Petrolia Energy Corp (Form: 10-Q, Received: 05/15/2017 17:19:47)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒ Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2017

☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 000-52690

PETROLIA ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of incorporation or organization)

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

710 N Post Oak, Suite 512

(Address of principal executive offices)

(Issuer’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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

Large accelerated filer r		Accelerated filer r

Non-accelerated filer r		Smaller Reporting Company ☒

Emerging growth company r

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

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 79,034,505 shares of common stock as of May 15, 2017.

Part I Financial Information

Part II Other Information

Item 1. Financial Statements

PETROLIA ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

	March 31, 2017			December 31, 2016
ASSETS
Current assets
Cash	$	4,387		$	68,648
Accounts receivable		48,201			199,003
Other current assets		5,506			31,192
Total current assets		58,094			298,843

Property & equipment
Oil and gas, on the basis of full cost accounting
Evaluated properties		14,032,580			13,465,387
Furniture, equipment & software		236,092			200,416
Less accumulated depreciation		(1,137,981	)		(1,119,708	)
Net property and equipment		13,130,691			12,546,095

Other Assets
Intangible assets		49,886			49,886
Note receivable		---			316,800

Total Assets	$	13,238,671		$	13,211,624

LIABILITIES & STOCKHOLDERS EQUITY

Current liabilities
Accounts payable	$	402,343		$	352,241
Accrued liabilities		584,211			494,983
Debt short term		275,000			275,000
Convertible debt – related party, unamortized discount of 0 and 0		550,000			550,000
Current maturities of installment notes payable		32,582			26,186
Note payable – related parties		1,414,480			1,287,980
Total current liabilities		3,258,616			2,986,390

Asset retirement obligations		436,045			322,710
Installment note payable – long term		28,316			---
Note payable to related party – long term		2,904,020			2,904,020
Total Liabilities		6,626,997			6,213,120

Stockholders’ Equity
Preferred stock, $0.10 par value, 1,000,000 shares authorized; No shares issued & outstanding		-			-
Common stock, $.001 par value; 150,000,000 shares authorized; 79,034,505 and 79,034,505 shares issued and outstanding		79,034			79,034
Additional paid in capital		14,963,530			14,887,090
Accumulated deficit		(8,430,890	)		(7,967,620	)
Total Stockholders’ Equity		6,611,674			6,998,504

Total Liabilities and Stockholders’ Equity	$	13,238,671		$	13,211,624

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

PETROLIA ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31, 2017			Three Months Ended March 31, 2016
Revenue	$			$
Oil and gas sales		33,560			22,999
Equipment sales – related party		---			180,000
Total Revenue		33,560			202,999

Operating expenses
Lease operating expense		119,992			45,994
Cost of equipment sold		---			30,300
General and administrative expenses		273,668			338,482
Depreciation, depletion and amortization		18,273			17,532
Asset retirement obligation accretion		11,930			6,428
Total operating expenses		423,863			438,736

Loss from operations		(390,303	)		(235,737	)

Other income (expense)
Interest (expense)		(73,112	)		(73,076	)
Other income		145			19,502
Loss on warrants issued for PORRI		---			(12,631	)
Total other income (expense)		(72,967	)		(66,205	)

Net loss	$	(463,270	)	$	(301,942	)

Loss per share (Basic and fully diluted)	$	(0.01	)	$	(0.01	)

Weighted average number of common shares outstanding, basic and diluted		79,034,505			43,521,276

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

PETROLIA ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31, 2017			Three Months Ended March 31, 2016
Cash Flows from Operating Activities
Net loss	$	(463,270	)	$	(301,942	)
Adjustment to reconcile net loss to net cash provided by/(used in) operating activities:
Depreciation and amortization		18,273			17,532
Accretion of debt discount		---			59,177
ARO accretion		11,930			6,428
Finance fee for extension of note payable		31,660			---
Loss on conveyance of PORRI warrants		---			12,631
Stock-based compensation expense - employees		13,351			127,755
Stock-based compensation expense – directors		12,127			---
Stock-based compensation expense – consultants		19,302			---
Changes in operating assets and liabilities
Accounts receivable		1,815			(19,049	)
Inventory		---			30,300
Other assets		25,686			2,268
Accounts payable		50,102			117,423
Accrued liabilities		89,228			(13,416	)
Net cash flows from operating activities		(189,796	)		39,107

Cash Flows from Investing Activities
Capital expenditures on oil and gas properties		---			114
Capital expenditures on oil and gas properties		---			(2,850	)
Conveyance of oil and gas properties		---			24,000
Cash flows from investing activities		---			21,264

Cash Flows from Financing Activities
Proceeds from affiliate advances		126,500			65,000
Payments of affiliated advances		---			(60,000	)
Payments on notes payable		(965	)		(1,610	)
Cash flows from financing activities		125,535			3,390

Net change in cash and cash equivalents		(64,261	)		63,761

Cash and cash equivalents
Beginning of period		68,648			3,091

End of period	$	4,387		$	66,852

SUPPLEMENTAL DISCLOSURES

NON-CASH INVESTING AND FINANCIAL DISCLOSURES

Transfer to Askarii inventory

Settlement of accrued accounts payable through share issuance

Initial recognition of asset retirement obligation

Settlement of accounts receivable and other assets for oil and gas properties

Note payable for vehicle purchase

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

PETROLIA ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2017

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION:

Petrolia Energy Corporation (“we”, “us”, “Rockdale” and the “Company”) an oil and gas exploration, development, and production company. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).

Basis of Presentation

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for such interim periods are not necessarily indicative of operations for a full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year, 2016, as reported in Form 10-K, have been omitted.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Askarii Resources. Our subsidiary operates in the oil field services industry, providing equipment and services to various oil field related Companies. All significant intercompany transactions are eliminated in the consolidation process. Since the single subsidiary is wholly-owned, all non intercompany balances are included in the consolidated financial statement balances.

The severance tax balances for all years presented was reclassified and included in the Consolidated Statements of Operations’ lease operating expense line item.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying unaudited consolidated financial statements follows.

Management Estimates — The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Intangible Assets - Our intangible assets are subject to amortization and are amortized using the straight-line method over their estimated period of benefit. Intangible assets acquired as part of a business combination are capitalized at their acquisition-date fair value.

Equipment sales - Revenues from the sale of oil and gas related equipment are recognized at the time of sale, when the significant risks and rewards of ownership have been transferred to the buyer and the recovery of the consideration is probable.

Recent Accounting Pronouncements

The Company has evaluated all the recent accounting pronouncements through the filing date and believes that none of them will have a material effect on the Company.

NOTE 3. GOING CONCERN

The Company has suffered recurring losses from operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company plans to generate profits by reworking its existing oil or gas wells and drilling additional wells, as needed. The Company will need to raise funds through either the sale of its securities, issuance of corporate bonds, joint venture agreements and/or bank financing to accomplish its goals. The Company does not have any commitments or arrangements from any person to provide the Company with any additional capital, at this time. If additional financing is not available when needed, the Company may need to cease operations. The Company may not be successful in raising the capital needed to drill and/or rework existing oil wells. Any additional wells that the Company may drill may be non-productive. Management believes that actions presently being taken to secure additional funding for the reworking of its existing infrastructure will provide the opportunity for the Company to continue as a going concern. Since the Company has an oil producing asset, its goal is to increase the production rate by optimizing its current infrastructure. The accompanying financial statements have been prepared assuming the Company will continue as a going concern; no adjustments to the financial statements have been made to account for this uncertainty.

NOTE 4. NOTE PAYABLE

On January 6, 2017, the Company purchased a truck and entered into an installment note with Don Ringer Toyota in the amount of $35,677 for a term of five years at 5.49% APR.

Preferred Stock – 1,000,000 shares authorized, none issued or outstanding.

Effective February 12, 2017, the Company acquired an additional 60% net working interest in the “Twin Lakes San Andres Unit” or “TLSAU” field located in Chaves County, New Mexico (the “Net Working Interest”) resulting from the execution of a Settlement Agreement on February 12, 2016. The agreement assigned Dead Aim Investments’ (“Dead Aim”) 60% ownership interests to the Company. Dead Aim assumed liability for the OPBE note that Petrolia purchased. As a result of this transaction, Petrolia now owns 100% working interest in TLSAU. Consideration of $465,788 was given in exchange for Dead Aim’s working interest. The consideration includes the forgiveness of the Orbit Petroleum Inc Bankruptcy Estate (“OPBE”) note of $316,800 (with a $1.3 M face value) and the write off of $148,988 of outstanding accounts receivable to Petrolia.

Effective March 31, 2017, the seven (7) Advisory Board members were compensated for their service from January 1, 2017 through March 31, 2017 by the granting of 12,500 warrants each (87,500 total warrants per quarter), per quarter per Board member, to purchase 12,500 shares of the Company’s common stock at an average exercise price of $0.14 per share, which vested immediately, and are exercisable for 36 months thereafter. The warrants were issued with a fair value of $12,127 based on an average $0.14 valuation, volatility of 296%, a discount rate of 1.09% and a 3 year term. The warrants were valued using the Black Sholes valuation model. These warrants are subject to a clawback provision which would be ratably invoked if an advisory board member did not complete his 2017 service term.

Effective February 1, 2017, the Company entered into a consulting agreement in exchange for geology related services. Specifically these services include providing reports detailing analysis of present and potential oil and gas assets. The term of the agreement is one (1) year, subject to a one (1) year extension. The consultant is granted 25,000 warrants for services provided each quarter. The exercise price of the warrants will be the market price of the Company’s stock at quarter end, the warrant term expires 3 years from the date of issuance. At March 31, 2017, 25,000 warrants were issued with a fair value of $3,466 based on an average $0.14 valuation, volatility of 296%, a discount rate of 1.09% and a 3 year term. The warrants vested immediately.

On December 13, 2016 the Company entered into a consulting agreement in exchange for assistance with evaluating financial offers, raising capital and other strategic operational decisions. The consultant is granted 40,000 warrants for each month of service. The exercise price of the shares is $0.14 per share and the term is 3 years. During the first quarter of 2017, warrants to purchase 120,000 shares of common stock were issued with a fair value of $15,836, based on a $0.14 valuation, volatility of 296%, a discount rate of 1.09% and a 3 year return. The warrants vested in 3 years.

On December 31, 2016 the Company signed an amendment with Rick Wilber concerning his outstanding convertible debt. A clause in the amendment stated that if Mr. Wilber’s outstanding principal balance was not paid back by January 1, 2017 then he was due to receive warrants to purchase 80,000 shares of Company common stock for each month the balance remained outstanding. The balance was not repaid during the first quarter of 2017. Consequently, Mr. Wilber received warrants to purchase a total of 240,000 shares of common stock which were valued at $31,660, with an exercise price of $0.15 per share that expire five (5) years from their grant dates

Summary information regarding common stock warrants issued and outstanding as of March 31, 2017, is as follows:

Weighted average remaining contractual life (years)

Outstanding at year ended December 31, 2016

Outstanding at quarter ended March 31, 2017

NOTE 6. COMMITMENTS AND CONTINGENCIES

The Company, as a lessee of oil and gas properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the Company for the cost of pollution clean-up resulting from operations and subject the Company to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. The Company is not aware of any environmental claims existing as of March 31, 2017, which have not been provided for, or covered by insurance or which may have a material impact on its financial position or results of operations. There can be no assurance, however, that current regulatory requirements will not change, or past noncompliance with environmental laws will not be discovered on the Company’s properties.

Office Lease – As of May 15, 2017, the Company has one annually renewable office lease in Houston at a cost of $1,650 per month.

NOTE 7. RELATED PARTY

Transactions with related parties and affiliates

In association with Mr. Deputy’s employment agreement dated July 1, 2016, the Company issued one warrant to purchase one share of the Company’s restricted stock at the exercise price at quarter end for each dollar of Mr. Deputy’s deferred gross salary for the quarter ended March 31, 2017. Mr. Deputy’s total accrued salary from first deferral to March 31, 2017 was $87,520. The Company granted warrants to purchase 35,000 shares of common shares for quarter ended March 31, 2017. The warrants have a term of 36 months from their issuance date. The fair value of the quarter’s warrants was $4,851, based on a $0.14 price per share valuation, volatility of 296%, a discount rate of 1.09% and a 3 year term. The warrants were valued using the Black Sholes valuation model. The warrants were recognized as stock compensation expense.

During the three months ended March 31, 2017, shareholders advanced an additional $126,500. This increased the shareholder advance liability from $192,000 at December 31, 2016 to $318,500 at March 31, 2017.

On September 23, 2015, the Company’s Board of Directors agreed to issue Mr. Zel C. Khan, the CEO and President of the Company, 1,000,000 shares of the Company’s restricted common stock in consideration for entering into an employment agreement with the Company. The value of the award on the issuance date was $68,000 and the award vests over a twenty four (24) month term. Consequently, $8,500 of the award is being expensed each quarter. During the first quarter of 2017, $8,500 of the award was expensed. The remaining award amount is $17,000.

NOTE 8. BUSINESS SEGMENTS

We are a diversified oil and gas company with operations in two segments:

Oil and Gas Exploration and Production – which includes exploration, development, and production of current and potential oil and gas properties.

Oil field services – which includes selling oil field related equipment and providing various oil field related services to the oil and gas industry.

Three months ended March 31, 2017

Three months ended March 31, 2016

All segment expenses were incurred by the Oil & Gas segment.

NOTE 9. SUBSEQUENT EVENTS

Mr. Zel C. Khan, the Company’s CEO’s employment contract has been revised. His annual salary will now be the sum of ten dollars ($10.00) per annum, effective January 1, 2017. This salary change will be effective until the end of the fiscal year 2017.

Effective April 11, 2017, the Company initiated a $2,000,000 Series A Convertible Preferred Stock (“Preferred Stock”) offering at a price of $10.00 per share. This results in a 71.429-for-one basis based on the Company’s common stock market price of $0.14 per share on April 11, 2017. The holders of Series A Preferred Stock are entitled to receive non-cumulative dividends at a rate of 9%. The Preferred Stock will automatically convert into common stock when the Company’s common stock market price equals or exceeds $0.30 per share for 30 consecutive days. Currently 23,000 shares or $230,000 of the offering has been issued.

Effective April 18, 2017, all non-insider owners of SUDS PORRI interests are authorized to convert those interests, at their sole discretion, to preferred shares in the Company in conjunction with the Company’s current Series A Preferred Stock Offering.

FORWARD LOOKING STATEMENTS

This report contains statements which, to the extent that they do not recite historical fact, constitute forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts and may include the words ‘‘may,’’ ‘‘will,’’ ‘‘could,’’ ‘‘should,’’ ‘‘would,’’ ‘‘believe,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘intend,’’ ‘‘plan’’ or other words or expressions of similar meaning. We have based these forward-looking statements on our current expectations about future events. The forward-looking statements include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our financial condition, results of operations, future performance and business, including statements relating to our business strategy and our current and future development plans.

The potential risks and uncertainties that could cause our actual financial condition, results of operations and future performance to differ materially from those expressed or implied in this report include:

The sale prices of crude oil;

The amount of production from oil wells in which we have an interest;

Lease operating expenses;

International conflict or acts of terrorism;

General economic conditions; and

Other factors disclosed in this report.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Many factors discussed in this report, some of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from the forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this report as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read the matters described in “Risk Factors” and the other cautionary statements made in, and incorporated by reference in, this report as being applicable to all related forward-looking statements wherever they appear in this report. We cannot assure you that the forward-looking statements in this report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

Please see the “Glossary of Oil and Gas Terms” on page 11 of our most recent Form 10-K, for a list of abbreviations and definitions used throughout this report.

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

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

Unless the context requires otherwise, references to the “ Company, ” “ we, ” “ us, ” “ our, ” “ Petrolia ” and “ Petrolia Energy Corp. ” refer specifically to Petrolia Energy Corp. and its wholly-owned subsidiary.

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

● “ Exchange Act ” refers to the Securities Exchange Act of 1934, as amended;

● “ SEC ” or the “ Commission ” refers to the United States Securities and Exchange Commission; and

● “ Securities Act ” refers to the Securities Act of 1933, as amended.

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

We were incorporated in Colorado on January 16, 2002.

In February 2012 we decided it would be in the best interests of our shareholders to no longer pursue our original business plan and, in April 2012 we became active in the exploration and development of oil and gas properties.

Effective September 2, 2016, we formally changed our name to Petrolia Energy Corporation, pursuant to the filing of a Statement of Conversion with the Secretary of State of Colorado and a Certificate of Conversion with the Secretary of State of Texas, authorized by the Plan of Conversion which was approved by our stockholders at our April 14, 2016, annual meeting of stockholders, each of which are described in greater detail in the Definitive Proxy Statement on Schedule 14A, which was filed with the Securities and Exchange Commission on March 23, 2016. In addition to the Certificate of Conversion filing, we filed a Certificate of Correction filing with the Secretary of State of Texas (correcting certain errors in our originally filed Certificate of Formation) on August 24, 2016.

As previously reported, although the stockholders approved the Plan of Conversion at the annual meeting, pursuant to which our corporate jurisdiction was to be changed from the State of Colorado to the State of Texas by means of a process called a “Conversion” and our name was to be changed to “Petrolia Energy Corporation”, those filings were not immediately made and the Conversion did not become legally effective until September 2, 2016. Specifically, on June 15, 2016, the Company filed a Certificate of Conversion with the Texas Secretary of State, affecting the Conversion and the name change, and including a Certificate of Formation as a converted Texas corporation; however, the Statement of Conversion was not filed with the State of Colorado until a later date. As a result, and because FINRA and the Depository Trust Company (DTC) had advised us that they would not recognize the Conversion or name change, or update such related information in the marketplace, until we became current in our periodic filings with the Securities and Exchange Commission and they had a chance to review and approve such transactions, we took the position that the Conversion and name change were not legally effective until September 2, 2016.

As a result of the filings described above, and FINRA and the Depository Trust Company (DTC) formally recognizing and reflecting the events described above in the marketplace, the Company has formally converted from a Colorado corporation to a Texas corporation, and has formally changed its name to “Petrolia Energy Corporation”.

Two significant acquisitions were made in 2015 and additional working interests in the same properties were acquired in 2016, as described in greater detail in the “Plan of Operation” section below

Since 2015, we have established a clearly defined strategy to acquire, enhance and redevelop high-quality, resource in place assets. Focused on acquisitions in the southwest United States while actively pursuing our strategy to offer low-cost operational solutions in established Oil and Gas regions. We believe our mix of assets-oil-in-place conventional plays, low-risk resource plays and the redevelopment of our late-stage plays is a solid foundation for continued growth and future revenue growth.

Our strategy is to acquire low risk, conventionally producing oil fields. This strategy allows us to incorporate new technology to minimize risk and maximize the recoverability of existing reservoirs. This approach allows us to minimize the environmental impact caused by exploratory development.

Our activities will primarily be dependent upon available financing.

Oil and gas leases are considered real property. Title to properties which we may acquire will be subject to landowner’s royalties, overriding royalties, carried working and other similar interests and contractual arrangements customary in the oil and gas industry, to liens for current taxes not yet due, liens for amounts owing to persons operating wells, and other encumbrances. As is customary in the industry, in the case of undeveloped properties little investigation of record title will be made at the time of acquisition (other than a preliminary review of local records). However, drilling title opinions may be obtained before commencement of drilling operations.

Minerva-Rockdale Field

The Minerva-Rockdale Field, which is located approximately 30 miles Northeast of Austin, Texas, was first discovered in 1921 and is approximately 50 square miles in size. The main producing formation for this field is the Upper Cretaceous Navarro Group of sands and shale’s. The Navarro is typically subdivided into several producing zones from the uppermost “A” and “B” sands to the lower “C” and “D” sands. The “B” sand is the primary producing zone. These sands are commonly fine grained and poorly sorted and were deposited close to a shoreline during a cycle of marine regression.

In April 2013, the Company entered into a lease pertaining to a 423 acre tract in Milam County, Texas, which is adjacent to the Company’s original 200 acre lease. The Company issued 500,000 shares of its common stock as consideration for a 100% working interest (75% net revenue interest) in such lease.

In August 2013, we became an oil and gas operator and took over the operation of 100% of our wells. As such, we terminated our relationship with RTO Operating, LLC for the day-to-day operations and monitoring of our wells. During 2014, the Company continued to operate its own lease. During the fourth quarter of 2014, the Company hired Jovian Petroleum Corporation (Jovian) to survey the operations and well performance at the Noack field. Their report identified paraffin buildup problems in the well bores and gathering lines as the main production issue for the Company to overcome. In December 2014, the Company signed an operating agreement with Jovian to assume full operational responsibility for the Noack field under a fixed fee agreement of $10,000 per month for full operating field services. On March 1, 2015, the Company hired Zel C. Khan, our current CEO and director, who is the largest stockholder of Jovian, as well as several former employees of Jovian Petroleum. This allowed for the fixed fee agreement with Jovian to end.

During the period from our inception to December 31, 2011, we did not drill any oil or gas wells. During the year-ended December 31, 2012 we drilled and completed six (6) oil wells and during 2013 the Company drilled and completed three (3) wells of which one (1) was converted to an injection well. During 2014 the Company drilled seven (7) new wells. In 2015, six (6) of the wells were completed, five (5) wells produced, one (1) did not produce and one (1) well was not completed. During 2016 and through first quarter end, the Company had thirteen (13) wells producing with one (1) injection well and one (1) did not produce/one (1) well not completed.

Slick Unit Dutcher Sands (“SUDS”) Field

The SUDS oilfield consists of 2,600 acres located in Creek County, Oklahoma and carries a 7.8% net revenue interest (NRI). The first oil producer was completed in 1918 by Standard Oil of Ohio (“Sohio”), which at that time was owned by John D. Rockefeller. By 1959, approximately 14,000,000 barrels of oil had been recovered at an average well depth of 3,100 feet and over 100 wells in production. Through a series of events, the infrastructure had deteriorated and the field suffered a lot of neglect. Since 2011, Jovian has invested an estimated $1.6 million into the restoration of the field; rebuilding the infrastructure and putting wells back in production. To date, 18 wells have been worked over and 9 are fully operational with considerable reserves remaining.

The Company has approved SUDS well#1, a new infill drill well, to be drilled during the second quarter of 2017, funding permitting.

SUDS 10% Acquisition

The Company acquired a 10% working interest in the SUDS field located in Creek County Oklahoma on September 23, 2015, in exchange for 10,586,805 shares of restricted common stock. Based on the then current market value of our common stock, $0.068 per share, the price paid was $719,903 or $4.77 dollars per barrel of oil (Bbl). Through this transaction, the Company increased its reserve base by approximately 151,000 Bbls of (1P) proven reserves. Concurrently with the purchase, Jovian agreed to assign to the Company the right to be the operator of record of the SUDS field, governed by an American Association of Professional Landmen (AAPL) standard Joint Operating Agreement (JOA).

SUDS 90% Acquisition

On the effective date of September 28 2016, the Company acquired a 90% net working interest in the SUDS field as a result of two separate agreements, Purchase and Sale Agreement and the Share Exchange Agreement, both between the Company and Jovian.

The Company issued two notes for a combined value of $4,000,000 in exchange for a cumulative 50% working interest in SUDS. A Promissory Note to Jovian for $1,000,000 was executed bearing interest at 5% and due on December 31, 2016 related to the acquisition of a 50% working interest in the SUDS field. The Promissory Note is secured by a 12.5% undivided working interest in the SUDS field. In addition, a Production Payment Note was executed for the same 50% working interest in the SUDS field. This note was for $3,000,000, paid out of twenty percent (20%) of the 50% undivided interest of net revenues received by the Purchaser that is attributable to the SUDS field assets. The Production Payment Note is secured by a 12.5% undivided working interest in the SUDS field.

The Company issued 24,308,985 shares of its restricted common stock to Jovian to acquire an additional 40% working interest ownership of SUDS. The purchase price of the shares equates to a $4,373,186 value, based on the $0.1799/share market price of our common stock on September 28, 2016 (the effective date of the transaction).

Twin Lakes San Andres Unit (“TLSAU”) Field

TLSAU is located 45 miles from Roswell, Chavez County, New Mexico and consists of 4,864 acres with 130 wells. The last independent reserve report prepared by MKM Engineering on December 31, 2016, reflects approximately 2.7 million barrels of proven oil reserves remaining for the 100% working interest (of which we hold a 40% working interest). During 2016 and through first quarter end, the field had ninety (90) total wells, eight (8) were producing on timers to equal one well as allowed by permit with thirty-two (32) requiring workovers and an additional fifty (50) will serve as injection wells as needed and permits are acquired. As of December 31, 2016 Petrolia was the operator of the TLSAU field (through an agreement with BSNM described below). As of the date of this report, Petrolia owns a 100% working interest in the field.

TLSAU 15% Acquisition

On November 4, 2015, the Company acquired a 15% net working interest in the TLSAU field located in Chavez County, New Mexico (the “Net Working Interest”) and all operating equipment on the field. Through this transaction, the Company increased its reserve base by approximately 384,800 Bbls of (1P) proven reserves. The Company was also assigned all rights to be the operator of the TLSAU unit under a standard operating agreement.

The total purchase price for the acquisition of the net working interest and equipment rights was $196,875 or $0.52 dollars per barrel of oil (Bbl) and was paid to Blue Sky NM, Inc. (“BSNM”). The Company paid $50,000 in cash and gave a promissory note in the amount of $146,875. The $50,000 was paid by the CEO of the Company for the benefit of the Company and recorded as a shareholder advance. Subsequently, the $50,000 advance was converted into 800,000 shares of common stock at $0.06 per share and warrants to purchase 800,000 shares of common stock that expire in three (3) years. In addition, a $1.3 million face value note payable to BSNM was purchased for $316,800 (6,000,000 shares of common stock at $0.0528 per share). With the inclusion of the note receivable, the price per barrel would be $1.33 dollars per barrel oil (Bbl).

TLSAU 25% Acquisition

On September 1, 2016 the Company acquired an additional 25% working interest ownership in the TLSAU field through the issuance of 3,500,000 shares of its restricted common stock to an unrelated party. The purchase price of the shares equates to a $350,000 value, based on the $0.10 per share market price of Petrolia’s shares on September 1, 2016. After the purchase, the Company owns a total working interest ownership of 40%. Included in the purchase price was the write off of $32,288 in outstanding accounts receivable to Petrolia. The final purchase price allocation of the transaction is as follows: oil and gas properties acquired $424,540, asset retirement obligations assumed of $42,252.

TLSAU 60% Acquisition

Effective February 12, 2017, the Company acquired an additional 60% net working interest in the “Twin Lakes San Andres Unit” or “TLSAU” field located in Chaves County, New Mexico (the “Net Working Interest”) resulting from the execution of a Settlement Agreement on February 12, 2017. The agreement assigned Dead Aim Investments’ (“Dead Aim”) 60% ownership interests to the Company. As a result of this transaction, Petrolia now owns 100% working interest in TLSAU. Consideration of $433,500 was given in exchange for Dead Aim’s working interest. The consideration includes the forgiveness of the Orbit Petroleum Inc Bankruptcy Estate (“OPBE”) note of $316,800 (with a $1.3million face value) and the write off of $116,700 of Dead Aim’s outstanding accounts receivable to Petrolia. Dead Aim assumed liability (prior to the acquisition) for the OPBE note that Petrolia purchased.

Askarii Resources, LLC

Effective February 1, 2016, the Company acquired 100% of the issued and outstanding interests in Askarii Resources LLC (“Askarii”), a private Texas based oil & gas service company. The Company acquired Askarii by issuing one (1) million restricted common shares. Based on the then market value of the Company’s common stock at $0.05 per share, the aggregate value of the transaction is $50,000.

Askarii, while dormant for the last few years, has a significant history with major oil companies providing services both onshore and offshore- Gulf of Mexico. Using Askarii, the Company plans to engage in the oil field service business as well as the leasing of field related heavy equipment. It is also contemplated that Askarii will research various enhanced oil recovery (EOR) technologies and methods which it can use for the benefit of the Company’s oil fields.

Results of Operations/Liquidity and Capital Resources

Our oil and gas revenue reported for the quarter ended March 31, 2017 was $33,560, an increase of $10,561 from revenue of $22,999 for the three month’s ended March 31, 2016. Our increased revenue for the quarter ended March, 31, 2017 as compared with the prior year’s quarter is due to the acquisition of an additional 90% working interest in SUDS and an additional 85% working interest in TLSAU after the first quarter of 2016, as described above.

We had no equipment sales for the quarter ended March 31, 2017, a decrease of $180,000 from the prior year’s equipment sales of $180,000 for the three months ended March 31, 2016. This was due to a one time equipment sale to Askarii in 2016.

Operating Expenses

Operating expenses decreased to $423,863 for the quarter ended March 31, 2017 from $438,736 for the quarter ended March 31, 2016. Our major expenses for the quarter ended March 31, 2017 were lease operating expenses of $119,992, professional services of $34,878, stock based compensation of $44,780, and salaries and wages of $74,571, all of which are included in general and administrative expenses. In comparison, our major expenses for the quarter ended March 31, 2016 were professional services of $78,666, stock based compensation (directors) of $127,755, and salaries and wages of $77,320, all of which were included in general and administrative expenses

Our lease operating expenses increased from $45,994 for the quarter ended March 31, 2016 to $119,992 for the quarter ended March 31, 2017, due to an additional crew being hired later in 2016 to workover wells and maintain our TLSAU field and a significant increase in working interest ownership in SUDS and TLSAU during 2016. In addition, a consulting fee of $15,000 was expensed in 2017 for field engineering services. . Our decrease in general and administrative expenses decrease was primarily due to the recognition of the board’s 2016 warrant compensation in the first quarter of 2016 where the corresponding compensation will not be recognized until second quarter in 2017. In addition, in 2016 there were increased costs related to contractor compensation for accounting, investor, and financial analysis supporting services that decreased significantly in 2017.

Other Income/Expenses

Other income/(expense) was ($72,967) for the quarter ended March 31, 2017 compared to other expense of ($66,205) for the quarter ended March 31, 2016. The increase was due to a increase in interest expense from the loss on warrants issued to extend debt, which was offset by a decrease in consulting income, for the respective period.

Net Loss

Net loss for the quarter ended March 31, 2017 was $463,270 compared to a net loss of $301,942 for the quarter ended March 31, 2016 due to the factors described above.

Liquidity and Capital Resources

Our sources and (uses) of funds for the three months ended March 31, 2017 were:

Cash provided (used) in operations		$	(189,796	)
Proceeds from shareholder and affiliate advances			126,500

Overview of Cash Flow Activities:

Net cash used by operating activities was $(186,796) for the three months ended March 31, 2017 and 2016 and net cash provided by operating activities was $39,107 for the three months ended March 31, 2016. The change was due primarily to a net loss, an increase in working capital requirements and due to newly acquired fields with higher cumulative lease operating expenses. This was partially offset by a decrease in cash expended for general and administrative expenses, a delay in the accounts payable cycle (increased days outstanding) and deferred interest on short term debt.

We had no net cash provided by investing activities for the three months ended March 31, 2017 compared to net cash provided by investing activities of $21,261 for the three months ended March 31, 2016. The decrease was due to a conveyance of oil and gas properties related to the SUDS ORRI.

Net cash provided by financing activities was $125,535 and $3,390 for the three months ended March 31, 2017 and 2016, respectively. The increase from 2016 to 2017 was due to a year to year increase in advances from affiliates ($126,500 compared to $65,000).

As of March 31, 2017, we had total current assets of $58,094 and total assets in the amount of $13,238,671. Our total current liabilities as of March 31, 2017 were $3,258,616. We had negative working capital of $3,200,522 as of March 31, 2017. Our material asset balances are made up of oil & gas properties and related equipment. Our most significant liabilities include a related party notes, ARO and accruals for professional services. Two notes totaling $4,000,000 are outstanding with Jovian as well as, another related party note ($550,000) with Rick Wilber. Additionally, there is $318,500 of shareholder advances outstanding and other short term debts that are temporarily funding working capital shortfalls. See “Note 6 – Notes Payable” to our audited financials included in our Annual Report, for further details regarding our outstanding notes payable.

Our material asset balances are made up of oil and gas properties and related equipment. Our most significant liabilities include related party notes (primarily the purchase of 90% working interest in SUDS from Jovian).

The Company continues to operate at a negative cash flow of approximately $50,000 per month and our Auditors have raised a going concern issue in their latest audit report. Management is pursuing several initiatives to secure funding to increase production at both the SUDS and Twin Lakes fields which together with anticipated increases in the price of crude oil may reduce Company’s monthly cash shortfall. The total amount required by the Company to accomplish this objective is approximately $250,000, which funding may not be available on favorable terms, if at all..

The Company has suffered recurring losses from operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. We plan to generate profits by drilling productive oil or gas wells. However, we will need to raise additional funds to drill new wells through the sale of our securities, through loans from third parties or from third parties willing to pay our share of drilling and completing the wells. We do not have any commitments or arrangements from any person to provide us with any additional capital. If additional financing is not available when needed, we may need to cease operations. There can be no assurance that we will be successful in raising the capital needed to drill oil or gas wells nor that any such additional financing will be available to us on acceptable terms or at all. Any wells which we may drill may not be productive of oil or gas. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. The accompanying financial statements have been prepared assuming the Company will continue as a going concern; no adjustments to the financial statements have been made to account for this uncertainty.

As described in further detail below under “Part II - Item 5. Other Information”, on April 11, 2017, the Company began a private offering of up to $2 million of Series A Convertible Preferred Stock (“Series A Preferred Stock”), at $10 per share. As of the date of this filing, an aggregate of 23,000 shares of Series A Preferred Stock have been sold to an aggregate of two investors for an aggregate of $230,000 pursuant to the offering. Additionally, effective April 18, 2017, all non-insider owners of SUDS PORRI interests were authorized to convert those interests, at their sole discretion, to preferred shares in the Company in conjunction with the Company’s current Series A Preferred Stock offering.

C ritical Accounting Policies and New Accounting Pronouncements

See Note 2 to the financial statements included as part of our Annual Report on Form 10-K, for the year ended December 31, 2016, filed with the Securities and Exchange Commission on April 17, 2017 for a description of our critical accounting policies and the potential impact of the adoption of any new accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 4. Controls and Procedures.

(a) We maintain a system of controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act , is recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of March 31, 2017, our Principal Executive and Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Principal Executive and Financial Officer concluded that our disclosure controls and procedures were effective.

(b) Changes in Internal Controls . There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II :OTHER INFORMATION

Item 1. Legal Proceedings.

We are periodically named in legal actions arising from normal business activities. We evaluate the merits of these actions and, if we determine that an unfavorable outcome is probable and can be reasonably estimated, we will establish the necessary reserves. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Commission on April 17, 2017, under the heading “Risk Factors”, and investors should review the risks provided in the Form 10-K, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2016, under “Risk Factors”, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

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

Use of Proceeds from Sale of Registered Securities

Effective March 31, 2017, the seven (7) Advisory Board members were compensated for their service from January 1, 2017 through March 31, 2017 though the granting of warrants to purchase 12,500 shares of common stock each (87,500 total warrants per quarter), per quarter per Board member, to purchase 12,500 shares of the Company’s common stock at an average exercise price of $0.14 per share, which vested immediately, and are exercisable for 36 months thereafter. The warrants were issued with a fair value of $12,127.

Effective February 1, 2017, the Company entered into a consulting agreement in exchange for geology related services. Specifically these services include providing reports detailing analysis of present and potential oil and gas assets. The term of the agreement is one (1) year, subject to a one (1) year extension. The consultant is granted warrants to purchase 25,000 shares of common stock for services provided each quarter. The exercise price of the warrants will be the market price of the Company’s stock at quarter end, the warrant term expires 3 years from the date of issuance. At March 31, 2017, warrants to purchase 25,000 shares of common stock were granted with a fair value of $3,465.

On December 13, 2016 the Company entered into a consulting agreement in exchange for assistance with evaluating financial offers, raising capital and other strategic operational decisions. The consultant is granted warrants to purchase 40,000 shares of common stock for each month of service. The exercise price of the shares is $0.14 per share and the term is 3 years. During the first quarter of 2017, warrants to purchase 120,000 shares of common stock were issued with a fair value of $15,438.

On December 31, 2016 the Company signed an amendment with Rick Wilber concerning his outstanding convertible debt. A clause in the amendment stated that if Mr. Wilber’s outstanding principal balance was not paid back by January 1, 2017 then he was due to receive warrants to purchase 80,000 shares of Company common stock for each month the balance remained outstanding.. The balance was not repaid during the first quarter of 2017. Consequently, Mr. Wilber received a total of 240,000 warrants which were valued at $31,660, with an exercise price of $0.15 per share that expire five (5) years from their grant dates.

In association with Mr. Deputy’s employment agreement dated July 1, 2016, the Company issued one warrant to purchase one share of the Company’s restricted stock at the exercise price at quarter end for each dollar of Mr. Deputy’s deferred gross salary for the quarter ended March 31, 2017. Mr. Deputy’s total accrued salary from the initial deferral to March 31, 2017 was $87,520. The Company granted warrants to purchase 35,000 shares of common shares for quarter ended March 31, 2017 that were valued at $4,851with an exercise price of $0.14 per share. The warrants have a term of 36 months from their issuance date.

As described in further detail below under “Part II - Item 5. Other Information”, on April 11, 2017, the Company began a private offering of up to $2 million of Series A Preferred and as of the date of this filing, an aggregate of 23,000 shares of Series A Preferred Stock have been sold to an aggregate of two investors for an aggregate of $230,000 pursuant to the private offering.

We claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, and the rules and regulations promulgated thereunder in connection with the sales, grants and issuances described above since the foregoing issuances did not involve a public offering, the recipients were (a) “accredited investors”, and/or (b) had access to similar documentation and information as would be required in a Registration Statement under the Securities Act.. With respect to the transactions described above, no general solicitation was made either by us or by any person acting on our behalf. The transactions were privately negotiated, and did not involve any kind of public solicitation. No underwriters or agents were involved in the foregoing issuances and we paid no underwriting discounts or commissions. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom.

Issuer Purchases of Equity Securities

None.

Item 3. Defaults Upon Senior Securities

Item 4. Mine Safety Disclosures.

Item 5. Other Information.

The employment contract of Mr. Zel C. Khan, the Company’s CEO, has been revised. His annual salary will now be the sum of ten dollars ($10.00) per annum, effective January 1, 2017. This salary change will be effective until the end of the fiscal year 2017.

On April 11, 2017, the Company began a private offering of up to $2 million of Series A Convertible Preferred Stock (“Series A Preferred Stock”), at $10 per share. On May 3, 2017, the Board of Directors approved, and the Company filed, a Certificate of Designations, designating the rights and preferences of the Series A Preferred Stock with the Secretary of State of Texas. We also provided the investors in the private offering piggyback registration rights in connection with the shares of common stock issuable upon conversion of the Series A Preferred Stock which remain in place until the earlier of (a) two years from the closing date; and (b) the date that the investors are eligible to sell the securities under Rule 144.

The designation provided for up to 400,000 shares of Series A Preferred Stock. The Series A Preferred Stock have an original issuance price of $10 per share; are convertible into shares of common stock of the Company on a 71.429-for-one basis, based on a conversion price of $0.14 per share, provided that accrued and unpaid dividends are also convertible into common stock based on a conversion price of $0.14 per share; entitle the holders thereof the right to receive non-cumulative dividends in preference to any dividend on the common stock at the rate of 9% per annum, payable in cash on a semi-annual basis; participate pro-rata, on an as-converted basis, in cash dividends paid on the common stock; provide the holders thereof the right to receive, in preference to the holders of common stock, an amount equal to the original issuance price, together with any declared but unpaid dividends, in the event of any liquidation, dissolution or winding up of the Company; and contain no redemption rights.

The Series A Preferred Stock and all accrued and unpaid dividends thereon automatically convert into common stock, upon the earliest to occur of (i) the holders of a majority of the Series A Preferred Stock then outstanding consenting to such conversion; (ii) the closing of a registered public offering of the Company's common stock, but only if the gross proceeds of the offering to the Corporation equal or exceed $10 million and the offering price is at least $0.30 per share; (iii) May 3, 2022 (the five year anniversary of the date the designation was filed); and (iv) the date that the average closing price per share of the Company's common stock as reported on a national securities exchange, NASDAQ, the OTCQX, the OTCQB, the OTCQX or the OTC Pink market, equals or exceeds $0.28 per share during any period of thirty (30) consecutive trading days.

Table of Contents

The Series A Preferred Stock votes together with the common stock and not as a separate class except that as long as at least 20% of the original shares of the Series A Preferred Stock issued remain outstanding, consent of the holders of a majority of the Series A Preferred Stock then outstanding is required for any action which (a) increases or decreases (other than by redemption or conversion) the total number of authorized shares of Series A Preferred Stock; (b) adopts or authorizes any new designation of any preferred stock or which amends the Certificate of Formation of the Company in a manner which adversely affects the rights, preferences and privileges of the Series A Preferred Stock; (c) creates (by reclassification or otherwise) any new series or shares of capital stock having rights, preferences, or privileges senior to or on a parity with the Series A Preferred Stock in connection with liquidation rights or dividends; (d) effects an exchange, or creates a right of exchange, cancellation, or creates a right to cancel, of all or any part of the shares of another class of shares into shares of Series A Preferred Stock; or (e) alters or changes the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the shares of such series.

The Series A Preferred Stock includes a blocker prohibiting the conversion of the Series A Preferred Stock into common stock of the Company, if upon such conversion/exercise the holder thereof would beneficially own more than 4.99% of the Company’s then outstanding common stock, provided such limitation shall not apply in the event of an automatic conversion of the Series A Preferred Stock (the “Beneficial Ownership Limitation”). The Beneficial Ownership Limitation also limits the voting rights of any holders of the Series A Preferred Stock. The Beneficial Ownership Limitation may be waived by any holder with 61 days prior written notice to the Company.

As of the date of this filing, an aggregate of 23,000 shares of Series A Preferred Stock have been sold to an aggregate of two investors for an aggregate of $230,000 pursuant to the offering.

Effective April 18, 2017, all non-insider owners of SUDS PORRI interests were authorized to convert those interests, at their sole discretion, to preferred shares in the Company in conjunction with the Company’s current Series A Preferred Stock offering

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

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

PETROLIA ENERGY CORPORATION

Chief Executive Officer

(Principal Executive Officer

PETROLIA ENERGY CORPORATION

Chief Financial Officer

(Principal Financial and Accounting Officer

EXHIBITS INDEX

3.1*	Certificate of Designations of Series A Convertible Preferred Stock of Petrolia Energy Corporation, filed with the Secretary of State of Texas on May 3, 2017

10.1	Settlement Agreement effective February 12, 2017 between Petrolia Energy Corporation and Dead Aim Investments (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 21, 2017, and incorporated by reference herein)

10.2	Quitclaim Deed effective February 12, 2017 by and between Dead Aim Investments and Petrolia Energy Corporation, relating to the 60% Net Working Interest in the Twin Lakes San Andres Unit (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 21, 2017, and incorporated by reference herein)

10.3*	Series A Convertible Preferred Stock Offering Memorandum

10.4*	Form of Preferred Stock Subscription Agreement for the Company’s Series A Convertible Preferred Stock Offering

31.1 *	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 *	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 **	Certification pursuant to Section 906 of the Sarbanes-Oxley Act.

32.2 **	Certification pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS+	XBRL Instance Document

101.SCH+	XBRL Taxonomy Extension Schema Document

101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB+	XBRL Taxonomy Extension Label Linkbase Document

101.PRE+	XBRL Taxonomy Presentation Linkbase Document

* Filed herewith

** Furnished herewith

CERTIFICATE OF DESIGNATIONS

PETROLIA ENERGY CORPORATION

ESTABLISHING THE DESIGNATIONS , PREFERENCES,

LIMITATIONS AND RELATIVE RIGHTS OF ITS

SERIES A CONVERTIBLE PREFERRED STOCK

Pursuant to Section 21.155 of the Texas Business Organizations Code (the “ TBOC ”), Petrolia Energy Corporation, a corporation organized and existing under the TBOC (the “ Corporation ”),

DOES HEREBY CERTIFY that pursuant to the authority conferred upon the Board of Directors by the Certificate of Formation of the Corporation, as amended, and pursuant to Section 21.155 of the TBOC, the Board of Directors, pursuant to Section 6.201 of the TBOC, by unanimous consent of all members of the Board of Directors on April 28, 2017, duly adopted a resolution providing for the designation of a series of four hundred thousand (400,000) shares of Series A Convertible Preferred Stock, which resolution is and reads as follows:

RESOLVED , that pursuant to the authority expressly granted to and invested in the Board of Directors by the provisions of the Certificate of Formation of the Corporation, as amended and Section 21.155 of the TBOC, the Corporation hereby establishes a new series of Preferred Stock, par value $0.01 per share, of the Corporation and fixes the number of shares of such series and the powers, designations, preferences and relative rights of such series, and the qualifications, limitations or restrictions thereof as follows:

The new series of Preferred Stock, par value $0.01 per share, of the Corporation shall be, and hereby is, designated “ Series A Convertible Preferred Stock ” (the “ Series A Preferred Stock ” or the “ Preferred Stock ”), and the initial number of designated shares constituting such series shall be four hundred thousand (400,000). The powers and preferences, and the relative, participating, optional and other rights, and the qualifications, limitations, and restrictions thereon of the Series A Preferred Stock shall be set forth in this Certificate of Designations (the “ Designation ” or the “ Certificate of Designation ”) below:

1. Dividends .

1.1 Dividends in General . Dividends shall accrue on the Series A Preferred Stock at the end of each calendar month, beginning on the Original Issue Date, at the Dividend Rate, until such Series A Preferred Stock is no longer outstanding either due to conversion or otherwise as provided herein (“ Dividends ” and such Dividends which have accrued as of any applicable date and remain unpaid as of such date, the “ Accrued Dividends ”).

1.2 Payment of Dividends . The Corporation shall, in accordance with the terms set forth herein, pay the Holder of the Series A Preferred Stock all Accrued Dividends in cash (as discussed in Section 1.3 ), within five (5) Business Days, beginning on June 30, 2017, and continuing thereafter on each June 30 ^th and December 31 ^st (each, as applicable a “ Dividend Payable Date ”), for so long as the Series A Preferred Stock remains outstanding.

Petrolia Energy Corporation : Certificate of Designations of Series A Convertible Preferred Stock

Page 1

1.3 Cash Dividend Payments . All Dividends payable in cash hereunder shall be made in lawful money of the United States of America to each Holder in whose name the Series A Preferred Stock is registered as set forth on the books and records of the Corporation. Such payments shall be made by wire transfer of immediately available funds to the account such Holder may from time to time designate by written notice to the Corporation or by Corporation cashier’s check, without any deduction, withholding or offset for any reason whatsoever except to the extent required by law.

1.4 Participation . Subject to the rights of other holders, if any, of any securities senior to or pari passu with, the Series A Preferred Stock, the Holders shall, as holders of Series A Preferred Stock, in addition to the Dividends described in Section 1.1 , above, be entitled to such dividends paid and Distributions made to the holders of Common Stock to the same extent as if such Holders had converted the Series A Preferred Stock into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date for such dividends and Distributions. Payments under the preceding sentence shall be made concurrently with the dividend or Distribution to the holders of Common Stock. Following the occurrence of a Liquidation Event (as hereinafter defined) and the payment in full to a Holder of its applicable Liquidation Preference, such Holder shall cease to have any rights hereunder to participate in any future dividends or distributions made to the holders of Common Stock. No Distributions shall be made with respect to the Common Stock until all past due, if any, and/or declared Dividends on the Series A Preferred Stock have been paid or set aside for payment to the Holders. Notwithstanding the foregoing, the Holders shall have no right of participation in connection with dividends or Distributions made to the Common Stock shareholders consisting solely of shares of Common Stock.

1.5 Non-Cash Distributions . Whenever a Distribution provided for in this Section 1 shall be payable in property other than cash, the value of such Distribution shall be deemed to be the fair market value of such property as determined in good faith by the Board of Directors.

1.6 Other Distributions . Subject to the terms of this Certificate of Designation, and to the fullest extent permitted by the TBOC, the Corporation shall be expressly permitted to redeem, repurchase or make distributions on the shares of its capital stock in all circumstances other than where doing so would cause the Corporation to be unable to pay its debts as they become due in the usual course of business (unless consent to such redemption, repurchase or distribution is provided by the lenders thereunder).

1.7 Dividend Default . In the event a Dividend Default should occur in respect to the Dividends due to Holder, any unpaid Dividends shall accrue interest at the rate of twelve percent (12%) per annum until such Dividend Default is cured by the Corporation.

2. Liquidation Rights .

2.1 Liquidation Preference . In the event of any Liquidation Event, the holders of Series A Preferred Stock shall be entitled to receive prior and in preference to any Distribution of any of the assets of the Corporation to the holders of the Corporation’s securities other than Senior Securities by reason of their ownership of such stock, but not prior to any holders of the

Petrolia Energy Corporation : Certificate of Designations of Series A Convertible Preferred Stock

Page 2

Corporation’s Senior Securities, which holders of the Senior Securities shall have priority to the Distribution of any assets of the Corporation upon the ocurrence of any Liquidation Event, by reason of their ownership of such stock, the greater (as applicable, the “ Liquidation Preference ”) of (i) an amount per share for each share of Series A Preferred Stock held by them equal to the Original Issue Price, or (ii) the amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 3 immediately prior to such Liquidation Event. If upon the liquidation, dissolution or winding up of the Corporation, the assets of the Corporation legally available for distribution to the holders of the Series A Preferred Stock ( i.e. , after payment of the Corporation’s liabilities and payment to any holders of the Corporation’s Senior Securities) are insufficient to permit the payment to such holders of the full amounts specified in this Section then the entire assets of the Corporation legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this Section and applicable law.

2.2 Remaining Assets . After the payment to the Holders of Series A Preferred Stock of the full preferential amounts specified above, the entire remaining assets of the Corporation legally available for distribution by the Corporation shall be distributed with equal priority and pro rata among the holders of the Junior Securities in proportion to the number of shares of Junior Securities held by them and the holders of Common Stock in proportion to the number of shares of Common Stock held by them.

2.3 Valuation of Non-Cash Consideration . If any assets of the Corporation distributed to stockholders in connection with any liquidation, dissolution, or winding up of the Corporation are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Board of Directors. In the event of a merger or other acquisition of the Corporation by another entity, the Distribution date shall be deemed to be the date such transaction closes.

2.4 Effecting a Merger or Consolidation . The Corporation shall not have the power to effect a Liquidation Event or other transaction which is a merger, consolidation or exchange pursuant to which the shareholders of the Corporation will, subsequent to such transaction, hold less than 50% of the voting securities of the resulting entity, unless the agreement or plan of merger or consolidation for such transaction (the “ Merger Agreement ”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 .

3. Conversion . The Series A Preferred Stock shall have conversion rights as follows (the “ Conversion Rights ”):

3.1 Holder Conversion .

(a) Each share of Series A Preferred Stock and all Accrued Dividends shall be convertible, at the option of the Holder thereof (a “ Holder Conversion ”), at any time following the Original Issuer Date, at the office of the Corporation or any Transfer Agent for the Series A Preferred Stock, into that number of fully-paid, nonassessable shares of Common Stock determined by dividing (i) the Original Issue Price for the Series A Preferred Stock and (ii) the

Page 3

total Accrued Dividends, desired to be converted, by the Conversion Price (such shares of Common Stock issuable upon a Conversion, the “ Holder Conversion Shares ”). In order to effectuate the Holder Conversion under this Section 3.1 , the Holder must provide the Corporation a written notice of conversion in the form of Exhibit A hereto (the “ Notice of Conversion ”). The Notice of Conversion must be dated no earlier than three (3) Business Days from the date the Notice of Conversion is actually received by the Corporation.

(b) Mechanics of Conversion . In order to effect a Holder Conversion, a Holder shall fax or email a copy of the fully executed Notice of Conversion to the Corporation (or in the discretion of the Corporation, with notice to the Holder, the Transfer Agent)(Attention: James Burns, 710 N. Post Oak Rd., Ste. 512, Houston, Texas 77024, Email: james.b@petroliaenergy.com, with a copy to (which shall not constitute notice) The Loev Law Firm, PC, Attn: David M. Loev, Esq., 6300 West Loop South, Suite 280, Bellaire, Texas 77401, Fax: (713) 524-4122, Email: dloev@loevlaw.com). Upon receipt by the Corporation (or the Transfer Agent) of a facsimile or emailed copy of a Notice of Conversion from a Holder, the Corporation (or the Transfer Agent) shall promptly send, via facsimile or email, a confirmation to such Holder stating that the Notice of Conversion has been received, the date upon which the Corporation (or the Transfer Agent) expects to deliver the Common Stock issuable upon such conversion and the name and telephone number of a contact person at the Corporation (or the Transfer Agent) regarding the Holder Conversion. The Holder shall surrender, or cause to be surrendered, the Preferred Stock Certificates being converted, duly endorsed, to the Corporation (or the Transfer Agent) at the address listed above within three (3) Business Days of delivering the fully executed Notice of Conversion. The Corporation (or the Transfer Agent) shall not be obligated to issue shares of Common Stock upon a Conversion unless either (x) the Preferred Stock Certificates; or (y) the Lost Certificate Materials described in Section 11 below have been previously received by the Corporation or its Transfer Agent. In the event the Holder has lost or misplaced the certificates evidencing the Preferred Stock, the Holder shall be required to provide the Corporation or the Corporation’s Transfer Agent (as applicable) with whatever reasonable documentation and fees each may require to re-issue the Preferred Stock Certificates and shall be required to provide such re-issued Preferred Stock Certificates to the Corporation (or the Transfer Agent) within three (3) Business Days of delivering the Notice of Conversion. Unless the Holder Conversion Shares are covered by a valid and effective registration under the Securities Act or the Notice of Conversion provided by the Holder includes a valid opinion from an attorney stating that such shares of Common Stock issuable in connection with the Notice of Conversion can be issued free of restrictive legend, which shall be determined by the Corporation (or the Transfer Agent) in its sole discretion, such shares shall be issued as Restricted Shares.

(c) Delivery of Common Stock upon Conversion . Upon the receipt of a Notice of Conversion, the Corporation (itself, or through its Transfer Agent) shall, no later than the third (3 ^rd ) Business Day following the date of such receipt (subject to the surrender of the Preferred Stock Certificates by the Holder within the period described in Section 3.1 (b) or, in the case of lost, stolen or destroyed certificates, after provision of the Lost Certificate Materials) (the “ Delivery Period ”), issue and deliver (i.e., deposit with a nationally recognized overnight courier service postage prepaid) to the Holder or its nominee (x) a certificate representing the Holder Conversion Shares and (y) a certificate representing the number of shares of Series A Preferred Stock not being converted, if any.

Page 4

(d) Failure to Provide Preferred Stock Certificates . In the event the Holder provides the Corporation with a Notice of Conversion, but fails to provide the Corporation with the Preferred Stock Certificates or the Lost Certificate Materials (as defined in Section 11 below), by the end of the Delivery Period, the Notice of Conversion shall be considered void and the Corporation shall not be required to comply with such Notice of Conversion. Provided that if the Notice of Conversion only relates to the conversion of Accrued Dividends, the Holder shall not be required to provide the Corporation any Preferred Stock Certificates.

(e) Beneficial Ownership Limitation for Holder Conversions and Voting . No Holder Conversion shall result in the conversion of more than that number of shares of Series A Preferred Stock, if any, such that, upon such Holder Conversion, the aggregate beneficial ownership of the Corporation’s Common Stock (calculated pursuant to Rule 13d-3 of the Exchange Act) of such Holder and all persons affiliated with such Holder as described in Rule 13d-3 is more than 4.999% of the Corporation’s Common Stock then outstanding (the “ Maximum Percentage ”). In the event any Holder Conversion would result in the issuance of shares of Common Stock to any Holder in excess of the Maximum Percentage, only that number of shares of Series A Preferred Stock which when Converted would not result in such Holder exceeding the Maximum Percentage shall be subject to such applicable Holder Conversion, if any, and Holder shall continue to hold any remaining shares of Series A Preferred stock, the conversion of which would result in Holder exceeding the Maximum Percentage. The Corporation’s Transfer Agent shall be authorized to promptly disclose the total outstanding shares of Common Stock of the Corporation to the Holder from time to time at the request of the Holder in order for the Holder to determine its compliance with the Maximum Percentage. The provisions of this Section 3.1 (e) shall not be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3.1 (e) to correct this Section (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The Corporation shall not be required to verify or investigate or confirm whether any Holder Conversion would exceed the Maximum Percentage, and instead the Corporation shall be able to rely on any Notice of Holder Conversion as prima facie evidence of, and as a representation by, the applicable Holder, that such applicable conversion described in the Notice of Holder Conversion would not result in a violation of the Maximum Percentage. Additionally, in no event shall any Holder have the right pursuant to Section 5 below, to vote, on any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders in lieu of meeting), a number of voting shares in excess of the Maximum Percentage . The Maximum Percentage may be increased or decreased by the Holder, at the election of the Holder, from time to time, upon not less than 61 days’ prior written notice to the Corporation. Any such increase or decrease will not be effective until the 61st day after such written notice is delivered to the Corporation.

3.2 Automatic Conversion .

(a) Each share of Series A Preferred Stock and all Accrued Dividends thereon, shall automatically and without any required action by any Holder, be converted into that number of fully-paid, non-assessable shares of Common Stock as determined by dividing the

Page 5

Original Issue Price of each share of Series A Preferred and all Accrued Dividends thereon by the Conversion Price, on the Automatic Conversion Date (an “ Automatic Conversion ”).

(b) Following an Automatic Conversion, the Corporation shall within two (2) Business Days, deliver notice to each Holder that an Automatic Conversion has occurred, at the address of each Holder which the Corporation then has on record (an “ Automatic Conversion Notice ”); provided, that the Corporation is not required to receive any confirmation that such Automatic Conversion Notice was received by a Holder, but instead assuming such Automatic Conversion Notice was sent to the address which the Corporation then has on record for such Holder, the Automatic Conversion Notice shall be treated as received by the Holder for all purposes on the third (3 ^rd ) Business Day following the date such notice was sent by the Corporation (the “ Automatic Conversion Notice Receipt Date ”). Within three (3) Business Days following the Automatic Conversion Notice Receipt Date, the Corporation shall issue to each Holder all shares of Common Stock which such Holder is due in connection with the Automatic Conversion (the “ Automatic Conversion Shares ”, and together with the Holder Conversion Shares, the “ Shares ”) and promptly deliver such Automatic Conversion Shares to the address of Holder which the Corporation then has on record (a “ Delivery ”). The Automatic Conversion Shares issuable in connection with an Automatic Conversion shall be fully-paid, non-assessable shares of Common Stock. Unless the Automatic Conversion Shares are covered by a valid and effective registration under the Securities Act or the Holder provides a valid opinion from an attorney stating that such Automatic Conversion Shares can be issued free of restrictive legend, which shall be determined by the Corporation in its sole discretion, prior to the issuance date of such Automatic Conversion Shares, such Automatic Conversion Shares shall be issued as Restricted Shares.

(c) The issuance and Delivery by the Corporation of the Automatic Conversion Shares shall fully discharge the Corporation from any and all further obligations under or in connection with the Series A Preferred Stock and shall automatically, and without any required action by the Corporation or the Holder, result in the cancellation, termination and invalidation of any outstanding Series A Preferred Stock and Preferred Stock Certificates held by Holder or his, her or its assigns and shall upon the payment of the Automatic Conversion Dividends, fully discharge any and all requirement for the Corporation to pay Dividends on such Series A Preferred Stock shares converted, which Series A Preferred Stock converted shall cease accruing Dividends upon an Automatic Conversion.

(d) Without limiting the obligation of each Holder set forth herein (including in the subsequent clause (e), the Corporation and/or the Corporation’s Transfer Agent shall be authorized to take whatever action necessary, if any, following the issuance and Delivery of the Automatic Conversion Shares to reflect the cancellation of the Series A Preferred Stock subject to the Automatic Conversion, which shall not require the approval and/or consent of any Holder (a “ Cancellation ”).

(e) Notwithstanding the above, each Holder, by accepting such Preferred Stock Certificates hereby covenants that it will, whenever and as reasonably requested by the Corporation and the Transfer Agent, at the Corporation’s sole cost and expense, do, execute, acknowledge and deliver any and all such other and further acts, deeds, assignments, transfers, conveyances, confirmations, powers of attorney and any instruments of further

Page 6

assurance, approvals and consents as the Corporation or the Transfer Agent may reasonably require in order to complete, insure and perfect the Cancellation, if such may be reasonably required by the Corporation and/or the Corporation’s Transfer Agent.

(f) In the event that the Delivery of any Automatic Conversion Shares is unsuccessful and/or any Holder fails to accept such Automatic Conversion Shares, such Automatic Conversion Shares shall be held by the Corporation and/or the Transfer Agent in trust (without accruing interest) and shall be released to such Holder upon reasonable evidence to the Corporation or the Transfer Agent that such Holder is the legal owner of such Automatic Conversion Shares, provided that the Holder’s failure to accept such Automatic Conversion Shares, cash Accrued Dividends and/or the Corporation’s inability to Deliver such shares or dividends shall in no event effect the validity of the Cancellation.

(g) The Automatic Conversion Right shall supersede and take priority over the Holder’s Optional Conversion Right in the event that there are any conflicts between such rights.

(h) The Maximum Percentage ownership limitation described in Section 3.1(e) above shall not apply to an Automatic Conversion.

3.3 Fractional Shares . If any Conversion of Series A Preferred Stock would result in the issuance of a fractional share of Common Stock (aggregating all shares of Series A Preferred Stock being converted pursuant to a given Notice of Conversion), then, the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be the next higher whole number of shares.

3.4 Taxes . The Corporation shall not be required to pay any tax which may be payable in respect to any transfer involved in the issue and delivery of shares of Common Stock upon Conversion in a name other than that in which the shares of the Series A Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax, or has established, to the satisfaction of the Corporation, that such tax has been paid. The Corporation shall withhold from any payment due whatsoever in connection with the Series A Preferred Stock any and all required withholdings and/or taxes the Corporation, in its sole discretion deems reasonable or necessary, absent an opinion from Holder’s accountant or legal counsel, acceptable to the Corporation in its sole determination, that such withholdings and/or taxes are not required to be withheld by the Corporation.

3.5 No Impairment . The Corporation will not through any reorganization, transfer of assets, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation but will at all times in good faith assist in the carrying out of all the provisions of this Section 3 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the Holders of Series A Preferred Stock against impairment. Notwithstanding the foregoing, nothing in this Section shall prohibit the Corporation from amending its Certificate of Formation, subject to the other terms of this Designation, with the requisite consent of its stockholders and the Board of Directors, provided

Page 7

that such amendment will not prohibit the Corporation from having sufficient authorized shares of Common Stock to permit conversion hereunder.

3.6 Reservation of Stock Issuable Upon Conversion . The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Corporation will use its commercially reasonable efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

4. Adjustments for Recapitalizations .

4.1 Equitable Adjustments for Recapitalizations . (a) The Liquidation Preference and the Original Issue Price (each, as and if applicable) (the “ Preferred Stock Adjustable Provisions ”); (b) any provisions hereof which are expressly tied to the price or value of the Common Stock of the Corporation, including the Conversion Price (as and if applicable) (the “ Common Stock Adjustable Provisions ”), and (c) any and all other terms, conditions, amounts and provisions of this Designation which (i) pursuant to the terms of this Designation provide for equitable adjustment in the event of a Recapitalization (the “ Other Equitable Adjustable Provisions ”); or (ii) the Board of Directors of the Corporation determines in their reasonable good faith judgment is required to be equitably adjusted in connection with any Recapitalizations, shall each be subject to equitable adjustment as provided in Sections 4.2 through 4.3 , below, as determined by the Board of Directors in their sole and reasonable discretion.

4.2 Adjustments for Subdivisions or Combinations of Common Stock . In the event the outstanding shares of Common Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Common Stock, without a corresponding subdivision of the Series A Preferred Stock, the applicable Common Stock Adjustable Provisions and the Other Equitable Adjustable Provisions (if any) in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately and equitably adjusted. In the event the outstanding shares of Common Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Common Stock, without a corresponding combination of the Series A Preferred Stock, the Common Stock Adjustable Provisions and the Other Equitable Adjustable Provisions (if any) in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately and equitably adjusted.

4.3 Adjustments for Subdivisions or Combinations of Series A Preferred Stock . In the event the outstanding shares of Series A Preferred Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Series A Preferred Stock, the applicable Preferred Stock Adjustable Provisions, Common Stock Adjustable Provisions and the Other Equitable Adjustable Provisions (if any) in effect

Page 8

immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately and equitably adjusted. In the event the outstanding shares of Series A Preferred Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Series A Preferred Stock, the applicable Preferred Stock Adjustable Provisions, Common Stock Adjustable Provisions and the Other Equitable Adjustable Provisions (if any) in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately and equitably adjusted. Provided however that the result of any concurrent adjustment in the Common Stock (as provided under Section 4.2 ) and Series A Preferred Stock (as provided under Section 4.3 ) shall only be to affect the equitable adjustable provisions hereof once .

4.4 Other Adjustments . The Board of Directors of the Corporation shall also adjust equitably, and shall have the right to adjust equitably, any or all of the Preferred Stock Adjustable Provisions, Common Stock Adjustable Provisions or Other Equitable Adjustable Provisions from time to time, if the Board of Directors of the Corporation determine in their reasonable good faith judgment that such values and/or provisions are required to be equitably adjusted in connection with any Corporation action.

4.5 Adjustments for Reclassification, Exchange and Substitution .

(a) Except to the extent such Recapitalization Event is subject to Sections 4.1 through 4.3 , above (the “ Recapitalization and Adjustment Rights ”), if at any time or from time to time after the date of the filing of the Designation there shall occur any capital reorganization, recapitalization, reclassification, share exchange, restructuring, consolidation, combination or merger involving the Corporation in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for shares of stock or other securities or property (including cash) of the Corporation or otherwise (other than a transaction covered by the Recapitalization and Adjustment Rights) (each a “ Recapitalization Event ”), provision shall be made so that each Holder shall thereafter be entitled to receive upon conversion of the shares of Series A Preferred Stock held by such Holder the kind and number of shares of stock or other securities or property (including cash or any combination thereof) of the Corporation or otherwise, to which a Common Stock stockholder holding the number of shares of Common Stock into which the shares of Series A Preferred Stock held by such Holder are convertible immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled upon such event.

(b) In the event that the holders of Common Stock have the opportunity to elect the form of consideration to be received in the business combination, then the Corporation shall make adequate provision whereby the Holders shall have the opportunity to determine the form of consideration into which all of the Series A Preferred Stock, treated as a single class, shall be convertible from and after the effective date of such business combination. If such opportunity is granted, such determination shall be based on the determination at a meeting duly called or via a written consent to action of a Simple Majority, shall be subject to any limitations to which all holders of Common Stock are subject, such as pro rata reductions applicable to any portion of the consideration payable in such business combination, and shall be conducted in such a manner as to be completed by the date which is the earliest of (1) the deadline for elections to be made by holders of Common Stock and (2) two Business Days prior to the

Page 9

anticipated effective date of the business combination. Further, the Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than the Corporation) resulting from consolidation or merger or the entity purchasing such assets assumes by written instrument, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire.

(c) If a conversion of Series A Preferred Stock is to be made in connection with a transaction contemplated by this Section 4.3 or a similar transaction affecting the Corporation (other than a tender or exchange offer), the conversion of any shares of Series A Preferred Stock may, at the election of the Holder thereof, be conditioned upon the consummation of such transaction, in which case such conversion shall not be deemed to be effective until such transaction has been consummated. In connection with any tender or exchange offer for shares of Common Stock, Holders shall have the right to tender (or submit for exchange) shares of Series A Preferred Stock in such a manner so as to preserve the status of such shares as Series A Preferred Stock until immediately prior to such time as shares of Common Stock are to be purchased (or exchanged) pursuant to such offer, at which time that portion of the shares of Series A Preferred Stock so tendered which is convertible into the number of shares of Common Stock to be purchased (or exchanged) pursuant to such offer shall be deemed converted into the appropriate number of shares of Common Stock. Any shares of Series A Preferred Stock not so converted shall be returned to the Holder as Series A Preferred Stock.

(d) None of the foregoing provisions shall affect the right of a Holder to convert such Holder’s shares of Series A Preferred Stock into shares of Common Stock prior to the effective date of such business combination, subject to the terms of this Designation.

(e) In the event of any Recapitalization Event falling under this Section 4.3 , in such case, appropriate adjustment shall be made in the application of the provisions of this Section 4.3 with respect to the rights and interests of the Holders after such events to the end that the provisions of this Section 4.3 (including, but not limited to, adjustment of the Conversion Price in respect of any shares of Series A Preferred Stock then in effect and the number of shares issuable upon conversion of all such shares of Series A Preferred Stock) shall be applicable after that event as nearly reasonably as may be. The Corporation may not become a party to any such transaction unless its terms are consistent with the preceding requirements and such transaction is otherwise effected in accordance with this Designation.

4.6 Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment pursuant to this Section 4 , the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the reasonable written request at any time of any Holder, furnish or cause to be furnished to such Holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series A Preferred Stock.

Page 10

5. Voting .

5.1 Restricted Class Voting . In addition to any class or series voting rights provided to the holders of Series A Preferred Stock herein or required by law, if any, on any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders in lieu of meeting), each Holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such Holder are convertible as of the record date for determining shareholders entitled to vote on such matter, subject in all cases to the Maximum Percentage (i.e., in no event shall any Holder have the right to vote more voting shares in connection with the terms of this Section 5.1 than as equals its individual Maximum Percentage (when aggregated with all other voting shares beneficially owned by such Holder as of such applicable record date)), and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders’ meeting in accordance with the bylaws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted to Common Stock basis (after aggregating all fractional shares into which shares of Series A Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole share (with one-half being rounded upward). Except as provided by law or by the other provisions of the Certificate of Formation or this Designation, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class. In the event any Holder’s voting rights under this Section 5.1 are limited by the Maximum Percentage, the total number of voting shares eligible to be voted on the applicable matter shall similarly be decreased.

5.2 Amendments to This Designation . This Designation may be amended with the consent of a majority of the Board of Directors of the Corporation and a Simple Majority, and no amendment hereof shall require the vote or approval of any other stockholders of the Corporation, including, but not limited to Common Stock holders, except as otherwise required by law or required by any subsequent designation of preferred stock of the Corporation.

5.3 No Series Voting . Other than as provided herein or required by law, there shall be no series voting.

6. Protective Provisions .

6.1 Subject to the rights of series of preferred stock which may from time to time come into existence, so long as at least 20% of the shares of Series A Preferred Stock which are issued in connection with the Subscription Agreements (and any debt conversion agreements entered into by the Corporation whereby Series A Preferred Stock is issued in consideration for the conversion of debt of the Corporation), are outstanding, the Corporation shall not, without first obtaining the approval (at a meeting duly called or by written consent, as provided by law) of a Simple Majority:

(a) Increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series A Preferred Stock of the Corporation;

Page 11

(b) Adopt or authorize any new designation of any Preferred Stock or amend the Certificate of Formation of the Corporation in a manner which adversely affects the rights, preferences and privileges of the Series A Preferred Stock;

(c) Create (by reclassification or otherwise) any new series or shares of capital stock having rights, preferences, or privileges senior to or on a parity with the Series A Preferred Stock in connection with liquidation rights or dividends;

(d) Effect an exchange, or create a right of exchange, cancel, or create a right to cancel, of all or any part of the shares of another class of shares into shares of Series A Preferred Stock; or

(e) Alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the shares of such series.

7. Redemption . The Series A Preferred Stock shall not have any redemption rights.

8. Notices .

8.1 In General . Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return receipt requested) or delivered personally, by nationally recognized overnight carrier or by confirmed facsimile or email transmission, and shall be effective, unless otherwise provided herein, three days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally or by nationally recognized overnight carrier or confirmed facsimile transmission, in each case addressed to a party. The addresses for such communications are (i) if to the Corporation to, Attn: James Burns, 710 N. Post Oak Rd., Ste. 512, Houston, Texas 77024, Email: james.b@petroliaenergy.com), with a copy to (which shall not constitute notice), The Loev Law Firm, PC, Attn: David M. Loev, 6300 West Loop South, Suite 280, Bellaire, Texas 77401, Fax: (713) 524-4122, Email: dloev@loevlaw.com, and (ii) if to any Holder to the address set forth in the records of the Corporation or its Transfer Agent, as applicable, or such other address as may be designated in writing hereafter, in the same manner, by such person.

8.2 Notices of Record Date . In the event that the Corporation shall propose at any time:

(a) to declare any Distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus;

(b) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or

then, in connection with each such event, the Corporation shall send to the Holders of the Series A Preferred Stock at least ten Business Days’ prior written notice of the date on which a

Page 12

record shall be taken for such Distribution (and specifying the date on which the holders of Common Stock shall be entitled thereto and, if applicable, the amount and character of such Distribution) or for determining rights to vote in respect of the matters referred to in (b) and (c) above.

Such written notice shall be given by first class mail (or express courier), postage prepaid, addressed to the holders of Series A Preferred Stock at the address for each such Holder as shown on the books of the Corporation and shall be deemed given on the date such notice is mailed.

The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the vote or written consent of the holders of a Simple Majority, voting together as a single class.

9. No Preemptive Rights . No Holder shall have the right to repurchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such right may from time to time be set forth in a written agreement between the Corporation and such stockholder.

10. Reports . The Corporation shall mail to all holders of Series A Preferred Stock those reports, proxy statements and other materials that it mails to all of its holders of Common Stock.

11. Replacement Preferred Stock Certificates . In the event that any Holder notifies the Corporation that a Preferred Stock Certificate evidencing shares of Series A Preferred Stock has been lost, stolen, destroyed or mutilated, the Corporation shall issue a replacement stock certificate evidencing the Series A Preferred Stock identical in tenor and date (or if such certificate is being issued for shares not covered in a redemption or conversion, in the applicable tenor and date) to the original Preferred Stock Certificate evidencing the Series A Preferred Stock, provided that the Holder executes and delivers to the Corporation and/or its Transfer Agent, as applicable, an affidavit of lost stock certificate and an agreement reasonably satisfactory to the Corporation and its Transfer Agent to indemnify the Corporation from any loss incurred by it in connection with such Series A Preferred Stock certificate, and provides the Corporation and/or its Transfer Agent such other information, documents and if applicable, bonds and indemnities as the Corporation or its Transfer Agent customarily requires for reissuances of stock certificates (collectively the “ Lost Certificate Materials ”); provided, however, the Corporation shall not be obligated to re-issue replacement stock certificates if the Holder contemporaneously requests the Corporation to convert or redeem the full number of shares evidenced by such lost, stolen, destroyed or mutilated certificate.

12. No Other Rights or Privileges . Except as specifically set forth herein, the Holders of the Series A Preferred Stock shall have no other rights, privileges or preferences with respect to the Series A Preferred Stock.

13. Construction . When used in this Designation, unless a contrary intention appears: (i) a term has the meaning assigned to it; (ii) “ or ” is not exclusive; (iii) “ including ” means including without limitation; (iv) words in the singular include the plural and words in the

Page 13

plural include the singular, and words importing the masculine gender include the feminine and neuter genders; (v) any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; (vi) the words “ hereof ”, “ herein ” and “ hereunder ” and words of similar import when used in this Designation shall refer to this Designation as a whole and not to any particular provision hereof; (vii) references contained herein to Article, Section, Schedule and Exhibit, as applicable, are references to Articles, Sections, Schedules and Exhibits in this Designation unless otherwise specified; (viii) references to “ dollars ”, “ Dollars ” or “ $ ” in this Designation shall mean United States dollars; (ix) reference to a particular statute, regulation or law means such statute, regulation or law as amended or otherwise modified from time to time; (x) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (xi) unless otherwise stated in this Designation, in the computation of a period of time from a specified date to a later specified date, the word “ from ” means “ from and including ” and the words “ to ” and “ until ” each mean “ to but excluding ”; (xii) references to “ days ” shall mean calendar days; and (xiii) the paragraph and section headings contained in this Designation are for convenience only, and shall in no manner affect the interpretation of any of the provisions of this Designation.

14. Miscellaneous .

14.1 Further Assurances . Each Holder hereby covenants that, in consideration for receiving shares of Series A Preferred Stock, that he, she or it will, whenever and as reasonably requested by the Corporation, do, execute, acknowledge and deliver any and all such other and further acts, deeds, confirmations, agreements and documents as the Corporation or its Transfer Agent may reasonably require in order to complete, insure and perfect any of the terms, conditions or provisions of this Designation.

14.2 Technical, Corrective, Administrative or Similar Changes . The Corporation may, by any means authorized by law and without any vote of the Holders of shares of the Series A Preferred Stock, make technical, corrective, administrative or similar changes in this Designation that do not, individually or in the aggregate, adversely affect the rights or preferences of the Holders of shares of the Series A Preferred Stock.

14.3 Waiver/Amendment . Notwithstanding any provision in this Designation to the contrary, any provision contained herein and any right of the holders of Series A Preferred Stock granted hereunder may be waived and/or amended as to all shares of Series A Preferred Stock (and the Holders thereof) upon the written consent of a Simple Majority, unless a higher percentage is required by applicable law, in which case the written consent of the Holders of not less than such higher percentage of shares of Series A Preferred Stock shall be required.

14.4 Interpretation . Whenever possible, each provision of this Designation shall be interpreted in a manner as to be effective and valid under applicable law and public policy. If any provision set forth herein is held to be invalid, unlawful or incapable of being enforced by

Page 14

reason of any rule of law or public policy, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions of this Designation. No provision herein set forth shall be deemed dependent upon any other provision unless so expressed herein. If a court of competent jurisdiction should determine that a provision of this Designation would be valid or enforceable if a period of time were extended or shortened, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.

15. Definitions . In addition to other terms defined throughout this Designation, the following terms have the following meanings when used herein:

15.1 “ Automatic Conversion Date ” means the first to occur of (i) the Holders of a majority of the shares of Series A Preferred Stock then outstanding consenting to an Automatic Conversion; (ii) the closing of Qualified Public Offering; (iii) the five year anniversary of the date that this Designation is filed with the Secretary of State of Texas; and (iv) the date that the average closing price per share of the Corporation’s Common Stock as reported on a national securities exchange, NASDAQ, the OTCQX, the OTCQB, the OTCQX or the OTC Pink market, equals or exceeds $0.28 per share (subject to adjustment in connection with any Recapitalization) during any period of thirty (30) consecutive trading days.

15.2 “ Business Day ” means any day except Saturday, Sunday or any day on which banks are authorized by law to be closed in the City of Houston, Texas.

15.3 “ Common Stock ” shall mean the common stock, $0.001 par value per share of the Corporation.

15.4 “ Conversion Price ” shall equal $0.14 per share, subject to adjustment in connection with any Recapitalization.

15.5 “ Deemed Liquidation Event ” shall mean each of the following events, unless the holders of at least a Simple Majority elect otherwise by written notice sent to the Corporation at least 10 days prior to the effective date of any such event:

(a) a merger or consolidation in which

(i) the Corporation is a constituent party; or

(ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

(b) except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of

Page 15

another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

(c) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all of the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly-owned subsidiary of the Corporation.

15.6 “ Distribution ” shall mean the transfer of cash or other property without consideration whether by way of dividend or otherwise (other than dividends on Common Stock payable in Common Stock), or the purchase or redemption of shares of the Corporation for cash or property other than repurchases of Common Stock (or securities convertible into Common Stock) approved by the Corporation’s Board of Directors.

15.7 “ Dividend Default ” shall mean the failure of the Corporation to pay any Dividends when due, subject to any cure provisions described herein, if any.

15.8 “ Dividend Rate ” shall mean an annual rate of nine percent (9%) of the Original Issue Price.

15.9 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended (and any successor thereto) and the rules and regulations promulgated thereunder.

15.10 “ Filing Date ” means the date that this Designation is filed with the Secretary of State of Texas.

15.11 “ Holder ” shall mean the person or entity in which the Series A Preferred Stock is registered on the books of the Corporation, which shall initially be the person or entity which such Series A Preferred Stock is issued to, and shall thereafter be permitted and legal assigns which the Corporation is notified of by the Holder and which the Holder has provided a valid legal opinion in connection therewith to the Corporation and to whom such Preferred Stock Shares are legally transferred.

15.12 “ Junior Securities ” shall mean each other class of capital stock or series of preferred stock of the Corporation other than the Common Stock established after the Filing Date, the terms of which do not expressly provide that such class or series ranks senior to or on parity with the Series A Preferred upon the liquidation, winding-up or dissolution of the Corporation.

15.13 “ Liquidation Event ” means any liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event.

15.14 “ Liquidation Preference ” has the meaning given to it in Section 2 .

Page 16

15.15 “ Original Issue Date ” means the date on which each applicable share of Series A Preferred Stock is originally issued pursuant to (i) the Subscription Agreements or (ii) any debt conversion agreements entered into by the Corporation whereby Series A Preferred Stock is issued in consideration for the conversion of debt of the Corporation.

15.16 “ Original Issue Price ” shall mean $10.00 per share (as appropriately adjusted for any Recapitalizations).

15.17 “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

15.18 “ Preferred Stock Certificates ” means the stock certificate(s) issued by the Corporation representing the applicable Series A Preferred Stock shares.

15.19 “ Pro Rata Amount ” means, with respect to any Holder, a fraction, the numerator of which is equal to the number of shares of Series A Preferred Stock held of record by such Holder, and the denominator of which is equal to the aggregate number of outstanding shares of Series A Preferred Stock.

15.20 “ Qualified Public Offering ” means a registered public offering of the Corporation’s Common Stock, but only if the price per share is at least $0.30 (subject to adjustment in connection with any Recapitalization) and the gross proceeds of the offering to the Corporation equal or exceed $10 million.

15.21 “ Recapitalization ” shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event described in Sections 4.2 through 4.4 .

15.22 “ Restricted Shares ” means shares of the Corporation’s Common Stock which are restricted from being transferred by the Holder thereof unless the transfer is effected in compliance with the Securities Act and applicable state securities laws (including investment suitability standards, which shares shall bear the following restrictive legend (or one substantially similar)):

The securities represented by this certificate have not been registered under the Securities Act of 1933 or any state securities act. The securities have been acquired for investment and may not be sold, transferred, pledged or hypothecated unless (i) they shall have been registered under the Securities Act of 1933 and any applicable state securities act, or (ii) the corporation shall have been furnished with an opinion of counsel, satisfactory to counsel for the corporation, that registration is not required under any such acts .

15.23 “ SEC ” means the Securities and Exchange Commission.

15.24 “ Securities Act ” means the Securities Act of 1933, as amended (and any successor thereto) and the rules and regulations promulgated thereunder.

Page 17

15.25 “ Senior Securities ” means (a) the Corporation’s capital leases as may be in place from time to time; and (b) any other senior debt or other security holders of the Corporation, including certain banks and/or institutions, which hold security interests over the Corporation’s assets as of the Filing Date, or which the Corporation may agree in the future to provide priority security interests to, which shall require the approval of a Simple Majority, which shall not be unreasonably withheld.

15.26 “ Simple Majority ” means the holders of at least a majority of the issued and outstanding shares of Series A Preferred Stock, voting on an as-converted basis.

15.27 “ Subscription Agreements ” mean those certain Preferred Stock Subsription Agreements entered into between the Corporation and the subscribers in the Corporation’s Apirl 2017 offering of up to $2 million (provided sucn amount may be increased in the sole discretion of the Corporation without notice) of Series A Preferred Stock.

15.28 “ Transfer Agent ” means initially, the Corporation, which will be serving as its own transfer agent for the Series A Preferred Stock, but at the option of the Corporation from time to time, may also mean any transfer agent which the Corporation may use for its Series A Preferred Stock.

——————————————————————————

NOW THEREFORE BE IT RESOLVED , that the Designation is hereby approved, affirmed, confirmed, and ratified; and it is further

RESOLVED , that each officer of the Corporation be and hereby is authorized, empowered and directed to execute and deliver, in the name of and on behalf of the Corporation, any and all documents, and to perform any and all acts necessary to reflect the Board of Directors approval and ratification of the resolutions set forth above; and it is further

RESOLVED , that in addition to and without limiting the foregoing, each officer of the Corporation and the Corporation’s attorney be and hereby is authorized to take, or cause to be taken, such further action, and to execute and deliver, or cause to be delivered, for and in the name and on behalf of the Corporation, all such instruments and documents as he may deem appropriate in order to effect the purpose or intent of the foregoing resolutions (as conclusively evidenced by the taking of such action or the execution and delivery of such instruments, as the case may be) and all action heretofore taken by such officer in connection with the subject of the foregoing recitals and resolutions be, and it hereby is approved, ratified and confirmed in all respects as the act and deed of the Corporation; and it is further

RESOLVED , that this Designation may be executed in several counterparts, each of which is an original; that it shall not be necessary in making proof of this Designation or any counterpart hereof to produce or account for any of the other.

[Remainder of page left intentionally blank. Signature page follows.]

Page 18

IN WITNESS WHEREOF, the Board of Directors of the Corporation has unanimously approved and caused this “ Certificate of Designation of Petrolia Energy Corporation Establishing the Designations, Preferences, Limitations and Relative Rights of Its Series A Convertible Preferred Stock ” to be duly executed and approved this 28th day of April 2017.

DIRECTORS:

______________________________

Leo Womack

Chairman and Director

______________________________

Zel C. Khan

Director

______________________________

Lee Lytton
Director

______________________________

Joel Oppenheim

Director

______________________________

Quinten Beasley
Director

Page 19

Exhibit A

NOTICE OF CONVERSION

This Notice of Conversion is executed by the undersigned holder (the “ Holder ”) in connection with the conversion of shares of the Series A Convertible Preferred Stock of Petrolia Energy Corporation, a Texas corporation (the “ Corporation ”), pursuant to the terms and conditions of that certain Certificate of Designations of Petrolia Energy Corporation, Establishing the Designations, Preferences, Limitations and Relative Rights of its Series A Convertible Preferred Stock (the “ Designation ”), approved by the Board of Directors of the Corporation on April 28, 2017. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Designation.

Conversion : In accordance with and pursuant to such Designation, the Holder hereby elects to convert the number of shares of Series A Convertible Preferred Stock indicated below into shares of Common Stock of the Corporation as of the date specified below.

Date of Conversion:

Number of Preferred Shares Held by Holder:

Prior to Conversion:

Amount Being Converted Hereby:

Common Stock Shares Due:________________

Preferred Shares Held After Conversion:

Beneficial Maximum Percentage : The Holder represents that, after giving effect to the conversion provided for in this Notice of Conversion, the Holder will not beneficially own a number of shares of Common Stock of the Corporation which exceeds the Maximum Percentage as determined pursuant to the provisions of the Designation.

Delivery of Shares : Pursuant to this Notice of Conversion, the Corporation shall deliver the applicable number of shares of Common Stock (the “ Shares ”) issuable in accordance with the terms of the Designation as set forth below. If Shares are to be issued in the name of a person other than the Holder, the Holder will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Corporation in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any. The Holder acknowledges and confirms that the Shares issued pursuant to this Notice of Conversion will, to the extent not previously registered by the Corporation under the Securities Act, be Restricted Shares, unless the Shares are covered by a valid and effective registration under the Securities Act or this Notice of Conversion includes a valid opinion from an attorney stating that such Shares can be issued free of restrictive legend, which shall be determined by the Corporation in its sole discretion.

Page 20

If stock certificates are to be issued, in the following name and to the following address:	If DWAC is permissible, to the following brokerage account:
__________________________________ __________________________________ __________________________________ __________________________________ __________________________________	Broker: ____________________________________ DTC No.: ___________________________________ Acct. Name: _________________________________ For Further Credit (if applicable): ____________________________________

Authority : Any individual executing this Notice of Conversion on behalf of an entity has authority to act on behalf of such entity and has been duly and properly authorized to sign this Notice of Conversion on behalf of such entity.

_______________________________________

(Print Name of Holder)

By/Sign: _______________________________

Print Name: ____________________________

Print Title: _____________________________

EXHIBIT 10.3

Petrolia Energy Corporation

Best Efforts, No Minimum Offering

Private Offering to Accredited Investors of

Series A Convertible 9% Preferred Stock
April 11, 2017

Houston, Texas

The following information is provided to you as an accredited investor who has indicated an interest in investing in these securities. The Officers and Directors of Petrolia Energy Corporation (the “Company” or “Petrolia”) are available to answer questions and provide additional information you may request.

The Company operates and owns a 100% Working Interest in three (3) oil fields located across three States: 1) a 660 acre lease in Milam County, Texas (the Noack Oil Lease); 2) a 4,800 acre lease in Chaves County, New Mexico (Twin Lakes San Andres Lease or TLSAU); and 3) a 2,600 acre lease in Creek County, Oklahoma (Slick Unit Dutcher Sands or SUDS). In the past 24 months, Petrolia’s proven oil reserves have grown from approximately 200,000 barrels of proven 1P oil reserves to an estimated 4 million barrels of proven 1P oil reserves from these oil leases combined (ref. 2015 Independent Year-End Reserve Report).

As Petrolia now officially owns a 100% Working Interest in each of the 3 leases, we are ready to execute a production development plan at the field level for each lease. Such plans are available for review at Petrolia’s Headquarters upon request and subject to potential investors entering into customary non-disclosure and confidentiality agreements. In addition, Management has been working diligently on another strategic acquisition in California which, if successfully closed, will allow the Company to operate in California.

Funds from this offering are planned to be used to:

a) The Development Plan for TLSAU requires $500,000 to workover 28 wells and initiate a waterflood in certain areas of the field. Target production is 150 BOPD upon completion of this phase.

b) The Development Plan for SUDS requires $500,000 to drill 2 vertical infill wells and workover 26 current wells. Target production is 150 BOPD upon completion of this phase.

c) The Development Plan for the Noack Oil Lease requires $100,000 to drill 1 vertical infill well and workover the 14 existing wells. Target production upon completion of this phase is 50 BOPD.

d) Reduce outstanding liabilities and provide working capital. Approximately $900,000.

1 | Page

PROJECTS	USE OF PROCEEDS
TLSAU Development Plan (Phase 1)	$	500,000.00
SUDS Development Plan (Phase II)	$	500,000.00
Noack Development Plan (Phase I)	$	100,000.00
Working Capital and Offering fees	$	900,000.00

While these are the planned use of funds as of the offering date we continue to evaluate other non-dilutive opportunities to fund some of the drilling activities shown above. The Company reserves the right to change the allocation of funds as it deems appropriate based on subsequent events as noted. We believe that meeting these goals will better position the Company to generate revenues and work towards being profitable in 2017.

Stock Offering Terms

Issuer:	Petrolia Energy Corporation., a Texas corporation (the “Company”) having an address of 710 N Post Oak Road, Suite 512, Houston, Texas 77024.

Amount of Financing:	$2,000,000.00 (two million dollars) unless increased by the Company in its discretion, without notice to prior investors.

Proposed Offering:	The Series A Preferred Stock will be sold in a private placement exempt from registration pursuant to Section 4(a)(2) and/or Rule 506 of the Securities Act of 1933, as amended (the “Securities Act”), to only ‘accredited investors’ as such term is defined in the Securities Act.

Type of Securities:	Shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), initially convertible into shares of common stock of the Company (“Common Stock”) on a 71.428571-for-one basis (i.e., the equivalent number of shares as would be due, based on the Original Purchase Price, if converted into common stock based on the market value of the Company’s common stock on April 11, 2017, which trading value was $0.14 per share).

Price Per Share:	$10.00 (ten dollars) (the “Original Purchase Price”).
Resulting Capitalization:	Existing Outstanding Common Stock Warrant Pool Series A Preferred Stock (after conversion) -------------------------------------------------------- Total Fully Diluted Common Stock Post-Offering	79,034,505 17,035,527 14,285,714 -------------- 110,355,746	71.6% 15.4% 13.0% -------- 100.0	%

Eligible Investors:	Accredited investors located in New York, Texas, California and Oklahoma.

2 | Page

Dividends:	The holders of Series A Preferred Stock shall be entitled to receive non-cumulative dividends in preference to any dividend paid on the Common Stock at the rate of 9% of the Series A Preferred Stock Original Purchase Price per annum, paid in cash on a semi-annual basis. The Series A Preferred Stock will also participate pro-rata, on an as-converted basis, in cash dividends paid on the Common Stock.

Liquidation Preference:	In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Stock shall be entitled to receive, in preference to the holders of Common Stock, an amount equal to the Original Purchase Price, together with any declared but unpaid dividends. The remaining assets will be distributed ratably among the holders of Common Stock.

Optional Conversion:	The holders of the Series A Preferred Stock shall have the right to convert the Series A Preferred Stock and accrued dividends thereon, at the option of the holder, at any time, into shares of Common Stock of the Company.

Automatic Conversion:	The Series A Preferred Stock and all accrued and unpaid dividends thereon shall be automatically converted into Common Stock, at the then applicable conversion price, upon the earliest to occur of (i) the holders of a majority of the Series A Preferred Stock then outstanding consenting to such conversion; (ii) the closing of a registered public offering of the Company’s Common Stock, but only if the price per share is at least $0.30 (subject to anti-dilution, recapitalization, and reorganization adjustments) and the gross proceeds of the offering to the Company equal or exceed $10 million (a “Qualified Public Offering”); (iii) the five year anniversary of the closing date; or (iv) the average closing price per share of the Company’s Common Stock as reported on a national securities exchange, NASDAQ, the OTCQX, the OTCQB, the OTCQX or the OTC Pink market, equals or exceeds $0.28 per share (as adjusted for any recapitalizations) during any period of thirty (30) consecutive trading days.

Anti-Dilution Protection:	The conversion price of the Series A Preferred Stock will be subject to proportional adjustment for stock splits, stock dividends, recapitalizations, and the like.

Voting Rights:	The Series A Preferred Stock will vote together with the Common Stock and not as a separate class except as specifically provided herein under “Protective Provisions” or as otherwise required by law. Each share of Series A Preferred Stock shall have a number of votes equal to the number of shares of Common Stock then issuable upon the conversion of such share of Series A Preferred Stock, subject to the Beneficial Ownership Limitation described below.

3 | Page

Protective Provisions:	As long as at least 20% of the original shares of the Series A Preferred Stock issued remain outstanding, consent of the holders of a majority of the Series A Preferred Stock then outstanding shall be required for any action which (i) increases or decreases the authorized number of shares of Series A Preferred Stock; or (ii) creates (by reclassification or otherwise) any new series or shares of capital stock having rights, preferences, or privileges senior to or on a parity with the Series A Preferred Stock.

Piggyback Registration Rights:	The Company covenants and agrees that if, at any time prior to the Registration Rights Expiration Date (defined below), it proposes to file a registration statement with respect to any class of equity or equity-related securities (other than in connection with an offering to the Company’s employees or in connection with an acquisition, merger or similar transaction) under the Securities Act in a primary registration on behalf of the Company and/or in a secondary registration on behalf of holders of such securities, and the registration form to be used may be used for the issuance or resale of the shares of common stock issuable upon conversion of the Series A Preferred Stock (collectively, the “Registrable Securities”), the Company will either include the Registrable Securities in such registration statement or give prompt written notice to the holders of its intention to file such registration statement and will offer to include in such registration statement, such number of Registrable Securities with respect to which the Company has received written requests for inclusion therein within twenty (20) days after the giving of notice by the Company (the “Piggyback Registration Rights”). The holders shall also be required to provide the Company customary and reasonable representations and confirmations regarding the Registrable Securities held by the holders, information relating to the beneficial ownership of other securities of the Company held by such holders, information regarding the persons with voting and dispositive control over the holder and such other information as the Company or its legal counsel may reasonably request. The Company shall not be required to include Registrable Securities in a registration statement relating solely to an offering by the Company of securities for its own account if the managing underwriter or placement agent shall have advised the Company in writing that the inclusion of such securities will have a material adverse effect upon the ability of the Company to sell securities for its own account, and provided further that the holders are not treated less favorably than others seeking to have their securities included in such registration statement. Notwithstanding the obligations set forth above, if any Securities and Exchange Commission guidance sets forth a limitation on the number of securities permitted to be registered on a particular registration statement as a secondary offering, the number of Registrable Securities to be registered on such registration statement will be reduced pro rata between the holders (or other parties) whose securities are included in such registration statement. The “Registration Rights Expiration Date” is the earlier of (a) two years from the closing date; and (b) the date that the investors are eligible to sell the Registrable Securities under Rule 144.

4 | Page

Ownership Limitation:	The Series A Preferred Stock will contain a blocker prohibiting the conversion of the Series A Preferred Stock into Common Stock of the Company, if upon such conversion/exercise the holder thereof would beneficially own more than 4.99% of the Company’s then outstanding Common Stock, provided such limitation shall not apply in the event of an automatic conversion of the Series A Preferred Stock (the “Beneficial Ownership Limitation”). The Beneficial Ownership Limitation shall also limit the voting rights of any holders of the Series A Preferred Stock. The Beneficial Ownership Limitation may be waived by any holder with 61 days prior written notice to the Company.

Recapitalizations:	If at any time while the Series A Preferred Stock is outstanding, there shall occur any capital reorganization, recapitalization, reclassification, share exchange, restructuring, consolidation, combination or merger (subject to certain standard exceptions) involving the Company in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for shares of stock or other securities or property (including cash) of the Company or otherwise, a provision shall be made so that each Series A Preferred Stock holder will be entitled to receive upon conversion of the shares of Series A Preferred Stock held by such holder the kind and number of shares of stock or other securities or property (including cash or any combination thereof) of the Company or otherwise, to which a holder holding the number of shares of Common Stock into which the shares of Series A Preferred Stock held by such Series A Preferred Stock holder are convertible immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled upon such event.

Expenses:	Irrespective of whether any closing or sale is effected, the Company and the investors shall each bear their own legal and other expenses with respect to the transaction.

Other Provisions:	The purchase agreement/subscription agreement shall include standard and customary representations and warranties of the Company and the investors, and the other agreements prepared to implement this financing shall contain other standard and customary provisions. The Company reserves the right to terminate the offering at any time and to pay investment banking fees and other appropriate finder’s fees. The Company reserves the right to issue additional Preferred stock to redeem existing indebtedness.

5 | Page

Risk factors

The Company has filed various reports with the Securities and Exchange Commission that are available online at www.sec.gov for any potential investor to read that discloses substantial risk factors involved with the Company and any security it may issue.

All potential investors are encouraged to read the reports and risk factors and ask any questions that may arise.

Operating plan

As disclosed in the Report described above, the Company owns and operates three fields in Texas, Oklahoma, and New Mexico. These fields encompass 8,060 acres and have 190 existing drilled wells (both producing wells and disposal wells) in place with all necessary infrastructure including gathering lines and holding tanks. The development plan for all 3 oil leases is to drill new wells and workover the old wells with the combination of new production technology available at low cost with sustained production above 500 BOPD which the Company believes will be sufficient for the Company to be self-sustaining moving forward. As disclosed, the Company plans on using some of the proceeds of this offering to acquire a 65% working interest in the Midway-Sunset leases in Kern County, California. This is a strategic area and Petrolia’s management is experienced in operating in this area with 13 years of successful operating history.

The Company plans on up-listing its shares of common stock which are currently being traded on the OTCQB market to the OTCQX market during the second quarter of 2017, provided that the Company meets the requirements to up list. With a firm footing established, the Company intends to raise additional capital through future offerings and financings, to take advantage of the current low entry point in the market. By avoiding the pitfalls of overleveraging and utilizing the skills evidenced by the management team, led by Zel C. Khan, the Company believes it can successfully build significant shareholder value. The management team has prepared financial forecasts relating to the three fields currently being operated and the field being acquired. These forecasts are available for inspection as are all the geological reports and related information upon execution of a confidentiality agreement.

(Remainder of page intentionally left blank)

6 | Page

The undersigned investor hereby acknowledges that he has read this document and understands the risks associated with any investment in this offering.

Signature Date______________________________

This summary is not an offer to sell or a solicitation of any offer to buy any securities of the Company, including, but not limited to, the Series A Preferred Stock, nor shall there be any sale of securities in any state or jurisdiction in which such solicitation or sale would be unlawful prior to registration or qualification of the securities under the laws of any such state or jurisdiction.

This document is intended solely as a basis for further discussion and is not intended to be and does not constitute a legally binding obligation. No legally binding obligations will be created, implied, or inferred until a document in final form is executed and delivered by all parties. Without limiting the generality of the foregoing, it is the parties intent that, until that event, no agreement shall exist among them and there shall be no obligations whatsoever based on such things as parol evidence, extended negotiations, “handshakes,” oral understandings, or courses of conduct (including reliance and changes of position).

The foregoing disclosures, as well as information obtained from the Company during the investor’s due diligence investigation, contain various forward-looking statements that are based on our beliefs and assumptions made by and information currently available to us. Any statement that does not contain a historical fact may be deemed to be a forward-looking statement. The words “intend,” “predict,” “potential,” “continue,” “believe,” “expect,” “anticipate,” “estimate,” the negative of such terms, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Such statements may include statements regarding, and are subject to, certain risks, uncertainties, and assumptions that could cause actual results to differ materially from projections or estimates. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. Investors should not place undue reliance on forward-looking statements, all of which speak only as of the date made. We undertake no obligation to update or correct forward-looking statements, except as otherwise provided by law.

PREFERRED STOCK SUBSCRIPTION AGREEMENT

PETROLIA ENERGY CORPORATION

(a Texas corporation)

Petrolia Energy Corporation, a Texas corporation (the “ Company ”), is offering for purchase to a limited number of qualified investors up to an aggregate of $2,000,000.00 (the “ Maximum Amount ”) in shares of Series A Convertible 9% Preferred Stock of the Company (the “ Shares ” or the “ Securities ”) (the “ Offering ”) for $10.00 per Share. The Shares are being offered on a “ best efforts, no minimum ” basis to a limited number of accredited investors and non-“ U.S. Persons ”. The Offering is made in reliance upon an exemption from registration under the federal securities laws provided by Rule 506(b) of Regulation D and Regulation S of the Securities Act of 1933, as amended. The minimum investment is $25,000.00, although the Company may, in its discretion, accept subscriptions for a lesser amount. The Company reserves the right to reject orders for the purchase of Shares in whole or in part, and if a subscription is rejected the subscriber’s funds will be returned without interest the next business day after rejection. There is no minimum amount required for an initial closing, and all proceeds will be available for immediate use by the Company. Additionally, the Company, in its sole discretion, may waive or increase the Maximum Amount, without notice to prospective investors or subscribers in the Offering.

INSTRUCTIONS TO INVESTORS

Persons wishing to subscribe for Shares in the Company must perform the following:

Thoroughly read and review (a) the Preferred Stock Subscription Agreement attached hereto; (b) the term sheet, attached hereto as Exhibit A ; (c) the draft designation of the rights and preferences of the Series A Convertible 9% Preferred Stock, attached hereto as Exhibit B ; and (c) the Information for Residents of Certain States, attached hereto as Exhibit C .

2.	Complete page 2, being certain to indicate, your name, entity type, the number of Shares you will purchase and the total purchase price.

3.	Complete and execute pages 13 to 18 (as applicable), and 19 to 26, as applicable. These pages must be fully completed as applicable and signed.

4.	Wire funds to the Company:

Petrolia Energy Corporation

Origin Bank

500 S. Service Road E

Ruston , La 71270__

Account # 0020770613

ABA # 111102758

Swift Code: CTUUUS44_________]

Or mail funds to the Company at the following address:

Petrolia Energy Corporation

Attn: Paul Deputy

710 N. Post Oak Rd., Ste. 512, Houston, Texas 77024

5.	FedEx original signature pages to:

Petrolia Energy Corporation

Attn: Paul Deputy

710 N. Post Oak Rd., Ste. 512, Houston, Texas 77024

Note to Partnership, Corporate and Trust Subscribers :

—

Partnerships provide a copy of the partnership agreement, as amended to date, showing the date of formation and giving evidence of the authority of the person(s) signing the subscription documentation to do so.

—	Corporations provide a copy and the filing date of the articles of incorporation and bylaws, as amended to date, and a corporate resolution authorizing the purchase of the Shares and giving authority to the person(s) signing the subscription documents to do so.

—	Limited Liability Companies provide a copy and the filing date of the articles of organization and operating agreement, as amended to date, and a resolution authorizing the purchase of the Shares and giving authority to the person(s) signing the subscription documents to do so.

—	Trusts provide a copy of the trust agreement as amended to date, showing the date of formation and giving evidence of the authority of the person(s) signing the subscription documentation to do so.

PREFERRED STOCK SUBSCRIPTION AGREEMENT

PETROLIA ENERGY CORPORATION

Petrolia Energy Corporation

Attn: Paul Deputy

710 N. Post Oak Rd., Ste. 512,

Houston, Texas 77024

A. Subscription . This Agreement has been executed by , a/an
, residing and/or having a
  (Individual/Corporation/LLC/Trust/Partnership)
principal place of business in    ( “ Purchaser ”, or “ Subscriber ”)
                        (Country/State and City)

in connection with the subscription to purchase ____________ shares of the Series A Convertible 9% Preferred Stock (the “ Shares ” or the “ Securities ”) of Petrolia Energy Corporation, a Texas corporation (the “ Company ”). This Preferred Stock Subscription Agreement is referred to herein as the “ Agreement ”. The sale of the Shares is part of an offering of an aggregate of $2,000,000.00 (the “ Maximum Amount ”), in Shares to multiple investors, as part of a “ best efforts, no minimum ” offering, defined herein as the “ Offering ”) by the Company. The minimum investment is $25,000.00, although the Company may, in its discretion, accept subscriptions for a lesser amount. The Company reserves the right to reject orders for the purchase of Shares in whole or in part, and if a subscription is rejected the subscriber’s funds will be returned without interest the next business day after rejection. There is no amount required for an initial closing, and all proceeds will be available for immediate use by the Company. The Shares shall be purchased for $10.00 per Share (the “ Purchase Price ”). The Company, in its sole discretion, may waive or increase the Maximum Amount, without notice to prospective investors or subscribers in the Offering.

When the context in which words are used in this Agreement indicates that such is the intent, singular words shall include the plural, and vice versa, and masculine words shall include the feminine and neuter genders, and vice versa. Any reference to a person shall include an individual, trust, estate, or any incorporated or unincorporated organization, including general or limited partnerships, limited liability companies, corporations, joint ventures and cooperatives, and all heirs, executors, administrators, legal representatives, successors and assigns of such person where permitted or required by the context. Captions are inserted for convenience only, are not a part of this Agreement, and shall not be used in the interpretation of this Agreement.

B. Acceptance of Subscription . It is understood and agreed that the Company shall have the right to accept or reject this subscription (the “ Subscription ”), in whole or in part, and that the same shall be deemed to be accepted by the Company only when it is signed by the Company.

C. Representations and Warranties of Subscriber . Subscriber hereby represents and warrants to the Company as follows:

Page 1 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

i) Subscriber has such knowledge and experience in financial and business matters that Subscriber is capable of evaluating the merits and risks of an investment in the Company and the suitability of the Securities as an investment for Subscriber;

ii)

(1) Subscriber is an Accredited Investor; “ Accredited Investor ” means:

(A) an individual who has a net worth (either individually or jointly with spouse) in excess of $1,000,000 (excluding the individual’s principal residence); or an individual who had an individual income (NOT including joint income with spouse) in excess of $200,000 in each of the two most recent tax years and reasonably expects individual income in excess of $200,000 during the current tax year; or an individual who had an income (including joint income with spouse) in excess of $300,000 in each of the two most recent tax years and reasonably expects individual income in excess of $300,000 during the current tax year. “ Income ” for this purpose is computed by adding the following items to adjusted gross income for federal income tax purposes: (a) the amount of any tax-exempt interest income received; (b) the amount of losses claimed as a limited partner in a limited partnership; (c) any deduction claimed for depletion; (d) deductions for alimony paid; (e) deductible amounts contributed to an IRA or Keogh retirement plan; and (f) any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income pursuant to the provisions of Section 1202 of the Code; or

(B) an entity which is one of the following, not formed solely for the purpose of subscribing for the Securities:

(a)

A bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “ Act, ” the “ Securities Act ” or the “ 1933 Act ”) or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act of 1933, whether acting in an individual or a fiduciary capacity;

(b)

An insurance company, as defined in Section 2(13) of the Securities Act of 1933;

(c)

An investment company registered under the Investment Company Act of 1940;

(d)

A business development company, as defined in Section 2(a) (48) of the Investment Company Act of 1940;

(e)

A small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;

Page 2 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

(f)

An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 and the investment is made by Subscriber as a plan fiduciary, as defined in Section 3(21) of such Act, and Subscriber is a bank, insurance company or a registered investment advisor, or has total assets in excess of $5 million;

(g)

A private business development company as defined in Section 202(a) (22) of the Investment Advisers Act of 1940;

(h)

An organization described in Section 501 (c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring Securities, with total assets in excess of $5 million;

(i)

An irrevocable trust with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring Securities, whose purchase is directed by a person with such knowledge and experience in financial and business matters that (s)he is capable of evaluating the merits and risks of the prospective investment;

(j)

A revocable trust that is revocable by its grantors, each of whose grantors is an accredited investor, qualifies as an accredited investor for the purposes of the subscription (each grantor should complete the individual accredited information questionnaire, and describe the fact that they are grantors of the trust on such individual questionnaire below); or

(k)

An entity in which all of the equity owners are Accredited Investors; or

(2) a non “ U.S. person ” as such term is defined under Regulation S as promulgated by the Securities and Exchange Commission (“ SEC ”) under authority of the Securities Act; resides outside of the United States; was not solicited for an investment in this Offering by the Company or any person or entity acting on its behalf while he, she or it, was located within the United States; has not entered into this Agreement inside the United States; and certifies under penalty of perjury that it is neither a citizen nor a resident of the United States and the following definitions and acknowledgements are applicable to the current purchase.

(A) A “ U.S. person ” is defined by Regulation S of the Securities Act as:

•

Any natural person resident in the United States;

•

Any partnership or corporation organized or incorporated under the laws of the United States;

Page 3 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

•

Any estate of which any executor or administrator is a U.S. person;

•

Any trust of which any trustee is a U.S. person;

•

Any agency or branch of a foreign entity located in the United States;

•

Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;

•

Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and

•

Any partnership or corporation if organized or incorporated under the laws of any foreign jurisdiction; and formed by a U.S. person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts;

(B) At the time the buy order for the Securities was originated, Subscriber was outside the United States;

(C) Subscriber is purchasing the Securities for his, her or its own account and not on behalf of any U.S. person, and the sale has not been pre-arranged with a purchaser in the United States;

(D) All offering documents received by the Subscriber include statements to the affect that the securities have not been registered under the 1933 Act and may not be offered or sold in the United States or to U.S. persons unless the securities are registered under the 1933 Act or an exemption from the registration requirement is available;

(E) Subscriber has been informed that the Securities will not be registered in the United States under the 1933 Act, and are being offered and sold pursuant to this Agreement in reliance on an exemption from the registration requirements of the 1933 Act for non-public offerings;

(F) The “ United States ” means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia; and

(G) The Subscriber will comply with all of the requirements of Regulation S of the 1933 Act.

Page 4 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

iii) The Subscriber is acquiring the Securities for his, her or its own account for long-term investment and not with a view toward resale, fractionalization or division, or distribution thereof, and he, she or it does not presently have any reason to anticipate any change in his, her or its circumstances, financial or otherwise, or particular occasion or event which would necessitate or require his, her or its sale or distribution of the Securities. No one other than the Subscriber has any beneficial interest in said securities. No person has made to the Subscriber any written or oral representations: (x) that any person will resell or repurchase any of the Securities; (y) that any person will refund the purchase price of any of the Securities, or (z) as to the future price or value of any of the Securities;

iv) Subscriber has received no representations or warranties from the Company, or its affiliates, employees or agents regarding the Securities or suitability of an investment in the Securities or the Company other than those set forth herein and attached hereto;

v) Subscriber is able to bear the economic risk of the investment in the Securities and Subscriber has sufficient net worth to sustain a loss of Subscriber’s entire investment in the Company without economic hardship if such a loss should occur;

vi) Subscriber has had an opportunity to inspect relevant documents relating to the organization and operations of the Company. Subscriber acknowledges that all documents, records and books pertaining to this investment which Subscriber has requested have been made available for inspection by Subscriber and Subscriber’s attorney, accountant or another adviser(s);

vii) Subscriber has had an opportunity to ask questions of and receive satisfactory answers from the Company, or any person or persons acting on behalf of the Company, concerning the terms and conditions of this investment and the Offering and the Securities, and all such questions have been answered to the full satisfaction of Subscriber. The Company has not supplied Subscriber any information for investment purposes other than as contained in this Agreement and the attachments hereto, and Subscriber is relying on its own investigation and evaluation of the Company and the Securities in making an investment hereunder and not on any other information whatsoever, including, but not limited to, any presentations or other materials, other than this Agreement and the attachments, provided to the Subscriber by the Company;

viii) The Subscriber recognizes that the investment herein is a speculative venture and that the total amount of funds tendered to purchase Securities is placed at the risk of the business and may be completely lost. The purchase of Securities as an investment involves special risks;

ix) The Subscriber: (i) if a natural person, represents that the Subscriber has reached the age of 21 and has full authority, legal capacity and competence to enter into, execute and deliver this Agreement and all other related agreements or certificates and to take all actions required pursuant hereto and thereto and to carry out the provisions hereof and thereof, or (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not

Page 5 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

formed for the specific purpose of acquiring the Shares and such entity is duly organized, validly existing and in good standing under the laws of the state of its organization. Subscriber is a bona fide resident and domiciliary of the state set forth in the Investor Application (the “ Qualification Questionnaire ”) and has no present intention to become a resident of any other state or jurisdiction;

x) Subscriber acknowledges and is aware of the following:

(1) There are substantial restrictions on the transferability of the Securities; the Securities will not be, and investors in the Company have no right to require that the Securities be registered under the 1933 Act; there may not be any public market for the Securities; Subscriber may not be able to use the provisions of Rule 144 of the 1933 Act with respect to the resale of the Securities; and accordingly, Subscriber may have to hold the Securities indefinitely and it may not be possible for Subscriber to liquidate Subscriber’s investment in the Company. Subscriber agrees that the Securities shall not be sold, transferred, pledged or hypothecated unless such sale is exempt from registration under the 1933 Act. Subscriber also acknowledges that Subscriber shall be responsible for compliance with all conditions on transfer imposed by any blue sky or securities law administrator and for any expenses incurred by the Company for legal or accounting services in connection with reviewing a proposed transfer;

(2) No federal or state agency has made any finding or determination as to the fairness of the Offering of the Securities for investment or any recommendation or endorsement of the Securities;

(3) The Securities have not been approved or registered under any Blue Sky law or with any State Securities Division, and as such, there may be restrictions on the sale or transfer of such Securities under State law; and

(4) The purchase of Securities under this Subscription Agreement is expressly conditioned upon the exemption from qualification of the offer and sale of the Securities from applicable Federal, state and provincial securities laws. The Company shall not be required to qualify this transaction under the securities laws of any jurisdiction and, should qualification be necessary, the Company shall be released from any and all obligations to maintain its offer, and may rescind any sale contracted, in the jurisdiction; provided, however, that upon any such rescission, the Company shall promptly return to Subscriber all funds received by the Company from the Subscriber prior to such rescission.

xi) The Subscriber has carefully considered and has, to the extent he, she or it believes such discussion is necessary, discussed with his, her or its professional, legal, tax and financial advisors, the suitability of an investment in the Securities for his, her or its particular tax and financial situation and that the Subscriber and his, her or its advisers, if such advisors were deemed necessary, have determined that the Securities are a suitable investment for him, her or it;

Page 6 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

xii) The Subscriber has not become aware of this Offering and has not been offered Securities by any form of general solicitation or advertising, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or other similar media or television or radio broadcast or any seminar or meeting where, to the Subscriber’s knowledge, those individuals that have attended have been invited by any such or similar means of general solicitation or advertising;

xiii) The Subscriber realizes that the Securities cannot readily be sold and will be restricted securities and therefore the Securities must not be purchased unless the Subscriber has liquid assets sufficient to assure that such purchase will cause no undue financial difficulties and the Subscriber can provide for current needs and possible personal contingencies;

xiv) The Subscriber confirms and represents that he, she or it is able (i) to bear the economic risk of his, her or its investment, (ii) to hold the Securities for an indefinite period of time, and (iii) to afford a complete loss of his, her or its investment. The Subscriber also represents that he, she or it has (i) adequate means of providing for his, her or its current needs and possible personal contingencies, and (ii) has no need for liquidity in this particular investment;

xv) The Subscriber understands that the Securities are being offered and sold to he, she, or it in reliance on specific exemptions from or non-application of the registration requirements of federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Subscriber set forth herein in order to determine the applicability of such exemptions and the suitability of the Subscriber to acquire the Securities. All information which the Subscriber has provided to the Company concerning the Subscriber’s financial position and knowledge of financial and business matters is correct and complete as of the date hereof, and if there should be any material change in such information prior to acceptance of this Agreement by the Company, the Subscriber will immediately provide the Company with such information;

xvi) The Subscriber has the requisite power and authority to enter into and perform the transactions contemplated by this Agreement and the purchase of the Securities. The execution, delivery and performance of this Agreement by the Subscriber and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate, partnership or other entity action, and no further consent or authorization of the Subscriber or its Board of Directors, managers, stockholders, members, trustees, holders or partners, as the case may be, as required. When executed and delivered by the Subscriber, this Agreement shall constitute a valid and binding obligation of the Subscriber enforceable against the Subscriber in accordance with its terms;

xvii) The Subscriber has not agreed to act with any of the other investors for the purpose of acquiring, holding, voting or disposing of the Securities purchased hereunder for purposes of Section 13(d) under the Securities Exchange Act of 1934, as amended, and the Subscriber is acting independently with respect to its investment in the Securities;

Page 7 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

xviii) The Subscriber is a bona fide resident or operates its principal place of business as set forth in this Subscription Agreement and Qualification Questionnaire, which Qualification Questionnaire Subscriber has completed completely and honestly;

xix) The Subscriber confirms and certifies that:

(a)

Subscriber is in receipt of and has carefully and thoroughly read and reviewed and understands (i) the term sheet, attached hereto as Exhibit A ; (ii) the draft designation of the rights and preferences of the Series A Convertible 9% Preferred Stock, attached hereto as Exhibit B ; and (iii) the Information for Residents of Certain States, attached hereto as Exhibit C .

(b)

Prior to the Subscriber’s entry into this Agreement, Subscriber has had an opportunity to review the Company’s reports, schedules, forms, statements and other documents filed by the Company with the United States Securities and Exchange Commission (the “ SEC Reports ”) (which filings can be accessed by going to http://www.sec.gov/edgar/searchedgar/companysearch.html , typing Petrolia ” in the “ Company name ” field, and clicking the “ Search ” button), including, but not limited to the Company’s latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q, as well as its Current Reports on Form 8-K that have been filed since its latest periodic report filing.

(c)

The Subscription hereunder is irrevocable by Subscriber, and, except as required by law, Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of Subscriber hereunder and that this Subscription Agreement and such other agreements shall survive the death or disability of Subscriber and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns. If Subscriber is more than one person, the obligations of Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his or her heirs, executors, administrators, successors, legal representatives and permitted assigns.

(d)

No federal or state agency has made any findings or determination as to the fairness of the terms of this Offering for investment purposes; or any recommendations or endorsements of the Securities.

(e)

The Offering is intended to be exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the Securities Act and the provisions of Rule 506(b) of Regulation D and/or Regulation S thereunder, which is in part dependent upon the truth, completeness and accuracy of the statements made by the Subscriber herein.

Page 8 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

(f)

It is understood that in order not to jeopardize the Offering’s exempt status under Section 4(a)(2) and/or Rule 506(b) of the Securities Act and Regulation D or Regulation S, any transferee may, at a minimum, be required to fulfill the investor suitability requirements thereunder.

(g)

The Company may pay broker’s, finder’s or similar fees of up to 10% of the total gross amount of the Offering.

(h)

Subscriber, as required by the Internal Revenue Code, certifies under penalty of perjury that 1) the Social Security Number or Federal Identification Number provided below is correct and 2) Subscriber is not subject to backup withholding either because Subscriber has not been notified that Subscriber is subject to backup withholding as a result of a failure to report interest or dividends, or because the Internal Revenue Service has notified Subscriber that Subscriber is no longer subject to backup withholding.

(i)

IN MAKING AN INVESTMENT DECISION, SUBSCRIBER MUST RELY ON HIS, HER, OR ITS OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

(j)

THIS SUBSCRIPTION DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT PERMITTED UNDER APPLICABLE LAW OR TO ANY FIRM OR INDIVIDUAL THAT DOES NOT POSSESS THE QUALIFICATIONS PRESCRIBED IN THIS SUBSCRIPTION.

xx) The Subscriber confirms and acknowledges that this is a “ best efforts, no minimum ” Offering; that the Company need not raise any certain level of funding; that regardless of the amount of funding raised in the Offering, the Company will not return any of the undersigned’s investment herein assuming the Subscription is accepted by the Company; and the Company is not required to use the funds raised in this Offering for any particular purpose or towards any specific use of proceeds. The Subscriber further confirms that the Company may undertake additional offerings in the future and/or may issue shares to consultants or employees at offering prices below that of the Offering, which may cause dilution to the Subscriber; and

xxi) The Subscriber expressly represents and warrants to the Company that (a) before executing this Agreement, he, she or it has fully informed itself, himself or herself of the terms, contents, conditions and effects of this Agreement and the exhibits, and the Shares; (b) the Subscriber has relied solely and completely upon its own judgment in executing this Agreement;

Page 9 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

(c) the Subscriber has had the opportunity to seek and has obtained the advice of its own legal, tax and business advisors before executing this Agreement and the exhibits; and (d) the Subscriber has acted voluntarily and of its, his or her own free will in executing this Agreement.

D. Indemnification . Subscriber acknowledges that Subscriber understands the meaning and legal consequences of the representations and warranties in paragraph C hereof, and Subscriber hereby agrees to indemnify and hold harmless the Company and its affiliates, partners, officers, directors, agents, attorneys, and employees from and against any and all loss, damage or liability due to or arising out of a breach of any such representations or warranties and the breach of any representations and warranties whatsoever made herein. Notwithstanding the foregoing, however, no representation, warranty, acknowledgment or agreement made herein by Subscriber shall in any manner be deemed to constitute a waiver of any rights granted to Subscriber under federal or state securities laws. The representations and warranties set forth herein shall survive the date upon which the Subscriber becomes a shareholder of the Company and/or the date of this Agreement in the event the Company does not accept the Subscriber’s subscription. No representation, warranty or covenant in this Agreement, nor the Qualification Questionnaire, contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were or are to be made, not misleading.

E. Compliance with Securities Laws . Subscriber understands and agrees that a legend has been or will be placed on any certificate(s) or other document(s) evidencing the Securities in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (I) THEY SHALL HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES ACT, OR (II) THE CORPORATION SHALL HAVE BEEN FURNISHED WITH AN OPINION OF COUNSEL, SATISFACTORY TO COUNSEL FOR THE CORPORATION, THAT REGISTRATION IS NOT REQUIRED UNDER ANY SUCH ACTS.

F. Future Financings and Offerings . Subscriber recognizes that the Company may seek to raise additional financing and working capital through a variety of sources in the future, and that although the Company may undertake one or more public or private offerings of its debt or equity securities, there can be no assurance that any such offering will be made or, if made, that it will be successful. Moreover, Subscriber understands and agrees that the Company reserves the right to make future offers, either public or private, of securities, including, but not limited to, promissory notes, shares of common stock, preferred stock or warrants, on terms that may be

Page 10 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

more than or less favorable than the Shares. Subscriber further confirms that Subscriber has no right to purchase any securities in any future offerings.

G. Confidentiality . Subscriber agrees to maintain in confidence all information furnished by the Company or its agents that may be deemed to be material nonpublic information, including, but not limited to the fact that the Offering is being made and the terms and conditions of this Offering.

H. Piggyback Registration Rights . The Company covenants and agrees that if, at any time prior to the Registration Rights Expiration Date (defined below), it proposes to file a registration statement with respect to any class of equity or equity-related securities (other than in connection with an offering to the Company’s employees or in connection with an acquisition, merger or similar transaction) under the Securities Act in a primary registration on behalf of the Company and/or in a secondary registration on behalf of holders of such securities, and the registration form to be used may be used for the issuance or resale of the Shares, the Company will either include the shares of common stock issuable upon conversion of the Shares (the “ Registrable Securities ”) in such registration statement or give prompt written notice to Subscriber of its intention to file such registration statement and will offer to include in such registration statement, such number of Shares with respect to which the Company has received written requests for inclusion therein within twenty (20) days after the giving of notice by the Company (the “ Piggyback Registration Rights ”). The Subscriber shall also provide the Company customary and reasonable representations and confirmations regarding the Shares held by the Subscriber, information relating to the beneficial ownership of other securities of the Company held by such Subscriber, information regarding the persons with voting and dispositive control over the Subscriber and such other information as the Company or its legal counsel may reasonably request. The Subscriber acknowledges and understands that the Company shall not be required to include Registrable Securities in a registration statement relating solely to an offering by the Company of securities for its own account if the managing underwriter or placement agent shall have advised the Company in writing that the inclusion of such securities will have a material adverse effect upon the ability of the Company to sell securities for its own account, and provided further that the Subscriber is not treated less favorably than others seeking to have their securities included in such registration statement. Notwithstanding the obligations set forth above, if any Securities and Exchange Commission guidance sets forth a limitation on the number of securities permitted to be registered on a particular registration statement as a secondary offering, the number of Registrable Securities to be registered on such registration statement will be reduced pro rata between the Subscriber (or other parties) whose securities are included in such registration statement. The “ Registration Rights Expiration Date ” is the earlier of (a) two years from the date that the Offering closes; and (b) the date that the Subscriber is eligible to sell the Registrable Securities under Rule 144.

I. U.S.A. Patriot Act and Anti-Money Laundering Representations . Subscriber represents and warrants that Subscriber is not and is not acting as an agent, representative, intermediary or nominee for, a person identified on the list of blocked persons maintained by the Office of Foreign Assets Control, U.S. Department of Treasury. In addition, Subscriber is in full compliance with all applicable U.S. laws, regulations, directives, and executive orders imposing

Page 11 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

economic sanctions, embargoes, export controls or anti-money laundering requirements, including but not limited to the following laws: (1) the International Emergency Economic Powers Act, 50 U.S.C. 1701-1706; (2) the National Emergencies Act, 50 U.S.C. 1601-1651; (3) section 5 of the United Nations Participation Act of 1945, 22 U.S.C. 287c; (4) Section 321 of the Antiterrorism Act, 18 U.S.C. 2332d; (5) the Export Administration Act of 1979, as amended, 50 U.S.C. app. 2401-2420; (6) the Trading with the Enemy Act, 50 U.S.C. app. 1 et seq.; (7) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56; and (8) Executive Order 13224 (Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) of September 23, 2001. The Subscriber represents that the amounts invested by it in the Company in the Offering were not and are not directly or indirectly derived from activities that contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. To the best of the Subscriber’s knowledge, none of: (1) the Subscriber; (2) any person controlling or controlled by the Subscriber; (3) if the Subscriber is a privately-held entity, any person having a beneficial interest in the Subscriber; or (4) any person for whom the Subscriber is acting as agent or nominee in connection with this investment is a country, territory, individual or entity named on an Office of Foreign Assets Control (“ OFAC ”) list, or a person or entity prohibited under the OFAC Programs.

J. Entire Agreement . This Subscription is the entire and fully integrated agreement of the parties regarding the subject matter hereof, and there are no oral representations, warranties, agreements, or promises pertaining to this Subscription, or the Securities, whether set forth in any presentations other documents or information provided to the Subscriber or otherwise.

K. Construction . The parties acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by the parties hereto. All references in this Agreement as to gender shall be interpreted in the applicable gender of the parties.

L. Purchase Payment . The Purchase Price shall be paid to the Company in cash, check or via wire transfer simultaneously with the Subscriber’s entry into this Agreement.

M. Construction of Terms . As used in this Agreement, the terms “ herein, ” “ herewith, ” “ hereof ” and “ hereunder ” are references to this Agreement, taken as a whole; the term “ includes ” or “ including ” shall mean “ including, without limitation; ” the word “ or ” is not exclusive; and references to a “ Section, ” “ subsection, ” “ clause, ” “ Exhibit, ” “ Appendix, ” “ Schedule, ” “ Annex ” or “ Attachment ” shall mean a Section, subsection, clause, Exhibit, Appendix, Schedule, Annex or Attachment of this Agreement, as the case may be, unless in any such case the context requires otherwise. Exhibits, Appendices, Schedules, Annexes or Attachments to any document shall be deemed incorporated by reference in such document. All references to or definitions of any agreement, instrument or other document (a) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (b) except as otherwise expressly provided, shall mean such agreement, instrument or document, or

Page 12 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

replacement or predecessor thereto, as modified, amended, supplemented and restated through the date as of which such reference is made.

N. Effect of Facsimile and Photocopied Signatures . This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. A copy of this Agreement signed by one party and (a) faxed to another party or (b) scanned and emailed to another party, shall be deemed to have been executed and delivered by the signing party as though an original. A photocopy or PDF of this Agreement shall be effective as an original for all purposes.

O. Severability . The holding of any provision of this Subscription Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Subscription Agreement, which shall remain in full force and effect.

P. Further Assurances . The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Subscription Agreement.

Q. Governing Law . This Agreement shall be interpreted in accordance with the laws of the State of Texas. In the event of a dispute concerning this Agreement, the parties agree that venue lies in a court of competent jurisdiction in Harris County, Texas.

R. Collection of Personal Information . The Subscriber (on its own behalf and, if applicable, on behalf of any person for whose benefit the Subscriber is subscribing) acknowledges and consents to the fact the Company is collecting the Subscriber’s (and any beneficial purchaser’s) personal information pursuant to this Agreement. The Subscriber (on its own behalf and, if applicable, on behalf of any person for whose benefit the Subscriber is subscribing) acknowledges and consents to the Company retaining the personal information for as long as permitted or required by applicable law or business practices. The Subscriber (on its own behalf and, if applicable, on behalf of any person for whose benefit the Subscriber is subscribing) further acknowledges and consents to the fact the Company may be required by applicable securities laws and stock exchange rules to provide regulatory authorities any personal information provided by the Subscriber respecting itself (and any beneficial purchaser). By executing this Agreement, the Subscriber is deemed to be consenting to the foregoing collection, use and disclosure of the Subscriber’s (and any beneficial purchaser’s) personal information. The Subscriber also consents to the filing of copies or originals of any of the Subscriber’s documents described herein as may be required to be filed with any stock exchange or securities regulatory authority in connection with the transactions contemplated hereby. The Subscriber represents and warrants that it has the authority to provide the consents and acknowledgments set out in this paragraph on behalf of all beneficial purchasers.

S. Amount of Subscription. The undersigned hereby subscribes to _____________ Shares for an aggregate amount of $___________.

Page 13 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

“ PURCHASER ”

Check enclosed in the amount of $ ____________ or Wire Transfer Sent in the Amount of $ __________

Subscribed for: _______________ Shares.

Social Security or Taxpayer I.D. Number [required if applicable]:

Business Address (including zip code):

Business Phone: ( )

Residence Address (including zip code)

Residence Phone: ( )

All communications to be sent to: Business or Residence Address

Name Shares should be registered in:___________________________________________________

If different than subscriber name please advise of the reason for such difference:

_____________________________________________________________________

Address for registration of shares:_____________________________________________________

Email Address:______________________________________________________________________

Please indicate on the following pages the form in which you will hold title to your interest in the securities. PLEASE CONSIDER CAREFULLY. ONCE YOUR SUBSCRIPTION IS ACCEPTED, A CHANGE IN THE FORM OF TITLE CONSTI-TUTES A TRANSFER OF THE INTEREST IN THE SECURITIES AND MAY THEREFORE BE RESTRICTED BY THE TERMS OF THIS SUBSCRIPTION, THE SECURITIES AND MAY RESULT IN ADDITIONAL COSTS TO YOU. Subscribers should seek the advice of their attorneys in deciding in which of the forms they should take ownership of the interest in the securities, because different forms of ownership can have varying gift tax, estate tax, income tax, and other consequences, depending on the state of the investor’s domicile and his or her particular personal circumstances.

Please select one of the following forms of ownership:

INDIVIDUAL OWNERSHIP (one signature required)

JOINT TENANTS WITH RIGHT OF SURVIVORSHIP AND NOT AS TENANTS IN COMMON (both or all parties must sign)

COMMUNITY PROPERTY (one signature required if interest held in one name, i.e., managing spouse; two signatures required if interest held in both names)

TENANTS IN COMMON (both or all parties must sign)

GENERAL PARTNERSHIP (fill out all documents in the name of the PARTNERSHIP, by a PARTNER authorized to sign, and include a copy of the Partnership Agreement)

Page 14 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

LIMITED PARTNERSHIP (fill out all documents in the name of the LIMITED PARTNERSHIP, by a GENERAL PARTNER autho-rized to sign, and include a copy of the Limited Partnership Agreement and any other document showing that the investment is authorized)

LIMITED LIABILITY COMPANY (fill out all documents in the name of the LIMITED LIABILITY COMPANY, by a member authorized to sign, and include a copy of the LIMITED LIABILITY COMPANY’s Operating Agreement and any other documents necessary to show the investment is authorized.)

CORPORATION (fill out all documents in the name of the CORPORATION, by the President or other officer authorized to sign, and include a copy of the Corporation’s Articles and certified Corporate Resolution authorizing the signature)

TRUST (fill out all documents in the name of the TRUST, by the Trustee, and include a copy of the instrument creating the trust and any other documents necessary to show the investment by the Trustee is authorized. The date of the trust must appear on the Notarial where indicated.)

PLEASE ALSO COMPLETE PAGES 16, 17 OR 18 AS APPLICABLE, BELOW, AND THE QUESTIONNAIRE BEGINNING ON PAGE 19 OF THIS SUBSCRIPTION AGREEMENT, WHICH IS A REQUIRED PART OF THIS AGREEMENT.

Page 15 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

EXECUTION

Please execute this Subscription Agreement by completing the appropriate section below.

1. If the subscriber is an INDIVIDUAL , complete the following:

_____________________________________________

Signature of Subscriber

_____________________________________________

Name (please type or print)

_____________________________________________

Signature of Spouse or Co-Owner if funds are

to be invested as joint tenants by the entirety

or community property.

_____________________________________________

Name (please type or print)

2. If the subscriber is a CORPORATION , complete the following:

The undersigned hereby represents, warrants and covenants that the undersigned has been duly authorized by all requisite action on the part of the corporation listed below (“ Corporation ”) to acquire the Shares and, further, that the Corporation has all requisite authority to acquire such Shares.

The officer signing below represents and warrants that each of the above representations or agreements or understandings set forth herein applies to that Corporation and that he has authority under the articles of incorporation, bylaws, and resolutions of the board of directors of such Corporation to execute this Subscription Agreement. Such officer encloses a true copy of the articles of incorporation, the bylaws and, as necessary, the resolutions of the board of directors authorizing a purchase of the investment herein, in each case as amended to date.

_____________________________________________

Name of Corporation (please type or print)

By: __________________________________________

Name: ______________________________________

Title: ____________________________________

Page 16 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

3. If the subscriber is a PARTNERSHIP , complete the following:

The undersigned hereby represents, warrants and covenants that the undersigned is a general partner of the partnership named below (“ Partnership ”), and has been duly authorized by the Partnership to acquire the Shares and that he has all requisite authority to acquire such Shares for the Partnership.

The undersigned represents and warrants that each of the above representations or agreements or understandings set forth herein applies to that Partnership and he is authorized by such Partnership to execute this Subscription Agreement. Such partner encloses a true copy of the partnership agreement of said Partnership, as amended to date, together with a current and complete list of all partners thereof.

_____________________________________________

Name of Partnership (please type or print)

By: ________________________________________________

Name: ______________________________________________

Title: _______________________________________________

4. If the subscriber is a TRUST , complete the following:

The undersigned hereby represents, warrants and covenants that he is duly authorized by the terms of the trust instrument (“ Trust Instrument ”) for the (“ Trust ”) set forth below to acquire the Shares and the undersigned, as trustee, has all requisite authority to acquire such Shares for the Trust.

The undersigned, as trustee, executing this Subscription Agreement on behalf of the Trust, represents and warrants that each of the above representations or agreements or understandings set forth herein applies to that Trust and he is authorized by such Trust to execute this Subscription Agreement. Such trustee encloses a true copy of the Trust Instrument of said Trust as amended to date.

____________________________________________

Name of Trust (Please type or print)

By:

Name:

Title:

Page 17 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

5. If the subscriber is a LIMITED LIABILITY COMPANY , complete the following:

The undersigned hereby represents, warrants and covenants that the undersigned has been duly authorized by all requisite action on the part of the Limited Liability Company listed below (“ Company ”) to acquire the Shares and, further, that the Company has all requisite authority to acquire such Shares.

The officer signing below represents and warrants that each of the above representations or agreements or understandings set forth herein applies to that Company and that he has authority under the articles of organization, company agreement, and resolutions of the managers and/or members, as applicable, of such Company to execute this Subscription Agreement. Such officer encloses a true copy of the articles of organization, the operating agreement and, as necessary, the resolutions of the managers and/or members authorizing a purchase of the investment herein, in each case as amended to date.

_____________________________________________

Name of Company (please type or print)

By: __________________________________________

Name: ______________________________________

Title: ____________________________________

ACCEPTED BY THE COMPANY this the _____ day of _________, 2017.

PETROLIA ENERGY CORPORATION

By:____________________________

Name:____________________________

Title:____________________________

PLEASE ALSO COMPLETE THE QUESTIONNAIRE BEGINNING ON PAGE 18 OF THIS SUBSCRIPTION AGREEMENT, WHICH IS A REQUIRED PART OF THIS AGREEMENT.

Page 18 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

Subscription Documents - Continued

PETROLIA ENERGY CORPORATION (THE “ COMPANY ”)

INVESTOR APPLICATION

(QUALIFICATION QUESTIONNAIRE)

(CONFIDENTIAL)

ALL INFORMATION CONTAINED IN THIS APPLICATION WILL BE TREATED CONFIDENTIALLY. The undersigned understands, however, that the Company may present this application to such parties as the Company, in its discretion, deems appropriate when called upon to establish that the proposed offer and sale of the Securities are exempt from registration of the Securities Act of 1933, as amended, or meet the requirements of applicable securities and blue sky laws.

PART I - INDIVIDUALS (OTHERS COMPLETE PART II)

Name:

2. Residence Address:

Residence Telephone:

3.	Social Security Number:_____________________

Date of Birth: _________________

Citizenship:

4. Present Employer:

Business Address:

Business Telephone:

Title/Position:

Page 19 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

Length of Time:

5.	I prefer to have communications sent to:

Home Address or _________Business Address

6. Investment Experience

I have made investments, or been involved in activities, of the type indicated below (recognizing that the types of investments listed are not mutually exclusive and certain investments may fall into two or more of the categories listed):

CHECK ALL THAT APPLY

(a)

Ownership of stocks, bonds, and other securities

(b)

Investment in partnerships, joint ventures and other syndicates

(c)

Other direct or partnership investments (such as real estate, oil and gas, equipment leasing, research and development, agriculture or commodities syndications)

Do you make your own ultimate decisions on your investments?

YES [ ] NO [ ]

7.	Method of Investment Evaluation

Each subscriber must have sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in the Company or must retain the services of a Purchaser Representative(s) (who may be an attorney, accountant or other financial advisor but not a person employed by or associated with the Company or its affiliates) for the purpose of this particular transaction.

This item is presented in alternative form. Please cheek the appropriate alternative.

Alternative One: No Advisor.

I have such knowledge and experience in financial and business matters that I am capable of evaluating the merits and risks of an investment in the Company and of making an informed investment decision, and will not require a Purchaser Representative.

Alternative Two: Purchaser Representative.

Page 20 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

I have relied upon the advice of the following Purchaser Representative (who is not affiliated with the Company or its affiliates) in evaluating the merits and risks of an investment in the Company.

Name:

(name of purchaser representative)

Address:

Relationship:

The above-named Purchaser Representative and I together have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Company and of making an informed investment decision.

PLEASE COMPLETE 8 OR 9, BELOW

8. Accredited Individual Investor

As an individual, I ________________________________________ (PRINT NAME) represent that I (please check all that are applicable):

☐	have a net worth (either individually or jointly with spouse) in excess of $1,000,000 in United States Dollars (“ USD ”) (not including my principal residence); or

☐	am an individual who had an individual income (NOT including joint income with spouse) in excess of USD $200,000 in each of the two most recent tax years and reasonably expects individual income in excess of $200,000 during the current tax year; or

☐ am an individual who had an income (including joint income with spouse) in excess of USD $300,000 in each of the two most recent tax years and reasonably expects individual income in excess of USD $300,000 during the current tax year.

“ Income ” for this purpose is computed by adding the following items to adjusted gross income for federal income tax purposes: (a) the amount of any tax-exempt interest income received; (b) the amount of losses claimed as a limited partner in a limited partnership; (c) any deduction claimed for depletion; (d) deductions for alimony paid; (e) deductible amounts contributed to an IRA or Keogh retirement plan; and (f) any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income pursuant to the provisions of Section 1202 of the Code.

Page 21 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

I, the undersigned, represent that I do not have any state or federal judicial judgments adverse to me nor are there any state or federal tax liens against me, nor is there any pending or threatened litigation adverse to me. I, the undersigned, undertake to notify the Company immediately of any material change in any of such information occurring prior to the closing of the Offering or, if relevant, any time during the existence of the Company.

Date: ___________________ Signature:

9. Non-U.S. Person Investor

As an individual, I ________________________________________ (PRINT NAME) represent that I reside outside of the United States and am not a “ U.S. person ” as such term is defined under Regulation S as promulgated by the SEC under authority of the 1933 Act. I was not solicited for an investment in the Offering by the Company or any person or entity acting on its behalf while I was located within the United States and has not entered into the Subscription Agreement inside the United States. To enable the Company to avoid withholding interest paid, I certify under penalty of perjury that I am neither a citizen nor a resident of the United States and that its address set forth above is correct. At the time the buy order for the Securities was originated, Subscriber was outside the United States. Subscriber is purchasing the Securities for his or her own account and not on behalf of any U.S. person, and the sale has not been pre-arranged with a purchaser in the United States. I further agree to comply with all of the requirements of Regulation S of the 1933 Act.

I, the undersigned, represent that I do not have any state or federal judicial judgments adverse to me nor are there any state or federal tax liens against me, nor is there any pending or threatened litigation adverse to me. I, the undersigned, undertake to notify the Company or the Company immediately of any material change in any of such information occurring prior to the closing of the Offering or, if relevant, any time during the existence of the Company.

Date: ___________________ Signature:

[If individual purchasers are co-tenants, tenants-in-common or joint owners (including joint owners with such purchaser’s spouse) all co-tenants, tenants-in-common and/or joint owners shall complete a copy of Part I above]

Page 22 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

PART II-INVESTORS WHO ARE NOT INDIVIDUALS

1. General Information

Entity Name (“ Entity ”) :

Address of Principal Office:

Type of Organization:

Date and Place of Organization:

( Please attach a copy of your organizational documents in effect, including any amendments ).

Business

A brief description of the business conducted by the entity is as follows:

Each person involved in making the decision on behalf of the entity, to subscribe to purchase Securities is listed below [NOTE AT LEAST ONE NAME MUST BE LISTED] :

Name __________________ Title __________________

[Please list any additional names on a separate page].

Each person named above must complete Part I of this questionnaire.

PLEASE COMPLETE 3 OR 4, BELOW AND PLEASE ALSO COMPLETE SECTION 5

3.	Accredited Investor Status of Entity

Please cheek the appropriate description which applies to you.

Page 23 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

_____ (a)

A bank, as defined in Section 3 (a)(2) of the Securities Act of 1933, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act of 1933, whether you are acting in an individual or a fiduciary capacity.

_____ (b)

An insurance company, as defined in Section 2(13) of theSecurities Act of 1933.

_____ (c)

An investment company registered under the Investment Company Act of 1940.

_____ (d)

A business development company, as defined in Section (a)(48) of the Investment Company Act of 1940.

_____ (e)

A small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.

_____ (f)

An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 and the investment is made by you as a plan fiduciary, as defined in Section 3(21) of such Act, and you are a bank, insurance company or a registered investment advisor, or you have total assets in excess of $5 million.

_____ (g)

A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.

_____ (h)

_____

(i)

An entity (other than a trust, which must meet the requirements set forth in Section (j), below) in which all of the equity owners are accredited investors and meet at least one of the criteria listed in Part I, Section 8 of this Questionnaire.

_____ (j)

A trust with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring Securities, whose purchase is directed by a person with such knowledge and experience in financial and business matters that (s)he is capable of evaluating the merits and risks of the prospective investment.

Page 24 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

If you checked (i), please complete the following part of this question:

(1) List all equity owners: __________________________________

(2) What is the type of entity? _______________________________

(3) Attach a copy of your resolutions or other evidence of the entity’s authority to make this investment.

(4)

Represent that each equity owner qualifies individually to Part I, Section 9 of this Questionnaire by printing each equity owners name below (you may include an additional sheet if necessary):

(5)

Please confirm that the entity was not formed solely for the purpose of subscribing for Securities in the Offering by initialing below:

_________

4.	Non “U.S. Person Status”

Please initial next to the below paragraph certifying the accuracy of such representations:

________

The Entity is organized and has a principal place of business outside of the United States and is not a “ U.S. person ” as such term is defined under Regulation S as promulgated by the SEC under authority of the 1933 Act. The Entity was not solicited for an investment in the Offering by the Company or any person or entity acting on its behalf within the United States and has not entered into the Subscription Agreement inside the United States. To enable the Company to avoid withholding interest paid, the Entity certifies under penalty of perjury that it is neither a citizen nor a resident of the United States and that its address set forth above is correct. At the time the buy order for the Securities was originated, Subscriber was outside the United States. Subscriber is purchasing the Securities for its own account and not on behalf of any U.S. person, and the sale has not been pre-arranged with a purchaser in the United States. The Entity further agrees to comply with Regulation S of the 1933 Act.

Page 25 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

5. Representations

The undersigned represents on behalf of the entity that:

(a) The entity has, and its officers, employees, directors or equity owners have, sufficient knowledge and experience in similar programs or investments to evaluate the merits and risks of an investment in the Company (or the entity has retained an attorney, accountant, financial advisor or consultant as a Purchaser Representative); that because of the background and employment experience of the entity’s equity owners, its officers, directors or employees, it has received and has had access to material and relevant information enabling it to make an informed investment decision, and that all data it has requested has been furnished to it.

If applicable, the name, employer, address and telephone number of the entity’s Purchaser Representative follows:

(b) The information contained herein is complete and accurate and may be relied upon by you.

Attached is the requested information (e.g., articles of incorporation, bylaws and resolutions) for your review.

The undersigned represents that the information provided above is true and correct and acknowledges such investor’s awareness that the Company, and other investors are relying upon the accuracy of such information to ensure that the sale of any securities by the Company to such investor is in compliance with applicable federal and state securities laws. The undersigned represents that neither the entity it represents nor, its officers, directors or shareholders have any state or federal judicial judgments adverse to them nor are there any state or federal tax liens against them, nor is there any pending or threatened litigation adverse to them. The undersigned undertakes to notify the Company immediately of any material change in any of such information occurring prior to the closing of the Offering, or, if relevant, any time during the existence of the Company.

Entity

Date:

Name of Entity Typed or Printed:

By:

Name:

Title:

PLEASE ALSO CONFIRM THAT EACH PERSON NAMED IN PART II, SECTION 2, ABOVE HAS COMPLETED PART I OF THIS QUESTIONNAIRE.

Page 26 of 26

Preferred Stock Subscription Agreement

Petrolia Energy Corporation

EXHIBIT A

[Attach Term Sheet]

EXHIBIT B

[Attach Designation]

EXHIBIT C

INFORMATION FOR RESIDENTS OF CERTAIN STATES

Each prospective purchaser should read the legend and/or state disclosure listed below applicable to the state in which he resides. The state disclosures and/or legends listed below do not in any way constitute or imply that offers or sales may be made in such states. Offers and/or sales may only be made in those states approved by the Company. If any prospective purchaser resides in a state not included below, such prospective investor should request the state legend applicable to such purchaser’s state prior to making an investment in the Company.

California Residents :

These securities have not been registered under the Securities Act of 1933, as amended, or the California Corporations Code by reason of specific exemptions thereunder relating to the limited availability of the offering. These securities cannot be sold, transferred or otherwise disposed of to any person or entity unless subsequently registered under the Securities Act of 1933, as amended, or the California Corporations Code, if such registration is required.

Connecticut Residents :

These securities offered herein have not been registered under section 36-485 of the Connecticut Uniform Securities Act (the “ Act ”) and, therefore, cannot be resold unless they are registered under the Act or unless an exemption from registration is available.

Florida Residents :

These securities have not been registered under the Florida Securities and Investor Protection Act in reliance upon exemption provisions contained therein. Section 5l7.061(11)(a)(5) of the Florida Securities and Investor Protection Act (the “ Florida Act ”) provides when sales are made to five or more purchasers in this state that any purchaser of securities in Florida which are exempted from registration under Section 517.061(11) of the Florida Act may withdraw his subscription agreement and receive a full refund of all monies paid, within three days after the later of (i) the date he tenders consideration for such securities and (ii) the date this statutory right of rescission is communicated to him (which shall be established conclusively by the Company’s provision of this “ Information for Residents of Certain States ”). Any Florida resident who purchases securities is entitled to exercise the foregoing statutory rescission right by telephone, telegram, or letter notice to the Company. Any telegram or letter should be sent or postmarked prior to the end of the third business day. A letter should be mailed by certified mail, return receipt requested, to ensure its receipt and to evidence the time of mailing. Any oral requests should be confirmed in writing.

Georgia Residents :

The securities sold in the state of Georgia have been issued or sold in reliance on paragraph (I3) of Code section 10-5-9 of the Georgia Securities Act of 1973, and may not be sold or transferred except in a transaction which is exempt under such Act or pursuant to an effective registration under such Act.

Illinois Residents :

These securities have not been approved or disapproved by the Secretary of State of Illinois, nor has the Secretary of State of Illinois nor the State of Illinois passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Indiana Residents :

These securities have not been registered under Section 3 of the Indiana Securities Act and therefore, cannot be resold or transferred unless they are so registered or unless an exemption from registration is available.

Maryland Residents :

The Securities which are the subject of this offering memorandum have not been registered under the Maryland Securities Act in reliance upon the exemption in section 11-602(9) of such act. Unless these Securities are registered, they may not be re-offered for sale or resold in the State of Maryland, except as security, or in a transaction exempt under such Act.

Minnesota Residents :

The securities represented by this Memorandum have not been registered under Chapter 80A of the Minnesota Securities Laws and may not be sold, transferred or otherwise disposed of except pursuant to registration or an exemption therefrom.

New Jersey Residents :

These securities have not been approved or disapproved by the Bureau of Securities of the State of New Jersey, nor has the Bureau passed on or endorsed the merits of this Offering. The filing of the written Offering does not constitute approval of the issue or the sale thereof by the Bureau of Securities. Any representation to the contrary is unlawful.

These are speculative securities and involve a high degree of risk. These securities are offered only to bona fide adult residents of the State of New Jersey.

New York Residents:

This Private Placement Memorandum has not been reviewed by the attorney general of the State of New York (or any other state) prior to its issuance and use. The attorney general of the State of New York has not passed upon or endorsed the merits of this Offering. Any representation to the contrary is unlawful.

All purchasers who are offered the Securities within or from the State of New York shall be deemed to automatically confirm and certify the following to the Company in connection with their execution of the Subscription Agreement:

“I understand that this offering of Securities in the Company has not been reviewed by the Attorney General of the State of New York because of the issuer’s representations that this is intended to be a nonpublic Offering pursuant to SEC Regulation D and that if all of the conditions and limitations of Regulation D are not complied with, the offering will be resubmitted to the Attorney General for amended

exemption. I understand that any offering literature used in connection with this offering has not been pre-filed with the Attorney General and has not been reviewed by the Attorney General. This security is being purchased for his own account for investment, and not for distribution or resale to others. I agree that I will not sell or otherwise transfer these securities unless they are registered under the Federal Securities Act of 1933, or unless an exemption from such registration is available. I represent that I have adequate means of providing for my current needs and possible personal contingencies and that I have no need for liquidity of this investment.”

“It is understood that all documents, records and books pertaining to this investment have been made available for inspection by my attorney and/or my accountant or my offeree representative and myself, and that the books and records of the issuer will be available upon reasonable notice for inspection by investors during reasonable business hours at its principal place of business.”

Oklahoma Residents:

The securities offered herein have not been registered under the Oklahoma Securities Act (the “ Oklahoma Act ”), and therefore Cannot be resold or transferred by the investor in a transaction Which is exempt under the Oklahoma Act or pursuant to an effective Registration under the Oklahoma Act.

Ohio Residents :

These securities have not been approved or disapproved as an investment for any Ohio resident by the Ohio Division of Securities nor has the Division passed upon the accuracy of the offering.

Pennsylvania Residents :

Residents of the Commonwealth of Pennsylvania can only transfer the Securities offered hereby in accordance with the provisions of section 203(d) of the Pennsylvania Securities Act of 1972 and are subject to the following conditions:

A. Under the provisions of the Pennsylvania Securities Act of 1972, a Pennsylvania resident who accepts an offer to purchase securities exempted from registration by section 203(d)(f)(p) or (r) directly from an issuer or affiliate of an issuer shall have the right to withdraw his acceptance without incurring any liability to the seller, underwriter, if any, or any other person, within two business days from the date of receipt by the issuer of this written binding contract to purchase, or in the case of a transaction where there is no written binding contract to purchase, within two business days after he makes the initial payment for the securities being offered.

B. Pursuant to Section 203.041(c)(1) of the Pennsylvania Blue Sky Regulations (“ Regulations ”) , the purchaser must acknowledge that he or she agrees not to sell the securities purchased herein within 12 months after the date of purchase except in accordance with Section 204.011 of the Regulations. Section 204.011 provides for an automatic waiver of the 12 month holding period under certain conditions including that the securities purchased are subsequently being registered under the Securities Act of 1933 or 1934.

Texas Residents :

Each purchaser of Securities must bear the economic risk of an investment in the Company for an indefinite period of time. The Securities have not been registered under the Securities Laws of Texas or the Securities Act of 1933 and may not be transferred or sold by the purchaser thereof except in

transactions that are exempt from registration under the Securities Laws of Texas and the Securities Act of 1933 or pursuant to an effective registration thereunder.

Virginia Residents :

Any predictions and representations, written or oral, which do not conform to those contained in the Memorandum, shall not be permitted.

Wisconsin Residents :

The Securities Commission of the State of Wisconsin has not passed upon the merits or qualifications of, or recommended or given approval to, the securities hereby offered, nor has the Securities Commissioner of this state passed upon the adequacy of this Memorandum. Any representation to the contrary is a criminal offense.

The investor must rely on his own examination of the person or entity creating the securities and the terms of the Offering, including the merits and risks involved in making an investment decision on these securities.

NASAA UNIFORM LEGEND

In making an investment decision investors must rely on their examination of the offering, including the merits and risks involved. These securities have not been recommended by a 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 exemption therefrom. Investors should be aware that they will be required to bear the investment risks of this investment for an indefinite period of time.

EXHIBIT 31.1

CERTIFICATIONS

I, Zel C. Khan, certify that;

1. I have reviewed this Quarterly Report on Form 10-Q of Petrolia Energy Corporation;

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

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

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

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

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

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

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

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

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

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

May 15, 2017 By: /s/ Zel C. Khan

Zel C. Khan,

Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATIONS

I, Paul Deputy, certify that;

1. I have reviewed this Quarterly Report on Form 10-Q of Petrolia Energy Corporation;

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

May 15, 2017 By: /s/ Paul Deputy

Paul Deputy,

Chief Financial Officer

(Principal Financial/Accounting Officer)

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND

PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Petrolia Energy Corporation (the “Company”) on Form 10-Q for the quarter ending March 31, 2017 as filed with the Securities and Exchange Commission (the “Report”), Zel C. Khan, the Principal Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

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

(2)

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

May 15, 2017

By: /s/ Zel C. Khan

Zel C. Khan,

Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND

PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Petrolia Energy Corporation (the “Company”) on Form 10-Q for the quarter ending March 31, 2017 as filed with the Securities and Exchange Commission (the “Report”), Paul Deputy, the Principal Financial and Accounting Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

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

(2)

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

May 15, 2017

By: /s/ Paul Deputy

Paul Deputy,

Chief Financial Officer

(Principal Financial/Accounting Officer)

	Warrants		Weighted Average Exercise Price		Aggregate intrinsic value		Weighted average remaining contractual life (years)
Outstanding at year ended December 31, 2016		16,825,527	$	0.26	$	-		3.20
Granted		507,500		0.14		-		3.89
Exercised		-		-		-		-
Expired		-		-		-		-
Outstanding at quarter ended March 31, 2017		17,333,027	$	0.26	$	432,165		2.38

Texas	86-1061005
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

710 N Post Oak, Suite 512 Houston, Texas	77024
(Address of principal executive offices)	(Zip Code)

Part I Financial Information

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3	Quantitative and Qualitative Disclosures about Market Ris k	15

Item 4.	Controls and Procedures	15

Part II Other Information

Item 1	Legal Proceedings	16

Item 1A.	Risk Factors	16

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

Item 3	Defaults Upon Senior Securities	17

Item 4	Mine Safety Disclosures	17

Item 5	Other Information	17

Item 6.	Exhibits	18

SIGNATURES		19

EXHIBITS INDEX		20

SUPPLEMENTAL DISCLOSURES
Interest Paid	$	8,318	$	8,825
NON-CASH INVESTING AND FINANCIAL DISCLOSURES
Transfer to Askarii inventory	$	---	$	146,861
Settlement of accrued accounts payable through share issuance		---		42,000
Purchase of Askarii		---		50,000
Initial recognition of asset retirement obligation		101,405		---
Settlement of accounts receivable and other assets for oil and gas properties		465,788		---
Note payable for vehicle purchase		35,677		---

	Three months ended March 31, 2017			Three months ended March 31, 2016
Revenues
Oil & Gas	$	33,560		$	22,999
Oil field services		-			180,000
		-			-
Net Income (Loss)
Oil & Gas		(459,222	)		(451,642	)
Oil field services		(4,048	)		149,700

Assets
Oil & Gas		13,057,078			4,140,901
Oil field services		181,593			116,561

Accounts Receivable
Oil & Gas		48,201			67,682
Oil field services	$	-		$	-

	PETROLIA ENERGY CORPORATION

May 15, 2017	By:	/s/ Zel C. Khan
		Zel C. Khan
		Chief Executive Officer
		(Principal Executive Officer

	PETROLIA ENERGY CORPORATION

May 15, 2017	By:	/s/ Paul Deputy
		Paul Deputy
		Chief Financial Officer
		(Principal Financial and Accounting Officer