UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30~~March 31, ~~2015~~2016

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

For the transition period from _______________to _______________.

Commission File Number 000-10690

ARABELLA EXPLORATION, INC.

(Exact name of registrant as specified in its charter)

Cayman Islands		98-1162608
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

509 Pecan Street, Suite 200
Fort Worth, Texas 76102

(Address of Principal Executive Offices including zip code)

432 897-4755

(Registrant’s Telephone Number, Including Area Code)

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

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~~ preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No q ☐

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company

Large Accelerated Filer o☐ Accelerated Filer o☐ Non-Accelerated Filer o☐ Smaller reporting company ☒ (Do not check if a smaller reporting company) ~~Smaller reporting company þ~~

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

As of ~~November~~May 2319, ~~2015~~2016, 5,020,303 shares of the issuer’s common stock, par value $0.~~001~~01, were outstanding.

TABLE OF CONTENTS

Part I	FINANCIAL INFORMATION		31
	ITEM 1	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	31
	ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1713
	ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2318
	ITEM 4	CONTROLS AND PROCEDURES.	2318
Part II	OTHER INFORMATION		2419
	ITEM 1	LEGAL PROCEEDINGS	2419
	ITEM 1A.	RISK FACTORS	2419
	ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	2419
	ITEM 3	DEFAULTS UPON SENIOR SECURITIES	2419
	ITEM 4	~~MINE~~Mine ~~SAFETY~~Safety ~~DISCLOSURES~~Disclosures	2419
	ITEM 5	OTHER INFORMATION	2419
	ITEM 6	EXHIBITS	2419

2Part I FINANCIAL INFORMATION

~~Part I~~ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL INFORMATION

ITEM 1 CONSOLIDATED FINANCIAL STATEMENTS

ARABELLA EXPLORATION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2015			December 31, 2014
	March 31, 2016			December 31, 2015
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	123,~~083~~086		$	373,~~002~~472
Accounts receivable - oil and gas sales		~~963~~1,~~650~~385,632			~~814~~1,~~689~~631,735
Prepaid expenses		-			417,617
Total current assets		1,388,718			1,705,207
Total current assets		975,733			1,235,308
Deposits and other assets		67,368			67,368
Deposits and other assets		51,280			85,000
Property and equipment, net		25,088			132,508
Receivable from affiliate		-			381,801
Oil and gas properties, successful efforts method - net		6,857,172			6,931,126
Property and equipment, net		215,277			315,826
Total assets	$	8,338,346		$	8,836,209
Oil and gas properties, successful efforts method - net		28,383,360			28,305,172
Total assets	$	29,625,650		$	30,323,107
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	21,~~455~~592,~~386~~422		$	1,~~001~~820,~~058~~209
Advances from affiliates		1,943,298			32,550
Accrued interest payable		3,050,573			2,191,620
Notes payable, net of discount		16,125,000			11,838,247
Payable to affiliates		2,193,336			1,983,155
Accrued joint interest billings payable, related party		3,207,553			3,382,514
Notes payable, net of discount		16,115,000			16,115,000
Total current liabilities		23,731,237			16,254,369
Accrued joint interest billings payable, related party		4,296,710			4,109,729
Total current liabilities		27,248,041			26,220,025
Note payable to officer		3,007,170			3,007,170
Asset retirement obligation		2724,~~283~~910			2524,~~843~~490
Total liabilities		2630,~~765~~280,~~690~~121			1929,~~287~~251,~~382~~685
Commitments and contingencies
Shareholders’ equity
Shareholders’ deficit
Preferred shares, $0.001 par value, authorized 5,000,000 shares and none issued and outstanding		-			-
Ordinary shares, $0.001 par value, authorized 50,000,000 shares; issued and outstanding 5,020,303 at September 30, 2015 and December 31, 2014		5,020			5,020
Ordinary shares, $0.001 par value, authorized 50,000,000 shares; issued and outstanding 5,020,303 at March 31, 2016 and December 31, 2015		5,020			5,020
Additional paid-in-capital		15,~~489~~550,~~487~~679			15,~~335~~540,~~684~~755
Accumulated deficit		(1237,~~634~~497,~~547~~474	)		(435,~~304~~961,~~979~~251	)
Total shareholders’ equity		2,859,960			11,035,725
Total shareholders’ deficit		(21,941,775	)		(20,415,476	)
Total liabilities and shareholders’ equity	$	298,~~625~~338,~~650~~346		$	308,~~323~~836,~~107~~209

The accompanying notes are an integral part of the condensed consolidated financial statements.

ARABELLA EXPLORATION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the three months ended September 30,						For the nine months ended September 30,
	For the three months ended
	2015			2014			2015			2014
	March 31, 2016			March 31, 2015
	(unaudited)			(unaudited)			~~(unaudited)~~			~~(unaudited)~~
Revenues:
Oil and gas revenue	$	~~394~~236,~~324~~878		$	~~953~~346,~~896~~669		$	~~1,011,509~~		$	~~2,716,093~~
Other revenue – administrative overhead		410,~~200~~800			-12,000			~~24,000~~			-
Other operating revenue – gain on sale of oil and gas properties		-			80,196			-			3,084,917
Total revenues		247,678			358,669
Total revenues		398,524			1,034,092			1,035,509			5,801,010
Costs and expenses:
Costs and expenses:
Lease operating expenses		111,306			182,529
Lease operating expenses		52,072			335,720			316,132			888,072
Ad valorem and production taxes		18,225			17,945
Ad valorem and production taxes		21,163			42,449			53,579			121,466
Depreciation, depletion and amortization		78,478			190,322
Depreciation, depletion and amortization		103,593			383,556			415,315			954,930
Accretion of asset retirement obligation		420			480
Accretion of asset retirement obligation		480			480			1,440			1,290
General and administrative expenses		646,519			995,860
General and administrative expenses		800,847			1,718,151			2,616,694			4,319,236
Total costs and expenses		854,948			1,387,136
Total costs and expenses		978,155			2,480,356			3,403,160			6,284,994
Loss from operations		(607,270	)		(1,028,467	)
Loss from operations		(579,631	)		(1,446,264	)		(2,367,651	)		(483,984	)
Other expense
Other expenses
Interest expense		928,953			2,160,657
Interest Expense, related party		-			(24,649	)		-			(40,722	)
Other expenses		928,953			2,160,657
Interest expense		(1,640,438	)		(720,219	)		(5,961,917	)		(720,219	)
Net loss	$	(1,536,223	)	$	(3,189,124	)
Other expenses		(1,640,438	)		(744,868	)		(5,961,917	)		(760,941	)
Net loss per ordinary share:
Net loss before taxes		(2,220,069	)		(2,191,132	)		(8,329,568	)		(1,244,925	)
Basic	$	(0.31	)	$	(0.64	)
Income tax benefit		-			327,885			-			-
Diluted	$	(0.31	)	$	(0.64	)
Net loss	$	(2,220,069	)	$	(1,863,247	)	$	(8,329,568	)	$	(1,244,925	)
Weighted average ordinary shares outstanding:
Loss per ordinary share:
Basic		5,020,303			5,020,303
Basic	$	(0.44	)	$	(0.37	)		(1.66	)	$	(0.25	)
Diluted		5,020,303			5,020,303
Diluted	$	(0.44	)	$	(0.37	)		(1.66	)	$	(0.25	)
Weighted average ordinary shares outstanding:
Basic		5,020,303			5,020,303			5,020,303			4,896,807
Diluted		5,020,303			5,020,303			5,020,303			4,896,807

The accompanying notes are an integral part of the condensed consolidated financial statements.

ARABELLA EXPLORATION, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016

(unaudited)

	Ordinary		Shares		Paid – In		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2014		5,020,303	$	5,020	$	15,335,684	$	(4,304,979	)	$	11,035,725
Balance at December 31, 2015		5,020,303	$	5,020	$	15,540,755	$	(35,961,251	)	$	(20,415,476	)
Stock based compensation		-		-		~~153~~9,~~803~~924		-			~~153~~9,~~803~~924
Net loss		-		-		-		(81,~~329~~536,~~568~~223	)		(81,~~329~~536,~~568~~223	)
Balance at September 30, 2015		5,020,303	$	5,020	$	15,489,487	$	(12,634,547	)	$	2,859,960
Balance at March 31, 2016		5,020,303	$	5,020	$	15,550,679	$	(37,497,474	)	$	(21,941,775	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

ARABELLA EXPLORATION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the nine months ended
	For the three months ended
	September 30, 2015			September 30, 2014
	March 31, 2016			March 31, 2015
	(unaudited)			(unaudited)
Cash flows from operating activities:	(unaudited)			(unaudited)
Cash flows from operating activities:
Net loss	$	(1,536,223	)	$	(3,189,124	)
Net loss	$	(8,329,568	)	$	(1,244,925	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization		78,478			190,322
Depreciation, depletion and amortization		415,315			954,930
Accretion of asset retirement obligation		420			480
Accretion of asset retirement obligation		1,440			1,290
Amortization of interest expense		-			400,000
Amortization of interest expense		400,000			200,000
Amortization of deferred financing costs		-			751,198
Amortization of deferred financing costs		2,003,193			250,399
Amortization of debt discount		-			809,460
Amortization of debt discount		2,158,560			269,820
Stock based compensation		9,924			51,268
Stock based compensation		153,803			209,607
Loss on disposal of fixed assets		52,280			-
Loss on disposal of fixed assets		-			429
Gain from sale of oil and gas properties		-			(3,084,917	)
Changes in operating assets and liabilities:
Accounts receivable - oil and gas sales		~~(148~~246,~~960~~103	)		14143,~~609~~305
Prepaid expenses		17,617			8,026
Receivable from affiliated companies		-			303,668
Deposits		33,720			(35,000	)
Accrued joint interest billing payable		186,981			(12,904	)
Receivable from affiliated companies		381,801			(591,246	)
Accrued interest expense		858,953			-
Payable to affiliated companies		-			21,750
Accounts payable and accrued liabilities		(176,100	)		1,153,996
Accrued joint interest billing payable		(174,961	)		(2,206,275	)
Net cash (used in) provided by operating activities		(279,183	)		601,669
Accounts payable and accrued liabilities		1,579,326			565,920
Net cash used in operating activities		(1,508,714	)		(4,665,583	)
Cash flows from investing activities:
Additions to property and equipment		-			~~(496,969~~-	)
Additions to oil and gas properties		(~~392~~1,~~953~~384	)		(17599,~~538,736~~774	)
Proceeds from sale of oil and gas properties		-			~~5,665,121~~-
Net cash used in investing activities		(~~392~~1,~~953~~384	)		(12599,~~370,584~~774	)
Cash flows from financing activities:
Proceeds from sale of ordinary shares		-			2,000,009
Cash advance from affiliate		210,181			-
Proceeds from Senior Secured Notes		-			16,000,000
Net cash provided by financing activities		210,181			-
Proceeds from Directors’ Loans		-			1,300,000
Net (decrease) increase in cash and cash equivalents		(70,386	)		1,895
Repayment of Directors’ Loans		-			(1,300,000	)
Cash and cash equivalents at beginning of period		73,472			3,002
Prepaid interest, Senior Secured Notes		-			(1,200,000	)
Cash and cash equivalents at end of period	$	3,086		$	4,897
Deferred financing cost		-			(1,787,000	)
Proceeds from advances from affiliates		1,910,748			-
Net cash provided by financing activities		1,910,748			15,013,009
Net increase (decrease) in cash and cash equivalents		9,081			(2,023,158	)
Cash and cash equivalents at beginning of period		3,002			2,118,533
Cash and cash equivalents at end of period	$	12,083		$	95,375
Cash for:
Interest	$	-70,000		$	-
Taxes	$	-		$	-
Non-cash investing and financing activities:
Accrued liability converted to term note	$	125,000		$	-
Addition to deferred financing costs	$	-			-
Addition to oil and gas properties through increase in accrued joint interest billings payable	$	-		$	-

The accompanying notes are an integral part of the condensed consolidated financial statements.

ARABELLA EXPLORATION, INC.

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMNTS

1. Organization and Operations of the Company

Organization

Arabella Exploration, Inc. (formerly known as Lone Oak Acquisition Corporation) (the “Parent”) was incorporated in the Cayman Islands on June 17, 2010 as a blank check company whose objective was to acquire an operating business. Parent’s wholly owned subsidiary Arabella Exploration, Limited Liability Company (“Arabella LLC”) was formed in 2011, to acquire interests in low risk prospective and producing oil and gas properties primarily in the Permian Basin in West Texas. The Parent and Arabella LLC (collectively the “Company”) completed a reverse merger on December 24, 2013 as more fully described below in Note 2.

Arabella Operating, LLC (“AOC”), a wholly owned subsidiary of the Parent, was formed in 2014 to assume the operations role for the Parent. AOC posted a surety bond with the Texas Railroad Commission and is the operator of record for the Company’s oil and gas properties as of December 31, 2014. Prior to December 31, 2014 Arabella Petroleum Company, LLC, an affiliate of Jason Hoisager, the Parent’s Chief Executive Officer was the operating of record for the Company’s acreage.

Nature of Business

The Company is an independent exploration and production company focused on the acquisition and development of unconventional oil and natural gas resources in the Permian Basin in West Texas. The Company owns acreage leases and participates in the drilling of oil and natural gas wells with other working interest partners. Due to the capital intensive nature of oil and natural gas drilling activities, the operating company responsible for conducting the drilling operations may request advance payments from the working interest partners for their share of the costs.

Basis of Presentation

The ~~condensed~~ consolidated financial statements include the accounts of the Company and its subsidiaries after all significant intercompany balances and transactions have been eliminated upon consolidation.

These financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). They reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for interim periods, on a basis consistent with the annual audited financial statements. All such adjustments are of a normal recurring nature. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted pursuant to such rules and regulations, although the Company believes the disclosures are adequate to make the information presented not misleading. This Quarterly Report on Form 10–Q should be read in conjunction with the Company’s most recent Annual Report on Form 10–K for the fiscal year ended December 31, ~~2014~~2015, which contains a summary of the Company’s significant accounting policies and other disclosures.

Revised Prior Period Amounts

The Company revised the presentation of oil and gas properties, successful efforts method - net, notes payable, net of discount and accrued joint interest billings payable – related party in its consolidated balance sheet for the year ending December 31, 2014 to reverse the effect of an over-accrual of joint interest billings payable – related party in the amount of $737,974, more fully discussed in Note 6 and to reflect a $125,000 liability as described more fully in Note 9. Tabular summaries of the revisions are presented below:

	Consolidated Balance Sheet December 31, 2014
	Previously Reported			Revisions			Revised Reported
Oil and gas properties, successful efforts method - net	$	29,043,146		$	(737,974	)	$	28,305,172
Accounts payable and accrued liabilities		876,058			125,000			1,001,058
Accrued joint interest billings payable, related party		4,120,488			(737,974	)		3,382,514
Accumulated deficit		(4,179,979	)		(125,000	)		(4,304,979	)

	Consolidated Income Statement Year ended December 31, 2014
	Previously Reported			Revisions			Revised Reported
Net (loss) income	$	(4,691,549	)	$	(125,000	)	$	(4,816,549	)
Net (loss) income per ordinary share:
Basic	$	(0.95	)	$	(0.03	)	$	(0.98	)
Diluted	$	(0.95	)	$	(0.03	)	$	(0.98	)

The Company analyzed the revisions under SEC staff guidance (Staff Accounting Bulletin 108) and determined that the revisions are immaterial on a quantitative and qualitative basis and that it is probable that the judgment of a reasonable person relying upon the financial statements would not have been changed or influenced by the inclusion or correction of the items in the year ended December 31, 2014. Therefore, amendment of the previously filed annual report on Form 10-K is not considered necessary. However, if the adjustments to correct the errors had been recorded in the first quarter of 2015, the Company believes the impact would have been significant to the first quarter and would impact comparisons to prior periods. The Company has also revised in this current Form 10-Q filing, and plans to revise in future filings of its reports on Form 10-K, the previously reported annual financial statements for 2014 on Form 10-K for these amounts.

2. Reverse Merger

Parent and Arabella LLC (the wholly owned subsidiary) entered into a reverse merger on December 24, 2013 where the Parent issued 3,125,000 ordinary shares to the holders of all of the issued and outstanding interests of Arabella LLC immediately prior to the time of the Acquisition in exchange for 100% of the units of Arabella LLC. In connection with the reverse merger, 1,704,826 of the Parent’s ordinary shares remained outstanding and the remaining funds in the trust account, in the amount of $5,183,417, were distributed to the Parent. With that exchange, the Company’s Chief Executive Officer Jason Hoisager owns the majority of the Company’s ordinary shares. In connection with the reverse merger, 1,705,002 of additional ordinary shares (“earnout shares”) will be awarded to certain individuals associated with Arabella LLC over the following three years if the Company achieves its earnout goals. The shares will be ~~issue~~issued in equal thirds if on each of December 31, 2014, 2015 and 2016 the Company shall have increased its proved reserves over the immediately preceding year by 100%, 66% and 33%, respectively and ~~conforms~~conformed ~~with~~to certain cost metrics. The Company has not determined ~~whether~~ the ~~goals~~ultimate ~~have~~disposition ~~been~~of ~~met~~these shares for 2015 or 2014.

The merger was accounted for as a “reverse merger” and a recapitalization since the shareholders of Arabella LLC (i) owned a majority of the outstanding ordinary shares of the Company immediately following the completion of the transaction, and (ii) have the significant influence and the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity, and Arabella LLC’s senior management dominates the management of the combined entity in following the completion of the transaction in accordance with the provision of Financial Accounting Standards Board Accounting Standards Codification (“FASB-ASC”) Topic 805 Business Combinations. Accordingly, Arabella LLC is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of Arabella LLC. Accordingly, the assets and liabilities and the historical operations that are reflected in the financial statements are those of Arabella LLC and are recorded at the historical cost basis of Arabella LLC. Parent’s assets, liabilities and results of operations were consolidated with the assets, liabilities and results of operations of Arabella LLC after the merger.5

8The merger was accounted for as a “reverse merger” and a recapitalization since the shareholders of Arabella LLC (i) owned a majority of the outstanding ordinary shares of the Company immediately following the completion of the transaction, and (ii) have the significant influence and the ability to elect or appoint or to remove a majority of the members of the governing body of the combined entity, and Arabella LLC’s senior management dominates the management of the combined entity in following the completion of the transaction in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (“FASB-ASC”) Topic 805 Business Combinations. Accordingly, Arabella LLC is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of Arabella LLC. Accordingly, the assets and liabilities and the historical operations that are reflected in the financial statements are those of Arabella LLC and are recorded at the historical cost basis of Arabella LLC. Parent’s assets, liabilities and results of operations were consolidated with the assets, liabilities and results of operations of Arabella LLC after the merger.

3. Recent Developments, Liquidity and Ability to Continue as a Going Concern

The accompanying financial statements have been prepared in ~~U.S.~~US dollars and in accordance with accounting principles generally accepted in the United States on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company commenced oil and gas exploration activities in 2011 and at ~~September~~March 3031, ~~2015~~2016 had an accumulated deficit of ~~approximately~~ $1237,~~635~~497,~~000~~474 and a working capital deficit of ~~approximately~~ $2225,~~756~~859,~~000~~323 largely consisting of ~~notes~~the ~~payable~~Notes discussed ~~due~~below ~~in less than twelve months~~ as well as accounts payable and advances from affiliates. The Company is not currently engaged in any new drilling for oil and gas due to the depressed price for oil. The current oil pricing environment and related conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to generate revenue from oil and gas operations or asset sales and achieve profitable operations and to generate sufficient cash flow from financing and operations to meet its obligations, as they become payable.

Management is exploring alternatives to its existing oil and gas activities in the current oil pricing environment. Although there are no assurances that management’s plans will be realized management believes that the Company will be able to continue operations in the future. Accordingly, no adjustment relating to the recoverability and classification of recorded asset amounts and the classification of liabilities has been made to the accompanying financial statements in anticipation of the Company not being able to continue as a going concern. The Company entered into a Purchase and Sale Agreement with a third party buyer (“Buyer”), dated as of July 1, 2015, and a letter agreement with McCabe Petroleum Corporation (“McCabe”), dated as of April 15, 2015, pursuant to which the Company would sell its ownership interest in certain of its properties for cash and properties. Pursuant to the agreements, the transactions would have closed simultaneously and the Company would transfer its Locker State, Graham, Woods, Jackson and Emily Bell prospects to the Buyer and would have received cash from the Buyer and certain properties from McCabe. On September 1, 2015, the Company received a text message and email from the Buyer terminating the PSA pursuant to Section 13.1 of the PSA. The Buyer cited several items to justify its unexpected cancelation of the PSA including a number of standard closing information items as well as certain third party approvals that had not been obtained as of that date. The letter agreement with McCabe remains in place but is dependent on a transaction similar to the one contemplated in the PSA being consummated simultaneously. The Company is currently searching for such a replacement or another strategic alternative.

InThe ~~the~~Company ~~event~~is ofnot acurrently ~~return to~~ drilling, ~~the~~any ~~Company~~new ~~expects~~wells; ~~that,~~if ~~depending~~it onwere ~~the~~to ~~pace~~resume of drilling ~~and the pricing environment for oil and gas,~~ it ~~could~~might need ~~approximately~~ $40 million toover ~~fund~~a ~~its operations during the first~~ twelve ~~months~~month ~~of activity~~period, which ~~will~~would include minimum annual property lease payments, well expenditures and operating costs and expenses. ~~There~~However, unless ~~can~~oil beprices norebound ~~assurance~~significantly ~~that~~in ~~the~~a ~~price~~short oftime ~~oil~~it ~~will~~is ~~improve~~highly tounlikely that the ~~point~~Company ~~that~~will resume drilling ~~resumes~~or drill at such a high pace. In the event that ~~the~~it ~~Company~~ begins new drilling operations, it may require additional funding in 2016. ~~There can be no assurance that financing will be available on acceptable terms if at all.~~

On September 2, 2014 the Company sold ~~the first~~ $16,000,000 of Notes under its $45,000,000 Senior Secured Note Facility (See Note 8 – Senior Secured Notes), with further sales during the term of the facility to be based upon reserve based performance hurdles. No additional Notes were issued. The Notes were due on September 2, 2015; the Company was unable to repay them and the Company is continuing to ~~work~~ negotiate with its Senior Lender. toOn ~~find~~January 21, 2016 the ~~best~~Company ~~alternative~~received ~~solution~~notice ~~for~~from its Senior Lender that they were declaring the Notes in default as of June 4, 2015.

~~Additionally,~~In in the event that the Company is able to redeem its initial public offering warrants as discussed in Note 1211 – Shareholders Equity, the initial public offering warrants would likely be exercised resulting in the receipt of proceeds up to $20,532,500. toGiven ~~further sustain~~ the Company’s ~~operations.~~current ~~There~~stock ~~can~~price, beit nois ~~assurance~~unlikely that the Company will redeem the initial public offering warrants in the near future.

4. Summary of Significant Accounting Policies

Principals of Consolidation

The accompanying consolidated financial statements of the Company include the accounts of Arabella Exploration Inc. and its wholly owned subsidiaries Arabella Exploration, ~~Limited Liability Company~~LLC, Arabella Operating, LLC and Arabella Midstream, LLC. All significant ~~intercompany~~ intercompany transactions have been eliminated in consolidation.

Use of Estimates

Preparation of the Company’s consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates pertain to proved oil and natural gas reserves and related cash flow estimates used in impairment tests of long-lived assets, estimates of future development, dismantlement and abandonment costs, estimates relating to certain oil and natural gas revenues and expenses, estimates of the valuation allowance for deferred tax assets and estimates of expenses related to legal, environmental and other contingencies. Certain of these estimates require assumptions regarding future commodity prices, future costs and expenses and future production rates. Actual results could differ from those estimates.

As an oil and natural gas producer, the Company’s revenue, profitability and future growth are substantially dependent upon the prevailing and future prices for oil and natural gas, which are dependent upon numerous factors beyond its control such as economic, political and regulatory developments and competition from other energy sources. The energy markets have historically been very volatile and there can be no assurance that oil and natural gas prices will not be subject to wide fluctuations in the future. A substantial or extended decline in oil and natural gas prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows and quantities of oil and natural gas reserves that may be economically produced.

Estimates of oil and natural gas reserves and their values, future production rates and future costs and expenses are inherently uncertain for numerous reasons, including many factors beyond the Company’s control. Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of data available and of engineering and geological interpretation and judgment. In addition, estimates of reserves may be revised based on actual production, results of subsequent exploration and development activities, prevailing commodity prices, operating costs and other factors. These revisions may be material and could materially affect future depreciation, depletion and amortization expense, dismantlement and abandonment costs, and impairment expense.

5. Property and Equipment

Property and equipment include furniture and fixtures, computer equipment and software and transportation equipment:

	September 30,			December 31,
	March 31,			December 31,
	2015			2014
	2016			2015
Property and equipment, gross	$	~~435~~52,~~679~~306		$	~~435~~346,~~679~~199
Less: Accumulated depreciation and amortization		(220,402	)		(119,853	)
Less: Accumulated depreciation, depletion, amortization and impairment		(27,218	)		(213,691	)
Property and Equipment, net	$	~~215~~25,~~277~~088		$	~~315~~132,~~826~~508

Depreciation expense was $273,~~866~~141 and $44,~~771~~816 for the three months ~~and $100,549 and $87,392 for the nine months~~ ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~ 2015, respectively.

10Effective January 1, 2016 the Company transferred certain of its fixed assets to a third party management company controlled by one of its directors in return for the partial, non-cash settlement of certain indebtedness in the amount of $52,000. The net book value of the assets was $104,280 and they were appraised at under $50,000 in current conditions. The Company incurred a loss on disposal of fixed assets of $52,280 which is accounted for in general and administrative expenses for the period. The Company currently leases this equipment for its use from that third party management company, inclusive of utilities and other office expenses for $12,500 per month.

6. Oil and Gas Properties

The following table sets forth the Company’s oil and gas properties:

	September 30,			December 31,
	March 31,			December 31,
	2015			2014
	2016			2015
Proved oil and gas properties (1)	$	2522,~~434~~318,~~284~~144		$	2522,~~168~~316,~~514~~760
Less: Accumulated depreciation, depletion, amortization and impairment		(220,~~078~~246,~~497~~902	)		(120,~~763~~171,~~731~~564	)
Proved oil and gas properties, net		232,~~355~~071,~~787~~242			232,~~404~~145,~~783~~196
Unproved oil and gas properties		54,~~027~~785,~~573~~930			4,~~900~~785,~~389~~930
Total oil and gas properties, net	$	286,~~383~~857,~~360~~172		$	286,~~305~~931,~~172~~126

(1) Included in the Company’s proved oil and gas properties are estimates of future asset retirement costs of $2321,~~575~~105 at ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015.

Depletion expense was $75,~~726~~337 and $~~338~~145,~~785~~506 for the three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014, respectively. Depletion expense was $314,766 and $854,381 for the nine months ended September 30,~~ 2015 ~~and 2014~~, respectively.

The Company accrued certain amounts during 2014 to reflect estimated spending on oil and gas leases based upon the overall spending during 2014. As a result of declining oil prices, those amounts were overestimated and the Company revised certain accruals for the year ended December 31, 2014. The preceding table reflects the revisions described in Note 1.

7. Asset Retirement Obligations

The following table reflects the changes in the Company’s ARO during the ~~nine~~three months ended ~~September~~March 3031, 2015 and the year ended December 31, 2014:

	September 30,		December 31,
	March 31,		December 31,
	2015		2014
	2016		2015
Asset retirement obligation — beginning of period	$	2524,~~843~~490	$	2125,~~171~~843
Additions to ARO from new properties		-		~~6,030~~-
Sales or abandonments of properties		-		(3,~~128~~273	)
Accretion expense during period		~~1,440~~420		1,~~770~~920
Asset retirement obligation — end of period	$	2724,~~283~~910	$	2524,~~843~~490

8. Senior Secured Notes

On September 2, 2014 the Company entered into a $45,000,000 Senior Secured Note Facility with a one year borrowing period and ~~one~~ a one year term per draw (the “Notes”) with a New York based investor (the “Investor”). The ~~initial~~ sale of $16,000,000 in Notes occurred on September 2, 2014 with further sales to be based upon reserve based performance hurdles. No additional Notes were issued. The Notes bear interest at an annual rate of 15%, of which six months was prepaid at close. The Notes became due on September 2, 2015; the Company was unable to repay them and is continuing to ~~work~~negotiate with its Senior Lender ~~to find the best alternative solution for the Notes~~. The Company paid a 3% origination fee to the Investor and a 5% cash commission to its advisors on the transaction. In conjunction with the sale of the Notes, the Company issued warrants to purchase 1,300,000 of the Company’s ordinary shares at a price of $5.00 per share (the “Financing Warrants”). The Financing Warrants expire on September 2, 2019.

The ~~Senior Secured~~ Notes are carried at their face value less the amortized amount of the debt discount associated with the relative fair value at issuance of the Financing Warrants. The fair value of the Financing Warrants at issue was determined to be approximately $4,059,300 using the Black-Scholes ~~option~~ pricing model. Significant assumptions used in the valuation include an expected term of 5 years, an expected volatility of 51.0% based on historical value and corresponding volatility of the Company’s peer group stock price for a period consistent with the warrants expected term, a risk free interest rate of 1.69% based on the a U.S. Treasury Note with a similar term to the expected term on the date of the grant, and an expected dividend yield of 0.0% as the Company does not expect to pay dividends in the near future. The relative fair value of the Financing Warrants was then determined by applying the ratio of value of the Notes to the value of the Notes plus the fair value of the Financing Warrants to the amount of the Notes. Using this metric, the relative fair value of the Financing Warrants was determined to be $3,237,840. The debt discount is amortized using the straight line method over the one year term of the Notes. ~~As of September 2, 2015, the Notes became due and the debt discount has been fully amortized, as such the Notes are presented at their full face value as of September 30, 2015.~~

118

~~The~~Interest ~~Company~~expenses ~~has~~for ~~elected~~the ~~early~~period ~~adoption~~ended ofMarch ~~accounting~~31, ~~Standards~~2016 ~~Update~~was $928,953 (~~ASU)~~including ~~No. 2015-03~~$328,953 ~~Interest~~in -possible ~~Imputation~~penalty rate interest) of ~~Interest~~which ~~(Subtopic~~$70,000 ~~835-30):~~was ~~Simplifying~~paid ~~the~~in ~~Presentation~~cash ofand ~~Debt~~$858,953 ~~Issuance~~was ~~Costs,~~accrued. asInterest ~~such~~expense ~~deferred~~for ~~financing~~the ~~costs~~period ended March 31, ~~net~~2015 ofwas ~~amortization~~a dototal ~~not~~of ~~appear~~$1,409,460 consisting inof ~~current~~$600,000 ~~assets~~of interest expense and ~~are~~$809,460 ~~instead~~of ~~netted~~accretion ~~against~~of the ~~face~~debt ~~value~~discount. Amortization of deferred financing costs was $751,198 for the ~~Notes~~same period.

	September 30,			December 31,
	2015			2014
Senior Secured Notes Payable	$	16,000,000		$	16,000,000
Less:
Debt discount – Financing Warrants		(3,237,840	)		(3,237,840	)
Deferred financing costs		(3,004,790	)		(3,004,790	)
Add:
Accretion of debt discount		3,237,840			1,079,280
Amortization of deferred financing cost		3,004,790			1,001,597
Senior Secured Notes Payable, net of discount	$	16,000,000		$	11,838,247

On January 21, 2016 the Company received notice from its Senior Lender that they were declaring the Notes in default as of June 4, 2015. While the Company does not necessarily believe that additional interest is due, it has recorded an additional accrued interest charge in the amount of $258,953 at March 31, 2016 and $591,620 at December 31, 2015 to reflect the maximum possible difference between the original Note interest and the default Note interest provisions.

Interest expense for the three months ended September 30, 2015 was a total of $1,139,640 consisting of $600,000 of interest expense and $539,640 of accretion of the debt discount. Amortization of deferred financing costs was $500,798 for the same period. Interest expense for the three months ended September 30, 2014 was a total of $469,820 consisting of $200,000 of interest expense and $269,820 of accretion of the debt discount. Amortization of deferred financing costs was $250,399 for the same period. Interest expense for the nine months ended September 30, 2015 was a total of $3,958,560 consisting of $1,800,000 of interest expense and $2,158,560 of accretion of the debt discount. Amortization of deferred financing costs was $2,003,193 for the same period. Interest expense for the nine months ended September 30, 2014 was a total of $469,820 consisting of $200,000 of interest expense and $269,820 of accretion of the debt discount. Amortization of deferred financing costs was $250,399 for the same period. Pending discussions with its Senior Lender concerning the disposition of the Notes, the Company has continued to accrue $200,000 per month in interest expenses though there is no assurance that this will be the amount agreed to by the Company and the Senior Lender.

9. Term Note

On May 4, 2015 the Company reached a settlement agreement to pay Heartland Bank (“Heartland”) $125,000 to settle Heartland’s demands that the Company pay a break-up fee and certain costs relating to a financing that the Company explored with Heartland but ultimately rejected in favor of other financing. Under the settlement, the Company issued Heartland a $250,000 Term Note (the “Term Note”) and agreed to pay $10,000 on the 15th of every month towards that note. However, the full face amount of the Term Note is intended only to be punitive in the event of non-compliance and, upon the maturity of the Senior Secured Notes, the Company will pay an amount of $125,000, less payments made to date, in full satisfaction of the Term Note. ~~The~~ The Term Note is not interest bearing. The Company made only a single $10,000 payment on the Term Note in 2015, leaving a $115,000 balance; the final disposition of the Term Note has not been determined.

~~Because~~10. Note ~~the~~Payable ~~events leading~~ to the Heartland lawsuit occurred during 2014, the Company has accounted for the liability as if it had been incurred during the year ended December 31, 2014 and adjusted its financials accordingly as described in Note 1.Officer

10As of March 31, 2016 and December 31, 2015, the Company’s note payable to officer is payable to Jason Hoisager, the founder of Arabella LLC, with an outstanding balance of $3,007,170. ~~Notes~~The founder is currently the President of the Company and is a director ~~Payable~~and tomajority ~~Directors~~shareholder of the Company. The note payable is non-interest bearing and matures in December of 2023.

~~On May 1, 2014 the Company received a loan from Hauser Holdings, LLC an affiliate of Richard Hauser, one of our directors~~11. ~~The $800,000~~ ~~loan~~Shareholders’ ~~was due August 31, 2014 and bore an interest rate of 10% per annum.~~Equity

On June 10, 2014 the Company received a loan from BBS Capital Fund, LP an affiliate of Berke Bakay, one of our directors. The $500,000 loan was due August 31, 2014 and bore an interest rate of 10% per annum.

On September 4, 2014 the Company repaid its loans from BBS Capital Fund, LP and Hauser Holdings, LLC with accrued interest for total repayment of $512,500 and $828,222, respectively.

The Company accrued $24,649 and $40,722 in interest expenses for these loans in the three and nine months ended September 30, 2014, respectively.

11. Note Payable to Officer

As of September 30, 2015 and December 31, 2014, the Company’s note payable to officer is payable to Jason Hoisager, the founder of Arabella Exploration LLC, with an outstanding balance of $3,007,170. The founder is currently the President of the Company and is a director and majority shareholder of the Company. The note payable is non-interest bearing and matures in December of 2023.

12. Shareholders’ Equity

The Company is authorized to issue 50,000,000 ordinary shares and 5,000,000 preferred shares with a par value of $0.001 per share.

Ordinary Shares

OnThe ~~June 26, 2014 the~~ Company’s ~~Chief~~is ~~Executive~~authorized ~~Officer~~to ~~Jason~~issue ~~Hoisager purchased 190~~50,~~477~~000,000 ~~of the Company’s~~ ordinary shares ~~for~~ ~~$10.50~~with ~~per~~a ~~share~~par ~~for~~value ~~an aggregate~~ of $~~2,000,009~~0.001 inper ~~a private placement~~share.

Preferred Shares

The Company is authorized to issue up to 5,000,000 preferred shares with a par value of $0.001 and the characteristics of the preferred shares will be determined by the Board of Directors of the Company from time to time.

Warrants

In connection with Parent’s initial public offering (“Offering”) in March 2011, the Company issued 4,106,500 offering warrants, which entitles the holders to purchase ordinary shares at the price of $5.00 per share, commencing on the date of the business combination, if the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the offering warrants and a current prospectus relating to such ordinary shares, and expiring three years from that date. The Company may redeem the offering warrants at a price of $0.01 per offering warrant upon 30 days’ notice while the offering warrants are exercisable, only when the last sale price of the ordinary shares is at least $10.50 per share for any 20 trading days within a 30 trading day period, provided that a current registration statement is in effect for the ordinary shares underlying the offering warrants. If not exercised, the offering warrants expire on December 24, 2016. If the Company redeems the offering warrants, management of the Company will have the option to require any holder that wishes to exercise his offering warrants to do so on a cashless basis.

Simultaneously with the Offering, certain of the shareholders purchased 6,600,000 insider warrants at the price of $0.35 per insider warrant (for an aggregate purchase price of $2,310,000) from the Company. These insider warrants have the same terms as the 4,106,500 offering warrants referred to in the preceding paragraph, except these insider warrants are not redeemable and the insider warrants are exercisable for cash or on a cashless basis.

In conjunction with the sale of the Notes, the Company issued the Financing Warrants to purchase 1,300,000 of the Company’s ordinary shares at a price of $5.00. The Financing Warrants expire on September 2, 2019.

Unit Purchase Option

In connection with the Offering, the Company issued unit purchase options to purchase an aggregate of 400,000 units at an exercise price of $8.80 per unit to its underwriters and designees of the underwriter. Each unit consists of one ordinary share and one redeemable ordinary share purchase warrant, which contains a provision for cashless exercise and has the same terms as the 4,106,500 initial public offering warrants. The unit purchase option expires on December 24, 2018.

Stock-based Compensation

On May 5, 2014 the Company granted each non-employee director 30,000 stock options to purchase its ordinary shares for joining the board and 20,000 stock options to purchase its ordinary shares for the year of service commencing from January 30, 2014. All, 50,000 stock options in aggregate, vest ratably over two years and expire five years from the grant date. The stock options have an exercise price of $6.15 per share, which represents the closing price of the Company’s ordinary shares the day prior to the grant ~~option~~ date. The grant date fair value of the options granted was determined to be $558,950 using the Black-Scholes ~~option~~ pricing model. Significant assumptions used in the valuation include an expected term of 3.5 years utilizing the “Simplified Method” as the Company does not have sufficient historical experience to estimate an expected term, an expected volatility of 49.0% based on historical value and corresponding volatility of the Company’s peer group stock price for a period consistent with the stock option expected term, a risk free interest rate of 0.9% based on the a U.S. Treasury Note with a similar term to the expected term on the date of the grant, and an expected dividend yield of 0.0% as the Company does not expect to pay dividends in the near future. According to the terms of the option plan, vesting was retroactive to the beginning of service in January 2014; as such two quarters of vesting was recorded during the three months ended June 30, 2014. Messrs. Bush and Boyuls, two of the directors, resigned from the board on September 9, 2014. The remaining members of the board voted to allow them to continue in the vesting of their granted stock options as if they had served out their term. However, as no further service is required for the vesting, the Company expensed the entire amount of the grant in 2014. ~~Accordingly,~~All ~~aggregated~~ stock-based compensation expense under the 2014 grant ~~for~~had ~~the nine months ended September 30, 2015 and 2014 was $125,764 and $209,606, respectively. Unrecognized~~been ~~compensation~~recognized ~~expense for the nine months ended September 30, 2014 was $349,344. Unrecognized compensation expense~~ as of ~~September 30, 2015, relating to non-vested common stock options is $41,921 and is expected to be recognized through~~ the fourth quarter of 2015. At ~~September~~March 3031, ~~2015~~2016, no options had been exercised and no options had been forfeited. As of ~~September~~March 3031, ~~2015~~2016 the aggregate intrinsic value of these options was $0.

On February 2, 2015 the Company granted each non-employee director 20,000 stock options to purchase its ordinary shares for the year of service commencing from January 30, 2015. All, 20,000 stock options vest ratably over two years on a quarterly basis and expire five years from the grant date. The stock options have an exercise price of $3.35 per share, which represents the closing price of the Company’s ordinary shares the day prior to the grant date. The grant date fair value of the options granted was determined to be $74,772 using the Black-Scholes pricing model. Significant assumptions used in the valuation include an expected term of 3.5 years utilizing the “Simplified Method” as the Company does not have sufficient historical experience to estimate an expected term, an expected volatility of 51.0% based on historical value and corresponding volatility of the Company’s peer group stock price for a period consistent with the stock option expected term, a risk free interest rate of 0.8% based on the a U.S. Treasury Note with a similar term to the expected term on the date of the grant, and an expected dividend yield of 0.0% as the Company does not expect to pay dividends in the near future. Aggregated stock-based compensation expense under the 2015 grant for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 was $289,~~040~~347. Unrecognized compensation expense as of ~~September~~March 3031, ~~2015~~2016, ~~relating~~ relating to non-vested common stock options is $4628,~~733~~040 and is expected to be recognized through the fourth quarter of 2016. At ~~September~~ ~~30,~~March ~~2015~~31, 2016, no options had been exercised and no options had been forfeited. As of ~~September~~March 3031, ~~2015~~2016 the aggregate intrinsic value of these options was $0.

~~A summary of stock option activity for the nine months ended September 30, 2015 is presented below:~~10

	Number of Options		Weighted Average Exercise Price
Outstanding at December 31, 2014		250,000	$	6.15
Granted		60,000	$	3.35
Forfeited		-		-
Exercised		-		-
Outstanding at September 30, 2015		310,000	$	5.61
Exercisable at September 30, 2015		241,250	$	5.89

On February 11, 2016 the Company granted each non-employee director 20,000 stock options to purchase its ordinary shares for the year of service commencing from January 30, 2016. All, 20,000 stock options vest ratably over two years on a quarterly basis and expire five years from the grant date. The stock options have an exercise price of $0.18 per share, which represents the closing price of the Company’s ordinary shares the day prior to the grant date. The grant date fair value of the options granted was determined to be $4,620 using the Black-Scholes pricing model. Significant assumptions used in the valuation include an expected term of 3.5 years utilizing the “Simplified Method” as the Company does not have sufficient historical experience to estimate an expected term, an expected volatility of 59.0% based on historical value and corresponding volatility of the Company’s peer group stock price for a period consistent with the stock option expected term, a risk free interest rate of 0.8% based on the a U.S. Treasury Note with a similar term to the expected term on the date of the grant, and an expected dividend yield of 0.0% as the Company does not expect to pay dividends in the near future. Aggregated stock-based compensation expense under the 2016 grant for the three months ended March 31, 2016 was $578. Unrecognized compensation expense as of March 31, 2015, relating to non-vested common stock options is $4,042 and is expected to be recognized through the fourth quarter of 2017. At March 31, 2016, no options had been exercised and no options had been forfeited. As of March 31, 2016 the aggregate intrinsic value of these options was $0.

14A summary of stock option activity for the three months ended March 31, 2016 is presented below:

13. Related Party Transactions

	Number of Options		Weighted Average Exercise Price
Outstanding at December 31, 2015		310,000	$	5.61
Granted		60,000	$	0.18
Forfeited		-		-
Exercised		-		-
Outstanding at March 31, 2016		370,000	$	4.73
Exercisable at March 31, 2016		295,000	$	5.64

12. Related Party Transactions

Mr. Jason Hoisager, the Company’s Chief Executive Officer, owns 100% of Arabella Petroleum Company LLC (“Petroleum”), which was the operating company for substantially all the wells that the Company has its working interest in prior to December 31, 2014. As Petroleum drilled and completed the wells, Petroleum billed the Company for its working ownership percentage of the capital costs. After the completion of each well, Petroleum sold the oil and gas and provided the Company its working interest revenue, net of production taxes and charges for the lease operating expenses.

As of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015, the Company owed Petroleum $2,~~894~~952,~~396~~190 ~~and $3,382,514, respectively,~~ in joint interest billings to vendors for the well ~~costs. During the year ended December 31, 2014, the Company paid Petroleum $17,072,542~~ ~~in capital~~ costs ~~for the wells~~. ~~Petroleum was responsible for collecting the revenue from the purchasers and providing the Company its accounts receivable, which totaled $814,689 at December 31, 2014.~~ As of December 31, 2014 ~~Petroleum owed the Company $381~~,~~801,~~ ~~a portion of the costs from the expense sharing agreement between the companies. As of December 31, 2014,~~ Petroleum has ceased to provide these services to the Company and Arabella Operating, LLC, a wholly owned subsidiary of the Company, is the operator of record for the Company’s wells.

~~During~~The ~~the~~Company ~~nine~~has ~~months~~a ~~ended~~month ~~September~~to ~~30,~~month ~~2015,~~consulting ~~advances~~agreement with an affiliate of ~~$1,910,748~~one ~~were~~of ~~received~~its ~~from~~directors ~~affiliates~~to provide certain financial and ~~shareholders~~operation services for $24,584 per month.

14Effective January 1, 2016 the Company transferred certain of its fixed assets to a third party management company controlled by one of its directors in return for the partial, non-cash settlement of certain indebtedness in the amount of $52,000. ~~Other~~The net book value of the assets ~~Operating~~was ~~Revenue~~$104,280 –and ~~Gain~~they were appraised at under $50,000 in current conditions. The Company incurred a loss on ~~Sale~~disposal of ~~Oil~~fixed assets of $52,280 which is accounted for in general and ~~Gas~~administrative ~~Properties~~expenses for the period. The Company currently leases this equipment for its use from that third party management company, inclusive of utilities and other office expenses for $12,500 per month.

During the ~~third~~three ~~quarter~~months ofended ~~2014~~March 31, ~~Arabella~~2016 ~~sold~~and ~~undeveloped~~the ~~leased~~year ~~acreage~~ended ~~for~~December ~~$293~~31,~~333~~ in2015, ~~cash~~advances of $210,181 and ~~recognized~~$1,950,605, arespectively, were ~~gain~~received onfrom affiliates of the ~~sale~~Company’s ofChief Executive Officer and other shareholders. These advances are non-interest ~~the~~bearing ~~property~~and ofpayable ~~$80,196~~on demand.

During the first nine months of 2014, Arabella sold undeveloped leased acreage (which includes the acreage identified in the immediately preceding paragraph) for $5,337,387 in cash and recognized a gain on the sale of the properties of $3,038,519. Contingent conditions on the sale of the Weatherby acreage may result in an additional $78,300 of revenue.11

~~During~~13. ~~the~~Income ~~second quarter of 2014, Arabella sold developed, non-operated leased acreage for $327,734 in cash and recognized a gain on the sale of the properties of $46,398.~~Taxes

Total acreage sales resulted in $293,333 and $5,665,121 in cash and gains of $80,196 and $3,084,917 for the three and nine months ended September 30, 2014, respectively.

15. Income Taxes

As of December 23, 2013, Arabella LLC elected to be treated as a corporation for tax purposes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized. The Company has placed a 100% valuation allowance against the net deferred tax asset because future realization of these assets is not assured.

The Company had no income tax expense due to operating losses incurred for either the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 ~~and~~or ~~none for the nine months ended September 30, 2014 due to deductions available from intangible drilling costs~~2015.

1514. Earnings per Share

~~16.~~Basic earnings ~~Earnings~~per share is computed by dividing net income available to shareholders by the weighted average number of shares outstanding for the periods presented. Fully diluted earnings per ~~Share~~share is computed by dividing net income available to shareholders by the weighted average number of fully diluted shares outstanding for the periods presented.

~~Basic~~The calculation of diluted earnings per share isdoes ~~computed~~not byinclude ~~dividing~~the ~~net~~potential ~~income~~dilutive ~~available~~impact toof ~~shareholders~~the by4,106,500 offering warrants outstanding during the ~~weighted~~periods ~~average~~presented ~~number~~since ofin ~~shares~~the ~~outstanding~~three months ended March 31, 2016 and 2015 they were anti-dilutive. The calculation ~~for~~of diluted earnings per share does not include the ~~periods~~potential ~~presented~~dilutive impact of the Unit Purchase Option as it would be anti-dilutive.

The calculation of diluted earnings per share does not include the ~~potential dilutive~~ impact of the 46,~~106~~600,~~500~~000 ~~offering~~Insider ~~warrants~~Warrants ~~outstanding during the periods presented since~~ in the three ~~or nine~~ months ended March ~~September 30~~31, 2016 and 2015 as they were anti-dilutive and in the three or nine months ended September 30, 2014 the exercise of the offering warrants was contingent upon the effectiveness of a registration statement that had not yet been filed with the SEC. The calculation of diluted earnings per share does not include the potential dilutive impact of the Unit Purchase Option as it was not exercisable based on the Company’s average share and warrant prices.

The calculation of diluted earnings per share does not include the ~~dilutive~~ impact of the 61,~~600~~300,000 ~~Insider~~financing ~~Warrants~~warrants ~~as they were sold pursuant to an exemption from the registration requirements of the Securities Act~~ in the three ~~and nine~~ months ended ~~September 30~~March 31, ~~2014~~2016 and ~~not in the three and nine months ended September 30,~~ 2015 as they were anti-dilutive.

The calculation of diluted earnings per share does not include the impact of the 1370,~~300,~~000 ~~financing~~board ~~warrants~~of directors’ options as they were anti-dilutive in the three ~~and nine~~ months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015.

The ~~calculation~~following oftable ~~diluted~~sets ~~earnings~~forth ~~per share does not include~~ the ~~impact~~computation of the ~~310,000~~basic ~~board~~and ofdiluted ~~directors’~~earnings ~~options~~per asshare ~~they were~~for ~~anti-dilutive in~~ the ~~three~~periods ~~and nine months~~ ended ~~September~~March 3031, ~~2015~~2016 and ~~2014.~~ 2015:

The following table sets forth the computation of the basic and diluted earnings per share for the three and nine months ended September 30, 2015 and 2014:

	Three Months Ended
	March 31,			March 31,
	2016			2015

Numerator for basic and diluted earnings per share:
Net (loss) income	$	(1,536,223	)	$	(3,189,124	)

Denominator:
Denominator for basic earnings per ordinary shares – weighted average shares outstanding		5,020,303			5,020,303
Effect of dilutive warrants					-
Denominator for diluted earnings per ordinary share – weighted average shares outstanding		5,020,303			5,020,303

Basic earnings per ordinary share	$	(0.31	)	$	(0.64	)
Diluted earnings per ordinary share	$	(0.31	)	$	(0.64	)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2015			2014			2015			2014
Numerator for basic and diluted earnings per share:
Net loss	$	(2,220,069	)	$	(1,863,247	)	$	(8,329,568	)	$	(1,244,925	)
Denominator:
Denominator for basic earnings per ordinary shares – weighted average shares outstanding		5,020,303			5,020,303			5,020,303			4,896,807
Effect of dilutive warrants		-			-			-			-
Denominator for diluted earnings per ordinary share – weighted average shares outstanding		5,020,303			5,020,303			5,020,303			4,896,807
Basic earnings per ordinary share	$	(0.44	)	$	(0.37	)	$	(1.66	)	$	(0.25	)
Diluted earnings per ordinary share	$	(0.44	)	$	(0.37	)	$	(1.66	)	$	(0.25	)

16ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Report, including any projections of earnings, revenue or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. Thus, investors should refer to and carefully review information in future documents the Company files with the Securities and Exchange Commission (“SEC”). Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 under “Part I, Item 1A – Risk Factors” and for the reasons described elsewhere in this Report. All forward looking statements and reasons why results may differ included in this Report are made as of the date hereof, and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Report, the “Company,” “Arabella,” “we,” “us” and “our” refer to Arabella Exploration, Inc., a Cayman Islands company, and, where appropriate, its subsidiaries.

Business Overview

We are an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional, long-life, onshore oil and natural gas reserves in the Delaware Basin in West Texas, which is a part of the Permian Basin. Our activities have historically been directed at the Avalon, Bone Springs, and Wolfcamp formations, which we refer to collectively as the Wolfbone play.

When it is feasible to do so, we intend to grow our reserves and production through development drilling, exploitation and exploration activities on our multi-year inventory of identified potential drilling locations and through acquisitions that meet our strategic and financial objectives, targeting oil-weighted reserves. Substantially all of our revenues are generated through the sale of oil, natural gas liquids and natural gas production, though we do on occasion sell parcels of our land when the opportunity to generate profit presents itself. Our production was approximately 9075% oil, no natural gas liquids and 1025% natural gas for the ~~three~~ ~~months~~quarter ended ~~September~~March 3031, ~~2015~~2016 and 8583% oil, no natural gas liquids and 1517% natural ~~gas for the three months ended September~~ ~~30, 2014. Our production was approximately 88% oil, no natural~~ gas ~~liquids and 12% natural gas~~ for the ~~nine~~year ~~months~~ ended ~~September 30,~~December ~~2015 and 85% oil~~31, ~~no natural gas liquids and 15% natural gas for the nine months ended September 30, 2014~~2015. On ~~September~~March 3031, ~~2015~~ 2016, our net acreage position in the Delaware Basin was approximately 4 1,~~972~~562 net acres. On December 31, ~~2014~~2015, our net acreage position in the Delaware Basin was approximately 41,~~972~~562 net acres. We are not currently engaged in any drilling activity due to the reduced price of oil.

We were organized on June 17, 2010 as an exempted company under the laws of the Cayman Islands. We were a blank check company formed to acquire through a merger, capital stock exchange, asset acquisition, stock purchase or similar business combination, or control through contractual arrangements, one or more operating businesses. On October 23, 2013, we entered into an Agreement and Plan of Merger and Reorganization to acquire Arabella Exploration, Limited Liability Company, a Texas limited liability company (the “Acquisition”). On December 24, 2013, we consummated the Acquisition with Arabella Exploration, Limited Liability Company, as more fully described in our Annual Report on Form 20-F for the year ended December 31, 2013 filed on May 15, 2014. On February 4, ~~2013~~2014, we changed our name from Lone Oak Acquisition Corporation to Arabella Exploration, Inc.

17During 2015 the dramatic and continuing decline in oil and gas prices caused significant damage to our assets and business. Among other things, we were forced to write down the value of our oil and gas assets by $21,202,608 reflecting acreage and wells lost to lease expiration and the reduced production economics on our producing wells. Reduced oil prices have also dramatically reduced our proven reserves through the reduction in the dollar value of our reserve barrels of oil and the number of barrels that we can produce economically over the expected life of ours wells. The adverse pricing conditions have led to operating losses which were exacerbated by the non-cash earnings charge for the oil and gas asset impairment. Further, the reduced revenue resulting from the prices for oil and gas has left us unable to service and repay the senior secured notes which came due on September 2, 2015. On January 21, 2016 we received notice from our lender that they were declaring the senior secured notes in default as of June 4, 2015.

Future Activity

IfAny oil prices improve in 2016, depending on the pace of drilling and our strategic direction at the time, we could drill and complete an estimated ten additional gross horizontal wells on our acreage. Based on this plan, we would estimate that our capital expenditures for the next twelve months would be approximately $40 million, which includes costs for infrastructure and non-operated wells, but does not include the cost of any land acquisitions. However, any future drilling and completion activity will be highly dependent on the recovery of prices for crude oil. IfUnless oil prices ~~do not~~ rebound significantly in a short time, it is highly unlikely that we will drill atnew ~~such a high pace~~wells. We are not currently engaged in any drilling activity due to the reduced price of oil.

Operating Results Overview

During the three months ended ~~September~~March 3031, ~~2015~~2016, our average daily production was approximately ~~54.3~~101 BOE, consisting of 4875.89 Bbls/d of oil, 32 152.89 Mcf/d of natural gas and no natural gas liquids, as compared to the three months ended ~~September~~March 3031, ~~2014~~2015, when our ~~average~~ average daily production was approximately ~~144~~94.43 BOE, consisting of ~~122~~86.13 Bbls/d of oil, ~~133~~47.68 Mcf/d of natural gas and no natural gas liquids.

~~During~~Through ~~the~~March ~~nine months ended September 30~~31, ~~2015~~2016, ~~our~~we ~~average~~had ~~daily~~participated ~~production~~in ~~was~~8 ~~approximately~~gross 71(2.996 ~~BOE,~~net) ~~consisting~~operated ofwells ~~63.4~~in ~~Bbls/d of oil, 51.1 Mcf/d of natural gas and no natural gas liquids, as compared to~~ the ~~nine~~Delaware ~~months ended September 30, 2014, when our average daily production was approximately 124~~Basin.~~4 BOE, consisting of 105.6 Bbls/d of oil, 112.7 Mcf/d of natural gas and no natural gas liquids.~~

The reduction in production during the 2015 periods is a direct result of the lack of availability of funds to maintain our wells. Without access to additional Senior Secured Notes funding and reduced revenue due to depressed prices for oil and natural gas we have had to delay regular maintenance items on our wells resulting in additional periods with wells offline and not producing.

Through September 30, 2015, we had participated in 8 gross (2.96 net) operated wells in the Delaware Basin.

Sources of Our Revenue

Our revenues are derived from the sale of oil and natural gas production, as well as the sale of natural gas liquids that are extracted from our natural gas during processing. For the ~~three~~periods ~~months~~ ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015 our revenues were derived 9790% and 93 96%, respectively, from oil sales, 0% and 0%, respectively, from natural gas liquids sales and 310% and 7%, respectively, from natural gas sales. For the nine months ended September 30, 2015 and 2014 our revenues were derived 96% and 93%, respectively, from oil sales, 0% and 0%, respectively, from natural gas liquids sales and 4% ~~and 7%~~, respectively, from natural gas sales. Our ~~revenues~~ revenues may vary significantly from period to period as a result of changes in volumes of production sold or changes in commodity prices. Oil, natural gas liquids and natural gas prices have historically been volatile.

Results of Operations

The following table sets forth selected historical operating data for the three ~~and nine~~ month periods indicated.

	Three months ended September 30,						Nine months ended September 30,
	March 31, 2016			March 31, 2015
	2015			2014			2015			2014
Revenues:
Revenues:
Oil and gas revenue	$	236,878		$	346,669
Oil and gas revenue	$	394,324		$	953,896		$	1,011,509		$	2,716,093
Other revenue – administrative overhead		10,800			12,000
Other revenue – administrative overhead		4,200			-			24,000			-
Total revenues		247,678			358,669
Other operating revenue – gain on sale of oil and gas properties		-			80,196			-			3,084,917
Costs and expenses:
Total revenues		398,524			1,034,092			1,035,509			5,801,010
Lease operating expenses		111,306			182,529
Costs and expenses:
Ad valorem and production taxes		18,225			17,945
Lease operating expenses		52,072			335,720			316,132			888,072
Depreciation, depletion and amortization		78,478			190,322
Ad valorem and production taxes		21,163			42,449			53,579			121,466
Accretion of asset retirement obligation		420			480
Depreciation, depletion and amortization		103,593			383,556			415,315			954,930
General and administrative expenses		646,519			995,860
Accretion of asset retirement obligation		480			480			1,440			1,290
Total costs and expenses		854,948			1,387,136
General and administrative expenses		800,847			1,718,151			2,616,694			4,319,236
Loss from operations		(607,270	)		(1,028,467	)
Total costs and expenses		978,155			2,480,356			3,403,160			6,284,994
Other expense
Loss from operations		(579,631	)		(1,446,264	)		(2,367,651	)		(483,984	)
Interest expense		928,953			2,160,657
Other expense
Total other expense		928,953			2,160,657
Interest expense, related party		-			(24,649	)		-			(40,722	)
Net loss before taxes		(1,536,223	)		(3,189,124	)
Interest expense		(1,640,438	)		(720,219	)		(5,961,917	)		(720,219	)
Provision for income taxes		-			-
Total other expense		(1,640,438	)		(744,868	)		(5,961,917	)		(760,941	)
Net loss	$	(1,536,223	)	$	(3,189,124	)
Net loss before taxes		(2,220,069	)		(2,191,132	)		(8,329,568	)		(1,244,925	)
Income tax benefit		-			327,885	)		-			-
Net loss	$	(2,220,069	)	$	(1,863,247	)	$	(8,329,568	)	$	(1,244,925	)

1814

	Three months ended September 30,						Nine months ended September 30,
	March 31, 2016			March 31, 2015
	2015			2014			2015			2014
Production Data:
Production Data:
Oil (Bbls)		6,905.9			7,771.1
Oil (Bbls)		4,490.2			11,233.4			17,303.2			28,831.5
Natural gas (Mcf)		13,916.9			4,302.9
Natural gas (Mcf)		3,018.4			12,293.4			13,951.1			30,778.5
Combined volumes (BOE)		9,225.4			8,488.3
Combined volumes (BOE)		4,993.3			13,282.3			19,628.3			33,961.3
Daily combined volumes (BOE/d)					94.3
Daily combined volumes (BOE/d)		54.3			144.4			71.9			124.4
Average Prices:
Average Prices:
Oil (per Bbl)	$	26.51		$	42.29
Oil (per Bbl)	$	48.58		$	79.32		$	46.55			87.99
Natural gas (per Mcf)		1.47			2.89
Natural gas (per Mcf)		2.31			5.11			2.71			5.83
Combined (per BOE)		22.06			40.18
Combined (per BOE)		45.09			71.82			42.96			79.98
Average Costs (per BOE):
Average Costs (per BOE):
Lease operating expense	$	12.07		$	21.50
Lease operating expense	$	11.60		$	25.28			18.27			26.15
Production Taxes		1.98			2.11
Production Taxes		4.71			3.20			3.10			3.58
Production Taxes as a % of sales		7.7	%		5.2	%
Production Taxes as a % of sales		5.4	%		4.5	%		5.3	%		4.5	%
Depreciation, depletion and amortization		8.51			22.42
Depreciation, depletion and amortization		23.07			28.88			24.00			28.12
General and Administrative		70.08			117.32
General and Administrative		178.35			129.36			151.23			127.18

Three Months Ended ~~September~~March 3031, ~~2015~~2016 Compared to the Three Months Ended ~~September~~March 3031, ~~2014~~2015

Oil and Natural Gas Revenues. Our oil and natural gas revenues decreased by $~~559~~109,~~572~~791, or 5932%, to $~~394~~229,~~324~~048 for the three months ended ~~September~~March 3031, ~~2015~~2016, as compared to $~~953~~346,~~896~~669 for the three months ended ~~September~~March 3031, ~~2014~~2015. Our revenues are a function of oil and natural gas production volumes sold and average sales prices received for those volumes. The decrease in revenues is due to the ~~substantially~~ lower price of oil realized in the period ended ~~September~~March 3031, ~~2015~~2016 ~~($48.58~~as ~~per~~well ~~barrel in the quarter ended September 2015~~ as ~~compared to $86.25 in the prior year period) and to the~~ decreased ~~volumes~~oil of production.

Other Revenue. Other revenue relates to administrative overhead fees paid to Arabella Operating ~~by other working interest owners~~ to operate our wells. Arabella Operating was paid $410,~~200~~800 and $12,000 for the three months ended ~~September~~March 3031, ~~2015~~2016 and ~~did not operate our wells for the three months ended September 30~~2015, ~~2014~~respectively.

~~Other~~Lease Operating ~~Revenue~~Expense. ~~Other~~Lease operating ~~revenue~~expenses indecreased ~~the~~from ~~three months ended September 30~~$182,529 ~~2014~~in ~~relates to oil and gas property sales. In~~ the three months ended ~~September~~March 3031, ~~2014,~~2015 weto ~~sold a non-producing property for~~ $~~293~~111,~~333, with a net profit of $80,196.~~306 ~~We did not have any property sales~~ in the three months ~~ending~~ended ~~September~~March 3031, 2015. ~~Other~~This ~~operating~~decrease ~~revenue~~is ~~from~~ the ~~sale~~result of ~~oil and~~reduced ~~gas~~spending ~~properties~~in ~~fluctuates~~light ~~due~~of toreduced ~~market~~revenue ~~demand~~as ~~and~~described under ~~preparation~~revenues, ~~of the land~~above. WeLease ~~buy~~operating ~~and~~expenses ~~sell~~can ~~parcels~~vary ofbased ~~land~~upon ~~when~~conditions at the ~~opportunity to~~well ~~generate~~site ~~significant~~and ~~profit~~well ~~presents itself~~productivity.

19Ad Valorem and Production Tax Expense. Ad valorem and production taxes as a percentage of oil and natural gas revenues increased for the three months ended March 31, 2016, as compared to the three months ended March 31, 2015. The increase was due to normal variances in the taxes due at production. Ad valorem and production taxes are primarily based on the market value of our production at the wellhead and may vary across the different counties in which we operate.

~~Lease~~Depreciation, ~~Operating~~Depletion ~~Expense~~and Amortization. ~~Lease~~Depreciation, ~~operating~~depletion ~~expenses~~and amortization expense decreased from $~~335~~190,~~720~~322 in the three months ended ~~September~~March 3031, ~~2014~~2015 to $5278,~~072~~ 478 in the three months ended ~~September~~March 3031, ~~2015~~2016. ~~This~~The decrease is ~~the~~related ~~result of reduced operations due~~ to ~~low~~decreased ~~oil~~production ~~prices. Lease operating~~from ~~expenses~~our ~~can~~wells ~~vary~~discussed ~~based~~under ~~upon~~revenue, ~~conditions~~above atand the ~~well~~disposal ~~site~~of ~~and~~fixed ~~well productivity~~assets.

AdGeneral ~~Valorem~~ and ~~Production Tax Expense~~Administrative. AdGeneral ~~valorem~~ and ~~production~~administrative ~~taxes~~expenses asdecreased afrom ~~percentage~~$995,860 ofin ~~oil and natural gas revenues increased for~~ the three months ended ~~September~~March 3031, 2015 to $646,519 asin ~~compared to~~ the three months ended ~~September~~March 3031, ~~2014~~2016. ~~There~~These ~~was~~expenses anrelate ~~overall decrease~~primarily ~~in taxes due~~ to ~~the~~salaries ~~revenue~~and ~~decrease~~wages, ~~discussed~~investor ~~above.~~relations costs Adand ~~valorem~~professional and ~~production~~consulting ~~taxes~~fees. The ~~are~~decrease ~~primarily~~is ~~based~~related onto ~~the~~cost ~~market value~~cutting ofefforts ~~our~~in ~~production~~response atto the ~~wellhead~~significantly lower ~~and~~price ~~may~~of ~~vary~~oil ~~across~~in the ~~different~~period ~~counties~~ended inMarch ~~which~~31, ~~we operate~~2015.

~~Depreciation,~~Net ~~Depletion~~Interest ~~and Amortization~~Expense. ~~Depreciation,~~Net ~~depletion~~interest ~~and amortization~~ expense ~~decreased~~was ~~from~~ $~~383~~928,~~556~~953 induring the three months ended ~~September~~March 3031, ~~2014~~2016 as compared to $~~103~~2,~~593~~160,657 during in the three months ended ~~September~~March 3031, 2015. The ~~decrease~~interest isfor ~~related~~the tothree ~~decreased~~months ~~production~~ended March 31, 2016 includes provisions for possible ~~from~~default ~~our~~interest. ~~wells~~The ~~discussed~~interest ~~under~~expense ~~Oil~~the ~~and~~three ~~Natural~~months ~~Gas~~ended ~~Revenues~~March 31, ~~above~~2015 was non-cash and represented the costs of our Senior Secured Notes (see “Senior Secured Notes” below).

General and Administrative. General and administrative expenses decreased from $1,718,151 in the three months ended September 30, 2014 to $800,847 in the three months ended September 30, 2015. These expenses relate primarily to salaries and wages, investor relations costs and professional and consulting fees. The decrease is related to cost cutting efforts in response to the significantly lower price of oil in the period ended September 30, 2015.15

Net Interest Expense. Net interest expense was $1,640,438 during the three months ended September 30, 2015 as compared to $744,868 during the three months ended September 30, 2014. In both periods, the interest expense represented the costs of our Senior Secured Notes (see “Senior Secured Notes” below). In the 2014 period, the interest expense also included the costs of our Directors’ Loans.

Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014

Oil and Natural Gas Revenues. Our oil and natural gas revenues decreased by $1,704,584, or 63%, to $1,011,509 for the nine months ended September 30, 2015, as compared to $2,716,093 for the nine months ended September 30, 2014. Our revenues are a function of oil and natural gas production volumes sold and average sales prices received for those volumes. The decrease in revenues is due to the substantially lower price of oil realized in the period ended September 30, 2015 ($46.55 per barrel in the quarter ended September 2015 as compared to $90.69 in the prior year period) and to the decreased volumes of production.

Other Revenue. Other revenue relates to administrative overhead fees paid to Arabella Operating by other working interest owners to operate our wells. Arabella Operating was paid $24,000 for the nine months ended September 30, 2015 and did not operate our wells for the nine months ended September 30, 2014.

Other Operating Revenue. Other operating revenue in the nine months ended September 30, 2014 relates to oil and gas property sales. In the nine months ended September 30, 2014, we sold five non-producing properties for $5,337,387 with a net profit of $3,038,519 and one non-operated, producing property for $327,734 with a net profit of $46,398. Contingent conditions on the sale of the Weatherby acreage may result in an additional $78,300 of revenue. We did not have any property sales in the nine months ending September 30, 2015. Other operating revenue from the sale of oil and gas properties fluctuates due to market demand and preparation of the land. We buy and sell parcels of land when the opportunity to generate significant profit presents itself.

Lease Operating Expense. Lease operating expenses decreased from $888,072 in the nine months ended September 30, 2014 to $316,132 in the nine months ended September 30, 2015. This decrease is the result of reduced operations due to low oil prices. Lease operating expenses can vary based upon conditions at the well site and well productivity.

Ad Valorem and Production Tax Expense. Ad valorem and production taxes as a percentage of oil and natural gas revenues increased for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014. There was an overall decrease in taxes due to the revenue decrease discussed above. Ad valorem and production taxes are primarily based on the market value of our production at the wellhead and may vary across the different counties in which we operate.

Depreciation, Depletion and Amortization. Depreciation, depletion and amortization expense decreased from $954,930 in the nine months ended September 30, 2014 to $415,315 in the nine months ended September 30, 2015. The decrease is related to decreased production from our wells discussed under Oil & Natural Gas Revenues, above.

General and Administrative. General and administrative expenses decreased from $4,319,236 in the nine months ended September 30, 2014 to $2,616,695 in the nine months ended September 30, 2015. These expenses relate primarily to salaries and wages, investor relations costs and professional and consulting fees. The decrease is related to cost cutting efforts in response to the significantly lower price of oil in the period ended September 30, 2015.

Net Interest Expense. Net interest expense was $5,961,917 during the nine months ended September 30, 2015 as compared to $760,941 during the nine months ended September 30, 2014. In both periods, the interest expense represented the costs of our Senior Secured Notes (see “Senior Secured Notes” below). In the 2014 period, the interest expense also included the costs of our Directors’ Loans.

Liquidity and Capital Resources

Our primary ~~source~~sources of liquidity ~~has~~have previously been oil and gas sales revenue and the sales of certain properties., equity Acontributions ~~major~~from ~~source~~the ofAcquisition, equity and loans from our ~~liquidity~~founder Jason Hoisager, loans from Hauser Holdings, LLC isand BBS Capital Fund, LP, affiliates of two of our directors and the Senior Secured Note Facility entered into on September 2, 2014 (the “Notes”) and advances from affiliates . Currently, our only source of liquidity is our ongoing sales of oil and gas. Our primary uses of capital have been the acquisition, development and exploration of oil and natural gas properties. AsWe ~~we pursue reserves and production growth, we~~ regularly consider which capital resources, including equity and debt financings, are available to meet our future financial obligations, planned capital expenditure activities and liquidity requirements. Our future ability to grow proved reserves and production will be highly dependent on the ~~price of oil and the~~ capital resources available to us.

The Notes discussed below became due on September 2, 2015 and the Company was unable to repay them and is continuing to ~~work~~ negotiate with its Senior Lender to. ~~find~~On ~~the~~January ~~best~~21, ~~alternative~~2016 ~~solution~~we ~~for~~received notice from our Senior Lender that they were declaring the Notes in default as of June 4, 2015.

The rapid and substantial decline in oil prices in the later part of 2014 and in 2015 significantly reduced the amount of revenue we receive per barrel of oil. Approximately 9790% of our oil and gas revenue comes from oil sales. This decline has reduced our revenue and, as a result, our cash flow, which limits our operations and could limit our future growth. Our current cash position, ~~availability~~ availability of financing from our Notes and current level of operating cash flows may not, in aggregate, be adequate to support our current working capital requirements, interest costs and, at the same time, support additional drilling activity. The current oil pricing environment and related conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management is exploring various opportunities to remedy the Company’s liquidity concerns.

Liquidity and cash flow

We commenced oil and gas exploration activities in 2011 and had a working capital deficit of $2225,~~755~~859,~~503~~323 as of ~~September~~March 3031, ~~2015~~ 2016 largely consisting of ~~notes~~our ~~payable~~Notes indescribed ~~less~~below, ~~than~~accrued ~~twelve~~liabilities ~~months~~ and advances from affiliates. Our net cash flow for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 was ana ~~increase~~decrease of $970,~~081~~386, the components of which are described below. Our net cash ~~flow~~ flow for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 was aan ~~decrease~~increase of $21,~~023,158~~895. We are not currently drilling any new wells; if if we were to resume drilling we might need ~~approximately~~ $40 million toover ~~fund~~a ~~our~~12 ~~operations~~month ~~during the next twelve months~~period, which ~~will~~would include minimum annual property lease payments, well expenditures and operating costs and expenses,. ~~however~~However, if unless oil prices ~~do not~~ rebound significantly in a short time, it is highly unlikely that we will resume drilling or drill at such a high pace. In the event that we begin new drilling operations we may require additional funding in 2016. ~~There can be no assurance that financing will be available on acceptable terms if at all.~~

On September 2, 2014 we sold $16,000,000 of Notes under our $45,000,000 Senior Secured Note Facility, with further sales during the term of the facility to be based upon reserve based performance hurdles. No additional Notes were issued. The Notes became due on September 2, 2015; we were unable to repay them and are continuing to negotiate with our Senior Lender. On January 21, 2016 we received notice from our Senior Lender that they were declaring the Notes in default as of June 4, 2015.

OnIn ~~September~~the 2,event ~~2014~~ we ~~sold~~are ~~the~~able ~~first~~to ~~$16,000,000~~redeem ~~of Notes under~~ our ~~$45~~offering warrants,~~000,000~~ ~~Senior~~they ~~Secured~~would ~~Note~~likely ~~Facility,~~be ~~with~~exercised ~~further sales~~resulting ~~during~~in the ~~term~~receipt of ~~the~~proceeds ~~facility~~ up to be$20,532,500. ~~based~~There ~~upon~~can ~~reserve~~be ~~based~~no ~~performance~~assurance ~~hurdles.~~we ~~The~~will ~~Notes~~redeem ~~became~~the ~~due~~offering ~~on September~~warrants. 2,Given ~~2015;~~the weCompany’s ~~were~~current ~~unable~~stock toprice, it ~~repay~~is ~~them~~unlikely ~~and~~that ~~are~~the ~~continuing~~Company towill ~~work~~redeem ~~with~~the ~~our~~initial ~~Senior~~public ~~Lender~~offering towarrants ~~find~~in the ~~best alternative~~near ~~solution for the Notes~~future.

Additionally, in the event we are able to redeem our offering warrants, they would likely be exercised resulting in the receipt of proceeds up to $20,532,500. There can be no assurance we will redeem the offering warrants.

Operating Activities

Net cash used in operating activities was $1279,~~508,713~~183 for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, as compared to net cash ~~used~~provided inby operating activities of $41,~~665,583~~895 for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015. The ~~change~~decrease in ~~operating~~ cash ~~flows~~from operating activities is largely adue ~~result~~to of the ~~impact~~reduced ofcash ~~the~~from ~~operating~~oil ~~losses during the 2015 period~~ and ~~operating~~gas ~~losses,~~sales ~~the~~due ~~reduction~~to oflower ~~joint~~prices ~~interest~~for ~~billings payable~~oil and ~~the sale of oil &~~ gas ~~properties in the 2014 period~~.

Investing Activities

The purchase and development of oil and natural gas properties generally accounts for the majority of our cash outlays for investing activities~~, however, we did not have any drilling activity in the first nine months of 2015~~. We used net cash for investing activities of $392,953 and $12,370,584 for the nine months ended September 30, 2015 and 2014, respectively. During the nine months ended September 30, 2014 we received proceeds of $5,665,121 from sales of oil and gas properties. We used cash for investing in oil and natural gas properties in the amounts of $392,954 and $17,538,736 for the nine months ended September 30, 2015 and 2014, respectively. We used cash for investing in property and equipment in the amounts of $0 and $496,969 for the nine months ended September 30, 2015 and 2014, respectively.

We used net cash for investing activities of $1,384 and $599,774 for the three months ended March 31, 2016 and March 31, 2015, respectively. We used cash for investing in oil and natural gas properties in the amounts of $1,384 and $599,774 for the three months ended March 31, 2016 and 2015, respectively. We used no cash for investing in property and equipment for the three months ended March 31, 2016 and March 31, 2015.

Financing Activities

During the ~~nine~~year three months ended ~~September~~March 3031, ~~2015~~2016 we received an aggregate of $1210,~~910,748~~181 in advances from affiliates and shareholders, which are repayable on demand without interest. During the nine months ended September 30, 2014 we received a loan from Hauser Holdings, LLC an affiliate of Richard Hauser, one of our directors. The $800,000 loan was due August 31, 2014 and bore an interest rate of 10% per annum. We ~~also~~had ~~received~~no acash ~~loan~~used ~~from~~or ~~BBS~~provided ~~Capital~~by ~~Fund,~~financing LPactivities anduring ~~affiliate~~the ofthree ~~Berke Bakay, one of our directors. The~~months ~~$500,000~~ended ~~loan~~March ~~was due August~~ 31, ~~2014 and bore an interest rate of 10% per annum~~2015. ~~On September 4, 2014 we repaid the loans from BBS Capital Fund, LP and Hauser Holdings, LLC with accrued interest for total repayment of $512,500 and $828,222, respectively.~~

On June 26, 2014 our Chief Executive Officer Jason Hoisager purchased 190,477 of our ordinary shares for $10.50 a share in a private transaction from us.

Senior Secured Note Facility

On September 2, 2014 we entered into a $45,000,000 Senior Secured Note Facility (the “Notes”) with a New York based investor (the “Investor”). The ~~initial~~ sale of $16,000,000 in Notes occurred on September 2, 2014 with further sales during the term of the facility to be based upon reserve based performance hurdles. No additional Notes were issued. The Notes bear interest at an annual rate of 15%, of which six months was prepaid at close. We paid a 3% origination fee to the Investor and a 5% cash ~~commission~~ commission to our ~~financial~~ advisors on the transaction. In conjunction with the sale of the Notes, we issued warrants to purchase 1,300,000 of our ordinary shares at a price of $5.00 per share. The warrants expire on September 2, 2019. The Notes became due on September 2, 2015; we were unable to repay them and are continuing to ~~work~~negotiate with our Senior Lender ~~to find the best alternative solution for the Notes~~.

On January 21, 2016 we received notice from our Senior Lender that they were declaring the Notes in default as of June 4, 2015. While we do not necessarily believe that additional interest is due, we have recorded an accrued interest charges in the total amount of $258,953 for the three months ended March 31, 2016 and $591,620 at December 31, 2015 to reflect the maximum possible difference between the original Note interest and the default Note interest provisions. We paid $70,000 in cash interest payments for the three months ended March 31, 2016.

The Notes are the senior secured obligations of the Company and, with certain exceptions, are secured by first lien positions on all of the Company’s assets and property.

Capital Requirements, Sources of Liquidity and Ability to Continue as a Going Concern

~~Currently,~~We we are not ~~engaged~~currently indrilling any ~~drilling~~new ~~activity~~wells; ~~due~~if toit ~~the~~were ~~reduced price of oil. A return~~ to ~~our~~resume ~~drill schedule will be dependent on future oil prices and planning. Depending on the pace of~~ drilling ~~and~~it ~~the~~might ~~oil and gas pricing environment, we could~~ need ~~approximately~~ $40 million toover ~~fund~~a ~~our~~12 ~~operations~~month ~~during the first twelve months of drilling~~period, which would ~~will~~ include minimum annual property lease payments, well expenditures and operating costs and expenses. WeHowever, dounless ~~not~~oil prices ~~have~~rebound significantly in a ~~specific~~short ~~acquisition~~time, ~~budget~~it ~~since~~is ~~the~~highly ~~timing~~unlikely ~~and size~~that ofthe ~~acquisitions~~Company ~~cannot~~will beresume ~~accurately~~drilling ~~forecasted.~~or Wedrill ~~anticipate~~at ~~that~~such ~~while~~a ~~some~~high pace. ofIn ~~these~~the ~~expenditures~~event ~~will~~that bewe ~~funded~~begin bynew drilling operations~~, the~~ ~~majority~~we ~~will~~may ~~come~~require ~~from~~additional ~~outside~~ funding ~~sources~~in 2016.

The amount and timing of ~~these~~any capital expenditures is largely discretionary and within our control. ~~The~~We ~~timing~~could choose to defer a portion of ~~these~~any planned capital expenditures ~~depends~~ depending on a variety of factors, including but not limited to raising of outside capital, the success of our drilling activities, prevailing and anticipated prices for oil and natural gas, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other interest owners.

Additionally, while some of our capital expenditures will be financed through operations, the majority of these costs will require outside financing.

The current oil pricing environment, the amounts due on the Senior Secured Note Facility and related conditions raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to generate revenue from oil and gas operations or asset sales and achieve profitable operations and to generate sufficient cash flow from financing and operations to meet our obligations, as they become payable. We have plans to explore additional alternatives to our existing oil and gas activities to generate revenue in the current oil pricing environment. Although there are no assurances that our plans will be realized we believe that we will be able to continue operations in the future.

Critical Accounting Policies

There have been no changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015.

OFF-BALANCE SHEET ARRANGEMENTS:

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, operating results, liquidity or capital expenditures.

~~Item~~ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company we are not required to provide information required by this Item.

~~Item~~ITEM 4 CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of our disclosure controls and procedures as of ~~September~~March 3031, ~~2015~~2016 was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal controls

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(d) of the Exchange Act) that occurred during the ~~nine~~quarter ~~months~~ ended ~~September~~March 3031, ~~2015~~2016 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

23On April 20, 2016 we learned that our Chief Financial Officer, Terry E. Sanford, had passed away. Our Chief Executive Officer was appointed as interim Chief Financial Officer pending a search for Mr. Sanford’s replacement.

~~Part II OTHER INFORMATION~~ 18

Part II

OTHER INFORMATION

ITEM 1

LEGAL PROCEEDINGS

We ~~are~~have ~~not~~been named as a ~~party~~defendant in an action brought by Morris Weiss, Chapter 11 Trustee for Arabella Petroleum, LLC (“APC”), a predecessor in interest to ~~any~~much ~~pending~~of ~~legal~~the ~~proceeding~~acreage that our wholly owned subsidiary, ~~nor~~Arabella Exploration, LLC, owns and which another wholly owned subsidiary, Arabella Operating, LLC, operates. Both subsidiaries are also named defendants, as is Platinum Long Term Growth VIII, LLC (“Platinum”), our ~~property~~senior ~~the~~secured ~~subject~~lender. Platinum’s parent fund, one of aour ~~pending~~directors, ~~legal~~Jason ~~proceeding~~Hoisager, ~~that~~and isa ~~not~~company inowned by one Mr. Hoisager are also named defendants. The action alleges, among other things against parties other than us or our wholly owned subsidiaries, that the transfer ~~ordinary~~of ~~course~~the majority of ~~business~~acreage owned by Arabella LLC was constructively or ~~otherwise~~actually ~~material~~fraudulent toon the ~~financial~~creditors ~~condition~~ of ~~our~~APC, are ~~business.~~preferential Wetransfers ~~expect~~and tothat ~~resolve~~APC ~~these~~has, and should be allowed to foreclose on, a lien against those property interests. ~~any~~The ~~similar~~APC ~~suits~~Trustee ~~within~~seeks return of the ~~ordinary~~properties ~~course~~to APC or the payment of ~~business~~the fair market value of those assets at the time of the transfer. ~~None~~The Trustee has not stated an amount of ~~our~~damages ~~directors,~~dollars. ~~officers~~The oranswer ~~affiliates~~date isto ~~involved~~the inaction awas ~~proceeding~~set at April 29, ~~adverse~~2016 toat ~~our~~which ~~business~~time orwe ~~has~~filed a ~~material~~general ~~interest~~denial. ~~adverse~~We intend to ~~our~~vigorously ~~business~~defend ourselves and dispute both the factual and legal basis underpinning the suit. This action was only recently filed on February 29, 2016; little to no discovery has been undertaken and no substantive rulings have been made.

Due to the nature of our business, we are, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities, including workers’ compensation claims and employment related disputes. In the opinion of our management, none of the pending litigation, disputes or claims against us, unless previously mentioned in this section, if decided adversely, will have a material adverse effect on our financial condition, cash flows or results of operations.

ITEM 1A.

RISK FACTORS

There have been no material changes from the Risk Factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2014~~2015.

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities that were not reported on a Current Report on Form 8-K.

ITEM 3

DEFAULTS UPON SENIOR SECURITIES

~~None~~The Notes became due on September 2, 2015 and the Company was unable to repay them and is continuing to negotiate with its Senior Lender. On January 21, 2016, the Company received notice from its Senior Lender that they were declaring the Notes in default as of June 4, 2015.

ITEM 4

mine safety disclosures

Not Applicable.

ITEM 5

OTHER INFORMATION

None.

ITEM 6

EXHIBITS

The exhibits listed on the Exhibit Index are filed as part of this report.

No.		Description
31.1		Certification of Chief Executive Officer and interim Chief Financial Officer of the Registrant pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
32.1		Certification of Chief Executive Officer and interim Chief Financial Officer of the Registrant pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.1		Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2		Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.1		Interactive Data Files

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SIGNATURES

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.

Dated: November 23, 2015	ARABELLA EXPLORATION, INC.
Dated: May 20, 2016	ARABELLA EXPLORATION, INC.
	By:	/s/ Jason Hoisager
		Jason Hoisager
		Chief Executive Officer (Principal Executive Officer)
		Chief Executive Officer and interim Chief Financial Officer (Principal Executive, Financial and Accounting Officer)
Dated: November 23, 2015	ARABELLA EXPLORATION, INC.
	By:	/s/ Terry E. Sanford
		Terry E. Sanford
		Chief Financial Officer (Principal Financial and Accounting Officer)

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