<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>________________________</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&#9;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM 8 K</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CURRENT REPORT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PURSUANT TO SECTION 13 OR 15(D) OF THE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES EXCHANGE ACT OF 1934</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Date of Report <B>(Date of earliest event
reported)</B>:<BR>
May 11, 2012 <B>(May 10, 2012)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 24pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Baby All Corp</B>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified in
its charter)</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center">Delaware</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="vertical-align: top; font-weight: bold; text-align: center">333-17302</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top; font-weight: bold; text-align: center">99-0362658</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(State or other jurisdiction</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">of incorporation)</P></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="vertical-align: top; text-align: center">(Commission File Number)</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: center">(IRS Employer Identification No.)</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD></TR>
<TR>
    <TD COLSPAN="3" STYLE="vertical-align: top">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>4011 West Plano Parkway</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Suite 126</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Plano, Texas</B></P></TD>
    <TD STYLE="vertical-align: bottom; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="vertical-align: top">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>75093</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="3">&nbsp;</TD></TR>
<TR>
    <TD COLSPAN="3" STYLE="vertical-align: top; font-weight: bold; text-align: center">(Address of principal executive offices)</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="vertical-align: top; font-weight: bold; text-align: center">(Zip Code)</TD></TR>
<TR>
    <TD STYLE="width: 32%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 16%">&nbsp;</TD>
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 16%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 29%">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Registrant&rsquo;s telephone number, including
area code: (<B>888) 870-7060</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Former address:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">c/o Efrat Schwartz</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">17 HaRav Frank Street</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Jerusalem, Israel 96387</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%"><FONT STYLE="font-family: Wingdings">&#168;</FONT></TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 88%">Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Wingdings">&#168;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Wingdings">&#168;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD><FONT STYLE="font-family: Wingdings">&#168;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="color: black">&nbsp;</FONT><B>CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>We have included or incorporated by reference in this current
report statements that may constitute &ldquo;forward-looking statements&rdquo; within the meaning of the federal securities laws.
All statements other than statements of historical facts contained in this current report, including statements regarding our future
results of operations and financial position, business strategy and plans and objectives of management for future operations, are
forward-looking statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>The words &ldquo;believe,&rdquo; &ldquo;may,&rdquo; &ldquo;might,&rdquo;
&ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;estimate,&rdquo; &ldquo;predict,&rdquo; &ldquo;continue,&rdquo; &ldquo;anticipate,&rdquo;
&ldquo;intend,&rdquo; &ldquo;expect, &ldquo;plan,&rdquo; &ldquo;project,&rdquo; &ldquo;potential&rdquo; and similar expressions
are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations
and projections about future events and trends that we believe may affect our financial condition, results of operations, business
strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions, including those described in &ldquo;Risk Factors.&rdquo; In light
of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this current report may not occur
and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>You should read this current report completely and with the
understanding that our actual future results may be materially different from what we expect. Given these uncertainties, you should
not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions
only as of the date of this current report and, except as required by law, we undertake no obligation to update or revise publicly
any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this current
report. All subsequent written and oral forward-looking statements attributable to us or any person on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred to in this section.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are a smaller reporting company as defined in Regulation
S-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 1.01 Entry into a Material Definitive Agreement.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Share Exchange</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 10, 2012, Baby All Corp.<FONT STYLE="color: black">
(&ldquo;we,&rdquo; the &ldquo;Company&rdquo;, the &ldquo;Registrant&rdquo; or &ldquo;Baby All Corp.&rdquo;)</FONT> entered into
and consummated a Share Exchange Agreement, attached hereto as Exhibit 2.1 (the &ldquo;Exchange Agreement&rdquo;) with all the
shareholders of Santa Fe Operating, Inc., a Delaware corporation (&ldquo;SFO&rdquo;), which is engaged in exploration and production
of oil and gas. Pursuant to the Exchange Agreement, the shareholders of SFO were issued a share of the Company&rsquo;s common stock,
$0.0001 par value (&ldquo;Common Stock&rdquo;) in exchange for each of their shares of SFO. As a result, the shareholders of SFO
were issued 33,478,261 shares of Common Stock and SFO became a wholly-owned subsidiary of the Company upon the closing of the Share
Exchange. Additionally, the shareholders of SFO were issued warrants to purchase 6,764,856 shares of Common Stock at $0.50 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 2 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of May 10, 2012, we have 39,478,261 shares
of common stock outstanding and warrants outstanding to purchase 6,764,856 shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Private Placement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Before the Share Exchange, Focus Capital
Group, Inc. (&ldquo;Focus&rdquo;) and other brokers were assisting SFO in raising up to $5.0 million from accredited investors,
of which none had been raised at the time of the Share Exchange. We anticipate entering into an engagement letter in the near future(the
&ldquo;Placement Agent Agreement&rdquo;), with Focus under which Focus will use best efforts to assist us in raising up to $5 million
through the sale of shares of our common stock at $0.50 per share. For its services under the Placement Agent Agreement, we will
pay Focus a fee equal to 10% of the capital raised plus a non-accountable expense allowance of 3% of the capital raised and indemnify
Focus for claims arising out of the engagement that are not due to its gross negligence. In addition, Focus and any other brokers
that assist Focus in the private placement will receive warrants to purchase shares of our common stock equal in aggregate to 10%
of the number of shares sold in the private placement at $0.50 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Land Banks</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Santa Fe Land, LLC (&ldquo;SFL&rdquo;),
a wholly owned subsidiary of SFO, has entered into Lease Acquisition Agreements (the &ldquo;Lease Acquisition Agreement with Langtre
LLC and Woodlake, LLC (the &ldquo;Land Banks&rdquo;), both wholly owned by Long Branch Petroleum, LP (&ldquo;LB&rdquo;) and Santa
Fe Petroleum, LLC (&ldquo;SFP&rdquo;), its managing member. The President of both LB and SFP is Tom Griffin, the Company&rsquo;s
President and Chairman of the Board. 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 less of our available funds. As of May 1, 2012, the Land Banks
had acquired leases on approximately 1,338 acres and top leases on an additional 1,045 acres. Under the Lease Acquisition Agreement,
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 20-24 months from the closing of the Share Exchange, subject to change by mutual consent.
The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through
the sale of its SFO common stock and utilized for the support of the Land Banks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Land Bank Participation investors with the
Land Banks subsequent to the closing of the Share Exchange will receive proceeds from the sale of leases by the Land Banks to SFL
based on their Participation Agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 2.01 Completion of Acquisition or Disposition of Assets.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="color: black">On May 10, 2012,
the Company and SFO completed the Share Exchange pursuant to which SFO became a wholly-owned subsidiary of Baby All Corp</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 3 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The discussion contained in this Item 2.01
relates primarily to SFO and SFL and to our business plans following the Share Exchange. &nbsp;Information relating to our business
before the Share Exchange has been previously reported in our annual report on Form 10-K for the year ended December 31, 2011,
as filed with the Securities and Exchange Commission on March 22, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Exchange Agreement
provided, among other things, that upon the closing of the Exchange Agreement, the Company&rsquo;s board of directors would appoint
designees of SFO to the board of directors and the existing members of the board of directors would resign as officers and directors
of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For accounting purposes,
this transaction is being accounted for as a reverse merger, since the stockholders of SFO will own and control approximately 84.8%
of the Company&rsquo;s outstanding Common Stock.&nbsp; In connection with the reverse merger, the Company will change its name
to Santa Fe Petroleum, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;<B>Item&nbsp;3.01 Unregistered Sales
of Equity Securities.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;In connection
with the Exchange Agreement, the Company issued 33,478,261 shares of restricted Common Stock to SFO.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;<B>Item&nbsp;5.01 Changes in Control
of Registrant.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;In connection
with the reverse merger, SFO&rsquo;s shareholders will own 33,478,261 shares or approximately 84.8% of the Company&rsquo;s Common
Stock and the designees of SFO to the Company&rsquo;s board of directors and the resignation of the Company&rsquo;s former directors,
effective May 10, 2012, will result in a change of control of the Registrant. (Please see Item 5.06 below.)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;<B>Item&nbsp;5.02 Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective May 10, 2012,
Efrat Schwartz and Merav Shalom resigned as directors of the Company. Ms. Schwartz and Ms. Shalom had no disagreements with the
Company on any matter related to the Company&rsquo;s operations, policies or practices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 10, 2012, Tom
Griffin, Bruce A. Hall and Jack Nelson were elected to serve as directors of the Company. Mr. Griffin was elected chairman of the
board of directors and was appointed president and secretary of the Company. Mr. Hall was appointed as Chief Executive Officer
and Chief Financial Officer of the Company. For a complete discussion
of the composition of the Board as well as the newly-appointed officers of the Company, please see the section entitled &ldquo;DIRECTORS
AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS&rdquo; in the Item 5.06 disclosure of this Current Report on Form 8-K, which
is incorporated herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 4 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;<B>Item&nbsp;5.06 Change in Shell
Company Status.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;In connection
with the reverse merger, the Company has ceased to be a non-operating shell company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 1pt; margin-bottom: 1pt"><DIV STYLE="font-size: 1pt; border-top: #7F0000 0.75pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 5 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS &nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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; background-color: #CCFFCC">
    <TD STYLE="width: 84%; color: blue; text-decoration: underline">Description of Business</TD>
    <TD STYLE="width: 16%">&nbsp;&nbsp; 7</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Risk Factors</TD>
    <TD>&nbsp; 12</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="color: blue; text-decoration: underline">Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations</TD>
    <TD>&nbsp; 22</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Description of Properties</TD>
    <TD>&nbsp; 27</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="color: blue; text-decoration: underline">Security Ownership of Certain Beneficial Owners and Management</TD>
    <TD>&nbsp; 28</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Directors, Executive Officers, Promoters, and Control Persons</TD>
    <TD>&nbsp; 29</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Indemnification of Directors and Officers</TD>
    <TD>&nbsp; 30</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="color: blue; text-decoration: underline">Executive Compensation</TD>
    <TD>&nbsp; 31</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Certain Relationships and Related Transactions, and Director Independence</TD>
    <TD>&nbsp; 31</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Recent Sales of Unregistered Securities</TD>
    <TD>&nbsp; 32</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Description of Securities</TD>
    <TD>&nbsp; 32</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Market Price of and Dividends on the Registrant&rsquo;s Common Equity and Related Stockholder Matters</TD>
    <TD>&nbsp; 34</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="color: blue; text-decoration: underline">Legal Proceedings</TD>
    <TD>&nbsp; 35</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Financial Statements and Supplementary Data</TD>
    <TD>&nbsp; 35</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="color: blue; text-decoration: underline">Changes In and Disagreements with Accountants on Accounting and Financial Disclosure</TD>
    <TD>&nbsp; 35</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="color: blue; text-decoration: underline">Financial Statements and Exhibits</TD>
    <TD>&nbsp; 35</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 1pt; margin-bottom: 1pt"><DIV STYLE="font-size: 1pt; border-top: #7F0000 0.75pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Page; Sequence: 6 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As the result of the Share Exchange described
in Item 1.01, we are 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. Management believes that our future growth will primarily occur through the acquisition of additional oil and gas properties
following extensive due diligence by our company. 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 board of directors. Although the oil and gas industry
is currently very competitive, management believes that many undervalued prospective properties remain available for acquisition
purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Background</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In 1997 our chairman of the board, Tom Griffin,
established a business to engage in oil and gas exploration and production. That business drilled 25 vertical and horizontal wells
in East Texas and achieved significant aggregate returns for investors in those projects. In December 2009 that business drilled
a test well on a 76-acre lease in the Bend Arch-Fort Worth Basin in Texas. Interpretation and analysis of the logs and core samples
from the test well indicated the potential for substantial production of oil and gas from the test-well site and surrounding acreage.
In order to exploit this opportunity, Mr. Griffin and the investors in the test well formed SFO, a Texas corporation, in 2010.
SFO&rsquo;s wholly owned subsidiary, SFL, which was incorporated in Texas in 2009, owns the 76-acre oil and gas lease and the test
well. Aside from acquiring the test well and associated leases, SFO and SFL have not conducted any operations and have not begun
oil and gas production from the test well. As a result of the Share Exchange on May 10, 2012, SFO and SFL became our wholly owned
subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a development stage oil and gas company
led by an experienced management team and focused on production of oil and natural gas. Our business plan&nbsp;is to acquire&nbsp;oil
and gas properties&nbsp;for appraisal&nbsp;and development.&nbsp;&nbsp; Through the Land Bank arrangement described above in Item
1.01 and similar arrangements, we plan to gain control over substantial oil and gas prospects, which will be acquired from the
Land Bank(s) from time to time as we are prepared to begin our appraisal and drilling operations on specific leases. We plan to
give priority to projects with near-term cash flow potential. We will employ strict selection guidelines for our projects and utilize
premier oilfield services and engineering firms in conducting our operations. Until we form a subsidiary that is qualified to be
the operator under our oil and gas leases, an affiliated company will act as contract operator. &nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Test-Well Site</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We hold a 100% working interest (75% net
revenue interest) on approximately 76 acres located in the Fort Worth Basin in North Central Texas. Our lease on this tract runs
through March 2014 or as long as there is commercial production. We have not yet started production. Our lease is located in the
Bend Arch-Fort Worth Basin oil and gas producing province designated by the United States Geological Survey. Several prolific-producing
fields have been discovered in this province beginning in the early 1900s. Since the turn of the 21<SUP>st</SUP> century, the Barnett
Shale in the eastern part of the Fort Worth Basin has become one of the largest natural-gas-producing formations in North America.
The Barnett Shale is a significant source and reservoir shale formation that extends throughout much of the Fort Worth Basin. At
the test-well site, the Barnett Shale begins at a depth of approximately 2,600 feet. Another target oil and gas producing horizon
in the region surrounding the test-well site will be the Marble Falls Formation, a layer of limestone and shaley (tight) limestone
that lies directly above the Barnett Shale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 7 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Participation Agreement for Land Acquisition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into a variety of arrangements with affiliates (&ldquo;Land Banks&rdquo;) that will raise capital through a private
offering of participation interests, and in turn use its funds to acquire oil and gas leases selected by Santa Fe Land.&nbsp; Additionally,
at our discretion, we may borrow up to $150,000 of the funds from the Land Bank for testing the Barnett Cody #1 well owned by SFL.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFL has 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As part of the commercial arrangement, we
guarantee all obligations of SFL under the Lease Acquisition Agreement.&nbsp; The amount of our financial risk related to these
guarantees will depend on the amount and value of the leases that the Land Bank acquires.&nbsp; Based on current estimates we expect
that we will be guaranteeing the purchase of up to $5,000,000 in leases, or more, which amount is subject to change.&nbsp; Additionally,
the Land Bank may lend up to $150,000 to SFL to fund the expenses of testing the Barnett Cody #1 well owned by SFL.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the Lease Acquisition Agreement, SFL
will have the right to acquire leases from the Land Banks.&nbsp;&nbsp;The aggregate purchase price for the leases will be equal
to a 50% annualized return of the total investment raised by LB through the sale of its SFO common stock and utilized for the support
of the Land Banks. SFL&rsquo;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.&nbsp; Additionally, if the Land Banks have loaned funds to complete the testing of the Barnett
Cody #1 well owned by SFL, the loan will bear interest at 15% per year and be payable in full not later than 18 months after the
Land Bank was formed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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&rsquo;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&rsquo; contributions and provide a minimum of a 50% annual return
to the Participants on their unpaid contributions over the life of the Land Bank.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 8 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.&nbsp; Additionally, we will be liable
if Santa Fe Land does not perform its obligations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the date of this filing, the Land Banks have leased approximately 1,338 acres in the general vicinity of the Barnett Cody #1
test well.&nbsp; Additionally, the Land Bank has obtained &ldquo;top leases&rdquo; on approximately 1,045 acres of land also in
the general vicinity of the Barnett Cody #1 test well.&nbsp; A top lease is a lease taken on &ldquo;top&rdquo; of another preexisting
lease, with the top lease becoming effective only after the termination of the first lease.&nbsp; We believe that the acres structured
under top leases will become available to be leased within a three month&rsquo;s timeframe based upon discussions we have had with
the land owners.&nbsp; The Land Bank intends to continue leasing additional acres in the general area of the Barnett Cody #1 test
well.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Business Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our immediate strategy is to acquire control
of oil and gas lease on substantial acreage in the southwest part of the Bend Arch-Fort Worth Basin in Texas. We plan to evaluate
these prospects with a focus on drilling for and production of oil from the Barnett Shale and Marble Falls Formations in this prospect
area.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We compete with other companies for financing
and for the acquisition of new oil and gas properties. Many of the oil and gas exploration companies with which we compete have
greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater
amounts on acquisitions of oil and gas properties of merit, on exploration of their properties, and on development of their properties.
In addition, they may be able to afford more geological and other technical expertise in the targeting and exploration of oil
and gas properties. This competition could result in competitors having properties of greater quality and interest to prospective
investors who may finance additional exploration and development. This competition could have an adverse impact on our ability
to achieve the financing necessary for us to conduct further exploration of our acquired properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will also compete with other junior
oil and gas exploration companies for financing from a limited number of investors that are prepared to make investments in junior
oil and gas exploration companies. The presence of competing junior oil and gas exploration companies may have an adverse impact
on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments
in competitors are more attractive based on the merit of the oil and gas properties under investigation and the price of the investment
offered to investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 9 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also compete with other junior and senior oil and gas companies for available resources, including, but
not limited to, professional exploration and production, geological and engineering personnel services and supplies, for the drilling
completion and production of hydrocarbon resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not own any copyrights, patents, or
trademarks. We own the Internet domain name <U>www.sfpetro.com</U>. Under current domain name registration practices, no one else
can obtain an identical domain name, but someone might obtain a similar name, or the identical name with a different suffix, such
as &ldquo;.org&rdquo;, or with a country designation. The regulation of domain names in the United States and in foreign countries
is subject to change, and we could be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease
the value of our domain names. During each of the last two fiscal years, we had no expenditures on research and development activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Governmental Regulation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our oil and gas operations are subject to
various federal, state, and local governmental regulations. Matters subject to regulation include discharge permits for drilling
operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, pooling of properties, and taxation.
From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow
of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage,
transportation, and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection
with oil and gas operations are also subject to regulation under federal, state, and local laws and regulations relating primarily
to the protection of human health and the environment. The requirements imposed by such laws and regulations are frequently changed
and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect
on our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Environmental legislation provides for,
among other things, restrictions and prohibitions on spills, releases, or emissions of various substances produced in association
with oil and gas operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned, and
reclaimed to the satisfaction of the applicable regulatory authorities. Compliance with such legislation can require significant
expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation
is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability, and potentially increased
capital expenditures and operating costs. The discharge of oil or gas or other pollutants into the air, soil, or water may give
rise to liabilities to governments and third parties and may require us to incur costs to remedy such discharge. No assurance can
be given that environmental laws will not result in a curtailment of production or a material increase in the costs of production,
development, or exploration activities or otherwise adversely affect our financial condition, results of operations, or prospects.&nbsp;&nbsp;We
could incur significant liability for damages, clean-up costs, and penalties in the event of discharges into the environment, environmental
damage caused by us or previous owners of&nbsp;our property, or non-compliance with environmental laws or regulations. In addition
to actions brought by governmental agencies, we could face actions brought by private parties or citizens groups.&nbsp;&nbsp;Any
of the foregoing could have a material adverse effect on our financial results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 10 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Failure to comply with environmental laws
could result in fines or penalties being owed to third parties or governmental entities, the payment of which could have a material
adverse effect on our financial condition or results of operations.&nbsp;<FONT STYLE="background-color: yellow"><B> </B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently have no employees. Our officers
and other personnel currently provide their services pursuant to consulting agreements. Until the scope of our operations warrants
otherwise, we plan to outsource independent consultant engineers&nbsp;and geologists on a&nbsp;part time&nbsp;basis to conduct
our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Facilities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. We pay rent of
$1,500 per month under an arrangement with a company controlled by Mr. Griffin, which leases the space from an unaffiliated owner.
We believe that our current office space and facilities will have to be expanded in the near future to meet our growth plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Reports to Security Holders</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At the current time, we are not required
to send annual reports to security holders; however, we intend to voluntarily send such reports and will include audited financial
information in such reports. We are currently not subject to the reporting requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, however we intend to become subject to those requirements by the end of the calendar year 2012. The public
may read and copy any materials we file with the Commission at the SEC's Public Reference Room at 100 F Street, NE., Washington,
DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of
the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.
The address of that site is http://www.sec.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Internet Website</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Internet website is <U>www.sfpetro.com</U>,
which is currently under construction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 11 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Business and the Oil and Gas Industry</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our exploration, appraisal, and development activities
are subject to many risks that may affect our ability to profitably extract oil and gas reserves or achieve targeted returns.&nbsp;&nbsp;In
addition, continued growth requires that we acquire and successfully develop additional oil reserves.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Oil and gas exploration may involve unprofitable
efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit
after drilling, operating, and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling,
completion, and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations,
and various field operating conditions may adversely affect the production from successful wells. These conditions include delays
in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient
storage or transportation capacity, or other geological and mechanical conditions. While diligent well supervision and effective
maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field
operating conditions cannot be eliminated and can be expected to adversely affect revenue and cash flow levels to varying degrees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our
commercial success depends on our ability to find, acquire, develop, and commercially produce oil and natural gas reserves.&nbsp;&nbsp;Without
the continual addition of new reserves, any existing reserves and production will decline over time as such existing reserves
are depleted. A future increase in our reserves will depend not only on our ability to explore and develop any properties we may
have from time to time, but also on our ability to select and acquire suitable producing properties or prospects.&nbsp;&nbsp;No
assurance can be given that we will be able to continue to locate satisfactory properties for acquisition or participation.&nbsp;&nbsp;Moreover,
if such acquisitions or participations are identified, we may determine that current markets, terms of acquisition, and participation
or pricing conditions make such acquisitions or participations economically disadvantageous.&nbsp;&nbsp;There is no assurance
that commercial quantities of oil or gas will be discovered or acquired by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our oil and gas operations are subject to operating hazards
that may increase our operating costs to prevent such hazards or may materially affect our operating results if any of such hazards
were to occur.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Oil and gas exploration, development, and production
operations are subject to all the risks and hazards typically associated with such operations, including hazards such as fire,
explosion, blowouts, cratering,&nbsp;unplanned gas releases, and spills, each of which could result in substantial damage to oil
wells, production facilities, other property and the environment or in personal injury. Oil and gas production operations are also
subject to all the risks typically associated with such operations, including encountering unexpected formations or pressures,
premature decline of reservoirs, and the invasion of water into hydrocarbon&nbsp;producing formations. Losses resulting from the
occurrence of any of these risks could have a material adverse effect on our results of operations, liquidity, and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 12 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To date, we have not generated revenues from production
of our oil and gas lease interests.&nbsp;&nbsp;Our oil and gas exploration and development activities will be focused on the exploration
and development of our properties which are high-risk ventures with uncertain prospects for success.&nbsp;&nbsp;In addition, we
will not have earnings to support our activities should the wells drilled or properties acquired prove not to be commercially viable.&nbsp;&nbsp;No
assurance can be given that commercial quantities of oil or gas will be successfully produced as a result of our exploration and
development efforts.&nbsp;&nbsp;Further there is no guarantee that we will generate sufficient revenues from production of&nbsp;our
reserves.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our exploration and development activities will depend
in part on the evaluation of data obtained through geophysical testing and geological analysis, as well as test drilling activity.&nbsp;&nbsp;The
results of such studies and tests are subjective, and no assurances can be given that exploration and development activities based
on positive analysis will produce oil or gas in commercial quantities or costs.&nbsp;&nbsp;As developmental and exploratory activities
are performed, further data required for evaluation of our oil and gas interests will become available.&nbsp;&nbsp;The exploration
and development activities that will be undertaken by us are subject to greater risks than those associated with the acquisition
and ownership of producing properties.&nbsp;&nbsp;The drilling of development wells, although generally consisting of drilling
to reservoirs believed to be productive, may result in dry holes or a failure to produce oil or gas in commercial quantities.&nbsp;&nbsp;Moreover,
any drilling of exploratory wells is subject to significant risk of dry holes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If we are unable to compete successfully with the large
number of oil and gas producers in our industry, we may not be able to achieve profitable operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Oil and gas exploration is intensely competitive in
all its phases and involves a high degree of risk.&nbsp;&nbsp;We compete with numerous other participants in the search for and
the acquisition of oil and gas properties and in the marketing of oil and gas.&nbsp;&nbsp;Our competitors include oil and gas companies
that have substantially greater financial resources, staff, and facilities than we do.&nbsp;&nbsp;Our ability to increase reserves
in the future will depend not only on our ability to explore and develop our existing properties, but also on our ability to select
and acquire suitable producing properties or prospects for exploratory drilling.&nbsp;&nbsp;Competitive factors in the distribution
and marketing of oil and gas include price and methods and reliability of delivery.&nbsp;&nbsp;Competition may also be presented
by alternative fuel sources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We are subject to various regulatory requirements, including
environmental regulations, and may incur substantial costs to comply and remain in compliance with those requirements.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our operations in the United States are subject to
regulation at the federal, state, and local levels, including regulation relating to matters such as the exploration for and the
development, production, marketing, pricing, transmission and storage of oil and gas, as well as environmental and safety matters.&nbsp;&nbsp;Failure
to comply with applicable regulations could result in fines or penalties being owed to third parties or governmental entities,
the payment of which could have a material adverse effect on our financial condition or results of operations.&nbsp;&nbsp;Our operations
are subject to significant laws and regulations, which may adversely affect our ability to conduct business or increase our costs.&nbsp;&nbsp;Extensive
federal, state, and local laws and regulations relating to health and environmental quality in the United States affect nearly
all of our operations.&nbsp;&nbsp;These laws and regulations set various standards regulating various aspects of health and environmental
quality, provide for penalties and other liabilities for the violation of these standards, and in some circumstances, establish
obligations to remediate current and former facilities and off-site locations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 13 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Environmental legislation provides for, among other
things, restrictions and prohibitions on spills, releases, or emissions of various substances produced in association with oil
and gas operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned, and reclaimed
to the satisfaction of the applicable regulatory authorities. Compliance with such legislation can require significant expenditures
and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving
in a manner expected to result in stricter standards and enforcement, larger fines and liability, and potentially increased capital
expenditures and operating costs. The discharge of oil or gas or other pollutants into the air, soil, or water may give rise to
liabilities to governments and third parties and may require us to incur costs to remedy such discharge. No assurance can be given
that environmental laws will not result in a curtailment of production or a material increase in the costs of production, development,
or exploration activities or otherwise adversely affect our financial condition, results of operations, or prospects.&nbsp;&nbsp;We
could incur significant liability for damages, clean-up costs, and penalties in the event of discharges into the environment, environmental
damage caused by us or previous owners of&nbsp;our property, or non-compliance with environmental laws or regulations. In addition
to actions brought by governmental agencies, we could face actions brought by private parties or citizens groups.&nbsp;&nbsp;Any
of the foregoing could have a material adverse effect on our financial results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Moreover, we cannot predict what legislation or regulations
will be enacted in the future or how existing or future laws or regulations will be administered, enforced, or made more stringent.
Compliance with more stringent laws or regulations, or more vigorous enforcement policies of the regulatory agencies, could require
us to make material expenditures for the installation and operation of systems and equipment for remedial measures, all of which
could have a material adverse effect on our financial condition or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our ability to market and sell oil and gas successfully
is subject to a number of factors that are beyond our control and that may adversely impact our ability to produce and sell oil
and gas or to achieve profitability.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The marketability and price of oil or gas that may
be acquired or discovered by us will be affected by numerous factors beyond our control.&nbsp;&nbsp;Our ability to market our oil
and gas may depend upon our ability to acquire space on pipelines that deliver oil or gas to commercial markets. We may also be
affected by deliverability uncertainties related to the proximity of our reserves to pipelines and processing facilities, by operational
problems with such pipelines and facilities, and by government regulation relating to price, taxes, royalties, land tenure, allowable
production, export of oil or gas, and by many other aspects of the oil and gas business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 14 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our revenues, profitability, and future growth and
the carrying value of our oil and gas properties are substantially dependent on prevailing prices of oil and gas. Our ability to
borrow and to obtain additional capital on attractive terms is also substantially dependent upon oil and natural gas&nbsp;prices.
Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand
for oil, market uncertainty, and a variety of additional factors beyond our control. These factors include economic conditions
in the United States and Canada, the actions of the Organization of Petroleum Exporting Countries, governmental regulation, political
stability in the Middle East and elsewhere, the foreign supply of oil, the price of foreign imports and the availability of alternative
fuel sources. Any substantial and extended decline in the price of oil or gas would have an adverse effect on the carrying value
of our proved reserves, borrowing capacity, revenues, profitability, and cash flows from operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Volatile oil and gas prices make it difficult to estimate
the value of producing properties for acquisition and often cause disruption in the market for oil and gas producing properties,
as buyers and sellers have difficulty agreeing on such value. Price volatility also makes it difficult to budget for and project
the return on acquisitions and development and exploitation projects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We cannot guarantee that title to our properties does
not contain a defect that may materially affect our interest in those properties.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">It is our practice in acquiring significant oil and
gas leases or interests in oil and gas leases to retain lawyers to fully examine the title to the interest under the lease.&nbsp;&nbsp;In
the case of minor acquisitions, we rely upon the judgment of oil lease brokers or landmen who do the field work in examining records
in the appropriate governmental office before attempting to place under lease a specific interest. We believe that this practice
is widely followed in the oil and gas industry. Nevertheless, there may be title defects that affect some of our properties, which
may adversely affect us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our business may be harmed if we are unable to retain
our interests in leases</I></B>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All our properties are held under interests in oil
and gas mineral leases. If we fail to meet the specific requirements of each lease, especially future drilling and production requirements,
the lease may be terminated or otherwise expire. We cannot be assured that we will be able to meet our obligations under each lease.
The termination or expiration of our working interest relating to any lease would harm our business, financial condition, and results
of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our reserve estimates are subject to numerous uncertainties
and may be inaccurate.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There are numerous uncertainties inherent in estimating
quantities of oil and gas reserves and cash flows to be derived from reserves, including many factors beyond our control. In general,
estimates of economically recoverable oil or gas reserves and the future net cash flows from reserves are based upon a number of
variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery,
timing and amount of capital expenditures, marketability of oil and gas, royalty rates, the assumed effects of regulation by governmental
agencies, and future operating costs, all of which may vary from actual results. All such estimates are to some degree speculative,
and classifications of reserves are only attempts to define the degree of speculation involved. For those reasons, estimates of
the economically recoverable oil or gas reserves attributable to any particular group of properties, classification of such reserves
based on risk of recovery, and estimates of future net revenues expected from reserves prepared by different engineers, or by the
same engineers at different times, may vary. Our actual production, revenues, taxes, and development and operating expenditures
with respect to our reserves will vary from estimates, and such variations could be material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 15 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Estimates of proved or unproved reserves that may
be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves
rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual
production history. Subsequent evaluation of the same reserves based upon production history and production practices will result
in variations in the estimated reserves, and such variations could be material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our oil and gas property is held in the form of leases.&nbsp;&nbsp;If
we default on those leases, we may lose our interest in those properties.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our properties are held in the form of leases
and working interests in leases. If we or the holder of the lease fails to meet the specific requirement of a lease, the lease
may terminate or expire. There can be no assurance that any of the obligations required to maintain each lease will be met, although
we exercise our commercially reasonable efforts to do so. The termination or expiration of our leases or the working interests
relating to a lease may have a material adverse effect on our results of operations and business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The loss or unavailability of our key personnel for an
extended period of time could adversely affect our business operations and prospects.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our success depends in large measure on
certain key personnel, including our chairman of the board and our chief executive officer and chief financial officer. The loss
of the services of such key personnel could have a material adverse effect on us.&nbsp;&nbsp;We do not currently have any key-person
insurance in effect for these key individuals. In addition, the competition for qualified personnel in the oil and gas industry
is intense, and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the
development and operation of our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We depend on the services of third parties for material
aspects of our operations, including drilling operators, and accordingly if we cannot obtain certain third-party services, we may
not be able to operate.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may rely on third parties to operate
some of the assets in which we possess an interest. Assuming the presence of commercial quantities of oil or gas on our properties,
the success of the oil and gas operations, whether considered on the basis of drilling operations or production operations, will
depend largely on whether the operator of the property properly fulfills our obligations.&nbsp;&nbsp;As a result, our ability to
exercise influence over the operation of these assets or their associated costs may be limited, adversely affecting our financial
performance.&nbsp;&nbsp;Our performance will therefore depend upon a number of factors that may be outside of our full control,
including the timing and amount of capital expenditures, the operator&rsquo;s expertise and financial resources, the approval of
other participants, the selection of technology, and risk-management practices.&nbsp;&nbsp;The failure of third-party operators
and their contractors to perform their services in a proper manner could adversely affect our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 16 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We are subject to the reporting requirements of federal
securities laws, which will be expensive.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a public reporting company in the
United States and, accordingly, subject to the information and reporting requirements of the Securities Exchange Act and other
federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and
quarterly reports, proxy statements and other information with the Securities and Exchange Commission (&ldquo;SEC&rdquo;) and furnishing
audited reports to stockholders will cause our expenses to be higher than they would be if we remained a privately held company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our compliance with the Sarbanes-Oxley Act and SEC rules
concerning internal controls will be time consuming, difficult and costly.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">It will be time consuming, difficult and costly for
us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley. We will need to hire additional
financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls
and reporting procedures. If we are unable to comply with Sarbanes-Oxley&rsquo;s internal controls requirements, we may not be
able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires publicly traded companies to obtain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may not be able to achieve the benefits we expect to
result from the Share Exchange.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 10, 2012, we completed the Share
Exchange.&nbsp;&nbsp;We may not realize the benefits that we hope to receive as a result of the Share Exchange, which include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>access to the capital markets of the United States;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>increased market liquidity expected to result from the Share Exchange;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>ability to use registered securities to make acquisition of assets or businesses;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>increased visibility in the financial community;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>enhanced access to the capital markets;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>improved transparency of operations; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>perceived credibility and enhanced corporate image of being a publicly traded company.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 17 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There can be no assurance that any of the anticipated benefits
of the Share Exchange will be realized in respect to our business operations. In addition, the attention and effort devoted to
achieving the benefits of the Share Exchange and attending to the obligations of being a public company, such as reporting requirements
and securities regulations, could significantly divert management&rsquo;s attention from other important issues, which could materially
and adversely affect our operating results or stock price in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We will operate as a public company subject to evolving
corporate governance and public disclosure regulations that may result in additional expenses and continuing uncertainty regarding
the application of such regulations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Changing laws, regulations, and standards
relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related rules and regulations,
are creating uncertainty for public companies. We are evaluating and monitoring developments with respect to new and proposed rules
and cannot predict or estimate the amount of the additional compliance costs we may incur or the timing of such costs. These new
or changed laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity,
and as a result, their application in practice may evolve over time as new guidance is provided by courts and regulatory and governing
bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions
to disclosure and governance practices. Maintaining appropriate standards of corporate governance and public disclosure may result
in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities
to compliance activities. In addition, if we fail to comply with new or changed laws, regulations, and standards, regulatory authorities
may initiate legal proceedings against us and our business and our reputation may be harmed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also expect these new rules and regulations may
make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it
may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are currently evaluating and monitoring
developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or
the timing of such costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our shares may have limited liquidity.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A substantial portion of our shares of common
stock will be closely held by certain insider investors. Consequently, the public float for our shares may be highly limited. As
a result, should you wish to sell your shares into the open market you may encounter difficulty selling large blocks of your shares
or obtaining a suitable price at which to sell your shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 18 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our stock price may be volatile, which may result in losses
to our stockholders.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The stock markets have experienced significant price
and trading volume fluctuations, and the market prices of companies quoted on the Over-The-Counter Bulletin Board, where our shares
of common stock will be quoted, generally have been very volatile and have experienced sharp share-price and trading-volume changes.
The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following
factors, some of which are beyond our control:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>variations in our operating results;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>changes in operating and stock price performance of other companies in our industry:</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>additions or departures of key personnel; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>future sales of our common stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Domestic and international stock markets often experience significant
price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance,
may adversely affect the price of our common stock. In particular, following initial public offerings, the market prices for stocks
of companies often reach levels that bear no established relationship to the operating performance of these companies. These market
prices are generally not sustainable and could vary widely. In the past, following periods of volatility in the market price of
a public company&rsquo;s securities, securities class action litigation has often been initiated.<B> &nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If we fail to maintain the adequacy of our internal controls,
our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act could be impaired,
which could cause our stock price to decrease substantially.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have been subject to public reporting
requirements only since January 2012 have committed limited personnel and resources to the development of the external reporting
and compliance obligations that required of a public company. We plan to obtain additional financial and accounting resources to
support and enhance our ability to meet the requirements of being a public company. We will need to continue to improve our financial
and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls,
reporting systems, or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply
with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate
financial statements could cause the trading price of our common stock to decrease substantially.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our common shares have not yet traded and in the future,
may be thinly traded, and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money
or otherwise desire to liquidate such shares.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We cannot predict the extent to which an
active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are
a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment
community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse
and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such
time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity
in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity
that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a
broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels
will be sustained.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 19 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The market price for our common stock may
be particularly volatile given our status as a relatively small company with a presumably small and thinly traded &ldquo;float&rdquo;
and lack of current revenues that could lead to wide fluctuations in our share price. You may be unable to sell your common stock
at or above your purchase price if at all, which may result in substantial losses to you.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The market for our common shares may be
characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more
volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number
of factors. First, as noted above, our common shares may be sporadically and thinly traded. As a consequence of this lack of liquidity,
the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares
in either direction. The price for our shares could, for example, decline precipitously if a large number of our common shares
are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without
adverse impact on its share price. Secondly, an investment in us is a speculative or &ldquo;risky&rdquo; investment due to our
lack of revenues or profits to date and uncertainty of future revenues or profits. As a consequence of this enhanced risk, more
risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress,
be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock
of a seasoned issuer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Stockholders should be aware that, according
to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns
include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through pre-arranged matching of purchases and sales and false and misleading press releases; (3) boiler
room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse
of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of practical limitations to prevent the described patterns
from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility
of our share price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 20 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We do not anticipate paying any cash dividends.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently do not anticipate that we will
pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent
upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will
be within the discretion of our board of directors. We currently intend to retain all earnings, if any, to implement our business
plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our common stock may be subject to penny stock rules,
which may make it more difficult for our stockholders to sell their common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Broker-dealer practices in connection with
transactions in &ldquo;penny stocks&rdquo; are regulated by certain penny stock rules adopted by the SEC.&nbsp;&nbsp;Penny stocks
generally are equity securities with a price of less than $5.00 per share.&nbsp;&nbsp;The penny stock rules require a broker-dealer,
prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk
disclosure document that provides information about penny stocks and the risks in the penny stock market.&nbsp;&nbsp;The broker-dealer
also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the
customer&rsquo;s account.&nbsp;&nbsp;In addition, the penny stock rules generally require that prior to a transaction in a penny
stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and
receive the purchaser&rsquo;s written agreement to the transaction.&nbsp;&nbsp;These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Volatility in our common stock price may subject us to
securities litigation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The market for our common stock will be
characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue
to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class
action litigation against a company following periods of volatility in the market price of its securities. We may, in the future,
be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management&rsquo;s
attention and resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 21 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may need additional capital, and the sale of additional
shares or other equity securities could result in additional dilution to our stockholders.</I></B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will require additional cash resources
due to fully execute our business strategy. If our resources are insufficient to satisfy our cash requirements, we will seek to
sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in
additional dilution to our stockholders. The incurrence of indebtedness would result in debt service obligations and could result
in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available
in amounts or on terms acceptable to us, if at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We closed the share exchange with no cash proceeds, and
we may not be able to obtain the required capital to fund our continuing operations and our business plan.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We closed the share exchange transaction
with no cash proceeds. Accordingly, we are subject to corporate governance and financial reporting requirements without any cash.
Although we expect that the closing of a proposed offering of our common stock will occur in the near future, there is a risk that
the we will not close the proposed offering would have no way to operate our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we do close the Offering, we expect that
our current capital and our other existing resources will only be sufficient to provide a limited amount of working capital, and
the revenues generated from our properties in Texas alone will not be sufficient to fund both our continuing operations and our
planned growth. We will require additional capital to continue to operate our business beyond the initial phase of our current
properties, and to further expand our exploration and development programs to additional properties. We may be unable to obtain
additional capital required, which may hamper our growth or cause us to incur losses on ongoing projects if we do not have sufficient
resources to manage them</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B>MANAGEMENT&rsquo;S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>The following discussion should be read in conjunction with
the financial information included elsewhere in this Form 8-K, including SFO&rsquo;s audited financial statements for the period
from May 11, 2011 (commencement of operations) to December 31, 2011, and related notes. </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Forward Looking Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This Current Report on Form 8-K contains
&ldquo;forward-looking statements&rdquo; within the meaning of the Private Securities Litigation Reform Act of 1995 that are based
on current management&rsquo;s expectations. These statements may be identified by their use of words like &ldquo;plans,&rdquo;
&ldquo;expect,&rdquo; &ldquo;aim,&rdquo; &ldquo;believe,&rdquo; &ldquo;projects,&rdquo; &ldquo;anticipate,&rdquo; &ldquo;intend,&rdquo;
&ldquo;estimate,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;could,&rdquo; and other expressions that indicate future
events and trends. All statements that address expectations or projections about the future, including statements about our business
strategy, expenditures, and financial results are forward-looking statements. Our management believes that the expectations reflected
in such forward-looking statements are accurate. However, management cannot assure you that such expectations will occur.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 22 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Actual results could differ materially from
those in the forward looking statements due to a number of uncertainties including, but not limited to, those discussed in this
section. Factors that could cause future results to differ from these expectations include general economic conditions, further
changes in our business direction or strategy; competitive factors, oil and gas exploration uncertainties, and an inability to
attract, develop, or retain technical, consulting, managerial, agents, or independent contractors. As a result, the identification
and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable
alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and accordingly, no opinion is expressed on the achievability of those forward-looking statements.
No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information
are accurate, and management assumes no obligation to update any such forward-looking statements. You should not unduly rely on
these forward-looking statements, which speak only as of the date of this Current Report. Except as required by law, management
is not obligated to release publicly any revisions to these forward-looking statements to reflect events or circumstances occurring
after the date of this report or to reflect the occurrence of unanticipated events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a development stage exploration oil
and gas company led by an experienced management team and focused on exploration and production of oil and natural gas. Our business
plan&nbsp;is to acquire&nbsp;oil and gas properties&nbsp;for exploration, appraisal,&nbsp;and development.&nbsp;&nbsp; We plan
to give priority to projects with near-term cash flow potential. We will employ strict selection guidelines for our projects and
utilize premier oilfield services and engineering firms in conducting our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the Share Exchange, for accounting
purposes, SFO is deemed to have acquired the Company. Accordingly, the financial statement data presented are those of SFO for
all periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Critical Accounting Policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our discussion and analysis of our financial
condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity
with accounting principles generally accepted in the United States of America (&ldquo;GAAP&rdquo;). 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Oil and Gas Properties</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. 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. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 23 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Use of Estimates</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company&rsquo;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 proved 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&rsquo;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: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Recent Accounting Pronouncements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In January 2010, the Financial Accounting
Standards Board issued Accounting Standards Update (&ldquo;ASU&rdquo;) No. 2010&ndash;03, <I>Extractive Activities &ndash; Oil
and Gas (Topic 932)</I>, to align the oil and natural gas reserve estimation and disclosure requirements of Topic 932 with the
Securities and Exchange Commission&rsquo;s final rule, <I>Modernization of Oil and Gas Reporting</I>. The Company adopted ASU No.
2010-03 on May 11, 2011 (commencement of operations). There was no immediate impact of this adoption given the Company had no production
and its oil and natural gas reserves are considered probable as of December 31, 2011. Management expects ASU No. 2010-03 to affect
the Company once the Company has the financial wherewithal to carry out its drilling plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 24 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In December 2011, the FASB issued ASU No.
2011&ndash;11, <I>Disclosures about Offsetting Assets and Liabilities</I>. This ASU affect all entities that have financial instruments
and derivative instruments that are either offset or subject to an enforceable master netting arrangement or similar agreement.
ASU 2011&ndash;11 requires an entity to disclose information about offsetting and related arrangements to enable user of its financial
statements to understand the effect of those arrangements on its financial position. The provisions of ASU 2011&ndash;11 are applicable
to annual reporting periods beginning on or after January 1, 2011 and interim periods within those annual periods. The Company
has not yet determined the impact of this ASU on our consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Going Concern</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As reflected in the
accompanying consolidated financial statements, the Company had a net loss of $542,000 for the period from May 11, 2011 (commencement
of operations) through December 31, 2011. Additionally, at December 31, 2011, the Company had no cash, a working capital deficit
of $418,000 and an accumulated deficit of $542,000, which could have a material impact on the Company&rsquo;s financial condition
and operations. Our substantial obligations pose risks to our business and stockholders by:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">making it more difficult for us to satisfy
our obligations;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">impeding us from obtaining additional financing
in the future for working capital, capital expenditures and general corporate purposes; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left; text-indent: -0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;making us more vulnerable to a downturn in our business and limit our flexibility to plan for, or react to, changes in our business.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: left; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The time required for us to become profitable
is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from
operations to meet our planned capital expenditures and working capital requirements. Our ability to obtain additional financing
from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects
for our business. The necessary additional financing may not be available to us or may be available only on terms that would result
in further dilution to the current owners of our common stock. The accompanying consolidated financial statements do not include
any adjustments to reflect the possible effects on recoverability and classification of assets or the amount and classification
of liabilities which may result from the inability of the Company to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 25 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the period from May 11, 2011 to December
31, 2011, we had no revenue. We had expenses of $542,000 consisting principally of compensation ($304,000) and professional and
consulting fees ($212,000) incurred in connection with our efforts to raise capital and to achieve listing with OTC Markets and
trading as a public company. For this period we had a net loss of $542,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At December 31, 2011, we had no cash and
a working capital deficit of $418,000. At May 10, 2012, we had no cash to meet our outstanding obligations and conducting our oil
and gas exploration and production activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A critical component
of our operating plan is the ability to obtain additional capital through additional equity or debt financing. We do not believe
that existing capital and anticipated funds from operations will be sufficient to execute our strategic plan during 2012. We have
engaged an investment bank to raise up to $5 million in a private placement of our common stock. We plan to seek additional capital
in the future to fund growth and expansion through additional equity or debt financing. No assurance can be made that such financing
will be available.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions
of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses, and difficulties
frequently encountered by companies in their early stage of development, particularly companies in the oil and gas exploration
industry. To address these risks we must, among other things, implement and successfully execute our business strategy. There
can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse
effect on our business prospects, financial condition, and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Off-Balance Sheet Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have entered into
a variety of arrangements with affiliates (&ldquo;Land Banks&rdquo;) that will raise capital through a private offering of participation
interests, and in turn use its funds to acquire oil and gas leases selected by Santa Fe Land.&nbsp; Additionally, at our discretion,
we may borrow up to $150,000 of the funds from the Land Bank for testing the Barnett Cody #1 well owned by SFL.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As part of the commercial arrangement, we
guarantee all obligations of SFL under the Lease Acquisition Agreement.&nbsp; The amount of our financial risk related to these
guarantees will depend on the amount and value of the leases that the Land Bank acquires.&nbsp; Based on current estimates we expect
that we will be guaranteeing the purchase of up to $5,000,000 in leases, or more, which amount is subject to change.&nbsp; Additionally,
the Land Bank may lend up to $150,000 to SFL to fund the expenses of testing the Barnett Cody #1 well owned by SFL.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 26 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the Lease Acquisition Agreement, SFL
will have the right to acquire leases from the Land Banks.&nbsp;&nbsp; The aggregate purchase price for the leases will be equal
to a 50% annualized return of the total investment raised by LB through the sale of its SFO common stock and utilized for the support
of the Land Banks. SFL&rsquo;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.&nbsp; Additionally, if the Land Banks have loaned funds to complete the testing of the Barnett
Cody #1 well owned by SFL, the loan will bear interest at 15% per year and be payable in full not later than 18 months after the
Land Bank was formed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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&rsquo;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&rsquo; contributions and provide a minimum of a 50% annual return
to the Participants on their unpaid contributions over the life of the Land Bank.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
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.&nbsp; Additionally, we will be liable
if Santa Fe Land does not perform its obligations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Plan of Operations </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the remainder of 2012, if sufficient
funds are obtained, we plan to re-complete the test well that was originally drilled in December 2009 in the Barnett Shale and
drill four additional wells, one of which will be a gas-injection well, at the test-well site. We plan to acquire oil and gas leases
in the surrounding area and begin drilling additional five-well projects in the Barnett Shale. We also intend to drill horizontal
wells in the Marble Falls Formation on the same acreage. The amount of leased acreage we acquire and the number of five-well projects
in the Barnett Shale and horizontal wells in the Marble Falls Formation will depend to a large extent on whether we are successful
in raising sufficient capital to execute this plan of operation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B>DESCRIPTION OF PROPERTIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company&rsquo;s
properties and principal asset consists of an unevaluated oil and natural gas property in the Bend Arch-Fort Worth Basin in Texas.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 27 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The unevaluated oil
and natural gas property was originally drilled in 2009, as a test well. 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 December 31, 2011. As
of December 31, 2011, the primary term of the Company&rsquo;s oil and natural gas lease was through March 2012; however, subsequent
to December 31, 2011, the Company extended the primary term through March 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth certain information,
as of May 10, 2012 with respect to the beneficial ownership of the Company&rsquo;s outstanding common stock by (i) any holder of
more than five (5%) percent; (ii) each of the directors and executive officers; and (iii) our directors and executive officers
as a group. Except as otherwise indicated, to our knowledge each of the stockholders listed below has sole voting and investment
power over the shares beneficially owned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Name and Address of </B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Beneficial
Owner (1)</B>&nbsp;</P></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Number of
    Shares of Common Stock Beneficially Owned (4)</B></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Percent
    of Outstanding Shares</B></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 63%; font-size: 10pt; text-align: left">Tom Griffin, Director and Chairman of the&nbsp;Board</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 16%; font-size: 10pt; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;17,149,579</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"> (2)&nbsp;</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; font-size: 10pt; text-align: right">43.4</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Bruce A. Hall, Director, Chief Executive Officer, and Chief Financial Officer</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,347,826</TD><TD STYLE="font-size: 10pt; text-align: left"> (3)&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">21.2</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Vernon Hughes, Director of Field Operations, Textron Southwest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,000,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7.6</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Jack Nelson, Director</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">--</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">--</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Directors and executive officers as a group</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">28,497,405</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">72.2</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><SUP>&nbsp;</SUP></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>The address of each beneficial owner is care of the Company at 4011 W. Plano Parkway, Suite 126, Plano, Texas 75093.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Includes shares held by Long Branch Petroleum, L.P., of which Mr. Griffin is the President</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Includes shares held by BHDH Family, L.P., of which Mr. Hall&rsquo;s spouse is the general partner and the primary limited
partner</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(4)</TD><TD>Based upon 39,478,261 outstanding shares of common stock</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 28 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following individuals serve as our directors
and executive officers and significant employees. All directors of our company hold office until the next annual meeting of our
shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by
our board of directors and hold office until their death, resignation, or removal from office. There are no family relationships
between any of our directors or executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 17%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline">Name</TD>
    <TD STYLE="width: 10%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline">Age</TD>
    <TD STYLE="width: 73%; padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-decoration: underline">Positions</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Tom Griffin</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">67</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Chairman of the Board, President, Secretary, Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Bruce A. Hall</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">55</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Chief Executive officer, Chief Financial Officer, Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Jack Nelson</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">65</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Director</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><B>Tom Griffin, Director,
Chairman of the Board, President, Secretary and Director</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="text-underline-style: none">Mr.
Griffin has over 16 years of experience in the exploration and production of oil and natural gas. Since 1997, he has been the
chief executive of Santa Fe Petroleum, LLC, an oil and gas exploration and production company and our predecessor, where he
managed drilling of 25 wells and provided substantial investment returns to investors. Mr. Griffin was selected to serve as a
director of the Company due to his extensive experience and expertise in managing companies involved in the field of oil and
gas exploration.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><B>Bruce A. Hall, Chief
Executive Officer, Chief Financial Officer, and Director</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="text-underline-style: none">Mr.
Hall is a senior financial executive with experience in the energy, real estate, private equity, construction, and manufacturing
industries. From May 2003 to present, Mr. Hall has been the principal of his own CFO consulting and advisory firm assisting both
large and small public and private companies with complete services, including, all areas of accounting and financial operations,
interim CFO and COO, mergers and acquisitions, recapitalizations, crisis management, cash flow management, banking and capital,
taxation and regulatory (including extensive SEC reporting), and compliance.<B> </B>Since July 2008, Mr. Hall has been the chief
financial officer and a director of Triland International, Inc., a privately held Canadian real estate group conducting residential
and commercial real estate development and construction. Since July 2008, Mr. Hall has also been the chief financial officer and
a director of Chipman Development Corporation and Canadian Cottage Corporation, both affiliates of Triland. Since March 2006, Mr.
Hall has been the chief financial officer and a director of Nortia Capital Partners, Inc., a publicly traded merchant banking firm.
From March 2006 to April 2009, Mr. Hall was the chief financial officer and a director of Knight Energy Corp., a publicly traded
oil and gas exploration and production company. From May 2004 to July 2007, Mr. Hall was the chief financial officer of RG America,
a publicly traded company in the insurance restoration business. Mr. Hall began his career in public accounting with Ernst &amp;
Young LLP, and is a licensed Certified Public Accountant in the State of Texas, a licensed Certified Management Accountant. He
graduated from the University of Texas at Austin in B.S. in Accounting and a minor in Finance. Mr. Hall was selected to serve as
a Director of the Company due to his extensive experience as a CFO of several publicly traded companies. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 29 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><B>Jack Nelson, Director</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Nelson has extensive
experience in many facets of the construction, aviation, and oil and gas industries. His depth of knowledge extends through sales,
marketing, management and consulting. Mr. Nelson has worked with international land and commercial development companies as well
as international aviation companies. He is currently President of a multifaceted management and consulting firm. Mr. Nelson is
a military veteran having served as an officer flying helicopters in the Army. He is a multi-rated pilot. In his spare time, he
raises Quarter and Paint horses. Mr. Nelson was selected to serve as a Director of the Company due to his extensive experience
in several industries and specifically, for the oil and gas industry.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><FONT STYLE="text-transform: uppercase"><B>Indemnification
of Directors and Officers</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our bylaws in Article XII provide that to
the fullest extent permitted by Delaware law, the Company shall indemnify our directors and officers against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with any threatened,
pending or completed action, suit, or proceeding in which such person was or is a party or is threatened to be made a party by
reason of the fact that such person is or was a director or officer of the corporation. The indemnification provisions in our bylaws
may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may
also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action,
if successful, might otherwise benefit us and our stockholders.&nbsp; In addition, your investment in the Company may be adversely
affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification
provisions. We believe that the indemnification provisions in our bylaws are necessary to attract and retain qualified persons
as directors and officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 30 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No executive officer of the Company received
salary and bonus in excess of $100,000 or other compensation from the Company during 2011. No director of the Company received
compensation in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Hall acquired all shares of SFO that
were exchanged for the shares of the Company beneficially owned by him from a limited partnership controlled by Mr. Griffin in
exchange for promissory notes totaling $83,478.26. If Mr. Hall fails to pay the promissory notes, the shares will revert to the
limited partnership. In addition, if Mr. Hall resigns as an officer of the Company or is terminated for cause, the limited partnership
will have the right to acquire 4,000,000 of such shares if the resignation or termination occurs before May 10, 2013; 2,666,666
of such shares if the resignation or termination occurs after May 10, 2013 and before May 102, 2014; and 1,333,334 of such shares
if the resignation or termination occurs after May 10, 2014 and before May 10, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;<B>CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following is a description
of certain relationships and related transactions between us and our directors, executive officers, and 5% stockholders. In the
future, we plan to present all such possible transactions to our board of directors for consideration and approval. Any such transaction
will require approval by a majority of the disinterested directors, and such transactions will be on terms no less favorable than
those available to disinterested third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Capitalization of SFO</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 11, 2011, SFO
acquired 100% of the member units of Santa Fe Land, LLC (&ldquo;LAND&rdquo;), which held the oil and gas lease and test well now
owned by us, in exchange for 33,478,261 shares of common stock and 1,999,150 warrants to LAND member unit holders in exchange for
their LAND member units. All the LAND 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Share Exchange</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the Share
Exchange described previously, Mr. Griffin exchanged 18,157,329 shares of SFO for 18,157,329 shares of our common stock and Mr.
Hall 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: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 31 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Land Banks</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Santa Fe Land, LLC (&ldquo;SFL&rdquo;),
a wholly owned subsidiary of SFO, has entered into Lease Acquisition Agreements (the &ldquo;Lease Acquisition Agreement with Langtre
LLC and Woodlake, LLC (the &ldquo;Land Banks&rdquo;), both wholly owned by Long Branch Petroleum, LP (&ldquo;LB&rdquo;) and Santa
Fe Petroleum, LLC (&ldquo;SFP&rdquo;), its managing member. The President of both LB and SFP is Tom Griffin, the Company&rsquo;s
President and Chairman of the Board. 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 less of our available funds. As of May 1, 2012, the Land Banks
had acquired leases on approximately 1,338 acres and top leases on an additional 1,045 acres. Under the Lease Acquisition Agreement,
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 20-24 months from the closing of the Share Exchange, subject to change by mutual consent.
The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through
the sale of its SFO common stock and utilized for the support of the Land Banks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Land Bank Participation investors with the
Land Banks subsequent to the closing of the Share Exchange will receive proceeds from the sale of leased by the Land Banks to SFL
based on their Participation Agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Independence </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Currently we are not subject to a requirement
of any securities exchange or inter-dealer quotation system that any of our directors be independent. Mr. Nelson, however, would
qualify as an &ldquo;independent director&rdquo; under the NASDAQ Stock Market&rsquo;s Rule 5605(a)(2).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RECENT SALES OF UNREGISTERED SECURITIES
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For a complete discussion of the recent
sales of unregistered securities of the Company, please see Items 1.01 and 3.01 of this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF SECURITIES </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following description of our capital
stock is a summary and is qualified in its entirety by the provisions of our Articles of Incorporation, with amendments, all of
which have been filed as exhibits to our registration statement of which this prospectus is a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Stock </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are authorized to issue 200,000,000 shares
of our Common Stock, $0.0001 par value, of which, as of May 10, 2012, 39,478,261 shares are issued and outstanding. Holders of
shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Under Delaware
Law, a corporation&rsquo;s stockholders may appoint Directors by cumulative voting as set forth in its certificate of incorporation,
however, our certificate of incorporation does not include such a right and therefore our holders of common stock do not have cumulative
voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time
by the Board of Directors in its discretion from funds legally available therefore. In the event of our liquidation, dissolution,
or winding up, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities.
Pursuant to Article X, Section 6 of our by-laws we have the ability to hold our shareholders liable for calls on partly paid shares
in accordance with Delaware General Corporations Law &sect;156 and to redeem shares called by us in accordance with Delaware General
Corporations Law &sect;160. Holders of common stock have no preemptive rights to purchase our common stock. There are no conversion
or redemption rights or sinking fund provisions with respect to the common stock. Delaware General Corporations Law &sect;156 states
that the corporation MAY (emphasis added) issue shares as partially paid and subject to a call on the remaining amount due for
the purchase of the issued shares. At the present time, the Corporation has not intent to issue shares for partial payment&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 32 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The restrictions on the ability of shareholders
to call meetings in Article III, the authority of your board of directors to set the size of your board and appoint directors in
Article V, and limitations on the ability to remove directors in Article V of Exhibit 3.2 would have an effect of delaying, deferring,
or preventing a change in control.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Article III, Section 2, states, &ldquo;Special
meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation,
may be called by the chairman or the president or vice president (if any) or secretary at the request in writing of the majority
of the members of the Board of Directors or holders of a majority of the total voting power of all outstanding shares of stock
of this corporation then entitled to vote, and may not be called by the stockholders absent such request. Any such request shall
state the purpose or purposes of the proposed meeting.&rdquo; Accordingly, it would take shareholders owning a majority of the
shares to call such a meeting. In the event that management owns a majority of the shares entitled to vote, the minority shareholders
would have no authority to call a special meeting in the event they wished to attempt to remove the management of the Company Article
V, Section 1 states, &ldquo;The first Board of Directors and all subsequent Boards of the Corporation shall consist of at least
one person, unless and until otherwise determined by vote of a majority of the entire Board of Directors. Directors shall be at
least eighteen years of age and need not be residents of the State of Delaware nor shareholders of the corporation. The directors,
other than the first Board of Directors, shall be elected at the annual meeting of the shareholders, except as hereinafter provided,
and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected
and qualified. The first Board of Directors shall hold office until the first annual meeting of shareholders.&rdquo; The effect
of this provision precludes the minority shareholders from being able to affect the number of directors of the Company because
the current members of the Board of Directors have the sole authority to determine the number of directors. Since the minority
shareholders cannot elect any directors, where the absence of cumulative voting is in existence, as currently exists, the minority
shareholders can never elect a director of their choosing. This effectively precludes any takeover attempt without the approval
of the directors then sitting on the Board</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 33 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have not authorized the issuance of shares
of preferred stock. In order to authorize the issuance of shares of preferred stock, our stockholders and Directors will be required
to amend our Certificate of Incorporation to designate and fix the relative rights, preferences and limitations of the preferred
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Anti-Takeover Effects Of Provisions of the Articles of Incorporation
Authorized and Unissued Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The authorized but unissued shares of our
common stock are available for future issuance without our stockholders&rsquo; approval. These additional shares may be utilized
for a variety of corporate purposes including but not limited to future public or direct offerings to raise additional capital,
corporate acquisitions and employee incentive plans. The issuance of such shares may also be used to deter a potential takeover
of the Company that may otherwise be beneficial to stockholders by diluting the shares held by a potential suitor or issuing shares
to a stockholder that will vote in accordance with the Company&rsquo;s Board of Directors&rsquo; desires. A takeover may be beneficial
to stockholders because, among other reasons, a potential suitor may offer stockholders a premium for their shares of stock compared
to the then-existing market price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The existence of authorized but unissued
and unreserved shares of preferred stock may enable the Board of Directors to issue shares to persons friendly to current management
which would render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender
offer, merger or otherwise, and thereby protect the continuity of our management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT&rsquo;S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At May 10, 2012, there were 39,478,261 shares
of our common stock outstanding held by approximately 86 holders of record. In addition, we have issued warrants to acquire 6,764,856
shares of our common stock at $0.50 per share exercisable for 3 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company&rsquo;s Common Stock is currently
not yet trading on the public markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Dividend Policy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently intend to retain all earnings,
if any, to implement our business plan; accordingly, we do not anticipate that we will pay any dividends on any of our capital
stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any,
capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our board
of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Page; Sequence: 34 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We know of no material, active or pending
legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no
proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder is an adverse party
or has a material interest adverse to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>Financial
Statements and Supplementary Data.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not Applicable to Smaller reporting
Companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>Financial
Statements and Exhibits.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;(a)&nbsp;Financial
Statements of business acquired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;The required financial statements
of Santa Fe Operating, Inc. and Subsidiary for the periods specified in Rule 3-05(b) of Regulation&nbsp;S-X are included herein.
This Current Report includes the audited financial statements for the period from May 11, 2011 (Commencement of Operations) to
December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 35 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="margin: 0; font-size: 12pt; font-weight: bold">SANTA FE OPERATING, INC. AND SUBSIDIARY</P>

<P STYLE="margin: 0; font-weight: bold">(A Development Stage Company)</P>

<P STYLE="margin: 0; font-weight: bold">Contents</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 3pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="margin: 0; font-weight: bold"></P>

<P STYLE="margin: 0; text-align: right"></P>

<P STYLE="margin: 0; text-align: right">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>



<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; width: 21%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; width: 45%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; width: 3%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; width: 12%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; width: 2%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; width: 2%">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right; width: 15%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Report of Independent Registered Public Accounting Firm</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">37</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold">Financial Statements</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Consolidated Balance Sheet</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">38</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Consolidated Statement of Operations</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">39</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Consolidated Statement of Stockholders' Equity</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">40</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Consolidated Statement of Cash Flows</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">41</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-right: 5.4pt; padding-left: 5.4pt">Notes to Consolidated Financial Statements</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: right">42-53</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&#9;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 36 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the Board of Directors and Stockholders of Santa Fe Operating,
Inc.:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying consolidated
balance sheet of Santa Fe Operating, Inc. and Subsidiary (A Development Stage Company) (collectively the &ldquo;Company&rdquo;)
as of December 31, 2011 and the related consolidated statements of operations, stockholders' equity, and cash flows for the period
from May 11, 2011 (commencement of operations) through December 31, 2011. These consolidated financial statements are the responsibility
of the Company&rsquo;s management. Our responsibility is to express an opinion on these consolidated financial statements based
on our audit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States).&nbsp; Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.&nbsp;
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&rsquo;s
internal control over financial reporting. Accordingly, we express no such opinion.&nbsp; An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation.&nbsp; We
believe that our audit provides a reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2011 and the results of their operations and their cash flows for the period from May 11, 2011 (commencement of operations) through
December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has
an accumulated deficit, a working capital deficit and a net loss from operations, which raise substantial doubt about its ability
to continue as a going concern. Management&rsquo;s plans in regard to these matters are also described in Note 2. The accompanying
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">/s/ Rothstein Kass</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dallas, Texas</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">April 9, 2012&#9;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 37 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0; font-size: 12pt; font-weight: bold">SANTA FE OPERATING, INC. AND SUBSIDIARY&nbsp; &nbsp; &nbsp; &nbsp;</P>

<P STYLE="margin: 0; font-weight: bold">(A Development Stage Company) &nbsp; &nbsp; &nbsp;</P>

<P STYLE="margin: 0; font-weight: bold">CONSOLIDATED BALANCE SHEET &nbsp; &nbsp; &nbsp;</P>

<P STYLE="margin: 0; font-weight: bold">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 3pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="margin: 0; font-weight: bold"></P>

<P STYLE="margin: 0; font-weight: bold"></P>

<P STYLE="margin: 0; font-weight: bold">December 31, 2011 &nbsp; &nbsp; &nbsp; &nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="margin: 0; font-weight: bold"></P>

<P STYLE="margin: 0; text-align: right">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>

<P STYLE="margin: 0; text-align: right"></P>

<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 5.4pt">ASSETS</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 84%; font-size: 10pt; text-align: left; padding-left: 5.4pt">Unevaluated oil and natural gas property, successful efforts method</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">494,132</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Deferred offering costs</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">23,784</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt; padding-bottom: 2.5pt">Total assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">517,916</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: left; padding-left: 5.4pt">&nbsp;<BR>LIABILITIES AND STOCKHOLDERS' EQUITY</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt">Current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Accounts payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">203,338</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Accounts payable, related parties</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">87,321</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Accrued compensation</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">127,350</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Total current liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">418,009</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Commitments and contingencies</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt">Stockholders' equity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">Preferred stock, $0.0001 par value, 5,000,000 shares authorized,</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;&nbsp;zero issued and outstanding</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">Common stock, $0.0001 par value, 50,000,000 shares authorized</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;&nbsp;33,478,261 shares issued and outstanding</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,348</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Additional paid in capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">638,149</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Deficit accumulated during the development stage</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(541,590</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Total stockholders' equity</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">99,907</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt; padding-bottom: 2.5pt">Total liabilities and stockholders' equity</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">517,916</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 38 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&#9;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></P>

<P STYLE="margin: 0; font-size: 12pt; font-weight: bold">SANTA FE OPERATING, INC. AND SUBSIDIARY</P>

<P STYLE="margin: 0; font-weight: bold">(A Development Stage Company) </P>

<P STYLE="margin: 0; font-weight: bold">CONSOLIDATED BALANCE SHEET</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 3pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="margin: 0; text-align: right"></P>

<P STYLE="margin: 0; font-weight: bold">Period from May 11, 2011 (commencement of operations) through December 31, 2011</P>

<P STYLE="margin: 0; text-align: right"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="margin: 0; text-align: right"></P>

<P STYLE="margin: 0; text-align: right"></P>



<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 5.4pt">Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 84%; font-size: 10pt; padding-left: 5.4pt">Compensation</TD><TD STYLE="width: 2%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">303,581</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">Professional</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">115,650</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">Consulting</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">96,200</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">Rent</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,649</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 5.4pt">Other</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,510</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Total expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">541,590</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt; padding-bottom: 2.5pt">Net loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(541,590</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt; padding-bottom: 2.5pt">Basic and diluted loss per share</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">(0.02</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 5.4pt; padding-bottom: 2.5pt">Basic and diluted weighted average shares outstanding</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">33,478,261</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 39 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0; font-size: 12pt; font-weight: bold">SANTA FE OPERATING, INC. AND SUBSIDIARY&nbsp;</P>

<P STYLE="margin: 0; font-weight: bold">(A Development Stage Company)</P>

<P STYLE="margin: 0; font-weight: bold">CONSOLIDATED STATEMENT OF STOCKHOLDERS&rsquo; EQUITY</P>

<P STYLE="margin: 0; font-weight: bold">&nbsp;</P>

<P STYLE="margin: 0; text-align: right"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 3pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="margin: 0; text-align: right"></P>

<P STYLE="margin: 0; font-weight: bold">Period from May 11, 2011 (commencement of operations) to December 31, 2011</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="margin: 0; font-weight: bold"></P>

<P STYLE="margin: 0; text-align: right; font-weight: bold"></P>



<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Deficit</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Accumulated</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Additional</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">During the</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Total</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Common Stock</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">Paid - In</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Preferred Stock</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">Development</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; padding-bottom: 1pt">Stockholders'</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Stage</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Equity</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 23%; font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in">May 11, 2011 - Common stock and 1,999,150 warrants issued to unit holders of Santa Fe Land, LLC</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">33,478,261</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">3,348</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">490,784</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right"></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right"></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right"></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">494,132</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in">May 11, 2011 - Stock based compensation provided by Principal Stockholder</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">123,581</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">123,581</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -0.12in; padding-left: 0.12in">May 17, 2011 - Common stock and 1,573,956 warrants issued for capital placement fees provided by Principal Stockholder</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,784</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right"></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,784</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Net loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(541,590</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(541,590</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-indent: -0.12in; padding-left: 0.12in">Balances at December 31, 2011</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">33,478,261</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,348</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">638,149</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(541,590</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">99,907</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="margin: 0"></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<!-- Field: Page; Sequence: 40 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="margin: 0"></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0; font-weight: bold">SANTA FE OPERATING, INC. AND SUBSIDIARY</P>

<P STYLE="margin: 0; font-weight: bold">(A Development Stage Company)</P>

<P STYLE="margin: 0; font-weight: bold">CONSOLIDATED
STATEMENT OF CASH FLOWS&nbsp;</P>

<P STYLE="margin: 0; font-weight: bold">&nbsp;</P>

<P STYLE="margin: 0; text-align: right"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 3pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="margin: 0; text-align: right"></P>

<P STYLE="margin: 0; font-weight: bold">Period from May 11, 2011 (commencement of operations) to December 31, 2011</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="margin: 0; font-weight: bold"></P>

<P STYLE="margin: 0; text-align: right"></P>

<P STYLE="margin: 0; text-align: right">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt">Cash flows from operating activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 85%; font-size: 10pt; text-align: left; padding-left: 5.4pt">Net loss</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">(541,590</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;Stock based compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">123,581</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;Increase in cash attributable to changes in operating assets and liabilities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">203,338</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable, related parties</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">87,321</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued compensation</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">127,350</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Net cash used in operating activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt">Net increase (decrease) in cash</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 5.4pt"><B>Cash</B>, beginning of period</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt; padding-bottom: 2.5pt"><B>Cash</B>, end of period</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt">Supplemental disclosure of non-cash investing activity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Unevaluated oil and natural gas property acquired through the Santa Fe Land, LLC acquisition</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">494,132</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: right; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt">Supplemental disclosure of non-cash financing activity</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 5.4pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Common stock and warrants issued to capital placement group as deferred offering costs</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">23,784</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 41 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">1.</TD><TD>Nature of Operations</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Santa Fe Operating, Inc. and Subsidiary
(collectively the &ldquo;Company&rdquo;, &ldquo;We&rdquo;, or &ldquo;Our&rdquo;) are privately owned companies which are engaged
in the acquisition, exploration, development, and producing and marketing of oil and natural gas.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company was incorporated on May 11,
2011 (commencement of operations) under the laws of the State of Delaware and is classified as a development stage company in accordance
with Accounting Standard Codification (&ldquo;ASC&rdquo;) 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&rsquo;s contemplated equity financing
plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">2.</TD><TD>Going Concern and Liquidity</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As reflected in the accompanying consolidated
financial statements, the Company had a net loss of $541,590 for the period from May 11, 2011 (commencement of operations) through
December 31, 2011. Additionally, at December 31, 2011, the Company had no cash, a working capital deficit of $418,009 and an accumulated
deficit of $541,590, which could have a material impact on the Company&rsquo;s financial condition and operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">Our substantial obligations pose
risks to our business and stockholders by:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">making it more difficult for us to satisfy
our obligations;</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">impeding us from obtaining additional financing
in the future for working capital, capital expenditures and general corporate purposes; and</FONT></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif">making us more vulnerable to a downturn in
our business and limit our flexibility to plan for, or react to, changes in our business.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The time required for us to become profitable
is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from
operations to meet our planned capital expenditures and working capital requirements. Our ability to obtain additional financing
from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects
for our business. The necessary additional financing may not be available to us or may be available only on terms that would result
in further dilution to the current owners of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management believes that the contemplated
equity financing, which will require the Company to become publicly traded, will provide several options in obtaining financing
from third parties in order to carry out the business plan of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying consolidated financial
statements do not include any adjustments to reflect the possible effects on recoverability and classification of assets or the
amount and classification of liabilities which may result from the inability of the Company to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 42 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>3.</B></TD><TD STYLE="text-align: justify"><B>Summary of Significant Accounting Policies</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: normal italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Basis of Presentation</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in the United States of America (&ldquo;GAAP&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These consolidated financial statements were approved by management
and available for issuance on April 9, 2012. Subsequent events have been evaluated through this date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><FONT STYLE="font-weight: normal"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><FONT STYLE="font-weight: normal"><I>Principles
of Consolidation </I></FONT></P>

<P STYLE="font: normal italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-style: normal">&nbsp;</FONT><FONT></P>

<P STYLE="font: normal italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-style: normal">The
accompanying consolidated financial statements include the general accounts of Santa Fe Operating, Inc. and its wholly-owned subsidiary
as of December 31, 2010. All significant intercompany transactions, accounts and balances have been eliminated in consolidation.</FONT><FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 21.75pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Oil and Gas Properties</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">of the cost of the well. Capitalized costs
of producing oil and natural gas interests are depleted on a unit-of-production basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Impairment of Long-Lived Assets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 43 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->43<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>3. Summary of Significant Accounting Policies (Continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Deferred Offering Costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company complies with the requirements
of the Securities and Exchange Commission (&ldquo;SEC&rdquo;) Staff Accounting Bulletin (&ldquo;SAB&rdquo;) Topic 5A, <I>Expenses
of Offering</I>. Deferred offering costs consist principally of the fair value of stock grants and warrants issued to placement
agents incurred through December 31, 2011 that are related to the Company&rsquo;s contemplated equity financing and will be charged
to stockholders&rsquo; equity upon the receipt of the contemplated equity financing proceeds or charged to expense if the contemplated
equity financing is not completed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Income Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 &ldquo;more-likely-than-not&rdquo; 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 December 31, 2011, no adjustments
were recognized for uncertain tax benefits. The Company&rsquo;s initial tax year for 2011 is still subject to audit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 December 31, 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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&rsquo;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&rsquo;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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The number of years with open tax audits
varies depending on the tax jurisdiction. The Company&rsquo;s major taxing jurisdictions include the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Stock-Based Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company adopted ASC 718, <I>Compensation
&ndash; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B>&nbsp;</P>

<!-- Field: Page; Sequence: 44 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>3. Summary of Significant Accounting
Policies (Continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Net Income (loss) per Common Share</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 (&ldquo;EPS&rdquo;) 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. At December 31, 2011, there were warrants to purchase 3,573,106 shares of the Company&rsquo;s
common stock which may dilute future earnings per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Legal Costs and Contingencies</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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: 0pt 0; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Use of Estimates</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;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 proved 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&rsquo;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: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 45 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->45<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>3. Summary of Significant Accounting Policies (Continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Recent Accounting Pronouncements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In January 2010, the Financial Accounting
Standards Board issued Accounting Standards Update (&ldquo;ASU&rdquo;) No. 2010&ndash;03, <I>Extractive Activities &ndash; Oil
and Gas (Topic 932)</I>, to align the oil and natural gas reserve estimation and disclosure requirements of Topic 932 with the
Securities and Exchange Commission&rsquo;s final rule, <I>Modernization of Oil and Gas Reporting</I>. The Company adopted ASU No.
2010-03 on May 11, 2011 (commencement of operations). There was no immediate impact of this adoption given the Company had no production
and its oil and natural gas reserves are considered probable as of December 31, 2011. Management expects ASU No. 2010-03 to affect
the Company once the Company has the financial wherewithal to carry out its drilling plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2011, the FASB issued ASU No.
2011&ndash;11, <I>Disclosures about Offsetting Assets and Liabilities</I>. This ASU affect all entities that have financial instruments
and derivative instruments that are either offset or subject to an enforceable master netting arrangement or similar agreement.
ASU 2011&ndash;11 requires an entity to disclose information about offsetting and related arrangements to enable user of its financial
statements to understand the effect of those arrangements on its financial position. The provisions of ASU 2011&ndash;11 are applicable
to annual reporting periods beginning on or after January 1, 2011 and interim periods within those annual periods. The Company
has not yet determined the impact of this ASU on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">4.</TD><TD>Acquisition of Oil and Natural Gas Company</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 11, 2011, the Company acquired 100
percent of the member units of Santa Fe Land, LLC (&ldquo;LAND&rdquo;), a Texas limited liability company. The Company issued 33,478,261
shares of common stock and 1,999,150 warrants to LAND member unit holders in exchange for their LAND member units. The LAND member
unit holders were comprised entirely of entities under the control of Tom Griffin, the Company&rsquo;s Chairman of the Board and
a related party (the &ldquo;Principal Stockholder&rdquo;),. The acquisition of LAND 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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company acquired LAND&rsquo;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: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 85%; font-size: 10pt; text-align: justify; padding-left: 5.4pt">Assets acquired, unevaluated oil and natural gas property</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">494,132</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 5.4pt">Liabilities assumed</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify; padding-bottom: 2.5pt; padding-left: 5.4pt">Net assets acquired for 33,478,261 shares of Company common stock and 1,999,150 warrants to purchase Company common stock at $0.50 per share</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">494,132</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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&rsquo;s obligations were deemed to be capital contributions.&nbsp; Accordingly, the assignment of shares has
been recognized in the accompanying consolidated financial statements as stock based compensation and deferred offering costs of
approximately $124,000 and $24,000, respectively.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0in"></P>

<!-- Field: Page; Sequence: 46 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">5.</TD><TD>Unevaluated Oil and Natural Gas Property</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s principal asset consists
of an unevaluated oil and natural gas property in Comanche County, Texas, which approximated $494,000 as of December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The unevaluated oil and natural gas property
was originally drilled in 2009, 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 December 31, 2011. As of December 31,
2011, the primary term of the Company&rsquo;s oil and natural gas lease was through March 2012; however, subsequent to December
31, 2011, the Company extended the primary term through March 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>6.</B></TD><TD STYLE="text-align: justify"><B>Income Taxes</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There was no income tax during the period from May 11, 2011
(commencement of operations) to December 31, 2011 due to the Company&rsquo;s net loss and valuation allowance position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s effective tax expense
differs from the &ldquo;statutory&rdquo; tax expense (benefit) for the period from May 11, 2011 (commencement of operations) to
December 31, 2011 (computed by applying the Federal Corporate tax rate of 35% for 2011 to loss before taxes), as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 85%; font-size: 10pt; text-align: left; padding-left: 5.4pt">Computed &ldquo;expected&rdquo; tax benefit</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">189,557</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Stock based compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(43,253</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(146,303</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">&nbsp;<BR>Net taxable benefit</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The tax effects of temporary differences that gave rise to significant
portions of deferred tax assets and liabilities at December 31, 2011 are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; text-indent: -8.1pt; padding-left: 8.1pt">Deferred tax assets:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 85%; font-size: 10pt; text-align: left; text-indent: -8.1pt; padding-left: 17.1pt">Net operating loss carryforward</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">101,730</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: -8.1pt; padding-left: 17.1pt">Accrued compensation</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">44,573</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: -8.1pt; padding-left: 8.1pt">Total deferred tax assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">146,303</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: -8.1pt; padding-left: 8.1pt">Valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(146,303</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; text-indent: -8.1pt; padding-left: 8.1pt">Net deferred taxes</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">In assessing the recognition
of deferred tax assets, management estimates it is more likely than not that the Company will not be able to recover its deferred
tax asset. As a result, the valuation allowance has been recorded for the entire amount of the net deferred tax asset. As of December
31, 2011, the Company&rsquo;s n<FONT STYLE="color: black">et operating loss carry-forwards approximated $291,000 and expires in
years through 2032. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&nbsp;</B></P>

<!-- Field: Page; Sequence: 47 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->47<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>7.</B></TD><TD STYLE="text-align: justify"><B>Stockholders&rsquo; Equity</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0"><I>Capital Structure</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is authorized to issue up to
5,000,000 shares of preferred stock, at $0.0001 par value per share, of which none were issued and outstanding as of December 31,
2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is authorized to issue up to
50,000,000 shares of common stock, at $0.0001 par value per share, of which 33,478,261 shares were issued and outstanding at December
31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Common Stock</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 LAND 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: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock Warrants </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 LAND.
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
LAND. Therefore, no Black Scholes calculation was made by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 is included in deferred offering
costs in the accompanying consolidated balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">The Company used the following
Black Sholes inputs in determining the fair value of the warrants:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 85%; font-size: 10pt; text-align: left; padding-left: 5.4pt">Stock Price (grant date)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">0.0139</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">Exercise Price</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">0.50</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Expected Term (between vesting period and term of stock options)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.5</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 5.4pt">Volatility</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">153</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Annual Rate of Quarterly Dividends</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.00</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 5.4pt">Risk Free Interest Rate (1 year T-bill rate)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">0.1</TD><TD STYLE="font-size: 10pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify">We have adopted the guidance
of ASC 718-10-S99-1 for purposes of determining the expected term for stock warrants. Due to limited historical data to rely upon,
we use the &quot;simplified&quot; method in developing an estimate of expected term for stock warrants per ASC 718-10-S99-1. Additionally,
the volatility utilized is based on the composite of several comparable guideline companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 48 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->48<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify"><B>7. Stockholders&rsquo; Equity
(Continued)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Stock Warrants (continued) </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify">The following table summarizes
activity related to warrants:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.7pt 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted Average Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify; padding-left: 5.4pt">&nbsp;<BR>Balance at May 11, 2011(commencement of operations)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">-</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">-</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; font-size: 10pt; text-align: justify; padding-left: 5.4pt">&nbsp;&nbsp;Granted</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">3,573,106</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">0.50</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 5.4pt">&nbsp;&nbsp;Exercised</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;&nbsp;Forfeited</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify; padding-bottom: 1pt; padding-left: 5.4pt">&nbsp;<BR>Balance at December 31, 2011</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">3,573,106</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">0.50</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">The terms of warrants to purchase
our common stock are summarized below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD COLSPAN="3" STYLE="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;Warrants Outstanding</TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;Warrants Exercisable</TD>
    <TD STYLE="vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD></TR>
<TR>
    <TD STYLE="width: 13%; vertical-align: bottom; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">Range of Exercise Prices</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 12%; vertical-align: top; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center"><B>Number</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center"><B>Outstanding at</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center"><B>December 31, 2011</B></P></TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 21%; vertical-align: bottom; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">Weighted Average Remaining Contractual Life</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 14%; vertical-align: bottom; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">Weighted Average Exercise Price</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 15%; vertical-align: bottom; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">Number Exercisable at December 31, 2011</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 15%; vertical-align: bottom; border-bottom: Black 1pt solid; padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; font-weight: bold">Weighted Average Exercise Price</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 6pt; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 6pt; text-align: center">$0.50</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; text-underline-style: double">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">3,573,106</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; text-underline-style: double">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">2.37 Years</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; text-underline-style: double">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">$0.50</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt; text-underline-style: double">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">3,573,106</P></TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center; tab-stops: -.5in 499.5pt">&nbsp;</TD>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: center">$0.50</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Stock Grants</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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, 2012. This amount is included in deferred offering costs within the accompanying consolidated balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 49 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->49<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>8.</B></TD><TD STYLE="text-align: justify"><B>Related Party Transactions</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">On
May 11, 2011 (commencement of operations), the Company acquired 100% of the member units of LAND as discussed under Note 4. The
LAND member unit holders were comprised entirely of entities under the control of the Principal Stockholder.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">From
May 11, 2011 (commencement of operations) through December 31, 2011, Santa Fe Petroleum, Inc. (&ldquo;SFP Inc.&rdquo;) expended
$73,385 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying
consolidated balance sheet at December 31, 2011. SFP Inc. is owned entirely by entities under the control of the Principal Stockholder.
The majority of the expenditures were related to compensation and legal expenses for the Company related to the Company preparing
to structure a transaction to become a publicly traded company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">From
May 11, 2011 (commencement of operations) through December 31, 2011, Santa Fe Petroleum, LLC (&ldquo;SFP LLC&rdquo;), expended
$13,936 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying
consolidated balance sheet at December 31, 2011. SFP LLC is owned entirely by entities under the control of the Principal Stockholder.
The majority of the expenditures were related to legal and consulting expenses for the Company related to the Company preparing
to structure a transaction to become a publicly traded company.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">We
currently do not have a lease but we are accruing a pro-rata charge from a company controlled by the Principal Stockholder, which
approximated $24,000 for the period from May 11, 2011 (commencement of operations) through December 31, 2011 and is included in
the accompanying consolidated statement of operations. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.55pt 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">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. (&ldquo;TexTron&rdquo;) 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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>9.</B></TD><TD STYLE="text-align: justify"><B>Commitment and Contingencies</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 50 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->50<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>SANTA FE OPERATING AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>10.</B></TD><TD STYLE="text-align: justify"><B>Subsequent Events</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">On March 20, 2012, the Company
extended its oil and gas mineral lease through March 2014. Also on March 20, 2012, the Company executed a non-binding Memorandum
of Understanding (&ldquo;MOU&rdquo;) with an unrelated third party, related to a proposed transaction with a public company. The
MOU is subject to due diligence by both parties. If an agreement is reached between both parties, definitive documents would be
required to consummate a transaction. The Company can provide no assurance that a transaction will be completed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>11.</B></TD><TD><B>Supplemental Oil and Gas Disclosures (Unaudited) </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Since the Company is in the development stage and its oil and
natural gas property is considered probable, reserve data is not presented</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 51 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->51<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(b)&nbsp;ProForma Financial Information
(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following selected
unaudited pro forma consolidated financial information of Baby All Corp. and SFO is prepared to illustrate the effect of SFO&rsquo;s
reverse acquisition of Baby All Corp., whereby SFO is the acquirer for accounting purposes.&nbsp;&nbsp;The unaudited pro forma
consolidated balance sheet gives effect to the reverse merger as if it occurred on December 31, 2011.&nbsp;&nbsp;The unaudited
pro forma consolidated statement of operations gives effect to the merger as if it occurred at the beginning of the year ended
December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The pro forma information presented may
not be indicative of the financial position or results of operations had the transaction been completed at December 31, 2011 or
at the beginning of the each of the periods presented, nor is it indicative of the future financial position or results of the
combined entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>BABY ALL CORP. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>PRO FORMA CONSOLIDATED BALANCE SHEET</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 3pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">December 31, 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><B>PRO-FORMA</B></TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">BABY</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">SFO</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">ADJUST</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">TOTAL</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold">ASSETS</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 46%; font-size: 10pt; text-align: left; padding-left: 0.12in">Cash and cash equivalents</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 9%; font-size: 10pt; text-align: right">300</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 9%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 9%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="width: 3%; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 9%; font-size: 10pt; text-align: right">300</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Deferred offering costs</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">20,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(20,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">(A)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">Total current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">20,300</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(20,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">300</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.24in">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Other assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in">Unevaluated oil and natural gas property, successful efforts method</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">494,132</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">494,132</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Deferred offering costs</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">23,784</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">23,784</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Total other assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">517,916</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">517,916</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 2.5pt; padding-left: 0.24in">Total assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">20,300</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">517,916</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(20,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">518,216</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">LIABILITIES AND STOCKHOLDERS' EQUITY</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-left: 0in">Current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in">Accounts payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">41,125</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">203,338</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">244,463</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in">Accounts payable, related parties</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">87,321</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">87,321</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0.12in">Loans, related parties</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">22,900</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">22,900</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Accrued compensation</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">127,350</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">127,350</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Total current liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">64,025</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">418,009</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">482,034</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left">Commitments and contingencies</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">Stockholders' equity (deficit)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 0.12in">Common stock, $0.0001 par value, 200,000,000 shares authorized</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">39,478,261 shares issued and outstanding</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">300</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">3,348</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">600</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">(B)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">3,948</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">(300</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">(C)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Additional paid in capital</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">638,149</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">(600</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">(B)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">573,824</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">300</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">(C)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">(44,025</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">(C)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">(20,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">(A)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Deficit accumulated during the development stage</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(44,025</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(541,590</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">44,025</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">(C)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(541,590</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Total stockholders' equity (deficit)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(43,725</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">99,907</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(20,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">36,182</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 1pt; vertical-align: top; padding-left: 0.24in">Total liabilities and stockholders' equity (deficit)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">20,300</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">517,916</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(20,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left; vertical-align: bottom">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">518,216</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<!-- Field: Page; Sequence: 52 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->52<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>BABY ALL CORP. AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(A Development Stage Company)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 3pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Year Ended December 31, 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: right"></TD><TD STYLE="font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: center"><B>PRO FORMA</B>&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center"><B>BABY</B></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center"><B>SFO</B></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center"><B>ADJUST</B></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center"><B>TOTAL</B></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold">Expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 40%; font-size: 10pt; padding-left: 0.12in">Compensation</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">303,581</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 12%; font-size: 10pt; text-align: right">303,581</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">Professional</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">26,970</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">115,650</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">142,620</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">Consulting</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">96,200</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">96,200</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; padding-left: 0.12in">Rent</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,649</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">23,649</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 0.12in">Other</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">6,600</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,510</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">9,110</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 0.24in">Total expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">33,570</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">541,590</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">575,160</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(33,570</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(541,590</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(575,160</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: left; padding-bottom: 2.5pt">Basic and diluted loss per share</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(0.01</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 2.5pt">Basic and diluted weighted average shares outstanding</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">39,478,261</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 53 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->53<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Baby All Corp. and Subsidiaries</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Notes to Unaudited Consolidated Pro Forma
Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTE 1--Basis of Presentation</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unaudited pro forma consolidated financial information of
Baby All Corp. (the &ldquo;Company&rdquo; or &ldquo;Baby All Corp.) and Santa Fe Operating, Inc. (&ldquo;SFO&rdquo;) is prepared
to illustrate the effect of SFO&rsquo;s reverse acquisition of Baby All Corp., whereby SFO is the acquirer for accounting purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unaudited pro forma balance sheet gives effect to the reverse
merger as if it occurred on December 31, 2011. The unaudited pro forma consolidated balance sheet as of December 31, 2011 was based
on the audited balance sheet of the Company and the audited consolidated balance sheet of SFO as of December 31, 2011 combined
with pro forma adjustments to give effect to the reverse merger as if it occurred on December 31, 2011. The unaudited pro forma
consolidated statement of operations gives effect to the merger as if it occurred at the beginning of the year ended December 31,
2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These unaudited consolidated pro forma financial statements
are provided for illustrative purposes and do not purport to represent what the Company's financial position would have been if
such transactions had occurred on the above mentioned date. These statements were prepared based on accounting principles generally
accepted in the United States. The use of estimates is required and actual results could differ from the estimates used. The Company
believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to the acquisition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following pro forma adjustments are incorporated into the
unaudited consolidated pro forma balance sheet as of December 31, 2011 and the unaudited consolidated pro forma statement of operations
for the year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(A) To remove Baby All Corp. deferred offering costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(B) To record Baby All Corp. common shares issued at reverse
merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(C) To eliminate the capital structure of Baby All Corp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 54 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->54<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 70.2pt; text-align: justify; text-indent: -70.2pt"><B>Item
7.01.&#9;Regulation FD</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 11, 2012, the Company issued the press release filed
as <U>Exhibit 99.1</U>, which is incorporated by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 70.2pt; text-align: justify; text-indent: -70.2pt"><B>Item
9.01.&#9;Financial Statements and Exhibits</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.9pt 0pt 70.2pt; text-align: justify; text-indent: -70.2pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(a)&#9;Please see attached financial information<I>.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(b)&#9;Please see attached financial information<I>.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(c)&#9;Please see attached financial information<I>.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(d)&#9;Exhibits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 14%; font-weight: bold">Exhibit</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 82%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold">Number</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold">Description</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; text-align: right">2.1</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Share Exchange Agreement between the Company and Santa Fe Operating, Inc. dated May 8, 2012.</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: right">99.1</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Press Release, dated May 11, 2012</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Page; Sequence: 55 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->55<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXHIBITS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 14%; font-weight: bold">Exhibit</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 82%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold">Number</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold">Description</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top; text-align: right">2.1</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Share Exchange Agreement between the Company and Santa Fe Operating, Inc. dated May 10, 2012.</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: right">99.1</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Press Release, dated May 11, 2012</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">SIGNATURES</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">Baby All Corp.</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Date: May 11, 2012&nbsp;</TD>
    <TD STYLE="width: 4%">By:&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 46%">/s/ &#9;Bruce A. Hall</TD></TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid">&#9;Bruce A. Hall<BR>&#9;Chief Executive Officer</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Page; Sequence: 56; Options: Last -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font-size: 10pt"><TR><TD STYLE="text-align: center; width: 100%"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->56<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</BODY>
</HTML>
[{"type": "8-K", "sequence": "1", "filename": "v312861_8k.htm", "description": "FORM 8-K", "secsgml_size_bytes": 447456}]
{"company-data": {"conformed-name": "BABY ALL CORP.", "cik": "0001508262", "assigned-sic": "3829", "irs-number": "990362658", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "333-173302", "film-number": "12834664"}, "business-address": {"street1": "17 HARAV FRANK STREET", "city": "JERUSALEM", "state": "L3", "zip": "96387", "phone": "97225021322"}, "mail-address": {"street1": "17 HARAV FRANK STREET", "city": "JERUSALEM", "state": "L3", "zip": "96387"}}
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 8 K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event
reported)
:
May 11, 2012
(May 10, 2012)
Baby All Corp
.
(Exact name of registrant as specified in
its charter)
Delaware
333-17302
99-0362658
(State or other jurisdiction
of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
4011 West Plano Parkway
Suite 126
Plano, Texas
75093
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including
area code: (
888) 870-7060
Former address:
c/o Efrat Schwartz
17 HaRav Frank Street
Jerusalem, Israel 96387
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
1
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have included or incorporated by reference in this current
report statements that may constitute "forward-looking statements" within the meaning of the federal securities laws.
All statements other than statements of historical facts contained in this current report, including statements regarding our future
results of operations and financial position, business strategy and plans and objectives of management for future operations, are
forward-looking statements.
The words "believe," "may," "might,"
"will," "should," "estimate," "predict," "continue," "anticipate,"
"intend," "expect, "plan," "project," "potential" and similar expressions
are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations
and projections about future events and trends that we believe may affect our financial condition, results of operations, business
strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors." In light
of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this current report may not occur
and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should read this current report completely and with the
understanding that our actual future results may be materially different from what we expect. Given these uncertainties, you should
not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions
only as of the date of this current report and, except as required by law, we undertake no obligation to update or revise publicly
any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this current
report. All subsequent written and oral forward-looking statements attributable to us or any person on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred to in this section.
We are a smaller reporting company as defined in Regulation
S-K.
Item 1.01 Entry into a Material Definitive Agreement.
Share Exchange
On May 10, 2012, Baby All Corp.
("we," the "Company", the "Registrant" or "Baby All Corp.")
entered into
and consummated a Share Exchange Agreement, attached hereto as Exhibit 2.1 (the "Exchange Agreement") with all the
shareholders of Santa Fe Operating, Inc., a Delaware corporation ("SFO"), which is engaged in exploration and production
of oil and gas. Pursuant to the Exchange Agreement, the shareholders of SFO were issued a share of the Company's common stock,
$0.0001 par value ("Common Stock") in exchange for each of their shares of SFO. As a result, the shareholders of SFO
were issued 33,478,261 shares of Common Stock and SFO became a wholly-owned subsidiary of the Company upon the closing of the Share
Exchange. Additionally, the shareholders of SFO were issued warrants to purchase 6,764,856 shares of Common Stock at $0.50 per
share.
2
As of May 10, 2012, we have 39,478,261 shares
of common stock outstanding and warrants outstanding to purchase 6,764,856 shares of common stock.
Private Placement
Before the Share Exchange, Focus Capital
Group, Inc. ("Focus") and other brokers were assisting SFO in raising up to $5.0 million from accredited investors,
of which none had been raised at the time of the Share Exchange. We anticipate entering into an engagement letter in the near future(the
"Placement Agent Agreement"), with Focus under which Focus will use best efforts to assist us in raising up to $5 million
through the sale of shares of our common stock at $0.50 per share. For its services under the Placement Agent Agreement, we will
pay Focus a fee equal to 10% of the capital raised plus a non-accountable expense allowance of 3% of the capital raised and indemnify
Focus for claims arising out of the engagement that are not due to its gross negligence. In addition, Focus and any other brokers
that assist Focus in the private placement will receive warrants to purchase shares of our common stock equal in aggregate to 10%
of the number of shares sold in the private placement at $0.50 per share.
Land Banks
Santa Fe Land, LLC ("SFL"),
a wholly owned subsidiary of SFO, has entered into Lease Acquisition Agreements (the "Lease Acquisition Agreement with Langtre
LLC and Woodlake, LLC (the "Land Banks"), both wholly owned by Long Branch Petroleum, LP ("LB") and Santa
Fe Petroleum, LLC ("SFP"), its managing member. The President of both LB and SFP is Tom Griffin, the Company's
President and Chairman of the Board. 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 less of our available funds. As of May 1, 2012, the Land Banks
had acquired leases on approximately 1,338 acres and top leases on an additional 1,045 acres. Under the Lease Acquisition Agreement,
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 20-24 months from the closing of the Share Exchange, subject to change by mutual consent.
The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through
the sale of its SFO common stock and utilized for the support of the Land Banks.
Land Bank Participation investors with the
Land Banks subsequent to the closing of the Share Exchange will receive proceeds from the sale of leases by the Land Banks to SFL
based on their Participation Agreements.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On May 10, 2012,
the Company and SFO completed the Share Exchange pursuant to which SFO became a wholly-owned subsidiary of Baby All Corp
.
3
The discussion contained in this Item 2.01
relates primarily to SFO and SFL and to our business plans following the Share Exchange.  Information relating to our business
before the Share Exchange has been previously reported in our annual report on Form 10-K for the year ended December 31, 2011,
as filed with the Securities and Exchange Commission on March 22, 2012.
The Exchange Agreement
provided, among other things, that upon the closing of the Exchange Agreement, the Company's board of directors would appoint
designees of SFO to the board of directors and the existing members of the board of directors would resign as officers and directors
of the Company.
For accounting purposes,
this transaction is being accounted for as a reverse merger, since the stockholders of SFO will own and control approximately 84.8%
of the Company's outstanding Common Stock.  In connection with the reverse merger, the Company will change its name
to Santa Fe Petroleum, Inc.
Item 3.01 Unregistered Sales
of Equity Securities.
In connection
with the Exchange Agreement, the Company issued 33,478,261 shares of restricted Common Stock to SFO.
Item 5.01 Changes in Control
of Registrant.
In connection
with the reverse merger, SFO's shareholders will own 33,478,261 shares or approximately 84.8% of the Company's Common
Stock and the designees of SFO to the Company's board of directors and the resignation of the Company's former directors,
effective May 10, 2012, will result in a change of control of the Registrant. (Please see Item 5.06 below.)
Item 5.02 Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective May 10, 2012,
Efrat Schwartz and Merav Shalom resigned as directors of the Company. Ms. Schwartz and Ms. Shalom had no disagreements with the
Company on any matter related to the Company's operations, policies or practices.
On May 10, 2012, Tom
Griffin, Bruce A. Hall and Jack Nelson were elected to serve as directors of the Company. Mr. Griffin was elected chairman of the
board of directors and was appointed president and secretary of the Company. Mr. Hall was appointed as Chief Executive Officer
and Chief Financial Officer of the Company. For a complete discussion
of the composition of the Board as well as the newly-appointed officers of the Company, please see the section entitled "DIRECTORS
AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS" in the Item 5.06 disclosure of this Current Report on Form 8-K, which
is incorporated herein by reference.
4
Item 5.06 Change in Shell
Company Status.
In connection
with the reverse merger, the Company has ceased to be a non-operating shell company.
5
TABLE OF CONTENTS
Description of Business
7
Risk Factors
12
Management's Discussion and Analysis of Financial Condition and Results of Operations
22
Description of Properties
27
Security Ownership of Certain Beneficial Owners and Management
28
Directors, Executive Officers, Promoters, and Control Persons
29
Indemnification of Directors and Officers
30
Executive Compensation
31
Certain Relationships and Related Transactions, and Director Independence
31
Recent Sales of Unregistered Securities
32
Description of Securities
32
Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters
34
Legal Proceedings
35
Financial Statements and Supplementary Data
35
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
35
Financial Statements and Exhibits
35
6
DESCRIPTION OF BUSINESS
As the result of the Share Exchange described
in Item 1.01, we are 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. Management believes that our future growth will primarily occur through the acquisition of additional oil and gas properties
following extensive due diligence by our company. 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 board of directors. Although the oil and gas industry
is currently very competitive, management believes that many undervalued prospective properties remain available for acquisition
purposes.
Background
In 1997 our chairman of the board, Tom Griffin,
established a business to engage in oil and gas exploration and production. That business drilled 25 vertical and horizontal wells
in East Texas and achieved significant aggregate returns for investors in those projects. In December 2009 that business drilled
a test well on a 76-acre lease in the Bend Arch-Fort Worth Basin in Texas. Interpretation and analysis of the logs and core samples
from the test well indicated the potential for substantial production of oil and gas from the test-well site and surrounding acreage.
In order to exploit this opportunity, Mr. Griffin and the investors in the test well formed SFO, a Texas corporation, in 2010.
SFO's wholly owned subsidiary, SFL, which was incorporated in Texas in 2009, owns the 76-acre oil and gas lease and the test
well. Aside from acquiring the test well and associated leases, SFO and SFL have not conducted any operations and have not begun
oil and gas production from the test well. As a result of the Share Exchange on May 10, 2012, SFO and SFL became our wholly owned
subsidiaries.
Our Business
We are a development stage oil and gas company
led by an experienced management team and focused on production of oil and natural gas. Our business plan is to acquire oil
and gas properties for appraisal and development.   Through the Land Bank arrangement described above in Item
1.01 and similar arrangements, we plan to gain control over substantial oil and gas prospects, which will be acquired from the
Land Bank(s) from time to time as we are prepared to begin our appraisal and drilling operations on specific leases. We plan to
give priority to projects with near-term cash flow potential. We will employ strict selection guidelines for our projects and utilize
premier oilfield services and engineering firms in conducting our operations. Until we form a subsidiary that is qualified to be
the operator under our oil and gas leases, an affiliated company will act as contract operator.
The Test-Well Site
We hold a 100% working interest (75% net
revenue interest) on approximately 76 acres located in the Fort Worth Basin in North Central Texas. Our lease on this tract runs
through March 2014 or as long as there is commercial production. We have not yet started production. Our lease is located in the
Bend Arch-Fort Worth Basin oil and gas producing province designated by the United States Geological Survey. Several prolific-producing
fields have been discovered in this province beginning in the early 1900s. Since the turn of the 21
st
century, the Barnett
Shale in the eastern part of the Fort Worth Basin has become one of the largest natural-gas-producing formations in North America.
The Barnett Shale is a significant source and reservoir shale formation that extends throughout much of the Fort Worth Basin. At
the test-well site, the Barnett Shale begins at a depth of approximately 2,600 feet. Another target oil and gas producing horizon
in the region surrounding the test-well site will be the Marble Falls Formation, a layer of limestone and shaley (tight) limestone
that lies directly above the Barnett Shale.
7
Participation Agreement for Land Acquisition
We have entered into a variety of arrangements with affiliates ("Land Banks") that will raise capital through a private
offering of participation interests, and in turn use its funds to acquire oil and gas leases selected by Santa Fe Land.  Additionally,
at our discretion, we may borrow up to $150,000 of the funds from the Land Bank for testing the Barnett Cody #1 well owned by SFL.
SFL has 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.
As part of the commercial arrangement, we
guarantee all obligations of SFL under the Lease Acquisition Agreement.  The amount of our financial risk related to these
guarantees will depend on the amount and value of the leases that the Land Bank acquires.  Based on current estimates we expect
that we will be guaranteeing the purchase of up to $5,000,000 in leases, or more, which amount is subject to change.  Additionally,
the Land Bank may lend up to $150,000 to SFL to fund the expenses of testing the Barnett Cody #1 well owned by SFL.
Under the Lease Acquisition Agreement, 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% annualized return of the total investment raised by LB through the sale of its SFO 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.  Additionally, if the Land Banks have loaned funds to complete the testing of the Barnett
Cody #1 well owned by SFL, the loan will bear interest at 15% per year and be payable in full not later than 18 months after the
Land Bank was formed.
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 minimum of a 50% annual return
to the Participants on their unpaid contributions over the life of the Land Bank.
8
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 Santa Fe Land does not perform its obligations.
As
of the date of this filing, the Land Banks have leased approximately 1,338 acres in the general vicinity of the Barnett Cody #1
test well.  Additionally, the Land Bank has obtained "top leases" on approximately 1,045 acres of land also in
the general vicinity of the Barnett Cody #1 test well.  A top lease is a lease taken on "top" of another preexisting
lease, with the top lease becoming effective only after the termination of the first lease.  We believe that the acres structured
under top leases will become available to be leased within a three month's timeframe based upon discussions we have had with
the land owners.  The Land Bank intends to continue leasing additional acres in the general area of the Barnett Cody #1 test
well.
Business Strategy
Our immediate strategy is to acquire control
of oil and gas lease on substantial acreage in the southwest part of the Bend Arch-Fort Worth Basin in Texas. We plan to evaluate
these prospects with a focus on drilling for and production of oil from the Barnett Shale and Marble Falls Formations in this prospect
area.
Competition
We compete with other companies for financing
and for the acquisition of new oil and gas properties. Many of the oil and gas exploration companies with which we compete have
greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater
amounts on acquisitions of oil and gas properties of merit, on exploration of their properties, and on development of their properties.
In addition, they may be able to afford more geological and other technical expertise in the targeting and exploration of oil
and gas properties. This competition could result in competitors having properties of greater quality and interest to prospective
investors who may finance additional exploration and development. This competition could have an adverse impact on our ability
to achieve the financing necessary for us to conduct further exploration of our acquired properties.
We will also compete with other junior
oil and gas exploration companies for financing from a limited number of investors that are prepared to make investments in junior
oil and gas exploration companies. The presence of competing junior oil and gas exploration companies may have an adverse impact
on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments
in competitors are more attractive based on the merit of the oil and gas properties under investigation and the price of the investment
offered to investors.
9
We also compete with other junior and senior oil and gas companies for available resources, including, but
not limited to, professional exploration and production, geological and engineering personnel services and supplies, for the drilling
completion and production of hydrocarbon resources.
Intellectual Property
We do not own any copyrights, patents, or
trademarks. We own the Internet domain name
www.sfpetro.com
. Under current domain name registration practices, no one else
can obtain an identical domain name, but someone might obtain a similar name, or the identical name with a different suffix, such
as ".org", or with a country designation. The regulation of domain names in the United States and in foreign countries
is subject to change, and we could be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease
the value of our domain names. During each of the last two fiscal years, we had no expenditures on research and development activities.
Governmental Regulation
Our oil and gas operations are subject to
various federal, state, and local governmental regulations. Matters subject to regulation include discharge permits for drilling
operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, pooling of properties, and taxation.
From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow
of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage,
transportation, and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection
with oil and gas operations are also subject to regulation under federal, state, and local laws and regulations relating primarily
to the protection of human health and the environment. The requirements imposed by such laws and regulations are frequently changed
and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect
on our operations.
Environmental legislation provides for,
among other things, restrictions and prohibitions on spills, releases, or emissions of various substances produced in association
with oil and gas operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned, and
reclaimed to the satisfaction of the applicable regulatory authorities. Compliance with such legislation can require significant
expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation
is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability, and potentially increased
capital expenditures and operating costs. The discharge of oil or gas or other pollutants into the air, soil, or water may give
rise to liabilities to governments and third parties and may require us to incur costs to remedy such discharge. No assurance can
be given that environmental laws will not result in a curtailment of production or a material increase in the costs of production,
development, or exploration activities or otherwise adversely affect our financial condition, results of operations, or prospects.  We
could incur significant liability for damages, clean-up costs, and penalties in the event of discharges into the environment, environmental
damage caused by us or previous owners of our property, or non-compliance with environmental laws or regulations. In addition
to actions brought by governmental agencies, we could face actions brought by private parties or citizens groups.  Any
of the foregoing could have a material adverse effect on our financial results.
10
Failure to comply with environmental laws
could result in fines or penalties being owed to third parties or governmental entities, the payment of which could have a material
adverse effect on our financial condition or results of operations.
Employees
We currently have no employees. Our officers
and other personnel currently provide their services pursuant to consulting agreements. Until the scope of our operations warrants
otherwise, we plan to outsource independent consultant engineers and geologists on a part time basis to conduct
our operations.
Facilities
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. We pay rent of
$1,500 per month under an arrangement with a company controlled by Mr. Griffin, which leases the space from an unaffiliated owner.
We believe that our current office space and facilities will have to be expanded in the near future to meet our growth plans.
Reports to Security Holders
At the current time, we are not required
to send annual reports to security holders; however, we intend to voluntarily send such reports and will include audited financial
information in such reports. We are currently not subject to the reporting requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, however we intend to become subject to those requirements by the end of the calendar year 2012. The public
may read and copy any materials we file with the Commission at the SEC's Public Reference Room at 100 F Street, NE., Washington,
DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of
the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains
reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.
The address of that site is http://www.sec.gov.
Internet Website
Our Internet website is
www.sfpetro.com
,
which is currently under construction.
11
RISK FACTORS
Risks Related to Our Business and the Oil and Gas Industry
Our exploration, appraisal, and development activities
are subject to many risks that may affect our ability to profitably extract oil and gas reserves or achieve targeted returns.  In
addition, continued growth requires that we acquire and successfully develop additional oil reserves.
Oil and gas exploration may involve unprofitable
efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit
after drilling, operating, and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling,
completion, and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations,
and various field operating conditions may adversely affect the production from successful wells. These conditions include delays
in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient
storage or transportation capacity, or other geological and mechanical conditions. While diligent well supervision and effective
maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field
operating conditions cannot be eliminated and can be expected to adversely affect revenue and cash flow levels to varying degrees.
Our
commercial success depends on our ability to find, acquire, develop, and commercially produce oil and natural gas reserves.  Without
the continual addition of new reserves, any existing reserves and production will decline over time as such existing reserves
are depleted. A future increase in our reserves will depend not only on our ability to explore and develop any properties we may
have from time to time, but also on our ability to select and acquire suitable producing properties or prospects.  No
assurance can be given that we will be able to continue to locate satisfactory properties for acquisition or participation.  Moreover,
if such acquisitions or participations are identified, we may determine that current markets, terms of acquisition, and participation
or pricing conditions make such acquisitions or participations economically disadvantageous.  There is no assurance
that commercial quantities of oil or gas will be discovered or acquired by us.
Our oil and gas operations are subject to operating hazards
that may increase our operating costs to prevent such hazards or may materially affect our operating results if any of such hazards
were to occur.
Oil and gas exploration, development, and production
operations are subject to all the risks and hazards typically associated with such operations, including hazards such as fire,
explosion, blowouts, cratering, unplanned gas releases, and spills, each of which could result in substantial damage to oil
wells, production facilities, other property and the environment or in personal injury. Oil and gas production operations are also
subject to all the risks typically associated with such operations, including encountering unexpected formations or pressures,
premature decline of reservoirs, and the invasion of water into hydrocarbon producing formations. Losses resulting from the
occurrence of any of these risks could have a material adverse effect on our results of operations, liquidity, and financial condition.
12
To date, we have not generated revenues from production
of our oil and gas lease interests.  Our oil and gas exploration and development activities will be focused on the exploration
and development of our properties which are high-risk ventures with uncertain prospects for success.  In addition, we
will not have earnings to support our activities should the wells drilled or properties acquired prove not to be commercially viable.  No
assurance can be given that commercial quantities of oil or gas will be successfully produced as a result of our exploration and
development efforts.  Further there is no guarantee that we will generate sufficient revenues from production of our
reserves.
Our exploration and development activities will depend
in part on the evaluation of data obtained through geophysical testing and geological analysis, as well as test drilling activity.  The
results of such studies and tests are subjective, and no assurances can be given that exploration and development activities based
on positive analysis will produce oil or gas in commercial quantities or costs.  As developmental and exploratory activities
are performed, further data required for evaluation of our oil and gas interests will become available.  The exploration
and development activities that will be undertaken by us are subject to greater risks than those associated with the acquisition
and ownership of producing properties.  The drilling of development wells, although generally consisting of drilling
to reservoirs believed to be productive, may result in dry holes or a failure to produce oil or gas in commercial quantities.  Moreover,
any drilling of exploratory wells is subject to significant risk of dry holes.
If we are unable to compete successfully with the large
number of oil and gas producers in our industry, we may not be able to achieve profitable operations.
Oil and gas exploration is intensely competitive in
all its phases and involves a high degree of risk.  We compete with numerous other participants in the search for and
the acquisition of oil and gas properties and in the marketing of oil and gas.  Our competitors include oil and gas companies
that have substantially greater financial resources, staff, and facilities than we do.  Our ability to increase reserves
in the future will depend not only on our ability to explore and develop our existing properties, but also on our ability to select
and acquire suitable producing properties or prospects for exploratory drilling.  Competitive factors in the distribution
and marketing of oil and gas include price and methods and reliability of delivery.  Competition may also be presented
by alternative fuel sources.
We are subject to various regulatory requirements, including
environmental regulations, and may incur substantial costs to comply and remain in compliance with those requirements.
Our operations in the United States are subject to
regulation at the federal, state, and local levels, including regulation relating to matters such as the exploration for and the
development, production, marketing, pricing, transmission and storage of oil and gas, as well as environmental and safety matters.  Failure
to comply with applicable regulations could result in fines or penalties being owed to third parties or governmental entities,
the payment of which could have a material adverse effect on our financial condition or results of operations.  Our operations
are subject to significant laws and regulations, which may adversely affect our ability to conduct business or increase our costs.  Extensive
federal, state, and local laws and regulations relating to health and environmental quality in the United States affect nearly
all of our operations.  These laws and regulations set various standards regulating various aspects of health and environmental
quality, provide for penalties and other liabilities for the violation of these standards, and in some circumstances, establish
obligations to remediate current and former facilities and off-site locations.
13
Environmental legislation provides for, among other
things, restrictions and prohibitions on spills, releases, or emissions of various substances produced in association with oil
and gas operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned, and reclaimed
to the satisfaction of the applicable regulatory authorities. Compliance with such legislation can require significant expenditures
and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving
in a manner expected to result in stricter standards and enforcement, larger fines and liability, and potentially increased capital
expenditures and operating costs. The discharge of oil or gas or other pollutants into the air, soil, or water may give rise to
liabilities to governments and third parties and may require us to incur costs to remedy such discharge. No assurance can be given
that environmental laws will not result in a curtailment of production or a material increase in the costs of production, development,
or exploration activities or otherwise adversely affect our financial condition, results of operations, or prospects.  We
could incur significant liability for damages, clean-up costs, and penalties in the event of discharges into the environment, environmental
damage caused by us or previous owners of our property, or non-compliance with environmental laws or regulations. In addition
to actions brought by governmental agencies, we could face actions brought by private parties or citizens groups.  Any
of the foregoing could have a material adverse effect on our financial results.
Moreover, we cannot predict what legislation or regulations
will be enacted in the future or how existing or future laws or regulations will be administered, enforced, or made more stringent.
Compliance with more stringent laws or regulations, or more vigorous enforcement policies of the regulatory agencies, could require
us to make material expenditures for the installation and operation of systems and equipment for remedial measures, all of which
could have a material adverse effect on our financial condition or results of operations.
Our ability to market and sell oil and gas successfully
is subject to a number of factors that are beyond our control and that may adversely impact our ability to produce and sell oil
and gas or to achieve profitability.
The marketability and price of oil or gas that may
be acquired or discovered by us will be affected by numerous factors beyond our control.  Our ability to market our oil
and gas may depend upon our ability to acquire space on pipelines that deliver oil or gas to commercial markets. We may also be
affected by deliverability uncertainties related to the proximity of our reserves to pipelines and processing facilities, by operational
problems with such pipelines and facilities, and by government regulation relating to price, taxes, royalties, land tenure, allowable
production, export of oil or gas, and by many other aspects of the oil and gas business.
14
Our revenues, profitability, and future growth and
the carrying value of our oil and gas properties are substantially dependent on prevailing prices of oil and gas. Our ability to
borrow and to obtain additional capital on attractive terms is also substantially dependent upon oil and natural gas prices.
Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand
for oil, market uncertainty, and a variety of additional factors beyond our control. These factors include economic conditions
in the United States and Canada, the actions of the Organization of Petroleum Exporting Countries, governmental regulation, political
stability in the Middle East and elsewhere, the foreign supply of oil, the price of foreign imports and the availability of alternative
fuel sources. Any substantial and extended decline in the price of oil or gas would have an adverse effect on the carrying value
of our proved reserves, borrowing capacity, revenues, profitability, and cash flows from operations.
Volatile oil and gas prices make it difficult to estimate
the value of producing properties for acquisition and often cause disruption in the market for oil and gas producing properties,
as buyers and sellers have difficulty agreeing on such value. Price volatility also makes it difficult to budget for and project
the return on acquisitions and development and exploitation projects.
We cannot guarantee that title to our properties does
not contain a defect that may materially affect our interest in those properties.
It is our practice in acquiring significant oil and
gas leases or interests in oil and gas leases to retain lawyers to fully examine the title to the interest under the lease.  In
the case of minor acquisitions, we rely upon the judgment of oil lease brokers or landmen who do the field work in examining records
in the appropriate governmental office before attempting to place under lease a specific interest. We believe that this practice
is widely followed in the oil and gas industry. Nevertheless, there may be title defects that affect some of our properties, which
may adversely affect us.
Our business may be harmed if we are unable to retain
our interests in leases
.
All our properties are held under interests in oil
and gas mineral leases. If we fail to meet the specific requirements of each lease, especially future drilling and production requirements,
the lease may be terminated or otherwise expire. We cannot be assured that we will be able to meet our obligations under each lease.
The termination or expiration of our working interest relating to any lease would harm our business, financial condition, and results
of operations.
Our reserve estimates are subject to numerous uncertainties
and may be inaccurate.
There are numerous uncertainties inherent in estimating
quantities of oil and gas reserves and cash flows to be derived from reserves, including many factors beyond our control. In general,
estimates of economically recoverable oil or gas reserves and the future net cash flows from reserves are based upon a number of
variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery,
timing and amount of capital expenditures, marketability of oil and gas, royalty rates, the assumed effects of regulation by governmental
agencies, and future operating costs, all of which may vary from actual results. All such estimates are to some degree speculative,
and classifications of reserves are only attempts to define the degree of speculation involved. For those reasons, estimates of
the economically recoverable oil or gas reserves attributable to any particular group of properties, classification of such reserves
based on risk of recovery, and estimates of future net revenues expected from reserves prepared by different engineers, or by the
same engineers at different times, may vary. Our actual production, revenues, taxes, and development and operating expenditures
with respect to our reserves will vary from estimates, and such variations could be material.
15
Estimates of proved or unproved reserves that may
be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves
rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual
production history. Subsequent evaluation of the same reserves based upon production history and production practices will result
in variations in the estimated reserves, and such variations could be material.
Our oil and gas property is held in the form of leases.  If
we default on those leases, we may lose our interest in those properties.
Our properties are held in the form of leases
and working interests in leases. If we or the holder of the lease fails to meet the specific requirement of a lease, the lease
may terminate or expire. There can be no assurance that any of the obligations required to maintain each lease will be met, although
we exercise our commercially reasonable efforts to do so. The termination or expiration of our leases or the working interests
relating to a lease may have a material adverse effect on our results of operations and business.
The loss or unavailability of our key personnel for an
extended period of time could adversely affect our business operations and prospects.
Our success depends in large measure on
certain key personnel, including our chairman of the board and our chief executive officer and chief financial officer. The loss
of the services of such key personnel could have a material adverse effect on us.  We do not currently have any key-person
insurance in effect for these key individuals. In addition, the competition for qualified personnel in the oil and gas industry
is intense, and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the
development and operation of our business.
We depend on the services of third parties for material
aspects of our operations, including drilling operators, and accordingly if we cannot obtain certain third-party services, we may
not be able to operate.
We may rely on third parties to operate
some of the assets in which we possess an interest. Assuming the presence of commercial quantities of oil or gas on our properties,
the success of the oil and gas operations, whether considered on the basis of drilling operations or production operations, will
depend largely on whether the operator of the property properly fulfills our obligations.  As a result, our ability to
exercise influence over the operation of these assets or their associated costs may be limited, adversely affecting our financial
performance.  Our performance will therefore depend upon a number of factors that may be outside of our full control,
including the timing and amount of capital expenditures, the operator's expertise and financial resources, the approval of
other participants, the selection of technology, and risk-management practices.  The failure of third-party operators
and their contractors to perform their services in a proper manner could adversely affect our operations.
16
Risks Related to Our Common Stock
We are subject to the reporting requirements of federal
securities laws, which will be expensive.
We are a public reporting company in the
United States and, accordingly, subject to the information and reporting requirements of the Securities Exchange Act and other
federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and
quarterly reports, proxy statements and other information with the Securities and Exchange Commission ("SEC") and furnishing
audited reports to stockholders will cause our expenses to be higher than they would be if we remained a privately held company.
Our compliance with the Sarbanes-Oxley Act and SEC rules
concerning internal controls will be time consuming, difficult and costly.
It will be time consuming, difficult and costly for
us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley. We will need to hire additional
financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls
and reporting procedures. If we are unable to comply with Sarbanes-Oxley's internal controls requirements, we may not be
able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires publicly traded companies to obtain.
We may not be able to achieve the benefits we expect to
result from the Share Exchange.
On May 10, 2012, we completed the Share
Exchange.  We may not realize the benefits that we hope to receive as a result of the Share Exchange, which include:
·
access to the capital markets of the United States;
·
increased market liquidity expected to result from the Share Exchange;
·
ability to use registered securities to make acquisition of assets or businesses;
·
increased visibility in the financial community;
·
enhanced access to the capital markets;
·
improved transparency of operations; and
·
perceived credibility and enhanced corporate image of being a publicly traded company.
17
There can be no assurance that any of the anticipated benefits
of the Share Exchange will be realized in respect to our business operations. In addition, the attention and effort devoted to
achieving the benefits of the Share Exchange and attending to the obligations of being a public company, such as reporting requirements
and securities regulations, could significantly divert management's attention from other important issues, which could materially
and adversely affect our operating results or stock price in the future.
We will operate as a public company subject to evolving
corporate governance and public disclosure regulations that may result in additional expenses and continuing uncertainty regarding
the application of such regulations.
Changing laws, regulations, and standards
relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related rules and regulations,
are creating uncertainty for public companies. We are evaluating and monitoring developments with respect to new and proposed rules
and cannot predict or estimate the amount of the additional compliance costs we may incur or the timing of such costs. These new
or changed laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity,
and as a result, their application in practice may evolve over time as new guidance is provided by courts and regulatory and governing
bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions
to disclosure and governance practices. Maintaining appropriate standards of corporate governance and public disclosure may result
in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities
to compliance activities. In addition, if we fail to comply with new or changed laws, regulations, and standards, regulatory authorities
may initiate legal proceedings against us and our business and our reputation may be harmed.
We also expect these new rules and regulations may
make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it
may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.
We are currently evaluating and monitoring
developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or
the timing of such costs.
Our shares may have limited liquidity.
A substantial portion of our shares of common
stock will be closely held by certain insider investors. Consequently, the public float for our shares may be highly limited. As
a result, should you wish to sell your shares into the open market you may encounter difficulty selling large blocks of your shares
or obtaining a suitable price at which to sell your shares.
18
Our stock price may be volatile, which may result in losses
to our stockholders.
The stock markets have experienced significant price
and trading volume fluctuations, and the market prices of companies quoted on the Over-The-Counter Bulletin Board, where our shares
of common stock will be quoted, generally have been very volatile and have experienced sharp share-price and trading-volume changes.
The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following
factors, some of which are beyond our control:
·
variations in our operating results;
·
changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
·
changes in operating and stock price performance of other companies in our industry:
·
additions or departures of key personnel; and
·
future sales of our common stock.
Domestic and international stock markets often experience significant
price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance,
may adversely affect the price of our common stock. In particular, following initial public offerings, the market prices for stocks
of companies often reach levels that bear no established relationship to the operating performance of these companies. These market
prices are generally not sustainable and could vary widely. In the past, following periods of volatility in the market price of
a public company's securities, securities class action litigation has often been initiated.
If we fail to maintain the adequacy of our internal controls,
our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act could be impaired,
which could cause our stock price to decrease substantially.
We have been subject to public reporting
requirements only since January 2012 have committed limited personnel and resources to the development of the external reporting
and compliance obligations that required of a public company. We plan to obtain additional financial and accounting resources to
support and enhance our ability to meet the requirements of being a public company. We will need to continue to improve our financial
and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls,
reporting systems, or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply
with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate
financial statements could cause the trading price of our common stock to decrease substantially.
Our common shares have not yet traded and in the future,
may be thinly traded, and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money
or otherwise desire to liquidate such shares.
We cannot predict the extent to which an
active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are
a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment
community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse
and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such
time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity
in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity
that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a
broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels
will be sustained.
19
The market price for our common stock may
be particularly volatile given our status as a relatively small company with a presumably small and thinly traded "float"
and lack of current revenues that could lead to wide fluctuations in our share price. You may be unable to sell your common stock
at or above your purchase price if at all, which may result in substantial losses to you.
The market for our common shares may be
characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more
volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number
of factors. First, as noted above, our common shares may be sporadically and thinly traded. As a consequence of this lack of liquidity,
the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares
in either direction. The price for our shares could, for example, decline precipitously if a large number of our common shares
are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without
adverse impact on its share price. Secondly, an investment in us is a speculative or "risky" investment due to our
lack of revenues or profits to date and uncertainty of future revenues or profits. As a consequence of this enhanced risk, more
risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress,
be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock
of a seasoned issuer.
Stockholders should be aware that, according
to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns
include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through pre-arranged matching of purchases and sales and false and misleading press releases; (3) boiler
room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive
and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse
of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the
penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of practical limitations to prevent the described patterns
from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility
of our share price.
20
We do not anticipate paying any cash dividends.
We currently do not anticipate that we will
pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent
upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will
be within the discretion of our board of directors. We currently intend to retain all earnings, if any, to implement our business
plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.
Our common stock may be subject to penny stock rules,
which may make it more difficult for our stockholders to sell their common stock.
Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules adopted by the SEC.  Penny stocks
generally are equity securities with a price of less than $5.00 per share.  The penny stock rules require a broker-dealer,
prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk
disclosure document that provides information about penny stocks and the risks in the penny stock market.  The broker-dealer
also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the
customer's account.  In addition, the penny stock rules generally require that prior to a transaction in a penny
stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and
receive the purchaser's written agreement to the transaction.  These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.
Volatility in our common stock price may subject us to
securities litigation.
The market for our common stock will be
characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue
to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class
action litigation against a company following periods of volatility in the market price of its securities. We may, in the future,
be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's
attention and resources.
21
We may need additional capital, and the sale of additional
shares or other equity securities could result in additional dilution to our stockholders.
We will require additional cash resources
due to fully execute our business strategy. If our resources are insufficient to satisfy our cash requirements, we will seek to
sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in
additional dilution to our stockholders. The incurrence of indebtedness would result in debt service obligations and could result
in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available
in amounts or on terms acceptable to us, if at all.
We closed the share exchange with no cash proceeds, and
we may not be able to obtain the required capital to fund our continuing operations and our business plan.
We closed the share exchange transaction
with no cash proceeds. Accordingly, we are subject to corporate governance and financial reporting requirements without any cash.
Although we expect that the closing of a proposed offering of our common stock will occur in the near future, there is a risk that
the we will not close the proposed offering would have no way to operate our business.
If we do close the Offering, we expect that
our current capital and our other existing resources will only be sufficient to provide a limited amount of working capital, and
the revenues generated from our properties in Texas alone will not be sufficient to fund both our continuing operations and our
planned growth. We will require additional capital to continue to operate our business beyond the initial phase of our current
properties, and to further expand our exploration and development programs to additional properties. We may be unable to obtain
additional capital required, which may hamper our growth or cause us to incur losses on ongoing projects if we do not have sufficient
resources to manage them
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the financial information included elsewhere in this Form 8-K, including SFO's audited financial statements for the period
from May 11, 2011 (commencement of operations) to December 31, 2011, and related notes.
Forward Looking Statements
This Current Report on Form 8-K contains
"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are based
on current management's expectations. These statements may be identified by their use of words like "plans,"
"expect," "aim," "believe," "projects," "anticipate," "intend,"
"estimate," "will," "should," "could," and other expressions that indicate future
events and trends. All statements that address expectations or projections about the future, including statements about our business
strategy, expenditures, and financial results are forward-looking statements. Our management believes that the expectations reflected
in such forward-looking statements are accurate. However, management cannot assure you that such expectations will occur.
22
Actual results could differ materially from
those in the forward looking statements due to a number of uncertainties including, but not limited to, those discussed in this
section. Factors that could cause future results to differ from these expectations include general economic conditions, further
changes in our business direction or strategy; competitive factors, oil and gas exploration uncertainties, and an inability to
attract, develop, or retain technical, consulting, managerial, agents, or independent contractors. As a result, the identification
and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable
alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and accordingly, no opinion is expressed on the achievability of those forward-looking statements.
No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information
are accurate, and management assumes no obligation to update any such forward-looking statements. You should not unduly rely on
these forward-looking statements, which speak only as of the date of this Current Report. Except as required by law, management
is not obligated to release publicly any revisions to these forward-looking statements to reflect events or circumstances occurring
after the date of this report or to reflect the occurrence of unanticipated events.
Overview
We are a development stage exploration oil
and gas company led by an experienced management team and focused on exploration and production of oil and natural gas. Our business
plan is to acquire oil and gas properties for exploration, appraisal, and development.   We plan
to give priority to projects with near-term cash flow potential. We will employ strict selection guidelines for our projects and
utilize premier oilfield services and engineering firms in conducting our operations.
As a result of the Share Exchange, for accounting
purposes, SFO is deemed to have acquired the Company. Accordingly, the financial statement data presented are those of SFO for
all periods.
Critical Accounting Policies
Our discussion and analysis of our financial
condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity
with accounting principles generally accepted in the United States of America ("GAAP"). 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.
Oil and Gas Properties
The Company uses the successful efforts
method of accounting for oil and natural gas producing activities, as further defined under ASC 932,
Extractive Activities -
Oil and Natural Gas
. 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. 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. 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.
23
Use of Estimates
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 proved 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.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting
Standards Board issued Accounting Standards Update ("ASU") No. 2010–03,
Extractive Activities – Oil
and Gas (Topic 932)
, to align the oil and natural gas reserve estimation and disclosure requirements of Topic 932 with the
Securities and Exchange Commission's final rule,
Modernization of Oil and Gas Reporting
. The Company adopted ASU No.
2010-03 on May 11, 2011 (commencement of operations). There was no immediate impact of this adoption given the Company had no production
and its oil and natural gas reserves are considered probable as of December 31, 2011. Management expects ASU No. 2010-03 to affect
the Company once the Company has the financial wherewithal to carry out its drilling plans.
24
In December 2011, the FASB issued ASU No.
2011–11,
Disclosures about Offsetting Assets and Liabilities
. This ASU affect all entities that have financial instruments
and derivative instruments that are either offset or subject to an enforceable master netting arrangement or similar agreement.
ASU 2011–11 requires an entity to disclose information about offsetting and related arrangements to enable user of its financial
statements to understand the effect of those arrangements on its financial position. The provisions of ASU 2011–11 are applicable
to annual reporting periods beginning on or after January 1, 2011 and interim periods within those annual periods. The Company
has not yet determined the impact of this ASU on our consolidated financial statements.
Going Concern
As reflected in the
accompanying consolidated financial statements, the Company had a net loss of $542,000 for the period from May 11, 2011 (commencement
of operations) through December 31, 2011. Additionally, at December 31, 2011, the Company had no cash, a working capital deficit
of $418,000 and an accumulated deficit of $542,000, which could have a material impact on the Company's financial condition
and operations. Our substantial obligations pose risks to our business and stockholders by:
·
making it more difficult for us to satisfy
our obligations;
·
impeding us from obtaining additional financing
in the future for working capital, capital expenditures and general corporate purposes; and
·
making us more vulnerable to a downturn in our business and limit our flexibility to plan for, or react to, changes in our business.
The time required for us to become profitable
is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from
operations to meet our planned capital expenditures and working capital requirements. Our ability to obtain additional financing
from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects
for our business. The necessary additional financing may not be available to us or may be available only on terms that would result
in further dilution to the current owners of our common stock. The accompanying consolidated financial statements do not include
any adjustments to reflect the possible effects on recoverability and classification of assets or the amount and classification
of liabilities which may result from the inability of the Company to continue as a going concern.
25
Results of Operations
For the period from May 11, 2011 to December
31, 2011, we had no revenue. We had expenses of $542,000 consisting principally of compensation ($304,000) and professional and
consulting fees ($212,000) incurred in connection with our efforts to raise capital and to achieve listing with OTC Markets and
trading as a public company. For this period we had a net loss of $542,000.
Liquidity and Capital Resources
At December 31, 2011, we had no cash and
a working capital deficit of $418,000. At May 10, 2012, we had no cash to meet our outstanding obligations and conducting our oil
and gas exploration and production activities.
A critical component
of our operating plan is the ability to obtain additional capital through additional equity or debt financing. We do not believe
that existing capital and anticipated funds from operations will be sufficient to execute our strategic plan during 2012. We have
engaged an investment bank to raise up to $5 million in a private placement of our common stock. We plan to seek additional capital
in the future to fund growth and expansion through additional equity or debt financing. No assurance can be made that such financing
will be available.
We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions
of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses, and difficulties
frequently encountered by companies in their early stage of development, particularly companies in the oil and gas exploration
industry. To address these risks we must, among other things, implement and successfully execute our business strategy. There
can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse
effect on our business prospects, financial condition, and results of operations.
Off-Balance Sheet Arrangements
We have entered into
a variety of arrangements with affiliates ("Land Banks") that will raise capital through a private offering of participation
interests, and in turn use its funds to acquire oil and gas leases selected by Santa Fe Land.  Additionally, at our discretion,
we may borrow up to $150,000 of the funds from the Land Bank for testing the Barnett Cody #1 well owned by SFL.
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.
As part of the commercial arrangement, we
guarantee all obligations of SFL under the Lease Acquisition Agreement.  The amount of our financial risk related to these
guarantees will depend on the amount and value of the leases that the Land Bank acquires.  Based on current estimates we expect
that we will be guaranteeing the purchase of up to $5,000,000 in leases, or more, which amount is subject to change.  Additionally,
the Land Bank may lend up to $150,000 to SFL to fund the expenses of testing the Barnett Cody #1 well owned by SFL.
26
Under the Lease Acquisition Agreement, 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% annualized return of the total investment raised by LB through the sale of its SFO 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.  Additionally, if the Land Banks have loaned funds to complete the testing of the Barnett
Cody #1 well owned by SFL, the loan will bear interest at 15% per year and be payable in full not later than 18 months after the
Land Bank was formed.
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 minimum of a 50% annual return
to the Participants on their unpaid contributions over the life of the Land Bank.
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 Santa Fe Land does not perform its obligations.
Plan of Operations
During the remainder of 2012, if sufficient
funds are obtained, we plan to re-complete the test well that was originally drilled in December 2009 in the Barnett Shale and
drill four additional wells, one of which will be a gas-injection well, at the test-well site. We plan to acquire oil and gas leases
in the surrounding area and begin drilling additional five-well projects in the Barnett Shale. We also intend to drill horizontal
wells in the Marble Falls Formation on the same acreage. The amount of leased acreage we acquire and the number of five-well projects
in the Barnett Shale and horizontal wells in the Marble Falls Formation will depend to a large extent on whether we are successful
in raising sufficient capital to execute this plan of operation.
DESCRIPTION OF PROPERTIES
The Company's
properties and principal asset consists of an unevaluated oil and natural gas property in the Bend Arch-Fort Worth Basin in Texas.
27
The unevaluated oil
and natural gas property was originally drilled in 2009, as a test well. 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 December 31, 2011. As
of December 31, 2011, the primary term of the Company's oil and natural gas lease was through March 2012; however, subsequent
to December 31, 2011, the Company extended the primary term through March 2014.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information,
as of May 10, 2012 with respect to the beneficial ownership of the Company's outstanding common stock by (i) any holder of
more than five (5%) percent; (ii) each of the directors and executive officers; and (iii) our directors and executive officers
as a group. Except as otherwise indicated, to our knowledge each of the stockholders listed below has sole voting and investment
power over the shares beneficially owned.
Name and Address of
Beneficial
Owner (1)
Number of
    Shares of Common Stock Beneficially Owned (4)
Percent
    of Outstanding Shares
Tom Griffin, Director and Chairman of the Board
17,149,579
(2)
43.4
%
Bruce A. Hall, Director, Chief Executive Officer, and Chief Financial Officer
8,347,826
(3)
21.2
%
Vernon Hughes, Director of Field Operations, Textron Southwest
3,000,000
7.6
%
Jack Nelson, Director
--
--
Directors and executive officers as a group
28,497,405
72.2
%
(1)
The address of each beneficial owner is care of the Company at 4011 W. Plano Parkway, Suite 126, Plano, Texas 75093.
(2)
Includes shares held by Long Branch Petroleum, L.P., of which Mr. Griffin is the President
(3)
Includes shares held by BHDH Family, L.P., of which Mr. Hall's spouse is the general partner and the primary limited
partner
(4)
Based upon 39,478,261 outstanding shares of common stock
28
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS
The following individuals serve as our directors
and executive officers and significant employees. All directors of our company hold office until the next annual meeting of our
shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by
our board of directors and hold office until their death, resignation, or removal from office. There are no family relationships
between any of our directors or executive officers.
Name
Age
Positions
Tom Griffin
67
Chairman of the Board, President, Secretary, Director
Bruce A. Hall
55
Chief Executive officer, Chief Financial Officer, Director
Jack Nelson
65
Director
Tom Griffin, Director,
Chairman of the Board, President, Secretary and Director
Mr.
Griffin has over 16 years of experience in the exploration and production of oil and natural gas. Since 1997, he has been the
chief executive of Santa Fe Petroleum, LLC, an oil and gas exploration and production company and our predecessor, where he
managed drilling of 25 wells and provided substantial investment returns to investors. Mr. Griffin was selected to serve as a
director of the Company due to his extensive experience and expertise in managing companies involved in the field of oil and
gas exploration.
Bruce A. Hall, Chief
Executive Officer, Chief Financial Officer, and Director
Mr.
Hall is a senior financial executive with experience in the energy, real estate, private equity, construction, and manufacturing
industries. From May 2003 to present, Mr. Hall has been the principal of his own CFO consulting and advisory firm assisting both
large and small public and private companies with complete services, including, all areas of accounting and financial operations,
interim CFO and COO, mergers and acquisitions, recapitalizations, crisis management, cash flow management, banking and capital,
taxation and regulatory (including extensive SEC reporting), and compliance.
Since July 2008, Mr. Hall has been the chief
financial officer and a director of Triland International, Inc., a privately held Canadian real estate group conducting residential
and commercial real estate development and construction. Since July 2008, Mr. Hall has also been the chief financial officer and
a director of Chipman Development Corporation and Canadian Cottage Corporation, both affiliates of Triland. Since March 2006, Mr.
Hall has been the chief financial officer and a director of Nortia Capital Partners, Inc., a publicly traded merchant banking firm.
From March 2006 to April 2009, Mr. Hall was the chief financial officer and a director of Knight Energy Corp., a publicly traded
oil and gas exploration and production company. From May 2004 to July 2007, Mr. Hall was the chief financial officer of RG America,
a publicly traded company in the insurance restoration business. Mr. Hall began his career in public accounting with Ernst &
Young LLP, and is a licensed Certified Public Accountant in the State of Texas, a licensed Certified Management Accountant. He
graduated from the University of Texas at Austin in B.S. in Accounting and a minor in Finance. Mr. Hall was selected to serve as
a Director of the Company due to his extensive experience as a CFO of several publicly traded companies.
29
Jack Nelson, Director
Mr. Nelson has extensive
experience in many facets of the construction, aviation, and oil and gas industries. His depth of knowledge extends through sales,
marketing, management and consulting. Mr. Nelson has worked with international land and commercial development companies as well
as international aviation companies. He is currently President of a multifaceted management and consulting firm. Mr. Nelson is
a military veteran having served as an officer flying helicopters in the Army. He is a multi-rated pilot. In his spare time, he
raises Quarter and Paint horses. Mr. Nelson was selected to serve as a Director of the Company due to his extensive experience
in several industries and specifically, for the oil and gas industry.
Indemnification
of Directors and Officers
Our bylaws in Article XII provide that to
the fullest extent permitted by Delaware law, the Company shall indemnify our directors and officers against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with any threatened,
pending or completed action, suit, or proceeding in which such person was or is a party or is threatened to be made a party by
reason of the fact that such person is or was a director or officer of the corporation. The indemnification provisions in our bylaws
may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may
also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action,
if successful, might otherwise benefit us and our stockholders.  In addition, your investment in the Company may be adversely
affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification
provisions. We believe that the indemnification provisions in our bylaws are necessary to attract and retain qualified persons
as directors and officers.
30
EXECUTIVE COMPENSATION
No executive officer of the Company received
salary and bonus in excess of $100,000 or other compensation from the Company during 2011. No director of the Company received
compensation in 2011.
Mr. Hall acquired all shares of SFO that
were exchanged for the shares of the Company beneficially owned by him from a limited partnership controlled by Mr. Griffin in
exchange for promissory notes totaling $83,478.26. If Mr. Hall fails to pay the promissory notes, the shares will revert to the
limited partnership. In addition, if Mr. Hall resigns as an officer of the Company or is terminated for cause, the limited partnership
will have the right to acquire 4,000,000 of such shares if the resignation or termination occurs before May 10, 2013; 2,666,666
of such shares if the resignation or termination occurs after May 10, 2013 and before May 102, 2014; and 1,333,334 of such shares
if the resignation or termination occurs after May 10, 2014 and before May 10, 2015.
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE
Following is a description
of certain relationships and related transactions between us and our directors, executive officers, and 5% stockholders. In the
future, we plan to present all such possible transactions to our board of directors for consideration and approval. Any such transaction
will require approval by a majority of the disinterested directors, and such transactions will be on terms no less favorable than
those available to disinterested third parties.
Capitalization of SFO
On May 11, 2011, SFO
acquired 100% of the member units of Santa Fe Land, LLC ("LAND"), which held the oil and gas lease and test well now
owned by us, in exchange for 33,478,261 shares of common stock and 1,999,150 warrants to LAND member unit holders in exchange for
their LAND member units. All the LAND 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.
Share Exchange
In the Share
Exchange described previously, Mr. Griffin exchanged 18,157,329 shares of SFO for 18,157,329 shares of our common stock and Mr.
Hall exchanged 8,347,826 shares of SFO for 8,347,826 shares of our common stock.
31
Land Banks
Santa Fe Land, LLC ("SFL"),
a wholly owned subsidiary of SFO, has entered into Lease Acquisition Agreements (the "Lease Acquisition Agreement with Langtre
LLC and Woodlake, LLC (the "Land Banks"), both wholly owned by Long Branch Petroleum, LP ("LB") and Santa
Fe Petroleum, LLC ("SFP"), its managing member. The President of both LB and SFP is Tom Griffin, the Company's
President and Chairman of the Board. 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 less of our available funds. As of May 1, 2012, the Land Banks
had acquired leases on approximately 1,338 acres and top leases on an additional 1,045 acres. Under the Lease Acquisition Agreement,
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 20-24 months from the closing of the Share Exchange, subject to change by mutual consent.
The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through
the sale of its SFO common stock and utilized for the support of the Land Banks.
Land Bank Participation investors with the
Land Banks subsequent to the closing of the Share Exchange will receive proceeds from the sale of leased by the Land Banks to SFL
based on their Participation Agreements.
Director Independence
Currently we are not subject to a requirement
of any securities exchange or inter-dealer quotation system that any of our directors be independent. Mr. Nelson, however, would
qualify as an "independent director" under the NASDAQ Stock Market's Rule 5605(a)(2).
RECENT SALES OF UNREGISTERED SECURITIES
For a complete discussion of the recent
sales of unregistered securities of the Company, please see Items 1.01 and 3.01 of this Current Report on Form 8-K.
DESCRIPTION OF SECURITIES
The following description of our capital
stock is a summary and is qualified in its entirety by the provisions of our Articles of Incorporation, with amendments, all of
which have been filed as exhibits to our registration statement of which this prospectus is a part.
Common Stock
We are authorized to issue 200,000,000 shares
of our Common Stock, $0.0001 par value, of which, as of May 10, 2012, 39,478,261 shares are issued and outstanding. Holders of
shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Under Delaware
Law, a corporation's stockholders may appoint Directors by cumulative voting as set forth in its certificate of incorporation,
however, our certificate of incorporation does not include such a right and therefore our holders of common stock do not have cumulative
voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time
by the Board of Directors in its discretion from funds legally available therefore. In the event of our liquidation, dissolution,
or winding up, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities.
Pursuant to Article X, Section 6 of our by-laws we have the ability to hold our shareholders liable for calls on partly paid shares
in accordance with Delaware General Corporations Law §156 and to redeem shares called by us in accordance with Delaware General
Corporations Law §160. Holders of common stock have no preemptive rights to purchase our common stock. There are no conversion
or redemption rights or sinking fund provisions with respect to the common stock. Delaware General Corporations Law §156 states
that the corporation MAY (emphasis added) issue shares as partially paid and subject to a call on the remaining amount due for
the purchase of the issued shares. At the present time, the Corporation has not intent to issue shares for partial payment"
32
The restrictions on the ability of shareholders
to call meetings in Article III, the authority of your board of directors to set the size of your board and appoint directors in
Article V, and limitations on the ability to remove directors in Article V of Exhibit 3.2 would have an effect of delaying, deferring,
or preventing a change in control.
Article III, Section 2, states, "Special
meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation,
may be called by the chairman or the president or vice president (if any) or secretary at the request in writing of the majority
of the members of the Board of Directors or holders of a majority of the total voting power of all outstanding shares of stock
of this corporation then entitled to vote, and may not be called by the stockholders absent such request. Any such request shall
state the purpose or purposes of the proposed meeting." Accordingly, it would take shareholders owning a majority of the
shares to call such a meeting. In the event that management owns a majority of the shares entitled to vote, the minority shareholders
would have no authority to call a special meeting in the event they wished to attempt to remove the management of the Company Article
V, Section 1 states, "The first Board of Directors and all subsequent Boards of the Corporation shall consist of at least
one person, unless and until otherwise determined by vote of a majority of the entire Board of Directors. Directors shall be at
least eighteen years of age and need not be residents of the State of Delaware nor shareholders of the corporation. The directors,
other than the first Board of Directors, shall be elected at the annual meeting of the shareholders, except as hereinafter provided,
and each director elected shall serve until the next succeeding annual meeting and until his successor shall have been elected
and qualified. The first Board of Directors shall hold office until the first annual meeting of shareholders." The effect
of this provision precludes the minority shareholders from being able to affect the number of directors of the Company because
the current members of the Board of Directors have the sole authority to determine the number of directors. Since the minority
shareholders cannot elect any directors, where the absence of cumulative voting is in existence, as currently exists, the minority
shareholders can never elect a director of their choosing. This effectively precludes any takeover attempt without the approval
of the directors then sitting on the Board
33
Preferred Stock
We have not authorized the issuance of shares
of preferred stock. In order to authorize the issuance of shares of preferred stock, our stockholders and Directors will be required
to amend our Certificate of Incorporation to designate and fix the relative rights, preferences and limitations of the preferred
stock.
Anti-Takeover Effects Of Provisions of the Articles of Incorporation
Authorized and Unissued Stock
The authorized but unissued shares of our
common stock are available for future issuance without our stockholders' approval. These additional shares may be utilized
for a variety of corporate purposes including but not limited to future public or direct offerings to raise additional capital,
corporate acquisitions and employee incentive plans. The issuance of such shares may also be used to deter a potential takeover
of the Company that may otherwise be beneficial to stockholders by diluting the shares held by a potential suitor or issuing shares
to a stockholder that will vote in accordance with the Company's Board of Directors' desires. A takeover may be beneficial
to stockholders because, among other reasons, a potential suitor may offer stockholders a premium for their shares of stock compared
to the then-existing market price.
The existence of authorized but unissued
and unreserved shares of preferred stock may enable the Board of Directors to issue shares to persons friendly to current management
which would render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender
offer, merger or otherwise, and thereby protect the continuity of our management.
MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At May 10, 2012, there were 39,478,261 shares
of our common stock outstanding held by approximately 86 holders of record. In addition, we have issued warrants to acquire 6,764,856
shares of our common stock at $0.50 per share exercisable for 3 years.
The Company's Common Stock is currently
not yet trading on the public markets.
Dividend Policy
We currently intend to retain all earnings,
if any, to implement our business plan; accordingly, we do not anticipate that we will pay any dividends on any of our capital
stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any,
capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our board
of directors.
34
LEGAL PROCEEDINGS
We know of no material, active or pending
legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no
proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder is an adverse party
or has a material interest adverse to us.
Financial
Statements and Supplementary Data.
Not Applicable to Smaller reporting
Companies.
Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Financial
Statements and Exhibits.
(a) Financial
Statements of business acquired.
The required financial statements
of Santa Fe Operating, Inc. and Subsidiary for the periods specified in Rule 3-05(b) of Regulation S-X are included herein.
This Current Report includes the audited financial statements for the period from May 11, 2011 (Commencement of Operations) to
December 31, 2011.
35
SANTA FE OPERATING, INC. AND SUBSIDIARY
(A Development Stage Company)
Contents
Report of Independent Registered Public Accounting Firm
37
Financial Statements
Consolidated Balance Sheet
38
Consolidated Statement of Operations
39
Consolidated Statement of Stockholders' Equity
40
Consolidated Statement of Cash Flows
41
Notes to Consolidated Financial Statements
42-53
36
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders of Santa Fe Operating,
Inc.:
We have audited the accompanying consolidated
balance sheet of Santa Fe Operating, Inc. and Subsidiary (A Development Stage Company) (collectively the "Company")
as of December 31, 2011 and the related consolidated statements of operations, stockholders' equity, and cash flows for the period
from May 11, 2011 (commencement of operations) through December 31, 2011. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based
on our audit.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. 
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2011 and the results of their operations and their cash flows for the period from May 11, 2011 (commencement of operations) through
December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has
an accumulated deficit, a working capital deficit and a net loss from operations, which raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The accompanying
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Rothstein Kass
Dallas, Texas
April 9, 2012
37
SANTA FE OPERATING, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
December 31, 2011
ASSETS
Unevaluated oil and natural gas property, successful efforts method
$
494,132
Deferred offering costs
23,784
Total assets
$
517,916
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
203,338
Accounts payable, related parties
87,321
Accrued compensation
127,350
Total current liabilities
418,009
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.0001 par value, 5,000,000 shares authorized,
zero issued and outstanding
-
Common stock, $0.0001 par value, 50,000,000 shares authorized
33,478,261 shares issued and outstanding
3,348
Additional paid in capital
638,149
Deficit accumulated during the development stage
(541,590
)
Total stockholders' equity
99,907
Total liabilities and stockholders' equity
$
517,916
38
SANTA FE OPERATING, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
Period from May 11, 2011 (commencement of operations) through December 31, 2011
Expenses
Compensation
$
303,581
Professional
115,650
Consulting
96,200
Rent
23,649
Other
2,510
Total expenses
541,590
Net loss
$
(541,590
)
Basic and diluted loss per share
$
(0.02
)
Basic and diluted weighted average shares outstanding
33,478,261
39
SANTA FE OPERATING, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period from May 11, 2011 (commencement of operations) to December 31, 2011
Deficit
Accumulated
Additional
During the
Total
Common Stock
Paid - In
Preferred Stock
Development
Stockholders'
Shares
Amount
Capital
Shares
Amount
Stage
Equity
May 11, 2011 - Common stock and 1,999,150 warrants issued to unit holders of Santa Fe Land, LLC
33,478,261
$
3,348
$
490,784
$
494,132
May 11, 2011 - Stock based compensation provided by Principal Stockholder
123,581
123,581
May 17, 2011 - Common stock and 1,573,956 warrants issued for capital placement fees provided by Principal Stockholder
23,784
23,784
Net loss
(541,590
)
(541,590
)
Balances at December 31, 2011
33,478,261
$
3,348
$
638,149
$
(541,590
)
$
99,907
40
SANTA FE OPERATING, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED
STATEMENT OF CASH FLOWS
Period from May 11, 2011 (commencement of operations) to December 31, 2011
Cash flows from operating activities
Net loss
$
(541,590
)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation
123,581
Increase in cash attributable to changes in operating assets and liabilities:
Accounts payable
203,338
Accounts payable, related parties
87,321
Accrued compensation
127,350
Net cash used in operating activities
-
Net increase (decrease) in cash
-
Cash
, beginning of period
-
Cash
, end of period
$
-
Supplemental disclosure of non-cash investing activity
Unevaluated oil and natural gas property acquired through the Santa Fe Land, LLC acquisition
$
494,132
Supplemental disclosure of non-cash financing activity
Common stock and warrants issued to capital placement group as deferred offering costs
$
23,784
41
1.
Nature of Operations
Santa Fe Operating, Inc. and Subsidiary
(collectively the "Company", "We", or "Our") are privately owned companies which are engaged
in the acquisition, exploration, development, and producing and marketing of oil and natural gas.
The Company was incorporated on May 11,
2011 (commencement of operations) under the laws of the State of Delaware and is classified as a development stage company in accordance
with Accounting Standard Codification ("ASC") 915,
Development Stage Entities,
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.
2.
Going Concern and Liquidity
As reflected in the accompanying consolidated
financial statements, the Company had a net loss of $541,590 for the period from May 11, 2011 (commencement of operations) through
December 31, 2011. Additionally, at December 31, 2011, the Company had no cash, a working capital deficit of $418,009 and an accumulated
deficit of $541,590, which could have a material impact on the Company's financial condition and operations.
Our substantial obligations pose
risks to our business and stockholders by:
·
making it more difficult for us to satisfy
our obligations;
·
impeding us from obtaining additional financing
in the future for working capital, capital expenditures and general corporate purposes; and
·
making us more vulnerable to a downturn in
our business and limit our flexibility to plan for, or react to, changes in our business.
The time required for us to become profitable
is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from
operations to meet our planned capital expenditures and working capital requirements. Our ability to obtain additional financing
from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects
for our business. The necessary additional financing may not be available to us or may be available only on terms that would result
in further dilution to the current owners of our common stock.
Management believes that the contemplated
equity financing, which will require the Company to become publicly traded, will provide several options in obtaining financing
from third parties in order to carry out the business plan of the Company.
The accompanying consolidated financial
statements do not include any adjustments to reflect the possible effects on recoverability and classification of assets or the
amount and classification of liabilities which may result from the inability of the Company to continue as a going concern.
42
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3.
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").
These consolidated financial statements were approved by management
and available for issuance on April 9, 2012. Subsequent events have been evaluated through this date.
Principles
of Consolidation
The
accompanying consolidated financial statements include the general accounts of Santa Fe Operating, Inc. and its wholly-owned subsidiary
as of December 31, 2010. All significant intercompany transactions, accounts and balances have been eliminated in consolidation.
Oil and Gas Properties
The Company uses the successful efforts
method of accounting for oil and natural gas producing activities, as further defined under ASC 932,
Extractive Activities -
Oil and Natural Gas
. 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.
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.
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.
Impairment of Long-Lived Assets
The Company accounts for the impairment
of long-lived assets in accordance with ASC 360-10,
Property, Plant and Equipment
, 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.
43
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Summary of Significant Accounting Policies (Continued)
Deferred Offering Costs
The Company complies with the requirements
of the Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") Topic 5A,
Expenses
of Offering
. Deferred offering costs consist principally of the fair value of stock grants and warrants issued to placement
agents incurred through December 31, 2011 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.
Income Taxes
Income taxes are accounted for under the
asset and liability method of ASC 740,
Income Taxes
. 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.
Effective May 11, 2011 with the commencement
of operations, the Company adopted provisions of ASC 740, Sections 25 through 60,
Accounting for Uncertainties in Income Taxes
.
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 December 31, 2011, no adjustments
were recognized for uncertain tax benefits. The Company's initial tax year for 2011 is still subject to audit.
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 December 31, 2011
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.
The number of years with open tax audits
varies depending on the tax jurisdiction. The Company's major taxing jurisdictions include the United States.
Stock-Based Compensation
The Company adopted ASC 718,
Compensation
– Share Based Compensation
, 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.
44
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Summary of Significant Accounting
Policies (Continued)
Net Income (loss) per Common Share
The Company computes earnings (loss) per
share in accordance with ASC 260-10,
Earnings Per Share
. 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. At December 31, 2011, there were warrants to purchase 3,573,106 shares of the Company's
common stock which may dilute future earnings per share.
Legal Costs and Contingencies
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.
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.
Use of Estimates
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.
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 proved 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.
45
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In January 2010, the Financial Accounting
Standards Board issued Accounting Standards Update ("ASU") No. 2010–03,
Extractive Activities – Oil
and Gas (Topic 932)
, to align the oil and natural gas reserve estimation and disclosure requirements of Topic 932 with the
Securities and Exchange Commission's final rule,
Modernization of Oil and Gas Reporting
. The Company adopted ASU No.
2010-03 on May 11, 2011 (commencement of operations). There was no immediate impact of this adoption given the Company had no production
and its oil and natural gas reserves are considered probable as of December 31, 2011. Management expects ASU No. 2010-03 to affect
the Company once the Company has the financial wherewithal to carry out its drilling plans.
In December 2011, the FASB issued ASU No.
2011–11,
Disclosures about Offsetting Assets and Liabilities
. This ASU affect all entities that have financial instruments
and derivative instruments that are either offset or subject to an enforceable master netting arrangement or similar agreement.
ASU 2011–11 requires an entity to disclose information about offsetting and related arrangements to enable user of its financial
statements to understand the effect of those arrangements on its financial position. The provisions of ASU 2011–11 are applicable
to annual reporting periods beginning on or after January 1, 2011 and interim periods within those annual periods. The Company
has not yet determined the impact of this ASU on its consolidated financial statements.
4.
Acquisition of Oil and Natural Gas Company
On May 11, 2011, the Company acquired 100
percent of the member units of Santa Fe Land, LLC ("LAND"), a Texas limited liability company. The Company issued 33,478,261
shares of common stock and 1,999,150 warrants to LAND member unit holders in exchange for their LAND member units. The LAND 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"),. The acquisition of LAND 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.
The Company acquired LAND'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.
The following table presents a summary
of the historical costs of assets and liabilities acquired at the date of acquisition:
Assets acquired, unevaluated oil and natural gas property
$
494,132
Liabilities assumed
-
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
$
494,132
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,
Miscellaneous Accounting
, payments made by a principal stockholder to
settle the Company's obligations were deemed to be capital contributions.  Accordingly, the assignment of shares has
been recognized in the accompanying consolidated financial statements as stock based compensation and deferred offering costs of
approximately $124,000 and $24,000, respectively.
46
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5.
Unevaluated Oil and Natural Gas Property
The Company's principal asset consists
of an unevaluated oil and natural gas property in Comanche County, Texas, which approximated $494,000 as of December 31, 2011.
The unevaluated oil and natural gas property
was originally drilled in 2009, 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 December 31, 2011. As of December 31,
2011, the primary term of the Company's oil and natural gas lease was through March 2012; however, subsequent to December
31, 2011, the Company extended the primary term through March 2014.
6.
Income Taxes
There was no income tax during the period from May 11, 2011
(commencement of operations) to December 31, 2011 due to the Company's net loss and valuation allowance position.
The Company's effective tax expense
differs from the "statutory" tax expense (benefit) for the period from May 11, 2011 (commencement of operations) to
December 31, 2011 (computed by applying the Federal Corporate tax rate of 35% for 2011 to loss before taxes), as follows:
Computed "expected" tax benefit
$
189,557
Stock based compensation
(43,253
)
Valuation allowance
(146,303
)
Net taxable benefit
$
-
The tax effects of temporary differences that gave rise to significant
portions of deferred tax assets and liabilities at December 31, 2011 are as follows:
Deferred tax assets:
Net operating loss carryforward
$
101,730
Accrued compensation
44,573
Total deferred tax assets
146,303
Valuation allowance
(146,303
)
Net deferred taxes
$
-
In assessing the recognition
of deferred tax assets, management estimates it is more likely than not that the Company will not be able to recover its deferred
tax asset. As a result, the valuation allowance has been recorded for the entire amount of the net deferred tax asset. As of December
31, 2011, the Company's n
et operating loss carry-forwards approximated $291,000 and expires in
years through 2032.
47
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7.
Stockholders' Equity
Capital Structure
The Company is authorized to issue up to
5,000,000 shares of preferred stock, at $0.0001 par value per share, of which none were issued and outstanding as of December 31,
2011.
The Company is authorized to issue up to
50,000,000 shares of common stock, at $0.0001 par value per share, of which 33,478,261 shares were issued and outstanding at December
31, 2011.
Common Stock
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 LAND from a
related party. The stock was valued based on the historical cost basis of the asset acquired, which approximated $494,000.
Stock Warrants
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 LAND.
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
LAND. Therefore, no Black Scholes calculation was made by the Company.
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 is included in deferred offering
costs in the accompanying consolidated balance sheet.
The Company used the following
Black Sholes inputs in determining the fair value of the warrants:
Stock Price (grant date)
$
0.0139
Exercise Price
$
0.50
Expected Term (between vesting period and term of stock options)
1.5
Volatility
153
%
Annual Rate of Quarterly Dividends
0.00
%
Risk Free Interest Rate (1 year T-bill rate)
0.1
%
We have adopted the guidance
of ASC 718-10-S99-1 for purposes of determining the expected term for stock warrants. Due to limited historical data to rely upon,
we use the "simplified" method in developing an estimate of expected term for stock warrants per ASC 718-10-S99-1. Additionally,
the volatility utilized is based on the composite of several comparable guideline companies.
48
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Stockholders' Equity
(Continued)
Stock Warrants (continued)
The following table summarizes
activity related to warrants:
Number of Shares
Weighted Average Exercise Price
Balance at May 11, 2011(commencement of operations)
-
$
-
Granted
3,573,106
0.50
Exercised
-
-
Forfeited
-
-
Balance at December 31, 2011
3,573,106
$
0.50
The terms of warrants to purchase
our common stock are summarized below:
Warrants Outstanding
Warrants Exercisable
Range of Exercise Prices
Number
Outstanding at
December 31, 2011
Weighted Average Remaining Contractual Life
Weighted Average Exercise Price
Number Exercisable at December 31, 2011
Weighted Average Exercise Price
$0.50
3,573,106
2.37 Years
$0.50
3,573,106
$0.50
Stock Grants
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,
Stock Compensation
. 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, 2012. This amount is included in deferred offering costs within the accompanying consolidated balance sheet.
49
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8.
Related Party Transactions
On
May 11, 2011 (commencement of operations), the Company acquired 100% of the member units of LAND as discussed under Note 4. The
LAND member unit holders were comprised entirely of entities under the control of the Principal Stockholder.
From
May 11, 2011 (commencement of operations) through December 31, 2011, Santa Fe Petroleum, Inc. ("SFP Inc.") expended
$73,385 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying
consolidated balance sheet at December 31, 2011. SFP Inc. is owned entirely by entities under the control of the Principal Stockholder.
The majority of the expenditures were related to compensation and legal expenses for the Company related to the Company preparing
to structure a transaction to become a publicly traded company.
From
May 11, 2011 (commencement of operations) through December 31, 2011, Santa Fe Petroleum, LLC ("SFP LLC"), expended
$13,936 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying
consolidated balance sheet at December 31, 2011. SFP LLC is owned entirely by entities under the control of the Principal Stockholder.
The majority of the expenditures were related to legal and consulting expenses for the Company related to the Company preparing
to structure a transaction to become a publicly traded company.
We
currently do not have a lease but we are accruing a pro-rata charge from a company controlled by the Principal Stockholder, which
approximated $24,000 for the period from May 11, 2011 (commencement of operations) through December 31, 2011 and is included in
the accompanying consolidated statement of operations.
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.
9.
Commitment and Contingencies
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 December 31, 2011.
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.
50
SANTA FE OPERATING AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10.
Subsequent Events
On March 20, 2012, the Company
extended its oil and gas mineral lease through March 2014. Also on March 20, 2012, the Company executed a non-binding Memorandum
of Understanding ("MOU") with an unrelated third party, related to a proposed transaction with a public company. The
MOU is subject to due diligence by both parties. If an agreement is reached between both parties, definitive documents would be
required to consummate a transaction. The Company can provide no assurance that a transaction will be completed.
11.
Supplemental Oil and Gas Disclosures (Unaudited)
Since the Company is in the development stage and its oil and
natural gas property is considered probable, reserve data is not presented
51
(b) ProForma Financial Information
(Unaudited)
The following selected
unaudited pro forma consolidated financial information of Baby All Corp. and SFO is prepared to illustrate the effect of SFO's
reverse acquisition of Baby All Corp., whereby SFO is the acquirer for accounting purposes.  The unaudited pro forma
consolidated balance sheet gives effect to the reverse merger as if it occurred on December 31, 2011.  The unaudited
pro forma consolidated statement of operations gives effect to the merger as if it occurred at the beginning of the year ended
December 31, 2011.
The pro forma information presented may
not be indicative of the financial position or results of operations had the transaction been completed at December 31, 2011 or
at the beginning of the each of the periods presented, nor is it indicative of the future financial position or results of the
combined entity.
BABY ALL CORP. AND SUBSIDIARIES
(A Development Stage Company)
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
December 31, 2011
PRO-FORMA
BABY
SFO
ADJUST
TOTAL
ASSETS
Current assets
Cash and cash equivalents
$
300
$
-
$
-
$
300
Deferred offering costs
20,000
-
(20,000
)
(A)
-
Total current assets
20,300
-
(20,000
)
300
Other assets
Unevaluated oil and natural gas property, successful efforts method
$
-
494,132
494,132
Deferred offering costs
-
23,784
-
23,784
Total other assets
-
517,916
-
517,916
Total assets
$
20,300
$
517,916
$
(20,000
)
$
518,216
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
41,125
$
203,338
$
244,463
Accounts payable, related parties
-
87,321
87,321
Loans, related parties
22,900
-
22,900
Accrued compensation
-
127,350
127,350
Total current liabilities
64,025
418,009
-
482,034
Commitments and contingencies
Stockholders' equity (deficit)
Common stock, $0.0001 par value, 200,000,000 shares authorized
39,478,261 shares issued and outstanding
300
3,348
600
(B)
3,948
(300
)
(C)
Additional paid in capital
-
638,149
(600
)
(B)
573,824
300
(C)
(44,025
)
(C)
(20,000
)
(A)
Deficit accumulated during the development stage
(44,025
)
(541,590
)
44,025
(C)
(541,590
)
Total stockholders' equity (deficit)
(43,725
)
99,907
(20,000
)
36,182
Total liabilities and stockholders' equity (deficit)
$
20,300
$
517,916
$
(20,000
)
$
518,216
52
BABY ALL CORP. AND SUBSIDIARIES
(A Development Stage Company)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Year Ended December 31, 2011
PRO FORMA
BABY
SFO
ADJUST
TOTAL
Expenses
Compensation
$
-
$
303,581
$
303,581
Professional
26,970
115,650
142,620
Consulting
-
96,200
96,200
Rent
-
23,649
23,649
Other
6,600
2,510
9,110
Total expenses
33,570
541,590
-
575,160
Net loss
$
(33,570
)
(541,590
)
-
$
(575,160
)
Basic and diluted loss per share
$
(0.01
)
Basic and diluted weighted average shares outstanding
-
39,478,261
53
Baby All Corp. and Subsidiaries
Notes to Unaudited Consolidated Pro Forma
Financial Statements
NOTE 1--Basis of Presentation
The unaudited pro forma consolidated financial information of
Baby All Corp. (the "Company" or "Baby All Corp.) and Santa Fe Operating, Inc. ("SFO") is prepared
to illustrate the effect of SFO's reverse acquisition of Baby All Corp., whereby SFO is the acquirer for accounting purposes.
The unaudited pro forma balance sheet gives effect to the reverse
merger as if it occurred on December 31, 2011. The unaudited pro forma consolidated balance sheet as of December 31, 2011 was based
on the audited balance sheet of the Company and the audited consolidated balance sheet of SFO as of December 31, 2011 combined
with pro forma adjustments to give effect to the reverse merger as if it occurred on December 31, 2011. The unaudited pro forma
consolidated statement of operations gives effect to the merger as if it occurred at the beginning of the year ended December 31,
2011.
These unaudited consolidated pro forma financial statements
are provided for illustrative purposes and do not purport to represent what the Company's financial position would have been if
such transactions had occurred on the above mentioned date. These statements were prepared based on accounting principles generally
accepted in the United States. The use of estimates is required and actual results could differ from the estimates used. The Company
believes the assumptions used provide a reasonable basis for presenting the significant effects directly attributable to the acquisition.
The following pro forma adjustments are incorporated into the
unaudited consolidated pro forma balance sheet as of December 31, 2011 and the unaudited consolidated pro forma statement of operations
for the year ended December 31, 2011.
(A) To remove Baby All Corp. deferred offering costs.
(B) To record Baby All Corp. common shares issued at reverse
merger.
(C) To eliminate the capital structure of Baby All Corp.
54
Item
7.01.	Regulation FD
On May 11, 2012, the Company issued the press release filed
as
Exhibit 99.1
, which is incorporated by reference.
Item
9.01.	Financial Statements and Exhibits
(a)	Please see attached financial information
.
(b)	Please see attached financial information
.
(c)	Please see attached financial information
.
(d)	Exhibits.
Exhibit
Number
Description
2.1
Share Exchange Agreement between the Company and Santa Fe Operating, Inc. dated May 8, 2012.
99.1
Press Release, dated May 11, 2012
55
EXHIBITS
Exhibit
Number
Description
2.1
Share Exchange Agreement between the Company and Santa Fe Operating, Inc. dated May 10, 2012.
99.1
Press Release, dated May 11, 2012
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Baby All Corp.
Date: May 11, 2012
By:
/s/ 	Bruce A. Hall
Bruce A. Hall
Chief Executive Officer
56