standardized Measure”) of our proved reserves, which were prepared in accordance with the rules and regulations of the SEC and the Financial Accounting Standards Board. Future net cash flow represents future gross cash flow from the production and sale of proved reserves, net of crude oil, natural gas and natural gas liquids production costs (including production taxes, ad valorem taxes and operating expenses) and future development costs. The calculations used to produce the figures in this table are based on current cost and price factors at December 31, 2014 and 2013.

Standardized Measure relating to proved reserves:

	Canada		United States			Total
December 31, 2014 :
Future cash inflows	$	—	$	36,834,289		$	36,834,289
Future production costs:		—		(12,626,533	)		(12,626,533	)
Future development costs		—		(790,000	)		(790,000	)
Future cash flows before income taxes		—		23,417,756			23,417,756
Future income taxes		—		(6,765,655	)		(6,765,655	)
Future net cash flows after income taxes		—		16,652,101			16,652,101
10% annual discount for estimated timing of cash flows		—		(7,853,123	)		(7,853,123	)
Standardized measure of discounted future net cash flows	$	—	$	8,798,979		$	8,798,979

	Canada			United States			Total
December 31, 2013 :
Future cash inflows	$	7,220,225		$	8,462,956		$	15,683,181
Future production costs:		4,376,440			4,007,285			8,383,725
Future development costs		61,376			900,000			961,376
Future cash flows before income taxes		2,782,409			3,555,671			6,338,080
Future income taxes		—			—			—
Future net cash flows after income taxes		2,782,409			3,555,671			6,338,080
10% annual discount for estimated timing of cash flows		(1,085,403	)		(1,173,148	)		(2,258,551	)
Standardized measure of discounted future net cash flows	$	1,697,006		$	2,382,523		$	4,079,529

The following reconciles the change in the Standardized Measure for the year ended December 31, 2014:

	Canada			United States			Total
Beginning of year	$	1,697,006		$	2,382,523		$	4,079,529

Changes from:
Purchases of proved reserves		—			3,852,496			3,852,496
Sales of producing properties		(1,697,006	)		—			(1,697,006	)
Extensions, discoveries and improved recovery, less related costs		—			—			—
Sales of natural gas, crude oil and natural gas liquids produced, net of production costs		—			(672,019	)		(672,019	)
Revision of quantity estimates		—			4,429,775			4,429,775
Accretion of discount		—			238,252			238,252
Change in income taxes		—			(1,564,005	)		(1,564,005	)
Changes in estimated future development costs		—			(1,039,047	)		(1,039,047	)
Development costs incurred that reduced future development costs		—			1,199,762			1,199,762
Change in sales and transfer prices, net of production costs		—			1,170,301			1,170,301
Changes in production rates (timing) and other		—			(1,199,059	)		(1,199,059	)
End of year	$	—		$	8,798,979		$	8,798,979

The following reconciles the change in the Standardized Measure for the year ended December 31, 2013:

	Canada			United States			Total
Beginning of year	$	4,281,028		$	3,334,494		$	7,615,522

Changes from:
Purchases of proved reserves		—			188,694			188,694
Sales of producing properties		(1,865,642	)		—			(1,865,642	)
Extensions, discoveries and improved recovery, less related costs		—			—			—
Sales of natural gas, crude oil and natural gas liquids produced, net of production costs		(342,523	)		(207,651	)		(550,174	)
Revision of quantity estimates		—			—			—
Accretion of discount		—			—			—
Change in income taxes		—			—			—
Changes in estimated future development costs		(375,857	)		420,000			44,143
Development costs incurred that reduced future development costs		—			179,000			179,000
Change in sales and transfer prices, net of production costs		—			—			—
Changes in production rates (timing) and other		—			(1,532,014	)		(1,532,014	)
End of year	$	1,697,006		$	2,382,523		$	4,079,529

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Disclosure Control and Procedures

We fail to maintain adequate disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended). Such disclosure controls include the lack of an accounting department and segregation of duties due to the Chief Financial Officer being the sole member of the accounting department.

Management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness and design of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(c) as of December 31, 2014. Based on that evaluation, management has concluded that these disclosure controls and procedures were not effective as of December 31, 2014.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d - 15(f) under the Securities Exchange Act of 1934. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) 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; (iii) provide reasonable assurance that our receipts and expenditures are made in accordance with management authorization; and (iv) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting, however well designed and operated can provide only reasonable, and not absolute, assurance that the controls will prevent or detect misstatements. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

Management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer conducted an evaluation of our internal control over financial reporting as of December 31, 2014, based on the framework in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the COSO framework, management concluded that our internal control over financial reporting was not effective as of December 31, 2014. Such conclusion was reached based on the following material deficiencies noted by management:

a) We have a lack of segregation of duties due to the small size of the Company.

b) The Company did not maintain reasonable control over records underlying transactions necessary to permit preparation of the Company’s financial statements.

c) Lack of controls that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposal of the Company’s assets that could have a material effect on the financial statements.

c) In approximately June 2014, the Company hired a Chief Restructuring Officer, now the Chief Executive Officer (CEO), as well as a new Chief Financial Officer (CFO). In their work with the Company since their commencing service, they identified multiple material weaknesses in internal control by prior management, and have been working to cure those deficiencies. The CEO and CFO expect that any material weaknesses in internal control will be mitigated by December 31, 2015.

Management expects to hire a Controller for the Company, as well as integrate the accounting staff of Maxxon, post-acquisition, which will significantly enhance internal control for the Company.

Changes in Internal Control Over Financial Reporting

In approximately June 2014, we hired a Chief Restructuring Officer (CRO) and an acting Chief Financial Officer (CFO) to evaluate the viability of the Company and to initiate changes to various business processes and internal controls to eliminate and/or mitigate material weaknesses. In October 2014, the Company promoted the CRO to the position of Chief Executive Officer, also assuming the position of Chairman of the Board. At the same time, the acting CFO was contracted as a permanent CFO, and commenced serving on the Board of Directors as the Company’s Secretary and Treasurer. We are currently continuing to evaluate and strengthen our internal control over financial reporting. We anticipate integrating a stronger accounting system as well as hiring a Controller to enhance segregation of duties.

Attestation Report of the Registered Public Accounting Firm

This Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Additionally management’s report was not subject to attestation by our registered public accounting firm pursuant to the permanent exemption from Section 404(b) of the Sarbanes-Oxley Act of 2002 for non-accelerated filers.

ITEM 9B.

OTHER INFORMATION

See “BUSINESS – Recent Developments” in Item 1 of this Report.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

As of March 30, 2015, our Board of Directors consists of three executive officers. The term of office of each director expires at the next annual meeting of our shareholders. Directors serve until their respective successors have been elected and qualified. Executive officers are appointed by and serve at the pleasure of the Board of Directors.

Set forth below is biographical information for each of our current directors.

Name	Age	Position	Director Tenure
Andrew Reckles	45	Chief Executive Officer Chairman of the Board	October 2014 – Current

Marshall Diamond-Goldberg	60	President and Director	September 2010 – Current

Warren Binderman	51	Chief Financial Officer Executive Vice President	October 2014 – Current
		Secretary and Treasurer, Director

Andrew S. Reckles

Andy Reckles is our Chairman and Chief Executive Officer. Andy has been responsible for structuring and funding more than 200 domestic & international transactions totaling in excess of $1.5 billion in closed deals. He has keen business acumen and experience in numerous disciplines, including biotechnology, staffing, retail, energy, medical device technology, defense and advertising. Andy has significant buy-side experience, which proves invaluable when negotiating on behalf of clients. He was the General Partner of a US-based hedge fund from 2001 until 2008; the fund’s mandate was primarily to provide senior and mezzanine credit facilities to growing companies across multiple disciplines. Andy’s fund was the top performing hedge fund in the world in 2003 according to HedgeWorld database.

Andy has served on several public and private company boards. Andy has both executive experience acting as CEO, President, and/or Chief Restructuring Officer as well as held board positions at numerous companies across multiple industries over his career. In fact, his expertise while serving on the board of Oxford Media, during its bankruptcy proceeding, was an instrumental component to that company being acquired out of bankruptcy. Andy was also instrumental in negotiating and closing Australia’s largest biotech licensing agreement on behalf of his client with Pfizer. He is a Certified Lean Six Sigma Green Belt holder and is currently pursuing his Six Sigma Black Belt. Andy is also a Chartered Hedge Fund Professional (“CHP”).

Warren S. Binderman

Warren is the Chief Financial Officer of Legend, and has served in that capacity since July 2014. He also serves on the Company’s Board and is the Secretary and Treasurer. He also serves as the managing member of the Binderman Group, LLC, a specialized accounting and business consulting firm performing services throughout the United States. Warren excels in servicing and communicating with clients as they move through the transaction process—from IPO, private equity deals, mergers and acquisitions, public shell transactions and reverse mergers, and other such ownership transitions. He is a skilled business partner who listens and is committed to helping Clients achieve their goals, ensuring that the transactions being considered are properly supported and meet the appropriate financial and strategic objectives. With deep knowledge and experience across industries, he works with clients to ensure that money makes sense for their business and life. Warren’s expertise includes investment due diligence, mergers and acquisitions, private placement reviews, and restructuring services. He has demonstrated experience in various industry sectors and has worked with many publicly held companies, financial institutions, and closely held companies. Due to his experience working with public and private sector entities, he has an excellent depth of knowledge in both sectors’ activities and transactions. Warren also has significant depth performing due diligence, consulting services, and audits of entities with complex structures. Before working with Legend and starting the Binderman Group, Warren served in various capacities with International accounting firms in the capacities of partner, director, manager and staff. He worked for Arthur Andersen LLP for nine years and KPMG LLP for over three years, as well as other national and international firms throughout his career. Warren received his Bachelor of Business Administration degree from the University of Maryland in 1990 and was a Magna Cum Laude graduate of The Smith Business School, with a major in Accounting. He is a member of the AICPA, and is a CPA in Georgia, and Maryland.

Marshall Diamond-Goldberg

Mr. Diamond-Goldberg has served as our President and a director since September 1, 2010. He also serves as Legend’s Chief Operating Officer, and served as President and a director of Legend Canada. Mr. Diamond-Goldberg is a professional geologist with over 30 years’ experience in the oil and gas sector. From August 2010 until his resignation on July 1, 2011, he held the position of director of Wi2Wi, Inc., formerly known as, International Sovereign Energy Corp., an oil and gas exploration and production company. Since 1997, Mr. Diamond-Goldberg has been the President of Marlin Consulting Corporation providing services to oil and gas companies. From July 2008 until April 2011, he served as President, a director and chairman of reserve reporting for JayHawk Energy Inc., a publicly traded oil and gas company. He was the President, co-founder and director of Manhattan Resources Ltd., a TSX listed and publicly traded junior oil and gas production and exploration company, between 1997 and 2001, and subsequently held the same post at Trend Energy Inc. and Strand Resources Ltd., both private oil and gas producers until their sales in May 2004 and in 2008, respectively. Mr. Diamond-Goldberg is a member of the American Societies of Professional Geologists, as well as the Association of Professional Engineers, Geologists and Geophysicists of Alberta. We believe Mr. Diamond-Goldberg is qualified to serve on our Board of Directors because of his extensive knowledge and experience in the oil and gas industry, and his prior service as an executive officer and director with other public companies.

Unless otherwise stated above, none of our directors or executive officers is a director of any other public company, nor are they related to any officer, director or affiliate of the Company. Additionally, none of our directors or executive officers is a party to any pending legal proceeding, is subject to a bankruptcy petition filed against them or have been convicted in, or is subject to, any criminal proceeding.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than 10% of our common stock (collectively, “Reporting Persons”) to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock. Reporting Persons are also required by SEC regulations to furnish us with copies of all such ownership reports they file. SEC regulations also require us to identify in this Report any Reporting Person who failed to file any such report on a timely basis.

We believe that all Reporting Persons complied with all applicable Section 16(a) filing requirements for fiscal year 2014, based solely on our review of the copies of such reports received or written communications from certain Reporting Persons

Code of Ethics

We have a Code of Ethics that applies to our three key executives and directors. A copy of the Code of Ethics is included as Exhibit 14.1 to this Report and is available on our corporate website at http://legendoilandgas.com in the section “About Legend.”

Audit Committee

As of December 31, 2014, our audit committee was not independent, and the Board of Directors served in the role of the audit committee. During 2015, we expect to engage an outside director that is a “financial expert” to serve as the Chair of the audit committee.

ITEM 11.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows all compensation awarded, earned by or paid to Mssrs. Andrew Reckles, Chairman of the Board and CEO, Marshall Diamond-Goldberg, President and COO, Warren S. Binderman, Executive VP, CFO and Secretary/Treasurer, James Vandeberg, former CFO and Secretary and Kyle Severson, former Chief Financial Officer (our “NEOs”) for each of the fiscal years ended December 31, 2014 and 2013:

Name and Principal Position	Year		Salary			Bonus		Option Awards		All Other Compensation			Total Compensation
Andrew Reckles Chief Executive Officer	2014	$	163,000		$	550,000		125250	$	—		$	713,000
Marshall Diamond-Goldberg	2014	$	327,000,		$	65,000		125250	$	,		$	392,000
President and Chief Operating Officer	2013	$	300,000		$	—	$	—	$	15,000	(1)	$	315,000
James Vandeberg (2)	2014	$	51,500		$	—	$	—	$	—			51,500
Secretary and Chief Financial Officer	2013	$	60,000		$	—	$	—	$	—		$
Kyle Severson (3)	2014	$		$—	$	—	$	—		$
Former Chief Financial Officer	2013	$	180,000		$	—	$	—	$	—		$	180,000
Warren S. Binderman Chief Financial Officer	2014	$	73,500		$	38,000	$	—	$	—		$	111,500

(1)	Represents tax gross-up payments paid to Mr. Diamond-Goldberg to cover applicable taxes as a Canadian citizen.
(2)	Effective May 1, 2012, Mr. Vandeberg’s compensation was decreased to $10,000 per month. Effective July 1, 2012, Mr. Vandeberg’s compensation was decreased to $5,000 per month. Mr. Vandeberg was appointed as CFO on April 11, 2013.
(3)	Mr. Severson stepped down as CFO on April 11, 2013.
(4)	Mr. Reckles compensation includes amounts paid ($50,000) and the balance accrued at December 31, 2014.

Compensation Philosophy and Objectives

Our executive compensation program that we apply to our NEOs will be designed to attract and retain qualified and experienced executives who will contribute to our success. The executive compensation program is designed to attract, motivate and retain individuals with the skills and qualities necessary to support and develop our business within the framework of our small size and available resources. The Board of Directors has sole and unfettered discretion with respect to decisions regarding the compensation of the NEOs.

Elements of Compensation

Our executive compensation program is anticipated to consist of two components: (i) base compensation, and (ii) a long-term compensation component in the form of stock options and stock awards. Both components are determined and administered by the Board of Directors. The stock incentive component is expected to form an essential part of the NEOs’ compensation.

Base Compensation

Base compensation for the NEOs is reviewed from time to time and set by the Board of Directors, and is based on the individual’s job responsibilities, contribution, experience and proven or expected performance, as well as to market conditions. In setting base compensation levels, consideration will be given to such factors as level of responsibility, experience and expertise. Subjective factors such as leadership, commitment and attitude will also be considered.

Stock Options and Awards

To provide a long-term component to the executive compensation program, our executive officers, directors, employees and consultants may be granted Options and Awards (as those terms are defined below) under our 2011 Stock Incentive Plan and 2013 Stock Incentive Plan. The maximization of shareholder value is encouraged by granting equity incentive awards. The President will make recommendations to the Board of Directors for the other executive officers and key employees. These recommendations take into account factors such as equity compensation given in previous years, the number of Options and Awards outstanding per individual and the level of responsibility.

Narrative Disclosure to Summary Compensation Table

Outstanding Equity Awards at 2014 Fiscal Year-End

There are no outstanding equity awards outstanding at December 31, 2014.

Director Compensation

We paid and/or accrued a monthly fee of $5,000 per month to Mr. Reckles for his service as Chairman of the Board, commencing October 1, 2014.

2014 Stock Incentive Plan and the 2013 Stock Incentive Plan

On September 5, 2014, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2014 Stock Incentive Plan, included in the Form S-8 filed on that date. This Stock Incentive Plan provides for the grant of options (“Options”) to purchase Common Shares, and stock awards (“Awards”) consisting of Common Shares, to eligible participants, including our directors, executive officers, employees and consultants. The terms and conditions of the 2014 Stock Incentive Plan apply equally to all participants. We reserved a total of 65,000,000 Common Shares for issuance under the Plan. Further, the Board of Directors acknowledged that 600,000 shares issued on August 27, 2013 were also issued in error and should have only been issued as options. The Board also resolved to cancel these shares and reissued the options properly under the Legend Oil and Gas, Ltd. 2013 Stock Incentive Plan. As of December 31, 2013, there were outstanding Options for a total of 600,000, none of which have been exercised. During 2014, these 600,000 stock options were cancelled.

On September 30, 2013, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2013 Stock Incentive 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 10,000,000 shares of common stock for issuance under the Plan and have issued 750,000 shares to Mr. Vandeberg.

The Plan Administrator, which is currently the Board of Directors, may designate which of our directors, officers, employees and consultants are to be granted Options and Awards. The Plan Administrator has the authority, in its sole discretion, to determine the type or types of awards to be granted under the Plan. Awards may be granted singly or in combination.

Potential Payments upon Resignation, Retirement, or Change of Control

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following tables set forth information with respect to the beneficial ownership of our Common Shares as of March 31, 2015 by our directors, named executive officers, and directors and executive officers as a group, as well as each person (or group of affiliated persons) who is known by us to beneficially own 5% or more of our Common Shares. As of the latest practical date before filing this annual report, there were 0.00 Common Shares issued and outstanding.

The percentages of Common Shares beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. To our knowledge, unless indicated in the footnotes to the table, each beneficial owner named in the tables below has sole voting and sole investment power with respect to all shares beneficially owned.

Title of Class	Name of Beneficial Owner	Amount and Nature of Beneficial Ownership		Percent of Class
Common stock, par value $0.001	Marshall Diamond-Goldberg (1) Director and President 555 Northpoint Center East, Suite 400 Alpharetta, GA 30022		28,653,245		15	%
Common stock, par value $0.001	Warren S. Binderman 555 Northpoint Center East, Suite 400 Alpharetta, GA 30022		7,500,000		4	%
Common stock, par value $0.001	Wi2Wi Corporation (2) 132 Simonston Blvd. Thomhill Ontario, Canada L3T 4L8		21,350,247		11	%
Common stock, par value $0.001	Northpoint Energy Partners, LLC (2) 555 Northpoint Center East, Suite 400 Alpharetta, GA 30022		16,263,333		9	%
Common stock, par value $0.001	James Vandeberg Former Officer and Director 1218 Third Avenue, Suite 505 Seattle, WA 98101		17,516,679		9	%
TOTAL:			91,283,504		49	%

(1)		Mr. Diamond-Goldberg beneficially owns these shares through Marlin Consulting Corp., of which he is the sole shareholder.

(2)		The information for such shareholders are based on the list of record holders maintained by our stock transfer agent. Such shareholder has not filed a Schedule 13D with the SEC disclosing its greater than five percent ownership.

Securities Authorized for Issuance Under Equity Compensation Plans

On October 17, 2013, our Board of Directors adopted the Legend Oil and Gas, Ltd. 2013 Stock Incentive Plan. We reserved a total of 10,000,000 Common Shares for issuance under the Plan. This Plan has not been approved by shareholders. There are currently no options outstanding under the 2013 Stock Incentive Plan, and a grant for 750,000 Common Shares was issued on October 17, 2014.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related Party Transactions

Except as set forth below, we are not aware of any material interest, direct or indirect, of any of our directors or executive officers, any person beneficially owning, directly or indirectly, 10% or more of our voting securities, or any associate or affiliate of such person in any transaction since the beginning of the last fiscal year or in any proposed transaction which in either case has materially affected or will materially affect us.

Mr. Diamond-Goldberg previously served as a director of Wi2Wi from August 2010 until his resignation on July 1, 2011. As described in this Report, we entered into an Asset Purchase Agreement with Wi2Wi, Inc., formerly known as, International Sovereign Energy Corp. and acquired the Wi2Wi Assets on October 20, 2011. The terms of our acquisition of the Wi2Wi Assets was determined through independent negotiation between James Vandeberg, our Vice President and Chief Financial Officer, and Sharad Mistry, Wi2Wi’s Chief Executive Officer and Chief Financial Officer. Mr. Diamond-Goldberg recused himself from all negotiations with respect to the transaction.

We previously had a consulting services agreement with Marlin Consulting Corp., of which Mr. Diamond-Goldberg is the sole owner, which was made effective September 1, 2010. Pursuant to this agreement, Mr. Diamond-Goldberg serves as our President and as a consulting expert to us due to his specialized skills and extensive knowledge in the oil and gas industry, corporate finance and management. The agreement provides that Marlin Consulting Corp. is to be compensated at $6,000 per month during 2010 and $8,000 per month beginning in January 2011 and thereafter until the agreement terminates, plus a gross-up to cover applicable taxes and expense reimbursement for approved expenses. Effective July 1, 2011, the base compensation amount was increased by the Board of Directors to $26,250 per month. The term of the agreement is for one year and renews automatically on the anniversary of its effective date unless otherwise terminated by the parties. Mr. Diamond-Goldberg is to be reimbursed for out-of-pocket expenses reasonably incurred by him on our behalf or on behalf of Legend Canada. Mr. Diamond-Goldberg is eligible to participate in our 2011 Stock Incentive Plan or any bonus plan approved by the Board of Directors as provided in his agreement with us. On July 1, 2013, the Company executed a new employment agreement with Mr. Diamond-Goldberg, its Director and Chief Executive Officer, whereby, he is paid $25,000 per month. Mr. Diamond-Goldberg is eligible to participate in our 2013 Stock Incentive Plan or any bonus plan approved by the Board of Directors as provided in his agreement.

Conflicts of Interest

Our business raises potential conflicts of interest between certain with our officers and directors. Certain of our directors are directors of other natural resource companies and, to the extent that such other companies may participate in ventures in which we may participate, our directors may have a conflict of interest in negotiating and concluding terms regarding the extent of such participation. In the event that such a conflict of interest arises at a meeting of the Board of Directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, we will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict.

Mr. Marshall Diamond-Goldberg is our executive officer, director and shareholder, and he is also a former director of Wi2Wi. We have not found any reason to be concerned with this potential conflict of interest since Mr. Diamond-Goldberg resigned as a member of the board of directors of Wi2Wi effective as of July 1, 2011, and he was not involved on Wi2Wi’s behalf in negotiating the terms of the Asset Purchase Agreement.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

GBH CPAs, P.C. audited our financial statements for the year ended December 31, 2014, and Peterson Sullivan LLP audited our financial statements for the year ended December 31, 2013.

Policy for Approval of Audit and Permitted Non-Audit Services

The Board of Directors, in its discretion, may direct the appointment of different public accountants at any time during the year, if the Board believes that a change would be in the best interests of the shareholders. During 2014 and 2013, the Board of Directors considered the audit fees, audit-related fees, tax fees and other fees paid to our accountants, as disclosed below, and determined that the provision of such services by our independent registered public accounting firm was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

Audit and Related Fees

The following table sets forth the aggregate fees billed by both GBH CPAs and Peterson Sullivan for professional services rendered in fiscal years ended December 31, 2014 and 2013.

	2014		2013

Audit Fees (1)	$	21,000	$	77,056

Audit-Related Fees (2)		---		—

Tax Fees (3)		---		5,360

All Other Fees		---		—

(1)	“Audit Fees” represent fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements included in our reports on Form 10-Q, and audit services provided in connection with other statutory or regulatory filings.

(2)	“Audit-Related Fees” generally represent fees for assurance and related services reasonably related to the performance of the audit or review of our financial statements.

(3)	“Tax Fees” generally represent fees for tax advice.

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this Report are as follows:

Financial Statements: The consolidated financial statements, related notes and report of independent registered public accounting firm are included in Item 8 of Part II of this Report.

Financial Statement Schedules: All schedules have been omitted because they are not applicable or not required, or the required information is included in the financial statements or notes thereto.

Exhibits: The required exhibits are included at the end of this Report and are described in the exhibit index.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April 03, 2015.

LEGEND OIL AND GAS, LTD.

By:	/s/ Warren S. Binderman
	Warren S. Binderman, Chief Financial Officer
	Executive Vice President, Secretary, Treasurer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

*Signature*	*Capacities*	*Date*

/s/ Andrew S. Reckles	Chief Executive Officer and Director	04/03/15
Andrew S. Reckles	(Principal Executive Officer)

/s/ Warren S. Binderman	Executive Vice President, Chief Financial Officer, Treasurer, Secretary	04/03/15
Warren S. Binderman	and Director

EXHIBIT INDEX

The following exhibits are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference. Where an exhibit is incorporated by reference, the document to which it is cross referenced is made.

Exhibit No.	Description	Location
2.1	Agreement and Plan of Merger with New Western Energy Corporation New Western Energy Merger Corporation and the Company, dated January 23, 2014	Incorporated by reference herein from our report on Form 8-K dated January 23, 2014, filed with the SEC on January 27, 2014.

3.1	Amended and Restated Articles of Incorporation dated January 29, 2007	Incorporated by reference herein from our report on Form 8-K dated January 29, 2007, filed with the SEC on January 30, 2007.

3.2	First Articles of Amendment to the Amended and Restated Articles of Incorporation dated October 4, 2010	Incorporated by reference herein from our definitive Information Statement filed with the SEC on October 19, 2010.

3.3	Articles of Amendment to the Articles of Incorporation dated August 12, 2011	Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.

3.4	Bylaws dated November 29, 2000	Incorporated by reference herein from our registration statement on Form 10-SB, filed with the SEC on April 25, 2002.

4.1	Specimen Legend Oil and Gas, Ltd. Common Stock Certificate	Incorporated by reference herein from our report on Form 10-K dated December 31, 2010, filed with the SEC on March 31, 2011.

4.2	Form of Warrant issued to Iconic Investment Co.	Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.

4.3	Form of Warrant issued in connection with August 2011 unit financing	Incorporated by reference herein from our report on Form 10-Q for the period ended June 30, 2011, filed with the SEC on August 12, 2011.


4.4	Specimen Legend Oil and Gas, Ltd. Convertible Preferred Stock Certificate	Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.

10.1*	Consulting Agreement by and between Marlin Consulting Corp. and Legend dated September 1, 2010	Incorporated by reference herein from our report on Form 10-K dated December 31, 2010, filed with the SEC on March 31, 2011.

10.2	Agreement for Purchase and Sale by and between Piqua Petro, Inc. and the Company dated October 20, 2010 (Piqua Project)	Incorporated by reference herein from our report on Form 8-K dated October 29, 2010, filed with the SEC on November 4, 2010.

10.3	Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated February 25, 2011 (Bakken Project)	Incorporated by reference herein from our report on Form 10-K dated December 31, 2010, filed with the SEC on March 31, 2011.

10.4	Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated March 23, 2011 (Bakken Project)	Incorporated by reference herein from our report on Form 10-K dated December 31, 2010, filed with the SEC on March 31, 2011.

10.5	Assignment of Oil and Gas Lease by Wasaabee Energy Inc. dated March 30, 2011 (Bakken Project)	Incorporated by reference herein from our report on Form 10-K dated December 31, 2010, filed with the SEC on March 31, 2011

10.6	Subscription Agreement by and between Legend Oil and Gas, Ltd. and Iconic Investment Co. dated January 21, 2011	Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.

10.7	Subscription Agreement by and between Legend Oil and Gas, Ltd. and Iconic Investment Co. dated April 28, 2011	Incorporated by reference herein from our report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on May 13, 2011.

10.8A*	Legend Oil and Gas, Ltd. 2011 Stock Incentive Plan, as amended	Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012.
10.8B*	Form of Stock Option Agreement under 2011 Stock Incentive Plan	Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012.

10.9	Form of Subscription Agreement in connection with August 2011 unit financing	Incorporated by reference herein from our report on Form 10-Q for the period ended June 30, 2011, and filed with the SEC on August 12, 2011.

10.10A	Asset Purchase Agreement by and among International Sovereign Energy Corp., Legend Oil and Gas, Ltd., and Legend Energy Canada Ltd. dated September 13, 2011	Incorporated by reference herein from our report on Form 8-K dated September 12, 2011, filed with the SEC on September 16, 2011.

10.10B	Amending Agreement to Asset Purchase Agreement, by and among International Sovereign Energy Corp., Legend Oil and Gas, Ltd., and Legend Energy Canada Ltd. dated October 20, 2011	Incorporated by reference herein from our report on Form 8-K/A dated October 20, 2011, filed with the SEC on November 23, 2011
10.11	Credit Facility Offering Letter by and between National Bank of Canada and Legend Energy Canada Ltd. dated August 15, 2011	Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.

10.12	Acknowledgment of Debt Revolving Demand Credit Agreement by and between National Bank of Canada and Legend Energy Canada Ltd. dated August 15, 2011	Incorporated by reference herein from our amended current report on Form 8-K dated August 11, 2011, filed with the SEC on September 16, 2011.

10.13	Fixed and Floating Charge Demand Debenture by and between National Bank of Canada and Legend Energy Canada Ltd. dated October 19, 2011	Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.

10.14	Pledge by Legend Energy Canada Ltd. dated October 19, 2011	Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.

10.15	Assignment of Book Debts by Legend Energy Canada Ltd. dated October 19, 2011	Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.

10.16	Negative Pledge and Undertaking by and between National Bank of Canada and Legend Energy Canada Ltd. dated October 19, 2011	Incorporated by reference herein from our report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 14, 2011.

10.17	Amending Offering Letter by and among National Bank of Canada, Legend Energy Canada Ltd. and the Company dated March 26, 2012	Incorporated by reference herein from our report on Form 10-K dated December 31, 2011 and filed with the SEC on March 30, 2012.

10.18	CA$1.5 million Variable Rate Demand Note by Legend Energy Canada Ltd. in favor of National Bank of Canada	Incorporated by reference herein from our report on Form 10-K dated December 31, 2011 and filed with the SEC on March 30, 2012.

10.19	Office Space Lease by and between Dundeal Canada (GP) Inc. and Legend Energy Canada Ltd., dated October 17, 2011	Incorporated by reference herein from our report on Form 8-K/A dated October 20, 2011, filed with the SEC on November 23, 2011

10.20*	Summary of Non-Employee Director Compensation	Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012

10.21*	Form of Director Indemnification Agreement	Incorporated by reference herein from our report on Form 8-K dated February 7, 2012, filed with the SEC on February 13, 2012

10.22	Settlement and Termination Agreement with Wi2Wi Corporation dated May 1, 2013	Incorporated by reference herein from our report on Form 8-K dated May 1, 2013, filed with the SEC on May 1, 2013.

10.23		Securities Purchase Agreement with Hillair Capital Investments L.P.		Incorporated by reference herein from our report on Form 8-K dated May 28, 2013, filed with the SEC on July 17, 2013.
10.24		Legend Oil and Gas, Ltd. 2013 Stock Incentive Plan		Incorporated by reference herein from our report on Form S-8 dated September 9, 2013, filed with the SEC on September 9, 2013.


14.1	Code of Ethics	Incorporated by reference herein from our report on Form 10-K dated December 31, 2011 and filed with the SEC on March 30, 2012.

21.1	Subsidiaries	Incorporated by reference herein from our report on Form 8-K/A dated October 20, 2011, filed with the SEC on November 23, 2011

23.1	Consent of Peterson Sullivan LLP	Filed herewith.

23.2	Consent of GBH CPAs, PC	Filed herewith.

31.1	Certification by Andrew S. Reckles, Chief Executive Officer, pursuant to Rule 13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

31.2	Certification by Warren S. Binderman, Chief Financial Officer, pursuant to Rule 13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

32.1	Certification by Andrew Reckles, Chief Executive Officer, and Warren S. Binderman, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.

99.1	Reserve Report of KLH Consulting, dated March 2, 2015.	Filed herewith.


101.INS**		XBRL Instance Document

101.SCH**		XBRL Taxonomy Extension Schema Document

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF**		XBRL Taxonomy Extension Definition Linkbase

101.LAB**		XBRL Taxonomy Extension Label Linkbase Document

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document


*		Management contract or compensatory plan or arrangement.

**		Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

Colorado

84-1570556

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)