CARDINAL RESOURCES, INC.

In 2015, the Company identified certain errors in calculating derivative liabilities as of December 31, 2014. The Company had a convertible promissory note of $58,000 entitled to be converted at a discount to market price in November 2014. As a result, the existing 5,097,000 warrants shall be reclassified from equity to liabilities, and the convertible notes of total $230,000 with a fixed conversion price shall be bifurcated from the debt host and accounted for as a derivative liability. Accordingly, derivative liabilities as of December 31, 2014 and changes in derivative liabilities for the year of 2014 were understated in amount of $1,836,651. The error did not impact the statement of operations for the three and nine months ended November 30, 2014 and the statement of cash flows for the nine months ended November 30,2014.  

During the third quarter of 2015, $75,000 of the principal of the convertible notes was transfer to another unrelated third party. The $9,788 accrued interest payable was converted to principle. The related agreement was also amended to reduce the exercise price from $0.25 to $0.004 and extend the maturity date to December 31, 2015. In accordance with ASC 470-50-40, this debt modification would be classified as debt extinguishment. No gain or loss is recognized on the debt extinguishment. The amended Notes were discounted in the amount of $84,188 due to the derivative liabilities. During September 2015, the note holder converted $25,500 in principal to 6,374,840 shares, or $.004 per shares.

During the third quarter of 2015, the Board of Directors of the Company approved the issuance of 5,500,000 shares of common stock to an unrelated consultant for services rendered during such quarter. The value of the shares in amount of $187,000 was determined using the trading price of the Company's common stock on the effective date of agreement, or $0.03 per share. And the Board of Directors of the Company approved another issuance of 1,00,000 shares of common stock to an unrelated consultant for services rendered during such quarter. The value of the shares in amount of $34,000 was determined using the trading price of the Company's common stock on the date on the Broad of resolution, or $0.03 per shares. And the Board of Directors of the Company approved another issuance of 700,000 shares of common stock to two unrelated consultant for services rendered during such quarter. The value of the shares in amount of $21,350 was determined using the trading price of the Company's common stock on the date on the Board of resolution, or $.03 per share, and the shares are issued during the third quarter of 2015. Accordingly, the Company calculated stock based compensation of $21,350 as its fair value and recognized the expense during the nine months ended September 30, 2015.Accordingly, the Company calculated stock based compensation of $242,350 as its fair value and recognized the expense during the nine months ended September 30, 2015.

While the EXIM process is underway, the Company will continue to seek alternative financing for our international projects.  In this way if there are further delays in the Board approval we will still be positioned to move forward.  We have also closed cash deals for systems in Panama, the US and China as part of our plan to include both cash sales as well as sales requiring EXIM or other Export Credit Agency (ECA) financing.  Even in the best situations, projects with ECA financing will take longer than a cash sale.  Ultimately the Company's goal is to have a healthy mix of both types of projects, direct sale and ECA financing.

The US, Panama, and China contracts are smaller but not impacted by the lack of Export Credit Agency funding.  As the ECA issues are largely beyond our control, the Company has shifted focus to expanding with smaller cash transactions.  We believe these sales will lead to additional sales on a steady, sustainable basis.  With the anticipated return of the ECA financing, the Company will continue to pursue both types of sales.

The Company continues to provide environmental services, primarily to three customers on a smaller scale in the US and is working to increase that source of revenue.