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<p style="margin: 0pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><u>Note 1
– Nature of Operations</u></b></font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify"><font style="font-size: 10pt">On May
10, 2012, Santa Fe Petroleum, Inc., f/k/a Baby All Corp., a Delaware corporation (the “we,” “us ,” “our
,” or the “Company”), entered into a Share Exchange Agreement (the “Exchange Agreement”), with Santa
Fe Operating, Inc., a Delaware corporation engaged in the exploration and production of oil and gas (“SFO”), Tom Griffin,
an individual, on behalf of the holders (the “SFO Shareholders”) of 100% of the issued and outstanding common stock
of SFO (the “SFO Stock”), and Efrat Schwartz, an individual and the holder of a majority of the issued and outstanding
shares of our common stock, par value $0.0001 per share (the “Common Stock”). Pursuant to the Exchange Agreement, each
SFO Shareholder was issued one share of Common Stock in exchange for each of such SFO Shareholder’s shares of SFO Stock (the
“Exchange”). Pursuant to the terms of the Exchange Agreement, the Exchange closed on May 20, 2012, (the “Closing
Date”). As a result, (i) we issued an aggregate of 33,478,261 shares of Common Stock to the SFO Shareholders; (ii) we issued
warrants to purchase an aggregate of 6,764,856 shares of Common Stock to the SFO Shareholders, at an exercise price of $0.50 per
share; and (iii) SFO became our wholly-owned subsidiary.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify"><font style="font-size: 10pt; color: black"></font>Prior
to the Exchange, our business plan was to seek third party entities interested in licensing the rights to manufacture and market
the patent design of an “infant medicine dispenser.” We were incorporated in Delaware on November 30, 2010, and a Design
Patent Transfer and Sale Agreement was signed between Mrs. Julie Franchi (the inventor and seller), in relation to a patented
technology on December 13, 2010, granting us exclusive rights, title and interest in and to the Design Patent Number: 380828 and
all Intellectual Property rights, free and clear of any lien, charge, claim, preemptive rights, etc. for an infant medicine dispenser.
We were not able to commercialize the product due to a lack of funds, and we did not build a prototype. Hence, no testing has
been done to determine the ability of the technology to perform as we expect its reliability or its cost effectiveness. As a result,
we were not able to commence operations under the infant medicine dispenser business plan and were in the development stage at
the time of the Exchange.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify"><font style="font-size: 10pt">As the
result of the Exchange, we are now a development stage company engaged in the acquisition, exploration, and development of oil
and gas properties. In addition to the development of our existing property interests, we intend to acquire additional oil and
gas interests in the future. Our management believes that our future growth will primarily occur through the acquisition of additional
oil and gas properties following extensive due diligence by us. We also may elect to proceed through collaborative agreements
and joint ventures in order to share expertise and reduce operating costs with other experts in the oil and gas industry. The
analysis of new property interests will be undertaken by or under the supervision of our management and our board of directors
(our “Board”). Although the oil and gas industry is currently very competitive, our management believes that many undervalued
prospective properties remain available for acquisition purposes. <font style="color: black">For accounting purposes, the Exchange
Agreement was accounted for as a reverse merger, since the SFO Shareholders collectively beneficially own approximately 84.8%
of the Common Stock.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify"><font style="font-size: 10pt">On May
11, 2011, SFO acquired 100 percent of the issued and outstanding units of membership interest of Santa Fe Land, LLC (such units,
the “SFL Units”), a Texas limited liability company and a wholly-owned subsidiary of SFO (“SFL”). SFO issued
an aggregate of 33,478,261 shares of its common stock and 1,999,150 warrants to purchase its common stock to holders of SFL units
of membership interest (the “SFL Unit Holders”) in exchange for their SFL Units (the “SFL Acquisition”). The
SFL Unit Holders were comprised entirely of entities under the control of Tom Griffin, the Company’s Chairman of the Board
and a related party (the “Principal Stockholder”), including Long Branch Petroleum, LP (“LB”). The acquisition
of SFL by SFO is being accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded
at the historical cost basis of the assets transferred.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">In connection with the SFL Acquisition,
we acquired SFL’s oil and natural gas working interests of 100% with a net revenue interest of 75% for the Test Well in Comanche
County, Texas. Additionally, we acquired a mineral lease over approximately 76 acres of land as part of the SFL Acquisition.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">The Company formally changed its name
from Baby All Corp. to Santa Fe Petroleum, Inc. on May 17, 2012. </p>
<p style="margin: 0pt"></p>
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<p style="margin: 0pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><u>Note 2
– Going Concern and Liquidity</u></b></font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"> </font></p>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt">As of September
30, 2012, we hav</font>e not generated any revenue from our business plan and have an accumulated deficit since inception. The
continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, its ability
to obtain necessary equity and or debt financing to continue operations, and the attainment of profitable operations. These factors
raise substantial doubt regarding the Company’s ability to continue as a going concern.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 12pt/115% Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><u>Note
3 - <font style="color: black">Summary of Significant Accounting Policies</font></u></b></font></p>
<p style="font: 12pt/115% 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"><i>Basic of Presentation</i></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"><font style="letter-spacing: -0.1pt">The accompanying
unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim period reporting in conjunction with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all of the information required by
GAAP. In the opinion of management, the condensed consolidated financial statements include the adjustments and accruals, all of
which are of a normal recurring nature, which are necessary for a fair presentation of the results for the interim periods. These
interim results are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements
should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2011, and the Company’s financial information on Form 8-K for the
Exchange Agreement filed on May 11, 2012, and as amended on Form 8-K/A.</font></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>Principles of Consolidation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0; text-align: justify"><font style="color: black">The unaudited
condensed consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries.
</font><font style="letter-spacing: -0.1pt">All significant intercompany transactions, accounts and balances have been eliminated
in consolidation.</font></p>
<p style="font: 8pt 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"><font style="letter-spacing: -0.1pt"><i>Development
stage Company</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
is classified as a development stage company in accordance with Accounting Standard Codification (“ASC”) 915, <i>Development
Stage Entities, </i>since no revenues have been generated from inception through the date of these consolidated financial statements.
During the development stage, the Company has primarily incurred compensation, professional, and consulting expenses associated
with the Company’s contemplated equity financing plan. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Use
of Estimates</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The preparation
of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.</font></p>
<p style="font: 8pt 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 estimates of oil and natural
gas reserves are, by necessity, projections based on geologic and engineering data, and there are uncertainties inherent in the
interpretation of such data as well as the projection of future rates of production and the timing of development expenditures.
Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that are difficult to
measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation
and judgment. Estimates of economically recoverable natural gas and oil reserves and future net cash flows necessarily depend upon
a number of variable factors and assumptions, such as historical production from the area compared with production from other producing
areas, the assumed effect of regulations by governmental agencies, and assumptions governing future natural gas and oil prices,
future operating costs, severance taxes, development costs and workover costs, all of which may in fact vary considerably from
actual results. The future drilling costs associated with reserves assigned to prove undeveloped locations may ultimately increase
to the extent that these reserves are later determined to be uneconomic. For these reasons, estimates of the economically recoverable
quantities of expected natural gas and oil attributable to any particular group of properties, classifications of such reserves
based on risk of recovery, and estimates of the future net cash flows may vary substantially. Any significant variance in the assumptions
could materially affect the estimated quantity of the reserves, which could affect the carrying value of the Company’s oil
and natural gas properties and/or the rate of depletion related to the oil and natural gas properties.</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>JOBS Act and Emerging Growth Company</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">Section 107 (b) of the JOBS Act provides that
an “emerging growth company” can take advantage of the transition period for complying with new or revised accounting
standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards
under Section 102(b)(1 of the Jobs Act. This election allows the Company to delay the adoption of new or revised accounting standards
that have different effective dates for public and private companies. As a result of this election, the Company’s consolidated
financial statements may not be comparable to companies that comply with other company effective dates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Oil
and Gas Properties</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1.1in; text-align: justify; text-indent: -23.1pt"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
uses the successful efforts method of accounting for oil and natural gas producing activities, as further defined under ASC 932,
<i>Extractive Activities - Oil and Natural Gas</i>. Under these provisions, costs to acquire mineral interests in oil and natural
gas properties, to drill exploratory wells that find proved reserves, and to drill and equip development wells are capitalized.
</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">Exploratory
drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination
of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process
that relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful,
the capitalized drilling costs will be reclassified as part of the cost of the well. Capitalized costs of producing oil and natural
gas interests are depleted on a unit-of-production basis.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">If a well
is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is
made. If a determination cannot be made as to whether the reserves that have been found can be classified as proved, the cost of
drilling the exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that
year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired and its costs are
charged to expense. Its cost can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the
well to justify its completion as a producing well and the entity is making sufficient progress assessing the reserves and the
economic and operating viability of the project. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Impairment
of Long-Lived Assets</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
accounts for the impairment of long-lived assets in accordance with ASC 360-10, <i>Property, Plant and Equipment</i>, which requires
that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the book value of the
asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to the undiscounted
cash flow that the asset or asset group is expected to generate. If such assets or asset groups are considered to be impaired,
the loss recognized is the amount by which the carrying amount of the property, if any, exceeds its fair market value. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Deferred
Offering Costs</i></font></p>
<p style="font: 9pt 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="letter-spacing: -0.1pt">The
Company complies with the requirements of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin
(“SAB”) Topic 5A, <i>Expenses of Offering</i>. Deferred offering costs consist principally of the fair value of
stock </font>grants and warrants issued to placement agents that are related to the Company’s contemplated equity
financing and will be charged to stockholders’ equity upon the receipt of the contemplated equity financing proceeds or
charged to expense if the contemplated equity financing is not completed. During the three months ended September 30, 2012,
the Company received subscriptions of 807,050 shares of common stock for $319,789 of net proceeds ($403,525 gross proceeds
less $83,736 of financing and offering expenses) through a private placement memorandum at $0.50 per share. The total amount of funds raised through this PPM was less than 10% of the total amount of funds that the
investment bank was authorized to raise under the Agency Agreement.<font style="font: 10pt Times New Roman, Times, Serif"> </font>As a result,
previously recorded deferred offering expenses of $23,784 were written off.<font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Income
Taxes</i></font></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Income taxes are accounted for under the
asset and liability method of ASC 740, <i>Income Taxes</i>. Under ASC 740, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.</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">Effective May 11, 2011, with the commencement
of operations, the Company adopted provisions of ASC 740, Sections 25 through 60, <i>Accounting for Uncertainties in Income Taxes</i>.
These sections provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions
recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the
effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. Upon the adoption of ASC 740, the Company
had no unrecognized tax benefits. For the period from May 11, 2011, (commencement of operations) through September 30, 2012, no
adjustments were recognized for uncertain tax benefits. The Company’s initial tax year for 2011 is still subject to audit.</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 recognizes interest and penalties
related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties were
recognized during the period from May 11, 2011, (commencement of operations) through 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">The Company is subject to ongoing tax exposures,
examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the
outcomes of such matters. In addition, when applicable, the Company will adjust tax expense to reflect the Company’s ongoing
assessments of such matters which require judgment and can materially increase or decrease its effective rate as well as impact
operating results. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially
change over the next twelve months.</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 number of years with open tax audits varies
depending on the tax jurisdiction. The Company’s major taxing jurisdictions include 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"><i>Stock-Based Compensation</i></p>
<p style="font: 8pt 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"><font style="letter-spacing: -0.1pt">The Company
adopted ASC 718, <i>Compensation – Share Based Compensation</i>, as of May 11, 2011. This statement requires the recognition
of compensation expense measured at fair value when the Company obtains employee services in stock-based payment transactions.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Net
Income (loss) per Common Share</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
computes earnings (loss) per share in accordance with ASC 260-10, <i>Earnings Per Share</i>. ASC 260-10 requires presentation of
both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed
by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during
the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. Diluted EPS excludes
all dilutive potential common shares if their effect is anti-dilutive. No potential dilutive common shares are included in the
computation of any diluted per share amount when a loss is reported. Accordingly, we did not include 6,764,856 and 3,573,106 of
potentially dilutive warrants at September 30, 2012, and 2011, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Legal
Costs and Contingencies</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">In the
normal course of business, the Company incurs costs to retain external legal counsel to advise it on regulatory, litigation and
other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the
amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If we have 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.</font><b> </b></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Basic of Presentation</i></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"><font style="letter-spacing: -0.1pt">The accompanying
unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim period reporting in conjunction with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these statements do not include all of the information required by
GAAP. In the opinion of management, the condensed consolidated financial statements include the adjustments and accruals, all of
which are of a normal recurring nature, which are necessary for a fair presentation of the results for the interim periods. These
interim results are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements
should be read in connection with the consolidated financial statements and notes thereto included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2011, and the Company’s financial information on Form 8-K for the
Exchange Agreement filed on May 11, 2012, and as amended on Form 8-K/A.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Principles of Consolidation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 8pt 0 0; text-align: justify"><font style="color: black">The unaudited
condensed consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries.
</font><font style="letter-spacing: -0.1pt">All significant intercompany transactions, accounts and balances have been eliminated
in consolidation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Development
stage Company</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
is classified as a development stage company in accordance with Accounting Standard Codification (“ASC”) 915, <i>Development
Stage Entities, </i>since no revenues have been generated from inception through the date of these consolidated financial statements.
During the development stage, the Company has primarily incurred compensation, professional, and consulting expenses associated
with the Company’s contemplated equity financing plan. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Use
of Estimates</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The preparation
of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.</font></p>
<p style="font: 8pt 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 estimates of oil and natural
gas reserves are, by necessity, projections based on geologic and engineering data, and there are uncertainties inherent in the
interpretation of such data as well as the projection of future rates of production and the timing of development expenditures.
Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that are difficult to
measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation
and judgment. Estimates of economically recoverable natural gas and oil reserves and future net cash flows necessarily depend upon
a number of variable factors and assumptions, such as historical production from the area compared with production from other producing
areas, the assumed effect of regulations by governmental agencies, and assumptions governing future natural gas and oil prices,
future operating costs, severance taxes, development costs and workover costs, all of which may in fact vary considerably from
actual results. The future drilling costs associated with reserves assigned to prove undeveloped locations may ultimately increase
to the extent that these reserves are later determined to be uneconomic. For these reasons, estimates of the economically recoverable
quantities of expected natural gas and oil attributable to any particular group of properties, classifications of such reserves
based on risk of recovery, and estimates of the future net cash flows may vary substantially. Any significant variance in the assumptions
could materially affect the estimated quantity of the reserves, which could affect the carrying value of the Company’s oil
and natural gas properties and/or the rate of depletion related to the oil and natural gas properties.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>JOBS Act and Emerging Growth Company</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">Section 107 (b) of the JOBS Act provides that
an “emerging growth company” can take advantage of the transition period for complying with new or revised accounting
standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards
under Section 102(b)(1 of the Jobs Act. This election allows the Company to delay the adoption of new or revised accounting standards
that have different effective dates for public and private companies. As a result of this election, the Company’s consolidated
financial statements may not be comparable to companies that comply with other company effective dates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Oil
and Gas Properties</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1.1in; text-align: justify; text-indent: -23.1pt"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
uses the successful efforts method of accounting for oil and natural gas producing activities, as further defined under ASC 932,
<i>Extractive Activities - Oil and Natural Gas</i>. Under these provisions, costs to acquire mineral interests in oil and natural
gas properties, to drill exploratory wells that find proved reserves, and to drill and equip development wells are capitalized.
</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">Exploratory
drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination
of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process
that relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful,
the capitalized drilling costs will be reclassified as part of the cost of the well. Capitalized costs of producing oil and natural
gas interests are depleted on a unit-of-production basis.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">If a well
is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is
made. If a determination cannot be made as to whether the reserves that have been found can be classified as proved, the cost of
drilling the exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that
year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired and its costs are
charged to expense. Its cost can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the
well to justify its completion as a producing well and the entity is making sufficient progress assessing the reserves and the
economic and operating viability of the project. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Impairment
of Long-Lived Assets</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
accounts for the impairment of long-lived assets in accordance with ASC 360-10, <i>Property, Plant and Equipment</i>, which requires
that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the book value of the
asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to the undiscounted
cash flow that the asset or asset group is expected to generate. If such assets or asset groups are considered to be impaired,
the loss recognized is the amount by which the carrying amount of the property, if any, exceeds its fair market value. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Deferred
Offering Costs</i></font></p>
<p style="font: 9pt 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="letter-spacing: -0.1pt">The Company
complies with the requirements of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”)
Topic 5A, <i>Expenses of Offering</i>. Deferred offering costs consist principally of the fair value of stock </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">grants
and warrants issued to placement agents that are related to the Company’s contemplated equity financing and will be
charged to stockholders’ equity upon the receipt of the contemplated equity financing proceeds or charged to expense if
the contemplated equity financing is not completed. During the three months ended September 30, 2012, the Company </font>received
subscriptions of 807,050 shares of common stock for $319,789 of net proceeds ($403,525 gross proceeds less $83,736 of
financing and offering expenses) through a private placement memorandum at $0.50 per share. The total amount of funds raised
through this PPM was less than 10% of the total amount of funds that the investment bank was authorized to raise under the
Agency Agreement.<font style="font: 10pt Times New Roman, Times, Serif"> </font> As a result, previously recorded deferred
offering expenses of $23,784 were written off.<font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Income
Taxes</i></font></p>
<p style="font: 10pt Arial, Helvetica, Sans-Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Income taxes are accounted for under the asset
and liability method of ASC 740, <i>Income Taxes</i>. Under ASC 740, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.</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">Effective May 11, 2011, with the commencement
of operations, the Company adopted provisions of ASC 740, Sections 25 through 60, <i>Accounting for Uncertainties in Income Taxes</i>.
These sections provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions
recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the
effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. Upon the adoption of ASC 740, the Company
had no unrecognized tax benefits. For the period from May 11, 2011, (commencement of operations) through September 30, 2012, no
adjustments were recognized for uncertain tax benefits. The Company’s initial tax year for 2011 is still subject to audit.</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 recognizes interest and penalties
related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties were
recognized during the period from May 11, 2011, (commencement of operations) through 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">The Company is subject to ongoing tax exposures,
examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the
outcomes of such matters. In addition, when applicable, the Company will adjust tax expense to reflect the Company’s ongoing
assessments of such matters which require judgment and can materially increase or decrease its effective rate as well as impact
operating results. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially
change over the next twelve months.</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 number of years with open tax audits varies
depending on the tax jurisdiction. The Company’s major taxing jurisdictions include the United States.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Stock-Based Compensation</i></p>
<p style="font: 8pt 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"><font style="letter-spacing: -0.1pt">The Company
adopted ASC 718, <i>Compensation – Share Based Compensation</i>, as of May 11, 2011. This statement requires the recognition
of compensation expense measured at fair value when the Company obtains employee services in stock-based payment transactions.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Net
Income (loss) per Common Share</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
computes earnings (loss) per share in accordance with ASC 260-10, <i>Earnings Per Share</i>. ASC 260-10 requires presentation of
both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed
by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during
the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. Diluted EPS excludes
all dilutive potential common shares if their effect is anti-dilutive. No potential dilutive common shares are included in the
computation of any diluted per share amount when a loss is reported. Accordingly, we did not include 6,764,856 and 3,573,106 of
potentially dilutive warrants at September 30, 2012, and 2011, respectively. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i>Legal
Costs and Contingencies</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">In the
normal course of business, the Company incurs costs to retain external legal counsel to advise it on regulatory, litigation and
other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the
amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If we have 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.</font><b> </b></p>
807050
319789
403525
83736
0.50
23784
6764856
3573106
<p style="margin: 0pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><u>Note 4
- Acquisition of Oil and Gas Company</u></b></font></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">On May 11, 2011, SFO acquired 100 percent
of the member units of SFL by issuing 33,478,261 shares of common stock and 1,999,150 warrants to SFL member unit holders in exchange
for their SFL member units. The SFL member unit holders were comprised entirely of entities under the control of Tom Griffin, the
Company’s Chairman of the Board and a related party (the “Principal Stockholder”). As a result of the Share Exchange
on May 10, 2012, SFO and SFL are subsidiaries of the Company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">The acquisition of SFL is being accounted
for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost basis
of the assets transferred. The warrants to purchase common stock of the Company are at an exercise price of $0.50 per share and
have a three year exercise period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">The Company acquired SFL’s oil
and natural gas working interests of 100% with a net revenue interest of 75% for the Barnett Cody #1A in Comanche County, Texas.
Additionally, the Company acquired approximately 76 acres of land as part of the purchase.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">The following table presents a summary
of the historical costs of assets and liabilities acquired at the date of acquisition:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 70%; padding-left: 5.4pt; text-align: justify">Assets acquired, unevaluated oil and natural gas property</td>
<td style="width: 10%"> </td>
<td style="width: 1%">$</td>
<td style="width: 18%; text-align: right">494,132</td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt; padding-left: 5.4pt; text-align: justify">Liabilities assumed</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">—  </td>
<td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt; text-align: justify"> <br /> Net assets acquired for 33,478,261 shares of Company common stock and 1,999,150 warrants to purchase Company common stock at $0.50 per share</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">494,132</td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<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">Concurrent with this transaction, the Principal
Stockholder assigned 10,446,782 of his personal shares and 1,573,956 warrants in the Company to employees and consultants of the
Company for services rendered. Under SAB Topic 5T, <i>Miscellaneous Accounting</i>, payments made by a principal stockholder to
settle the Company’s obligations were deemed to be capital contributions.  Accordingly, the assignment of shares was
recognized in the accompanying condensed consolidated financial statements as stock based compensation and deferred offering costs
of approximately $124,000 and $24,000, respectively. In September 2012, the Company received cash proceeds from its private placement
memorandum and as a result, the deferred offering costs of $24,000 were adjusted to stockholders’ equity (deficit).</p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 70%; padding-left: 5.4pt; text-align: justify">Assets acquired, unevaluated oil and natural gas property</td>
<td style="width: 10%"> </td>
<td style="width: 1%">$</td>
<td style="width: 18%; text-align: right">494,132</td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1pt; padding-left: 5.4pt; text-align: justify">Liabilities assumed</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">—  </td>
<td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; padding-left: 5.4pt; text-align: justify"> <br /> Net assets acquired for 33,478,261 shares of Company common stock and 1,999,150 warrants to purchase Company common stock at $0.50 per share</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">494,132</td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
10446782
1573956
124000
24000
24000
494132
494132
494132
<p style="margin: 0pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><u>Note 5
- Unevaluated Oil and Natural Gas Property</u></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company’s principal asset consists
of an unevaluated oil and natural gas property in Comanche County, Texas, which approximated $502,000 as of September 30, 2012,
and $494,000 as of December 31, 2011.</p>
<p style="font: 8pt 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 unevaluated oil and natural gas property
was originally drilled in 2009 by a predecessor affiliate company, as the Barnett Cody #1A test. However, additional capital was
needed for the Company to commence further drilling activities. As a result of the additional capital requirements, the reservoir
analysis has not yet being completed. As such, the Company has classified the oil and natural gas property as unevaluated as of
September 30, 2012. As of September 30, 2012, the primary term of the Company’s oil and natural gas lease is through March
2014.</p>
<p style="font: 8pt 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">Additionally, as of September 30, 2012, the
Company performed an impairment assessment of its unevaluated oil and natural gas property. This assessment included various factors
such as management’s intention with regard to future exploration and development of wells in the geological area, the ability
to extend the primary term of the lease for a reasonable period of time, the Company’s ability to obtain funds to finance
exploration and development and the estimated discounted cash flows from the geological area as estimated based on initial core
samples. Based on this analysis, no impairment charge was recorded to the carrying amount of the Company’s unevaluated oil
and natural gas property as of September 30, 2012.</p>
<p style="margin: 0pt"></p>
502000
494000
<p style="margin: 0pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><u>Note 6
- Stockholders’ Deficit</u></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.55pt 0 0; text-align: justify"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.55pt 0 0; text-align: justify"><i>Capital Structure</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt">The Company
is authorized to issue up to 200,000,000 shares of common stock at $0.0001 par value per share. As of September 30, 2012, 39,478,261
shares were issued and outstanding. Additionally, there were 807,050 shares of common stock to be issued as of September 30, 2012.
In total, there were 40,285,311 shares of common stock issued, outstanding and to be issued as of September 30, 2012.</font></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>Common Stock</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">Effective on the commencement date of May 11,
2011, (commencement of operations), the Company issued 33,478,261 shares of common stock for the acquisition of SFL from a related
party. The stock was valued based on the historical cost basis of the asset acquired, which approximated $494,000.</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 2011, the Company filed a registration statement
on Form S-1 to register and sell in a self-directed offering 6,000,000 shares of newly issued common stock at an offering price
of $0.0125 per share for proceeds of up to $75,000. The Registration Statement was declared effective on January 9, 2012. On February
6, 2012, the Company issued 6,000,000 shares of common stock pursuant to the registration statement for proceeds of $75,000 and
these shares are freely-tradable as a result of the registration of the offer and sale of these shares on Form S-1.</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">From July 1, 2012, through September 30, 2012,
the Company received subscriptions of 807,050 shares of common stock for $319,789 of net proceeds ($403,525 gross proceeds less
$83,736 of financing and offering expenses) through a private placement memorandum (“PPM”). Common stock was sold at
$0.50 per share through the PPM to “accredited investors” as defined in Rule 501 (a) of Regulation D promulgated under
the Securities Act of 1933, as amended. As of September 30, 2012, the common stock sold had not been issued to the investors and
these subscriptions are not refundable. Thus, these amounts were reflected as common stock to be issued in the condensed consolidated
statement of stockholders’ equity (deficit). See Subsequent Events Note.</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>Stock Warrants </i></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">The Company had outstanding warrants at September
30, 2012, totaling 6,764,856. These warrants expire at various dates ranging from May 11, 2014, through May 17, 2015, and have
an average exercise price of $0.50 per share.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective on the commencement date of May 11,
2011, (commencement of operations), the Company granted 1,999,150 warrants to purchase common stock for the acquisition of SFL.
The warrants have an exercise price of $0.50 per share and an exercise period of three years from the date of grant. The Company
evaluated the warrants and determined that the warrants were not separable from the common stock issued for the acquisition of
SFL. Therefore, no Black Scholes calculation was made 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">Effective May 17, 2011, the Company granted
1,573,956 warrants to purchase common stock to a consultant of the Company. The Company evaluated the stock warrants in accordance
with ASC 718, Stock Compensation, and utilized the Black Scholes method to determine valuation. As a result of our analysis, the
total value for the stock warrant issuance on the grant date of May 17, 2011, approximated $2,000 and was recorded initially as
deferred offering costs in the condensed consolidated financial statements. When the Company sold shares through the PPM described
above, the Company converted the $2,000 of deferred offering costs to stockholders’ equity (deficit) in September 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">Effective on January 1, 2012, the Company issued
3,200,000 warrants to purchase common stock to two consultants of the Company and 24,000 warrants to purchase common stock to a
director of the Company. The Company evaluated the stock warrants in accordance with ASC 718, Stock Compensation, and utilized
the Black Scholes method to determine valuation. As a result of our analysis, the total value for the stock warrant issuance on
the grant date of January 1, 2012, was de minimis and no amount was recorded in the condensed consolidated financial statements.</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>Stock Grants</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">Effective May 11, 2011, (commencement of
operations), the Principal Stockholder granted 8,872,826 shares of common stock to employees and consultants of the Company.
Under SAB Topic 5T, Miscellaneous Accounting, these were deemed stock based compensation of the Company and were valued in
accordance with ASC 718, <i>Stock Compensation</i>. As a result of our analysis, the total fair value for the stock grant,
based on the net asset value of the Company on May 11, 2011, approximated $124,000 and is included in compensation expense
within the accompanying consolidate statement of operations. Additionally, on May 17, 2011, the Principal Stockholder granted
1,573,956 shares of common stock to a capital placement agent which had a fair value of approximately $22,000, based on the
net asset value of the Company on May 17, 2011. This amount was initially recorded as deferred offering costs in the
condensed consolidated financial statements. When the Company sold shares through the PPM described above, the Company
converted the $22,000 of deferred offering costs to stockholders’ equity (deficit) in September 2012.</p>
<p style="margin: 0pt"></p>
200000000
0.0001
39478261
807050
40285311
494000
6000000
0.0125
75000
6764856
0.50
24000
2000
2000
8872826
124000
1573956
22000
22000
<p style="margin: 0pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b><u>Note 7
- Related Party Transactions</u></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-size: 10pt"><b> </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">On May 11, 2011, SFO acquired 100% of
the member units of SFL in exchange for 33,478,261 shares of Common Stock and 1,999,150 warrants to SFL member unit holders in
exchange for their SFL member units. All the SFL member unit holders were entities under the control of Tom Griffin, our chairman
of the board. This acquisition was accounted for as a combination of entities under common control; therefore, the assets transferred
are reflected on our balance sheet at their historical cost basis of $494,132 at December 31, 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">In the Exchange described above, Mr.
Griffin exchanged 18,157,329 shares of SFO for 18,157,329 shares of our Common Stock, and Bruce A. Hall, our Chief Executive Officer
and Chief Financial Officer, exchanged 8,347,826 shares of SFO for 8,347,826 shares of our Common Stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">Tom Griffin, our chairman of the board,
is the President of Land Banks for which we have arrangements with. The Land Bank arrangement, and other similar arrangements we
intend to enter into, is designed to allow us to build an inventory of oil and gas leases utilizing our funds in a more efficient
way. As of September 30, 2012, the Land Banks had acquired 11 leases on approximately 1,574 acres. Under the Lease Acquisition
Agreements, we can purchase the leases, or portions of the leases, held by the Land Banks from time to time and are obligated to
purchase all the leases held by the Land Banks within two years from the dates the Land Banks were formed, subject to change by
mutual consent. The Land Banks were formed in February and May of 2012. The aggregate purchase price for the leases will be equal
to a 50% minimum return, or 50% annualized return, whichever is greater, of the total investment raised by an entity controlled
by Mr. Griffin through the sale of its holdings of our Common Stock and utilized for the support of the Land Banks. Investors in
the Land Banks subsequent to the closing of the Exchange will receive proceeds from the sale of leases by the Land Banks to SFL
based on their Participation Agreements. If there are excess profits remaining after payments to Participants by the Land Banks,
50% of the excess profits will be paid to the Participants and 50% to the Land Banks.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify">Our executive offices are located at
4011 W. Plano Parkway, Suite 126, Plano, Texas 75093, where we occupy approximately 1,000 square feet of office space. Effective
August 2012, we pay $1,211 per month to lease this office space from an unaffiliated third party. Previously, we paid $2,650 per
month under an arrangement with a company controlled by Mr. Griffin, which leased a larger space from an unaffiliated third party.
We believe that our current office space and facilities will have to be expanded in the near future to meet our growth plans. From
May 11, 2011, (commencement of operations) through September 30, 2012, we have recorded approximately $27,000 in rental expense
for our executive offices.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0.55pt 3pt 0; text-align: justify">From May 11, 2011, (commencement
of operations) through September 30, 2012, SFPetro, Inc., a Texas entity that is an affiliate of the Company (“SFPetro Inc.”)
expended $87,519 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying
condensed consolidated balance sheet at September 30, 2012. SFPetro, Inc. is owned entirely by entities under the control of the
Principal Stockholder. The expenditures were primarily related to compensation and legal expenses for the Company related to the
Company preparing to structure a transaction to become a publicly traded company.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0.55pt 0 0; text-align: justify">From May 11, 2011, (commencement
of operations) through September, 2012, SF Petroleum, LLC (“SF Petroleum LLC”), expended $13,939 of funds on behalf
of the Company and is recorded as a component of accounts payable, related parties in the accompanying condensed consolidated balance
sheet at September, 2012. SF Petroleum LLC is owned entirely by entities under the control of the Principal Stockholder. The expenditures
were primarily related to legal and consulting expenses for the Company related to the Company preparing to structure a transaction
to become a publicly traded 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">We have engaged, and may engage in the future,
in transactions with our affiliates or stockholders, officers and directors of our affiliates. TexTron Southwest, Inc. (“TexTron”)
provides operating services including drilling of wells and ongoing operating management for oil and gas entities and is owned
by entities under the control of the Principal Stockholder.</p>
<p style="margin: 0pt"></p>
18157329
8347826
0.50
0.50
0.50
1211
2650
27000
87519
13939
<p style="margin: 0pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-bottom: 0; margin-left: 0"><font style="font-size: 10pt"><b><u>Note
8 - Commitments and Contingencies</u></b></font></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">From time-to-time the Company may become subject
to proceedings, lawsuits and other claims in the ordinary course of business including proceedings related to environmental and
other matters. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. The Company is
unaware of any claim or lawsuit as of September 30, 2012, and December 31, 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">The Company is subject to various possible
contingencies that arise primarily from interpretation of federal and state laws and regulations affecting the oil and natural
gas industry. Such contingencies include differing interpretations as to the prices at which oil and natural gas sales may be made,
the prices at which royalty owners may be paid for production from their leases, environmental issues and other matters. Although
management believes that it has complied with the various laws and regulations, administrative rulings and interpretations thereof,
adjustments could be required as new interpretations and regulations are issued. In addition, environmental matters are subject
to regulation by various federal and state agencies.<font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="letter-spacing: -0.1pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We, along with SFL, have entered into Lease
Acquisition Agreements with the Land Banks pursuant to which SFL will have the option from time-to time to acquire leases held
by the Land Banks at prices to be determined based on the date of each purchase and the obligation to buy any remaining leases
the Land Bank owns at the end of a two (2) year period at a price determined by a preset formula as discussed below. The amount
of our financial risk related to these acquisitions will depend on the amount and value of the leases that the Land Bank acquires.</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">Under the Lease Acquisition Agreements,
SFL will have the right to acquire leases from the Land Banks. The aggregate purchase price for the leases will be equal to a
50% minimum return, or 50% annualized return, whichever is greater, of the total investment raised by LB through the sale of
its shares of our common stock and utilized for the support of the Land Banks. SFL’s acquisitions of Leases may occur
from time to time, but must be completed within two years from the date the Land Bank is formed<b>. </b>Additionally, if the
SFL has borrowed funds pursuant to the Land Bank Loan, the Land Bank Loan will bear interest at 50% minimum return, or 50%
annualized return, whichever is greater, and be payable in full not later than two years after each of the Land Banks were
formed, which was February and May of 2012, respectively.</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 the time SFL completes the acquisition of
all the Leases or pays the loan in full, whichever is later, the Lease Acquisition Agreement will require that SFL make an additional
payment to the Land Bank equal to the greater of (a) 50% of the total contributions by Participants to the Land Bank less the sum
of (i) Lease acquisition payments made by SFL to the Land Bank in excess of the Land Bank’s costs to acquire the Leases plus
(ii) aggregate interest paid on the loan to SFL or (b) an amount that, after taking into account the amount and timing of all distributions
from the Land Bank to Participants, will repay the Participants’ contributions and provide a 50% minimum return, or 50% annualized
return, whichever is greater, to the Participants on their un-repaid contributions (that is, contributions not yet repaid) over
the life of the Land Bank.</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">If, for any reason, SFL fails to acquire all
remaining leases or repay the loan as discussed above, in addition to any other remedies it may have for such failure, the Land
Bank may sell the remaining leases to other purchasers. Additionally, we will be liable if SFL does not perform its obligations.
See Note 9 – Subsequent Events.</p>
<p style="margin: 0pt"></p>
P2Y
0.50
<p style="margin: 0pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-bottom: 0; margin-left: 0"><font style="font-size: 10pt"><b><u>Note
9 - Subsequent Events</u></b></font></p>
<p style="font: 12pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-bottom: 0; margin-left: 0"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="color: black">In October 2012, the Company </font>received
subscriptions of 372,400 shares of common stock for $93,100 of net proceeds through a PPM at $0.50 per share.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In November 2012, the Company, along with SFL, entered into an agreement
with the Land Banks to terminate the Lease Acquisition Agreements, which were discussed previously under Note 8, “Commitments
and Contingencies,” by mutual consent.</p>
<p style="margin: 0pt"></p>
372400
93100
0.50
1999150
1573956
0.50
This Amendment No. 1 to our Quarterly Report on Form 10-Q (the “Amended Filing”), originally filed on November 13, 2012 (the “Original Filing”), is being made to respond to certain comments received from the Staff of the Securities and Exchange Commission, particularly in connection with certain details regarding its private placements and the cancellation of shares. For convenience and ease of reference, the Company is filing this Form 10-Q/A in its entirety with all applicable changes and unless otherwise stated, all information contained in this amendment is as of November 13, 2012, the filing date of the Original Filing. Except as stated herein, this Form 10-Q/A does not reflect events or transactions occurring after such filing date or modify or update those disclosures in the Original Filing that may have been affected by events or transactions occurring subsequent to such filing date.
0.10