0001580695-17-000542.txt : 20171114 0001580695-17-000542.hdr.sgml : 20171114 20171114164330 ACCESSION NUMBER: 0001580695-17-000542 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 45 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20171114 DATE AS OF CHANGE: 20171114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EnerJex Resources, Inc. CENTRAL INDEX KEY: 0000008504 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 880422242 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36492 FILM NUMBER: 171202328 BUSINESS ADDRESS: STREET 1: 4040 BROADWAY, SUITE 425 CITY: SAN ANTONIO STATE: TX ZIP: 78209 BUSINESS PHONE: (210) 592-1670 MAIL ADDRESS: STREET 1: 4040 BROADWAY, SUITE 425 CITY: SAN ANTONIO STATE: TX ZIP: 78209 FORMER COMPANY: FORMER CONFORMED NAME: MILLENNIUM PLASTICS CORP DATE OF NAME CHANGE: 20000525 FORMER COMPANY: FORMER CONFORMED NAME: AURORA CORP DATE OF NAME CHANGE: 19990825 10-Q 1 enrj-10q_093017.htm QUARTERLY REPORT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

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

Commission file number 001-36492

(ENERJEX RESOURCES LOGO)

ENERJEX RESOURCES, INC.

(Exact name of registrant as specified in its charter)

Nevada		88-0422242
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

4040 Broadway, Suite 425
San Antonio, Texas		78209
(Address of principal executive offices)		(Zip Code)

(210) 592-1670

(Registrant’s telephone number, including area code)

Indicate by check mark 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 check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of Common Stock, $0.001 par value, outstanding on November 9, 2017 was 10,321,397 shares.

ENERJEX RESOURCES, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets at September 30, 2017 (Unaudited) and December 31, 2016	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
	FORWARD-LOOKING STATEMENTS	16
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
ITEM 4.	CONTROLS AND PROCEDURES	29

PART II	OTHER INFORMATION	30
ITEM 1.	LEGAL PROCEEDINGS	30
ITEM 1A.	RISK FACTORS	30
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	33
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	34
ITEM 4.	MINE SAFETY DISCLOSURES	34
ITEM 5.	OTHER INFORMATION	34
ITEM 6.	EXHIBITS	34

SIGNATURES		35

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2017			2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	15,099		$	128,035
Restricted cash		—			50,000
Accounts receivable		257,152			600,255
Derivative receivable		—			10,570
Inventory		—			185,733
Marketable securities		—			210,990
Deposits and prepaid expenses		179,424			493,384
Total current assets		451,675			1,678,967
Non-current assets:
Fixed assets, net of accumulated depreciation of $600,085 and $1,817,711		196,691			2,077,055
Oil and gas properties using full-cost accounting, net of accumulated DD&A of $8,594,167 and $15,189,716		1,414,598			3,437,030
Other non-current assets		—			798,809
Total non-current assets		1,611,289			6,312,894
Total assets	$	2,062,964		$	7,991,861

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	153,170		$	294,241
Accrued liabilities		709,300			1,535,165
Note Payable		105,806			—
Current portion of long term debt		4,500,000			17,925,000
Total current liabilities		5,468,276			19,754,406

Asset retirement obligation		1,593,281			3,314,191
Other long-term liabilities		6,039,972			3,401,149
Total non-current liabilities		7,633,253			6,715,340
Total liabilities		13,101,529			26,469,746
Commitments & Contingencies
Stockholders’ Deficit:
10% Series A cumulative perpetual redeemable preferred stock, $0.001 par value, 25,000,000 shares authorized; 938,248 shares issued and outstanding September 30, 2017 and December 31, 2016		938			938
Series B convertible preferred stock, $0.001 par value, 1,764 shares authorized, and 1,374 and 1,764 issued and outstanding at September 30, 2017 and December 31, 2016, respectively.		1			2
Series C convertible preferred stock, $0.001 par value, 500 shares authorized; 300 and 0 shares, issued and outstanding at September 30, 2017 and December 31, 2016, respectively		1			—
Series C convertible preferred stock issuable		150,000			—
Common stock, $0.001 par value, 250,000,000 shares authorized; shares issued and outstanding 10,321,397 at September 30, 2017 and 8,423,936 at December 31, 2016, respectively		10,322			8,424
Paid-in capital		69,610,909			69,090,613
Accumulated deficit		(80,810,736	)		(87,577,862	)
Total stockholders’ deficit		(11,038,565	)		(18,477,885	)
Total liabilities and stockholders’ deficit	$	2,062,964		$	7,991,861

See Notes to Condensed Consolidated Financial Statements (unaudited).

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016

Oil revenues	$	187,297		$	454,825		$	1,082,492		$	1,581,972
Natural gas revenues		—			18,929			19,509			43,461
Total revenues		187,297			473,754			1,102,001			1,625,433

Expenses:
Direct operating costs		205,253			569,109			1,013,389			1,916,774
Depreciation, depletion and amortization		80,449			63,644			305,684			312,322
Impairment of oil and gas asset		—			800,000			—			7,444,597
Professional fees		—			43,968			422,538			181,086
Salaries		130,741			297,244			407,888			1,044,639
Administrative expense		190,341			124,090			461,378			435,616
Total expenses		606,784			1,898,055			2,610,877			11,335,034
Loss from operations		(419,487	)		(1,424,301	)		(1,508,876	)		(9,709,601	)

Other income (expense):
Interest expense		(184,148	)		(339,719	)		(908,642	)		(1,001,937	)
Gain on loan sale agreement		—			—			11,500,124			—
Loss on derivatives		—			(68,459	)		—			(2,449,855	)
Other income		285,000			138,075			531,846			2,312,261
Total other income (expense)		100,852			(270,103	)		11,123,328			(1,139,531	)
Net (loss) income	$	(318,635	)	$	(1,694,404	)	$	9,614,452		$	(10,849,132	)

Net (loss) income		(318,635	)		(1,694,404	)		9,614,452			(10,849,132	)
Preferred dividends		(879,608	)		(860,061	)		(2,847,324	)		(2,130,604	)
Net (loss) income attributable to common stockholders	$	(1,198,243	)	$	(2,554,465	)	$	6,767,128		$	(12,979,736	)
Net (loss) income per share basic	$	(0.12	)	$	(0.30	)	$	0.72		$	(1.54	)
Weighted average shares basic		10,321,397			8,423,936			9,416,837			8,423,936
Net (loss) income per share diluted	$	(0.12	)	$	(0.30	)	$	0.45		$	(1.54	)
Weighted average shares diluted		10,321,397			8,423,936			15,151,107			8,423,936

See Notes to Condensed Consolidated Financial Statements (unaudited).

EnerJex Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended
	September 30,
	2017			2016
Cash flows from operating activities
Net income (loss)	$	9,614,452		$	(10,849,132	)
Depreciation, depletion and amortization		212,186			312,322
Write-off of inventory		71,982			—
Amortization of deferred financing costs		223,790			90,323
Impairment of oil and gas assets		—			7,444,597
Stock, options and warrants issued for services		13,690			217,283
Accretion of asset retirement obligation		93,498			169,110
Settlement of asset retirement obligation		—			(2,767	)
Amortization of prepaid expenses		241,101			—
Loss on derivatives		—			2,449,855
Gain on loan sale agreement, net of cash		(11,500,124	)		—
Adjustments to reconcile net income (loss) to cash used in operating activities:
Accounts receivable		(15,656	)		(156,835	)
Inventory		(15,944	)		(81,805	)
Prepaid expenses		55,601			(76,261	)
Accounts payable		(67,008	)		(762,193	)
Accrued liabilities		556,677			(360,153	)
Cash used in operating activities		(515,752	)		(1,291,986	)

Cash flows from investing activities
Purchase of fixed assets		—			(243,274	)
Additions to oil and gas properties		(4,635	)		(16,794	)
Cash used in investing activities		(4,635	)		(260,068	)

Cash flows from financing activities
Bank account transfer on loan sale agreement		(92,547	)		—
Repayments of long-term debt		—			(686,660	)
Proceeds from sale of preferred stock		450,000			—
Cash provided by (used in) financing activities		357,453			(686,660	)

Net (decrease) in cash		(162,930	)		(2,238,714	)
Cash – beginning		178,035			3,101,682
Cash – ending	$	15,099		$	862,968

Supplemental disclosures:
Interest paid	$	—		$	919,089
Income taxes paid	$	—		$	—

Non-cash transactions:
Beneficial conversion feature on Series C preferred stock accounted as preferred dividend	$	208,500		$	—
Accrued preference dividend included in long term debt	$	2,638,824		$	—
Conversion of Series B preferred into common stock	$	1,897		$	—

See Notes to Condensed Consolidated Financial Statements (unaudited).

EnerJex Resources, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Basis of Presentation

The unaudited condensed consolidated financial statements of EnerJex Resources, Inc. (“we”, “us”, “our”, “EnerJex” and “Company”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year. Certain amounts in the prior year statements have been reclassified to conform to the current year presentations. The statements should be read in conjunction with the financial statements and footnotes thereto included in our Annual Report Form 10-K for the fiscal year ended December 31, 2016, filed with the Securities and Exchange Commission on March 31, 2017.

Our consolidated financial statements include the accounts of our wholly-owned subsidiaries, EnerJex Kansas, Inc., Black Sable Energy, LLC, Working Interest, LLC and Black Raven Energy, Inc., for the three and nine month periods ended September 30, 2017, and for the year ended December 31, 2016. All intercompany transactions and accounts have been eliminated in consolidation.

Note 2 – Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

Merger Agreement

On October 19, 2017, EnerJex entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AgEagle Aerial Systems, Inc., a Nevada corporation (“AgEagle”), which designs, develops, produces, and distributes technologically advanced small unmanned aerial vehicles (UAV or drones) that are supplied to the agriculture industry, and AgEagle Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Merger Sub”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into AgEagle, Merger Sub will cease to exist and AgEagle will survive as a wholly-owned subsidiary of the Company (the “Merger”). The respective boards of directors of EnerJex and AgEagle have approved the Merger Agreement and the transactions contemplated thereby.

At the effective time of the Merger (the “Effective Time”), the shares of AgEagle capital stock will be automatically converted into the right to receive equal to 85% of the then issued and outstanding capital stock of the Company on a fully diluted basis. In addition, at the Effective Time all outstanding options and warrants to purchase shares of AgEagle common stock will be assumed by the Company and converted into options and warrants to purchase shares of Company common stock. No fractional shares of Company common stock will be issued in the Merger but will be rounded to the nearest whole share. Following the consummation of the Merger, former stockholders of AgEagle with respect to the Merger are expected to own 85% of the Company’s outstanding common stock (inclusive of the AgEagle assumed stock options and warrants), and current common and Series A Preferred stockholders of the Company are expected to own 15% of the Company, excluding shares of common stock that may be issued in connection with the conversion of the Company’s Series B Preferred Stock and Series C Preferred Stock, and not including any additional shares which may be issued in connection with the Company’s closing obligation to provide up to $4 million in new working capital and the elimination of all liabilities currently on the Company’s balance sheet.

In connection with the Merger, the Company will also file a proxy statement seeking stockholder approval to: (a) amend the terms of its Series A Preferred Stock (as discussed below); (b) approve the issuance of the Company’s shares in connection with the Merger to the AgEagle shareholders and new investors, in excess of 19.9% of the Company’s total issued and outstanding shares of common stock; (c) approve the issuance of shares to current Company management and directors in lieu of deferred salary and fees, a majority of which will be held in escrow to secure the Company’s indemnity obligations under the Merger Agreement; and (d) change the name of the Company to “AgEagle Aerial Resources, Inc.”

The Merger Agreement provides that, immediately following the Effective Time, the existing board of directors and officers of the Company will resign and new directors and officers will be appointed by AgEagle.

The Company intends to dispose of its principal assets, consisting primarily of its Kansas oil and gas properties, concurrently with the closing of the Merger. In the event the Merger is not consummated, the Company does not have a present intention to dispose of the above described assets.

The completion of the Merger is subject to various customary conditions, including, among other things: (a) the approval of the stockholders of the Company and AgEagle; (b) the accuracy of the representations and warranties made by each of the Company and AgEagle and the compliance by each of the Company and AgEagle with their respective obligations under the Merger Agreement; (c) approval of the stockholders of the Company for the issuance of its common stock and any other securities (x) to the AgEagle stockholders in connection with the Merger and (y) in connection with the financing transactions contemplated by the Merger Agreement; (d) approval for the listing of shares of the Company’s common stock to be issued in the Merger and other related transactions on the NYSE American; and (e) that all of the Company’s assets as disclosed shall have been sold, transferred or otherwise disposed of and the corresponding debt and liabilities shall have been extinguished. The Company’s existing cash resources are insufficient to satisfy all of its outstanding liabilities. Accordingly, in order to satisfy the condition and consummate the Merger, the Company will be required to raise additional funding prior to the closing of the Merger, the failure of which could result in the Company’s failure to consummate the Merger Agreement.

The Merger Agreement contains customary representations, warranties and covenants, including covenants obligating each of the Company and AgEagle to continue to conduct its respective business in the ordinary course, to provide reasonable access to each other’s information and to use reasonable best efforts to cooperate and coordinate to make any filings or submissions that are required to be made under any applicable laws or requested to be made by any government authority in connection with the Merger. The Merger Agreement also contains a customary “no solicitation” provision pursuant to which, prior to the earlier of January 31, 2018, or the completion or termination of the Merger, neither the Company nor AgEagle may solicit or engage in discussions with any third party regarding another acquisition proposal unless, in the Company’s case, it has received an unsolicited, bona fide written proposal that the recipient’s board of directors determines is or would reasonably be expected to result in a superior proposal. The Company has paid AgEagle a $50,000 non-refundable fee at the signing of the Merger Agreement. The Merger Agreement contains certain termination rights in favor of each of the Company and AgEagle.

In addition, the Merger Agreement contains provisions for indemnification in the event of any damages suffered by either party as a result of breaches of representations and warranties contained therein. The aggregate maximum indemnification obligation of any indemnifying party for damages with respect to breaches of representations and warranties set forth in the Merger Agreement shall not exceed, in the aggregate, $350,000, other than fraud, intentional misrepresentation or willful breach. An indemnifying party shall satisfy its indemnification obligations with shares of Company common stock equal to the aggregate amount of losses of the indemnified party, calculated based upon the greater of (i) the value of the Company common stock as of the closing of the Merger; and (ii) the average closing price of the Company common stock on the NYSE American for the five trading days immediately prior to the date such a claim is made. The Company has agreed to deposit an aggregate of 1,215,278 shares of common stock to be issued to current officers and directors of the Company in lieu of deferred salary and fees into escrow to secure its indemnification obligations, the issuance of such shares requiring the approval of the Company’s common stockholders.

In connection with, and as a condition to the closing of the Merger, the Company is seeking the consent of the holder of its Series A Preferred Stock (“Series A Preferred Stock”) to amend the terms thereof to: (i) allow the Company to pay all accrued but unpaid dividends up to September 30, 2017 in additional shares of Series A Preferred Stock based on the value of the liquidation preference thereof, (ii) eliminate the right of the Series A Preferred Stock holders to receive any dividends accruing after September 30, 2017, and (iii) convert each share of Series A Preferred Stock into 10 shares of Company common stock. An affirmative vote of 66.7% of all shares of Series A Preferred Stock voting as a class as of the record date of the proxy statement is required to amend the terms of the Certificate of Designation to provide for these changes, as required under the Merger Agreement.

As of September 30, 2017, the Series A Preferred Stock had accrued a total of $6,039,972 in accrued but unpaid dividends, which would result in an additional 241,599 shares of Series A Preferred Stock being issued by the Company to satisfy these accrued dividends.

The Merger Agreement provides either party the right to terminate the Merger if it has not been consummated by January 31, 2018, provided that if all of the conditions to closing shall have been satisfied or shall be capable of being satisfied at such time, the required closing date may be extended until March 31, 2018.

Financing Transactions

On October 3, 2011, the Company entered into an Amended and Restated Credit Agreement with Texas Capital Bank, and other financial institutions and banks that may become a party to the Credit Agreement from time to time (“TCB” or “Bank”). The facilities provided under the Amended and Restated Credit Agreement were to be used to refinance a prior outstanding revolving loan facility with TCB dated July 3, 2008, and for working capital and general corporate purposes. On August 15, 2014, the Company entered into an Eighth Amendment to the Amended and Restated Credit Agreement. Among other things the Eighth Amendment extended the maturity of the Agreement by three years to October 3, 2018. On August 12, 2015, the Company entered into a Tenth Amendment to the Amended and Restated Credit Agreement. Among other things, the Tenth Amendment established the requirement of monthly borrowing base reductions commencing September 1, 2015 and continuing on the first of each month thereafter. On November 13, 2015, the Company entered into an Eleventh Amendment to the Amended and Restated Credit Agreement. The Eleventh Amendment reflects the following changes: (i) waived certain provisions of the Credit Agreement, (ii) suspended certain hedging requirements, and (iii) amended certain other items of the Credit Agreement.

On April 1, 2016, the Company informed the Bank that it would cease making the mandatory monthly borrowing base reduction payments and did not make the required April 1, 2016 payment. The Company made its mandatory quarterly interest payment on April 6, 2016 and on April 7, 2016, entered into a Forbearance Agreement whereby the Bank agreed to not exercise remedies and rights afforded it under the Amended and Restated Credit Agreement for thirty days. On May 31, 2016, the Company and the Bank amended the Forbearance Agreement to extend the forbearance period to August 31, 2016. On July 29, 2016, the Company and the Bank amended the Forbearance Agreement to extend the forbearance period to October 1, 2016. Upon the expiration of the Third Forbearance agreement, the Company did not enter into a Fourth Forbearance Agreement. Also, at that time the Company discontinued payment of interest on its outstanding loan obligations with the Bank.

Throughout 2016, the Company evaluated plans to restructure, amend or refinance existing debt through private options. On February 14, 2017, the Company announced that a group of investors unrelated to the Company had purchased from EnerJex’s secured bank lender all rights to the Company’s secured indebtedness, and that EnerJex had executed a definitive written agreement for the discharge of the Company’s secured indebtedness with the purchasing investor group. Final closing on this agreement occurred on May 10, 2017.

On February 10, 2017, the Company, TCB and IberiaBank (collectively, “Sellers”), and PWCM Investment Company IC LLC, and certain financial institutions (collectively, “Buyers”) entered into a Loan Sale Agreement (“LSA”), pursuant to which Sellers sold to Buyers, and Buyers purchased from Sellers, all of Sellers’ right, title and interest in, to and under the Credit Agreement and Loan Documents, in exchange for (i) a cash payment of $5,000,000 (the “Cash Purchase Price”), (ii) a Synthetic Equity Interest equal to 10% of the proceeds, after Buyer’s realization of a 150% return on the Cash Purchase Price within five (5) years of the closing date of the sale, with payment being distributed 65.78947368% to TCB and 34.21052632% to IberiaBank, and (iii) at any time prior to February 10, 2022, Buyer may acquire the interest in clause (ii) above. In connection with the LSA, the Company released Sellers and its successors as holders of the rights under the Credit Agreement and Loan Documents, including Buyers, from any and all claims under the Credit Agreement and Loan Documents.

Also on February 10, 2017, the Company and its subsidiaries, and successor lender entered into a binding letter agreement dated February 10, 2017, which was subsequently amended on March 30, 2017 (as amended, the “letter agreement”) pursuant to which:

the successor lender agreed to forgive our existing secured loan in the approximate principal amount of $17,295,000, and in exchange entered into a secured promissory note (which we refer to as the “restated secured note”) in the original principal amount of $4,500,000.

we:

conveyed our oil and gas properties and associated performance and surety bonds in Colorado, Texas, and Nebraska;

conveyed all of our shares of Oakridge Energy, Inc. (together, the “conveyed oil and gas assets”); and

retained our assets in Kansas and continued as a going concern. The Kansas assets currently provide most of our current operating revenue.

The restated secured note:

is secured by a first-priority lien in the Company’s oil and gas producing assets situated in the State of Kansas,

evidences accrued interest on the $4,500,000 principal balance at a rate of 16% per annum,

bears interest from and after May 1, 2017, at a rate of 16.0% per annum,

is pre-payable in full at a discount at any time during the term of the restated secured note upon EnerJex paying $3,300,000 to successor lender, and

matures and is due and payable in full on November 1, 2017.

We have two options to extend the maturity date of the restated secured note by 90 days each (first to January 30, 2018 and then to April 30, 2018), upon payment of extension fees of $100,000 for each extension.

So long as we repay the $3,300,000 in indebtedness on or prior to the maturity date, as extended, all other amounts payable under the restated secured note are to be forgiven.

The closing occurred on May 10, 2017. As part of the closing procedures and net settlement, we issued a promissory note to Pass Creek Resources LLC in the amount of $105,806. The promissory bears interest at 16% per annum and matured on June 9, 2017. The amount due was not paid on June 9, 2017, but the holder has not provided the Company a notice of default.

In connection with the May 10, 2017 closing and in consideration of the satisfaction of $13,425,000 of the amount due under the Credit Agreement, as amended, the Company and certain of its subsidiaries transferred to PCR Holdings LLC, an affiliate of the successor lenders under the Credit Agreement, all of the Company’s oil and gas properties and assets located in Colorado, Texas, and Nebraska, as well as the Company’s shares of Oakridge Energy, Inc.

To evidence the Company’s remaining $4,500,000 of indebtedness to PWCM Investment Company IC LLC (“PWCM”), RES Investment Group, LLC (“RES”), Round Rock Development Partners, LP (“Round Rock”), and Cibolo Holdings, LLC (“Cibolo Holdings,” and together with PWCM, RES and Round Rock, “Successor Lenders”), the Company’s subsidiaries (except Kansas Holdings, LLC) entered into a Second Amended and Restated Credit Agreement with Cortland Capital Market Services LLC, as Administrative Agent, and the other financial institutions and banks parties thereto (the “New Credit Agreement”), and a related Amended and Restated Note (the “New Note”), in the amount of $3.3 million as described above.

Our subsidiaries’ obligations under the credit agreement and note are non-recourse and are secured by a first-priority lien in the Company’s and its subsidiaries’ oil properties and assets located in Kansas. The Company was removed as a borrower under the Credit Agreement, but entered into a Guaranty of Recourse Carveouts, pursuant to which the Company guarantees its subsidiaries’ payment of certain fees and expenses due under the Credit Agreement, and may be liable for certain conduct, such as fraud, bad faith, gross negligence, and waste of the Kansas oil properties or assets.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months following the issuance of these financial statements. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 3 – Stock Options and Warrants

A summary of stock options and warrants is as follows:

	Options			Weighted Avg. Exercise Price		Warrants		Weighted Avg. Exercise Price
Outstanding December 31, 2016		207,664		$	9.69		1,904,286	$	2.75
Granted		—			—		—		—
Cancelled		(50,000	)		—		—		—
Exercised		—			—		—		—
Outstanding September 30, 2017		157,664		$	9.69		1,904,286	$	2.75

Note 4 – Asset Retirement Obligation

Our asset retirement obligations relate to the liabilities associated with the abandonment of oil and natural gas wells. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit adjusted risk-free interest rates. The following shows the changes in asset retirement obligations:

Asset retirement obligations, December 31, 2016	$	3,314,191
Release of liabilities		(1,814,408	)
Accretion		93,498
Asset retirement obligations, September 30, 2017	$	1,593,281

Note 5 – Long-Term Debt

Senior Secured Credit Facility

On October 3, 2011, the Company and DD Energy, Inc., EnerJex Kansas, Inc., Black Sable Energy, LLC and Working Interest, LLC, its subsidiaries (“Borrowers”) entered into an Amended and Restated Credit Agreement with Texas Capital Bank, N.A. (the “Bank”) and other financial institutions and banks that may become a party to the Credit Agreement from time to time. The facilities provided under the Amended and Restated Credit Agreement were used to refinance the Borrowers’ prior outstanding revolving loan facility with the Bank, dated July 3, 2008, and for working capital and general corporate purposes.

At our option, loans under the facility will bear stated interest based on the Base Rate plus Base Rate Margin, or Floating Rate plus Floating Rate Margin (as those terms are defined in the Credit Agreement). The Base Rate will be, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 0.50% and (b) the Bank’s prime rate. The Floating Rate shall mean, at Borrower’s option, a per annum interest rate equal to (i) the Eurodollar Rate plus Eurodollar Margin, or (ii) the Base Rate plus Base Rate Margin (as those terms are defined in the Amended and Restated Credit Agreement). Eurodollar borrowings may be for one, two, three, or nine months, as selected by the Borrowers. The margins for all loans are based on a pricing grid ranging from 0.00% to 0.75% for the Base Rate Margin and 2.25% to 3.00% for the Floating Rate Margin based on the Company’s Borrowing Base Utilization Percentage (as defined in the Amended and Restated Credit Agreement).

On December 15, 2011, we entered into a First Amendment to Amended and Restated Credit Agreement and Second Amended and Restated Promissory Note in the amount of $50,000,000 with the Bank. The Amendment reflected the addition of Rantoul Partners as an additional Borrower and added as additional security for the loans the assets held by Rantoul Partners.

On August 31, 2012, we entered into a Second Amendment to Amended and Restated Credit Agreement with the Bank. The Second Amendment: (i) increased our borrowing base to $7,000,000, (ii) reduced the minimum interest rate to 3.75%, and (ii) added additional new leases as collateral for the loan.

On November 2, 2012, we entered into a Third Amendment to Amended and Restated Credit Agreement with the Bank. The Third Amendment (i) increased our borrowing base to $12,150,000, and (ii) clarified certain continuing covenants and provided a limited waiver of compliance with one of the covenants so clarified for the quarter ended December 31, 2011.

On January 24, 2013, we entered into a Fourth Amendment to Amended and Restated Credit Agreement, which was made effective as of December 31, 2012, with the Bank. The Fourth Amendment reflected the following changes: (i) the Bank consented to the restructuring transactions related to the dissolution of Rantoul Partners, and (ii) the Bank terminated a Limited Guaranty, as defined in the Credit Agreement, executed by Rantoul Partners in favor of the Bank.

On April 16, 2013, the Bank increased our borrowing base to $19.5 million.

On September 30, 2013, we entered into a Fifth Amendment to the Amended and Restated Credit Agreement. The Fifth Amendment reflected the following changes: (i) an expanded principal commitment amount of the Bank to $100,000,000, (ii) an increase in our Borrowing Base to $38,000,000, (iii) the addition of Black Raven Energy, Inc., our wholly-owned subsidiary, to the Credit Agreement as a borrower party, (iv) the addition of certain collateral and security interests in favor of the Bank, and (v) the reduction of our current interest rate to 3.30%.

On November 19, 2013, we entered into a Sixth Amendment to the Amended and Restated Credit Agreement. The Sixth Amendment reflected the following changes: (i) the addition of Iberia Bank as a participant in our credit facility (together with the Bank, the “Banks”), and (ii) a technical correction to our covenant calculations.

On May 22, 2014, we entered into a Seventh Amendment to the Amended and Restated Credit Agreement. The Seventh Amendment reflected the Bank’s consent to our issuance of up to 850,000 shares of our 10% Series A Cumulative Redeemable Perpetual Preferred Stock.

On August 15, 2014, we entered into an Eighth Amendment to the Amended and Restated Credit Agreement. The Eighth Amendment reflected the following changes: (i) the borrowing base was increased from $38 million to $40 million, and (ii) the maturity of the facility was extended by three years to October 3, 2018.

On April 29, 2015, we entered into a Ninth Amendment to the Amended and Restated Credit Agreement. In the Ninth Amendment, the Banks (i) re-determined the Borrowing Base based upon our recent Reserve Report dated January 1, 2015, (ii) imposed affirmative obligations on the Company to use a portion of proceeds received with regard to future sales of securities or certain assets to repay the loan, (iii) consented to non-compliance by the Company with certain terms of the Credit Agreement, (iv) waived certain provisions of the Credit Agreement, and (v) agreed to certain other amendments to the Credit Agreement.

On May 1, 2015, the Borrowers and the Banks entered into a Letter Agreement to clarify that up to $1,000,000 in proceeds from any potential future securities offering will be unencumbered by the Banks’ liens as described in the Credit Agreement through November 1, 2015, and that, until November 1, 2015, such proceeds would not be subject to certain provisions in the Credit Agreement prohibiting the Company from declaring and paying dividends that may be due and payable to holders of securities issued in such potential offerings or issued prior to the Letter Agreement.

On August 12, 2015, we entered into a Tenth Amendment to the Amended and Restated Credit Agreement. The Tenth Amendment reflected the following changes, it: (i) allowed the Company to sell certain oil assets in Kansas, (ii) allowed for approximately $1,300,000 of the proceeds from the sale to be reinvested in Company owned oil and gas projects, and (iii) provided that not less than $1,500,000 from the proceeds of the sale would be applied to outstanding loan balances.

On November 13, 2015, the Company entered into an Eleventh Amendment to the Amended and Restated Credit Agreement. The Eleventh Amendment reflected the following changes: (i) waived certain provisions of the Credit Agreement, (ii) suspended certain hedging requirements, and (iii) amended other provisions of the Credit Agreement.

On April 1, 2016, the Company informed the Banks that it would cease making the mandatory monthly borrowing base reduction payments and did not make the required April 1, 2016 payment. The Company made its mandatory quarterly interest payment on April 6, 2016 and on April 7, 2016 entered into a Forbearance Agreement whereby the Banks agreed to not exercise remedies and rights afforded it under the Amended and Restated Credit Agreement for thirty days. On May 31, 2016, the Company and the Banks amended the Forbearance Agreement to extend the forbearance period to August 31, 2016. On July 29, 2016, the Company and the Banks entered into a Third Forbearance Agreement which extended the forbearance period to October 1, 2016. Upon the expiration of the Third Forbearance agreement, the Company did not enter into a fourth Forbearance Agreement. Also, at that time the Company discontinued payment of interest on its outstanding loan obligations with the Banks.

On February 10, 2017, the Company and the other Sellers entered into and completed the transactions contemplated by the LSA, described in greater detail in “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Financing Transactions”.

Below is a table showing the reconciliation of the gain on LSA as set forth on the statement of operations for the nine months ended September 30, 2017:

Forgiveness of existing secured loan	$	17,925,000
Forgiveness of accrued interest		1,306,801
Issuance of secured promissory note		(4,500,000	)
Transfer of oil and gas properties		(1,902,726	)
Transfer of gas gathering system		(1,772,588	)
Transfer of shares of Oakridge Energy, Inc.		(210,990	)
Transfer of ARO liability		1,814,407
Transfer of other assets		(1,159,780	)
Gain on LSA	$	11,500,124

Our subsidiaries’ obligations under the credit agreement and note are non-recourse and are secured by a first-priority lien in the Company’s and the subsidiaries’ oil properties and assets located in Kansas. The Company was removed as a borrower under the Credit Agreement, but entered into a Guaranty of Recourse Carveouts, pursuant to which the Company guarantees the Subsidiaries’ payment of certain fees and expenses due under the Credit Agreement, and may be liable for certain conduct, such as fraud, bad faith, gross negligence, and waste of the Kansas oil properties or assets.

As of September 30, 2017, the principal balance of $105,806 along with accrued interest remained due under the promissory note with Pass Creek Resources LLC.

Note 6 – Commitments & Contingencies

As of September 30, 2017, the Company had an outstanding irrevocable letter of credit in the amount of $50,000 issued in favor of the Texas Railroad Commission. The letter of credit is required by the Texas Railroad Commission for all companies operating in the state of Texas with production greater than limits they prescribe.

Rent expense for the nine months ended September 30, 2017 and 2016 was approximately $75,000 and $104,000, respectively. Future non-cancellable minimum lease payments are approximately $35,000 for the remainder of 2017, $91,000 for 2018, and $77,000 for 2019.

We, as a lessee and operator of oil and gas properties, are subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject to the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. As of September 30, 2017, we have no reserve for environmental remediation and are not aware of any environmental claims.

On September 23, 2016, the Company, American Standard Energy Corporation, Baylor Operating LLC, Bernard Given and Loeb & Loeb LLP were sued by Geronimo Holdings Corporation and Randal Capps in the 143rd Judicial District Court located in Pecos, Texas. The suit among other things, seeks damages for an alleged unlawful sale of properties in Crockett County, Texas and for alleged unpaid royalties. The Company believes the suit is without merit and will vigorously defend itself in connection with this proceeding. The Company has faith that it will prevail and at September 30, 2017, no reserve for potential losses arising from this matter has been recorded. Additionally, under its agreement with Baylor Operating LLC, Baylor has agreed to indemnify and defend the Company against all lawsuits and claims including this one.

On April 26, 2016, C&F Ranch, LLC sued the Company in Allen County, Kansas for alleged breach of contract related to the rental of certain lands located on the C&F Ranch. The Company believes that it has paid all rents owed to C&F Ranch LLC and will vigorously defend itself in connection with this proceeding. The Company has faith that it will prevail and at September 30, 2017, no reserve for potential losses arising from this matter has been recorded.

Note 7 – Impairment of Oil and Gas Properties

Pursuant to full cost accounting rules, the Company must perform a ceiling test each quarter on its proved oil and natural gas assets within each separate cost center. All of the Company’s costs are included in one cost center as all of the Company’s operations are located in the United States. The Company’s ceiling test was calculated using trailing twelve-month, unweighted-average first-day-of-the-month prices for oil and natural gas as of September 30, 2017, which were based on a West Texas Intermediate oil price of $42.46 per Bbl and a Henry Hub natural gas price of $2.63 per Mcf (adjusted for basis and quality differentials), respectively. For the nine-month period ended September 30, 2017, the Company’s present value of future estimate cash flows discounted at 10%, exceeded the net book value of those assets. Accordingly, the Company did not record an impairment charge. This test resulted in a pre-tax write-down of $7,444,597 for the nine-month period ended September 30, 2016.

Note 8 – Equity Transactions

We accrued dividends of $879,608 and $2,638,823 for our Series A Preferred Stock for the three and nine months ended September 30, 2017, respectively. At September 30, 2017, accumulated dividends payable to the Series A Preferred Stock holders totaled $6,039,972.

On April 27, 2017, the Company entered into an Additional Issuance Agreement with Alpha Capital Anstalt, for the purchase of 300 restricted shares of its newly designated Series C Convertible Preferred Stock in consideration for $300,000, with an option to purchase an additional 200 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $200,000. As of September 30, 2017, the Company had issued 300 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $300,000. In addition, during the nine months ending September 30, 2017, the Company had received $150,000 from Alpha Capital Anstalt to purchase an additional 150 shares of Series C Convertible Preferred Stock. As of September 30, 2017, the additional 150 shares of Series C Convertible Preferred Stock have not been issued and are reflected as Series C Convertible Preferred Stock Issuable on the balance sheet in the aggregate amount of $150,000.

The Company recorded a beneficial conversion feature of $208,500 based on the fair value of the common stock and the conversion rate as of the date of issuance. This amount was recorded as a deemed distribution for the nine months ended September 30, 2017.

The Series C Convertible Preferred Stock (“Series C Preferred Stock”) is non-voting (except to the extent required by law and except for certain consent rights relating to amending the certificate of incorporation or bylaws, and the like), ranks senior to the common stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-up of the Company, and ranks junior to the Company’s Series A preferred stock and Series B preferred stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-up of the Company. Upon request of the Holders, the Company can seek stockholder approval to remove the Issuance Limitation described therein and to allow for further adjustments related to anti-dilution protection, only if such stockholder approval is obtained. The Series C Convertible Preferred Stock has a liquidation preference of $1,000 per share, and is convertible at the option of the holder at a conversion price equal to $0.30 per share, or a ratio equal to approximately 3,333 shares of common stock for each one (1) share of Series C Convertible Preferred Stock, subject to customary adjustments. Dividends are payable on the shares of Series C Convertible Preferred Stock only if and to the extent that dividends are payable on the common stock into which the Series C Convertible Preferred Stock is convertible. The Series C Convertible Preferred Stock has no maturity date and can be redeemed by the Company beginning twelve months after the closing of the offering or upon a change of control for the redemption price of $1,000 per share, as adjustable as provided in the designation of the Series C Preferred Stock.

The Series C Preferred Stock includes a beneficial ownership limitation preventing conversion of shares of Series C Preferred Stock into more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Preferred Stock. In addition, the Company may not convert the Series C Preferred Stock into a number of shares of common stock which, when aggregated with any shares of common stock issued on or after the original issue date and prior to such conversion date in connection with any conversion of Series C Preferred Stock would exceed 1,683,944 shares of common stock (19.99% of the outstanding shares as of the original issue date), subject to adjustment for forward and reverse stock splits, recapitalizations and the like. In the event conversion of the Series C Preferred Stock is limited pursuant to these provisions, each holder shall be entitled to a pro rata portion of the issuable maximum.

Pursuant to the anti-dilutive provisions of the Securities Purchase Agreement dated as of March 11, 2015, which requires the Company to issue additional shares of common stock to adjust the purchase price paid by purchasers in the Company’s March 2015 offering, in the event any shares are sold (or convertible securities are sold), with a price per share less than the purchase price paid by the March 2015 purchasers subject to the terms of the Securities Purchase Agreement, Alpha Capital Anstalt received 597,461 shares of common stock. In addition, the Series B Convertible Preferred Stock conversion ratio equal to approximately 571 shares of common stock for each one (1) share of Preferred Stock reset to approximately 3,333 shares of common stock for each one (1) share of Series B Convertible Preferred Stock, to be consistent with the terms of the Series C Convertible Preferred Stock, pursuant to the anti-dilution requirements of the Series B Convertible Preferred Stock.

During the nine months ending September 30, 2017, Alpha Capital Anstalt converted 390 shares of Series B Convertible Preferred Stock into 1,300,000 shares of common stock.

See also the description of the Alpha Capital Anstalt warrant exercises which occurred subsequent to September 30, 2017, as described in “Note 10 – Subsequent Events”.

Note 9 – Related Party Transaction

Effective May 1, 2017, the Company entered into an agreement with Camber Energy, Inc., pursuant to which EnerJex will be responsible for performing certain general and administrative services for Camber for a fee of $150,000 per month. This fee includes payments to vendors who provide accounting services to Camber. Richard E. Menchaca, a member of the Board of Directors of the Company, is a co-guarantor of bank debt held by Camber Energy, Inc. and Robert Schleizer, our newly appointed Interim Chief Financial Officer is also the Chief Financial Officer and a Director of Camber Energy, Inc.

Note 10 – Subsequent Events

See the subsequent events in “Note 2 – Going Concern”.

On October 23, 2017, Alpha Capital Anstalt exercised warrants to purchase 1,000,000 shares of our common stock for an aggregate exercise price of $300,000 (or $0.30 per share), pursuant to the terms of such warrants, and was issued 1,000,000 shares of common stock.

On November 6, 2017, Alpha Capital Anstalt exercised warrants to purchase 771,428 shares of our common stock for an aggregate exercise price of $231,429 (or $0.30 per share), pursuant to the terms of such warrants, and was issued 771,428 shares of common stock.

We have reviewed all material events through the date of this report in accordance with ASC 855-10.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact, contained in this report, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” or “should” or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this report, our latest Annual Report on Form 10-K, filed with the SEC on March 31, 2017 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on August 21, 2017, which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. The factors impacting these risks and uncertainties include, but are not limited to:

	●	inability to complete and/or risks associated with recently disclosed and pending business combination transactions;
	●	inability to attract and obtain additional development capital;
	●	inability to achieve sufficient future sales levels or other operating results;
	●	inability to efficiently manage our operations;
	●	effect of our hedging strategies on our results of operations;
	●	defaults under our secured obligations or material debt agreements;
	●	estimated quantities and quality of oil reserves;
	●	our ability to raise capital in the future;
	●	outstanding debt obligations and our ability to repay such obligations as they come due;
	●	ongoing and potential future litigation, judgments and settlements;
	●	declining local, national and worldwide economic conditions;
	●	fluctuations in the price of oil;
	●	continued weather conditions that impact our abilities to efficiently manage our drilling and development activities;
	●	the inability of management to effectively implement our strategies and business plans;
	●	approval of certain parts of our operations by state regulators;
	●	inability to hire or retain sufficient qualified operating field personnel;
	●	increases in interest rates or our cost of borrowing;
	●	deterioration in general or regional economic conditions;
	●	adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
	●	the occurrence of natural disasters, unforeseen weather conditions, or other events or circumstances that could impact our operations or could impact the operations of companies or contractors we depend upon in our operations;
	●	inability to acquire mineral leases at a favorable economic value that will allow us to expand our development efforts;
	●	adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; and
	●	changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate.

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this report. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this report to conform our statements to actual results or changed expectations. For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Risk Factors” in this document and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on March 31, 2017 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on August 21, 2017.

You should read the matters described in “Risk Factors” and the other cautionary statements made in this report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this report. We cannot assure you that the forward-looking statements in this report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II”, “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “Annual Report”).

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information” - “Item 1. Financial Statements”.

All references in this report to “we,” “us,” “our,” “Company” and “EnerJex” refer to EnerJex Resources, Inc. and our wholly-owned operating subsidiaries, EnerJex Kansas, Inc., Black Sable Energy, LLC, Working Interest, LLC, and Black Raven Energy, Inc. unless the context requires otherwise. We report our financial information on the basis of a December 31 fiscal year end.

In addition, unless the context otherwise requires and for the purposes of this report only:

	●	“Bbl” refers to one stock tank barrel, or 42 U.S. gallons liquid volume, used in this report in reference to crude oil or other liquid hydrocarbons;
	●	“Boe” barrels of oil equivalent, determined using the ratio of one Bbl of crude oil, condensate or natural gas liquids, to six Mcf of natural gas;
	●	“Mcf” refers to a thousand cubic feet of natural gas;
	●	“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and
	●	“Securities Act” refers to the Securities Act of 1933, as amended.

AVAILABLE INFORMATION

We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC’s website at www.sec.gov or on our website at www.enerjex.com. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt of a written request to us at EnerJex Resources, Inc., 4040 Broadway, Suite 425, San Antonio, Texas 78209.

INDUSTRY AND MARKET DATA

The market data and certain other statistical information used throughout this report are based on independent industry publications, government publications, reports by market research firms or other published independent sources. In addition, some data is based on our good faith estimates. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to our financial statements included elsewhere in this report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under, and incorporated by reference in, ITEM 1A. Risk Factors and elsewhere in this report.

Overview

On October 19, 2017, EnerJex entered the Merger Agreement with AgEagle, described in greater detail under “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Merger Agreement”.

The completion of the Merger is subject to various customary conditions described in greater detail under “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Merger Agreement”.

In the event the Merger closes, the shareholders of AgEagle will become our majority shareholders, our operations will change to those of AgEagle, i.e., the design, development, production, and distribution of technologically advanced small unmanned aerial vehicles (UAV or drones) that are supplied to the agriculture industry and we will also dispose of our current principal assets, consisting of our Kansas oil and gas properties, concurrently with the closing of the Merger. In the event the Merger is not consummated, the Company does not have a present intention to dispose of the above described assets or to change its business focus.

Our current principal strategy is to consummate the pending Merger with AgEagle. We continue to manage our existing assets with reduced operating expenses while working to complete the Merger. In the event that the Merger does not close, we will continue to operate as an oil and gas company.

We will continue to investigate multiple opportunities to both increase and unlock value and accelerate growth in an accretive manner on behalf of shareholders, including but not limited to mergers, acquisitions, joint ventures, and non-dilutive financings. There can be no assurance of the results or timing associated with this process.

Plan of Operations

The Board of Directors is currently focused on the pending Merger, but is continuing to pursue possible strategic transactions involving opportunities both in and outside the oil and gas industry that will offer the opportunity for future growth and net cash flow. Those opportunities may involve a business combination with another business enterprise, the acquisition of one or more groups of assets, an equity or debt financing transaction to provide capital with which to fund operations and expansion, and other similar transactions. To illustrate the types of transactions that the Company is investigating, the Company has been investigating the acquisition by purchase or contribution of certain operating oil and gas assets.

As discussed previously, on October 19, 2017, the Company executed the Merger Agreement with AgEagle which is subject to shareholder approval at a meeting to be scheduled. While we are confident the Merger will be approved, the Company expects to continue to pursue other acquisition and business combination opportunities. No assurance can be given that any one or more of these potential business combinations or asset acquisition opportunities will be consummated.

Recent Developments

The following is a brief description of our most significant corporate developments that have occurred since the end of 2015:

On April 28, 2016, the Bank informed the Company that it would extend the above Forbearance Agreement period to May 31, 2016, upon effecting a principal reduction of $125,000.

On October 1, 2016, the Company and the Bank could not reach an agreement to extend the Third Amendment to the Forbearance Agreement. Following this outcome, the Company decided to discontinue payment of interest on its outstanding loan obligations with the Bank. The Company continued to evaluate plans to restructure, amend or refinance existing debt through private options.

On October 26, 2016, the NYSE American (the “NYSE”) delisted our Series A preferred stock from the NYSE due to the failure to maintain a market capitalization of above $1 million. On January 11, 2017, we announced that we received a letter of noncompliance from the NYSE due to our failure to hold an annual meeting for the fiscal year ended December 31, 2015. On January 17, 2017, we announced that the NYSE had accepted our plan to restore compliance with certain NYSE regulations on or before March 31, 2017. The NYSE subsequently granted an extension and on April 27, 2017, the Company held an annual meeting of shareholders.

On February 10, 2017, we and the other Sellers entered into the LSA, described in greater detail in “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Financing Transactions” and thereafter, the Company entered into the New Credit Agreement and New Note, also described in “Note 2 – Going Concern” under “Financing Transactions”.

Additional information regarding the Merger, the operations of AgEagle, which will become the operations of the Company in the event the Merger is completed and risk factors associated with the Merger, can be found in the Current Report on Form 8-K which we filed with the SEC on October 10, 2017.

On October 19, 2017, concurrently with the execution of the Merger Agreement, a principal stockholder of AgEagle (the “Key AgEagle Stockholder”) entered into a voting agreement in favor of EnerJex (the “EnerJex Voting Agreement”). Pursuant to the EnerJex Voting Agreement, the Key AgEagle Stockholder has agreed, among other things, to vote all shares of capital stock of AgEagle beneficially owned by him in favor of the Merger and the adoption of the Merger Agreement and the approval of the transactions contemplated by the Merger Agreement, and any actions required in furtherance thereof. The AgEagle Voting Agreement will terminate upon the earliest to occur of: (i) the termination of the Merger Agreement in accordance with its terms; or (ii) the date on which the Merger becomes effective.

On October 19, 2017, the Company received notice from NYSE Regulation, Inc. that it is not compliance with certain NYSE American (“NYSE American”) continued listing standards relating to stockholders’ equity. Specifically, the Company is not in compliance with Section 1003(a)(i) (requiring stockholders’ equity of $2.0 million or more if an issuer has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years) of the NYSE American Company Guide (the “Company Guide”). As a result, the Company has become subject to the procedures and requirements of Section 1009 of the Company Guide and is required to submit a plan by November 19, 2017, advising the NYSE American of the actions the Company has taken or will take to regain compliance with the NYSE American continued listing standards. The plan period may not exceed April 19, 2019.

The Company intends to submit a plan by the November 19, 2017 deadline. The plan will be based in significant part upon the merger and the associated financing. The Company expects that its common stock will continue to be listed on the NYSE American while the Company seeks to regain compliance with the listing standard noted, subject to the Company’s compliance with other continued listing requirements. If the Company fails to submit a plan or if the Company’s plan is not accepted then the NYSE American may commence delisting procedures. Upon completion of the Merger, the Company will be required to satisfy all applicable requirements for the initial listing on the NYSE American.

Net Production, Average Sales Price and Average Production and Lifting Costs

The table below sets forth our net oil production (net of all royalties, overriding royalties and production due to others), the average sales prices, average production costs and direct lifting costs per unit of production for the three and nine-month periods ended September 30, 2017 and 2016.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Net Production
Oil (Bbl)		5,450		14,015		25,083		44,961
Natural gas (Mcf)		—		11,493		11,649		39,692

Average Sales Prices
Oil (Bbl)	$	42.71	$	32.45	$	43.03	$	35.19
Natural gas (Mcf)	$	—	$	1.65	$	1.67	$	1.06

Average Production Cost ⁽¹⁾
Per barrel of oil equivalent (“Boe”)	$	52.42	$	39.72	$	48.68	$	43.22

Average Lifting Costs ⁽²⁾
Per Boe	$	37.66	$	35.73	$	37.40	$	37.16

	⁽¹⁾	Production costs include all operating expenses, transportation expenses, depreciation, depletion and amortization, lease operating expenses and all associated taxes. Impairment of oil properties is not included in production costs.
	⁽²⁾	Direct lifting costs do not include impairment expense or depreciation, depletion and amortization.

Results of Operations for the Three and Nine Months Ended September 30, 2017 and 2016 compared.

Income:

	Three Months Ended				Increase /			Nine Months Ended				Increase /
	September 30,				(Decrease)			September 30,				(Decrease)
	2017		2016		$			2017		2016		$
Oil revenues	$	187,297	$	454,825	$	(267,528	)	$	1,082,492	$	1,581,972	$	(499,480	)
Natural gas revenues		—		18,929		(18,929	)		19,509		43,461		(23,952	)
Total	$	187,297	$	473,754	$	(286,457	)		1,102,001	$	1,625,433	$	(523,432	)

Oil Revenues

Oil revenues for the nine months ended September 30, 2017, were $1,082,492 compared to revenues of $1,581,972 for the nine months ended September 30, 2016 and for the three months ended September 30, 2017, were $187,297 compared to revenues of $454,285 for the same period in 2016. Of the year-to-date oil revenue decrease of $499,480, approximately $852,109 (offset by the increase in prices as described below) was due to lower production volumes. Oil production decreased approximately 44% in the first nine months of 2017 from barrels produced in the first nine months of 2016 to barrels produced for the first nine months ended September 30, 2017. The production decrease was due primarily to the curtailment of both growth and maintenance capital expenditures, and the conveyance of the Company’s oil and gas properties in Colorado, Nebraska and Texas in connection with the restructuring of its outstanding senior debt in May 2017.

This was offset by an increase in revenues of approximately $352,629 due to higher crude oil prices. Crude oil prices increased $7.84 or 22% to an average price of $43.03 per barrel for the first nine months of 2017 compared to $35.19 per barrel for the same period in 2016.

Natural Gas Revenues

Natural gas revenues for the nine months ended September 30, 2017 were $19,509 compared to natural gas revenues of $43,461 for the nine months ended September 30, 2016 and for the three months ended September 30, 2017 were $-0- compared to natural gas revenues of $18,929 for the same period in 2016. Of the year-to-date revenue decrease of $23,952, approximately $46,964 (offset by the increase in prices as described below) was due to lower production volumes. Production decreased in the first nine months of 2017 from 39,692 Mcf for the nine months ended September 30, 2016, to 11,649 Mcf for the comparable period of 2017, as shown in the table above. The production decrease was due primarily to the curtailment of both growth and maintenance capital expenditures and the conveyance of the Company’s oil and gas properties in Colorado, Nebraska and Texas in connection with the restructuring of its outstanding senior debt in May 2017. This was offset by an increase in revenues of approximately $23,012 due to higher natural gas prices. Natural gas prices increased $0.58 or 53% from an average price of $1.09 per Mcf for the first nine months of 2016 to an average price of $1.67 per Mcf for the same period of 2017.

Expenses:

	Three Months Ended						Increase /			Nine Months Ended						Increase /
	September 30,						(Decrease)			September 30,						(Decrease)
	2017			2016						2017			2016
Production expenses:
Direct operating costs	$	205,253		$	569,109		$	(363,856	)	$	1,013,389		$	1,916,774		$	(903,385	)
Depreciation, depletion and amortization		80,449			63,644			16,805			305,684			312,322			(6,638	)
Impairment of oil & gas properties		—			800,000			(800,000	)		—			7,444,597			(7,444,597	)
Total production expenses		285,702			1,432,753			(1,147,051	)		1,319,073			9,673,693			(8,354,620	)

General expenses:
Professional fees		—			43,968			(43,968	)		422,538			181,086			241,452
Salaries		130,741			297,244			(166,503	)		407,888			1,044,639			(636,751	)
Administrative expense		190,341			124,090			66,251			461,378			435,616			25,762
Total general expenses		321,082			465,302			(144,220	)		1,291,084			1,661,341			(369,537	)
Total production and general expenses		606,784			1,898,055			(1,291,271	)		2,610,877			11,335,034			(8,724,157	)

(Loss) from operations		(419,487	)		(1,424,301	)		1,004,814			(1,508,876	)		(9,709,601	)		8,200,725

Other income (expense)
Interest expense		(184,148	)		(339,719	)		155,571			(908,642	)		(1,001,937	)		93,295
Gain on loan sale agreement		—			—			—			11,500,124			—			11,500,124
Loss on derivatives		—			(68,459	)		68,459			—			(2,449,855	)		2,449,855
Other income		285,000			138,075			146,925			531,846			2,312,261			(1,780,415	)
Total other income (expense)		100,852			(270,103	)		370,955			11,123,127			(1,139,531	)		12,262,859

Net income (loss)	$	(318,635	)	$	(1,694,404	)	$	1,375,769		$	9,614,452			(10,849,132	)	$	20,463,584

Direct Operating Costs

Direct operating costs include direct labor and equipment costs related to pumping, gauging, pulling, well repairs, compression, transportation costs, and general maintenance requirements in our oil and gas fields. These costs also include certain contract labor costs, and other non-capitalized expenses. Direct operating costs for the nine months ended September 30, 2017 decreased by $903,385, or 47% to $1,013,389 from $1,916,774 for the nine months ended September 30, 2016 and for the three months ended September 30, 2017 were $205,253 compared to $569,109 for the same period in 2016. Year-to-date direct operating costs per Boe decreased $1.29 or approximately 3% to $37.40 for 2017, compared to $37.16 per boe for the same period of 2016. The decrease was primarily due to the curtailment of both growth and maintenance capital expenditures, and the conveyance of the Company’s oil and gas properties in Colorado, Nebraska and Texas.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization for the nine months ended September 30, 2017 was $305,684 compared to $312,322 for the nine months ended September 30, 2016 and for the three months ended September 30, 2017 was $80,449 compared to $63,644 for the same period in 2016. The year-to-date decrease in depletion expense of $16,805 or approximately 26% was due to the decrease in our depletable base year-over-year resulting from the impairment sustained in 2016 and further reduced by lower production volumes. Depletion expense per Boe decreased $1.29 or approximately 44% in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2017 and also as discussed above production decreased approximately 44% nine months over nine months due primarily to lower spending on lease operating expenditures and lower investments in maintenance capital.

Impairment of Oil and Gas Properties

Under the full cost method of accounting, capitalized oil and gas property costs less accumulated depletion and net of deferred income taxes may not exceed an amount equal to the sum of the present value, discounted at 10%, of estimated future net revenues from proved oil and gas reserves and the cost of unproved properties not subject to amortization (without regard to estimates of fair value), or estimated fair value, if lower, of unproved properties that are not subject to amortization. Should capitalized costs exceed this ceiling, an impairment expense is recognized.

For the three and nine months ended September 30, 2017, we were not required to record an impairment expense on our evaluated oil and gas properties due to improved commodity prices and market conditions. For the three and nine months ended September 30, 2016, we recognized an impairment expense on our evaluated oil and gas properties of $800,000 and $7,444,597, respectively.

Professional Fees

Professional fees for the nine months ended September 30, 2017 were $422,538 compared to $181,086 for the nine months ended September 30, 2016 and $0 for the three months ended September 30, 2017 compared to $43,968 for the same period in 2016. The increase in year-to-date professional fees of $241,452 was primarily due to increased spending in 2017 on consulting, legal and investor relation services. These increases were partially offset by decreased third party reserve engineering fees.

Salaries

Salaries for the nine months ended September 30, 2017 were $407,888 compared to $1,044,639 for the nine months ended September 30, 2016 and $130,741 for the three months ended September 30, 2017 compared to $297,244 for the same period in 2016. The decrease in year-to-date salaries of approximately $636,751 is due primarily to a reduced number of employees from the prior period.

Administrative Expenses

Administrative expenses for the nine months ended September 30, 2017 were $461,378 compared to $435,616 for the nine months ended September 30, 2016 and $190,341 for the three months ended September 30, 2017 compared to $124,090 for the same period in 2016. The year-to-date decrease of $25,762 in 2017 compared to 2016, was due primarily to decreased general and administrative services provided from a working interest partner, and decreased IT, telecom, software, and meals, travel, and entertainment.

Interest Expense

Interest expense for the nine months ended September 30, 2017 was $908,642 compared to $1,001,937 for the nine months ended September 30, 2016, a decrease of $93,295 and $184,148 for the three months ended September 30, 2017 compared to $339,719 for the same period in 2016. Interest expense decreased as a result of the reduction of debt under the Loan Sale Agreement (“LSA”) (see “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Financing Transactions” for further information) offset by higher interest rate charges under the forbearance agreement also described under the Note 2.

Gain on Loan Sale Agreement

For the nine months ended September 30, 2017, we recognized a gain of $11,500,124 on the LSA and the restructuring of our debt completed thereby. For the three and nine months ended September 30, 2016, and the three months ended September 30, 2017, we had no loan sale gains or sale of loans.

Loss on Derivatives

All of the Company’s hedge contracts expired in 2016, so we incurred no unrealized gains or losses in the nine-months ended September 2017. We recorded an unrealized loss of $2,449,855 in the marking to market of our derivative contracts for the first nine months of 2016 and $68,459 for the three months ended September 30, 2016.

Other Income

Other income decreased by $1,780,415 from $2,312,261 for the nine months ended September 30, 2016 to $531,846 for the nine months ended September 30, 2017 and decreased by $146,925 for the three months ended September 30, 2017 compared to the same period in 2016. The decrease was due to the expiration of derivative contracts in 2016, resulting in no realization of gains from their monetization in 2017 offset by income from performing certain general and administrative services for Camber Energy, Inc., for a fee of $150,000 per month beginning in May 2017.

Net Income (Loss)

The net income for the nine months ended September 30, 2017 was $9,614,452 compared to a net loss of $10,849,132 for the nine months ended September 30, 2016 and net loss was $318,635 for the three months ended September 30, 2017, compared to net loss of $1,694,404 for the same period in 2016. The year-to-date increase in the net income was due primarily to the gain from the LSA of $11,500,124 and the reduction in the impairment of oil and gas properties of $7,444,597.

Liquidity and Capital Resources

Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through debt financing, revenues from operations, asset sales, and the issuance of equity securities. Due to the decline in oil prices and the restructuring of our outstanding debt, it will be more difficult during the remainder of 2017 and into 2018 to use our historical means of meeting our capital requirements to provide us with adequate liquidity to fund our operations and capital program.

The following table summarizes total current assets, total current liabilities and working capital.

	September 30, 2017			December 31, 2016			Increase / (Decrease)

Current Assets	$	451,675		$	1,678,967		$	(1,227,292	)

Current Liabilities	$	5,468,276		$	19,754,406		$	(14,286,130	)

Working Capital Deficit	$	(5,016,601	)	$	(18,075,439	)	$	(13,058,838	)

The working capital deficit at September 30, 2017 was $5,016,601 compared to $18,075,439 at December 31, 2016. The year-to-date decrease in the working capital deficit was primarily due to the $13.5 million of debt forgiven as part of the LSA.

We had $515,752 of cash used in operating activities for the nine months ended September 30, 2017, which was mainly due to $11.5 million of gain on the LSA, offset by the $9.7 million net income for the period.

We had $4,635 of cash used in investing activities for the nine months ended September 30, 2017, which was solely due to the purchase of oil and gas properties.

We had $357,453 of cash provided by financing activities for the nine months ended September 30, 2017, which was due to proceeds from the sale of Series C Convertible Preferred Stock of $450,000 and bank balance transfer on loan sale agreement.

The unaudited condensed consolidated financial statements included in “Part I” – “Item 1 Financial Statements” of this report have been prepared assuming that the Company will continue as a going concern. There is currently substantial doubt about the Company’s ability to continue as a going concern as discussed in “Note 2 – Going Concern” to the unaudited condensed consolidated financial statements.

The Company’s Senior Secured Credit Facility is described in “Part I” – “Item 1 Financial Statements” of this report above under “Note 5 – Long-Term Debt” – “Senior Secured Credit Facility”. “Note 6 – Commitments & Contingencies” to the unaudited condensed consolidated financial statements includes additional information on certain commitments and contingencies of the Company. “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Financing Transactions” includes a discussion of the LSA and related transactions and “Note 2 – Going Concern” – “Merger Agreement” includes information on the pending Merger.

Recent Funding and Related Transactions

On April 10, 2017, we obtained an unsecured loan in the principal amount of $150,000 from an affiliate of the holder of our issued and outstanding shares of Series B Preferred Stock (the “lender”). The loan was converted into 150 shares of Series Convertible Preferred Stock.

On April 27, 2017, the Company entered into an Additional Issuance Agreement with Alpha Capital Anstalt, for the purchase of 300 restricted shares of its newly designated Series C Convertible Preferred Stock in consideration for $300,000, of which $150,000 was payable in cash and $150,000 was payable via a note conversion, with an option to purchase an additional 200 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $200,000. As of September 30, 2017, the Company had issued 300 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $300,000. In addition, during the nine months ending September 30, 2017, the Company had received $150,000 from Alpha Capital Anstalt to purchase an additional 150 shares of Series C Convertible Preferred Stock. As of September 30, 2017, the additional 150 shares of Series C Convertible Preferred Stock have not been issued and are reflected as Series C Convertible Preferred Stock Issuable on the balance sheet in the aggregate amount of $150,000. The shares have also not been issued as of the date of this filing.

The Series C Preferred Stock is non-voting (except to the extent required by law and except for certain consent rights relating to amending the certificate of incorporation or bylaws, and the like), ranks senior to the common stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-up of the Company, and ranks junior to the Company’s Series A preferred stock and Series B preferred stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-up of the Company. Upon request of the Holders, the Company can seek stockholder approval to remove the Issuance Limitation described therein and to allow for further adjustments related to anti-dilution protection, only if such stockholder approval is obtained. The Series C Convertible Preferred Stock has a liquidation preference of $1,000 per share, and is convertible at the option of the holder at a conversion price equal to $0.30 per share, or a ratio equal to approximately 3,333 shares of common stock for each one (1) share of Series C Convertible Preferred Stock, subject to customary adjustments. Dividends are payable on the shares of Series C Convertible Preferred Stock only if and to the extent that dividends are payable on the common stock into which the Series C Convertible Preferred Stock is convertible. The Series C Convertible Preferred Stock has no maturity date and can be redeemed by the Company beginning twelve months after the closing of the offering or upon a change of control for the redemption price of $1,000 per share, as adjustable as provided in the designation of the Series C Preferred Stock.

The Series C Preferred Stock includes a beneficial ownership limitation preventing conversion of shares of Series C Preferred Stock into more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Preferred Stock. In addition, the Company may not convert the Series C Preferred Stock into a number of shares of common stock which, when aggregated with any shares of common stock issued on or after the original issue date and prior to such conversion date in connection with any conversion of Series C Preferred Stock would exceed 1,683,944 shares of common stock (19.99% of the outstanding shares as of the original issue date), subject to adjustment for forward and reverse stock splits, recapitalizations and the like. In the event conversion of the Series C preferred is limited pursuant to these provisions, each holder shall be entitled to a pro rata portion of the issuable maximum.

During the nine months ending September 30, 2017, Alpha Capital Anstalt converted 390 shares of Series B Convertible Preferred Stock into 1,300,000 shares of common stock.

Effective May 1, 2017, the Company entered into an agreement with Camber Energy, Inc., pursuant to which EnerJex will be responsible for performing certain general and administrative services for Camber for a fee of $150,000 per month. Richard E. Menchaca, a member of the Board of Directors of the Company, is a co-guarantor of bank debt held by Camber Energy, Inc. and Robert Schleizer, our newly appointed Interim Chief Financial Officer is also the Chief Financial Officer of Camber Energy, Inc.

On July 14, 2017, the Company entered into a Secured Promissory Note for $100,000 with Alpha Capital Anstalt, which has a maturity date of November 15, 2017, and accrues interest at a rate of 8% per annum. The amount due under the note is secured by a security interest, subordinate to certain other security interests of the Company, in substantially all of the Company’s assets.

On July 28, 2017, the Company received an advance of $50,000 from Alpha Capital Anstalt.

Summary of product research and development

We do not anticipate performing any significant product research and development under our plan of operations.

Expected purchase or sale of any significant equipment

We anticipate that we will purchase the necessary production and field service equipment required to produce oil during our normal course of operations over the next twelve months.

Significant changes in the number of employees

At September 30, 2017, we had one full-time employee, including field personnel. As production and drilling activities increase or decrease, we may have to continue to adjust our technical, operational and administrative personnel as appropriate. We are using and will continue to use independent consultants and contractors to perform various professional services, particularly in the area of land services, reservoir engineering, geology drilling, water hauling, pipeline construction, well design, well-site monitoring and surveillance, permitting and environmental assessment. We believe that this use of third-party service providers may enhance our ability to contain operating and general expenses, and capital costs.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies and Estimates

Our critical accounting estimates include the value of our oil and gas properties, asset retirement obligations, and share-based payments.

Oil and Gas Properties

We follow the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We also capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include costs related to production, general corporate overhead or similar activities.

Proved properties are amortized using the units of production (UOP) method. Currently we only have operations in the Unites States of America. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the cost of these reserves. The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and amortization (DD&A), estimated future development costs (future costs to access and develop proved reserves) and asset retirement costs, less related salvage value.

The cost of unproved properties are excluded from the amortization calculation until it is determined whether or not proved reserves can be assigned to such properties or until development projects are placed into service. Geological and geophysical costs not associated with specific properties are recorded as proved property immediately. Unproved properties are reviewed for impairment quarterly.

Under the full cost method of accounting, the net book value of oil and gas properties, less deferred income taxes, may not exceed a calculated “ceiling.” The ceiling limitation is (a) the present value of future net revenues computed by applying current prices of oil & gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil & gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves computed using a discount factor of 10 percent and assuming continuation of existing economic conditions plus (b) the cost of properties not being amortized plus (c) the lower of cost or estimated fair value of unproven properties included in the costs being amortized less (d) income tax effects related to differences between book and tax basis of properties. Future cash outflows associated with settling accrued retirement obligations are excluded from the calculation. Estimated future cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months held flat for the life of the production, except where prices are defined by contractual arrangements.

Any excess of the net book value of proved oil and gas properties, less related deferred income taxes, over the ceiling is charged to expense and reflected as additional DD&A in the statement of operations. The ceiling calculation is performed quarterly. For the three and nine months ended September 30 30, 2017, we were not required to record an impairment expense on our evaluated oil and gas properties. For the nine months ended September 30, 2017, we incurred no impairment charges and for the nine months ended September 30, 2016 our impairment charge was $7,444,597.

Asset Retirement Obligations

The asset retirement obligation relates to the plugging and abandonment costs when our wells are no longer useful. We determine the value of the liability by obtaining quotes for this service and estimate the increase we will face in the future. We then discount the future value based on an intrinsic interest rate that is appropriate for us. If costs rise more than what we have expected there could be additional charges in the future however we monitor the costs of the abandoned wells and we will adjust this liability if necessary.

Share-Based Payments

The value we assign to the options and warrants that we issue is based on the fair market value as calculated by the Black-Scholes pricing model. To perform a calculation of the value of our options and warrants, we determine an estimate of the volatility of our stock. We need to estimate volatility because there has not been enough trading of our stock to determine an appropriate measure of volatility. We believe our estimate of volatility is reasonable, and we review the assumptions used to determine this whenever we issue new equity instruments. If we have a material error in our estimate of the volatility of our stock, our expenses could be understated or overstated.

Effects of Inflation and Pricing

The oil industry is very cyclical and the demand for goods and services of oil field companies, suppliers and others associated with the industry puts extreme pressure on the economic stability and pricing structure within the industry. Material changes in prices impact revenue stream, estimates of future reserves, borrowing base calculations of bank loans and value of properties in purchase and sale transactions. Material changes in prices can impact the value of oil companies and their ability to raise capital, borrow money and retain personnel. We anticipate business costs and the demand for services related to production and exploration will fluctuate while the commodity prices for oil remains volatile.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting Company as defined by Rule 12b-2 under the Exchange Act, and are not required to provide the information required under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures.

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to management, including the Interim Chief Executive Officer and Interim Chief Financial Officer (our principal executive officer and principal financial officer), to allow timely decisions regarding required disclosures. The Company’s management, including our Interim Chief Executive Officer and our Interim Chief Financial Officer (our principal executive officer and principal financial officer), evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s Interim Chief Executive Officer and Interim Chief Financial Officer (our principal executive officer and principal financial officer) concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2017.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting during the three months ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We may become involved in various routine legal proceedings incidental to our business. However, to our knowledge as of the date of this report, there are no material pending legal proceedings to which we are a party or to which any of our property is subject, except the legal proceedings discussed below.

On April 26, 2016, C&F Ranch, LLC sued the Company in Allen County, Kansas for alleged breach of contract related to the rental of certain lands located on the C&F Ranch. The Company believes that it has paid all rents owe to C&F Ranch LLC and will vigorously defend itself in connection with this proceeding. The Company has faith that it will prevail and at September 30, 2017, no reserve for potential losses arising from this matter has been recorded.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed below and in “Part I” - “Item 1A. Risk Factors” in our 2016 Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 31, 2017, and “Part II” – “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on August 21, 2017, which could materially affect our business, financial condition or future results and which risk factors are incorporated by reference herein. You should also review the risk factors relating to the Merger set forth under AgEagle Risk Factors in our Current Report on Form 8-K, filed with the SEC on October 20, 2017. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially affect our business, financial condition or future results.

In the event the Merger closes, it will cause immediate and substantial dilution to existing shareholders and a change of control of the Company.

As described above, we are party to a Merger Agreement with AgEagle relating to the acquisition by us of the outstanding securities of AgEagle. We anticipate the consideration exchanged with AgEagle for the securities of AgEagle will be 85% of our total outstanding securities on a fully-diluted basis. As such, in the event the contemplated transaction closes, the issuance of the common stock consideration to AgEagle will result in immediate and substantial dilution to the interests of our then shareholders and result in a change of control of the Company.

The Merger Agreement limits our ability to pursue alternatives to the Merger.

The Merger Agreement contains provisions that could adversely impact competing proposals to acquire us. These provisions include the prohibition on us generally from soliciting any acquisition proposal or offer for a competing transaction. These provisions might discourage a third party that might have an interest in acquiring all or a significant part of our company from considering or proposing an acquisition, even if that party were prepared to pay consideration with a higher value than the current proposed Merger consideration.

Failure to complete the Merger could negatively impact our stock price and future business and financial results.

If the Merger is not completed, our ongoing business may be adversely affected and we would be subject to a number of risks, including the following:

	●	we will not realize the benefits expected from the Merger, including a potentially enhanced competitive and financial position, expansion of operations, and will instead be subject to all the risks we currently face as an independent company;

	●	we may experience negative reactions from the financial markets and our partners and employees;

	●	the Merger Agreement places certain restrictions on the conduct of our business prior to the completion of the Merger or the termination of the Merger Agreement. Such restrictions, the waiver of which is subject to the consent of AgEagle, may prevent us from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Merger; and

	●	matters relating to the Merger (including integration planning) may require substantial commitments of time and resources by our management, which would otherwise have been devoted to other opportunities that may have been beneficial to us as an independent company.

The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.

The completion of the Merger is subject to various customary conditions, including, among other things: (a) the approval of the shareholders of the Company and AgEagle; (b) the accuracy of the representations and warranties made by each of the Company and AgEagle and the compliance by each of the Company and AgEagle with their respective obligations under the Merger Agreement; (c) approval of the shareholders of the Company for the issuance of its common stock and any other securities (x) to the AgEagle shareholders in connection with the Merger and (y) in connection with the financing transactions contemplated by the Merger Agreement; (d) approval for the listing of shares of the Company’s common stock to be issued in the Merger and other related transactions on the NYSE American; and (e) that all of the Company’s assets as disclosed shall have been sold, transferred or otherwise disposed of and the corresponding debt and liabilities shall have been extinguished. The Company’s existing cash resources are insufficient to satisfy all of its outstanding liabilities. Accordingly, in order to satisfy the condition and consummate the Merger, the Company will be required to raise additional funding prior to the closing of the Merger, the failure of which could result in the Company’s failure to consummate the Merger Agreement. These conditions to the closing of the Merger may not be fulfilled and, accordingly, the Merger may not be completed. In addition, if the Merger is not completed by January 31, 2018, provided that if all of the conditions to closing shall have been satisfied or shall be capable of being satisfied at such time, the required closing date may be extended until March 31, 2018, either we or AgEagle may choose not to proceed with the Merger, and the parties can mutually decide to terminate the Merger Agreement at any time, before or after shareholder approval. In addition, we or AgEagle may elect to terminate the Merger Agreement in certain other circumstances.

Termination of the Merger Agreement could negatively impact the Company.

In the event the Merger Agreement is terminated, our business may have been adversely impacted by our failure to pursue other beneficial opportunities due to the focus of management on the Merger, and the market price of our common stock might decline to the extent that the current market price reflects a market assumption that the Merger will be completed. If the Merger Agreement is terminated and our board of directors seek another business combination, our shareholders cannot be certain that we will be able to find a party willing to offer equivalent or more attractive consideration than the consideration provided for by the Merger.

We will be subject to business uncertainties and contractual restrictions while the Merger is pending.

Uncertainty about the effect of the Merger on our partners may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed, and could cause partners and others that deal with us to seek to change existing business relationships, cease doing business with us or cause potential new partners to delay doing business with us until the Merger has been successfully completed. Retention of certain employees may be challenging during the pendency of the Merger, as certain employees may experience uncertainty about their future roles or compensation structure. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, our business following the Merger could be negatively impacted. In addition, the Merger Agreement restricts us from making certain acquisitions and taking other specified actions until the Merger is completed without the consent of AgEagle. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Merger.

We are currently not in compliance with NYSE American continued listing standards and if we are unable to maintain compliance with NYSE American continued listing standards, our common stock may be delisted from the NYSE American equities market, which would likely cause the liquidity and market price of our common stock to decline.

Our common stock is currently listed on the NYSE American. The NYSE American will consider suspending dealings in, or delisting, securities of an issuer that does not meet its continued listing standards. If we cannot meet the NYSE American continued listing requirements, the NYSE American may delist our common stock, which could have an adverse impact on us and the liquidity and market price of our stock.

We may be unable to comply with NYSE American continued listing standards. Our business has been and may continue to be affected by worldwide macroeconomic factors, which include uncertainties in the credit and capital markets. External factors that affect our stock price, such as liquidity requirements of our investors, as well as our performance, could impact our market capitalization, revenue and operating results, which, in turn, could affect our ability to comply with the NYSE American’s listing standards. The NYSE American has the ability to suspend trading in our common stock or remove our common stock from listing on the NYSE American if in the opinion of the exchange: (a) the financial condition and/or operating results of the Company appear to be unsatisfactory; or (b) it appears that the extent of public distribution or the aggregate market value of our common stock has become so reduced as to make further dealings on the exchange inadvisable; or (c) we have sold or otherwise disposed of our principal operating assets, or have ceased to be an operating company; or (d) we have failed to comply with our listing agreements with the exchange (which include that we receive additional listing approval from the exchange prior to us issuing any shares of common stock, something we have inadvertently failed to comply with in the past); or (e) any other event shall occur or any condition shall exist which makes further dealings on the exchange unwarranted.

On October 19, 2017, the Company received notice from NYSE Regulation, Inc. that it is not in compliance with certain NYSE American (“NYSE American”) continued listing standards relating to stockholders’ equity. Specifically, the Company is not in compliance with Section 1003(a)(i) (requiring stockholders’ equity of $2.0 million or more if an issuer has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years) of the NYSE American Company Guide (the “Company Guide”). As a result, the Company has become subject to the procedures and requirements of Section 1009 of the Company Guide and is required to submit a plan by November 19, 2017, advising the NYSE American of the actions the Company has taken or will take to regain compliance with the NYSE American continued listing standards. The plan period may not exceed April 19, 2019.

If we are unable to retain compliance with the NYSE American criteria for continued listing, our common stock would be subject to delisting. A delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and market price of our common stock and reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing. In addition, delisting from the NYSE American might negatively impact our reputation and, as a consequence, our business. Additionally, if we were delisted from the NYSE American and we are not able to list our common stock on another national exchange we will no longer be eligible to use Form S-3 registration statements and will instead be required to file a Form S-1 registration statement for any primary or secondary offerings of our common stock, which would delay our ability to raise funds in the future, may limit the type of offerings of common stock we could undertake, and would increase the expenses of any offering, as, among other things, registration statements on Form S-1 are subject to SEC review and comments whereas take downs pursuant to a previously filed Form S-3 are not.

If we are delisted from the NYSE American, your ability to sell your shares of our common stock would also be limited by the penny stock restrictions, which could further limit the marketability of your shares.

If our common stock is delisted from the NYSE American, it would come within the definition of “penny stock” as defined in the Exchange Act and would be covered by Rule 15g-9 of the Exchange Act. That Rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of shareholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On April 27, 2017, the Company entered into an Additional Issuance Agreement with Alpha Capital Anstalt, for the purchase of 300 restricted shares of its newly designated Series C Convertible Preferred Stock in consideration for $300,000, with an option to purchase an additional 200 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $200,000. As of September 30, 2017, the Company had issued 300 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $300,000. In addition, during the nine months ending September 30, 2017, the Company had received $150,000 from Alpha Capital Anstalt to purchase an additional 150 shares of Series C Convertible Preferred Stock. As of September 30, 2017, and the date of this filing, the additional 150 shares of Series C Convertible Preferred Stock have not been issued and are reflected as Series C Convertible Preferred Stock Issuable on the balance sheet as of September 30, 2017, in the aggregate amount of $150,000.

We claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the transaction did not involve a public offering, the recipient was an “accredited investor”, and acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom and are further subject to the terms of the escrow agreement. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

As the issuance of the anti-dilutive shares did not involve a “sale” of securities under Section 2(a)(3) of the Securities Act, we believe that no registration of such securities, or exemption from registration for such securities, was required under the Securities Act. Notwithstanding the above, to the extent such shares are deemed “sold or offered”, we claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the transaction did not involve a public offering, the recipient was an “accredited investor”, and acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom and are further subject to the terms of the escrow agreement. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

During the nine months ending September 30, 2017, Alpha Capital Anstalt converted 390 shares of Series B Convertible Preferred Stock into 1,300,000 shares of common stock.

We claim an exemption from registration provided by Section 3(a)(9) of the Securities Act for such issuance, as the securities were exchanged by us with our existing security holder in a transaction where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

Pursuant to the Merger, the Company will issue unregistered shares of Company common stock to the stockholders of AgEagle with respect to the Merger equal to 85% of the then issued and outstanding capital stock of the Company on a fully diluted basis.

The shares to be issued by the Company to the stockholders of AgEagle in the Merger and related transactions will be issued exempt from registration under Section 4(a)(2) of the Securities Act because the offer and sale of such securities does not involve a “public offering” as defined in Section 4(a)(2) of the Securities Act and other applicable requirements will be met.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Exhibit No.		Description
2.1***		Agreement and Plan of Merger and Reorganization, dated as of October 19, 2017, by and among EnerJex Resources, Inc., AgEagle Merger Sub, Inc., and AgEagle Aerial Systems, Inc. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 20, 2017, and incorporated herein by reference)
3.1		Certificate of Designation of Series C Preferred Stock as filed with the Secretary of State of Nevada on April 27, 2017 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 28, 2017, and incorporated herein by reference)

10.1		Form of Additional Issuance Agreement among Enerjex Resources, Inc. and Alpha Capital Anstalt effective as of April 27, 2017 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 28, 2017, and incorporated herein by reference)
10.2		Form of Services Agreement among EnerJex Resources, Inc., and Camber Energy, Inc. dated April 27, 2017 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Commission on April 28, 2017, and incorporated herein by reference)
10.3		Second Amended and Restated Credit Agreement dated May 10, 2017, by and among the Registrant, EnerJex Kansas, Inc., Black Raven Energy, Inc., Black Sable Energy, LLC, Adena, LLC, Working Interest, LLC, Kansas Holdings, LLC and Cortland Capital Market Services LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on May 12, 2017, and incorporated herein by reference)
10.4		Amended and Restated Note dated May 10, 2017, by and among the Registrant, EnerJex Kansas, Inc., Black Raven Energy, Inc., Black Sable Energy, LLC, Adena, LLC, Working Interest, LLC, Kansas Holdings, LLC and Cortland Capital Market Services LLC (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Commission on May 12, 2017, and incorporated herein by reference)
10.5		Guaranty of Recourse Carveouts dated May 10, 2017, by and between the Registrant and Cortland Capital Market Services LLC (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Commission on May 12, 2017, and incorporated herein by reference)
10.6		$100,000 Secured Promissory Note dated July 14, 2017, by the Company in favor of Alpha Capital Anstalt (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on July 20, 2017, and incorporated herein by reference)
10.7		Voting Agreement, dated as of October 19, 2017, by and among EnerJex Resources, Inc. and a principal stockholder of AgEagle (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 20, 2017, and incorporated herein by reference)
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Audited Financial Statements of AgEagle Aerial Systems, Inc. for the years ended December 31, 2016 and 2015 (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 20, 2017, and incorporated herein by reference)
99.2		Unaudited Financial Statements of AgEagle Aerial Systems, Inc. as of June 30, 2017 (filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed with the Commission on October 10, 2017, and incorporated herein by reference)
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 Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith.

Furnished herewith.

***

The schedules to the Agreement and Plan of Merger have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedules to the Securities and Exchange Commission upon request.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ENERJEX RESOURCES, INC.
(Registrant)

By:

/s/ Louis G. Schott

Louis G. Schott

Interim Chief Executive Officer

(Principal Executive Officer)

Date: November 14, 2017

EX-31.1 2 ex31-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Enerjex Resources, Inc. 10-Q

EXHIBIT 31.1

CERTIFICATION

I, Louis G. Schott, Interim Chief Executive Officer of EnerJex Resources, Inc., certify that:

I have reviewed this Quarterly Report on Form 10-Q of EnerJex Resources, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2017

/s/ Louis G. Schott
Louis G. Schott
Interim Chief Executive Officer
(Principal Executive Officer)

EX-31.2 3 ex31-2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER

Enerjex Resources, Inc. 10-Q

EXHIBIT 31.2

CERTIFICATION

I, Robert Schleizer, Interim Chief Financial Officer of EnerJex Resources, Inc., certify that:

I have reviewed this Quarterly Report on Form 10-Q of EnerJex Resources, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2017

/s/ Robert Schleizer

Robert Schleizer

Interim Chief Financial Officer

(Principal Financial/Accounting Officer)

EX-32.1 4 ex32-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Enerjex Resources, Inc. 10-Q

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Louis G. Schott, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of EnerJex Resources, Inc. on Form 10-Q for the quarterly period ended September 30, 2017, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of EnerJex Resources, Inc.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2017

/s/ Louis G. Schott
Louis G. Schott
Interim Chief Executive Officer
(Principal Executive Officer)

EX-32.2 5 ex32-2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER

Enerjex Resources, Inc. 10-Q

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Schleizer, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of EnerJex Resources, Inc. on Form 10-Q for the quarterly period ended September 30, 2017, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of EnerJex Resources, Inc.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2017

/s/ Robert Schleizer
Robert Schleizer
Interim Chief Financial Officer
(Principal Financial/Accounting Officer)

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50000

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1814408 17925000 1306801

4500000

1902726 1772588 210990 1814407 -1159780

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104000

35000

91000

77000

50000

0.10

150000

17295000

4500000

105806

3300000

105806

0.160

0.0375

3300000

100000

4500000

P5D 1.50 0.3421052632 0.6578947368

0.0330

0.0075

0.00

0.0050

0.0225

0.0300

38000000

40000000

100000000

19500000

12150000

7000000

50000000

38000000

0.1

1000000 1300000

1500000

597461

200

300

150

200000

300000

150000

150

1000

0.30

1000

0.0999

208500

3333

571

3333

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390

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2638823

Note 1 – Basis of Presentation   The unaudited condensed consolidated financial statements of EnerJex Resources, Inc. (“we”, “us”, “our”, “EnerJex” and “Company”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year. Certain amounts in the prior year statements have been reclassified to conform to the current year presentations. The statements should be read in conjunction with the financial statements and footnotes thereto included in our Annual Report Form 10-K for the fiscal year ended December 31, 2016, filed with the Securities and Exchange Commission on March 31, 2017.   Our consolidated financial statements include the accounts of our wholly-owned subsidiaries, EnerJex Kansas, Inc., Black Sable Energy, LLC, Working Interest, LLC and Black Raven Energy, Inc., for the three and nine month periods ended September 30, 2017, and for the year ended December 31, 2016. All intercompany transactions and accounts have been eliminated in consolidation.

Note 2 – Going Concern   The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.   Merger Agreement   On October 19, 2017, EnerJex entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AgEagle Aerial Systems, Inc., a Nevada corporation (“AgEagle”), which designs, develops, produces, and distributes technologically advanced small unmanned aerial vehicles (UAV or drones) that are supplied to the agriculture industry, and AgEagle Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Merger Sub”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into AgEagle, Merger Sub will cease to exist and AgEagle will survive as a wholly-owned subsidiary of the Company (the “Merger”). The respective boards of directors of EnerJex and AgEagle have approved the Merger Agreement and the transactions contemplated thereby.   At the effective time of the Merger (the “Effective Time”), the shares of AgEagle capital stock will be automatically converted into the right to receive equal to 85% of the then issued and outstanding capital stock of the Company on a fully diluted basis. In addition, at the Effective Time all outstanding options and warrants to purchase shares of AgEagle common stock will be assumed by the Company and converted into options and warrants to purchase shares of Company common stock. No fractional shares of Company common stock will be issued in the Merger but will be rounded to the nearest whole share. Following the consummation of the Merger, former stockholders of AgEagle with respect to the Merger are expected to own 85% of the Company’s outstanding common stock (inclusive of the AgEagle assumed stock options and warrants), and current common and Series A Preferred stockholders of the Company are expected to own 15% of the Company, excluding shares of common stock that may be issued in connection with the conversion of the Company’s Series B Preferred Stock and Series C Preferred Stock, and not including any additional shares which may be issued in connection with the Company’s closing obligation to provide up to $4 million in new working capital and the elimination of all liabilities currently on the Company’s balance sheet.   In connection with the Merger, the Company will also file a proxy statement seeking stockholder approval to: (a) amend the terms of its Series A Preferred Stock (as discussed below); (b) approve the issuance of the Company’s shares in connection with the Merger to the AgEagle shareholders and new investors, in excess of 19.9% of the Company’s total issued and outstanding shares of common stock; (c) approve the issuance of shares to current Company management and directors in lieu of deferred salary and fees, a majority of which will be held in escrow to secure the Company’s indemnity obligations under the Merger Agreement; and (d) change the name of the Company to “AgEagle Aerial Resources, Inc.”   The Merger Agreement provides that, immediately following the Effective Time, the existing board of directors and officers of the Company will resign and new directors and officers will be appointed by AgEagle.   The Company intends to dispose of its principal assets, consisting primarily of its Kansas oil and gas properties, concurrently with the closing of the Merger. In the event the Merger is not consummated, the Company does not have a present intention to dispose of the above described assets.   The completion of the Merger is subject to various customary conditions, including, among other things: (a) the approval of the stockholders of the Company and AgEagle; (b) the accuracy of the representations and warranties made by each of the Company and AgEagle and the compliance by each of the Company and AgEagle with their respective obligations under the Merger Agreement; (c) approval of the stockholders of the Company for the issuance of its common stock and any other securities (x) to the AgEagle stockholders in connection with the Merger and (y) in connection with the financing transactions contemplated by the Merger Agreement; (d) approval for the listing of shares of the Company’s common stock to be issued in the Merger and other related transactions on the NYSE American; and (e) that all of the Company’s assets as disclosed shall have been sold, transferred or otherwise disposed of and the corresponding debt and liabilities shall have been extinguished. The Company’s existing cash resources are insufficient to satisfy all of its outstanding liabilities. Accordingly, in order to satisfy the condition and consummate the Merger, the Company will be required to raise additional funding prior to the closing of the Merger, the failure of which could result in the Company’s failure to consummate the Merger Agreement.   The Merger Agreement contains customary representations, warranties and covenants, including covenants obligating each of the Company and AgEagle to continue to conduct its respective business in the ordinary course, to provide reasonable access to each other’s information and to use reasonable best efforts to cooperate and coordinate to make any filings or submissions that are required to be made under any applicable laws or requested to be made by any government authority in connection with the Merger. The Merger Agreement also contains a customary “no solicitation” provision pursuant to which, prior to the earlier of January 31, 2018, or the completion or termination of the Merger, neither the Company nor AgEagle may solicit or engage in discussions with any third party regarding another acquisition proposal unless, in the Company’s case, it has received an unsolicited, bona fide written proposal that the recipient’s board of directors determines is or would reasonably be expected to result in a superior proposal. The Company has paid AgEagle a $50,000 non-refundable fee at the signing of the Merger Agreement. The Merger Agreement contains certain termination rights in favor of each of the Company and AgEagle.   In addition, the Merger Agreement contains provisions for indemnification in the event of any damages suffered by either party as a result of breaches of representations and warranties contained therein. The aggregate maximum indemnification obligation of any indemnifying party for damages with respect to breaches of representations and warranties set forth in the Merger Agreement shall not exceed, in the aggregate, $350,000, other than fraud, intentional misrepresentation or willful breach. An indemnifying party shall satisfy its indemnification obligations with shares of Company common stock equal to the aggregate amount of losses of the indemnified party, calculated based upon the greater of (i) the value of the Company common stock as of the closing of the Merger; and (ii) the average closing price of the Company common stock on the NYSE American for the five trading days immediately prior to the date such a claim is made. The Company has agreed to deposit an aggregate of 1,215,278 shares of common stock to be issued to current officers and directors of the Company in lieu of deferred salary and fees into escrow to secure its indemnification obligations, the issuance of such shares requiring the approval of the Company’s common stockholders.   In connection with, and as a condition to the closing of the Merger, the Company is seeking the consent of the holder of its Series A Preferred Stock (“Series A Preferred Stock”) to amend the terms thereof to: (i) allow the Company to pay all accrued but unpaid dividends up to September 30, 2017 in additional shares of Series A Preferred Stock based on the value of the liquidation preference thereof, (ii) eliminate the right of the Series A Preferred Stock holders to receive any dividends accruing after September 30, 2017, and (iii) convert each share of Series A Preferred Stock into 10 shares of Company common stock. An affirmative vote of 66.7% of all shares of Series A Preferred Stock voting as a class as of the record date of the proxy statement is required to amend the terms of the Certificate of Designation to provide for these changes, as required under the Merger Agreement.   As of September 30, 2017, the Series A Preferred Stock had accrued a total of $6,039,972 in accrued but unpaid dividends, which would result in an additional 241,599 shares of Series A Preferred Stock being issued by the Company to satisfy these accrued dividends.   The Merger Agreement provides either party the right to terminate the Merger if it has not been consummated by January 31, 2018, provided that if all of the conditions to closing shall have been satisfied or shall be capable of being satisfied at such time, the required closing date may be extended until March 31, 2018.   Financing Transactions   On October 3, 2011, the Company entered into an Amended and Restated Credit Agreement with Texas Capital Bank, and other financial institutions and banks that may become a party to the Credit Agreement from time to time (“TCB” or “Bank”). The facilities provided under the Amended and Restated Credit Agreement were to be used to refinance a prior outstanding revolving loan facility with TCB dated July 3, 2008, and for working capital and general corporate purposes. On August 15, 2014, the Company entered into an Eighth Amendment to the Amended and Restated Credit Agreement. Among other things the Eighth Amendment extended the maturity of the Agreement by three years to October 3, 2018. On August 12, 2015, the Company entered into a Tenth Amendment to the Amended and Restated Credit Agreement. Among other things, the Tenth Amendment established the requirement of monthly borrowing base reductions commencing September 1, 2015 and continuing on the first of each month thereafter. On November 13, 2015, the Company entered into an Eleventh Amendment to the Amended and Restated Credit Agreement. The Eleventh Amendment reflects the following changes: (i) waived certain provisions of the Credit Agreement, (ii) suspended certain hedging requirements, and (iii) amended certain other items of the Credit Agreement.   On April 1, 2016, the Company informed the Bank that it would cease making the mandatory monthly borrowing base reduction payments and did not make the required April 1, 2016 payment. The Company made its mandatory quarterly interest payment on April 6, 2016 and on April 7, 2016, entered into a Forbearance Agreement whereby the Bank agreed to not exercise remedies and rights afforded it under the Amended and Restated Credit Agreement for thirty days. On May 31, 2016, the Company and the Bank amended the Forbearance Agreement to extend the forbearance period to August 31, 2016. On July 29, 2016, the Company and the Bank amended the Forbearance Agreement to extend the forbearance period to October 1, 2016. Upon the expiration of the Third Forbearance agreement, the Company did not enter into a Fourth Forbearance Agreement. Also, at that time the Company discontinued payment of interest on its outstanding loan obligations with the Bank.   Throughout 2016, the Company evaluated plans to restructure, amend or refinance existing debt through private options. On February 14, 2017, the Company announced that a group of investors unrelated to the Company had purchased from EnerJex’s secured bank lender all rights to the Company’s secured indebtedness, and that EnerJex had executed a definitive written agreement for the discharge of the Company’s secured indebtedness with the purchasing investor group. Final closing on this agreement occurred on May 10, 2017.   On February 10, 2017, the Company, TCB and IberiaBank (collectively, “Sellers”), and PWCM Investment Company IC LLC, and certain financial institutions (collectively, “Buyers”) entered into a Loan Sale Agreement (“LSA”), pursuant to which Sellers sold to Buyers, and Buyers purchased from Sellers, all of Sellers’ right, title and interest in, to and under the Credit Agreement and Loan Documents, in exchange for (i) a cash payment of $5,000,000 (the “Cash Purchase Price”), (ii) a Synthetic Equity Interest equal to 10% of the proceeds, after Buyer’s realization of a 150% return on the Cash Purchase Price within five (5) years of the closing date of the sale, with payment being distributed 65.78947368% to TCB and 34.21052632% to IberiaBank, and (iii) at any time prior to February 10, 2022, Buyer may acquire the interest in clause (ii) above. In connection with the LSA, the Company released Sellers and its successors as holders of the rights under the Credit Agreement and Loan Documents, including Buyers, from any and all claims under the Credit Agreement and Loan Documents.   Also on February 10, 2017, the Company and its subsidiaries, and successor lender entered into a binding letter agreement dated February 10, 2017, which was subsequently amended on March 30, 2017 (as amended, the “letter agreement”) pursuant to which:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.5in"> </td> <td style="width: 0.25in">1.</td> <td style="padding-right: 11pt">the successor lender agreed to forgive our existing secured loan in the approximate principal amount of $17,295,000, and in exchange entered into a secured promissory note (which we refer to as the “restated secured note”) in the original principal amount of $4,500,000.</td></tr> </table>    <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.5in"> </td> <td style="width: 0.25in">2.</td> <td style="padding-right: 11pt">we:</td></tr> </table>    <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.75in"> </td> <td style="width: 0.25in">a.</td> <td>conveyed our oil and gas properties and associated performance and surety bonds in Colorado, Texas, and Nebraska;</td></tr> </table>    <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.75in"> </td> <td style="width: 0.25in">b.</td> <td style="padding-right: 11pt">conveyed all of our shares of Oakridge Energy, Inc. (together, the “conveyed oil and gas assets”); and</td></tr> </table>    <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.75in"> </td> <td style="width: 0.25in">c.</td> <td style="padding-right: 11pt">retained our assets in Kansas and continued as a going concern. The Kansas assets currently provide most of our current operating revenue.</td></tr> </table>   The restated secured note:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.5in"> </td> <td style="width: 0.25in">a.</td> <td style="padding-right: 11pt">is secured by a first-priority lien in the Company’s oil and gas producing assets situated in the State of Kansas,</td></tr> </table>    <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.5in"> </td> <td style="width: 0.25in">b.</td> <td style="padding-right: 11pt">evidences accrued interest on the $4,500,000 principal balance at a rate of 16% per annum,</td></tr> </table>    <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.5in"> </td> <td style="width: 0.25in">c.</td> <td style="padding-right: 11pt">bears interest from and after May 1, 2017, at a rate of 16.0% per annum,</td></tr> </table>    <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.5in"> </td> <td style="width: 0.25in">d.</td> <td style="padding-right: 11pt">is pre-payable in full at a discount at any time during the term of the restated secured note upon EnerJex paying $3,300,000 to successor lender, and</td></tr> </table>    <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: top"> <td style="width: 0.5in"> </td> <td style="width: 0.25in">e.</td> <td style="padding-right: 11pt">matures and is due and payable in full on November 1, 2017.</td></tr> </table>   We have two options to extend the maturity date of the restated secured note by 90 days each (first to January 30, 2018 and then to April 30, 2018), upon payment of extension fees of $100,000 for each extension.   So long as we repay the $3,300,000 in indebtedness on or prior to the maturity date, as extended, all other amounts payable under the restated secured note are to be forgiven.   The closing occurred on May 10, 2017. As part of the closing procedures and net settlement, we issued a promissory note to Pass Creek Resources LLC in the amount of $105,806. The promissory bears interest at 16% per annum and matured on June 9, 2017. The amount due was not paid on June 9, 2017, but the holder has not provided the Company a notice of default.   In connection with the May 10, 2017 closing and in consideration of the satisfaction of $13,425,000 of the amount due under the Credit Agreement, as amended, the Company and certain of its subsidiaries transferred to PCR Holdings LLC, an affiliate of the successor lenders under the Credit Agreement, all of the Company’s oil and gas properties and assets located in Colorado, Texas, and Nebraska, as well as the Company’s shares of Oakridge Energy, Inc.   To evidence the Company’s remaining $4,500,000 of indebtedness to PWCM Investment Company IC LLC (“PWCM”), RES Investment Group, LLC (“RES”), Round Rock Development Partners, LP (“Round Rock”), and Cibolo Holdings, LLC (“Cibolo Holdings,” and together with PWCM, RES and Round Rock, “Successor Lenders”), the Company’s subsidiaries (except Kansas Holdings, LLC) entered into a Second Amended and Restated Credit Agreement with Cortland Capital Market Services LLC, as Administrative Agent, and the other financial institutions and banks parties thereto (the “New Credit Agreement”), and a related Amended and Restated Note (the “New Note”), in the amount of $3.3 million as described above.    Our subsidiaries’ obligations under the credit agreement and note are non-recourse and are secured by a first-priority lien in the Company’s and its subsidiaries’ oil properties and assets located in Kansas. The Company was removed as a borrower under the Credit Agreement, but entered into a Guaranty of Recourse Carveouts, pursuant to which the Company guarantees its subsidiaries’ payment of certain fees and expenses due under the Credit Agreement, and may be liable for certain conduct, such as fraud, bad faith, gross negligence, and waste of the Kansas oil properties or assets.   These conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months following the issuance of these financial statements. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 3 – Stock Options and Warrants   A summary of stock options and warrants is as follows:   <table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Options</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Weighted Avg. Exercise Price</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Warrants</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Weighted Avg. Exercise Price</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 47%; text-align: left">Outstanding December 31, 2016</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left"> </td> <td style="width: 10%; text-align: right">207,664</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 10%; text-align: right">9.69</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left"> </td> <td style="width: 10%; text-align: right">1,904,286</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 10%; text-align: right">2.75</td> <td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left">Granted</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Cancelled</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(50,000</td> <td style="text-align: left">)</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left">Exercised</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">—</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">—</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">—</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">—</td> <td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Outstanding September 30, 2017</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left"> </td> <td style="border-bottom: black 2pt double; text-align: right">157,664</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left">$</td> <td style="border-bottom: black 2pt double; text-align: right">9.69</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left"> </td> <td style="border-bottom: black 2pt double; text-align: right">1,904,286</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left">$</td> <td style="border-bottom: black 2pt double; text-align: right">2.75</td> <td style="padding-bottom: 2pt; text-align: left"> </td></tr> </table>

Note 4 – Asset Retirement Obligation   Our asset retirement obligations relate to the liabilities associated with the abandonment of oil and natural gas wells. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit adjusted risk-free interest rates. The following shows the changes in asset retirement obligations:   <table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 86%; text-align: left">Asset retirement obligations, December 31, 2016</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 10%; text-align: right">3,314,191</td> <td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left">Release of liabilities</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(1,814,408</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Accretion</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">93,498</td> <td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left">Asset retirement obligations, September 30, 2017</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left">$</td> <td style="border-bottom: black 2pt double; text-align: right">1,593,281</td> <td style="padding-bottom: 2pt; text-align: left"> </td></tr> </table>

Note 5 – Long-Term Debt   Senior Secured Credit Facility   On October 3, 2011, the Company and DD Energy, Inc., EnerJex Kansas, Inc., Black Sable Energy, LLC and Working Interest, LLC, its subsidiaries (“Borrowers”) entered into an Amended and Restated Credit Agreement with Texas Capital Bank, N.A. (the “Bank”) and other financial institutions and banks that may become a party to the Credit Agreement from time to time. The facilities provided under the Amended and Restated Credit Agreement were used to refinance the Borrowers’ prior outstanding revolving loan facility with the Bank, dated July 3, 2008, and for working capital and general corporate purposes.   At our option, loans under the facility will bear stated interest based on the Base Rate plus Base Rate Margin, or Floating Rate plus Floating Rate Margin (as those terms are defined in the Credit Agreement). The Base Rate will be, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 0.50% and (b) the Bank’s prime rate. The Floating Rate shall mean, at Borrower’s option, a per annum interest rate equal to (i) the Eurodollar Rate plus Eurodollar Margin, or (ii) the Base Rate plus Base Rate Margin (as those terms are defined in the Amended and Restated Credit Agreement). Eurodollar borrowings may be for one, two, three, or nine months, as selected by the Borrowers. The margins for all loans are based on a pricing grid ranging from 0.00% to 0.75% for the Base Rate Margin and 2.25% to 3.00% for the Floating Rate Margin based on the Company’s Borrowing Base Utilization Percentage (as defined in the Amended and Restated Credit Agreement).   On December 15, 2011, we entered into a First Amendment to Amended and Restated Credit Agreement and Second Amended and Restated Promissory Note in the amount of $50,000,000 with the Bank. The Amendment reflected the addition of Rantoul Partners as an additional Borrower and added as additional security for the loans the assets held by Rantoul Partners.   On August 31, 2012, we entered into a Second Amendment to Amended and Restated Credit Agreement with the Bank. The Second Amendment: (i) increased our borrowing base to $7,000,000, (ii) reduced the minimum interest rate to 3.75%, and (ii) added additional new leases as collateral for the loan.  On November 2, 2012, we entered into a Third Amendment to Amended and Restated Credit Agreement with the Bank. The Third Amendment (i) increased our borrowing base to $12,150,000, and (ii) clarified certain continuing covenants and provided a limited waiver of compliance with one of the covenants so clarified for the quarter ended December 31, 2011.   On January 24, 2013, we entered into a Fourth Amendment to Amended and Restated Credit Agreement, which was made effective as of December 31, 2012, with the Bank. The Fourth Amendment reflected the following changes: (i) the Bank consented to the restructuring transactions related to the dissolution of Rantoul Partners, and (ii) the Bank terminated a Limited Guaranty, as defined in the Credit Agreement, executed by Rantoul Partners in favor of the Bank.   On April 16, 2013, the Bank increased our borrowing base to $19.5 million.    On September 30, 2013, we entered into a Fifth Amendment to the Amended and Restated Credit Agreement. The Fifth Amendment reflected the following changes: (i) an expanded principal commitment amount of the Bank to $100,000,000, (ii) an increase in our Borrowing Base to $38,000,000, (iii) the addition of Black Raven Energy, Inc., our wholly-owned subsidiary, to the Credit Agreement as a borrower party, (iv) the addition of certain collateral and security interests in favor of the Bank, and (v) the reduction of our current interest rate to 3.30%.   On November 19, 2013, we entered into a Sixth Amendment to the Amended and Restated Credit Agreement. The Sixth Amendment reflected the following changes: (i) the addition of Iberia Bank as a participant in our credit facility (together with the Bank, the “Banks”), and (ii) a technical correction to our covenant calculations.   On May 22, 2014, we entered into a Seventh Amendment to the Amended and Restated Credit Agreement. The Seventh Amendment reflected the Bank’s consent to our issuance of up to 850,000 shares of our 10% Series A Cumulative Redeemable Perpetual Preferred Stock.   On August 15, 2014, we entered into an Eighth Amendment to the Amended and Restated Credit Agreement. The Eighth Amendment reflected the following changes: (i) the borrowing base was increased from $38 million to $40 million, and (ii) the maturity of the facility was extended by three years to October 3, 2018.   On April 29, 2015, we entered into a Ninth Amendment to the Amended and Restated Credit Agreement. In the Ninth Amendment, the Banks (i) re-determined the Borrowing Base based upon our recent Reserve Report dated January 1, 2015, (ii) imposed affirmative obligations on the Company to use a portion of proceeds received with regard to future sales of securities or certain assets to repay the loan, (iii) consented to non-compliance by the Company with certain terms of the Credit Agreement, (iv) waived certain provisions of the Credit Agreement, and (v) agreed to certain other amendments to the Credit Agreement.   On May 1, 2015, the Borrowers and the Banks entered into a Letter Agreement to clarify that up to $1,000,000 in proceeds from any potential future securities offering will be unencumbered by the Banks’ liens as described in the Credit Agreement through November 1, 2015, and that, until November 1, 2015, such proceeds would not be subject to certain provisions in the Credit Agreement prohibiting the Company from declaring and paying dividends that may be due and payable to holders of securities issued in such potential offerings or issued prior to the Letter Agreement.   On August 12, 2015, we entered into a Tenth Amendment to the Amended and Restated Credit Agreement. The Tenth Amendment reflected the following changes, it: (i) allowed the Company to sell certain oil assets in Kansas, (ii) allowed for approximately $1,300,000 of the proceeds from the sale to be reinvested in Company owned oil and gas projects, and (iii) provided that not less than $1,500,000 from the proceeds of the sale would be applied to outstanding loan balances.   On November 13, 2015, the Company entered into an Eleventh Amendment to the Amended and Restated Credit Agreement. The Eleventh Amendment reflected the following changes: (i) waived certain provisions of the Credit Agreement, (ii) suspended certain hedging requirements, and (iii) amended other provisions of the Credit Agreement.    On April 1, 2016, the Company informed the Banks that it would cease making the mandatory monthly borrowing base reduction payments and did not make the required April 1, 2016 payment. The Company made its mandatory quarterly interest payment on April 6, 2016 and on April 7, 2016 entered into a Forbearance Agreement whereby the Banks agreed to not exercise remedies and rights afforded it under the Amended and Restated Credit Agreement for thirty days. On May 31, 2016, the Company and the Banks amended the Forbearance Agreement to extend the forbearance period to August 31, 2016. On July 29, 2016, the Company and the Banks entered into a Third Forbearance Agreement which extended the forbearance period to October 1, 2016. Upon the expiration of the Third Forbearance agreement, the Company did not enter into a fourth Forbearance Agreement. Also, at that time the Company discontinued payment of interest on its outstanding loan obligations with the Banks.   On February 10, 2017, the Company and the other Sellers entered into and completed the transactions contemplated by the LSA, described in greater detail in “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Financing Transactions”.   Below is a table showing the reconciliation of the gain on LSA as set forth on the statement of operations for the nine months ended September 30, 2017:   <table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 87%; text-align: left; padding-left: 5.4pt">Forgiveness of existing secured loan</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 10%; text-align: right">17,925,000</td> <td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left; padding-left: 5.4pt">Forgiveness of accrued interest</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,306,801</td> <td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 5.4pt">Issuance of secured promissory note</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(4,500,000</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left; padding-left: 5.4pt">Transfer of oil and gas properties</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(1,902,726</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 5.4pt">Transfer of gas gathering system</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(1,772,588</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 5.4pt">Transfer of shares of Oakridge Energy, Inc.</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(210,990</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 5.4pt">Transfer of ARO liability</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,814,407</td> <td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; text-align: left; padding-left: 5.4pt">Transfer of other assets</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">(1,159,780</td> <td style="padding-bottom: 1pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 5.4pt">Gain on LSA</td> <td> </td> <td style="text-align: left">$</td> <td style="text-align: right">11,500,124</td> <td style="text-align: left"> </td></tr> </table>   To evidence the Company’s remaining $4,500,000 of indebtedness to PWCM Investment Company IC LLC (“PWCM”), RES Investment Group, LLC (“RES”), Round Rock Development Partners, LP (“Round Rock”), and Cibolo Holdings, LLC (“Cibolo Holdings,” and together with PWCM, RES and Round Rock, “Successor Lenders”), the Company’s subsidiaries (except Kansas Holdings, LLC) entered into a Second Amended and Restated Credit Agreement with Cortland Capital Market Services LLC, as Administrative Agent, and the other financial institutions and banks parties thereto (the “New Credit Agreement”), and a related Amended and Restated Note (the “New Note”), in the amount of $3.3 million as described above under “Note 2 – Going Concern” – “Financing Transactions”.   Our subsidiaries’ obligations under the credit agreement and note are non-recourse and are secured by a first-priority lien in the Company’s and the subsidiaries’ oil properties and assets located in Kansas. The Company was removed as a borrower under the Credit Agreement, but entered into a Guaranty of Recourse Carveouts, pursuant to which the Company guarantees the Subsidiaries’ payment of certain fees and expenses due under the Credit Agreement, and may be liable for certain conduct, such as fraud, bad faith, gross negligence, and waste of the Kansas oil properties or assets.   As of September 30, 2017, the principal balance of $105,806 along with accrued interest remained due under the promissory note with Pass Creek Resources LLC.

Note 6 – Commitments & Contingencies   As of September 30, 2017, the Company had an outstanding irrevocable letter of credit in the amount of $50,000 issued in favor of the Texas Railroad Commission. The letter of credit is required by the Texas Railroad Commission for all companies operating in the state of Texas with production greater than limits they prescribe.   Rent expense for the nine months ended September 30, 2017 and 2016 was approximately $75,000 and $104,000, respectively. Future non-cancellable minimum lease payments are approximately $35,000 for the remainder of 2017, $91,000 for 2018, and $77,000 for 2019.   We, as a lessee and operator of oil and gas properties, are subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject to the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. As of September 30, 2017, we have no reserve for environmental remediation and are not aware of any environmental claims.   On September 23, 2016, the Company, American Standard Energy Corporation, Baylor Operating LLC, Bernard Given and Loeb & Loeb LLP were sued by Geronimo Holdings Corporation and Randal Capps in the 143rd Judicial District Court located in Pecos, Texas. The suit among other things, seeks damages for an alleged unlawful sale of properties in Crockett County, Texas and for alleged unpaid royalties. The Company believes the suit is without merit and will vigorously defend itself in connection with this proceeding. The Company has faith that it will prevail and at September 30, 2017, no reserve for potential losses arising from this matter has been recorded. Additionally, under its agreement with Baylor Operating LLC, Baylor has agreed to indemnify and defend the Company against all lawsuits and claims including this one.    On April 26, 2016, C&F Ranch, LLC sued the Company in Allen County, Kansas for alleged breach of contract related to the rental of certain lands located on the C&F Ranch. The Company believes that it has paid all rents owed to C&F Ranch LLC and will vigorously defend itself in connection with this proceeding. The Company has faith that it will prevail and at September 30, 2017, no reserve for potential losses arising from this matter has been recorded.

Note 7 – Impairment of Oil and Gas Properties   Pursuant to full cost accounting rules, the Company must perform a ceiling test each quarter on its proved oil and natural gas assets within each separate cost center. All of the Company’s costs are included in one cost center as all of the Company’s operations are located in the United States. The Company’s ceiling test was calculated using trailing twelve-month, unweighted-average first-day-of-the-month prices for oil and natural gas as of September 30, 2017, which were based on a West Texas Intermediate oil price of $42.46 per Bbl and a Henry Hub natural gas price of $2.63 per Mcf (adjusted for basis and quality differentials), respectively. For the nine-month period ended September 30, 2017, the Company’s present value of future estimate cash flows discounted at 10%, exceeded the net book value of those assets. Accordingly, the Company did not record an impairment charge. This test resulted in a pre-tax write-down of $7,444,597 for the nine-month period ended September 30, 2016.

Note 8 – Equity Transactions   We accrued dividends of $879,608 and $2,638,823 for our Series A Preferred Stock for the three and nine months ended September 30, 2017, respectively. At September 30, 2017, accumulated dividends payable to the Series A Preferred Stock holders totaled $6,039,972.   On April 27, 2017, the Company entered into an Additional Issuance Agreement with Alpha Capital Anstalt, for the purchase of 300 restricted shares of its newly designated Series C Convertible Preferred Stock in consideration for $300,000, with an option to purchase an additional 200 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $200,000. As of September 30, 2017, the Company had issued 300 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $300,000. In addition, during the nine months ending September 30, 2017, the Company had received $150,000 from Alpha Capital Anstalt to purchase an additional 150 shares of Series C Convertible Preferred Stock. As of September 30, 2017, the additional 150 shares of Series C Convertible Preferred Stock have not been issued and are reflected as Series C Convertible Preferred Stock Issuable on the balance sheet in the aggregate amount of $150,000.   The Company recorded a beneficial conversion feature of $208,500 based on the fair value of the common stock and the conversion rate as of the date of issuance. This amount was recorded as a deemed distribution for the nine months ended September 30, 2017.   The Series C Convertible Preferred Stock (“Series C Preferred Stock”) is non-voting (except to the extent required by law and except for certain consent rights relating to amending the certificate of incorporation or bylaws, and the like), ranks senior to the common stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-up of the Company, and ranks junior to the Company’s Series A preferred stock and Series B preferred stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-up of the Company. Upon request of the Holders, the Company can seek stockholder approval to remove the Issuance Limitation described therein and to allow for further adjustments related to anti-dilution protection, only if such stockholder approval is obtained. The Series C Convertible Preferred Stock has a liquidation preference of $1,000 per share, and is convertible at the option of the holder at a conversion price equal to $0.30 per share, or a ratio equal to approximately 3,333 shares of common stock for each one (1) share of Series C Convertible Preferred Stock, subject to customary adjustments. Dividends are payable on the shares of Series C Convertible Preferred Stock only if and to the extent that dividends are payable on the common stock into which the Series C Convertible Preferred Stock is convertible. The Series C Convertible Preferred Stock has no maturity date and can be redeemed by the Company beginning twelve months after the closing of the offering or upon a change of control for the redemption price of $1,000 per share, as adjustable as provided in the designation of the Series C Preferred Stock.   The Series C Preferred Stock includes a beneficial ownership limitation preventing conversion of shares of Series C Preferred Stock into more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Preferred Stock. In addition, the Company may not convert the Series C Preferred Stock into a number of shares of common stock which, when aggregated with any shares of common stock issued on or after the original issue date and prior to such conversion date in connection with any conversion of Series C Preferred Stock would exceed 1,683,944 shares of common stock (19.99% of the outstanding shares as of the original issue date), subject to adjustment for forward and reverse stock splits, recapitalizations and the like. In the event conversion of the Series C Preferred Stock is limited pursuant to these provisions, each holder shall be entitled to a pro rata portion of the issuable maximum.   Pursuant to the anti-dilutive provisions of the Securities Purchase Agreement dated as of March 11, 2015, which requires the Company to issue additional shares of common stock to adjust the purchase price paid by purchasers in the Company’s March 2015 offering, in the event any shares are sold (or convertible securities are sold), with a price per share less than the purchase price paid by the March 2015 purchasers subject to the terms of the Securities Purchase Agreement, Alpha Capital Anstalt received 597,461 shares of common stock. In addition, the Series B Convertible Preferred Stock conversion ratio equal to approximately 571 shares of common stock for each one (1) share of Preferred Stock reset to approximately 3,333 shares of common stock for each one (1) share of Series B Convertible Preferred Stock, to be consistent with the terms of the Series C Convertible Preferred Stock, pursuant to the anti-dilution requirements of the Series B Convertible Preferred Stock.   During the nine months ending September 30, 2017, Alpha Capital Anstalt converted 390 shares of Series B Convertible Preferred Stock into 1,300,000 shares of common stock.   See also the description of the Alpha Capital Anstalt warrant exercises which occurred subsequent to September 30, 2017, as described in “Note 10 – Subsequent Events”.

Note 9 – Related Party Transaction   Effective May 1, 2017, the Company entered into an agreement with Camber Energy, Inc., pursuant to which EnerJex will be responsible for performing certain general and administrative services for Camber for a fee of $150,000 per month. This fee includes payments to vendors who provide accounting services to Camber. Richard E. Menchaca, a member of the Board of Directors of the Company, is a co-guarantor of bank debt held by Camber Energy, Inc. and Robert Schleizer, our newly appointed Interim Chief Financial Officer is also the Chief Financial Officer and a Director of Camber Energy, Inc.

A summary of stock options and warrants is as follows:   <table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Options</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Weighted Avg. Exercise Price</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Warrants</td> <td style="padding-bottom: 1pt"> </td> <td style="padding-bottom: 1pt"> </td> <td colspan="2" style="border-bottom: black 1pt solid; text-align: center">Weighted Avg. Exercise Price</td> <td style="padding-bottom: 1pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 47%; text-align: left">Outstanding December 31, 2016</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left"> </td> <td style="width: 10%; text-align: right">207,664</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 10%; text-align: right">9.69</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left"> </td> <td style="width: 10%; text-align: right">1,904,286</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 10%; text-align: right">2.75</td> <td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left">Granted</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Cancelled</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(50,000</td> <td style="text-align: left">)</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">—</td> <td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left">Exercised</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">—</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">—</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">—</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">—</td> <td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Outstanding September 30, 2017</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left"> </td> <td style="border-bottom: black 2pt double; text-align: right">157,664</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left">$</td> <td style="border-bottom: black 2pt double; text-align: right">9.69</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left"> </td> <td style="border-bottom: black 2pt double; text-align: right">1,904,286</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left">$</td> <td style="border-bottom: black 2pt double; text-align: right">2.75</td> <td style="padding-bottom: 2pt; text-align: left"> </td></tr> </table>

0.85 0.15 50000 400000

350000

1215278

0.667

0.199 42.46 2.63 6039972

Note 10 – Subsequent Events   See the subsequent events in “Note 2 – Going Concern”.   On October 23, 2017, Alpha Capital Anstalt exercised warrants to purchase 1,000,000 shares of our common stock for an aggregate exercise price of $300,000 (or $0.30 per share), pursuant to the terms of such warrants, and was issued 1,000,000 shares of common stock.   On November 6, 2017, Alpha Capital Anstalt exercised warrants to purchase 771,428 shares of our common stock for an aggregate exercise price of $231,429 (or $0.30 per share), pursuant to the terms of such warrants, and was issued 771,428 shares of common stock.   We have reviewed all material events through the date of this report in accordance with ASC 855-10.

1904286

2.75

0.30

1000000 771428

300000

231429

105806

15099

178035

3101682

862968

-515752

-1291986

-4635

-260068

357453

-686660

Below is a table showing the reconciliation of the gain on LSA as set forth on the statement of operations for the nine months ended September 30, 2017:   <table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 87%; text-align: left; padding-left: 5.4pt">Forgiveness of existing secured loan</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 10%; text-align: right">17,925,000</td> <td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left; padding-left: 5.4pt">Forgiveness of accrued interest</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,306,801</td> <td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 5.4pt">Issuance of secured promissory note</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(4,500,000</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left; padding-left: 5.4pt">Transfer of oil and gas properties</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(1,902,726</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 5.4pt">Transfer of gas gathering system</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(1,772,588</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 5.4pt">Transfer of shares of Oakridge Energy, Inc.</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(210,990</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 5.4pt">Transfer of ARO liability</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,814,407</td> <td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1pt; text-align: left; padding-left: 5.4pt">Transfer of other assets</td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">(1,159,780</td> <td style="padding-bottom: 1pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 5.4pt">Gain on LSA</td> <td> </td> <td style="text-align: left">$</td> <td style="text-align: right">11,500,124</td> <td style="text-align: left"> </td></tr> </table>

The following shows the changes in asset retirement obligations:   <table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 86%; text-align: left">Asset retirement obligations, December 31, 2016</td> <td style="width: 1%; text-align: left"> </td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td> <td style="width: 10%; text-align: right">3,314,191</td> <td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left">Release of liabilities</td> <td style="text-align: left"> </td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right">(1,814,408</td> <td style="text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Accretion</td> <td style="padding-bottom: 1pt; text-align: left"> </td> <td style="padding-bottom: 1pt"> </td> <td style="border-bottom: black 1pt solid; text-align: left"> </td> <td style="border-bottom: black 1pt solid; text-align: right">93,498</td> <td style="padding-bottom: 1pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: left">Asset retirement obligations, September 30, 2017</td> <td style="padding-bottom: 2pt; text-align: left"> </td> <td style="padding-bottom: 2pt"> </td> <td style="border-bottom: black 2pt double; text-align: left">$</td> <td style="border-bottom: black 2pt double; text-align: right">1,593,281</td> <td style="padding-bottom: 2pt; text-align: left"> </td></tr></table>

241101

-92547

1897

208500 2638824

71982

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MY_;[QWV$=MM@$_BO&IPWA1(.T3:8J$3,O%QS.2 M;.4$Q.8OEHIN->3&':K),T:+DH&2]%;*N6X&(L@5,IF M\@ J=Z20% P#W[!OZ: VGB?Q5S7AFLO*C.0&.JV5.X525(B M653(J85TA[P[=@V*(F$?IH#2,/\ "#.-1S[6,A6-]4XVNP[6;;6!Y63MT9&X M_FQ#)(K2S4%=S.8]$QRICMMLH;0!+<*>21(:XX*K-KJ+3 5FM?\ B0[Z233< M6@J#B5&0#FKNOC .;8VM]!.LBF MJNW>H.A=)IO5?<'8Z9O4QN@Z 5O'N%N5DL>WQ^9;-2B5D<;NL?U2*JR)2JN$ MCMOB(NY%83B4BRB291.([!W".@$LXA\/LQ< M5,Z.L XML 13 R1.htm IDEA: XBRL DOCUMENT

Document And Entity Information - shares	9 Months Ended
Document And Entity Information - shares	Sep. 30, 2017	Nov. 09, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	EnerJex Resources, Inc.
Entity Central Index Key	0000008504
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	ENRJ
Entity Common Stock, Shares Outstanding		10,321,397

XML 14 R2.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 15,099	$ 128,035
Restricted cash		50,000
Accounts receivable	257,152	600,255
Derivative receivable		10,570
Inventory		185,733
Marketable securities		210,990
Deposits and prepaid expenses	179,424	493,384
Total current assets	451,675	1,678,967
Non-current assets:
Fixed assets, net of accumulated depreciation of $600,085 and $1,817,711	196,691	2,077,055
Oil and gas properties using full-cost accounting, net of accumulated DD&A of $8,594,167 and $15,189,716	1,414,598	3,437,030
Other non-current assets		798,809
Total non-current assets	1,611,289	6,312,894
Total assets	2,062,964	7,991,861
Current liabilities:
Accounts payable	153,170	294,241
Accrued liabilities	709,300	1,535,165
Note Payable	105,806
Current portion of long term debt	4,500,000	17,925,000
Total current liabilities	5,468,276	19,754,406
Asset retirement obligation	1,593,281	3,314,191
Other long-term liabilities	6,039,972	3,401,149
Total non-current liabilities	7,633,253	6,715,340
Total liabilities	13,101,529	26,469,746
Stockholders' Deficit:
Common stock, $0.001 par value, 250,000,000 shares authorized; shares issued and outstanding 10,321,397 at September 30, 2017 and 8,423,936 at December 31, 2016, respectively.	10,322	8,424
Paid-in capital	69,610,909	69,090,613
Accumulated deficit	(80,810,736)	(87,577,862)
Total stockholders' deficit	(11,038,565)	(18,477,885)
Total liabilities and stockholders' deficit	2,062,964	7,991,861
Series A Preferred Stock [Member]
Stockholders' Deficit:
Preferred Stock Value	938	938
Series B Convertible Preferred Stock [Member]
Stockholders' Deficit:
Preferred Stock Value	1	2
Series C Convertible Preferred Stock [Member]
Stockholders' Deficit:
Preferred Stock Value	1
Series C convertible preferred stock issuable	$ 150,000

XML 15 R3.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Accumulated Depreciation, Property, Plant, and Equipment	$ 600,085	$ 1,817,711
Properties using full-cost accounting	$ 8,594,167	$ 15,189,716
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	10,321,397	8,423,936
Common stock, shares outstanding	10,321,397	8,423,936
Series A Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	938,248	938,248
Preferred Stock, shares outstanding	938,248	938,248
Series B Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,764	1,764
Preferred stock, shares issued	1,374	1,764
Preferred Stock, shares outstanding	1,374	1,764
Series C Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	500	500
Preferred stock, shares issued	300	0
Preferred Stock, shares outstanding	300	0

XML 16 R4.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Oil revenues	$ 187,297	$ 454,825	$ 1,082,492	$ 1,581,972
Natural gas revenues		18,929	19,509	43,461
Total revenues	187,297	473,754	1,102,001	1,625,433
Expenses:
Direct operating costs	205,253	569,109	1,013,389	1,916,774
Depreciation, depletion and amortization	80,449	63,644	305,684	312,322
Impairment of oil and gas asset		800,000		7,444,597
Professional fees		43,968	422,538	181,086
Salaries	130,741	297,244	407,888	1,044,639
Administrative expense	190,341	124,090	461,378	435,616
Total expenses	606,784	1,898,055	2,610,877	11,335,034
Loss from operations	(419,487)	(1,424,301)	(1,508,876)	(9,709,601)
Other income (expense):
Interest expense	(184,148)	(339,719)	(908,642)	(1,001,937)
Gain on loan sale agreement			11,500,124
Loss on derivatives		(68,459)		(2,449,855)
Other income	285,000	138,075	531,846	2,312,261
Total other income (expense)	100,852	(270,103)	11,123,328	(1,139,531)
Net (loss) income	(318,635)	(1,694,404)	9,614,452	(10,849,132)
Preferred dividends	(879,608)	(860,061)	(2,847,324)	(2,130,604)
Net (loss) income attributable to common stockholders	$ (1,198,243)	$ (2,554,465)	$ 6,767,128	$ (12,979,736)
Net (loss) income per share basic	$ (0.12)	$ (0.30)	$ 0.72	$ (1.54)
Weighted average shares basic	10,321,397	8,423,936	9,416,837	8,423,936
Net (loss) income per share diluted	$ (0.12)	$ (.30)	$ 0.45	$ (1.54)
Weighted average shares diluted	10,321,397	8,423,936	15,151,107	8,423,936

XML 17 R5.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities
Net income (loss)	$ 9,614,452	$ (10,849,132)
Depreciation, depletion and amortization	212,186	312,322
Write-off of inventory	71,982
Amortization of deferred financing costs	223,790	90,323
Impairment of oil and gas assets		7,444,597
Stock, options and warrants issued for services	13,690	217,283
Accretion of asset retirement obligation	93,498	169,110
Settlement of asset retirement obligation		(2,767)
Amortization of prepaid expenses	241,101
Loss on derivatives		2,449,855
Gain on loan sale agreement, net of cash	(11,500,124)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Accounts receivable	(15,656)	156,835
Inventory	(15,944)	(81,805)
Prepaid expenses	55,601	(76,261)
Accounts payable	(67,008)	(762,193)
Accrued liabilities	556,677	(360,153)
Cash used in operating activities	(515,752)	(1,291,986)
Cash flows from investing activities
Purchase of fixed assets		(243,274)
Additions to oil and gas properties	(4,635)	(16,794)
Cash used in investing activities	(4,635)	(260,068)
Cash flows from financing activities
Bank account transfer on loan sale agreement	(92,547)
Repayments of long-term debt		(686,660)
Proceeds from sale of preferred stock	450,000
Cash provided by (used in) financing activities	357,453	(686,660)
Net (decrease) in cash	(162,936)	(2,238,714)
Cash - beginning	178,035	3,101,682
Cash - ending	15,099	862,968
Supplemental disclosures:
Interest paid		$ 919,089
Non-cash transactions:
Benefical conversion feature on Series C Preferred Stock accounted as preferred dividend	208,500
Accrued preference dividend included in long term debt	2,638,824
Conversion of Series B preferred into common stock	$ 1,897

XML 18 R6.htm IDEA: XBRL DOCUMENT

Basis of Presentation

9 Months Ended

Sep. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

XML 19 R7.htm IDEA: XBRL DOCUMENT

Going Concern

9 Months Ended

Sep. 30, 2017

Going Concern Disclosure [Abstract]

Going Concern

Note 2 – Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

Merger Agreement

Financing Transactions

we:

conveyed our oil and gas properties and associated performance and surety bonds in Colorado, Texas, and Nebraska;

conveyed all of our shares of Oakridge Energy, Inc. (together, the “conveyed oil and gas assets”); and

retained our assets in Kansas and continued as a going concern. The Kansas assets currently provide most of our current operating revenue.

The restated secured note:

is secured by a first-priority lien in the Company’s oil and gas producing assets situated in the State of Kansas,

evidences accrued interest on the $4,500,000 principal balance at a rate of 16% per annum,

bears interest from and after May 1, 2017, at a rate of 16.0% per annum,

is pre-payable in full at a discount at any time during the term of the restated secured note upon EnerJex paying $3,300,000 to successor lender, and

matures and is due and payable in full on November 1, 2017.

So long as we repay the $3,300,000 in indebtedness on or prior to the maturity date, as extended, all other amounts payable under the restated secured note are to be forgiven.

XML 20 R8.htm IDEA: XBRL DOCUMENT

Stock Options and Warrants

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options and Warrants

Note 3 – Stock Options and Warrants

A summary of stock options and warrants is as follows:

	Options			Weighted Avg. Exercise Price		Warrants		Weighted Avg. Exercise Price
Outstanding December 31, 2016		207,664		$	9.69		1,904,286	$	2.75
Granted		—			—		—		—
Cancelled		(50,000	)		—		—		—
Exercised		—			—		—		—
Outstanding September 30, 2017		157,664		$	9.69		1,904,286	$	2.75

XML 21 R9.htm IDEA: XBRL DOCUMENT

Asset Retirement Obligation

9 Months Ended

Sep. 30, 2017

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligation

Note 4 – Asset Retirement Obligation

Asset retirement obligations, December 31, 2016	$	3,314,191
Release of liabilities		(1,814,408	)
Accretion		93,498
Asset retirement obligations, September 30, 2017	$	1,593,281

XML 22 R10.htm IDEA: XBRL DOCUMENT

Long-Term Debt

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Long-Term Debt

Note 5 – Long-Term Debt

Senior Secured Credit Facility

On April 16, 2013, the Bank increased our borrowing base to $19.5 million.

Below is a table showing the reconciliation of the gain on LSA as set forth on the statement of operations for the nine months ended September 30, 2017:

Forgiveness of existing secured loan	$	17,925,000
Forgiveness of accrued interest		1,306,801
Issuance of secured promissory note		(4,500,000	)
Transfer of oil and gas properties		(1,902,726	)
Transfer of gas gathering system		(1,772,588	)
Transfer of shares of Oakridge Energy, Inc.		(210,990	)
Transfer of ARO liability		1,814,407
Transfer of other assets		(1,159,780	)
Gain on LSA	$	11,500,124

As of September 30, 2017, the principal balance of $105,806 along with accrued interest remained due under the promissory note with Pass Creek Resources LLC.

XML 23 R11.htm IDEA: XBRL DOCUMENT

Commitments & Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 6 – Commitments & Contingencies

XML 24 R12.htm IDEA: XBRL DOCUMENT

Impairment of Oil and Gas Properties

9 Months Ended

Sep. 30, 2017

Oil and Gas Exploration and Production Industries Disclosures [Abstract]

Impairment of Oil and Gas Properties

Note 7 – Impairment of Oil and Gas Properties

XML 25 R13.htm IDEA: XBRL DOCUMENT

Equity Transactions

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Equity Transactions

Note 8 – Equity Transactions

During the nine months ending September 30, 2017, Alpha Capital Anstalt converted 390 shares of Series B Convertible Preferred Stock into 1,300,000 shares of common stock.

See also the description of the Alpha Capital Anstalt warrant exercises which occurred subsequent to September 30, 2017, as described in “Note 10 – Subsequent Events”.

XML 26 R14.htm IDEA: XBRL DOCUMENT

Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions

Note 9 – Related Party Transaction

XML 27 R15.htm IDEA: XBRL DOCUMENT

Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

Note 10 – Subsequent Events

See the subsequent events in “Note 2 – Going Concern”.

We have reviewed all material events through the date of this report in accordance with ASC 855-10.

XML 28 R16.htm IDEA: XBRL DOCUMENT

Stock Options and Warrants (Tables)

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of stock options

A summary of stock options and warrants is as follows:

	Options			Weighted Avg. Exercise Price		Warrants		Weighted Avg. Exercise Price
Outstanding December 31, 2016		207,664		$	9.69		1,904,286	$	2.75
Granted		—			—		—		—
Cancelled		(50,000	)		—		—		—
Exercised		—			—		—		—
Outstanding September 30, 2017		157,664		$	9.69		1,904,286	$	2.75

XML 29 R17.htm IDEA: XBRL DOCUMENT

Asset Retirement Obligation (Tables)

9 Months Ended

Sep. 30, 2017

Asset Retirement Obligation Disclosure [Abstract]

Schedule of changes in asset retirement obligations

The following shows the changes in asset retirement obligations:

Asset retirement obligations, December 31, 2016	$	3,314,191
Release of liabilities		(1,814,408	)
Accretion		93,498
Asset retirement obligations, September 30, 2017	$	1,593,281

XML 30 R18.htm IDEA: XBRL DOCUMENT

Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of the reconciliation of the gain on LSA to statement of operations

Below is a table showing the reconciliation of the gain on LSA as set forth on the statement of operations for the nine months ended September 30, 2017:

Forgiveness of existing secured loan	$	17,925,000
Forgiveness of accrued interest		1,306,801
Issuance of secured promissory note		(4,500,000	)
Transfer of oil and gas properties		(1,902,726	)
Transfer of gas gathering system		(1,772,588	)
Transfer of shares of Oakridge Energy, Inc.		(210,990	)
Transfer of ARO liability		1,814,407
Transfer of other assets		(1,159,780	)
Gain on LSA	$	11,500,124

XML 31 R19.htm IDEA: XBRL DOCUMENT

Going Concern (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
Going Concern (Details Narrative) - USD ($)	Feb. 10, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	May 10, 2017	May 01, 2017
Net Income (Loss) Attributable to Parent, Total		$ (318,635)	$ (1,694,404)	$ 9,614,452	$ (10,849,132)
Percentage of converted right				85.00%
Amount of fraud intentional misrepresentation				$ 350,000
Approved of investors issued and outstanding				19.90%
Face amount	$ 17,295,000
Number of days from closing	5 days
Return on cash purchase price (percent)	150.00%
Series A Preferred Stock [Member]
Accrued unpaid dividends		6,039,972		$ 6,039,972
Accrued of dividends		$ 241,599		241,599
Merger Agreement [Member]
Amount of working capital				400,000
Payment of non-refundable fee				50,000
Common stock of deposit				$ 1,215,278
Merger Agreement [Member] \| Series A Preferred Stock [Member]
Percentage of converted right				15.00%
Percent of voting right		66.70%		66.70%
Cortland Capital Market Services LLC [Member] \| Second Amended and Restated Credit Agreement [Member]
Amount of indebtedness						$ 4,500,000
Restated Secured Note [Member]
Face amount	$ 4,500,000
Debt Instrument, Interest Rate, Stated Percentage	16.00%						16.00%
Unamortized discount	$ 3,300,000
Debt Instrument fees	$ 100,000
16% Promissory Note Due on June 9 2017[Member] \| Pass Creek Resources LLC [Member]
Face amount		$ 105,806		$ 105,806		105,806
New Note [Member] \| New Credit Agreement [Member]
Face amount						$ 3,300,000
IberiaBank [Member]
Percent of payment allocation (percent)	34.21053%
TCB [Member]
Percent of payment allocation (percent)	65.78947%

XML 32 R20.htm IDEA: XBRL DOCUMENT

Stock Options and Warrants (Details)	9 Months Ended
Stock Options and Warrants (Details)	Sep. 30, 2017 $ / shares shares
Options
Options Outstanding, Beginning Balance	207,664
Options Cancelled	(50,000)
Options Outstanding, Ending Balance	157,664
Weighted Avg. Exercise Price
Weighted Avg. Exercise Price Outstanding, Beginning Balance \| $ / shares	$ 9.69
Weighted Avg. Exercise Price Outstanding, Ending balance \| $ / shares	$ 9.69
Warrants
Warrants Outstanding, Beginning Balance	1,904,286
Warrants Outstanding, Ending Balance	1,904,286
Weighted Avg. Exercise Price
Weighted Avg. Exercise Price Outstanding, Beginning Balance \| $ / shares	$ 2.75
Weighted Avg. Exercise Price Outstanding, Ending balance \| $ / shares	$ 2.75

XML 33 R21.htm IDEA: XBRL DOCUMENT

Asset Retirement Obligation (Details) - USD ($)	9 Months Ended
Asset Retirement Obligation (Details) - USD ($)	Sep. 30, 2017	Sep. 30, 2016
Asset Retirement Obligation Disclosure [Abstract]
Asset retirement obligations, Beginning	$ 3,314,191
Release of liabilities	(1,814,408)
Accretion	93,498	$ 169,110
Asset retirement obligations, Ending	$ 1,593,281

XML 34 R22.htm IDEA: XBRL DOCUMENT

Long-Term Debt (Details)	9 Months Ended
Long-Term Debt (Details)	Sep. 30, 2017 USD ($)
Debt Disclosure [Abstract]
Forgiveness of existing secured loan	$ 17,925,000
Forgiveness of accrued interest	1,306,801
Issuance of secured promissory note	(4,500,000)
Transfer of oil and gas properties	(1,902,726)
Transfer of gas gathering system	(1,772,588)
Transfer of shares of Oakridge Energy, Inc.	(210,990)
Transfer of ARO liability	1,814,407
Transfer of other assets	(1,159,780)
Gain on loan sale agreement	$ 11,500,124

XML 35 R23.htm IDEA: XBRL DOCUMENT

Long-Term Debt (Details Narrative) - USD ($)		1 Months Ended		9 Months Ended
Long-Term Debt (Details Narrative) - USD ($)	Aug. 12, 2015	May 22, 2014	Sep. 30, 2013	Sep. 30, 2017	May 10, 2017	May 01, 2017	Feb. 10, 2017	May 01, 2015	Aug. 15, 2014	Apr. 16, 2013	Nov. 02, 2012	Aug. 31, 2012	Dec. 15, 2011
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity										$ 19,500,000
Proceeds from potential future securities offering unencumbered by Banks' Liens								$ 1,000,000
Face amount							$ 17,295,000
Cortland Capital Market Services LLC [Member] \| Second Amended and Restated Credit Agreement [Member]
Debt Instrument [Line Items]
Amount of indebtedness					$ 4,500,000
Federal Funds Rate [Member] \| Line Of Credit [Member]
Debt Instrument [Line Items]
Debt instrument interest rate, margin				0.50%
Base Rate [Member] \| Line Of Credit [Member] \| Maximum [Member]
Debt Instrument [Line Items]
Debt instrument interest rate, margin				0.75%
Base Rate [Member] \| Line Of Credit [Member] \| Minimum [Member]
Debt Instrument [Line Items]
Debt instrument interest rate, margin				0.00%
Floating Rate [Member] \| Line Of Credit [Member] \| Maximum [Member]
Debt Instrument [Line Items]
Debt instrument interest rate, margin				3.00%
Floating Rate [Member] \| Line Of Credit [Member] \| Minimum [Member]
Debt Instrument [Line Items]
Debt instrument interest rate, margin				2.25%
Restated Secured Note [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage						16.00%	16.00%
Face amount							$ 4,500,000
Unamortized discount							3,300,000
Debt Instrument fees							$ 100,000
New Note [Member] \| New Credit Agreement [Member]
Debt Instrument [Line Items]
Face amount					3,300,000
16% Promissory Note Due on June 9 2017[Member] \| Pass Creek Resources LLC [Member]
Debt Instrument [Line Items]
Face amount				$ 105,806	$ 105,806
Tenth Amendment [Member]
Debt Instrument [Line Items]
Proceed from sale to outstanding loan balances	$ 1,300,000
Proceeds from sale of oil and gas property and equipment	$ 1,500,000
Seven Amendment [Member] \| Series A Cumulative Redeemable Perpetual Preferred Stock [Member]
Debt Instrument [Line Items]
Percentage of dividend rate		10.00%
Preferred stock shares issued		850,000
Fifth Amendment [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity			$ 100,000,000
Line of credit facility, current borrowing capacity			$ 38,000,000
Fifth Amendment [Member] \| Federal Funds Rate [Member] \| Line Of Credit [Member]
Debt Instrument [Line Items]
Debt instrument interest rate, margin			3.30%
Eight amendment [Member] \| Maximum [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity									$ 40,000,000
Eight amendment [Member] \| Minimum [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity									$ 38,000,000
Third Amendment [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity											$ 12,150,000
Second Amendment [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity												$ 7,000,000
Second Amendment [Member] \| Minimum [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage												3.75%
First Amendment [Member] \| Rantoul Partners [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity													$ 50,000,000

XML 36 R24.htm IDEA: XBRL DOCUMENT

Commitments & Contingencies (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Commitments and Contingencies Disclosure [Line Items]
Operating Leases, Rent Expense	$ 75,000	$ 104,000
Operating Leases, Future Minimum Payments, Remainder of Fiscal Year	35,000
Operating Leases, Future Minimum Payments, Due in Two Years	91,000
Operating Leases, Future Minimum Payments, Due in Three Years	77,000
Texas Railroad Commission [Member]
Commitments and Contingencies Disclosure [Line Items]
Letters of Credit Outstanding, Amount	$ 50,000

XML 37 R25.htm IDEA: XBRL DOCUMENT

Impairment of Oil and Gas Properties (Details Narrative)	3 Months Ended	9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2017 bbl	Sep. 30, 2016 USD ($)
Oil and Gas Exploration and Production Industries Disclosures [Abstract]
Oil Price Per Barrel		42.46
Natural Gas Price Per MMBtu		2.63
Write-down of oil and gas properties \| $	$ 800,000		$ 7,444,597
Future Estimate Cash Flows Discount Percentage		10.00%

XML 38 R26.htm IDEA: XBRL DOCUMENT

Equity Transactions (Details Narrative) - USD ($)		3 Months Ended	9 Months Ended
Equity Transactions (Details Narrative) - USD ($)	Apr. 27, 2017	Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2016	Mar. 11, 2015
Deemed distribution for beneficial conversion of preferred stock			$ 208,500
Series A Preferred Stock [Member]
Preferred Stock, shares outstanding		938,248	938,248	938,248
Accumulated dividends		$ 241,599	$ 241,599
Dividends declared		879,608	2,638,823
Accrued dividend payable		$ 6,039,972	$ 6,039,972
Series B Convertible Preferred Stock [Member]
Preferred Stock, shares outstanding		1,374	1,374	1,764
Common Stock [Member] \| Alpha Capital Anstalt [Member]
Stock issued upon conversion of preferred stock		1,300,000
Series C Convertible Preferred Stock [Member]
Series C convertible preferred stock issuable		$ 150,000	$ 150,000
Preferred stock, shares issuable		150	150
Preferred Stock, shares outstanding		300	300	0
Liquidation preference value		$ 1,000	$ 1,000
Conversion price		0.30	0.30
Redemption price		$ 1,000	$ 1,000
Beneficial ownership limitation (percent)			9.99%
Convertible shares		3,333	3,333
Series C Convertible Preferred Stock [Member] \| Maximum [Member]
Preferred Stock, shares outstanding		1,683,944	1,683,944
Series C Convertible Preferred Stock [Member] \| Alpha Capital Anstalt [Member]
Issuance of stock (shares)		150	300
Issuance of stock		$ 150,000	$ 300,000
Beneficial conversion feature of preferred stock			$ 208,500
Securities Purchase Agreement [Member] \| Series B Convertible Preferred Stock [Member]
Convertible shares		3,333	3,333		571
Preferred stock converted		390
Securities Purchase Agreement [Member] \| Common Stock [Member] \| Alpha Capital Anstalt [Member]
Issuance of stock (shares)		597,461
Additional Issuance Agreement - Option [Member] \| Series C Convertible Preferred Stock [Member] \| Alpha Capital Anstalt [Member]
Issuance of stock (shares)	200
Issuance of stock	$ 200,000
Additional Issuance Agreement [Member] \| Series C Convertible Preferred Stock [Member] \| Alpha Capital Anstalt [Member]
Issuance of stock (shares)	300
Issuance of stock	$ 300,000

XML 39 R27.htm IDEA: XBRL DOCUMENT

Related Party Transaction (Details Narrative)	May 01, 2017 USD ($)
Camber Energy Inc [Member]
Related Party Transaction [Line Items]
Fees	$ 150,000

XML 40 R28.htm IDEA: XBRL DOCUMENT

Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($)	Nov. 06, 2017	Oct. 23, 2017
Exercise of warrants	$ 231,429	$ 300,000
Exercise of warrants, shares	771,428	1,000,000
Exercised Price	$ 0.30	$ 0.30