NOTE 3 - ACQUISITIONS

PDC Acquisition

On June 30, 2016, the Company completed the acquisition of certain oil and gas assets from PDC Energy, Inc. ("PDC"), including leases covering approximately 3,652 gross (1,410 net) acres of lands located in Adams County, Colorado and PDC's interest in 35 producing wells ("PDC assets"). Simultaneous with the closing, the Company's working interest partner exercised its option under a participation agreement (the "Participation Agreement") and acquired 50% of the Company's interest in the PDC assets. The acquisition was effective April 1, 2016.

Following a final proration of costs and revenues from the operation of the PDC assets and the Company's working interest partner's exercise of its option under the Participation Agreement, the Company's net purchase price for the PDC assets was $2.3 million. A final allocation of the purchase price was prepared using, among other things, an internally prepared reserve analysis. The following table summarizes the consideration transferred, fair value of assets acquired, and liabilities assumed:


	December 31,
	2016
Consideration:
Cash		2,260,890
Total consideration	$	2,260,890

Fair Value of Liabilities Assumed:
Current liabilities		93,225
Asset retirement obligations		542,611
Total consideration plus liabilities assumed	$	2,896,726

Fair Value of Assets Acquired:
Proved crude oil and gas properties		2,473,082
Unproved crude oil and gas properties		423,644
Amount attributable to assets acquired	$	2,896,726

In accordance with FASB Topic ASC 805, the following table presents the unaudited pro forma combined results of operations for the years ended December 31, 2016, and 2015 (unaudited), as if the PDC assets acquisition had occurred on January 1, 2015. The unaudited pro forma results reflect significant pro forma adjustments related to depletion, depreciation and amortization expense, accretion expense and costs directly attributable to the acquisition, and operating costs incurred as a result of the assets acquired. The pro forma results do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by the Company to integrate the properties acquired. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period, nor are they necessarily indicative of future results.


	Year Ended December 31,
	2016		2015
Crude oil and natural gas revenues	$	466,138	$	423,653
Net income (loss)	$	(4,498,325)	$	(1,439,823)
Net income (loss) per common share basic and diluted	$	(0.21)	$	(0.08)

Crimson Acquisition

On December 22, 2016, the Company completed the acquisition of certain oil and gas assets from Crimson Exploration Operating, Inc. (“Crimson”), including leases covering approximately 15,514 gross (5,609 net) acres of lands located mostly in Adams and Weld Counties, Colorado and Crimson’s interest in 32 producing wells (“Crimson assets”). Simultaneous with the closing, the Company’s working interest partner acquired 50% of the Company’s interest in the Crimson assets. The acquisition was effective December 1, 2016.

Following a reconciliation of certain suspense and inventory accounts, the Company’s net purchase price for the Crimson assets was $2.5 million.

An Allocation of the purchase price was prepared using, among other things, an internally-prepared reserve analysis. The following table summarizes the consideration transferred, fair value of assets acquired, and liabilities assumed:


	December 31,
	2016
Consideration:
Cash		2,559,852
Total consideration	$	2,559,852

Fair Value of Liabilities Assumed:
Current liabilities		13,938
Asset retirement obligations		337,468
Total consideration plus liabilities assumed	$	2,911,258

Fair Value of Assets Acquired:
Current assets		20,907
Proved crude oil and gas properties		899,591
Unproved crude oil and gas properties		1,990,760
Amount attributable to assets acquired	$	2,911,258

In accordance with FASB Topic ASC 805, the following table presents the unaudited pro forma combined results of operations for the years ended December 31, 2016, and 2015 (unaudited), as if the Crimson assets acquisition had occurred on January 1, 2015. The unaudited pro forma results reflect significant pro forma adjustments related to depletion expense, accretion expense and costs directly attributable to the acquisition, and operating costs incurred as a result of the assets acquired. The pro forma results do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by the Company to integrate the properties acquired. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period, nor are they necessarily indicative of future results.


	Year Ended December 31,
	2016		2015
Crude oil and natural gas revenues	$	595,074	$	237,035
Net income (loss)	$	(4,437,877)	$	(1,551,850)
Net income (loss) per common share basic and diluted	$	(0.20)	$	(0.09)