NOTE 3 – OIL AND GAS PROPERTIES

During the nine months ended September 30, 2014, the Company invested $2,620,342 for the development of oil and gas properties, consisting of (1) preparation and evaluation costs in Colombia of $42,973, and (2) costs on U.S. properties of $2,577,369. Of the amount invested, the Company capitalized $688,484 to oil and gas properties subject to amortization, and $1,931,858 to oil and gas properties not subject to amortization, attributable to preparation and evaluation cost in Colombia of $42,973, leasehold cost in the U.S. of $1,251,450 and drilling cost in the U.S. of $1,325,919.

Sale of Oil and Gas Properties

During 2012, the Company sold all of its interest in HupecolCuerva, LLC (“HC, LLC”), which holds interests in the La Cuerva block and, pending approval of the Colombian authorities, the LLA 62 block, together covering approximately 90,000 acres in the Llanos Basin in Colombia.

HC, LLC sold for $75 million, adjusted for working capital. 13.3% of the sales price of HC, LLC will be held in escrow to fund potential claims arising from the sale. Pursuant to its 1.6% ownership interest in HC, LLC, the Company received 1.6% in the net sale proceeds after deduction of commissions, overriding royalty interest, and transaction expenses; subject to the escrow holdback and a further contingency holdback by Hupecol of 1.3% of the sales price. Following completion of the sale of HC, LLC, the Company had no continuing interest in the La Cuerva and LLA 62 blocks.

During the nine months ended September 30, 2013, the Company received $86,025 in cash proceeds from HC, LLC as a result of post-closing adjustments related to the sale of its interest and recorded it as a gain on sale of oil and gas properties.

Geographical Information

The Company currently has operations in two geographical areas, the United States and Colombia. Revenues for the nine months ended September 30, 2014 and Long Lived Assets (net of depletion, amortization, and impairments) as of September 30, 2014 attributable to each geographical area are presented below:

	Nine Months Ended September 30, 2014			As of September 30, 2014
	Revenues			Long Lived Assets, Net
United States		$	230,278		$	4,523,959
Colombia			—			1,832,510
Total		$	230,278		$	6,356,469