Cardinal Energy Group, Inc. (Form: 10-Q, Received: 05/15/2013 13:56:19)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013
OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-53923

CARDINAL ENERGY GROUP, INC.

(Exact name of registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

6037 Frantz Rd., Suite 103

Dublin, OH 43017

(Address of principal executive offices, including zip code)

(614) 459-4959

( Registrant’s, telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 90 days.

YES [X] 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 (SS 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 [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	[ ]	Accelerated Filer	[ ]
Non-accelerated Filer	[ ]	Smaller Reporting Company	[X]
(Do not check if smaller reporting company)

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

YES [ ] NO [X]

As of May 1, 2013 there were 34,877,505 shares issued and outstanding of Registrant’s Common Stock (par value $0.00001 per share)

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CARDINAL ENERGY GROUP, INC.

For the Quarter Ended March 31, 2013

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		Page

	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.	3

	Balance Sheets (Unaudited)	3
	Statements of Operations and Other Comprehensive Loss (Unaudited)	4
	Statements of Stockholders’ Equity (Unaudited)	5
	Statements of Cash Flows (Unaudited)	6
	Notes to Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	15

Item 4.	Controls and Procedures.	16

	PART II – OTHER INFORMATION

Item 1A.	Risk Factors.	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	16

Item 5.	Other Information.	17

Item 6.	Exhibits.	17

Signatures		18

Exhibit Index		19

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL INFORMATION.

Cardinal Energy Group, Inc.

(Formerly Koko, Ltd.)

Balance Sheets

(Unaudited)

				March 31,	December 31,
				2013	2012

ASSETS
CURRENT ASSETS
	Cash		$	1,453	$	3,460
	Accounts receivable - related party			-		16,978
	Investments			16,940		124,740

		Total Current Assets		18,393		145,178

PROPERTY AND EQUIPMENT, net				21,262		20,073

OIL AND GAS PROPERTIES (full cost method)
	Unproved properties, net of accumulated depletion, depreciation,
		amortization, and impairment of $579,963 and $579,963, respectively		671,972		653,222

OTHER ASSETS
	Cash bond			20,000		-
	Security deposit			3,452		3,452

		Total Other Assets		23,452		3,452

	TOTAL ASSETS		$	735,079	$	821,925

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
	Accounts payable and accrued expenses		$	119,535	$	50,948
	Related party payables			81,871		122,845
	Notes payable			53,000		-
	Derivative liability			49,079		74,240

	Total Current Liabilities			303,485		248,033

LONG-TERM LIABILITIES
	Convertible notes, net of debt discount of $24,187 and $-0-, respectively			108,813		-
	Asset retirement obligation			7,979		7,760

	Total Long-Term Liabilities			116,792		7,760

	TOTAL LIABILITIES			420,277		255,793

STOCKHOLDERS’ EQUITY
	Common stock, 100,000,000 shares authorized at par value of $0.00001;
	34,877,500 and 34,545,000 shares issued and outstanding, respectively			348		346
	Additional paid-in capital			3,835,425		3,518,752
	Accumulated other comprehensive loss			(2,200,660)		(2,092,860)
	Retained earnings (deficit)			(1,320,311)		(860,106)

	TOTAL STOCKHOLDERS’ EQUITY			314,802		566,132

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	735,079	$	821,925

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

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Cardinal Energy Group, Inc.

(Formerly Koko, Ltd.)

Statements of Operations and Other Comprehensive Loss

(Unaudited)

		For the Three Months Ended
		March 31,
		2013		2012

REVENUES
	Oil and gas revenues	$	1,871	$	1,487

	Total Revenues		1,871		1,487

OPERATING EXPENSES
	Well operating costs		1,709		1,795
	Depreciation and amortization expense		1,751		676
	Accretion expense		219		28
	General and administrative		480,512		26,517

	Total Operating Expenses		484,191		29,016

LOSS FROM OPERATIONS			(482,320)		(27,529)

OTHER INCOME (EXPENSES)
	Interest expense, net		(3,046)		-
	Gain (loss) on derivative		25,161		-

	Total Other Income (Expenses)		22,115		-

NET LOSS		$	(460,205)	$	(27,529)

OTHER COMPREHENSIVE LOSS
	Change in value of investments		(107,800)		(2,156)

NET COMPREHENSIVE LOSS		$	(568,005)	$	(29,685)

Basic and diluted loss per common share			(0.01)		(0.00)

Weighted average shares outstanding
(basic and diluted)			34,768,848		34,500,000

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

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Cardinal Energy Group, Inc.

(Formerly Koko, Ltd.)

Statements of Stockholders’ Equity

(Unaudited)

								Accumulated
				Additional				Other
	Common Stock			Paid-In		Accumulated		Comprehensive		Total
	Shares	Amount		Capital		Deficit		Loss		Equity

Balance at December 31, 2012	34,545,000	$	346	$	3,518,752	$	(860,106)	$	(2,092,860)	$	566,132

Common stock issued for services	217,500		2		271,873						271,875

Common stock issued for property	15,000		-		18,750						18,750

Beneficial conversion feature					26,050						26,050

Unrealized holding gains and losses f or available-for-sale-securities									(107,800)		(107,800)

Net loss	-		-		-		(460,205)		-		(460,205)

Balance at March 31, 2013	34,777,500	$	348	$	3,835,425	$	(1,320,311)	$	(2,200,660)	$	314,802

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

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Cardinal Energy Group, Inc.

(Formerly Koko, Ltd.)

Statements of Cash Flows

(Unaudited)

			For the Three Months Ended
			March 31,
			2013		2012

CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss		$	(460,205)	$	(27,529)
	Adjustments to reconcile net loss to net cash used in operations:
		Depreciation		1,751		676
		Accretion		219		28
		Amortization of debt discount		1,863		-
		Stock based compensation		271,875		-
		Gain on derivative liabilities		(25,161)		-
	Changes in operating assets and liabilities:
		Accounts receivable		-		(15,000)
		Accounts receivable - related party		16,978		-
		Accounts payable - related party		(2,974)		-
		Accounts payable and accrued expenses		68,587		(2,635)

		Net Cash Used in Operating Activities		(127,067)		(44,460)

CASH FLOWS FROM INVESTING ACTIVITIES
		Notes receivable		-		(20,000)
		Purchase of property and equipment		(2,940)		-
		Sale of oil properties		-		75,000

		Net Cash Provided by (Used in) Investing Activities		(2,940)		55,000

CASH FLOWS FROM FINANCING ACTIVITIES
		Proceeds from notes payable - related party		22,500		-
		Proceeds from notes payable		186,000		-
		Repayment of notes payable -related party		(80,500)		(10,022)

		Net Cash Provided by (Used in) Financing Activities		128,000		(10,022)

NET (DECREASE) INCREASE IN CASH				(2,007)		518
CASH AT BEGINNING OF PERIOD				3,460		111

CASH AT END OF PERIOD			$	1,453	$	629


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

	CASH PAID FOR:
		Interest	$	-	$	-
		Income Taxes		-		-

	NON-CASH INVESTING AND FINANCING ACTIVITIES:
		Common stock issued for oil and gas properties	$	18,750	$	-
		Unrealized gain (loss) on AFS securities	$	(107,800)	$	(2,156)
		Debt discount from beneficial conversion feature	$	26,050	$	-
		Related party debt issued for cash bond	$	20,000	$	-

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

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Cardinal Energy Group, Inc.

Notes to the Condensed Financial Statements

For the Periods Ended March 31, 2013 and December 31, 2012

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2013, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2012 audited financial statements. The results of operations for the period ended March 31, 2013 and 2012 are not necessarily indicative of the operating results for the full year.

Nature of Operations and Organization

Cardinal Energy Group, LLC (the “Company”) was organized as a Limited Liability Company (“LLC”) on March 10, 2009 under the laws of the State of Ohio.

Effective September 23, 2012 the Company entered into a Share Exchange Agreement with Koko Ltd., a Nevada company (“Koko”), whereby the Company agreed to issue 100 percent of its issued and outstanding shares of common stock in exchange for Koko issuing the shareholders of the Company 31,050,000 shares of Koko. The transaction was accounted for as a reverse-merger recapitalization with Koko the acquirer for legal purposes and the Company the acquirer for accounting purposes. Pursuant to this agreement the Company changed its corporate name from Cardinal Energy Group, LLC to Cardinal Energy Group, Inc. The shareholders of Koko retained 3,450,000 common shares in the transaction. The number of authorized shares in the surviving entity remained at 100,000,000.

The Company has been engaged in the exploration, development, exploitation and production of oil and natural gas. The Company sells its oil and gas products primarily to domestic purchasers of oil & gas production. Its operations are presently focused in the State of California. The recoverability of the capitalized exploration and development costs for these properties is dependent upon the existence of economically recoverable reserves, the ability of Cardinal Energy Group, Inc. to obtain the necessary financing to complete exploration and development, and future profitable production or proceeds from disposition of such property.

Basis of Presentation and Use of Estimates

These financial statements have been prepared in accordance with accounting principles generally accepted in United States of America which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosures of revenues and expenses for the reported year. Actual results may differ from those estimates.

Revenues and direct operating expenses of the California properties represent members’ interest in the properties acquired for the periods prior to the closing date and are presented on the accrual basis of accounting and in accordance with generally accepted accounting principles. The financial statements presented are not indicative of the results of operations of the acquired properties going forward due to changes in the business and inclusion of the above mentioned expenses.

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Cardinal Energy Group, Inc.

Notes to the Condensed Financial Statements

For the Periods Ended March 31, 2013 and December 31, 2012

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Oil and Gas Properties

The Company follows the full cost method of accounting for its oil and natural gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to income.

Depletion and depreciation of proved oil and gas properties is calculated on the units-of-production method based upon estimates of proved reserves. Such calculations include the estimated future costs to develop proved reserves. Oil and gas reserves are converted to a common unit of measure based on the energy content of 6,000 cubic feet of gas to one barrel of oil. Costs of unevaluated properties are not included in the costs subject to depletion. These costs are assessed periodically for impairment.

During the three months ended March 31, 2013, the Company issued 15,000 shares of its common stock valued at fair market value of $18,750 for oil and gas property. The acquisition expense was capitalized.

Accounts Receivable

The Company establishes provisions for losses on accounts receivable if it determines that it will not collect all or part of the outstanding balance. The Company regularly reviews collectability and establishes or adjusts the allowance as necessary using the specific identification method. At March 31, 2013 and December 31, 2012, no reserve for allowance for doubtful accounts was needed.

New Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 2 – GOING CONCERN

The Company currently utilizes production revenues to fund its operating expenses. The Company’s minimal cash flows from operations, projected cost of capital improvements of the oil and gas wells, and its projected operating losses to be incurred raise substantial doubt about its ability to continue as a going concern. The Company plans to use additional equity financing through fiscal year 2013 to fund potential acquisitions and business expansion.

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These

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Cardinal Energy Group, Inc.

Notes to the Condensed Financial Statements

For the Periods Ended March 31, 2013 and December 31, 2012

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs.

The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of March 31, 2013 and December 31, 2012. As required by ASC 820, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. There were no transfers between fair value hierarchy levels for the years ended March 31, 2013 and December 31, 2012.

The carrying amounts reported in the balance sheets for cash, accounts receivable, loans payable, and accounts payable and accrued expenses, approximate their fair market value based on the short-term maturity of these instruments. The following table presents assets and liabilities that are measured and recognized at fair value as of March 31, 2013 and December 31, 2012, on a recurring basis:

Assets and liabilities at fair value on a recurring basis at March 31, 2013:

	Level 1	Level 2	Level 3	Total
Assets
Marketable securities	$16,940	-	-	$16,940
Total	$16,940	-	-	$16,940

Liabilities
Derivative liability	-	-	$49,079	$49,079
Total	-	-	$49,079	$49,079

Assets and liabilities at fair value on a recurring basis at December 31, 2012:

	Level 1	Level 2	Level 3	Total
Assets
Marketable securities	$124,740	-	-	$124,740
Total	$124,740	-	-	$124,740

Liabilities
Derivative liability	-	-	$74,240	$74,240
Total	-	-	$74,240	$74,240

The balance of the derivative liability decreased from $74,240 on December 31, 2012 to $49,079 on March 31, 2013. This is due to the change in fair value of $25,161, which was recorded as gain on derivative in “Statement of Operations and Other Comprehensive Loss”.

The carrying value of short term financial instruments including cash, accounts payable, accrued expenses and short-term borrowings approximate fair value due to the short period of maturity for these instruments. The long-term debentures payable approximates fair value since the related rates of interest approximate current market rates.

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Cardinal Energy Group, Inc.

Notes to the Condensed Financial Statements

For the Periods Ended March 31, 2013 and December 31, 2012

NOTE 4 - STOCKHOLDERS’ EQUITY

During the three months ended March 31, 2013, the Company issued 217,500 shares of common stock for services valued at fair market value of $271,875.

During the three months ended March 31, 2013 the Company issued 15,000 shares of common stock valued at fair market value of $18,750 for the acquisition of oil and gas property.

NOTE 5 – RELATED PARTY TRANSACTIONS

On January 23, 2013 the Company entered into an agreement in which a related party transferred a $20,000 bond to the Company.

Various general and administrative expenses of the Company as well as loans for operating purposes have been paid for or made by related parties of the Company. During the three months ended March 31, 2013 the Company received cash of $22,500 on these payables, had $14,345 in expenses paid on behalf of the Company, and made payments totaling $80,500 on these related party payables. Related party payables totaled $81,871 and $122,845 at March 31, 2013 and December 31, 2012, respectively. These amounts payable bear no interest, are uncollateralized and due on demand.

NOTE 6 - CONVERTIBLE NOTES PAYABLE

On February 26, 2013 the Company borrowed $53,000 from an unrelated third party entity in the form of a convertible note. The note bears interest at a rate of 8.0 percent per annum, with principal and interest due one year from issuance. The principal balance of the note along with accrued interest is convertible after 180 days, at the option of the note holder, into the Company’s common stock at 58 percent of the current market price. The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date. The note is not convertible at March 31, 2013.

During the three months ended March 31, 2013 pursuant to a convertible debenture offering the Company borrowed $133,000. The convertible notes accrue interest at 8% per annum, with principal and interest due two years from issuance. The notes carry a default interest rate of 12% per annum. The notes are exercisable for two years from the issue date into shares of the Company’s common stock at a price of $1 per share.

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $26,050 and was recorded as debt discount. During the three months ended March 31, 2013, debt discount of $1,863 was amortized.

NOTE 7 – WARRANTS AND WARRANT DERIVATIVE LIABILITY

On December 31, 2012 the Company issued 30,000 units at $1.00 per unit resulting in total cash proceeds of $30,000. Each unit sold consists of one share of the Company’s common stock, one Class A Redeemable Warrant, and one Class B Redeemable Warrant.

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Cardinal Energy Group, Inc.

Notes to the Condensed Financial Statements

For the Periods Ended March 31, 2013 and December 31, 2012

NOTE 7 – WARRANTS AND WARRANT DERIVATIVE LIABILITY (continued)

The Class A warrants are exercisable into one share of the Company’s common stock at $5.00 per share, expire on December 31, 2015, and are callable by the Company any time after December 31, 2014 upon 30 days written notice by the Company. If the holders do not exercise the warrants within 30 days of receiving notice from the Company, the warrants terminate 30 days from the date of notice.

The Class B warrants are exercisable into one share of the Company’s common stock at $9.375 per share, expire on December 31, 2017, and are callable by the Company any time after December 31, 2015 upon 30 days written notice by the Company. If the holders do not exercise the warrants within 30 days of receiving notice from the Company, the warrants terminate 30 days from the date of notice.

For both the Class A and Class B warrants, the exercise price and/or the number of shares of common stock to be issued upon exercise is subject to adjustment in certain cases. Such adjustments would be triggered in instances where the Company does any of the following: a) pays a stock dividend, splits or reverse-splits its common stock; b) issues common stock, convertible securities, or debentures to obtain shares at a price less than the warrant exercise price; or c) distributes to shareholders evidences of its indebtedness or securities or assets.

The Company has analyzed this price adjustment provision under ASC 815 “Derivative and Hedging” and determined that these instruments should be classified as liabilities and recorded at fair value do to there being no explicit limit to the number of shares to be delivered upon settlement of the warrants. The Company has estimated the fair value of the derivative using the Black-Scholes option-pricing model at March 31, 2013. Assumptions included (1) 0.38-.80% risk-free interest rate, (2) expected term is the remaining term of the warrant, (3) expected volatility of 181.34-185.16%, (4) zero expected dividends, (5) exercise prices as set within the agreements, (6) common stock price of the underlying share on the valuation date, and (7) number of shares to be issued if the instrument is converted. At March 31, 2013 the embedded derivative liability was valued at $49,079 and a gain of $25,161 was recorded.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Litigation

The Company may be party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. There is no litigation or contingencies that require accrual or disclosure as of March 31, 2013 and December 31, 2012.

NOTE 9 – SUBSEQUENT EVENTS

In April 2013 the Company borrowed $42,500 from an unrelated third party entity in the form of a convertible note. The note bears interest at a rate of 8.0 percent per annum, with principal and interest due one year from issuance. The principal balance of the note along with accrued interest is convertible after 180 days, at the option of the note holder, into the Company’s common stock at a 58 percent of the current market price. The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.

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ITEM 2.

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

This section of the quarterly report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results of our predictions.

We are engaged in the business of exploring, purchasing, developing and operating oil and gas leases.

We intend to acquire additional producing and non-producing oil and gas properties in future. We have acquired a 2,200 acre lease in Wayne County, OH. Plans to develop this acreage are underway.

We have nominal revenues, have achieved losses since inception, have limited operations, have been issued a going concern opinion by our auditors and currently rely upon the sale of our securities to fund operations. We are concentrating on acquiring producing and non-producing properties in the United States. We currently own interests in oil and gas leases located in the states of California and Ohio. We may enter into agreements with major and independent oil and natural gas companies to drill and own interests in oil and natural gas properties. We also may drill and own interests without such strategic partners.

This discussion relates to Cardinal Energy Group, Inc. and its consolidated subsidiaries and should be read in conjunction with our consolidated financial statements and accompanying notes included under Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q, as well as our consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K filed with the SEC on March 28, 2013.

Financial Overview

The following reflects how we intend to spend our capital over the next twelve months:

Exploration	$	4,000,000
Operations	$	250,000
Administrative	$	500,000

Currently, we do not have sufficient capital on hand or expected from production from our properties to complete our proposed budget and maintain operations for the current year. Accordingly we will have to raise additional capital through the sale of our common or preferred stock or from loans from our officers and directors or unrelated third parties. As of the date of this report, we have not entered into any agreements with anyone to provide us with capital through the sale of capital stock or through loans.

Currently, based upon our current resources, we believe we can maintain operations through 2013.

We are focused on growth via the reworking of marginal oil and gas wells in mature but marginally producing fields that have significant proven reserves yet to be produced throughout the Appalachian Basin. Many of these wells were drilled during the boom time of the early 1980’s. Newer production theories and technology make it possible to re-enter these older wells that have been ‘walked away from’ by their original operators.

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Results of Operations

Three Months Ended March 31, 2013

Oil and Gas Revenues

For the three months ended March 31, 2013 oil and gas revenues increased to $1,871 compared to $1,487 for the three months ended March 31, 2012. We expect to increase revenues by acquiring additional oil and gas wells and reworking them to increase production.

Well Operating Expense

For the three months ended March 31, 2013 well operating costs decreased to $1,709 compared to $1,795 for the three months ended March 31, 2012. The decrease was due in part to a change in operator of our California wells.

General and Administrative Expenses

For the three months ended March 31, 2013 general and administrative expenses increased to $480,512 compared to $26,517 for the three months ended March 31, 2012.The increase was primarily attributable to stock based compensation as we have increased our efforts to locate additional future oil and gas leasing opportunities following our acquisition of Cardinal Energy Group, LLC and increases in our administrative costs of our SEC reporting obligations.

Bad Debt Expense

The Company recorded $0 of bad debt expense during the three months ended March 31, 2013.

Depreciation, Depletion and Amortization

For the three months ended March 31, 2013 depreciation and amortization expense increased to $1,970 compared to $704 for the three months ended March 31, 2012. The increase was due to a change in the estimated life of the assets being depreciated

Other Expenses

Other expense for the three months ended March 31, 2013 our other expenses was $22,115 compared to $0 for the three months ended March 31, 2012. The increase was due to a loss on derivative liabilities and interest expense associated with our borrowing activities.

Net Loss

For the three months ended March 31, 2013 our net loss was $460,205 compared to a net loss of $27,529 for the three months ended March 31, 2013. The increase was primarily due to the increase in General and Administrative expenses.

BALANCE SHEET

Convertible Notes Payable

The Company had convertible notes payable of $108,813 as of March 31, 2013 as compared to $0 as of March 31, 2012. The increase was related to increased borrowings of the Company as a result of its development activities.

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Accounts Payable Related Party

The Company had related party payables of $81,871 as of March 31, 2013 as compared to $122,845 as of March 31, 2012 due to [amounts paid down during the quarter.

Workovers

We did not undertake any substantial workovers during 2013. As of the date of this filing, we have no plans to undertake any workovers pending receipt of additional capital.

Financial Condition, Liquidity and Capital Resources

We continue to incur operating expenses in excess of net revenue and will require capital infusions to sustain our operations until operating results improve. We may not be able to obtain such capital in a timely manner and as a result may incur liquidity imbalances.

Capital Resources and Liquidity

We used cash in operations of $127,067during the three months ended March 31, 2013 compared to $44,461 during the three months ended March 31, 2013. The increase was due to the increased loss from operations as a result of costs incurred.

We used cash from investing activates of $2,940 during the three months ended March 31, 2013 for purchases of property and equipment compared to net receipts of $55,000 during the three months ended March 31, 2012. In 2012, $75,000 came from the sale of oil properties. We used $20,000 in 2012 to make payments on a note receivable.

We were provided $128,000of net cash from financing activities during the three months ended March 31, 2013 compared to $10,022 used during the same period in 2012. The funds in 2013 came primarily from sales of convertible notes, related party loans and partially offset by payments on related party loans.

At March 31, 2013 we had cash on hand of $1,453 which is not sufficient to meet our operating needs for the next twelve months. We anticipate the need to raise $1,250,000 to $5,000,000 from the issuance of common stock to meet our operating requirements and allow the rework of our existing wells and to drill new wells.

At March 31, 2013 our current assets were $$18,393 and our current liabilities were $$303,485resulting in a negative working capital of $$285,092.

We have a note receivable for $20,000. The note was due in October 2012 with accrued interest at 4% per annum. The note is currently in default and we anticipate filing suit shortly to obtain a judgment for the unpaid, principle, interest, attorney’s fees and court costs.

Critical Accounting Policies and Estimates

We prepared our financial statements and the accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect the reported amounts in the financial statements and the accompanying notes. We identified certain accounting policies as critical based on, among other things, their impact on the portrayal of our financial condition, results of operations, or liquidity and the degree of difficulty, subjectivity, and complexity in their deployment. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown. Management routinely discusses the development, selection, and disclosure of each of the critical accounting policies. The following is a discussion of our most critical accounting policies.

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We follow the full cost method of accounting for our oil and natural gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to income.

In applying the full cost method, we performed an impairment test (ceiling test) at each reporting date, whereby the carrying value of oil and gas property and equipment is limited to the “estimated present value” of the future net revenues from its proved reserves, discounted at a 10-percent interest rate and based on current economic and operating conditions, plus the cost of properties not being amortized, plus the lower of cost or fair market value of unproved properties included in costs being amortized, less the income tax effects related to any book and tax basis differences of the properties. As of March 31, 2013 and 2012 no impairment of oil and gas properties was recorded.

We follow FASB ASC 410, Asset Retirement and Environmental Obligations which requires entities to record the fair value of a liability for asset retirement obligations (“ARO”) and recorded a corresponding increase in the carrying amount of the related long-lived asset. The asset retirement obligation primarily relates to the abandonment of oil and gas properties. The present value of the estimated asset retirement cost is capitalized as part of the carrying amount of oil and gas properties and is depleted over the useful life of the asset. The settlement date fair value is discounted at our credit adjusted risk-free rate in determining the abandonment liability. The abandonment liability is accreted with the passage of time to its expected settlement fair value. Revisions to such estimates are recorded as adjustments to ARO are charged to operations in the period in which they become known. At the time the abandonment cost is incurred, the Company is required to recognize a gain or loss if the actual costs do not equal the estimated costs included in ARO. The ARO is based upon numerous estimates and assumptions, including future abandonment costs, future recoverable quantities of oil and gas, future inflation rates, and the credit adjusted risk free interest rate. The ARO is $7,979 as of March 31, 2013.

Off-Balance Sheet Arrangements.

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) that are designed to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported as specified in the SEC’s rules and forms and that such information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer, or CEO, and our Chief Financial Officer, CFO, to allow timely decisions regarding required disclosure. Management, with the participation of our CEO and CFO, performed an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2013. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of March 31, 2013.

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

Changes in Internal Control

There were no changes identified in connection with our internal control over financial reporting during the three months ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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

During the three months ended March 31, 2013 the Company issued 544,840 shares of common stock for services valued at fair market value of $681,050.

During the three months ended March 31, 2013 the Company issued 160 shares of common stock for cash of $200.

During the three months ended March 31, 2013 the Company issued 15,000 shares of common stock valued at fair market value of $18,750 for the acquisition of oil and gas property acreage.

These shares of our common stock were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). In addition, the recipients of our shares were sophisticated investors and had access to information normally provided in a prospectus regarding us. In addition, the recipients of these shares had the necessary investment intent as required by Section 4(2) since they agreed to allow us to include a legend on the shares stating that such shares are restricted pursuant to Rule 144 of the Securities Act. These restrictions ensure that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for the above transactions.

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ITEM 6. EXHIBITS.

		Incorporated by reference
Exhibit No.	Document Description	Form	Date	Number	Filed herewith
3.1(a)	Articles of Incorporation of Koko, Ltd.	S-1	3/12/09	3.1
3.1(b)	Amendment to Articles of Incorporation of Koko, Ltd.				X
3.2	Bylaws of Koko, Ltd.	S-1	3/12/09	3.2
3.3	Articles of Organization of Continental Energy Partners, LLC.	8-K	10/04/12	3.3
3.4	Amended Articles of Organization of Cardinal Energy Group, LLC.	8-K	10/04/12	3.4
3.5	Operating Agreement of Cardinal Energy Group, LLC.	8-K	10/04/12	3.5
4.1	Form of Class A Redeemable Warrant				X
4.2	Form of Class B Redeemable Warrant				X
10.1	License Agreement with Gregory Ruff.	S-1	6/13/11	10.1
10.2	Share Exchange Agreement.	8-K	10/04/12	10.4
10.3	8% Convertible Promissory Note dated February 26, 2013				X
10.4	Form of 8% Convertible Debenture				X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
101.INS*	XBRL Instance Document.				X
101.SCH*	XBRL Taxonomy Extension – Schema.				X
101.CAL*	XBRL Taxonomy Extension – Calculations.				X
101.DEF*	XBRL Taxonomy Extension – Definitions.				X
101.LAB*	XBRL Taxonomy Extension – Labels.				X
101.PRE*	XBRL Taxonomy Extension – Presentation.				X

*In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 14 th day of May, 2013.

	CARDINAL ENERGY GROUP, INC.

	BY:	TIMOTHY W. CRAWFORD
		Timothy W. Crawford
		Chief Executive Officer (Principal Executive Officer)

	BY:	DANIEL TROENDLY
		Daniel Troendly
		Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

		Incorporated by reference
Exhibit No.	Document Description	Form	Date	Number	Filed herewith
3.1(a)	Articles of Incorporation of Koko, Ltd.	S-1	3/12/09	3.1
3.1(b)	Amendment to Articles of Incorporation of Koko, Ltd.				X
3.2	Bylaws of Koko, Ltd.	S-1	3/12/09	3.2
3.3	Articles of Organization of Continental Energy Partners, LLC.	8-K	10/04/12	3.3
3.4	Amended Articles of Organization of Cardinal Energy Group, LLC.	8-K	10/04/12	3.4
3.5	Operating Agreement of Cardinal Energy Group, LLC.	8-K	10/04/12	3.5
4.1	Form of Class A Redeemable Warrant				X
4.2	Form of Class B Redeemable Warrant				X
10.1	License Agreement with Gregory Ruff.	S-1	6/13/11	10.1
10.2	Share Exchange Agreement.	8-K	10/04/12	10.4
10.3	8% Convertible Promissory Note dated February 26, 2013				X
10.4	Form of 8% Convertible Debenture				X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
101.INS*	XBRL Instance Document.				X
101.SCH*	XBRL Taxonomy Extension – Schema.				X
101.CAL*	XBRL Taxonomy Extension – Calculations.				X
101.DEF*	XBRL Taxonomy Extension – Definitions.				X
101.LAB*	XBRL Taxonomy Extension – Labels.				X
101.PRE*	XBRL Taxonomy Extension – Presentation.				X

* In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

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WARRANT TO PURCHASE SHARES OF COMMON STOCK

OF CARDINAL ENERGY GROUP, INC.

CLASS “A” REDEEMABLE WARRANTS

Dated as of December 31, 2012

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED AND OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS.

CARDINAL ENERGY GROUP, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

OF CARDINAL ENERGY GROUP, INC.

This is to certify that, FOR VALUE RECEIVED, "John Doe" (the "Holder"), is entitled to purchase up to 10,000 voting common shares (the "Common Stock"), of Cardinal Energy Group, Inc. (the "Company"), at a purchase price of $5.00 per share (the "Exercise Price"). Unless exercised pursuant to the terms hereof, this Warrant is immediately exercisable and will expire on December 31, 2015. The Class A Redeemable Warrants are callable by the Company upon thirty (30) days written notice to you at any time after December 31, 2014. The shares of the Company's Common Stock issuable upon the exercise of this Warrant are called herein the "Underlying Common Stock." The Holder may exercise this Warrant as to all or any portion of the shares of the Underlying Common Stock which it shall have the right to acquire hereunder.

(a) Exercise of Warrant. Warrants may be exercised by presentation and surrender hereof to the Company with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the shares of Common Stock specified in such form. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the shares purchasable hereunder. Upon receipt by the Company of this Warrant at the office of the Company, in proper form for exercise, accompanied by payment of the Exercise Price, the Holder shall be deemed to be the Holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. If the stock transfer books of the Company shall be closed on the date of receipt of this Warrant and the Exercise Price as aforesaid, the Holder shall be deemed to be the Holder of such shares of Common Stock on the next succeeding day on which the stock transfer books of the Company shall be opened.

(b) Reservation of Shares; Stock Fully Paid. The Company agrees that at all times there shall be authorized and reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance or delivery upon exercise of this Warrant. All shares which may be issued upon exercise hereof will, upon issuance, be fully paid and non-assessable. The Company shall pay all United States and state documentary stamp taxes, if any, in respect of the issue of the Common Stock.

(c) Fractional Shares. This Warrant shall be exercisable in such manner so as not to require the issuance of fractional shares of scrip representing fractional shares. If, as a result of adjustment in the Underlying Common Stock or for any other reason, fractional shares would be issuable, no such fractional shares shall be issued. In lieu thereof the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of such fractional share.

(d) Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant.

(e) Adjustment of Exercise Rights. The Exercise Price or the number of shares of Underlying Common Stock to be received upon the exercise of this Warrant, or both, shall be subject to adjustment from time to time as hereinafter in this Section (e) provides.

The Exercise Price shall be adjusted from time to time as follows:

(i) In case the Company shall, at any time or from time to time while any of the Warrants are outstanding, (1) pay a dividend or make a distribution on its Common Stock in shares of Common Stock, (2) subdivide or split its outstanding shares of Common Stock, or (3) combine its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior thereto shall be adjusted so that the holder of any Warrant thereafter surrendered for exercise shall be entitled to receive the number of shares of Common Stock or other securities of the Company which he would have owned or have been entitled to receive after the effectiveness of any of the events described above, had such Warrant been converted immediately prior to the effectiveness of such event. An adjustment made pursuant to this subdivision (i) shall become effective, in the case of a dividend, on the payment date retroactively to immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive such dividend, and shall become effective in the case of a subdivision, split or combination immediately after the opening of business on the day following the day when such subdivision or combination, as the case may be, becomes effective.

(ii) In case the Company shall, at any time or from time to time while any of the Warrants are outstanding, issue Common Stock, convertible securities (convertible or exercisable into Common Stock) or debentures (except debentures issued simultaneously with the Warrants) to subscribe for or purchase shares of Common Stock at a price per share less than the Exercise Price then in effect at the record date mentioned below, the Exercise Price in effect immediately prior to the issuance of such Common Stock, convertible securities or debentures shall be adjusted as follows; provided, however, that if such issuance is in connection with the sale of such securities by the Company, such adjustment will be made only if the Warrant holder purchases his pro rata portion of the shares to be issued in such financing as provided in paragraph (vi) below. The Exercise Price shall be multiplied by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately prior to such record date, plus the quotient determined by dividing the aggregate offering price of the total number of shares so offered by the Exercise Price, and of which the denominator shall be

the number of shares of Common Stock outstanding immediately prior to such record date plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective on the date of such issuance retroactively to immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive such Common Stock, convertible securities or debentures.

(iii) In case the Company shall, at any time or from time to time while any of the Warrants are outstanding, distribute to all holders of shares of its Common Stock evidences of its indebtedness or securities or assets (excluding cash dividends), the Exercise Price in effect immediately prior to such distribution shall be adjusted by multiplying the Exercise Price by a fraction, of which the numerator shall be the Current Market Price per share of the Common Stock on the record date mentioned below less than the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness distributed applicable to one share of Common Stock, and of which the denominator shall be such Current Market Price per share of Common Stock. Such adjustment shall become effective on the date of such distribution retroactively to immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive such distribution.

(iv) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1 % of such price.

(v) The "Current Market Price" at any date shall mean the price per share of Common Stock on such date determined by the Board of Directors as provided below. The Current Market Price shall be the average of the daily closing prices per share of Common Stock for thirty (30) consecutive business days ending no more than fifteen (I5) business days before the day in question (as adjusted for any stock dividend, split, combination or reclassification that took effect during such thirty (30) business day period). The closing price for each day shall be the last reported sales price regular way or, in case no such reported sales take place on such day, the average of the last reported bid and asked prices regular way, in either case on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, the average of the highest bid and the lowest asked prices quoted on the National Association of Securities Dealers Automated Quotation ("NASDAQ") System. In the event that the Common Stock is not listed on a National Securities Exchange or traded on NASDAQ, but the shares are traded on the over-the-counter market, then the Current Market Price will mean the average of the last bid and asked prices for the Common Stock on the over-the-counter market. If the Common Stock is not traded in such manner that the quotations referred to above are available for the period required hereunder, the Current Market Price per share of Common Stock shall be deemed to be fair value as determined by the Board of Directors (whose determination shall be conclusive), irrespective of any accounting treatment.

(vi) (A) Notwithstanding the provisions of paragraph (ii) above, no future adjustments shall be made in the Exercise Price of any holder or transferee of such holder who does not purchase his or its pro rata portion of the shares to be issued in future financings of the Company but only where the shares to be issued are offered so as to result in a reduction of the Exercise

Price (a "Non-Participating Holder").

(B) All of such Non-Participating Holder's Warrants shall automatically and without further action on the part of such holder be converted into a like principal amount of a newly created series of warrants, which new warrants shall be identical in all respect to the Warrants, except that the Exercise Price of such series shall be fixed immediately prior to the subsequent financing and shall be subject to no further adjustments as provided herein. The Board of Directors shall take all necessary actions to designate such new series.

(f) Statement of Adjusted Exercise Price. Whenever the Exercise Price of Underlying Common Stock is adjusted pursuant to Section (e), the Company shall forthwith prepare a written statement signed by the President or the Treasurer of the Company setting forth such adjustment. Such statement shall be filed among the permanent records of the Company and shall be delivered to the Holder.

(g) Dissolution or Liquidation . In case the Company shall liquidate or wind up its affairs, the Holder of this Warrant shall be entitled, upon the exercise thereof, to receive, in lieu of the Underlying Common Stock of the Company which he would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to him upon any such dissolution, liquidations or winding up with respect to such shares of Common Stock of the Company, had he been the holder of record of such Underlying Common Stock on the record date for the determination of those entitled to receive any such liquidating distribution; provided, however, that all rights under this Warrant shall terminate on a date fixed by the Company, such date to be not earlier than the date of commencement of proceedings for dissolution, liquidation, or winding up and not later than 30 days after such commencement date, unless the Holder shall have, prior to such termination date, exercised this Warrant. Notice of such termination of rights under this Warrants shall be given to the last registered Holder hereof, as the same shall appear on the books of the Company, by mail at least 30 days prior to such termination date.

(h) Piggyback Registration Rights . The Company hereby grants to the Holder piggyback registration rights with respect to all or any portion of the shares of Underlying Common Stock which Holder shall have the right to acquire hereunder. In the event Company proposes to register any of its Common Stock or other securities under the Securities Act of 1933, as amended (the "Act"), in connection with the public offering of such securities, the Company shall, prior to the filing of any such registration, promptly give Holder written notice of such registration. Upon the written request of Holder given within ten (10) days after receipt of such notice by the Company, the Company shall cause to be registered under the Act any of the Underlying Common Stock that have then vested under this Warrant that Holder has requested to be registered. If Holder decides not to include all of its Underlying Common Stock in any registration statement filed by Company, Holder shall nevertheless continue to have the right to include any Underlying Common Stock that have then vested under this Warrant in any subsequent registration statement or registration statements as may be filed by the Company with respect to the offering of its Common Stock or other securities under the Act, all upon the terms and conditions set forth herein.

In connection with any offering involving an underwriting of shares of the Company's Common Stock in which Holder makes a written request pursuant to the provisions of the preceding paragraph, the Company shall not be required to include any of Holder's Underlying Common Stock in such underwriting unless Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as the underwriters determine in their sole reasonable discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Holder's Underlying Common Stock, requested to be included in such registration exceeds the amount of securities that the underwriters determine in their sole reasonable discretion is compatible with the success of the offering, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first securities proposed by the Company to be sold for its own account, and (ii) second Underlying Common Stock of the Holder and securities of other selling security holders requested to be included in such registration pro-rata on the basis of the number of share of such securities so proposed to be sold and so requested to be included; provided, however, that the Holder shall have pro-rata rights of registration with all shares sought to be included by officers and directors of the Company as well as holders of ten percent (10%) or more of the Company's Common Stock.

(i) Notices . All notices, payments, requests and demands and other communications required or permitted under this Warrant shall be deemed to have been duly given, delivered and made if in writing and if served either by personal delivery to the party for whom it is intended or by being deposited postage prepaid, certified or registered mail, return receipt requested, to the address shown below or such other address as may be designated in writing hereafter by such party:

If to the Company: Cardinal Energy Group, Inc.

6037 Frantz Road, Suite 103

If to the Holder: _______________________________

_______________________________

(j) Governing Law . This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Ohio.

(k) Further Assurances . The parties agree to execute, acknowledge and deliver any and all such other documents and to take any and all such other actions as may, in the reasonable opinion of either of the parties hereto, be necessary or convenient to carry out more efficiently any or all of the purposes of this Warrant.

(I) Severability . Any provisions of this Warrant which shall be prohibited by law or otherwise held invalid shall be ineffective only to the extent of such prohibition or invalidity and shall not invalidate or otherwise render ineffective any or all of the remaining provisions of this Warrant.

(m) Parties in Interest; Assignment . This Warrant and the various rights and obligations arising hereunder shall be binding upon and shall inure to the benefit of the parties hereto and to each and all of their respective successors and assigns.

IN WITNESS WHEREOF, the Company has caused this instrument to be signed by its President, attested by its Secretary as of the 31st day of December, 2012.

CARDINAL ENERGY GROUP, INC.

By: ____________________________________

Principal Executive Officer

Attest: ____________________________________

CLASS “A” REDEEMABLE WARRANTS

The undersigned, __________________________ pursuant to the provisions of this Warrant hereby elects to purchase _____________ shares of Common Stock of Cardinal Energy Group, Inc.

Dated: ___________ ___________________________________

________________________________________

WARRANT TO PURCHASE SHARES OF COMMON STOCK

OF CARDINAL ENERGY GROUP, INC.

CLASS “B” REDEEMABLE WARRANTS

Dated as of December 31, 2012

CARDINAL ENERGY GROUP, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

OF CARDINAL ENERGY GROUP, INC.

This is to certify that, FOR VALUE RECEIVED, "John Doe" (the "Holder"), is entitled to purchase up to 10,000 voting common shares (the "Common Stock"), of Cardinal Energy Group, Inc. (the "Company"), at a purchase price of $9.375 per share (the "Exercise Price"). Unless exercised pursuant to the terms hereof, this Warrant is immediately exercisable and will expire on December 31, 2017. The Class B Redeemable Warrants are callable by the Company upon thirty (30) days written notice to you at any time after December 31, 2015. The shares of the Company's Common Stock issuable upon the exercise of this Warrant are called herein the "Underlying Common Stock." The Holder may exercise this Warrant as to all or any portion of the shares of the Underlying Common Stock which it shall have the right to acquire hereunder.

require the issuance of fractional shares of scrip representing fractional shares. If, as a result of adjustment in the Underlying Common Stock or for any other reason, fractional shares would be issuable, no such fractional shares shall be issued. In lieu thereof the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of such fractional share.

The Exercise Price shall be adjusted from time to time as follows:

the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective on the date of such issuance retroactively to immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive such Common Stock, convertible securities or debentures.

(iv) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1 % of such price.

In connection with any offering involving an underwriting of shares of the Company's Common Stock in which Holder makes a written request pursuant to the provisions of the

preceding paragraph, the Company shall not be required to include any of Holder's Underlying Common Stock in such underwriting unless Holder accepts the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as the underwriters determine in their sole reasonable discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Holder's Underlying Common Stock, requested to be included in such registration exceeds the amount of securities that the underwriters determine in their sole reasonable discretion is compatible with the success of the offering, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (i) first securities proposed by the Company to be sold for its own account, and (ii) second Underlying Common Stock of the Holder and securities of other selling security holders requested to be included in such registration pro-rata on the basis of the number of share of such securities so proposed to be sold and so requested to be included; provided, however, that the Holder shall have pro-rata rights of registration with all shares sought to be included by officers and directors of the Company as well as holders of ten percent (10%) or more of the Company's Common Stock.

If to the Company: Cardinal Energy Group, Inc.

6037 Frantz Road, Suite 103

If to the Holder: _________________________________

_________________________________

(j) Governing Law . This Warrant shall be construed and enforced in accordance with and governed by the laws of the State of Ohio.

IN WITNESS WHEREOF, the Company has caused this instrument to be signed by its President, attested by its Secretary as of the 31st day of December, 2012.

CARDINAL ENERGY GROUP, INC.

By: ____________________________________

Principal Executive Officer

Attest: ____________________________________

CLASS “B” REDEEMABLE WARRANTS

The undersigned, __________________________ pursuant to the provisions of this Warrant hereby elects to purchase _____________ shares of Common Stock of Cardinal Energy Group, Inc.

Dated: ___________ ___________________________________

________________________________________

CONVERTIBLE DEBENTURE

Amount $_______________ _______________ _____, 2013

________________________, _______________

FOR VALUE RECEIVED, Cardinal Energy Group, Inc a Nevada Corporation (“Maker") promises to pay to _____________________________________ ("Holder") the aggregate principal sum of _____________________________($______________) together with interest on the unpaid principal amount outstanding from time to time at an annual rate equal to eight percent (8%), calculated on an actual 365 day basis.

Accrued interest shall be due and payable on a quarterly basis (on the 10th business day following the last day of each quarter). Interest payments will begin within 90 days after the execution of this Convertible Debenture. All outstanding principal and interest shall be due and payable on or before the two (2) year anniversary date of this Convertible Debenture.

All payments made on account of the indebtedness evidenced by this Convertible Debenture shall be made in currency and coin of the United States of America which shall be legal tender for public and private debts at the time of payment. Said payments are to be made at such place as Holder may from time to time appoint.

Amounts due under this Convertible Debenture may be prepaid without any penalty or premium of any nature.

Holder shall have the option, at Holder’s sole discretion, to either (a) receive repayment of all outstanding principal and accrued interest due hereunder in cash as provided above or (b) convert this Convertible Debenture into the Maker’s common shares at the pre-set market price of $1.00 per share in whole or in part, which option shall be exercised on or before the two (2) year anniversary date of this Convertible Debenture, or, if earlier, upon the prepayment of this Convertible Debenture. The foregoing option shall be exercised by Maker providing written notice to Holder of Maker’s intent to pay or prepay this Convertible Debenture not less than thirty (30) days prior to such payment date, which notice shall include a written “election of option” form for execution by Holder. Holder shall return said election of option form, indicating Holder’s option selection, not less than three (3) days prior to the scheduled payment date, and Maker shall then make payment or conversion accordingly. Should Holder fail to timely respond in writing with respect to Holder’s option, Holder shall be deemed to have elected to receive a cash repayment of this Convertible Debenture, and the conversion option shall thereupon expire and be held for naught.

The occurrence of anyone of the following events shall constitute a default ("Event of Default") by Maker: (a) if Maker fails to make any payment hereunder within five (5) days such payment is due; (b) if any of Maker's

assets are attached, seized, subjected to a writ of distress warrant, or are levied upon, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors and such attachment, levy, writ or possession is not terminated within forty-five (45) days of the commencement thereof; (c) if a petition under the Bankruptcy Reform Act of 1978, as amended or any similar law or regulation shall be filed by or against Maker or if Maker shall make an assignment for the benefit of its creditors or if any case or proceeding is filed by or against Maker for its dissolution or liquidation, or if Maker is enjoined, restrained or in any way prevented by court order or otherwise from conducting all or a material part of its business affairs and such petition, assignment, case, proceeding or order is not dismissed, terminated or vacated within forty-five (45) days of the commencement or entry thereof; or (d) the dissolution of Maker.

If an Event of Default has occurred and is continuing, the interest rate on this Convertible Debenture shall increase immediately by an increment of the lesser of (a) four percentage points (4%) or (b) the maximum rate permitted by law.

At the election of Holder, and without notice, the principal balance remaining unpaid under this Convertible Debenture, and all unpaid interest accrued thereon, shall be and become immediately due and payable in full in the case of the occurrence of an Event of Default.

Holder shall not, by any act of omission or commission, be deemed to waive any of its rights, remedies or powers hereunder or otherwise unless such waiver is in writing and signed by Holder, and then only to the extent specifically set forth therein. The rights, remedies and powers of Holder, as provided in this Convertible Debenture are cumulative and concurrent, and may be pursued against Maker all at the sole discretion of Holder.

If any suit or action is instituted or attorneys are employed to collect this Convertible Debenture or any part thereof, whether or not any lawsuit is filed with respect thereto, Maker promises and agrees to pay all reasonable costs and expenses of every kind and nature of collection, protection and enforcement including, without limitation, reasonable attorneys' fees and court costs.

This Convertible Debenture may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

Maker hereby waives diligence, presentment, protest and demand, notice of protest, dishonor and nonpayment of this Convertible Debenture. Maker waives, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand on this Convertible Debenture, or on any pledge agreement, mortgage, security agreement, lease assignment, guaranty or other agreement now or hereafter securing this Convertible Debenture.

Every provision of this Convertible Debenture is intended to be severable. If any term or provision hereof is declared by a court of competent jurisdiction to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the balance of the terms and provisions hereof, which terms and provisions shall remain binding and enforceable.

Time is of the essence hereof.

THIS CONVERTIBLE DEBENTURE HAS BEEN DELIVERED AND ACCEPTED IN THE STATE OF OHIO. MAKER HEREBY SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN FRANKLIN COUNTY, OHIO. MAKER HEREBY WAIVES THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER. THIS CONVERTIBLE DEBENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF OHIO WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.

IN WITNESS WHEREOF, the undersigned has executed this Convertible Debenture on the day and year first written above.

Cardinal Energy Group, Inc

By: __________________________

Timothy W. Crawford, CEO

ACCEPTANCE OF CONVERTIBLE DEBENTURE

By his execution below, Holder accepts this Convertible Debenture subject to the terms and provisions stated hereinabove.

Further, Holder represents and warrants that he is acquiring the Convertible Debenture, and will acquire any common shares issued upon conversion hereof, for investment purposes only, for his own account, and not for or with a view to resale within the meaning of the Securities Act of 1933, as amended (the "Act"). Holder understands that this Convertible Debenture and any common shares which may be issued upon conversion hereof have not been, and will not be, registered under the Act by reason of a specific exemption from the registration provisions of the Act.

By: _______________________________

__________________________________

Notices and payments are to be sent to the following:

Cardinal Energy Group, Inc

c/o Timothy W. Crawford

tim.crawford@cardinalenergygroup.com

Name: ________________________________

Address: ________________________________

City / State / Zip Code: ________________________________

Tax ID number: ________________________________

Phone numbers: ________________________________

Email Address: ________________________________

THIS CONVERTIBLE DEBENTURE INVOLVES A HIGH DEGREE OF RISK.

SALES WILL ONLY BE MADE TO ACCREDITED INVESTORS.

THESE ARE SPECULATIVE SECURITIES, INVOLVE A HIGH DEGREE OF RISK CONCERNING US AND OUR BUSINESS INCLUDING UNPROFITABLE BUSINESS OPERATIONS DURING THE PRIOR YEARS, IMMEDIATE AVAILABILITY OF FUNDS AND RELATED PARTY TRANSACTIONS, AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM OR ENDORSED THE MERITS OF THIS PRIVATE PLACEMENT MEMORANDUM OR ENDORSED THE MERITS OF THIS PRIVATE PLACEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION PROVIDED BY REGULATION 506 OF THE ACT, CERTAIN STATE SECURITIES LAWS AND CERTAIN RULES AND REGULATIONS PROMULGATED PURSUANT THERETO. THE SECURITIES MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OR COUNSEL ACCEPTABLE TO US AND OUR COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

THESE SECURITIES HAVE NEITHER BEEN REGISTERED WITH NOR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES REGULATORY AUTHORITY. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE AUTHORITY HAS PASSED UPON OR ENDORSED THE MERITS OF THIS PRIVATE PLACEMENT OR THE ACCURACY OR ADEQUACY OF THIS DOCUMENT, AND IT IS NOT INTENDED THAT ANY OF THEM WILL. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF US AND THE TERMS OF THE PRIVATE PLACEMENT, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

THIS CONVERTIBLE DEBENTURE AND ITS ACCOMPANYING EXHIBITS SHOULD BE READ IN THEIR ENTIRETY BY ANY PROSPECTIVE INVESTOR PRIOR TO THE CONFIRMATION OF HIS INVESTMENT.

NO PERSON IS AUTHORIZED BY US TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS PRIVATE PLACEMENT MEMORANDUM (THE “MEMORANDUM”) IN CONNECTION WITH THIS PRIVATE PLACEMENT. THE DELIVERY OF THIS MEMORANDUM AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER WITHIN ANY STATE TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THIS MEMORANDUM AND THE INFORMATION CONTAINED HEREIN MAY NOT BE REPRODUCED OR USED IN ANY OTHER MANNER WITHOUT OUR EXPRESS WRITTEN CONSENT. BY ACCEPTING DELIVERY OF THIS MEMORANDUM, EACH OFFEREE AGREES TO RETURN THE MEMORANDUM IF HE/SHE DOES NOT PURCHASE THE SHARES OFFERED HEREBY.

THE CONTENTS OF THIS OFFERING SHOULD NOT BE VIEWED OR RELIED UPON AS LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT HIS OWN ATTORNEYS, ACCOUNTANTS AND OTHER ADVISORS IN REGARD TO LEGAL, TAX AND RELATED MATTERS CONCERNING HIS INVESTMENT.

JURISDICTIONAL STATEMENT

THE CONVERTIBLE DEBENTURES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE “ACT”) OR THE SECURITIES LAWS OF ANY STATES OR COUNTRIES, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON THE EXEMPTION FROM THE REGISTRATION CONTAINED IN REG. 506 OF THE ACT, REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE CONVERTIBLE DEBENTURES ARE SUBJECT TO RESTRICTION OF TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE CONVERTIBLE DEBENTURES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS PRIVATE PLACEMENT OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

REGULATION 506 AND INVESTOR SUITABILITY

To ensure that the Convertible Debentures are acquired only by suitable investors, each prospective investor must represent in writing to us (a) that he/she has adequate means of providing for his/her current needs and personal contingencies and has no need to sell the Convertible Debentures in the foreseeable future (that is, at the time of the investment, the prospective investor can afford to hold the investment for an indefinite period of time); (b) that he/she, either alone or with his/her duly designated Purchaser Representative, has such knowledge and experience in business and financial matters that he/she is capable of evaluating the risks and merits of an investment in the Convertible Debentures; and, (c) he, she or it is an accredited investor. Such representations will be made by each investor in the Subscription Agreement, a copy of which is attached hereto. Each prospective investor will be required to substantiate the accuracy of such representations.

Regulation D of the Securities Act of 1933, as amended, defines an accredited investor to include, in part, an individual who: (a) has a personal net worth in excess of $1,000,000, exclusive of the individual’s residence; or (b) any person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year. For the purposes of Regulation D, net worth excludes the value of an investor’s home. In the case of a corporation, the corporation must have total assets in excess of $5,000,000.

It should be noted that the above-described suitability standards adopted by us are minimum requirements for prospective purchasers of the Convertible Debentures and that the satisfaction of those standards does not necessarily mean that the Convertible Debentures are a suitable investment for a prospective purchaser. Subject to the limitations imposed by federal and state securities laws we may modify the above standards to allow for the sale to a limited number of unaccredited investors.

Execution documents (containing instructions, two copies of the Subscription Agreement, Investor Questionnaire and a Purchaser Representative Questionnaire) have been delivered to each prospective investor with a copy of this Memorandum. Each investor must complete and execute these documents in accordance with the instructions and resubmit all documents. Any person or entity serving as Purchaser Representative will be required to complete, execute and submit a Purchaser Representative Questionnaire.

SUMMARY OF OUR OFFERING

The Convertible Debenture

Following is a brief summary of the Convertible Debenture:

Securities being offered	Convertible Debentures
Offering price per Convertible Debenture	Face Amount (with a $15,000 minimum investment)
Term of Convertible Debenture	Maturity of Two Years (2)
Proceeds to us	$1,500,000 if all of the Convertible Debentures are sold
Number of shares of common stock outstanding before the offering.	34,500,000
Number of shares outstanding if the maximum number of Convertible Debentures are sold and all Debentures are converted to common stock.	36,000,000

TOTAL AMOUNT OF CONVERTIBLE DEBENTURE $1,500,000

Gross proceeds	$	1,500,000
Offering expenses	$	25,000
Net proceeds	$	1,475,000

The net proceeds will be used as follows:

General Administrative	$	275,000
Offering Expenses	$	25,000
Froggett Farm Project	$	1,200,000

The offering expenses are comprised of legal, accounting, printing and transfer fees.

General administrative expenses are comprised of office rent, purchase of office equipment, travel, utilities and other incidental costs associated with our operations.

With respect to the Froggett Project, located in Metcalfe County, Kentucky we intend to acquire a 100% working interest in 10 producing oil wells, ancillary equipment, complete the remediation of the 10 existing wells and drill and complete 5 additional development wells.

At the present time we do not own any interest in the Froggett Farm Project. If we do not acquire any interest therein, all money raised in this private placement will be allocated to working capital and used to expand our operations and discussed in our Form 8-K filed with the SEC on October 4, 2012.

Further, we reserve the right to adjust any of the foregoing amounts or the intended use of the proceeds without further notice to you.

PLAN OF DISTRIBUTION AND TERMS OF THE OFFERING

The convertible debenture is offered by us on a “best efforts” basis. There has been no provision made for escrowing any of the funds received from subscriptions for this offering. All funds received by our company from subscription will be immediately available to us for the purposes set forth herein.

To the extent permitted by federal, state and foreign securities laws in the applicable jurisdiction, our officers and directors will affect offers and sales of the convertible debenture to prospective investors.

We are privately selling up to $1,500,000 of convertible debentures with a $15,000 minimum investment. Any funds received by us will immediately be used by us. There will be no refunds under any circumstances.

We will sell the convertible debenture in this offering through our officers and directors. They will receive no commission from the sale of any such debentures. They will not register as a broker-dealer under Section 15 of the Securities Exchange Act of 1934 in reliance upon Rule 3a4-1. Rule 3a4-1 sets forth those conditions under which a person associated with an issuer may participate in the private placement of the issuer’s securities and not be deemed to be a broker-dealer. The conditions are that:

1. The person is not statutorily disqualified, as that term is defined in Section 3(a)(39) of the Act, at the time of his participation; and,

2. The person is not compensated in connection with his participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities;

3. The person is not at the time of their participation, an associated person of a broker-dealer; and,

4. The person meets the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that he (A) primarily performs, or is intended primarily to perform at the end of the private placement, substantial duties for or on behalf of the issuer otherwise than in connection with transactions in securities; and (B) is not a broker or dealer, or an associated person of a broker or dealer, within the preceding twelve (12) months; and (C) do not participate in selling and private placement of securities for any issuer more than once every twelve (12) months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii).

Our officers and directors are not statutorily disqualified, are not being compensated, and are not associated with a broker-dealer. They are and will continue to be one of our officers and directors at the end of the private placement and have not been during the last twelve months and are currently not broker-dealers or associated with a broker-dealer. They have not during the last twelve months and will not in the next twelve months offer or sell securities for another corporation.

Officers and directors will not be able to purchase the convertible debenture in this offering.

Procedures for Subscribing

If you decide to subscribe to the convertible debenture in this offering, you must

1. Execute and deliver a subscription agreement to us for acceptance or rejection,

2. Complete, execute and deliver a suitability questionnaire to us, and

3. Deliver a check or certified funds to us for the face amount of the debentures being acquired.

All checks for subscriptions must be made payable to CARDINAL ENERGY GROUP, INC. and be accompanied by an executed subscription agreement and suitability questionnaire.

Right to Reject Subscriptions

We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. All

monies from rejected subscriptions will be returned immediately by us to the subscriber, without interest or deductions. Subscriptions for securities will be accepted or rejected within 48 hours after we receive them.

DESCRIPTION OF SECURITIES

The Convertible Debentures

Each Convertible Debenture is one in a series authorized for issuance by the Company on December 3, 2012. The aggregate principal amount of the Convertible Debenture is $1,500,000. Each Convertible Debenture will be issued in a minimum of $15,000 in face value, with increments of $5,000 for investments greater than $15,000 (although the Company reserves the right, in the sole and absolute discretion of its Managers, to accept subscriptions for and issue Convertible Debentures in face values of less than $15,000). The purchase price paid by an Investor will be the face value of the Convertible Debenture issued to the Investor.

The Company’s Convertible Debentures are expected to be the only debt-securities issued by the Company, and will be senior to all rights of owners of the Company in liquidation. The Convertible Debentures will be fully non-recourse, with no person or entity having personal liability for the Notes. The Convertible Debentures will not be secured by any collateral.

The Convertible Debentures will be issued with maturities of two (2) years (“Maturity”), measured from the issuance date of the Convertible Debenture (being the date of the Company’s acceptance of the Investor’s Subscription Agreement). The interest rate of each Convertible Debenture will be 8% per year. Interest will be paid quarterly in arrears and will be payable in full together with repayment of the Principal on the Maturity date.

The Maturity Date will be established by the Investor at the time of his/her/its subscription for the Convertible Debenture. Once the Subscription Agreement is accepted by the Company, the Maturity date of each Convertible Debenture will be fixed and not subject to change.

Any Convertible Debenture may be called for prepayment, in part or in whole, at any time at the discretion of the Managers. No prepayment or early redemption penalty or fee will be payable in the event of prepayment.

The Convertible Debentures will be convertible into common stock of the Company, at the option of the investor, upon the date of prepayment or Maturity. The Company will give written notice to each investor of the date upon which the Company intends to repay the Convertible Debenture, and the investor will have not less than 30 days thereafter to make his/her/its election. If the investor elects to convert into common stock, the entire Principal balance of the Convertible Debenture, together with all accrued interest thereon, will be converted at the rate of one (1) share of the Company’s common stock for each $1.00 due to the investor.

Restrictions on Transfer

The Convertible Debentures have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) nor under the securities laws of any state (“Blue-Sky Laws”), and are being offered in reliance on exemptions from registration under the Securities Act and Blue-Sky Laws. Each prospective Investor is required to represent that the Convertible Debentures are being acquired for such Investor’s own account for investment purposes, and not with a view to resale or distribution. The Convertible Debentures may not be sold or transferred or otherwise disposed of by a holder thereof unless they have been registered under the Securities Act and relevant Blue-Sky Laws, or unless an exemption from such registration is available. Each of the Convertible Debentures will bear one or more legends relating to the foregoing.

Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.00001 per share. The holders of our common stock:

*	are entitled to share ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs;
*	do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights; and
*	are entitled to one non-cumulative vote per share on all matters on which stockholders may vote.

Date:	May 14, 2013	TIMOTHY W. CRAWFORD
		Timothy W. Crawford
		Principal Executive Officer

	TIMOTHY W. CRAWFORD
	Timothy W. Crawford
	Chief Executive Officer