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This Amendment No. 2 on Form 10-K/A (this “Amendment”) amends Petron Energy II, Inc.’s Annual Report on Form 10-K (the “Original Filing”) originally filed on April 16, 2012 with the Securities and Exchange Commission (the “Commission”) and Amendment No. 1
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<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>1. INCORPORATION AND NATURE OF OPERATIONS
</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Petron Energy II, Inc. (“Petron Energy”
or the “Company”) was formerly known as Restaurant Concepts of America, Inc. and was incorporated in August 2008 under
the laws of the State of Nevada.;</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company is engaged primarily in the acquisition,
development, production, exploration for and the sale of oil, gas and gas liquids in the United States. As of December 31, 2011
the Company is operating in the states of Texas and Oklahoma. In addition, the Company operates two gas gathering systems located
in Tulsa, Wagoner, Rogers and Mayes counties of Oklahoma. The pipeline consists of approximately 132 miles of steel and poly pipe,
a gas processing plant and other ancillary equipment. The Company sells its oil and gas products primarily to a domestic pipeline
and to another oil company.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Basis of presentation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 6pt; margin-left: 0">The accompanying consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 6pt; margin-left: 0"></p>
<p style="margin: 0"></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom; text-align: center">
<th style="text-align: left; text-indent: 30pt"><font style="font: 10pt Times New Roman, Times, Serif"><u>Subsidiary Name
Organization</u></font></th>
<th style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"><u>Date</u></font></th></tr>
<tr style="vertical-align: top; text-align: left">
<td style="width: 39%; text-indent: 30pt"><font style="font: 10pt Times New Roman, Times, Serif">Petron Energy Special Corp.</font></td>
<td style="width: 61%"><font style="font: 10pt Times New Roman, Times, Serif">June 2007</font></td></tr>
<tr style="vertical-align: top; text-align: left">
<td style="text-indent: 30pt"><font style="font: 10pt Times New Roman, Times, Serif">Petron Energy II Pipeline, Inc,</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">April 2008</font></td></tr>
<tr style="vertical-align: top; text-align: left">
<td style="text-indent: 30pt"><font style="font: 10pt Times New Roman, Times, Serif">Petron Energy II Well Service, Inc</font></td>
<td><font style="font: 10pt Times New Roman, Times, Serif">July 2008</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting principles of the United States. All intercompany transactions
and account balances have been eliminated in consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Going concern uncertainty</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">These financial statements have been prepared
in accordance with accounting principles generally accepted in the United States applicable to a going concern, which contemplates
the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has
incurred a net loss of $3,127,742 for the year ended December 31, 2011 (2010 - $1,529,459) and at December 31, 2011 had an accumulated
deficit of $11,495,160 (2010 – $8,366,543). While the Company has recognized revenues from operations, the revenues generated
are not sufficient to sustain operations. The Company does not have sufficient funds to acquire new business assets or maintain
its existing operations at this time. Management’s plan is to raise equity and/or debt financing as required but there is
no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters
cannot be predicted at this time.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">These financial statements do not include
any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification
of liabilities that might result from the outcome of this uncertainty.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Accounting estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The preparation of financial statements in
conformity with generally accepted accounting principles of the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Cash and cash equivalents</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Cash equivalents comprise certain highly liquid
instruments with a maturity of three months or less when purchased. As of December 31, 2011 there were no cash equivalents.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Oil and gas properties</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company utilizes the full cost method
to account for its investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development
of oil and gas reserves, including such costs as leasehold acquisition costs, capitalized interest costs relating to unproved properties,
geological expenditures, tangible and intangible development costs including direct internal costs are capitalized to the full
cost pool. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop
the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates
of proved reserves.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Investments in unproved properties are not
depleted pending determination of the existence of proved reserves. Unproved properties are assessed periodically to ascertain
whether impairment has occurred. Unproved properties whose costs are individually significant are assessed individually by considering
the primary lease terms of the properties, the holding period of the properties, and geographic and geologic data obtained relating
to the properties. Where it is not practicable to assess individually the amount of impairment of properties for which costs are
not individually significant, such properties are grouped for purposes of assessing impairment. The amount of impairment assessed
is added to the costs to be amortized, or is reported as a period expense, as appropriate.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Pursuant to full cost accounting rules, the
Company must perform a ceiling test periodically on its proved oil and gas assets. The ceiling test provides that capitalized costs
less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value
of future net revenue from estimated production of proved oil and gas reserves using current prices, excluding the future cash
outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, at a discount factor
of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved
properties included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax
basis of oil and gas properties. Should the net capitalized costs for a cost center exceed the sum of the components noted above,
an impairment charge would be recognized to the extent of the excess capitalized costs.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Sales of proved and unproved properties are
accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly
alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized
in the statement of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Exploration activities conducted jointly with
others are reflected at the Company’s proportionate interest in such activities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Cost related to site restoration programs
are accrued over the life of the project.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Pipeline and Equipment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Depreciation is based on the estimated useful
lives of the assets and is computed using the straight line method. Pipeline, trucks and equipment are recorded at cost. Depreciation
is provided using the following useful lives:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 50%; font: 10pt Times New Roman, Times, Serif; text-indent: 100pt">Pipeline</td>
<td style="width: 50%; font: 10pt Times New Roman, Times, Serif; text-align: center">15 years</td></tr>
<tr style="vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; text-indent: 100pt">Trucks and equipment          </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: center">5—15 years</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Stock-based compensation</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company accounts for stock options in
accordance with FASB ASC 505, “Equity,” and FASB ASC 718, “Compensation—stock Compensation.” Accordingly,
stock compensation expense has been recognized in the statement of operations based on the grant date fair value of the options
for the year ended December 31, 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Under ASC 718 and 505, the fair value of options
is estimated at the date of grant using a Black-Scholes-Merton (“Black-Scholes”) option-pricing model, which requires
the input of highly subjective assumptions including the expected stock price volatility. Volatility is determined using historical
stock prices over a period consistent with the expected term of the option. The Company utilizes the guidelines of Staff Accounting
bulletin No. 107 (SAB 107) of the Securities and Exchange Commission relative to “plain vanilla” options in determining
the expected term of options grants. SAB 107 permits the expected term of “plain vanilla” options to be calculated
as the average of the option’s vesting term and contractual period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company has used this method in determining
the expected term of all options. At such time as the Company has options with graded vesting, the Company will recognize compensation
cost for awards with graded vesting on a straight-line basis over the requisite service period for the entire award. The amount
of compensation expense recognized at any date is at least equal to the portion of the grant date value of the award that is vested
at that date.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Advertising Costs</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company expenses advertising costs as
these are incurred. Marketing expenses totaled $46,320 and $79,204 in 2011 and 2010, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Revenue Recognition</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Oil and gas revenues are recognized when oil
and gas is produced and sold.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Earnings (loss) per share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Basic earnings (loss) per share are computed
using the weighted average number of shares outstanding during the period. The treasury stock method is used to determine the diluted
effect of stock options and warrants. Diluted loss per share is equal to the basic loss per share for the years ended December
31, 2011 and 2010 because common stock equivalents consisting of stock purchase warrants of 518,042 outstanding at December 31,
2010 and 12,000,000 stock options outstanding at December 31, 2011, were anti-dilutive.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Income taxes</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company recognizes deferred tax liabilities
and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements
or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the year
in which the differences are expected to reverse.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Long-Lived Assets Impairment</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Long-term assets of the Company are reviewed
for impairment when circumstances indicate the carrying value may not be recoverable in accordance with the guidance established
in Statement of Financial Accounting Standards No. 144 (SFAS 144) (ASC 360), <i>Accounting for the impairment or Disposal of Long-Lived
Assets</i>. For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted cash flows
associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to
write the asset down to its fair value. Fair values are determined based on discounted cash flows or internal and external appraisals,
as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Asset Retirement Obligations</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company accounts for asset retirement
obligations in accordance with the provisions of SFAS 143 (ASC 410) <i>“Accounting for Asset Retirement Obligations”</i>.
SFAS 143 (ASC 410) requires the Company to record the fair value of an asset retirement obligation as a liability in the period
in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition,
construction, development and/or normal use of the assets. The Asset Retirement Obligation as of December 31, 2011 is $25,540.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Concentration of Credit Risk</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company has financial instruments that
are exposed to concentrations of credit risk and consist primarily of cash and trade accounts receivable. The Company routinely
maintains cash and temporary cash investments at certain financial institutions in amounts substantially in excess of Federal Deposit
Insurance Corporation (“FDIC”) insurance limits. Management believes that these financial institutions are of high
quality and the risk of loss is minimal. At December 31, 2011 the Company had no cash balances in excess of FDIC limits.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Financial Instruments</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The carrying amount of financial instruments
including cash, accounts receivable, accounts payable and accrued liabilities approximate fair value, unless otherwise stated as
of December 31, 2011 and 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Fair value estimates of financial instruments
are made at the period end based on relevant information about financial markets and specific financial instruments. Because these
estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with
precision. Changes in assumptions can significantly affect estimated fair value.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>Contingencies</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Certain conditions may exist as of the date
the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more
future events occur or fail to occur. Company management and legal counsel assess such contingent liabilities which inherently
involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company,
or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any
legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought
therein.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">If management determines that it is probable
that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability is accrued in
the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable
but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with
an estimate of the range of possible loss if determinable and material, is disclosed.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 11pt 0 0"><b>Commitments</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 11pt 0 0">During the year ended December 31, 2011, the Company entered
into the following agreements:</p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 72px"> </td>
<td style="width: 24px; padding-top: 11pt; font: 10pt Times New Roman, Times, Serif">·</td>
<td style="padding-top: 11pt; font: 10pt Times New Roman, Times, Serif">A Management Services Agreement with ASL Energy Corp. (“ASL Energy”), which has a five year term, provides for ASL Energy to provide management and consulting services to the Company; provides for the right for ASL Energy and the Company to enter into Joint Venture Agreements regarding the purchase of oil and gas interests; provides for ASL Energy to be paid $8,000 per month during the term of the agreement and the right to receive the Series A Preferred stock issued to Mr. Smith.</td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 72px"> </td>
<td style="width: 24px; padding-top: 11pt; font: 10pt Times New Roman, Times, Serif">·</td>
<td style="padding-top: 11pt; font: 10pt Times New Roman, Times, Serif">An Asset Acquisition Agreement with ONE Energy Capital Corp., ONE Energy International Corp. and their affiliated parties, pursuant to which the Company agreed to acquire the assets of ONE Energy Capital Corp., ONE Energy International Corp. and their affiliated parties, upon the mutual agreement of final closing agreements, in aggregate consideration for shares of convertible preferred stock, which convert into shares of the Company having a total value of $5,910,000, based on the trading price of the company’s common stock on the date converted; votes one-for-one with the common shares; provides that no shares can be converted by the holders thereof if such conversion would result in the acquisition by such holder of more than 9.99% of the Company’s outstanding stock; and provides for such converted shares to be subject to a lock-up agreements. The Company amended its operating lease for its administrative office in Dallas, Texas on May 10, 2011. The lease will expire on April 30, 2014. The following sets forth the future minimum lease payments by year:</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 11pt 0 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Year</td>
<td style="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Amount</td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="width: 50%; text-align: center">2012</td>
<td style="width: 50%; text-align: center">$ 38,872</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="text-align: center">2013</td>
<td style="text-align: center">   39,904 </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="text-align: center">2014</td>
<td style="border-bottom: black 1pt solid; text-align: center">   13,416</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="text-align: right">Total</td>
<td style="border-bottom: black 2.25pt double; text-align: center">$ 92,192</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 11pt 0 0"> Total rental expense was approximately $37,919 and
$61,259 for years ended December 31, 2011 and 2010, respectively.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>3. REVERSE MERGER TRANSACTION</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">On August 9, 2011, Petron Energy II, Inc.
(“PEII”), a privately owned company, entered into a stock purchase agreement with three (3) shareholders of Restaurant
Concepts of America, Inc. (“RCA”), a publicly traded company. The agreement called for PEII to purchase 10,000,000
shares of RCA’s common stock for $232,750 ($0.02375 per share) from the three shareholders. The shares purchased represented
ninety-eight point nine percent (98.9%) of the total outstanding common shares of RCA at August 9, 2011. Immediately after the
purchase, PEII cancelled nine million four hundred thousand (9,400,000) shares of RCA’s common stock resulting in the following
stock ownership, which was subsequently effected by a one hundred to one forward stock split:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Pre-Split</td>
<td style="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Post-Split</td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="width: 33%; text-align: center">Petron Enery II, Inc.</td>
<td style="width: 34%; text-align: center">600,000</td>
<td style="width: 33%; text-align: center">60,000,000</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="text-align: center">Other Shareholders</td>
<td style="border-bottom: black 1pt solid; text-align: center">110,003</td>
<td style="border-bottom: black 1pt solid; text-align: center">11,000,300</td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="text-align: right">Total RCA Common Shares Outstanding</td>
<td style="border-bottom: black 2.25pt double; text-align: center">710,003</td>
<td style="border-bottom: black 2.25pt double; text-align: center">71,000,300</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Subsequent to the issuance of the 60,000,000
stock certificate to PEII, management determined that 78,511,478 shares of RCA’s common stock should have been issued based
on an exchange rate of two shares of common stock for each share of PEII’s preferred stock outstanding and one share of common
stock for each share of PEII’s common stock outstanding. The 60,000,000 share certificate was cancelled. The exchange of
shares was effected as follows:</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">Type of Shares</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Outstanding</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Shares</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>PEII</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Private Company)</b></p></td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>RCA’s Shares</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Issued</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Public Company)</b></p></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Preferred Shares</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">13,629,261</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">27,258,522</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Common Shares</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">51, 252,956</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">51,252,956</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">64,882,217</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">78,511,478</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Other Shareholders</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">11,000,300</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Total Common Shares Outstanding</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in">After the Exchange</p></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">89,511,778</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">After PEII gained control of RCA, PEII’s
name was changed to “Petron Energy Special Corporation” and RCA’s name was changed to “Petron Energy II,
Inc.” The two entities will be statutorily merged, with the surviving entity assuming the name Petron Energy II, Inc., on
January 3, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Subsequent to August 9, 2011, PEII sold 21,215,733
shares of common stock at $0.06 per share, resulting in a total of 110,727,511 outstanding common shares at December 31, 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">As of the date PEII gained control of RCA,
RCA’s balance sheet was as follows (unaudited):</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center">Restaurant Concepts of America, Inc.</td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center">Balance Sheet</td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center">(unaudited)</td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center">August 9, 2011</td></tr>
<tr style="vertical-align: top">
<td> </td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td colspan="3" style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Assets</td>
<td style="padding-bottom: 2.5pt"> </td>
<td colspan="3" style="border-bottom: black 2.25pt double; text-align: right">— </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Current Liabilities</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="width: 70%">   Accrued Liabilities</td>
<td style="width: 10%"> </td>
<td style="width: 1%">$</td>
<td style="width: 18%; text-align: right">79,399</td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt">   Shareholders Payable</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">34,675</td>
<td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">114,074</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Stockholders’ Deficit</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Common Stock, $0.001 par value, 1,000,000,000 shares authorized, 71,000,300 issued and outstanding</td>
<td> </td>
<td> </td>
<td style="text-align: right">71,000</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Paid-in Capital</td>
<td> </td>
<td> </td>
<td style="text-align: right">(44,499</td>
<td>)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Retained Deficit at August 31, 2010</td>
<td> </td>
<td> </td>
<td style="text-align: right">(111,307</td>
<td>)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt">Operating Loss from August 31, 2010 to merger date</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(29,268</td>
<td style="padding-bottom: 1pt">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="padding-bottom: 1pt">Total Retained Deficit</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(140,575</td>
<td style="padding-bottom: 1pt">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt">Total Stockholders’ Deficit</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(114,074</td>
<td style="padding-bottom: 1pt">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="padding-bottom: 2.5pt">Total Liabilities and Stockholders’ Deficit</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">—  </td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Included in the Statement of Stockholders’
Equity (Deficit) for the year ended December 31, 2011, is a reduction in paid-in capital related to the reverse merger as follows:</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td style="border-bottom: black 1pt solid; text-align: center">Description</td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center">Amount</td>
<td style="border-bottom: black 1pt solid"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="width: 70%">Purchase of Common Stock</td>
<td style="width: 10%"> </td>
<td style="width: 1%">$</td>
<td style="width: 18%; text-align: right">(232,750)</td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Restaurant Concepts of America, Inc.</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Accumulated Stockholders’ Deficit</td>
<td> </td>
<td> </td>
<td style="text-align: right">(114,074)</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Related Party Debt Forgiveness</td>
<td> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">164,413 </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(182,411)</td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The following summarizes, on a pro forma basis,
the effect on PEII’s common and preferred stock and additional paid-in capital as of December 31, 2009 giving effect to RCA’s
outstanding shares and the conversion of preferred stock to common stock:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0"><b>Petron Energy Special Corp.</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0"><b>Pro Forma Statement of Stockholders’ Equity (Deficit)</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0"><b>As of December 31, 2009</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline; text-align: center">Preferred Stock</td>
<td colspan="2" style="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline; text-align: center">Common Stock</td>
<td rowspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Additional </u></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Paid-in</u></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Capital</u></b></p></td>
<td rowspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Accumulated</u></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b><u>Deficit</u></b></p></td>
<td rowspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline; text-align: center">Total</td></tr>
<tr>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Number</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Amount</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Number</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Amount</td></tr>
<tr style="vertical-align: top">
<td style="width: 31%; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="width: 12%; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="width: 12%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="width: 9%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="width: 8%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="width: 8%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Balance as reported on December 31, 2009</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">10,137,737 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   101,377 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">41,557,284</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$ 415,573 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt">$5,679,928</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$  (6,824,378)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$  (627,500)</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Conversion of Preferred Stock to Common</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(10,137,737)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(101,377)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">20,267,474</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">202,675 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(101,298)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Restaurant Concepts of America, Inc. shares</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">11,000,300</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">11,000 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(11,000)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Change in par value from $0.01 to $0.001</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(556,423)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">556,423 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(10,137,737)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(101,377)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">31,267,774</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(342,748)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">444,125 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Balance as restated on December 31, 2009</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$    -</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">72,825,058</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt">$  72,825</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$6,124,053</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$  (6,824,378)</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt">$(627,500)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The accumulated (deficit) reflected above
and in the accompanying statement of stockholders’ equity (deficit) for the two year period ended December 31, 2011 represent
the historical earnings and losses of Petron Energy Special Corp. from its inception in 2007 to December 31, 2011.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>4. PRODUCING OIL AND GAS PROPERTIES </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The following summarizes the investment in
producing oil & gas properties as of December 31, 2011 and 2010:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td> </td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: center">2011</td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center">2010</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="width: 56%">Leasehold Cost</td>
<td style="width: 8%"> </td>
<td style="width: 1%">$</td>
<td style="width: 12%; text-align: right">753,373</td>
<td style="width: 1%"> </td>
<td style="width: 8%"> </td>
<td style="width: 1%">$</td>
<td style="width: 12%; text-align: right">699,273</td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Development Cost</td>
<td> </td>
<td> </td>
<td style="text-align: right">442,792</td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">270,072</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Tangible Equipment</td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: right">865,698</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">482,978</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">2,061,863</td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">1,452,323</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Accumulated Depreciation</td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(628,795</td>
<td style="border-bottom: black 1pt solid">)</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(591,695</td>
<td>)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Net Investment</td>
<td> </td>
<td>$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,433,068</td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">860,628</td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Depletion expense for the year ended December
31, 2011 and 2010 was $37,100 and $23,672, respectively.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>5. PIPELINE AND OTHER DEPRECIABLE EQUIPMENT</b></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td> </td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: center">2011</td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center">2010</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="width: 56%">Pipeline</td>
<td style="width: 8%"> </td>
<td style="width: 1%">$</td>
<td style="width: 12%; text-align: right">988,000 </td>
<td style="width: 1%"> </td>
<td style="width: 8%"> </td>
<td style="width: 1%">$</td>
<td style="width: 12%; text-align: right">988,000 </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Accumulated Depreciation</td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(179,289)</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(113,422)</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Net Pipeline</td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">808,711 </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">874,578 </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Equipment and Other</td>
<td> </td>
<td> </td>
<td style="text-align: right">211,603 </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">67,832 </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Accumulated Depreciation</td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(31,339)</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(17,618)</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Net Equipment and Other</td>
<td> </td>
<td>$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">180,264 </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">50,214 </td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Depreciation expenses for the years ended
December 31, 2011 and 2010 was $79,588 and $61,748, respectively.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>6. RELATED PARTY TRANSACTIONS </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Petron Energy, Inc. is a company controlled
by the Company’s majority shareholder. In 2011 and 2010, the Company paid Petron Energy, Inc. $312,510 and $196,575, respectively.
These amounts have been reflected in the accompanying consolidated financial statement as charges from a related party and are
included in general and administrative expenses for the respective years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="background-color: white">Effective August 31, 2011,
the Company entered into an Executive Employment Agreement with Floyd L. Smith.  Pursuant to the employment agreement,
Mr. Smith agreed to serve as President and Chief Executive Officer of the Company for a term of five years, renewable thereafter
for additional one year periods if not terminated by either party. The employment agreement provides for Mr. Smith to receive a
salary of $200,000 per year; reimbursement for reasonable business expenses; the ability to earn a yearly bonus in the sole discretion
of the Board of Directors of the Company; co-investment rights, providing Mr. Smith the right to participate in the amount of up
to 20% of any acquisition, transaction or funding undertaken by the Company during the term of the employment agreement; stock
options to purchase 12,000,000 shares of the Company’s common stock at an exercise price of $0.0039 per share, with cashless
exercise rights and a five year term, which vested immediately upon the parties’ entry into the employment agreement; and
1,000 shares of Series A Preferred Stock which give Mr. Smith Super Majority Voting Rights.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="background-color: white"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="background-color: white">The employment agreement includes
a non-competition provision, prohibiting Mr. Smith from competing against the Company in Texas, Louisiana, Oklahoma or New Mexico
for a term of 12 months following the termination of the employment agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="background-color: white"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="background-color: white">The employment agreement can
be terminated by the Company for cause (as defined in the agreement), without cause, or by Mr. Smith for good reason (as defined
in the agreement) or without good reason. If the employment agreement is terminated due to Mr. Smith’s death, disability,
with cause by the Company or without good reason by Mr. Smith, he is due the consideration earned by him up until the date of termination
of the agreement. If the employment agreement is terminated by the Company without cause or by Mr. Smith for good reason, Mr. Smith
is due the consideration earned by him up until the date of termination, plus the lesser of six months of salary due to Mr. Smith
under the employment agreement and the remaining amount of consideration due pursuant to the terms of the employment agreement
in a lump sum.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="background-color: white"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="background-color: white">Mr. Smith also agreed to assign
the Company rights to any intellectual property and inventions which he creates or conceives during the term of the employment
agreement relating to the Company’s business pursuant to the employment agreement.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>7. RECENT ACCOUNTING PRONOUNCEMENTS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The FASB established the <i>FASB Accounting
Standards Codification </i>(“Codification”) as the source of authoritative U.S. generally accepted accounting principles
(“GAAP”) recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements
issued for interim and annual periods ending after September 15, 2009. The codification has changed the manner in which U.S. GAAP
guidance is referenced, but did not have an impact on the consolidated financial position, results of operations or cash flows
of the Company</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">In January 2010, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value Measurements
and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements.” This ASU requires some new disclosures
and clarifies some existing disclosure requirements about fair value measurement as set forth in Accounting Standards Codification
(“ASC”) 820. ASU 2010-06 amends ASC 820 to now require: (1) a reporting entity should disclose separately the amounts
of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers;
and (2) in the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present
separately information about purchases, sales, issuances, and settlements. In addition, ASU 2010-06 clarifies the requirements
of existing disclosures. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except
for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements.
Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal
years. Early application is permitted. The Company will comply with the additional disclosures required by this guidance upon its
adoption in January 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Also in January 2010, the FASB issued Accounting
Standards Update No. 2010-03, “Extractive Activities—Oil and Gas—Oil and Gas Reserve Estimation and Disclosures.”
This ASU amends the “Extractive Industries—Oil and Gas” Topic of the Codification to align the oil and gas reserve
estimation and disclosure requirements in this Topic with the SEC’s Release No. 33-8995, “Modernization of Oil and
Gas Reporting Requirements (Final Rule),” discussed below. The amendments are effective for annual reporting periods ending
on or after December 31, 2009, and the adoption of these provisions on December 31, 2009 did not have a material impact on our
consolidated financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">On December 31, 2008, the Securities and Exchange
Commission, referred to in this report as the SEC, issued Release No. 33-8995, “Modernization of Oil and Gas Reporting Requirements
(Final Rule),” which revises the disclosures required by oil and gas companies. The SEC disclosure requirements for oil and
gas companies have been updated to include expanded disclosure for oil and gas activities, and certain definitions have also been
changed that will impact the determination of oil and gas reserve quantities. The provisions of this final rule are effective for
registration statements filed on or after January 1, 2010, and for annual reports for fiscal years ending on or after December
31, 2009.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">In August 2009, the FASB issued ASU No. 2009-05,
“Fair Value Measurements and Disclosures (Topic 820) —Measuring Liabilities at Fair Value,” related to fair value
measurement of liabilities. This update provides clarification that in circumstances in which a quoted price in an active market
for an identical liability is not available, a reporting entity is required to measure fair value using one or more valuation techniques.
This guidance is effective for the first reporting period beginning after issuance.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">In June 2009, the FASB issued guidance under
ASC 105, “Generally Accepted Accounting Principles.” This guidance established a new hierarchy of GAAP sources for
non-governmental entities under the FASB Accounting Standards Codification. The Codification is the sole source for authoritative
U.S. GAAP and supersedes all accounting standards in U.S. GAAP, except for those issued by the SEC. The guidance was effective
for financial statements issued for reporting periods ending after September 15, 2009. The adoption had no impact on the Company’s
financial position, cash flows or results of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">In May 2009, the FASB issued guidance under
ASC 855 “Subsequent Events,” which sets forth: (1) the period after the balance sheet date during which management
of reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial
statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet
date in its financial statements and (3) the disclosures that an entity should make about events or transactions that occurred
after the balance sheet date. The guidance was effective on a prospective basis for interim or annual financial periods ending
after June 15, 2009.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">In April 2009, the FASB updated its guidance
under ASC 820, “Fair Value Measurements and Disclosures,” related to estimating fair value when the volume and level
of activity for an asset or liability have significantly decreased and identifying circumstances that indicate a transaction is
not orderly. The guidance was effective for interim and annual reporting periods ending after June 15, 2009 with early adoption
permitted for periods ending after March 15, 2009. The adoption of this guidance did not have any impact on the Company’s
results of operations. Also in April 2009, the FASB updated its guidance under ASC 825, “Financial Instruments,” which
requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well
as in annual financial statements. This guidance also requires those disclosures in summarized financial information at interim
reporting periods. The guidance was effective for interim reporting periods ending after June 15, 2009 with early adoption permitted
for periods ending after March 15, 2009.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>8. INCOME TAXES </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company uses the liability method in accounting
for income taxes. Deferred income tax assets and liabilities are determined based upon differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The potential benefit of net operating loss
carry forwards has not been recognized in the accompanying consolidated financial statements since the Company cannot be assured
that it is more likely than not that such benefit will be utilized in future years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; margin-left: 0">The Company is subject to
United States federal and state income taxes at an approximate rate of 34%. The reconciliation of the provision for income taxes
at the United States federal statutory rate compared to the Company’s income tax expense as reported for the years ended
December 31, 2011 and 2010 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; margin-left: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td> </td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: center">2011</td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center">2010</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="width: 56%">Net Loss</td>
<td style="width: 8%"> </td>
<td style="width: 1%">$</td>
<td style="width: 12%; text-align: right">3,127,742 </td>
<td style="width: 1%"> </td>
<td style="width: 8%"> </td>
<td style="width: 1%">$</td>
<td style="width: 12%; text-align: right">1,529,459 </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Income Tax Rate</td>
<td> </td>
<td> </td>
<td style="text-align: right">34%</td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">34%</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Income Tax Recovery</td>
<td> </td>
<td> </td>
<td style="text-align: right">1,063,432 </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">520,016 </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Permanent Difference</td>
<td> </td>
<td> </td>
<td style="text-align: right">(365,319)</td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">(280,683)</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Valuation Allowance Change</td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(698,113)</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(239,333)</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Deferred Income Tax (Recovery)</td>
<td> </td>
<td>$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">0 </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">0 </td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Future income taxes arise from temporary differences
in the recognition of income and expenses for financial reporting and tax purposes. The significant components of future income
tax assets and liabilities at December 31, 2011 and 2010 are as follows:</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td> </td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: center">2011</td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid; text-align: center"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: center">2010</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="width: 56%">Net Operating Loss Carryforwards</td>
<td style="width: 8%"> </td>
<td style="width: 1%">$</td>
<td style="width: 12%; text-align: right">2,025,658 </td>
<td style="width: 1%"> </td>
<td style="width: 8%"> </td>
<td style="width: 1%">$</td>
<td style="width: 12%; text-align: right">1,317,971 </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Depletion and Depreciation</td>
<td> </td>
<td> </td>
<td style="text-align: right">(209,432)</td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">(199,858)</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Net Deferred Tax Assets</td>
<td> </td>
<td> </td>
<td style="text-align: right">1,816,226 </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right">1,118,113 </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Valuation Allowance</td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(1,816,226)</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(1,118,113)</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td>Deferred Tax Asset</td>
<td> </td>
<td>$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">0 </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">0 </td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The Company has recognized a valuation allowance
for the deferred tax assets for which it is more likely than not that the realization will not occur. The valuation allowance is
reviewed periodically. When circumstance change and this causes a change in management's judgment about the realizeability of deferred
tax assets, the impact of the change on the valuation allowance is generally reflected in current income.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The net operating loss carryforwards for income
tax purposes are approximately $5,958,000 and will begin to expire in 2025. Neither the Company nor any of its subsidiaries have
ever been the subject of an examination by the Internal Revenue Service.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Pursuant to Section 382 of the Internal Revenue
Code, use of the Company’s net operating loss carryforwards may be limited if the Company experiences a cumulative change
in ownership of greater than 50% in a moving three year period. Ownership changes could impact the Company’s ability to utilize
net operating losses and credit carryforwards remaining at the ownership change date. The limitation would be determined by the
fair market value of common stock outstanding prior to the ownership change, multiplied by the applicable federal rate.<b> </b></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>9. STOCKHOLDERS’ EQUITY</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><u>Preferred Stock</u></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The articles of incorporation of the Company authorize the issuance
of 10,000,000 shares of $0.001 par value Preferred Stock. The Board of Directors is authorized, from time to time, to divide the
preferred shares into “Series” and to fix and determine separately for each Series any or all of the relative rights
and preferences.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In connection with an employment agreement, the Company issued 1,000
shares of Series A Preferred Stock in August 2011. The Series A Preferred Stock has voting rights on all shareholder matters equal
to fifty-one percent (51%) of the total vote. There are no other liquidation, conversion or redemption rights.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On February 17, 2012, the Board of Directors designated “Series
B Convertible Preferred Stock” and the number of shares initially constituting such series will be up to 6,000,000 shares.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt">The Board of Directors does not formally approve the declaration
of the preferred stock dividends; therefore, as checks for payment of preferred dividends are approved by the CEO of the Company,
dividend expense is recognized. For the years ended December 31, 2011 and 2010, the preferred stock dividend expense was $875 and
$12,706, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><u>Common Stock</u></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company is authorized to issue up to 1,000,000,000 shares of
$0.001 par value common stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In August 2010, the Company exchanged 6,373,239 shares of common
stock for notes payable of $1,964,721 plus accrued interest of $777,712. The exchange value was approximately $0.43 per share which
was the negotiated with the owners of the notes payable.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In connection with the employment agreement with Floyd L. Smith,
the Company issued: (1) stock options to purchase 12,000,000 shares of the Company’s common stock at an exercise price of
$0.0039 per share, with cashless exercise rights and a five year term, which vest immediately, and (2) 1,000 shares of Series A
Preferred Stock which provide him Super Majority Voting Rights. The stock options and Series A preferred stock were valued at $377,458
and $4,791, respectively, using a Black-Scholes Option Pricing model. In connection with the valuation of the stock options, the
Company used the following assumptions: dividend yield 0%, risk free rate 0.96%, volatility 44.44% and an expected term of 5 years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On August 25, 2011, the Company’s Board of Directors approved
a one hundred-to-one (100:1) forward stock split of the issued and outstanding shares of common stock for stockholders of record
on August 25, 2011. The effect of this stock split has been applied retroactively in the accompanying financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><u>Warrants</u></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The following summarizes the stock purchase
warrant transactions for the year ended December 31, 2011 and 2010.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: right"> </td>
<td colspan="4" style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="font: 10pt Times New Roman, Times, Serif"> </td>
<td style="border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt; text-align: center">Number of Warrants</td>
<td colspan="4" style="border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center">Weighted <br /> Average<br /> Exercise <br /> Price</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="font: 10pt Times New Roman, Times, Serif">Outstanding, December 31, 2009</td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">1,032,496 </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">$0.50 </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 64%; font: 10pt Times New Roman, Times, Serif">Warrants Issued</td>
<td style="width: 9%; font: 10pt Times New Roman, Times, Serif; text-align: right">711,787 </td>
<td style="width: 16%; font: 10pt Times New Roman, Times, Serif; text-align: right">$0.50 </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">Warrants Exercised</td>
<td style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: right">(551,000)</td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">$0.50 </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="font: 10pt Times New Roman, Times, Serif">Warrants Forfeited, Expired or Cancelled</td>
<td style="border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(675,241)</td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">$0.50 </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="font: 10pt Times New Roman, Times, Serif">Outstanding, December 31, 2010</td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">518,042 </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">$0.50 </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="font: 10pt Times New Roman, Times, Serif">Warrants Issued</td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">0 </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="font: 10pt Times New Roman, Times, Serif">Warrants Exercised</td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">0 </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="font: 10pt Times New Roman, Times, Serif">Warrants Forfeited, Expired or Cancelled</td>
<td style="border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(518,042)</td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right">$0.50 </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">Outstanding, December 31, 2011</td>
<td style="border-bottom: black 2.25pt double; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt; text-align: right">0 </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif"> </td>
<td style="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: right"> </td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>10. FAIR VALUE ESTIMATES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In February 2007 the FASB issued ASC 820 “Fair Value Measurements
and Disclosures”. The objective of ASC 820 is to increase consistency and comparability in fair value measurements and to
expand disclosures about fair value measurements. ASC 820 defines fair value establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 applies under other accounting
pronouncements that require or permit fair value measurements and does not require any new fair value measurements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company measures its options at fair value in accordance with
ASC 820. 820 specifies a valuation hierarchy based on whether the inputs to those valuations techniques are observable or unobservable.
Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s
own assumptions. These two types of inputs have created the following fair value hierarchy:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Level 1—Quoted prices for identical instruments
in active markets;</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">Level 2—Quoted prices for similar instruments in
active markets, quoted process for identical or similar instruments in markets that are not active, and model-derived valuations
in which all significant inputs and significant value drivers are observable in active markets; and</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">Level 3—Valuations derived from valuations techniques
in which one or more significant inputs or significant value drivers are unobservable.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">This hierarchy requires the Company to minimize the use of unobservable
inputs and to use observable market data, if available, when estimating fair value. The fair values of the common stock options
and preferred stock issuance at December 31, 2011 were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1pt solid; text-align: center">Markets for <br /> Indentical Assets<br /> (Level 1)</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: center">Observable <br /> Inputs<br /> (Level 2)</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: center">Unobservable<br /> Inputs<br /> (Level 3)</td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: center">Total</td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEECC">
<td style="width: 40%">Stock Options</td>
<td style="width: 3%"> </td>
<td style="width: 1%">$</td>
<td style="width: 10%; text-align: right">—  </td>
<td style="width: 1%"> </td>
<td style="width: 3%"> </td>
<td style="width: 1%">$</td>
<td style="width: 10%; text-align: right">377,456 </td>
<td style="width: 1%"> </td>
<td style="width: 3%"> </td>
<td style="width: 1%">$</td>
<td style="width: 10%; text-align: right">—  </td>
<td style="width: 1%"> </td>
<td style="width: 3%"> </td>
<td style="width: 1%">$</td>
<td style="width: 10%; text-align: right">377,456</td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Preferred Stock</td>
<td> </td>
<td>$</td>
<td style="text-align: right">—  </td>
<td> </td>
<td> </td>
<td>$</td>
<td style="text-align: right">4,791 </td>
<td> </td>
<td> </td>
<td>$</td>
<td style="text-align: right">—  </td>
<td> </td>
<td> </td>
<td>$</td>
<td style="text-align: right">4,791</td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>11. SUBSEQUENT EVENTS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company’s management has evaluated subsequent events through
April 16, 2012, the date the consolidated financial statements were issued. In the opinion of the Company’s management, there
have been no significant subsequent events since December 31, 2011.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b>12. SUPPLEMENTAL INFORMATION ON OIL &
GAS (Unaudited)</b></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline; text-align: center">2011</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline; text-align: center">2010</td></tr>
<tr style="vertical-align: top">
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Capitalized Costs Relating to Oil and Gas Producing</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">Activities at December 31, 2011 and 2010</p></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Unproved Oil and Gas Properties</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   202,886 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   -</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Proved Oil and Gas Properties</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">1,858,977 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">1,452,323 </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">2,061,863 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">1,452,323 </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 16.8pt">Less Accumulated Depletion</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(628,795)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(591,695)</td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Net Capitalized Costs Relating to Oil and Gas Producing Activities</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   1,433,068 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   860,628 </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Costs incurred in Oil and Gas Producing Activities for the</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">year ended December 31, 2011 and 2010</p></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Property acquisition cost:</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 16.8pt">Proved</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   -</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   -</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 16.8pt">Unproved</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">54,100 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Exploration and development costs</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">555,440 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">87,028 </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Depletion rate per equivalent barrel of production</td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$       23.26 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$       11.38 </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Results for Operations for Oil and Gas Producing Activities for
the</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">year ended December 31, 2011</p></td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Oil and Gas Sales</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   192,839 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   203,904 </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Less: Production Costs</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">271,873 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">266,599 </td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 22.5pt">Depletion, Depreciation and Amortization</td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">37,100 </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">23,672 </td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(116,134)</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(86,367)</td></tr>
<tr style="vertical-align: top; background-color: #CCEECC">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Income Tax Benefit</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="vertical-align: top; background-color: white">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Results of Operations for Oil and Gas Producing Activities</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">(excluding corporate overhead and financing costs)</p></td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   (116,134)</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   (86,367)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">Reserve Information</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">The estimates of proved oil and gas reserves
utilized in the preparation of the financial statements were prepared by independent petroleum engineers. Such estimates are in
accordance with guidelines established by the SEC and the FASB. All of our reserves are located in the United States.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">In 2009, the SEC issued its final rule on
the modernization of oil and gas reporting, and the FASB adopted conforming changes to ASC Topic 932, “<i>Extractive Industries”</i>,
to align the FASB’s reserves requirements with those of the SEC. The final rule is now in effect for companies with fiscal
years ending on or after December 31, 2009.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-left: 0">As it affects our reserve estimates and disclosures,
the final rule:</p>
<ul style="list-style-type: disc; margin-top: 0in">
<li style="text-align: justify; margin: 0; font-size: 10pt">amends the definition of proved reserves to require the use of average
commodity prices based upon the prior 12-month period rather than year-end prices (Oil - $90.63 bbl; Gas – $3.99mcf for year
ended December 31, 2011);</li>
<li style="text-align: justify; margin: 0; font-size: 10pt">expands the type of technologies available to establish reserve estimates
and categories;</li>
<li style="text-align: justify; margin: 0; font-size: 10pt">modifies certain definitions used in estimating proved reserves;</li>
<li style="text-align: justify; margin: 0; font-size: 10pt">permits disclosure of probable and possible reserves;</li>
<li style="text-align: justify; margin: 0; font-size: 10pt">requires disclosure of internal controls over reserve estimations and
the qualifications of technical persons primarily responsible for the preparation or audit of reserve estimates;</li>
<li style="text-align: justify; margin: 0; font-size: 10pt">permits disclosure of reserves based on different price and cost criteria,
such as futures prices or management forecasts; and</li>
<li style="text-align: justify; margin: 0; font-size: 10pt">requires disclosure of material changes in proved undeveloped reserves,
including a discussion of investments and progress made to convert proved undeveloped reserves to proved developed reserves</li>
</ul>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; margin-left: 0">We emphasize that reserve
estimates are inherently imprecise. Accordingly, the estimates are expected to change as more current information becomes available.
In addition, a portion of our proved reserves are classified as proved developed nonproducing and proved undeveloped, which increases
the imprecision inherent in estimating reserves which may ultimately be produced.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; margin-left: 0">The following table sets
forth estimated proved oil and gas reserves together with the changes therein for the years ended December 31, 2011 and 2010:</p>
<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.5in; margin-right: 0; margin-bottom: 0; margin-left: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 16.8pt"> </td>
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline; text-align: center">2011</td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center"> </td>
<td colspan="3" style="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline; text-align: center">2010</td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 16.8pt; text-align: center"> </td>
<td style="width: 91px; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Oil</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(bbls)</p></td>
<td style="width: 19px; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="width: 89px; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Gas</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(mcf)</p></td>
<td style="width: 18px; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="width: 84px; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Oil</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(bbls)</p></td>
<td style="width: 24px; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="width: 102px; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Gas</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(mcf)</p></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Proved Developed and undeveloped reserves:</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">Beginning of the year</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">94,566 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">148,000 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">74,409 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">341,000 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">Revisions of previous estimate</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(33,780)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(148,000)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">22, 237 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(193,000)</td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">Production</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(1,595)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">0 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(2,080)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">0 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">End of the year</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">59,191 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">0 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">94,566 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">148,000 </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">Proved developed reserves:</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">Beginning of year</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">36,456 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">148,000 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">19,002 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">0 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">End of year</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">36,557 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">0 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">36,456 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">0 </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Standardized measure of Discounted Future</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">Net Cash Flows at December 31</p></td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 34.8pt">Future cash inflows</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$5,364,574</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   8,046,536 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 34.8pt">Future production costs</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(1,913,921)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(2,218,257)</td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 34.8pt">Future development costs</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(175,000)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(500,000)</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">3,275,653 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">5,328,279 </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">Future net cash flows 10% annual discount</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 34.8pt">for estimated timing of cash flows</p></td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(1,525,034)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(2,399,085)</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Standardized measure of Discounted Future</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">Net Cash Flows relating to Proved Oil and</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">Gas Reserves</p></td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$  1,750,619 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   2,929,194 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt; text-indent: -16.8pt">The following reconciles the change
in the</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">standardized measure of discounted future</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">net cash flow during the year</p></td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">Beginning of the year</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$  2,929,194 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   3,251,241 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">Sales of oil and gas produced, net of</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 34.8pt">production costs</p></td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">80,510 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">79,034 </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">Net changes in prices and production costs</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">1,486,207 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">2,068,185 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">Development costs incurred during the year</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 34.8pt">which were previously estimated</p></td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">603,999 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">87,028 </td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 16.8pt">Net change in estimated future development</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 34.8pt">costs</p></td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(278,999)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(212,028)</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">Revisions of previous quantity estimates</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(3,944,343)</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(424,659)</td></tr>
<tr style="background-color: #CCEECC">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">Change in discount</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">874,051 </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(1,919,607)</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 16.8pt">End of year</td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$1,750,619</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1.5pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$   2,929,194 </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin-right: 0; margin-bottom: 0; margin-left: 0"> </p>
<p style="margin: 0pt"></p>
496733
-727771
-191903
52216