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<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="3" style="line-height: 115%; font-weight: bold; text-align: center"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 84%; line-height: 115%; font-weight: bold; text-decoration: underline">Assets acquired:</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 15%; line-height: 115%; text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Cash and cash equivalents</td>
<td style="line-height: 115%; text-align: right">$</td>
<td style="line-height: 115%; text-align: right">12,058</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Accounts receivable</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">18,054</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Property and equipment, net</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">123,849</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Investment in oil and gas properties, net</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">49,252</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Goodwill</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">333,799</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> Total assets acquired</td>
<td style="border-top: black 1pt solid; border-bottom: black 1pt solid; line-height: 115%; text-align: right">$</td>
<td style="border-top: black 1pt solid; border-bottom: black 1pt solid; line-height: 115%; text-align: right">537,012</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%; text-decoration: underline"><b><u>Liabilities assumed</u></b><u>:</u></td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Accounts payable</td>
<td style="line-height: 115%; text-align: right">$</td>
<td style="line-height: 115%; text-align: right">(9,439)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Accrued expenses</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">(2,205)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Notes payable</td>
<td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1pt solid; line-height: 115%; text-align: right">(52,087)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> Total liabilities assumed</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">(63,731)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Net assets acquired</td>
<td style="border-top: black 1pt solid; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">$</td>
<td style="border-top: black 1pt solid; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">473,281</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%; font-weight: bold; text-decoration: underline">Purchase consideration:</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Common stock - 1,000,000 shares, valued at $0.20 per share</td>
<td style="line-height: 115%; text-align: right">$</td>
<td style="line-height: 115%; text-align: right">200,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Pre-acquisition cash advances</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">163,095</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Value of net monetary assets acquired assigned to seller</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">20,186</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Cash consideration</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">35,000</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Note payable to stockholders </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%; text-align: right">55,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Total Consideration Paid</td>
<td style="border-top: black 1pt solid; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">$</td>
<td style="border-top: black 1pt solid; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">473,281</td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 1: NATURE OF OPERATIONS, BASIS OF PRESENTATION AND GOING
CONCERN</b></p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">New Western Energy Corporation (the “Company”)
was incorporated in the State of Nevada on September 25, 2008. The Company’s principal business is the acquisition, exploration
and development of, and production from oil, gas and mineral properties located in the United States.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On December 1, 2010, the Company formed an
entity named New Western Texas Oil and Gas Corporation (“New Western Texas”) incorporated in the State of Nevada, as
its wholly-owned subsidiary. New Western Texas started its operations in January 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 2, 2012, the Company completed the
acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. (“RTE”) (See Note 3).</p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis of presentation</b></p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying interim condensed consolidated
financial statements are unaudited, but in the opinion of management of the Company, contain all adjustments, which include normal
recurring adjustments and business acquisition adjustments, necessary to present fairly the financial position at September 30,
2012, and the results of operations and cash flows for the three months and nine months periods ended September 30, 2012 and 2011.
The balance sheet as of December 31, 2011 is derived from the Company’s audited financial statements.</p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain information and footnote disclosures
normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management
of the Company believes that the disclosures contained in these consolidated financial statements are adequate to make the information
presented therein not misleading. For further information, refer to the financial statements and the notes thereto contained in
the Company’s 2011 Annual Report filed with the SEC on Form 10-K on March 30, 2012.</p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Going Concern</b></p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="color: black">These consolidated
financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets
and discharge its liabilities in the normal course of business. The Company has not generated significant revenues since inception
and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future.
The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the
ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations.
The Company currently has on ongoing </font>private placement <font style="color: black">equity offering and has raised </font>$499,200
during the nine months ended September 30, 2012 and through the date of this report. <font style="color: black">At September 30,
2012, the Company had a working capital deficit of $217,216, incurred a net loss of $321,836 during the nine months ended September
30, 2012 and used cash in operating activities of $190,162. These factors raise substantial doubt regarding the Company’s
ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability
and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable
to continue as a going concern. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Principles of Consolidation</b></p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries <font style="color: black">New Western Texas Oil and Gas
Corporation and Royal Texan Energy Co.</font> All intercompany balances and transactions are eliminated in consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly
evaluates estimates and assumptions related to the valuation of marketable securities, valuation of accounts, notes and other receivables,
valuation and purchase price allocation of assets acquired and liabilities assumed in business combinations, valuation of long-lived
assets, goodwill and oil, gas and mineral properties, stock-based compensation and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><br clear="all" /></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair value of Financial Instruments and
Fair Value Measurements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 820, <i>Fair Value Measurements and Disclosures,
</i>requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs
used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest
level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be
used to measure fair value:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Level 1 </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 1 applies to assets or liabilities for
which there are quoted prices in active markets for identical assets or liabilities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Level 2 </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 2 applies to assets or liabilities for
which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Level 3 </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3 applies to assets or liabilities for
which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the
assets or liabilities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s financial instruments consist
principally of cash, amounts receivable, accounts payable, notes payable, and amounts due to related parties. Pursuant to ASC 820,
<i>Fair Value Measurements and Disclosures</i> and ASC 825, <i>Financial Instruments</i>, the fair value of our cash equivalents
is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The
Company believes that the recorded values of all of the other financial instruments approximate their current fair values because
of their nature and respective maturity dates or durations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Net Earnings (Loss) Per Share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company computes net earnings (loss) per
share in accordance with ASC 260, <i>Earnings per Share</i>. ASC 260 requires presentation of both basic and diluted net earnings
per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available
to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible
preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining
the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti-dilutive. At September 30, 2012, there were Class C Warrants outstanding for 2,090,666
common shares that were excluded from the computations of diluted loss per share since the effect was anti-dilutive. The warrants,
if exercised, may dilute future earnings per share.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Recent Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has implemented all new accounting
pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are
any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results
of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Principles of Consolidation</b></p>
<p style="font: 6pt Times New Roman, Times, Serif; margin: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries <font style="color: black">New Western Texas Oil and Gas
Corporation and Royal Texan Energy Co.</font> All intercompany balances and transactions are eliminated in consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Use of Estimates</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements in
conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly
evaluates estimates and assumptions related to the valuation of marketable securities, valuation of accounts, notes and other receivables,
valuation and purchase price allocation of assets acquired and liabilities assumed in business combinations, valuation of long-lived
assets, goodwill and oil, gas and mineral properties, stock-based compensation and deferred income tax asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results
experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material
differences between the estimates and the actual results, future results of operations will be affected.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Fair value of Financial Instruments and
Fair Value Measurements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 820, <i>Fair Value Measurements and Disclosures,
</i>requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs
used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest
level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be
used to measure fair value:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Net Earnings (Loss) Per Share</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company computes net earnings (loss) per
share in accordance with ASC 260, <i>Earnings per Share</i>. ASC 260 requires presentation of both basic and diluted net earnings
per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available
to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible
preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining
the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential shares if their effect is anti-dilutive. At September 30, 2012, there were Class C Warrants outstanding for 2,090,666
common shares that were excluded from the computations of diluted loss per share since the effect was anti-dilutive. The warrants,
if exercised, may dilute future earnings per share.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Recent Accounting Pronouncements</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has implemented all new accounting
pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are
any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results
of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 3: ACQUISITION OF ROYAL TEXAN ENERGY CO.</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; text-align: justify">On January 2, 2012, the Company completed the
acquisition of 100% of the issued and outstanding capital stock of Royal Texan Energy Co. pursuant to a Plan and Agreement of Reorganization
dated December 1, 2011, in exchange for (a) 1,000,000 shares of its common stock, (b) $35,000 in cash and (c) a Promissory Note
of $55,000 payable to the two stockholders of RTE, payable at the rate of $10,000 per month commencing 30 days after closing of
the acquisition.  In addition, pre-acquisition cash advances of $163,095 were applied as additional purchase price. In a supplemental
agreement between the Company and the sellers, the Company agreed to let the sellers retain net monetary assets acquired totaling
$20,186, which is treated as additional purchase price.  The Company also agreed to pay down the bank notes of approximately
$50,000 within nine months of the acquisition closing date which notes had been previously personally guaranteed by the seller
to the bank.  The shares issued to the owners of RTE were valued at $200,000 based on issuance of 1,000,000 shares of our
common stock valued at $0.20 per share, based on the closing price per share on the date of closing of the transaction. The fair
value of the total consideration paid for the acquisition of RTE amounted to $473,281. Upon completion of the acquisition, RTE
became a wholly-owned subsidiary of the Company. As of September 30, 2012, the Company has paid $35,000 in cash to the stockholders
of RTE, paid $55,000 towards the Promissory Note of $55,000, and issued 1,000,000 shares of its common stock.  In addition
$52,087 has been paid towards the bank debt assumed by the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Royal Texan Energy Co. principal business operations
are acquisitions, exploration and development of, and production from oil and gas properties located in Texas. The Company acquired
RTE primarily due to its lease ownership interests in oil and gas properties and the Company’s requirement to have an operator
for exploration and production of oil and gas in Texas.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The purchase price of RTE was allocated to
record identifiable assets and liabilities at their fair value and the remainder to goodwill as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 84%; font-weight: bold; text-decoration: underline">Assets acquired:</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 15%; text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Cash and cash equivalents</td>
<td style="text-align: right">$</td>
<td style="text-align: right">12,058</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Accounts receivable</td>
<td style="text-align: right"> </td>
<td style="text-align: right">18,054</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Property and equipment, net</td>
<td style="text-align: right"> </td>
<td style="text-align: right">123,849</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Investment in oil and gas properties, net</td>
<td style="text-align: right"> </td>
<td style="text-align: right">49,252</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Goodwill</td>
<td style="border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right">333,799</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> Total assets acquired</td>
<td style="border-bottom: windowtext 1pt solid; text-align: right">$</td>
<td style="border-bottom: windowtext 1pt solid; text-align: right">537,012</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-decoration: underline"><b><u>Liabilities assumed</u></b><u>:</u></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Accounts payable</td>
<td style="text-align: right">$</td>
<td style="text-align: right">(9,439)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Accrued expenses</td>
<td style="text-align: right"> </td>
<td style="text-align: right">(2,205)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Notes payable</td>
<td style="border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right">(52,087)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> Total liabilities assumed</td>
<td style="border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right">(63,731)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Net assets acquired</td>
<td style="border-bottom: windowtext 2.25pt double; text-align: right">$</td>
<td style="border-bottom: windowtext 2.25pt double; text-align: right">473,281</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="font-weight: bold; text-decoration: underline">Purchase consideration:</td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Common stock - 1,000,000 shares, valued at $0.20 per share</td>
<td style="text-align: right">$</td>
<td style="text-align: right">200,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Pre-acquisition cash advances</td>
<td style="text-align: right"> </td>
<td style="text-align: right">163,095</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Value of net monetary assets acquired assigned to seller</td>
<td style="text-align: right"> </td>
<td style="text-align: right">20,186</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Cash consideration</td>
<td style="text-align: right"> </td>
<td style="text-align: right">35,000</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Note payable to stockholders </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; text-align: right">55,000</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Total Consideration Paid</td>
<td style="border-bottom: windowtext 2.25pt double; text-align: right">$</td>
<td style="border-bottom: windowtext 2.25pt double; text-align: right">473,281</td></tr>
</table>
<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>NOTE 4: OIL AND GAS PROPERTIES AND RELATED OBLIGATIONS</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 Company's aggregate capitalized costs related to oil properties
consist of the following:</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">
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; font-weight: bold">Name of the property</td>
<td nowrap="nowrap" style="font-size: 12pt"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">Type</td>
<td nowrap="nowrap" style="font-size: 12pt"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">September 30, 2012 (Unaudited)</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">December 31, 2011</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="width: 43%; padding-right: 5.4pt; padding-left: 5.4pt">Glass Lease</td>
<td nowrap="nowrap" style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="width: 13%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="width: 15%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">221,000</td>
<td nowrap="nowrap" style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="width: 18%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 210,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Phillips Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 130,000</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 130,000</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Chautauqua Lease – B&W Ranch</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">75,000</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 75,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Chautauqua Lease – Smith Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">24,750</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Swenson Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">23,070</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 15,312</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">McLellan Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">4,191</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">2,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Reves Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">6,555</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">2,000</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Terry Heirs</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">9,722</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Trice, W. G.</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">25,333</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Uncompleted wells, equipment and facilities</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">36,972</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 36,973</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 556,593</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 471,285</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Accumulated depletion</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> (2,352)</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(515)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">554,241</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">470,770</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Changes in the Uncompleted Wells, Equipment and Facilities were
as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: center"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Nine Months Ended</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">September 30, 2012</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Unaudited)</p></td></tr>
<tr style="background-color: #CCEEFF">
<td style="width: 61%; vertical-align: top">Beginning Balance – December 31, 2011</td>
<td style="width: 3%; vertical-align: bottom; text-align: center"> </td>
<td style="width: 17%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 2%; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="width: 2%; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td style="width: 15%; vertical-align: bottom; border-top: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 36,972 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top">Additions</td>
<td style="font: 11pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Sale of lease</td>
<td style="font: 11pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: -0.25in"> </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">Reclassification to proved properties</td>
<td style="font: 11pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Costs charged to expense</td>
<td style="font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: -0.25in"> </td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr>
<td style="vertical-align: top; background-color: white">Ending Balance – September 30, 2012</td>
<td style="vertical-align: bottom; background-color: white; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; background-color: white; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 2.25pt double; vertical-align: bottom; background-color: white; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td style="border-bottom: windowtext 2.25pt double; vertical-align: bottom; background-color: white; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 36,972 </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-align: justify">There were no exploration well costs capitalized
for more than one year following the completion of drilling.</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 following oil and gas leases were acquired during the nine months
ended September 30, 2012.</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-align: justify"><u>Chautauqua Lease – Smith Lease, Chautauqua
County, Kansas (“Chautauqua Lease”)</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 11, 2012, the Company entered into an
Assignment of Oil and Gas Lease with a third party for an oil and gas property in Kansas named as “Chautauqua Lease –
Charles and Nancy Smith”, whereby the assignor(s) granted the rights to the Company to carry geographical and other exploratory
work, including core drilling, and the drilling, mining and operating for, producing, and saving all of the oil, gas, including
all associated hydrocarbons. The assignors agreed to transfer 90% of their rights, title, interest, and duties and obligations
in the Chautauqua Lease to the Company for a total consideration of $24,750. The Company’s net revenue interest in Chautauqua
Lease was calculated at 73.125% subject to the reserved 6.25% Overriding Royalty Interest after paying of the mineral owners and
other fees. The Company has paid the total consideration of $24,750 as of April 26, 2012. The Company has not started any oil and
gas exploration on Chautauqua Lease as of September 30, 2012.</p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Mrs. W.G. Trice, Trice and Methodist
Home and Trice Methodist “400” Leases, Shackelford County, Texas (“Trice Lease”)</u></p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Mrs. W.G. Trice Lease and Trice and
Methodist Home Lease</u></p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 2, 2012, as part of the RTE
acquisition, we acquired an assignment of an oil and gas lease. This lease had been acquired by RTE on April 1, 2010, when they
entered into an assignment of oil and gas lease agreement with Richard Windham, JR., individually and doing business as Tracker
Mineral and Tracker Mineral, LLC (“Assignor”), whereby the Assignor agreed to sell, assign, and transfer all of their
rights, title and interest in and to the leasehold estates covering one hundred percent (100%) of their rights, title and interest
in the Mrs. W. G. Trice and Trice and Methodist Home leases. The W. G. Trice and Methodist Home leases consist of four tracts of
257.75 acres of land in Shackelford County in Texas. The assignment of lease includes from the surface and insofar as covers ground
to a depth of one thousand (1,000) feet below the surface and insofar as covers and includes net revenue interests except, that
Richard Windham, Jr., individually reserves to himself, his heirs, successors and assigns an overriding royalty interest payable
on oil, gas and associated hydrocarbons produced, saved and sold from only the lands described as Trice and Methodist Home Lease
equal to the difference between an 80 percent net revenue interest and all lease royalty burdens. This assignment covers and includes
all of Assignor’s interest in all equipment, personal property, and fixtures located on or used in connection with the lease.</p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Trice Methodist “400” Lease</u></p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 2, 2012, as part of the RTE
acquisition, we acquired an assignment of an oil and gas lease. This lease had been acquired by RTE on April 1, 2010, when they
entered into an assignment agreement whereby, the assignor agreed to sell, assign, transfer all of their rights, title and interest
in and to the leasehold estates covering one hundred percent (100%) of their rights, title and interest in Trice Methodist “400”
lease effective September 1, 2010. Trice Methodist “400” consisted of 273.3 acres of land in Shackelford, Texas. Pursuant
to the terms of the assignment of the lease, RTE has a net revenue interest of 77%, and the operator shall pay the assignor, its
successors or assigns, based on their division of interest, less taxes required by law to be deducted and remitted by the purchaser
for all oil and gas.</p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">We recorded these leases as $25,333 investment
in oil and gas properties and $50,667 lease and well equipment. On April 2, 2010, RTE executed a promissory note with a bank and
obtained a loan for $76,000 to fund the payment to the Assignor for the sale, assignment and transfer of all of their rights including,
the cost of the tangible equipment, personal property and fixtures on the Mrs. W.G. Trice, Trice and Methodist Home and Trice Methodist
“400” Lease. The promissory note is secured by the debtor’s interest in and to the Mrs. W.G. Trice lease, Trice
Methodist “400” lease and Trice and Methodist Home lease all located in Shackelford County, Texas. The promissory note
bears 7% per annum interest, and is payable in 48 monthly payments of $1,820.25 beginning May 2, 2010. We recorded this assumed
note at its book value, which approximates fair value, of $46,929 on the RTE acquisition date. On September 27, 2012, the Company
paid $4,213 to pay off the total outstanding principal and interest due on the promissory note. The Company recorded an interest
expense of $344 and $1,846 for the three months and nine months ended September 30, 2012.</p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0"><u>Terry Heirs #1 and Lane #1, 2, 3 Shackelford County, Texas
(“Terry Heirs”)</u></p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 2, 2012, as part of the RTE
acquisition, we acquired an assignment of an oil and gas lease. We recorded this lease as $9,722 investment in oil and gas properties
and $10,278 lease and well equipment. This lease had been acquired by RTE on October 12, 2009, when they entered into a Purchase
and Sale Agreement and agreed to purchase the right, title and interest in, to and under the oil, gas and mineral leasehold interest
in the oil and gas wells on properties located in Schackelford County, Texas. RTE purchased a 75.59667 percent net revenue interest
in exchange for a purchase consideration of $20,000. RTE paid $4,583 in cash and executed a promissory note on November 4, 2009
of $15,417, payable on demand, but if no demand is made, then payable in 36 monthly installments of $486.63 bearing an interest
rate of 8.5% per annum. We recorded this assumed note at its book value, which approximates fair value, of $5,159 on the RTE acquisition
date. The Company recorded an interest expense of $0 and $66 for the three months and nine months ended September 30, 2012. On
February 2, 2012, the Company paid $4,738 to pay off the principal balance and interest due on the promissory note. </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>Doshier Lease, Nowata County, Oklahoma</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 5, 2011, the Company sold its ownership
interest in Doshier Lease to XnE, Inc., a third party, in exchange for a total consideration of $175,000, comprising of cash consideration
of $25,000 and 7,500,000 shares of common stock of XnE, Inc. valued at $150,000. The common stock received was valued at its fair
value on the date of issuance. As of December 31, 2011, the Company had received cash of $25,000 and sold the 7,500,000 shares
of common stock of XnE, Inc. back to XnE, Inc. for $30,000 and received an unsecured promissory note of $30,000 bearing 6% interest,
which was originally due on July 1, 2012 but extended to December 28, 2012. As a result, the Company recorded a gain of $25,000
from sale of Doshier Lease and a loss of $120,000 from sale of its investment in XnE shares as of December 31, 2011. The Company
recorded interest income of $450 and $1,350 for the three months and nine months ended September 30, 2012. The principal balance
due on the note receivable amounted to $30,000 at September 30, 2012.</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-align: center"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Swenson Lease, Jones County, Texas</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 27, 2011, the Company’s subsidiary
New Western Texas acquired a 50% working interest (39.66 % net revenue interest) in 160 acres of oil and gas leases in Jones County,
Texas for $8,000 cash. Subsequently additional acquisition costs of $7,312 were incurred. The lease was purchased subject to a
Venture Agreement with a third party (Venture Partner) who holds the other 50% working interest and will act as the operator for
a stipulated fee. Both parties will evenly split operating expenses of the lease. Operating proceeds after royalty interests and
expenses shall be distributed 50% to the Company. Additionally, a stipulated portion of the Venture Partner’s working interest
proceeds shall also be distributed to the Company until the Company recovers its acquisition and development costs of the particular
lease. Subsequent to any lease purchase under this Venture Agreement, the Company may decline to develop a property in which case
the Venture Partner must repurchase the working interest from the Company at the then fair value of the lease working interest.
The Company was required to provide the operator with a prepaid amount of $10,000 to be used to fund operating expenses within
3 days of a request by the Venture Partner. As of September 30, 2012, the Company incurred $36,972 of capitalizable equipment costs
classified as uncompleted wells equipment and facilities and incurred $7,048 and $25,689 of non-capitalizable exploratory costs
relating to the Texas lease for the three months and nine months ended September 30, 2012.</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; font-weight: bold">Name of the property</td>
<td nowrap="nowrap" style="font-size: 12pt"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">Type</td>
<td nowrap="nowrap" style="font-size: 12pt"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">September 30, 2012 (Unaudited)</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: center">December 31, 2011</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="width: 43%; padding-right: 5.4pt; padding-left: 5.4pt">Glass Lease</td>
<td nowrap="nowrap" style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="width: 13%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="width: 15%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">221,000</td>
<td nowrap="nowrap" style="width: 2%; padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="width: 3%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="width: 18%; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 210,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Phillips Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 130,000</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 130,000</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Chautauqua Lease – B&W Ranch</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">75,000</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 75,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Chautauqua Lease – Smith Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">24,750</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Swenson Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">23,070</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 15,312</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">McLellan Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">4,191</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">2,000</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Reves Lease</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">6,555</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">2,000</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Terry Heirs</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">9,722</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Trice, W. G.</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">Oil</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">25,333</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-right: 5.4pt; padding-left: 5.4pt">Uncompleted wells, equipment and facilities</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">36,972</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 36,973</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 556,593</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 471,285</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Accumulated depletion</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> (2,352)</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(515)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">554,241</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt; font-size: 12pt"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">470,770</td></tr>
</table>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td style="text-align: center"> </td>
<td style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Nine Months Ended</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">September 30, 2012</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Unaudited)</p></td></tr>
<tr style="background-color: #CCEEFF">
<td style="width: 61%; vertical-align: top">Beginning Balance – December 31, 2011</td>
<td style="width: 3%; vertical-align: bottom; text-align: center"> </td>
<td style="width: 17%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 2%; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="width: 2%; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td style="width: 15%; vertical-align: bottom; border-top: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 36,972 </td></tr>
<tr style="background-color: white">
<td style="vertical-align: top">Additions</td>
<td style="font: 11pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Sale of lease</td>
<td style="font: 11pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: -0.25in"> </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">Reclassification to proved properties</td>
<td style="font: 11pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Costs charged to expense</td>
<td style="font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; text-align: right; text-indent: -0.25in"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 1pt solid; font: 12pt Calibri, Helvetica, Sans-Serif; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; text-indent: -0.25in"> </td>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
<tr>
<td style="vertical-align: top; background-color: white">Ending Balance – September 30, 2012</td>
<td style="vertical-align: bottom; background-color: white; text-align: center"> </td>
<td style="vertical-align: bottom; text-align: right"> </td>
<td style="vertical-align: bottom; background-color: white; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td style="border-bottom: windowtext 2.25pt double; vertical-align: bottom; background-color: white; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td style="border-bottom: windowtext 2.25pt double; vertical-align: bottom; background-color: white; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 36,972 </td></tr>
</table>
36973
36972
0
0
0
0
2012-05-11
2012-01-02
2012-01-02
2012-01-02
2011-01-27
2011-05-05
1.00
1.00
0.50
4
257.75
273.3
160
1000
0.77
0.7559667
0.3966
7312
25333
9722
50667
10278
2010-04-02
2009-10-12
2010-05-02
2009-11-04
76000
15417
0.07
0.0850
0.06
0.10
0.10
4213
30000
46929
5159
1846
66
1350
344
450
4738
175000
25000
7500000
150000
-7500000
30000
30000
2012-07-01
2012-07-01
2013-01-31
2012-12-28
2013-07-01
25000
-120000
7048
25689
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 5: MINERAL PROPERTIES AND RELATED OBLIGATIONS</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; text-align: justify">The Company’s aggregate capitalized costs
related to mineral properties consist of the following:</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="background-color: white">
<td style="width: 67%"> </td>
<td style="width: 4%"> </td>
<td style="width: 4%"> </td>
<td style="width: 1%"> </td>
<td style="width: 2%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 7%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 2%"> </td>
<td style="width: 2%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 7%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 2%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 2%; vertical-align: bottom; text-align: right"> </td></tr>
<tr>
<td style="vertical-align: top">Unproved Properties:</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: top; text-align: center"> </td>
<td colspan="2" style="vertical-align: top; text-align: center"> </td>
<td colspan="4" style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="vertical-align: bottom; 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>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; text-align: center">Name of Property</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: center">Type</td>
<td style="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: center"> </td>
<td colspan="3" style="vertical-align: top; border-bottom: windowtext 1pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">September 30, 2012</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Unaudited)</p></td>
<td style="vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td colspan="4" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">December 31, 2011</td></tr>
<tr>
<td style="vertical-align: top"> </td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; 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"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td colspan="3" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Wellsboro Lease</td>
<td style="vertical-align: top">Gravel</td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; 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">103,530</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td colspan="3" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 103,530</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top"> </td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; 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">103,530</td>
<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 colspan="3" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">103,530</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom">Accumulated depletion</td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; 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"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td colspan="3" 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: bottom">Impairment loss</td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; 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">-     </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td colspan="3" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-     </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top"> </td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">103,530</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td colspan="3" style="vertical-align: bottom; border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 103,530</td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><br clear="all" />
<font style="font-size: 10pt">Since there was no production of minerals during the three months and nine months ended September
30, 2012 and 2011, no depletion expense relating to mineral properties has been recorded for the three months and nine months periods
ended September 30, 2012 and 2011, respectively.</font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="background-color: white">
<td style="width: 67%"> </td>
<td style="width: 4%"> </td>
<td style="width: 4%"> </td>
<td style="width: 1%"> </td>
<td style="width: 2%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 7%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 2%"> </td>
<td style="width: 2%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 7%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 2%; vertical-align: bottom; text-align: right"> </td>
<td style="width: 2%; vertical-align: bottom; text-align: right"> </td></tr>
<tr>
<td style="vertical-align: top">Unproved Properties:</td>
<td style="vertical-align: top; text-align: center"> </td>
<td style="vertical-align: top; text-align: center"> </td>
<td colspan="2" style="vertical-align: top; text-align: center"> </td>
<td colspan="4" style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td style="vertical-align: bottom; 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>
<td style="border-bottom: windowtext 1pt solid; vertical-align: bottom; text-align: center">Name of Property</td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; text-align: center">Type</td>
<td style="vertical-align: top; border-bottom: windowtext 1pt solid; text-align: center"> </td>
<td colspan="3" style="vertical-align: top; border-bottom: windowtext 1pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">September 30, 2012</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Unaudited)</p></td>
<td style="vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center"> </td>
<td colspan="4" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">December 31, 2011</td></tr>
<tr>
<td style="vertical-align: top"> </td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; 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"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td colspan="3" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top">Wellsboro Lease</td>
<td style="vertical-align: top">Gravel</td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; 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">103,530</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td colspan="3" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 103,530</td></tr>
<tr style="background-color: white">
<td style="vertical-align: top"> </td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; 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">103,530</td>
<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 colspan="3" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">103,530</td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom">Accumulated depletion</td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; 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"> </td>
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td colspan="3" 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: bottom">Impairment loss</td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; 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">-     </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td colspan="3" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-     </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: top"> </td>
<td style="vertical-align: top"> </td>
<td colspan="2" style="vertical-align: top"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td style="vertical-align: bottom; border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">103,530</td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td colspan="3" style="vertical-align: bottom; border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 103,530</td></tr>
</table>
103530
103530
100000
100000
50000
50000
50000
50000
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0"><b>NOTE 6: NOTES PAYABLE</b></p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0"><b> </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">
<td nowrap="nowrap"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; text-align: center">September 30, 2012 (Unaudited)</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">December 31, 2011</td></tr>
<tr style="background-color: white">
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Stockholder note payable, unsecured, bearing interest at 10% per annum, originally due on July 31, 2012 and extended to July 31, 2013, <font style="color: black">is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans </font></td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 50,000</td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 50,000</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Stockholder note payable, unsecured, bearing interest at 10% per annum, due on January 31, 2013, <font style="color: black">is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans </font></td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 50,000</td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 50,000</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="background-color: white">
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 100,000</td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 100,000</td></tr>
<tr style="background-color: #CCEEFF">
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Notes payable - current portion</td>
<td style="vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(100,000)</td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> (100,000)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Notes payable – long term</td>
<td style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
</table>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company recorded an interest expense
of $2,844 and $9,412 for the three months and nine months ended September 30, 2012 and $1,250 and $1,250 for the comparable periods
in 2011, respectively.</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 nowrap="nowrap"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; text-align: center">September 30, 2012 (Unaudited)</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td colspan="2" style="border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">December 31, 2011</td></tr>
<tr style="background-color: white">
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Stockholder note payable, unsecured, bearing interest at 10% per annum, originally due on July 31, 2012 and extended to July 31, 2013, <font style="color: black">is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans </font></td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 50,000</td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 50,000</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Stockholder note payable, unsecured, bearing interest at 10% per annum, due on January 31, 2013, <font style="color: black">is subordinated in right of payment to the prior payment in full of all future bank rediscount lines of credit or loans </font></td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 50,000</td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 50,000</td></tr>
<tr style="background-color: white">
<td style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt"> </td></tr>
<tr style="background-color: white">
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 100,000</td>
<td nowrap="nowrap" style="vertical-align: bottom; 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 nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> 100,000</td></tr>
<tr style="background-color: #CCEEFF">
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt">Notes payable - current portion</td>
<td style="vertical-align: top; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">(100,000)</td>
<td nowrap="nowrap" style="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> </td>
<td nowrap="nowrap" style="vertical-align: bottom; border-bottom: windowtext 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right"> (100,000)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt">Notes payable – long term</td>
<td style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-right: 5.4pt; padding-left: 5.4pt"> </td>
<td style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">$</td>
<td nowrap="nowrap" style="border-bottom: windowtext 2.25pt double; padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">-</td></tr>
</table>
9412
2844
1250
1250
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 7: RELATED PARTY TRANSACTIONS AND BALANCES</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; text-align: justify"><b>Payable to Related party</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At September 30, 2012 and December 31, 2011,
advances, net of repayments, made to the Company by the Chief Executive Officer (“Officer”) for its working capital
requirements amounted to $11,252 and $143,252, respectively. Amounts due to the Officer are unsecured, non-interest bearing and
due on demand without specific repayment terms. In addition, compensation payable to the Officer pursuant to the terms of an employment
agreement amounted to $90,000 and $0 as of September 30, 2012 and December 31, 2011, respectively.</p>
11252
143252
90000
0
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>NOTE 8: COMMITMENTS AND CONTINGENCIES</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Legal Costs and Contingencies</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In the normal course of business, the Company
incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses
these costs as the related services are received.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">If a loss is considered probable and
the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential
to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces
the estimated loss if recovery is also deemed probable. As of September 30, 2012, there were no pending or threatened lawsuits
that could reasonably be expected to have a material effect on the results of our operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 9: STOCKHOLDERS' EQUITY</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s capitalization at September
30, 2012 was 100,000,000 authorized common shares and 5,000,000 authorized preferred shares, both with a par value of $0.0001 per
share.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -1.5pt"><u>Common Stock and Warrants</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: -1.5pt"><b> </b>From January 1, 2012 to September
30, 2012, the Company sold, pursuant to a private placement equity offering, 1,664,000 Units to accredited investors for cash proceeds
of $499,200 or $0.30 per Unit, each Unit consisting of one share of common stock and one redeemable Class C Warrant to purchase
one share of common stock at an exercise price of $1.00 per share. Such warrants expire on December 31, 2013. The Class C warrants
are redeemable by the Company at a redemption price of $0.05 per warrant upon at least 30 days' prior written notice if the mean
average of the closing bid price exceeds $2.00 per share for 20 consecutive business days ending prior to the date notice of redemption
is given. On September 25, 2012, the Company received in cash $47,299 as a deposit from a stockholder towards purchase of 420,000
Units at $0.30 per Unit. The Company recorded the cash received as a current liability in the accompanying financial statements
as of September 30, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 26, 2012, the Company issued to
the owners of RTE 1,000,000 shares of its common stock valued at $200,000 or $0.20 per share, based on the closing price per share,
in exchange for the acquisition of 100% of capital stock of RTE (See Note 3).</p>
<p style="font: 11pt Calibri, Helvetica, Sans-Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><u>2012 Incentive Stock Plan</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 30, 2012, the Board of Directors
authorized and approved 2012 Incentive Stock Plan (the “2012 Plan”), subject to approval by the majority shareholders
within 12 months of the date of approval by the Board of Directors, to issue up to 5,000,000 shares of common stock of the Company
at $0.0001 par value per share. Pursuant to the terms of the 2012 Plan, the Company may award to officers, key employees and non-employee
directors options to purchase Company’s common stock. As of September 30, 2012, the Company had not granted or issued any
options to purchase shares of its common stock to officers, key employees and non-employee directors under the 2012 Plan.</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-align: justify">As a result of all stock, options and warrant
issuances as of September 30, 2012, the Company had 66,890,866 shares of common stock issued<font style="color: black"> and outstanding
and 2,090,666 Class C Warrants outstanding for conversion into common stock.</font></p>
0.30
1.00
12/31/2013
0.05
420000
0.30
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 10: CONCENTRATIONS</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"><u>Concentration of Operators</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s oil leases are obtained
from two separate lessors who also act as the operator for all leased properties. One operator uses its own equipment to extract
oil and gas, and therefore, the Company does not own or lease any production equipment related to these leases. The Company also
has one mineral lease with another lessor. There has been no activity on the mineral lease other than initial lease acquisition
costs relating to the mineral lease as of September 30, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Concentration of Customer</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company sells its oil product to one customer.</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-align: center"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Concentration of Credit Risk</u></p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">On November 9, 2010, the FDIC issued a
Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited
insurance coverage of noninterest-bearing transaction accounts.  Beginning December 31, 2010, through December 31, 2012,
all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions.  The
unlimited insurance coverage is available to all depositors, including consumers, businesses, and governmental entities.  This
unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to a depositor’s other
deposit accounts held at an FDIC-insured institution.  A noninterest-bearing transaction account is a deposit account
where interest is neither accrued nor paid; depositors are permitted to make an unlimited number of transfers and withdrawals;
and the bank does not reserve the right to require advance notice of an intended withdrawal.</p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company maintains its cash in bank
and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses
in such accounts through September 30, 2012.  As of September 30, 2012, the Company’s bank balances did not exceed
FDIC insured amounts.  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>NOTE 11: SUBSEQUENT EVENTS</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 1, 2012, the Board of Directors
(the “Board”) authorized and issued 50,000 shares of its restricted common stock valued at $30,000 to a non-employee
director as compensation for services. The common shares were valued at their fair value based upon the quoted trading price on
the date of authorization by the Board for their issuance. The securities were issued without registration under The Securities
Act (the “Act”) by reason of the exemption from registration afforded by the provisions of Section 4(2) thereof, and/or
Rule 506 promulgated there under, as a transaction by an issuer not involving any public offering. These securities have not been
and will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable
exemption from registration requirements. The investor delivered appropriate investment representations with respect to this issuance
and consented to the imposition of restrictive legends upon the stock certificates representing the shares and represented that
he did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented at any seminar or meeting.
He represented that he was afforded the opportunity to ask questions of our management and to receive answers concerning the terms
and conditions of the transaction. No underwriting discounts or commissions were paid in connection with the sales of the shares.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 1, 2012, the Board authorized and
issued 150,000 shares of its restricted common stock valued at $90,000 to a consultant providing public relations and corporate
communication services over a three months period. The common shares were valued at their fair value based upon the quoted trading
price on the date of authorization by the Board for their issuance and the expense will be recorded as a prepaid asset to be recognized
over the 3-month term. The securities were issued without registration under the Act by reason of the exemption from registration
afforded by the provisions of Section 4(2) thereof, and/or Rule 506 promulgated there under, as a transaction by an issuer not
involving any public offering. These securities have not been and will not be registered under the Act and may not be offered or
sold in the United States absent registration or an applicable exemption from registration requirements. The investor delivered
appropriate investment representations with respect to these issuances and consented to the imposition of restrictive legends upon
the stock certificates representing the shares and represented that he did not enter into the transaction with us as a result of
or subsequent to any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media
or broadcast on television or radio, or presented at any seminar or meeting. He represented that he was afforded the opportunity
to ask questions of our management and to receive answers concerning the terms and conditions of the transaction. No underwriting
discounts or commissions were paid in connection with the sales of the shares.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 1, 2012, the Board authorized and
issued 100,000 shares of its restricted common stock valued at $60,000 to a consultant for providing editorial and marketing services.
The common shares were valued at their fair value based upon the quoted trading price on the date of authorization by the Board
for their issuance and the expense will be recorded as a prepaid asset to be recognized over the 3-month term. The securities were
issued without registration under the Act by reason of the exemption from registration afforded by the provisions of Section 4(2)
thereof, and/or Rule 506 promulgated there under, as a transaction by an issuer not involving any public offering. These securities
have not been and will not be registered under the Act and may not be offered or sold in the United States absent registration
or an applicable exemption from registration requirements. The investor delivered appropriate investment representations with respect
to these issuances and consented to the imposition of restrictive legends upon the stock certificates representing the shares and
represented that he did not enter into the transaction with us as a result of or subsequent to any advertisement, article, notice,
or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio, or presented
at any seminar or meeting. He represented that he was afforded the opportunity to ask questions of our management and to receive
answers concerning the terms and conditions of the transaction. No underwriting discounts or commissions were paid in connection
with the sales of the shares.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 1, 2012, the Board granted vested stock options under its 2012 Incentive Stock Plan, to purchase
up to 200,000 shares of common stock to each of the four directors of the Company and two consultants, for a total of 1,200,000
shares of common stock, with a three years term . The exercise price of the stock options to purchase common stock is $0.60 per
share, which is the fair value of the Company stock on the grant date. The option to purchase common stock expires on October 31,
2015. The fair value of the options granted was $681,924, calculated using the Black-Scholes option pricing model using the assumptions
of risk free discount rate of 0.38%, volatility of 189%, 3 years term, and dividend yield of 0%. The expense was recognized immediately.</p>
50000
150000
100000
30000
90000
60000
0.60
2015-10-31
681924
0.38
1.89
P3Y
0.00
499200
Pay down within nine months of the aquisition closing date
Net revenue interest in Chautauqua Lease was calculated at 73.125% subject to the reserved 6.25% Overriding Royalty Interest after paying of the mineral owners and other fees.
Richard Windham, Jr., individually reserves to himself, his heirs, successors and assigns an overriding royalty interest payable on oil, gas and associated hydrocarbons produced, saved and sold from only the lands described as Trice and Methodist Home Lease equal to the difference between an 80 percent net revenue interest and all lease royalty burdens.
The Company was required to provide operator with a prepaid amont of $10,000 to be used to fund operating expenses with in 3 days of a request by the Venture Partner.
Each Unit consits of one share of common stock and one redememable Class C Warrant to purchase one share of common stock
Class C Warrants are redeemable by the company upon at least 30 days written notice if the mean average of the closing bid price exceeds $2.00 per share for 20 consecutive business days ending prior to the date notice of redemptions is given.
200,000 shares of common stock to each of the four directors of the Company and two consultants, for a total of 1,200,000 shares