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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman"><strong>UNITED
      STATES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman"><strong>SECURITIES
      AND EXCHANGE COMMISSION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Washington,
      D.C. 20549 </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 18pt; FONT-FAMILY: Times New Roman"><strong>FORM
      8-K</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CURRENT
      REPORT </strong></font></div>
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      to Section 13 or 15(d) of the Securities Exchange Act of 1934
</strong></font></div>
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      RESOURCES, INC.</strong></font></div>
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      name of registrant as specified in its charter) </strong></font></div>
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            <td align="left" valign="bottom" width="1%">&#160;</td>
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            <td align="left" valign="bottom" width="1%">&#160;</td>
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      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 (see General Instruction A.2. below): </font></div>
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                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425) </font></div>
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                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12) </font></div>
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                communications pursuant to Rule 14d-2(b) under the Exchange Act (17
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                240.14d-2(b)) </font></div>
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          <tr>
            <td align="left" valign="top" width="3%">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
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                240.13e-4(c)) </font></div>
            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PN" style="PAGE-BREAK-AFTER: always">
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      </div>
      <div>
        <hr style="MARGIN-TOP: -5px; COLOR: #000000" noshade size="1">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FORWARD
      LOOKING STATEMENTS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">This
      Current Report on Form 8-K contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. This Current Report
      includes statements regarding our plans, goals, strategies, intent, beliefs
      or
      current expectations. These statements are expressed in good faith and based
      upon a reasonable basis when made, but there can be no assurance that these
      expectations will be achieved or accomplished. These forward looking statements
      can be identified by the use of terms and phrases such as &#8220;believe,&#8221; &#8220;plan,&#8221;
&#8220;intend,&#8221; &#8220;anticipate,&#8221; &#8220;target,&#8221; &#8220;estimate,&#8221; &#8220;expect,&#8221; and the like, and/or
      future-tense or conditional constructions (&#8220;will,&#8221; &#8220;may,&#8221; &#8220;could,&#8221; &#8220;should,&#8221;
etc.). Items contemplating or making assumptions about, actual or potential
      future sales, market size, collaborations, and trends or operating results
      also
      constitute such forward-looking statements.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Although
      forward-looking statements in this report reflect </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">the
      good faith judgment of management, forward-looking statements are inherently
      subject to known and unknown risks, business, economic and other risks and
      uncertainties that may cause actual results to be materially different from
      those discussed in these forward-looking statements. Readers are urged not
      to
      place undue reliance on these forward-looking statements, which speak only
      as of
      the date of this report. We assume no obligation to update any forward-looking
      statements in order to reflect any event or circumstance that may arise after
      the date of this report, other than as may be required by applicable law or
      regulation. Readers are urged to carefully review and consider the various
      disclosures made by us in our reports filed with the Securities and Exchange
      Commission which attempt to advise interested parties of the risks and factors
      that may affect our business, financial condition, results of operation and
      cash
      flows. If one or more of these risks or uncertainties materialize, or if the
      underlying assumptions prove incorrect, our actual results may vary materially
      from those expected or projected.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXPLANATORY
      NOTE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
      the
      consummation of the Transactions (as defined and described more fully below),
      Foothills Resources, Inc. became the parent company and sole stockholder of
      Brasada California, Inc. The business operations of Foothills following the
      Transactions are primarily those of its wholly-owned subsidiary, Brasada
      California, Inc. Unless otherwise indicated or the context otherwise requires,
      the terms &#8220;Company,&#8221; &#8220;Brasada,&#8221; &#8220;we,&#8221; &#8220;us,&#8221; and &#8220;our&#8221; refer to Brasada
      California, Inc. and its affiliates, including Foothills Resources, Inc., after
      giving effect to the Transactions. Unless otherwise indicated or the context
      otherwise requires, references to &#8220;Foothills&#8221; refer to Foothills Resources, Inc.
      before giving effect to the Transactions. This Current Report on Form 8-K
      contains summaries of the material terms of various agreements executed in
      connection with the transactions described herein. The summaries of these
      agreements are subject to, and qualified in their entirety by, reference to
      these agreements, all of which are incorporated herein by
      reference.</font></div>
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      1.01.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Entry
      into a Material Definitive Agreement.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">April
      6</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      2006,
      Foothills completed a merger and an offering of common stock and warrants in
      a
      private placement transaction. For a description of the merger and the offering,
      and the material agreements entered into in connection therewith, please see
      Item 2.01 of this Current Report, which disclosure is incorporated herein by
      reference.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      2.01.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Completion
      of Acquisition or Disposition of Assets.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>THE
      MERGER AND RELATED TRANSACTIONS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      Merger</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">April
      6</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      2006
      (the &#8220;Closing Date&#8221;), Foothills, Brasada Acquisition Corp. (&#8220;Acquisition Sub&#8221;),
      a wholly owned subsidiary of Foothills, and Brasada entered into a Merger
      Agreement and Plan of Reorganization (the &#8220;Merger Agreement&#8221;). On the Closing
      Date, Acquisition Sub merged with and into Brasada, with Brasada remaining
      as
      the surviving corporation and a wholly-owned subsidiary of Foothills (the
&#8220;Merger&#8221;). Prior to their entry into the Merger Agreement, no material
      relationship previously existed among the parties to the Merger Agreement.
      The
      Merger Agreement has been attached as an exhibit hereto and is incorporated
      herein by reference. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      the
      Closing Date, the holders of Brasada&#8217;s issued and outstanding capital stock
      before the Merger (the &#8220;Brasada Stockholders&#8221;) surrendered all of their issued
      and outstanding capital stock of Brasada and received 17,375,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      common stock of Foothills, par value $0.001 per share (&#8220;Common Stock&#8221;). The
      stockholders of Foothills before the Merger (the &#8220;Foothills Stockholders&#8221;)
      retained 12,625,000 shares of Common Stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Merger Agreement contains customary representations, warranties and covenants
      of
      Brasada, Foothills and, as applicable, Acquisition Sub, for like transactions.
      Breaches of representations and warranties are secured by customary
      indemnification provisions. The Merger Agreement contains a post-closing
      adjustment to the number of shares of Common Stock issued to the Brasada
      Stockholders in an amount up to 2,000,000 shares of Common Stock issued on
      a pro
      rata basis for any breach of the Merger Agreement by Foothills discovered during
      the two year period following the Closing Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Merger will be treated as a recapitalization of Foothills for financial
      accounting purposes. Accordingly, the historical financial statements of
      Foothills before the Merger will be replaced with the historical financial
      statements of Brasada before the Merger in all future filings with the
      Securities and Exchange Commission.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      the
      Closing Date, the then-current officers and directors of Foothills resigned
      and
      new executive officers designated by the Brasada Stockholders were appointed.
      In
      addition, the sole member of the Foothills board of directors (the &#8220;Board&#8221;)
      appointed one new member to the Board and resigned, effective 10 days after
      the
      Closing Date. Following the Merger, the Board consists of two members and is
      expected to increase to five members. The Foothills Stockholders received the
      right to designate one of the members of the Board. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
      to
      the Closing Date, the Board and the Foothills Stockholders approved and adopted
      a stock option plan (the &#8220;Plan&#8221;), which is expected to be ratified and adopted
      by the Company&#8217;s stockholders soon after the consummation of the Merger. Under
      the Plan, 2,000,000 shares of Common Stock are reserved for issuance as
      incentive awards granted to executive officers, key employees and directors
      after the Closing Date. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      Offering and Bridge Financing</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Concurrently
      with the Merger, Foothills closed a private offering of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,383,009
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">units
      (&#8220;Units&#8221;) consisting of one share of Common Stock and a warrant to acquire
      three-quarters of a share of Common Stock for five years at a purchase price
      of
      $1.00 per whole share (the &#8220;Offering&#8221;). On the Closing Date of the Merger, the
      investors in the Offering collectively purchased </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,383,009
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Units
      for
      total consideration of $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,768,106</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (the
&#8220;PPO Closing&#8221;). Some of the consideration for the Units was in the form of
      Foothills Debentures which converted into Units on a dollar-for-dollar basis
      upon the PPO Closing and the closing of the Merger. The Foothills Debentures
      are
      described more fully below. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-3-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      debenture holders&#8217; Units were issued at the same price as the Units issued to
      other accredited investors as the fair value of the Units issued was equal
      to
      the carrying amount of the debt extinguished. No gain or loss was recorded
      on
      the repayment of the debentures. Therefore, the consideration we received on
      the
      Closing Date consisted of approximately $6,780,606 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      cash
      and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$3,987,500
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      cancelled debt. The investors participating in the PPO Closing hold </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,383,009
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock and warrants to acquire&#160;11,537,251 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      sale
      of Units in the Offering was exempt from registration under Section 4(2) of
      the
      Securities Act of 1933, as amended (the &#8220;Securities Act&#8221;) and Rule 506 of
      Regulation D as promulgated by the SEC. The Merger, the Offering and the other
      transactions related thereto are collectively referred to herein as the
&#8220;Transactions.&#8221; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      facilitate the completion of the Merger and to enable Brasada to meet certain
      specific working capital requirements, Foothills agreed to provide bridge
      financing (the &#8220;Bridge Financing&#8221;) to Brasada. The Bridge Financing was provided
      to Brasada from the proceeds of the sale of debentures convertible into Units
      (the &#8220;Foothills Debentures&#8221;) upon the closing of the Offering and the Merger
      (collectively, the &#8220;Transactions&#8221;). Foothills Debentures in the aggregate face
      amount of $3,987,500</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">were
      issued to investors in the Bridge Financing on March 17 and March 23,
      2006.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Bridge Financing was evidenced by a secured promissory note (the &#8220;Bridge Note&#8221;)
      which was to mature 120 days from the closing of the Bridge Financing and bear
      interest at the rate of 9% per annum. Brasada&#8217;s obligations related to the
      Bridge Financing were secured by a security interest in all of the assets of
      Brasada, evidenced by a Security Agreement entered into among Brasada and
      Foothills. To further secure Brasada&#8217;s obligations, the Brasada Stockholders
      pledged such number of shares of the common stock of Brasada as represented
      51%
      of the total number of shares of common stock issued and outstanding at that
      time. The security interest and the pledged shares were released (and the Bridge
      Note forgiven) on the Closing Date, upon the consummation of the
      Transactions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the completion of the Offering, our placement agents in
      connection with the offering, Sanders Morris Harris Inc., Canaccord Capital,
      Inc. and GEM Advisors, Inc. (the &#8220;Placement Agents&#8221;) received fees $275,000 and
      GEM Advisors, Inc. was issued 500,000 shares of Common Stock (the &#8220;Finder Fee&#8221;).
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Registration
      Rights</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Within
      120 days of the Closing Date, Foothills will be required to file a registration
      statement (the &#8220;Registration Statement&#8221;) registering for resale the shares of
      Common Stock purchased by the investors in the Offering, the shares of Common
      Stock issuable on exercise of the warrants issued to the investors in the
      Offering and the shares of Common Stock to be issued on the Closing Date as
      the
      Finder Fee, which shares will also include the shares and warrants underlying
      the Foothills Debentures. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Split-Off
      Agreement</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Contemporaneously
      with the closing of the Merger, Foothills split-off its wholly-owned subsidiary,
      Foothills Leaseco, Inc., a Nevada corporation (&#8220;Leaseco&#8221;), through the sale of
      all of the outstanding capital stock of Leaseco (the &#8220;Split-Off&#8221;). We executed a
      split-off agreement with J. Earl Terris and Leaseco, a copy of which is attached
      to this Current Report on Form 8-K and incorporated herein by
      reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-4-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Lock-Up
      Agreements</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">The
      Brasada Stockholders have agreed not to offer, pledge, sell, contract to sell
      or
      grant any option to purchase, or otherwise transfer or dispose of, directly
      or
      indirectly, any of their shares of Common Stock or any securities convertible
      into or exercisable for shares of Common Stock for a period ending on the
      12-month anniversary of the Closing Date. Such agreements were set forth in
      written Lock-Up Agreements, executed as of the Closing Date, with the Brasada
      Stockholders. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pro
      Forma Ownership</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Immediately
      after giving effect to the Merger and Offering, there are issued and outstanding
      on a fully diluted basis (including shares of Common Stock underlying warrants
      and shares reserved for issuance under the Company&#8217;s 2006 Equity Incentive
      Plan), 59,420,266 shares of Common Stock, as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                pre-Merger Brasada Stockholders hold 17,375,000 shares of Common
                Stock
                from the Merger;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                pre-Merger Foothills Stockholders hold 12,625,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
                of Common Stock;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                investors in the Offering, including the holders of converted Foothills
                Debentures, hold 15,383,009 shares of Common Stock and warrants to
                acquire&#160;11,537,257 shares of Common
                Stock;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GEM
                Advisors, Inc. holds 500,000 shares of Common Stock received as part
                of
                the Finder Fee; and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                Company&#8217;s 2006 Equity Incentive Plan has 2,000,000 shares of Common Stock
                authorized for issuance. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-5-</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PART
      I</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>1.
      DESCRIPTION OF BUSINESS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Company
      Overview</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      primary operations of the Company are those of Brasada California, Inc. (f/k/a
      Brasada Resources LLC), our wholly-owned subsidiary (&#8220;Brasada&#8221;). Brasada is a
      private oil and gas exploration company engaged in the acquisition, exploration
      and development of oil and natural gas properties. Brasada was formed on
      December 29, 2005 as Brasada Resources LLC, a Delaware limited liability
      company, and converted to a corporation in Delaware on February 28, 2006. On
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">April
      6</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      2006,
      Brasada merged with Brasada Acquisition Corp., a Delaware corporation and our
      wholly owned subsidiary, leaving Brasada as the surviving entity and our wholly
      owned subsidiary. Unless otherwise indicated or the context otherwise requires,
      the terms &#8220;Brasada,&#8221; &#8220;we,&#8221; &#8220;us,&#8221; and &#8220;our&#8221; refer to Brasada California, Inc. and
      its affiliates, including Foothills Resources, Inc., after giving effect to
      the
      Transactions. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business strategy is to identify and exploit low risk resources in and adjacent
      to existing or indicated producing areas that can be quickly developed and
      put
      on production at low cost, including the acquisition of producing properties
      with exploitation and exploration potential. We will also take advantage of
      our
      expertise to develop exploratory projects in focus areas and to participate
      with
      other companies in those areas to explore for oil and natural gas using
      state-of-the-art 3D seismic technology. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      management will use its extensive domestic and international oil and gas
      experience to establish and grow the Company. Our initial focus is on oil and
      natural gas properties located in the Eel River Basin, California and the
      Anadarko Basin, Oklahoma. We expect to have access to additional opportunities
      on a worldwide scale through a contractual relationship with Moyes &amp; Co.,
      Inc.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>California</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      believe that the oil and gas industry has in effect overlooked California in
      recent years because of the perceived difficulties of conducting operations
      in
      the state. This situation creates opportunities. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">California
      has abundant and long-lived oil and gas resources with prolific hydrocarbon
      basins. Infrastructure supporting oil and gas exploration, development and
      production activities is in place, consisting of contractors, suppliers,
      pipelines and refineries. Most oil and gas basins in the state are significantly
      under-explored even near large fields, with operators concentrating on a few,
      large, heavy oil resources. Offset exploration in and near fields has frequently
      been ignored. There is a dramatic lack of use of 3D seismic and other latest
      seismic technologies in many of the basins, and in some areas (such as the
      Eel
      River Basin) there has been insufficient attention to drilling and drilling
      fluid engineering. Through the experience and relationships of its management,
      Brasada has strong ties to other significant oil and gas companies operating
      in
      California. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Oklahoma</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Anadarko Basin in western Oklahoma and the Texas panhandle is one of the most
      prolific oil and natural gas producing basins in the United States. Most of
      the
      shallow shelf portion of the basin can be characterized as very mature. However,
      much promise remains in the deeper portion of the basin that is characterized
      by
      stratigraphic traps in the Pennsylvanian Morrow formation and structural traps
      in the Ordovician Hunton formation, two of the formations targeted by
      Brasada.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Project
      Status</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Eel
      River Basin</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Eel
      River Basin is the northernmost of the California sedimentary basins. Most
      of
      the basin exists offshore of northern California and southern Oregon. However,
      a
      portion of the basin is present onshore in Humboldt County, California.
      Hydrocarbons generated in the deeper offshore part of the basin have migrated
      updip into the Miocene and Pliocene rocks present in this area. The onshore
      portion of the basin contains the Tompkins Hill natural gas field that was
      discovered by Texaco in 1937. It is now owned and operated by Occidental, has
      produced in excess of 120 billion cubic feet (&#8220;BCF) of natural gas, and
      continues to produce. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Grizzly Bluff area approximately five miles south of the Tompkins Hill Field
      was
      initially proven to contain natural gas in well drilled by Zephyr in the
      mid-1960s. In the early 1970s, Chevron drilled a deep well seeking oil but
      found
      strong indications of natural gas. In the early 1990s, ARCO drilled several
      wells and found natural gas in the shallow zones. These wells were successfully
      tested at rates of up to 5 million cubic feet (&#8220;MMCF&#8221;) of gas per day, but the
      wells were never put into production due to the lack of a natural gas market
      and
      pipeline connection.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      past decade, the industry has overlooked the hydrocarbon potential and
      production within the Eel River Basin due to its relatively isolated position
      in
      California. INNEX Energy, L.L.C. recognized this overlooked potential in the
      form of multiple low resistivity, low contrast sands that possibly define part
      of a widespread, basin-centered natural gas play. INNEX began acquiring oil
      and
      gas leases in the area in 2000 to test this concept and entered into a joint
      venture with Forexco, Inc. in 2002. A subsequent 10-well drilling program in
      2003 by Forexco encountered drilling and completion problems, but established
      production from four wells in the Grizzly Bluff area that are now producing
      approximately 500,000 cubic feet of gas per day. This field was brought on
      line
      in late 2003 with the completion of a natural gas gathering system and a new
      pipeline that connects to the PG&amp;E backbone grid for northern California.
      INNEX and Forexco terminated their joint venture in 2004.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Tompkins Hill Field is the analog field in the basin for the Eel River Project.
      This production is from similar age rocks at similar depths that will be tested
      in the Grizzly Bluff Prospect, the first prospect that we plan to drill in
      the
      Eel River Project. Our mapping indicates that substantial natural gas reserves
      occur above the lowest tested gas in the Grizzly Bluff Field in multiple stacked
      Pliocene sandstone reservoirs. Shallow proved producing, proved undeveloped,
      and
      probable reserves overlie additional deeper potential, defining a project that
      will involve drilling between 3,000 and 10,500 feet. Reserve analysis indicates
      that the Grizzly Bluff Prospect could contain in excess of 100 BCF of natural
      gas recoverable reserves from relatively shallow Pliocene reservoirs. Much
      of
      this gas is categorized as proved undeveloped. Additional significant upside
      potential in the range of 500 BCF to 1 trillion cubic feet (&#8220;TCF&#8221;) of natural
      gas exists in the Grizzly Bear Prospect which is a deep exploratory prospect
      that underlies the shallow Grizzly Bluff Prospect.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      We
      believe that n</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">umerous
      defined prospects, including several with direct hydrocarbon indicators on
      the
      seismic data, can add one to two TCF of gas resources in the basin.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Eel
      River Project is the centerpiece of a large exploitation-exploration
      opportunity. There is presently minimal competition in the basin, providing
      us
      with an opportunity to effectively control the entire basin.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-7-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consequently,
      on January 3, 2006, we entered into a Farmout and Participation Agreement (the
      &#8220;INNEX Agreement&#8221;) with INNEX California, Inc. (&#8220;INNEX&#8221;) to acquire, explore and
      develop oil and natural gas properties located in the basin, the material terms
      of which are as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
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            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brasada
                serves as operator of a joint venture with INNEX, and has the right
                to
                earn an interest in approximately 3,500 existing leasehold acres
                held by
                INNEX in the basin, and to participate as operator with INNEX in
                oil and
                gas acquisition, exploration and development activities within an
                area of
                mutual interest consisting of the entire Eel River
                Basin.</font></div>
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      </table>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                INNEX Agreement provides for &#8220;drill-to-earn&#8221; terms, and consists of three
                phases.</font></div>
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      </table>
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    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                Phase I, Brasada will pay 100% of the costs of drilling two wells,
                acquiring 1,000 acres of new leases, and certain other activities.
                Upon
                completion of Phase I, Brasada will receive an assignment from INNEX
                of a
                75% working interest (representing an approximate 56.3% net revenue
                interest) in the leases held by INNEX in the two drilling units to
                the
                deepest depth drilled in the two Phase I obligation
                wells.</font></div>
            </td>
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      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brasada
                will then have the option, but not the obligation, to proceed into
                Phase
                II. In Phase II, Brasada will pay 100% of the costs of drilling one
                well
                and conducting a 3-D seismic survey covering not less than 15 square
                miles. Upon completion of Phase II, Brasada will receive an assignment
                from INNEX of a 75% working interest (representing an approximate
                56.3%
                net revenue interest) in the leases held by INNEX in the drilling
                unit and
                a 75% working interest (representing an approximate 59.3% net revenue
                interest) in all remaining leases held by INNEX to the deepest depth
                drilled in the three Phase I and II obligation
                wells.</font></div>
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      </table>
    </div>
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            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brasada
                will then have the option, but not the obligation, to proceed into
                Phase
                III. In Phase III, Brasada will pay 100% of the costs of drilling
                one deep
                well. Upon completion of Phase III, Brasada will receive an assignment
                from INNEX of a 75% working interest (representing an approximate
                56.3%
                net revenue interest) in the leases held by INNEX in the drilling
                unit and
                a 75% working interest (representing an approximate 59.3% net revenue
                interest) in all remaining leases held by INNEX with no depth
                limitation.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">After
                completion of Phase III, the two parties will each be responsible
                for
                funding their working interest share of the joint venture&#8217;s costs and
                expenses. Brasada will generally have a 75% working interest in activities
                conducted on specified prospects existing at the time of execution
                of the
                INNEX Agreement, and a 70% working interest in other activities.
                A party
                will be able to elect not to participate in exploratory wells on
                a
                prospect-by-prospect basis, and a non-participating party will lose
                the
                opportunity to participate in development activities and all rights
                to
                production relating to that
                prospect.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brasada
                is also entitled to a proportionate assignment from INNEX of its
                rights to
                existing permits, drill pads, roads, rights-of-way, and other
                infrastructure, as well as its pipeline access and marketing
                arrangements.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">INNEX
                has an option to participate for a 25% working interest in certain
                producing property acquisitions by Brasada in the area of mutual
                interest.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      completing drilling plans for the two Phase I wells, including location
      selection, well design, and services and equipment procurement. We are also
      initiating a leasing program to extensively expand the joint venture&#8217;s leasehold
      position in the basin. Further, we have identified two strategic opportunities
      to acquire existing producing fields in the basin. If consummated, these
      acquisitions will provide immediate cash flow from existing production, as
      well
      as access to proved undeveloped and probable reserves and deeper exploration
      potential through new drilling. Because both acquisition targets have existing
      proved developed producing reserves and production, we would expect to fund
      some
      portion of the acquisition costs with reserve-based debt financing.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-8-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Anadarko
      Basin</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      initial focus of our activity within the Anadarko Basin will be in the area
      covered by a 75 square mile 3D seismic survey in Roger Mills County, Oklahoma.
      Through a license held by one of our officers, Brasada has semi-exclusive access
      to this survey, which was shot by Texaco in 1998. The 3D seismic survey was
      initially shot to define stratigraphic traps in the Pennsylvanian sedimentary
      section in an area of substantial Pennsylvanian natural gas production. Only
      one
      well has been drilled to date using the 3D seismic data set. The well, drilled
      by Texaco, encountered wet Morrow sand and was plugged and abandoned. Texaco
      subsequently exited oil and gas exploration activity in the MidContinent region.
      Numerous exploratory ideas remain to be exploited on this data set, both in
      the
      Pennsylvanian section as well as the deeper Ordovician section. The best wells
      completed in these rocks typically flow in excess of 10 MMCF of natural gas
      per
      day and contain reserves in the 20 to 50 BCF range.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      completing preliminary geological and geophysical interpretations of the 3D
      seismic data, and plan to reprocess the 3D data, finalize the interpretations,
      and identify drillable prospects. We then plan to acquire oil and gas leases
      over those prospects, and to negotiate joint ventures with other companies,
      who
      will be able to earn interests in the leases by drilling one or more exploratory
      wells on the prospects.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Markets
      and Customers</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      market for oil and natural gas that we will produce depends on factors beyond
      our control, including the extent of domestic production and imports of oil
      and
      natural gas, the proximity and capacity of natural gas pipelines and other
      transportation facilities, demand for oil and natural gas, the marketing of
      competitive fuels and the effects of state and federal regulation. The oil
      and
      gas industry also competes with other industries in supplying the energy and
      fuel requirements of industrial, commercial and individual
      consumers.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      oil
      production is expected to be sold at prices tied to the spot oil markets. Our
      natural gas production is expected to be sold under short-term contracts and
      priced based on first of the month index prices or on daily spot market prices.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Regulations</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>General</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business is affected by numerous laws and regulations, including energy,
      environmental, conservation, tax and other laws and regulations relating to
      the
      energy industry. Most of our drilling operations will require permit or
      authorizations from federal, state or local agencies. Changes in any of these
      laws and regulations or the denial or vacating of permits could have a material
      adverse effect on our business. In view of the many uncertainties with respect
      to current and future laws and regulations, including their applicability to
      us,
      we cannot predict the overall effect of such laws and regulations on our future
      operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      believe that our operations comply in all material respects with applicable
      laws
      and regulations. There are no pending or threatened enforcement actions related
      to any such laws or regulations. We believe that the existence and enforcement
      of such laws and regulations will have no more restrictive an effect on our
      operations than on other similar companies in the energy industry.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Proposals
      and proceedings that might affect the oil and gas industry are pending before
      Congress, the Federal Energy Regulatory Commission (&#8220;FERC&#8221;), state legislatures
      and commissions and the courts. We cannot predict when or whether any such
      proposals may become effective. In the past, the natural gas industry has been
      heavily regulated. There is no assurance that the regulatory approach currently
      pursued by various agencies will continue indefinitely. Notwithstanding the
      foregoing, we do not anticipate that compliance with existing federal, state
      and
      local laws, rules and regulations will have a material adverse effect upon
      our
      capital expenditures, earnings or competitive position.</font></div>
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    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-9-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Federal
      Regulation of Sales and Transportation of Natural Gas</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Historically,
      the transportation and sale of natural gas and its component parts in interstate
      commerce has been regulated under several laws enacted by Congress and the
      regulations passed under these laws by FERC. Our sales of natural gas, including
      condensate and liquids, may be affected by the availability, terms and cost
      of
      transportation. The price and terms of access to pipeline transportation are
      subject to extensive federal and state regulation. From 1985 to the present,
      several major regulatory changes have been implemented by Congress and FERC
      that
      affect the economics of natural gas production, transportation and sales. In
      addition, FERC is continually proposing and implementing new rules and
      regulations affecting those segments of the natural gas industry, most notably
      interstate natural gas transmission companies that remain subject to FERC&#8217;s
      jurisdiction. These initiatives may also affect the intrastate transportation
      of
      gas under certain circumstances. The stated purpose of many of these regulatory
      changes is to promote competition among the various sectors of the natural
      gas
      industry.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      ultimate impact of the complex rules and regulations issued by FERC cannot
      be
      predicted. In addition, many aspects of these regulatory developments have
      not
      become final but are still pending judicial and final FERC decisions. We cannot
      predict what further action FERC will take on these matters. Some of FERC&#8217;s more
      recent proposals may, however, adversely affect the availability and reliability
      of interruptible transportation service on interstate pipelines. We do not
      believe that we will be affected by any action taken materially differently
      than
      other natural gas producers, gatherers and marketers with whom we
      compete.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>State
      Regulation</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      operations are also subject to regulation at the state and in some cases,
      county, municipal and local governmental levels. Such regulation includes
      requiring permits for the drilling of wells, maintaining bonding requirements
      in
      order to drill or operate wells and regulating the location of wells, the method
      of drilling and casing wells, the surface use and restoration of properties
      upon
      which wells are drilled, the plugging and abandonment of wells and the disposal
      of fluids used and produced in connection with operations. Our operations are
      also subject to various conservation laws and regulations pertaining to the
      size
      of drilling and spacing units or proration units and the unitization or pooling
      of oil and gas properties.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, state conservation laws, which frequently establish maximum rates
      of
      production from oil and gas wells, generally prohibit the venting or flaring
      of
      gas and impose certain requirements regarding the rates of production. State
      regulation of gathering facilities generally includes various safety,
      environmental and, in some circumstances, nondiscriminatory take requirements,
      but, except as noted above, does not generally entail rate regulation. These
      regulatory burdens may affect profitability, but we are unable to predict the
      future cost or impact of complying with such regulations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Environmental
      Matters</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>General</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      subject to extensive federal, state and local environmental laws and regulations
      relating to water, air, hazardous substances and wastes, and threatened or
      endangered species that restrict or limit our business activities for purposes
      of protecting human health and the environment. Compliance with the multitude
      of
      regulations issued by federal, state, and local administrative agencies can
      be
      burdensome and costly. State environmental regulatory programs are generally
      very similar to the corresponding federal environmental regulatory programs,
      and
      federal environmental regulatory programs are often delegated to the
      states.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-10-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      oil
      and gas exploration and production operations are subject to state and/or
      federal solid waste regulations that govern the storage, treatment and disposal
      of solid and hazardous wastes. However, much of the solid waste that will be
      generated by our oil and gas exploration and production activities is exempt
      from regulation under federal, and many state, regulatory programs. To the
      extent our operations generate solid waste, such waste is generally subject
      to
      state regulations. We will comply with solid waste regulations in the normal
      course of business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition to solid and hazardous waste, our production operations may generate
      produced water as a waste material. This water can sometimes be disposed of
      by
      discharging it to surface waters under discharge permits issued pursuant to
      the
      Clean Water Act, or an equivalent state program. Another common method of
      produced water disposal is subsurface injection in disposal wells. Such disposal
      wells are permitted under the Safe Drinking Water Act, or an equivalent state
      regulatory program. The drilling, completion, and operation of produced water
      disposal wells are integral to oil and gas operations. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Air
      emissions and exhaust from gas-fired generators and from other equipment, such
      as gas compressors, are potentially subject to regulations under the Clean
      Air
      Act, or equivalent state regulatory programs. To the extent that our air
      emissions are regulated, they are generally regulated by permits issued by
      state
      regulatory agencies. We will obtain air permits, where needed, in the normal
      course of business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that spills or releases of crude oil or produced water occur, we would
      be
      subject to spill notification and response regulations under the Clean Water
      Act, or equivalent state regulatory programs. Depending on the nature and
      location of our operations, we may also be required to prepare spill prevention,
      control and countermeasure response plans under the Clean Water Act, or
      equivalent state regulatory programs. Response costs could be high and may
      have
      a material adverse effect on our operations. We may not be fully insured for
      these costs.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Failure
      to comply with environmental regulations may result in the imposition of
      substantial administrative, civil, or criminal penalties, or restrict or
      prohibit our desired business activities. Environmental laws and regulations
      impose liability, sometimes strict liability, for environmental cleanup costs
      and other damages. Other environmental laws and regulations may delay or
      prohibit exploration and production activities in environmentally sensitive
      areas or impose additional costs on these activities.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Costs
      associated with responding to a major spill of crude oil or produced water,
      or
      costs associated with remediation of environmental contamination, are the most
      likely occurrences that could result in a material adverse effect on our
      business, financial condition and results of operations. In addition, changes
      in
      applicable federal, state and local environmental laws and regulations
      potentially could have a material adverse effect on our business, financial
      condition and results of operations. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Competition</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      oil
      and gas industry is highly competitive. Competitors include major oil companies,
      other independent energy companies and individual producers and operators,
      many
      of which have financial resources, personnel and facilities substantially
      greater than we have. We face intense competition for the acquisition of oil
      and
      gas leases and properties. For a more thorough discussion of how competition
      could impact our ability to successfully complete our business strategy, see
      &#8220;Risk Factors &#8212; Competition in Obtaining Rights to Explore and Develop Oil and
      Gas Reserves and to Market Our Production May Impair Our Business.&#8221;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Employees</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of
      March 1, 2006 we had three full-time employees. None of our employees is
      represented by a labor union, and we consider our employee relations to be
      good.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Legal
      Proceedings</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
      time
      to time we may be named in claims arising in the ordinary course of business.
      Currently, no legal proceedings or claims are pending against or involve us
      that, in the opinion of our management, could reasonably be expected to have
      a
      material adverse effect on our business and financial condition. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Available
      Information</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      subject to the reporting requirements of the Securities Exchange Act of 1934,
      as
      amended (the &#8220;Exchange Act&#8221;). Reports filed with the SEC pursuant to the
      Exchange Act, including proxy statements, annual and quarterly reports, and
      other reports we file, can be inspected and copied at the public reference
      facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
      Investors may obtain information on the operation of the public reference room
      by calling the SEC at 1-800-SEC-0330. Investors can request copies of these
      documents upon payment of a duplicating fee by writing to the SEC. The reports
      we file with the SEC are also available on the SEC&#8217;s Internet site
      (http://www.sec.gov). </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RISK
      FACTORS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>An
      investment in the Company involves a high degree of risk. Investors should
      carefully consider the risks below before making an investment decision. Our
      business, financial condition or results of operations could be materially
      adversely affected by any of these risks. In such case, the trading price of
      the
      Common Stock could decline and investors could lose all or part of their
      investment. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>As
      used in this section, and unless the context clearly indicates otherwise, &#8220;we,&#8221;
&#8220;us,&#8221; &#8220;our,&#8221; &#8220;Brasada&#8221; and the &#8220;Company,&#8221; prior to giving effect to the Merger,
      refer to Brasada California, Inc., the operations of which are expected to
      be
      the primary operations of the combined Foothills - Brasada entity following
      the
      Merger. After giving effect to the Merger, the combined Brasada - Foothills
      entity is referred to in this section as &#8220;Foothills,&#8221; &#8220;we,&#8221; &#8220;us,&#8221; &#8220;our&#8221; and the
&#8220;Company.&#8221; Please refer to the other information contained in this Current
      Report on Form 8-K (including the financial statements) for further details
      pertaining to the Company&#8217;s business and financial condition. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RISKS
      RELATED TO OUR BUSINESS </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are a
      new enterprise engaged in the business of oil and gas exploration and
      development. The business of acquiring, exploring for, developing and producing
      oil and natural gas reserves is inherently risky. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      are a Development Stage Company With Limited Operating History for Investors
      to
      Evaluate Our Business. We May Never Attain Profitability.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are a
      development stage company and have limited current oil or natural gas
      operations. As an oil and gas acquisition, exploration and development company
      with limited operating history, it is difficult for potential investors to
      evaluate our business. Our proposed operations are therefore subject to all
      of
      the risks inherent in light of the expenses, difficulties, complications and
      delays frequently encountered in connection with the formation of any new
      business, as well as those risks that are specific to the oil and gas industry.
      Investors should evaluate us in light of the delays, expenses, problems and
      uncertainties frequently encountered by companies developing markets for new
      products, services and technologies. We may never overcome these
      obstacles.</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      </div>
      <div id="HDR">
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business is speculative and dependent upon the implementation of our business
      plan and our ability to enter into agreements with third parties for the rights
      to exploit potential oil and natural gas reserves on terms that will be
      commercially viable for us. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      Lack of Diversification Will Increase the Risk of an Investment in Foothills,
      </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>and
      Our Financial Condition and Results of Operations May Deteriorate if We Fail
      to
      Diversify</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business will focus on the oil and gas industry in a limited number of
      properties, initially in California and Oklahoma with the intention of expanding
      elsewhere. Larger companies have the ability to manage their risk by
      diversification. However, we will lack diversification, in terms of both the
      nature and geographic scope of our business. As a result, we will likely be
      impacted more acutely by factors affecting our industry or the regions in which
      we operate than we would if our business were more diversified, enhancing our
      risk profile. If we cannot diversify our operations, our financial condition
      and
      results of operations could deteriorate. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Strategic
      Relationships Upon Which We May Rely are Subject to Change, Which May Diminish
      Our Ability to Conduct Our Operations.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      ability to successfully acquire additional properties, to discover reserves,
      to
      participate in drilling opportunities and to identify and enter into commercial
      arrangements with customers will depend on developing and maintaining close
      working relationships with industry participants and on our ability to select
      and evaluate suitable properties and to consummate transactions in a highly
      competitive environment. These realities are subject to change and may impair
      our ability to grow.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      develop our business, we will endeavor to use the business relationships of
      our
      management to enter into strategic relationships, which may take the form of
      joint ventures with other private parties and contractual arrangements with
      other oil and gas companies, including those that supply equipment and other
      resources that we will use in our business. We may not be able to establish
      these strategic relationships, or if established, we may not be able to maintain
      them. In addition, the dynamics of our relationships with strategic partners
      may
      require us to incur expenses or undertake activities we would not otherwise
      be
      inclined to in order to fulfill our obligations to these partners or maintain
      our relationships. If our strategic relationships are not established or
      maintained, our business prospects may be limited, which could diminish our
      ability to conduct our operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Competition
      in Obtaining Rights to Explore and Develop Oil and Gas Reserves and to Market
      Our Production May Impair Our Business.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      oil
      and gas industry is highly competitive. Other oil and gas companies may seek
      to
      acquire oil and gas leases and other properties and services we will need to
      operate our business in the areas in which we expect to operate. This
      competition is increasingly intense as prices of oil and natural gas on the
      commodities markets have risen in recent years. Additionally, other companies
      engaged in our line of business may compete with us from time to time in
      obtaining capital from investors. Competitors include larger companies, which,
      in particular, may have access to greater resources, may be more successful
      in
      the recruitment and retention of qualified employees and may conduct their
      own
      refining and petroleum marketing operations, which may give them a competitive
      advantage. In addition, actual or potential competitors may be strengthened
      through the acquisition of additional assets and interests. If we are unable
      to
      compete effectively or adequately respond to competitive pressures, this
      inability may materially adversely affect our results of operation and financial
      condition.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      May Be Unable to Obtain Additional Capital That We Will Require to Implement
      Our
      Business Plan, Which Could Restrict Our Ability to Grow.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      expect
      that our current capital and our other existing resources will be sufficient
      only to provide a limited amount of working capital, and the revenues generated
      from our properties in California and Oklahoma alone will not alone be
      sufficient to fund our operations or planned growth. We will require additional
      capital to continue to operate our business beyond the initial phase of our
      current properties, and to expand our exploration and development programs
      to
      additional properties. We may be unable to obtain additional capital required.
      Furthermore, inability to maintain capital may damage our reputation and
      credibility with industry participants in the event we cannot close previously
      announced transactions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Future
      acquisitions and future exploration, development, production and marketing
      activities, as well as our administrative requirements (such as salaries,
      insurance expenses and general overhead expenses, as well as legal compliance
      costs and accounting expenses) will require a substantial amount of additional
      capital and cash flow. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      plan
      to pursue sources of such capital through various financing transactions or
      arrangements, including joint venturing of projects, debt financing, equity
      financing or other means. We may not be successful in locating suitable
      financing transactions in the time period required or at all, and we may not
      obtain the capital we require by other means. If we do not succeed in raising
      additional capital, the capital received through the Offering may not be
      sufficient to fund our operations going forward without obtaining additional
      capital financing. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      additional capital raised through the sale of equity may dilute the ownership
      percentages of existing stockholders. This could also result in a decrease
      in
      the fair market value of our equity securities because our assets would be
      owned
      by a larger pool of outstanding equity. The terms of securities we issue in
      future capital transactions may be more favorable to our new investors, and
      may
      include preferences, superior voting rights and the issuance of warrants or
      other derivative securities, and issuances of incentive awards under equity
      employee incentive plans, which may have a further dilutive effect.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      ability to obtain needed financing may be impaired by such factors as the
      capital markets (both generally and in the oil and gas industry in particular),
      our status as a new enterprise without a demonstrated operating history, the
      location of our oil and natural gas properties and prices of oil and natural
      gas
      on the commodities markets (which will impact the amount of asset-based
      financing available to us) and/or the loss of key management. Further, if oil
      and/or natural gas prices on the commodities markets decrease, then our revenues
      will likely decrease, and such decreased revenues may increase our requirements
      for capital. If the amount of capital we are able to raise from financing
      activities, together with our revenues from operations, is not sufficient to
      satisfy our capital needs (even to the extent that we reduce our operations),
      we
      may be required to cease our operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      may
      incur substantial costs in pursuing future capital financing, including
      investment banking fees, legal fees, accounting fees, securities law compliance
      fees, printing and distribution expenses and other costs. We may also be
      required to recognize non-cash expenses in connection with certain securities
      we
      may issue, such as convertible notes and warrants, which may adversely impact
      our financial condition.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      May Not Be Able To Effectively Manage Our Growth, Which May Harm Our
      Profitability. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      strategy envisions expanding our business. If we fail to effectively manage
      our
      growth, our financial results could be adversely affected. Growth may place
      a
      strain on our management systems and resources. We must continue to refine
      and
      expand our business development capabilities, our systems and processes and
      our
      access to financing sources. As we grow, we must continue to hire, train,
      supervise and manage new employees. We cannot assure investors that we will
      be
      able to: </font></div>
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          <tr valign="top" style="line-height: 1.25;">
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            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">meet
                our capital needs; </font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">expand
                our systems effectively or efficiently or in a timely manner;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
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            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">allocate
                our human resources optimally; </font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">identify
                and hire qualified employees or retain valued employees; or
                </font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">incorporate
                effectively the components of any business that we may acquire in
                our
                effort to achieve growth. </font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      we are
      unable to manage our growth, our operations and our financial results could
      be
      adversely affected by inefficiency, which could diminish our profitability.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      Business May Suffer If We Do Not Attract and Retain Talented
      Personnel.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      success will depend in large measure on the abilities, expertise, judgment,
      discretion integrity and good faith of our management and other personnel in
      conducting the business of the Company. We have a small management team, and
      the
      loss of a key individual or inability to attract suitably qualified staff could
      materially adversely impact our business. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      success depends on the ability of our management and employees to interpret
      market and geological data correctly and to interpret and respond to economic
      market and other conditions in order to locate and adopt appropriate investment
      opportunities, monitor such investments, and ultimately, if required, to
      successfully divest such investments. Further, no assurance can be given that
      our key personnel will continue their association or employment with us or
      that
      replacement personnel with comparable skills can be found. We have sought to
      and
      will continue to ensure that management and any key employees are appropriately
      compensated; however, their services cannot be guaranteed. If we are unable
      to
      attract and retain key personnel, our business may be adversely affected.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      Management Team Does Not Have Extensive Experience in Public Company Matters,
      </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Which
      Could Impair Our Ability to Comply With Legal and Regulatory
      Requirements</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      management team has had limited U.S. public company management experience or
      responsibilities, which could impair our ability to comply with legal and
      regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable
      federal securities laws including filing required reports and other information
      required on a timely basis. There can be no assurance that our management will
      be able to implement and affect programs and policies in an effective and timely
      manner that adequately respond to increased legal, regulatory compliance and
      reporting requirements imposed by such laws and regulations. Our failure to
      comply with such laws and regulations could lead to the imposition of fines
      and
      penalties and further result in the deterioration of our business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Risks
      Related to our Prior Business May Adversely Affect our
      Business.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Foothills&#8217;
      business prior to the Merger involved mineral exploration. In 2001, Foothills
      acquired a mining lease on a total of five unpatented lode mineral claims
      property located in the State of Nevada. Subsequent to Foothills&#8217; fiscal year
      ended December 31, 2004, Foothills decided to abandon the property and terminate
      the claims and has since been in the process of reviewing other potential
      resource and non-resource assets for acquisition. We have determined not to
      pursue this line of business following the Merger, but could still be subject
      to
      claims arising from the former Foothills business. These claims may arise from
      Foothills&#8217; operating activities (such as employee and labor matters), financing
      and credit arrangements or other commercial transactions. While no claims are
      pending and we have no actual knowledge of any threatened claims, it is possible
      that third parties may seek to make claims against us based on Foothills&#8217; former
      business operations. Such claims are unlikely because the five mineral claims
      were never operated and Foothills was released by the lessor of the claims.
      Even
      if such asserted claims were without merit and we were ultimately found to
      have
      no liability for such claims, the defense costs and the distraction of
      management&#8217;s attention may harm the growth and profitability of our business.
      While the relevant definitive agreements executed in connection with the Merger
      provide indemnities to us for liabilities arising from the prior business
      activities of Foothills, these indemnities may not be sufficient to fully
      protect us from all costs and expenses.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RISKS
      RELATED TO OUR INDUSTRY</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      Exploration for Oil and Gas Is Risky and May Not Be Commercially Successful,
      Impairing Our Ability to Generate Revenues from Our
      Operations.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Oil
      and
      gas exploration involves a high degree of risk. These risks are more acute
      in
      the early stages of exploration. Our expenditures on exploration may not result
      in new discoveries of oil or natural gas in commercially viable quantities.
      It
      is difficult to project the costs of implementing an exploratory drilling
      program due to the inherent uncertainties of drilling in unknown formations,
      the
      costs associated with encountering various drilling conditions, such as
      over-pressured zones and tools lost in the hole, and changes in drilling plans
      and locations as a result of prior exploratory wells or additional seismic
      data
      and interpretations thereof. If exploration costs exceed our estimates, or
      if
      our exploration efforts do not produce results which meet our expectations,
      our
      exploration efforts may not be commercially successful, which could adversely
      impact our ability to generate revenues from our operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      May Not Be Able to Develop Oil and Gas Reserves on an Economically Viable Basis,
      and Our Reserves and Production May Decline as a Result. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      the
      extent that we succeed in discovering oil and/or natural gas reserves, we cannot
      assure that these reserves will be capable of production levels we project
      or in
      sufficient quantities to be commercially viable. On a long-term basis, our
      viability depends on our ability to find or acquire, develop and commercially
      produce additional oil and natural gas reserves. Without the addition of
      reserves through acquisition, exploration or development activities, our
      reserves and production will decline over time as reserves are produced. Our
      future reserves will depend not only on our ability to develop then-existing
      properties, but also on our ability to identify and acquire additional suitable
      producing properties or prospects, to find markets for the oil and natural
      gas
      we develop and to effectively distribute our production into our
      markets.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Future
      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-downs of connected wells resulting from extreme weather
      conditions, problems in storage and distribution and adverse geological and
      mechanical conditions. While we will endeavor to effectively manage these
      conditions, we cannot be assured of doing so optimally, and we will not be
      able
      to eliminate them completely in any case. Therefore, these conditions could
      diminish our revenue and cash flow levels and result in the impairment of our
      oil and natural gas interests.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Estimates
      of Oil and Natural Gas Reserves that We Make May Be Inaccurate and Our Actual
      Revenues May Be Lower than Our Financial Projections.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      will
      make estimates of oil and natural gas reserves, upon which we will base our
      financial projections. We will make these reserve estimates using various
      assumptions, including assumptions as to oil and natural gas prices, drilling
      and operating expenses, capital expenditures, taxes and availability of funds.
      Some of these assumptions are inherently subjective, and the accuracy of our
      reserve estimates relies in part on the ability of our management team,
      engineers and other advisors to make accurate assumptions. Economic factors
      beyond our control, such as interest rates, will also impact the value of our
      reserves. The process of estimating oil and natural gas reserves is complex,
      and
      will require us to use significant decisions and assumptions in the evaluation
      of available geological, geophysical, engineering and economic data for each
      property. As a result, our reserve estimates will be inherently imprecise.
      Actual future production, oil and natural gas prices, revenues, taxes,
      development expenditures, operating expenses and quantities of recoverable
      oil
      and natural gas reserves may vary substantially from those we estimate. If
      actual production results vary substantially from our reserve estimates, this
      could materially reduce our revenues and result in the impairment of our oil
      and
      natural gas interests.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Drilling
      New Wells Could Result in New Liabilities, Which Could Endanger Our Interests
      in
      Our Properties and Assets.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      are
      risks associated with the drilling of oil and natural gas wells, including
      encountering unexpected formations or pressures, premature declines of
      reservoirs, blow-outs, craterings, sour gas releases, fires and spills. The
      occurrence of any of these events could significantly reduce our revenues or
      cause substantial losses, impairing our future operating results. We may become
      subject to liability for pollution, blow-outs or other hazards. We intend to
      obtain insurance with respect to these hazards; however, such insurance has
      limitations on liability that may not be sufficient to cover the full extent
      of
      such liabilities. The payment of such liabilities could reduce the funds
      available to us or could, in an extreme case, result in a total loss of our
      properties and assets. Moreover, we may not be able to maintain adequate
      insurance in the future at rates that are considered reasonable. Oil and natural
      gas production operations are also subject to all the risks typically associated
      with such operations, including premature decline of reservoirs and the invasion
      of water into producing formations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Decommissioning
      Costs Are Unknown and May be Substantial; Unplanned Costs Could Divert Resources
      from Other Projects.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      may
      become responsible for costs associated with abandoning and reclaiming wells,
      facilities and pipelines which we use for production of oil and natural gas
      reserves. Abandonment and reclamation of these facilities and the costs
      associated therewith is often referred to as &#8220;decommissioning.&#8221; We have not yet
      determined whether we will establish a cash reserve account for these potential
      costs in respect of any of our properties or facilities, or if we will satisfy
      such costs of decommissioning from the proceeds of production in accordance
      with
      the practice generally employed in onshore and offshore oilfield operations.
      If
      decommissioning is required before economic depletion of our properties or
      if
      our estimates of the costs of decommissioning exceed the value of the reserves
      remaining at any particular time to cover such decommissioning costs, we may
      have to draw on funds from other sources to satisfy such costs. The use of
      other
      funds to satisfy such decommissioning costs could impair our ability to focus
      capital investment in other areas of our business.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      Inability to Obtain Necessary Facilities Could Hamper Our
      Operations.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Oil
      and
      gas exploration and development activities are dependent on the availability
      of
      drilling and related equipment, transportation, power and technical support
      in
      the particular areas where these activities will be conducted, and our access
      to
      these facilities may be limited. To the extent that we conduct our activities
      in
      remote areas, needed facilities may not be proximate to our operations, which
      will increase our expenses. Demand for such limited equipment and other
      facilities or access restrictions may affect the availability of such equipment
      to us and may delay exploration and development activities. The quality and
      reliability of necessary facilities may also be unpredictable and we may be
      required to make efforts to standardize our facilities, which may entail
      unanticipated costs and delays. Shortages and/or the unavailability of necessary
      equipment or other facilities will impair our activities, either by delaying
      our
      activities, increasing our costs or otherwise.</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      May Have Difficulty Distributing Our Production, Which Could Harm Our Financial
      Condition.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      order
      to sell the oil and natural gas that we are able to produce, we will have to
      make arrangements for storage and distribution to the market. We will rely
      on
      local infrastructure and the availability of transportation for storage and
      shipment of our products, but infrastructure development and storage and
      transportation facilities may be insufficient for our needs at commercially
      acceptable terms in the localities in which we operate. This could be
      particularly problematic to the extent that our operations are conducted in
      remote areas that are difficult to access, such as areas that are distant from
      shipping and/or pipeline facilities. These factors may affect our ability to
      explore and develop properties and to store and transport our oil and natural
      gas production and may increase our expenses. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Furthermore,
      weather conditions or natural disasters, actions by companies doing business
      in
      one or more of the areas in which we will operate, or labor disputes may impair
      the distribution of oil and/or natural gas and in turn diminish our financial
      condition or ability to maintain our operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Prices
      and Markets for Oil and Natural Gas Are Unpredictable and Tend to Fluctuate
      Significantly, Which Could Reduce Profitability, Growth and the Value of Our
      Business.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Oil
      and
      natural gas are commodities whose prices are determined based on world demand,
      supply and other factors, all of which are beyond our control. World prices
      for
      oil and natural gas have fluctuated widely in recent years, and rose to
      near-record levels in 2005. The average price for West Texas Intermediate oil
      in
      1999 was $22 per barrel. In 2002 it was $27 per barrel. In 2005, it was $57
      per
      barrel. We expect that prices will fluctuate in the future. Price fluctuations
      will have a significant impact upon our revenue, the return from our reserves
      and on our financial condition generally. Price fluctuations for oil and natural
      gas commodities may also impact the investment market for companies engaged
      in
      the oil and gas industry. Prices may not remain at current levels. Future
      decreases in the prices of oil and natural gas may have a material adverse
      effect on our financial condition, the future results of our operations and
      quantities of reserves recoverable on an economic basis.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Increases
      in Our Operating Expenses will Impact Our Operating Results and Financial
      Condition.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exploration,
      development, production, marketing (including distribution costs) and regulatory
      compliance costs (including taxes) will substantially impact the net revenues
      we
      derive from the oil and natural gas that we produce. These costs are subject
      to
      fluctuations and variation in different locales in which we will operate, and
      we
      may not be able to predict or control these costs. If these costs exceed our
      expectations, this may adversely affect our results of operations. In addition,
      we may not be able to earn net revenue at our predicted levels, which may impact
      our ability to satisfy our obligations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Penalties
      We May Incur Could Impair Our Business.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Failure
      to comply with government regulations could subject us to civil and criminal
      penalties, could require us to forfeit property rights, and may affect the
      value
      of our assets. We may also be required to take corrective actions, such as
      installing additional equipment or taking other actions, each of which could
      require us to make substantial capital expenditures. We could also be required
      to indemnify our employees in connection with any expenses or liabilities that
      they may incur individually in connection with regulatory action against them.
      As a result, our future business prospects could deteriorate due to regulatory
      constraints, and our profitability could be impaired by our obligation to
      provide such indemnification to our employees.</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Environmental
      Risks May Adversely Affect Our Business.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      phases of the oil and gas business present environmental risks and hazards
      and
      are subject to environmental regulation pursuant to a variety of federal, state
      and municipal laws and regulations. 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 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
      we expect may result in stricter standards and enforcement, larger fines and
      liability and potentially increased capital expenditures and operating costs.
      The discharge of oil, natural 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. The application of
      environmental laws to our business may cause us to curtail our production or
      increase the costs of our production, development or exploration
      activities.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      Insurance May Be Inadequate to Cover Liabilities We May Incur.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      involvement in the exploration for and development of oil and gas properties
      may
      result in our becoming subject to liability for pollution, blow-outs, property
      damage, personal injury or other hazards. Although we will obtain insurance
      in
      accordance with industry standards to address such risks, such insurance has
      limitations on liability that may not be sufficient to cover the full extent
      of
      such liabilities. In addition, such risks may not, in all circumstances, be
      insurable or, in certain circumstances, we may choose not to obtain insurance
      to
      protect against specific risks due to the high premiums associated with such
      insurance or for other reasons. The payment of such uninsured liabilities would
      reduce the funds available to us. If we suffer a significant event or occurrence
      that is not fully insured, or if the insurer of such event is not solvent,
      we
      could be required to divert funds from capital investment or other uses towards
      covering our liability for such events.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      Business Will Suffer if We Cannot Obtain or Maintain Necessary
      Licenses.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      operations will require licenses, permits and in some cases renewals of licenses
      and permits from various governmental authorities. Our ability to obtain,
      sustain or renew such licenses and permits on acceptable terms is subject to
      change in regulations and policies and to the discretion of the applicable
      governments, among other factors. Our inability to obtain, or our loss of or
      denial of extension, to any of these licenses or permits could hamper our
      ability to produce revenues from our operations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Challenges
      to Our Properties May Impact Our Financial Condition.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Title
      to
      oil and gas interests is often not capable of conclusive determination without
      incurring substantial expense. While we intend to make appropriate inquiries
      into the title of properties and other development rights we acquire, title
      defects may exist. In addition, we may be unable to obtain adequate insurance
      for title defects, on a commercially reasonable basis or at all. If title
      defects do exist, it is possible that we may lose all or a portion of our right,
      title and interests in and to the properties to which the title defects
      relate.</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
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        </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      our
      property rights are reduced, our ability to conduct our exploration, development
      and production activities may be impaired.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      Will Rely on Technology to Conduct Our Business and Our Technology Could Become
      Ineffective Or Obsolete. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      rely
      on technology, including geographic and seismic analysis techniques and economic
      models, to develop our reserve estimates and to guide our exploration,
      development and production activities. We will be required to continually
      enhance and update our technology to maintain its efficacy and to avoid
      obsolescence. The costs of doing so may be substantial, and may be higher than
      the costs that we anticipate for technology maintenance and development. If
      we
      are unable to maintain the efficacy of our technology, our ability to manage
      our
      business and to compete may be impaired. Further, even if we are able to
      maintain technical effectiveness, our technology may not be the most efficient
      means of reaching our objectives, in which case we may incur higher operating
      costs than we would were our technology more efficient. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RISKS
      RELATED TO OUR COMMON STOCK </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>There
      Has Been No Established Trading Market for the Common Stock.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      has
      been no established trading market for the Common Stock in the context of the
      business that the Company will operate after the Merger. The lack of an active
      market may impair investors&#8217; ability to sell their shares at the time they wish
      to sell them or at a price that they consider reasonable. The lack of an active
      market may also reduce the fair market value of investors&#8217; shares. An inactive
      market may also impair our ability to raise capital by selling shares of capital
      stock and may impair our ability to acquire other companies or technologies
      by
      using Common Stock as consideration.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Investors
      May Have Difficulty Trading and Obtaining Quotations for Our Common Stock.
      </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Common Stock is currently quoted on the NASD&#8217;s Over-the-Counter Bulletin Board
      under the symbol &#8220;FTRS.OB.&#8221; The Common Stock is not actively traded, and the bid
      and asked prices for our Common Stock have fluctuated widely. As a result,
      investors may find it difficult to dispose of, or to obtain accurate quotations
      of the price of, our securities. This severely limits the liquidity of the
      Common Stock, and would likely reduce the market price of the Common Stock
      and
      our hamper ability to raise additional capital. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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      Volatile and Subject to Wide Fluctuations. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      market price of the Common Stock following the Closing Date is likely to be
      highly volatile and could be subject to wide fluctuations in response to a
      number of factors that are beyond our control, including: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
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            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">dilution
                caused by our issuance of additional shares of Common Stock and other
                forms of equity securities, which we expect to make in connection
                with
                future capital financings to fund our operations and growth, to attract
                and retain valuable personnel and in connection with future strategic
                partnerships with other companies;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-20-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
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            </td>
            <td>
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                of new acquisitions, reserve discoveries or other business initiatives
                by
                our competitors;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">fluctuations
                in revenue from our oil and gas business as new reserves come to
                market;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">changes
                in the market for oil and natural gas commodities and/or in the capital
                markets generally;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
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            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">changes
                in the demand for oil and natural gas, including changes resulting
                from
                the introduction or expansion of alternative fuels;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
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                variations in our revenues and operating
                expenses;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">changes
                in the valuation of similarly situated companies, both in our industry
                and
                in other industries;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">changes
                in analysts&#8217; estimates affecting our company, our competitors and/or our
                industry;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">changes
                in the accounting methods used in or otherwise affecting our
                industry;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">additions
                and departures of key personnel;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">announcements
                of technological innovations or new products available to the oil
                and gas
                industry; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">announcements
                by relevant governments pertaining to incentives for alternative
                energy
                development programs;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">fluctuations
                in interest rates and the availability of capital in the capital
                markets;
                and </font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">&#160;</td>
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            </td>
            <td>
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                sales of our Common Stock, including sales by the investors following
                registration of the shares of Common Stock issued in this Offering
                and/or
                future investors in future offerings we expect to make to raise additional
                capital. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
      and
      other factors are largely beyond our control, and the impact of these risks,
      singly or in the aggregate, may result in material adverse changes to the market
      price of our Common Stock and/or our results of operations and financial
      condition.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Our
      Operating Results May Fluctuate Significantly, and These Fluctuations May Cause
      Our Stock Price to Decline. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      operating results will likely vary in the future primarily as the result of
      fluctuations in our revenues and operating expenses, including the coming to
      market of oil and natural gas reserves that we are able to develop, expenses
      that we incur, the prices of oil and natural gas in the commodities markets
      and
      other factors. If our results of operations do not meet the expectations of
      current or potential investors, the price of our Common Stock may
      decline.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>We
      Do
      Not Expect to Pay Dividends In the Foreseeable Future.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      do not
      intend to declare dividends for the foreseeable future, as we anticipate that
      we
      will reinvest any future earnings in the development and growth of our business.
      Therefore, investors will not receive any funds unless they sell their Common
      Stock, and stockholders may be unable to sell their shares on favorable terms
      or
      at all. Investors cannot be assured of a positive return on investment or that
      they will not lose the entire amount of their investment in the Common
      Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-21-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Investors
      Will Experience Dilution Upon the Exercise of Warrants or
      Options.</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      are
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11,537,257
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      common stock underlying warrants issued to purchasers of the Units, which if
      exercised or converted, could decrease the net tangible book value of investors&#8217;
Common Stock. In addition, there are 2,000,000 shares of Common Stock underlying
      options that may be granted pursuant to the Plan. If the holders of those
      options exercise those options, investors may experience dilution in the net
      tangible book value of their Common Stock. Further, the sale or availability
      for
      sale of the underlying shares in the marketplace could depress our stock price.
      We have registered or agreed to register for resale all of the underlying shares
      described above. Holders of registered underlying shares could resell the shares
      immediately upon registration, resulting in significant downward pressure on
      our
      stock price.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Directors
      and Officers of the Company Will Have a High Concentration of Common Stock
      Ownership. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Based
      on
      the&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">45,883,009
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock that are outstanding as of the Closing Date, our officers and
      directors will beneficially own approximately </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">28.0</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%
      of our
      outstanding Common Stock. Such a high level of ownership by such persons may
      have a significant effect in delaying, deferring or preventing any potential
      change in control of Foothills. Additionally, as a result of their high level
      of
      ownership, our officers and directors might be able to strongly influence the
      actions of the Board and the outcome of actions brought to our shareholders
      for
      approval. Such a high level of ownership may adversely affect the voting and
      other rights of our shareholders.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Applicable
      SEC Rules Governing the Trading of &#8220;Penny Stocks&#8221; Limit the Trading and
      Liquidity of the Common Stock, Which May Affect the Trading Price of the Common
      Stock. </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shares
      of
      Common Stock may be considered a &#8220;penny stock&#8221; and be subject to SEC rules and
      regulations which impose limitations upon the manner in which such shares may
      be
      publicly traded and regulate broker-dealer practices in connection with
      transactions in &#8220;penny stocks.&#8221; Penny stocks generally are equity securities
      with a price of less than $5.00 (other than securities registered on certain
      national securities exchanges or quoted on the NASDAQ system, provided that
      current price and volume information with respect to transactions in such
      securities is provided by the exchange or system). The penny stock rules require
      a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
      from the rules, to deliver a standardized risk disclosure document that provides
      information about penny stocks and the risks in the penny stock market. The
      broker-dealer must also 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&#8217;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&#8217;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 which may increase the
      difficulty investors may experience in attempting to liquidate such securities.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2.
      MANAGEMENT&#8217;S PLAN OF OPERATION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
      discussion of our past financial results is not pertinent to the business plan
      of the Company on a going forward basis, as the result of the change in our
      business and operations from a pre-exploration stage company prior to the Merger
      and Split-off to a company engaged in the acquisition, exploration and
      development of oil and natural gas properties following the
      Transactions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-22-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">After
      giving effect to the Transactions, our cash balance is expected to be
      approximately $9 million, representing net proceeds received from the private
      placement of securities, less amounts expended to date from the proceeds of
      the
      Bridge Financing and costs associated with the Transactions. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">This
      amount is expected to be sufficient to complete Phase I and a portion of Phase
      II under the INNEX Agreement, and to conduct certain other activities during
      the
      next 12 months.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following describes our current business plan, including a summary of planned
      acquisition, exploration and development opportunities, our ability to satisfy
      our cash requirements, and our need to raise additional funds over the next
      year. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                Phase I of the Eel River Project, we have an obligation to pay 100%
                of the
                costs of drilling two wells, acquiring additional leasehold acres,
                and
                certain other activities. We are completing drilling plans for the
                two
                Phase I wells, including location selection, well design, and services
                and
                equipment procurement. We expect to drill these wells during the
                second
                quarter of 2006. We have also initiated a leasing program to significantly
                expand the joint venture&#8217;s leasehold position in the basin. Following the
                drilling of the first two wells and the completion of Phase I, we
                will
                have the option, but not the obligation, to proceed into Phase II.
                If we
                elect to proceed into Phase II, we will have an obligation to pay
                100% of
                the costs of drilling another well to be commenced by the end of
                2006 and
                of conducting a 3D seismic survey covering not less than 15 square
                miles.
                Subject to the completion of permitting and regulatory requirements,
                we
                expect to conduct the 3D seismic survey in the fall of 2006 and to
                commence the drilling of the Phase II well in late 2006. Our existing
                financial resources are expected to be adequate to complete the Phase
                I
                activities and a portion of the Phase II activities.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
                the Anadarko Project, we are completing preliminary geological and
                geophysical interpretations of the 3D seismic data, and plan to reprocess
                the 3D data, finalize the interpretations, and identify drillable
                prospects. We then plan to acquire oil and gas leases over those
                prospects, and to negotiate joint ventures with other companies,
                who will
                be able to earn interests in the leases by paying some or all of
                the costs
                of drilling one or more exploratory wells on the prospects. Our existing
                financial resources are expected to be adequate to conduct these
                activities during the remainder of 2006, although it is possible
                that we
                will elect to defer some of these activities in order to utilize
                the
                required funds for other planned activities or
                opportunities.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                have identified strategic opportunities to acquire existing producing
                fields in the United States, including in the Eel River Basin. If
                consummated, these acquisitions will provide immediate cash flow
                from
                existing production, as well as access to proved undeveloped and
                probable
                reserves and deeper exploration potential through new drilling. Because
                the acquisition targets have existing proved developed producing
                reserves
                and production, we would expect to fund some portion of the acquisition
                costs with reserve-based debt financing. Assuming that mutually
                satisfactory agreements can be reached with the existing owners of
                the
                fields, our existing financial resources are expected to be adequate
                to
                conduct the evaluation of these opportunities, but not sufficient
                to
                complete the acquisitions. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                plan to continue to evaluate exploration and development opportunities
                and
                appropriate acquisitions. Successful completion of acquisitions will
                provide additional cash flow which will allow us to expand our activities
                and capabilities, and advance exploration and development
                opportunities.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
                expect a gradual increase in general and administrative expenses
                to
                approximately $150,000 per month in the second half of 2006. We expect
                to
                expand our staff from three to seven employees with additions in
                the areas
                of land and legal, geoscience, accounting and administration.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">It
                is&#160;likely</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                that we will need to (i) raise additional equity and/or debt financing
                during the next 12 months in order to complete these planned activities
                or
                to access additional opportunities, or (ii) adjust the scope and
                extent of
                our plans to correspond with our available financial resources.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-23-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Off-Balance
      Sheet Arrangements</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      no off-balance sheet arrangements.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>3.
      DESCRIPTION OF PROPERTY</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      business strategy is to identify and exploit low risk resources in and adjacent
      to existing or indicated producing areas that can be quickly developed and
      put
      on production at low cost, including the acquisition of producing properties
      with exploitation and exploration potential. We will also take advantage of
      our
      expertise to develop exploratory projects in focus areas and to participate
      with
      other companies in those areas to explore for oil and natural gas using
      state-of-the-art 3D seismic technology. Our management will use its extensive
      domestic and international oil and gas experience to establish and grow the
      Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      initial focus is on oil and natural gas properties located in the Eel River
      Basin, California and the Anadarko Basin, Oklahoma. We expect to have access
      to
      additional opportunities on a worldwide scale through a contractual relationship
      with Moyes &amp; Co., Inc.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      January 3, 2006 we entered into the INNEX Agreement. Our assets consist
      primarily of the right to acquire interests in existing leasehold acreage
      pursuant to the terms of the INNEX Agreement, and certain rights to a 75-square
      mile 3D seismic survey covering a portion of the Anadarko Basin in Roger Mills
      County, Oklahoma. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Our
      principal executive offices are located at 11902 Shanklin Street, Bakersfield,
      California 93303 and our phone number is (832) 567-0766. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      are
      negotiating a lease for approximately 3,200 square feet of office space which
      will serve as our headquarters in Bakersfield, California. We believe that
      suitable additional space to accommodate our anticipated growth will be
      available in the future on commercially reasonable terms.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>4.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table sets forth certain information regarding the expected beneficial
      ownership of the Common Stock as of the Closing Date, calculated in accordance
      with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
      amended. The table sets forth the beneficial ownership of (i) each person who,
      to our knowledge, beneficially owns more than 5% of the outstanding shares
      of
      Common Stock; (ii) each of the directors and executive officers of the Company;
      and (iii) all of our executive officers and directors as a group.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
      otherwise indicated, the address of each of our directors and executive officers
      is 11902 Shanklin Street, Bakersfield, California 93312.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-24-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

          <tr>
            <td align="left" valign="bottom" width="61%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name
                and Address of Beneficial Owner</strong></font></div>
            </td>
            <td width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td colspan="2" valign="bottom" width="14%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number
                of Shares Beneficially Owned </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(1)</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td colspan="2" valign="bottom" width="14%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Percentage</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>of
                Common Stock Outstanding </strong></font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="61%" style="border-bottom: white;">
              <div align="left">&#160;</div>
            </td>
            <td width="2%" style="border-bottom: white;">&#160;</td>
            <td colspan="2" valign="bottom" width="14%" style="border-bottom: white;">
              <div>&#160;</div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td colspan="2" valign="bottom" width="14%" style="border-bottom: white;">
              <div>&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="61%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">John
                L. Moran (2)</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,961,719</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10.80</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="61%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dennis
                B. Tower (3)</font></div>
            </td>
            <td width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,899,219</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10.63</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">%</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="61%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Christopher
                P. Moyes (4)</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,403,250</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">9.59</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="61%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">W.
                Kirk Bosch&#233; (5)</font></div>
            </td>
            <td width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">3,331,212</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">7.24</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="61%" style="border-bottom: white;">
              <div align="left">&#160;</div>
            </td>
            <td width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: white;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: white;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="61%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Executive
                Officers and Directors as Group</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">13,192,150</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="13%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">28.52</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="61%">&#160;</td>
            <td width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="13%">&#160;</td>
            <td align="left" valign="bottom" width="2%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
            <td align="right" valign="bottom" width="13%">&#160;</td>
            <td align="left" valign="bottom" width="1%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="15%">
      </div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beneficial
                ownership is calculated based on </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">45,883,009
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
                of Common Stock issued and outstanding as of the Closing Date. Beneficial
                ownership is determined in accordance with Rule 13d-3 of the SEC.
                The
                number of shares beneficially owned by a person includes shares of
                Common
                Stock underlying options or warrants held by that person that are
                currently exercisable or exercisable within 60 days of the Closing
                Date.
                The shares issuable pursuant to the exercise of those options or
                warrants
                are deemed outstanding for computing the percentage ownership of
                the
                person holding those options and warrants but are not deemed outstanding
                for the purposes of computing the percentage ownership of any other
                person. The persons and entities named in the table have sole voting
                and
                sole investment power with respect to the shares set forth opposite
                that
                person&#8217;s name, subject to community property laws, where applicable,
                unless otherwise noted in the applicable footnote.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                options exercisable within 60 days to acquire 75,000 shares of Common
                Stock, granted under the Company&#8217;s 2006 Equity Incentive
                Plan.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                warrants to acquire 112,500 shares of Common Stock exercisable within
                60
                days, and options exercisable within 60 days to acquire 75,000 shares
                of
                Common Stock, granted under the Company&#8217;s 2006 Equity Incentive Plan.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(4)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                4,343,750 shares of Common Stock distributed to affiliates of MMP
                LLP, a
                Brasada Stockholder, the holders of which have executed an irrevocable
                proxy giving Mr. Moyes sole voting power over the shares through
                April 6,
                2007. Also includes 34,000 shares of Common Stock and warrants to
                acquire
                25,500 shares of Common Stock exercisable within 60 days, which shares
                and
                warrants were purchased by Choregus Master Trust, Plan I, Money Purchase
                and Choregus Master Trust, Plan II, Profit Sharing in the Offering,
                and of
                which shares and warrants Mr. Moyes is deemed to be the beneficial
                owner.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(5)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Includes
                warrants to acquire 54,000 shares of Common Stock exercisable within
                60
                days, and options exercisable within 60 days to acquire 50,000 shares
                of
                Common Stock, granted under the Company&#8217;s 2006 Equity Incentive
                Plan.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>5.
      DIRECTORS AND EXECUTIVE OFFICERS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      the
      Closing Date, the then-current officers of Foothills resigned and,
      simultaneously, new officers were elected by the Board. Also on the Closing
      Date, J. Earl Terris, the then-sole director of Foothills, appointed Dennis
      B.
      Tower to the Board. Ten days after the Closing Date, Mr. Terris is expected
      to
      resign as a member of the Board, and Mr. Tower is expected to name two new
      directors to the Board. For more information regarding the changes to our Board,
      please see our Information Statement Pursuant to Section 14(F) of the Securities
      Exchange Act of 1934, filed with the SEC on April 6, 2006 and incorporated
      herein by reference. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Officers
      and Directors</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following persons are executive officers and directors of Foothills following
      the Merger, and hold the offices set forth opposite their names: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="26%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name</strong></font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Age</strong></font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Position</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="26%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dennis
                B. Tower</font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">59</font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Executive Officer, Director</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="26%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">John
                L. Moran</font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">60</font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">President</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="26%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">W.
                Kirk Bosch&#233;</font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">55</font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Financial Officer</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="26%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">J.
                Earl Terris</font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">60</font></div>
            </td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="26%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="6%">&#160;</td>
            <td align="left" valign="top" width="4%">&#160;</td>
            <td align="left" valign="top" width="37%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-25-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Dennis
      B. Tower</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Before
      joining Brasada as its Chief Executive Officer in 2006, Mr. Tower had extensive
      involvement in all phases of new venture exploration, appraisal, project
      evaluation and development, asset acquisition and disposal, strategic goals
      setting and human resource evaluation. During 2005, Mr. Tower, together with
      Messrs. Moran and Bosch&#233;, evaluated opportunities that would be appropriate for
      launching a new oil and gas exploration and development company, which
      ultimately led to the formation of Brasada at the end of 2005. From 2000 through
      2004, Mr. Tower served as President and Chief Executive Officer at First
      International Oil Corporation, a privately held independent oil company with
      extensive holdings in Kazakhstan, where he led the company to a successful
      sale
      with a major Chinese oil company. Previously, Mr. Tower held several Vice
      President, Manager, Director and Geologist positions at Atlantic Richfield
      Company (&#8220;ARCO&#8221;), where he was responsible for the company&#8217;s Mozambique drilling
      operations, managed the company&#8217;s exploration licenses in Myanmar and the
      Philippines, coordinated exploration efforts in other Asian countries and
      evaluated field redevelopment and asset acquisition opportunities. Mr. Tower
      led
      ARCO&#8217;s North Sea exploration activities for a nine-year period during which ARCO
      made numerous new oil and natural gas discoveries in the United Kingdom, Norway
      and the Netherlands. During the course of his career, Mr. Tower has been
      directly involved in the discovery of 35 oil and gas fields in 11 different
      countries. Mr. Tower holds both MSc and BSc degrees in Geology from Oregon
      State
      University. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>John
      L. Moran</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
      to
      joining Brasada in 2006, Mr. Moran, together with Messrs. Tower and Bosch&#233;,
      evaluated opportunities during 2005 that would be appropriate for launching
      a
      new oil and gas exploration and development company, which ultimately led to
      the
      formation of Brasada at the end of 2005. In May of 2000, Mr. Moran formed and
      later served as President and Exploration Manager of Carneros Energy, Inc.,
      a
      private oil and gas exploration company with exploration and acquisition
      emphasis in the San Joaquin and Sacramento Basins of California, where he was
      responsible for obtaining $75 million in equity funding. From 1997 through
      1998,
      Mr. Moran founded and acted President of Integrated Petroleum Exploration
      (&#8220;IPX&#8221;) which merged with and into Prime Natural Resources (&#8220;Prime&#8221;) in 1998,
      where he served as Vice President of Exploration. Prior to his time at IPX
      and
      Prime, Mr. Moran served as both Vice President Exploration/Chief Geologist
      and
      Exploration Manager/MidContinent Region for Apache Corporation. In 1995 Mr.
      Moran founded TeTra Exploration, an oil and gas exploration and development
      company using 3D seismic data base in the Anadarko Basin in Oklahoma. He was
      responsible for the acquisition of the right to use 13,000 miles of 2D seismic
      data base for exploration purposes and was instrumental in developing a 75
      square-mile 3D seismic data base that was later sold to a major oil and gas
      company. Mr. Moran holds both Bachelors and Masters Degrees in Geology with
      a
      major in Stratigraphy and a minor in Petrology from Oregon State
      University.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>W.
      Kirk Bosch&#233;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Bosch&#233; has diversified experience as a financial and accounting executive
      officer in public and private oil and gas exploration and production
      organizations. Mr. Bosch&#233; joined Brasada in 2006 as its Chief Financial Officer.
      During 2005, Mr. Bosch&#233;, together with Messrs. Tower and Moran, evaluated
      opportunities that would be appropriate for launching a new oil and gas
      exploration and development company, which ultimately led to the formation
      of
      Brasada at the end of 2005. Mr. Bosch&#233; served as Chief Financial Officer of
      First International Oil Corporation from 1997 through 2004. From 1986 through
      1997, Mr. Bosch&#233; was Vice President and Treasurer for Garnet Resources
      Corporation, a NASDAQ National Market System independent oil and gas exploration
      and production company with activities in seven foreign countries. He began
      his
      career with Price Waterhouse &amp; Co., and has been a Certified Public
      Accountant since 1975. Mr. Bosch&#233; holds a BBA in Accounting from the University
      of Houston.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-26-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>J.
      Earl Terris</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">J.
      Earl
      Terris is the founder of our company. Mr. Terris was the President,
      Secretary-Treasurer and Director from the company's inception on November 17,
      2000. On the Closing Date, Mr. Terris resigned from all offices, and resigned
      as
      a director effective 10 days after the Closing Date. He is currently employed
      as
      the president and owner of Sirret Investments, Ltd., a Canadian private
      investment company, and as a development manager for Berkshire Young
      Enterprises. Between September 1999 and January 2000 he was employed as the
      deputy store manager for Thresher Wine Stores. From November 1998 through August
      1999 he was employed as a sales advisor and sales administrator for Comet
      Stores, Inc. From September 1996 through April 1998 he was employed as the
      president of Koda Resources, Ltd., a Canadian public resources company. From
      1994 through 1997 Mr. Terris was a partner in Franchise Sales Associates and
      Franchise Conxions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Changes
      in Directors and Principal Officers</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      the
      Closing Date, J. Earl Terris, the sole member of the Board on that date,
      appointed Dennis B. Tower as a member of the Board. On the same date, Mr. Terris
      submitted a written resignation to the Company expressing his intent to resign
      from the Board as of 10 days following the Closing Date. Also on the Closing
      Date, Mr. Terris resigned as President and Secretary-Treasurer of the Company,
      effective upon submission. Concurrent with its acceptance of Mr. Terris&#8217;
resignation, the Board elected Mr. Tower as Chief Executive Officer, Mr. Moran
      as President, and Mr. Bosch&#233; as Chief Financial Officer of the Company.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Board
      Committees</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Board
      intends to appoint such persons and form such committees as are required to
      meet
      the corporate governance requirements imposed by the national securities
      exchanges. Therefore, we intend that a majority of our directors will eventually
      be independent directors and at least one director will qualify as an &#8220;audit
      committee financial expert.&#8221; Additionally, the Board is expected to appoint an
      audit committee, nominating committee and compensation committee, and to adopt
      charters relative to each such committee. Until further determination by the
      Board, the full Board will undertake the duties of the audit committee,
      compensation committee and nominating committee. We do not currently have an
      &#8220;audit committee financial expert&#8221; since we currently do not have an audit
      committee in place.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Code
      of Ethics</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company has not formally adopted a written code of ethics that applies to the
      Company&#8217;s principal executive officer, principal financial officer or
      controller, or persons performing similar functions. Based on the Company&#8217;s
      small size, early development stage and limited financial and human resources,
      Foothills did not adopt a written code of ethics prior to the Merger. We intend
      to formalize and adopt a written code of ethics as soon as practicable following
      the Closing Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-27-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>6.
      EXECUTIVE COMPENSATION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Executive
      Compensation</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brasada
      was formed in December 2005, and its business activities did not commence until
      January 2006. Accordingly, no compensation was paid to its executive officers
      during the year ended December 31, 2005. The executive officers of Brasada
      became the executive officers of Foothills on the Closing Date. Therefore,
      there
      was no compensation paid to the &#8220;Named Executive Officers&#8221; for any of the fiscal
      years ended 2005, 2004 or 2003. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Compensation
      of Directors</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      are
      currently no compensation arrangements in place for the members of the Board.
      We
      expect to establish these arrangements as additional members are appointed
      to
      the Board.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreements
      with Executive Officers </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Foothills
      entered into executive employment agreements with all members of our current
      management team on the Closing Date. The employment agreements entered into
      between Foothills and Dennis B. Tower, John L. Moran and W. Kirk Bosch&#233; have
      identical terms except for the position held by, the annual salary for, and
      the
      options granted to each such person. The respective employment agreements
      provide for an initial annual base salary of $190,000 each for Messrs. Tower
      and
      Moran and $175,000 for Mr. Bosch&#233;, for option grants of 300,000 shares of Common
      Stock each for Messrs. Tower and Moran and 200,000 shares of Common Stock for
      Mr. Bosch&#233;, and for unspecified annual bonuses as warranted. The options granted
      to each of Messrs. Tower, Moran and Bosch&#233; vest according to the following
      schedule: 25% of the options vest on the date of grant, 25% vest on the first
      anniversary of the date of grant, 25% vest on the second anniversary of the
      date
      of grant, and the remaining 25% vest on the third anniversary of the date of
      grant. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      executive employment agreements have unspecified terms of service subject to
      termination for cause and without cause, and provide for severance payments
      to
      each employee in the event he is terminated without cause or the employee
      terminates the agreement for good reason, in the amount of two times total
      compensation for the prior year. &#8220;Good reason&#8221; includes an adverse change in the
      executive&#8217;s position, title, duties or responsibilities, or any failure to
      re-elect him to such position (except for termination for &#8220;cause&#8221;). All of these
      employment agreements include standard indemnity, insurance, non-competition
      and
      confidentiality provisions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2006
      Equity Incentive Plan</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Summary</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Board
      reserved a total of 2,000,000 shares of our Common Stock for issuance under
      our
      2006 Equity Incentive Plan (the &#8220;2006 Plan&#8221;). If an incentive award granted
      under the 2006 Plan expires, terminates, is unexercised or is forfeited, or
      if
      any shares are surrendered to us in connection with an incentive award, the
      shares subject to such award and the surrendered shares will become available
      for further awards under the 2006 Plan. </font></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-28-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Shares
      issued under the 2006 Plan through the settlement, assumption or substitution
      of
      outstanding awards or obligations to grant future awards as a condition of
      acquiring another entity will not reduce the maximum number of shares available
      under the 2006 Plan. In addition, the number of shares of Common Stock subject
      to the 2006 Plan, any number of shares subject to any numerical limit in the
      2006 Plan, and the number of shares and terms of any incentive award may be
      adjusted in the event of any change in our outstanding Common Stock by reason
      of
      any stock dividend, spin-off, split-up, stock split, reverse stock split,
      recapitalization, reclassification, merger, consolidation, liquidation, business
      combination or exchange of shares or similar transaction. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Administration</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      compensation committee of the Board (or the Board in the absence of such a
      committee), will administer the 2006 Plan. Subject to the terms of the 2006
      Plan, the compensation committee will have complete authority and discretion
      to
      determine the terms of awards under the 2006 Plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Grants</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      2006
      Plan authorizes the grant to participants of nonqualified stock options,
      incentive stock options, restricted stock awards, restricted stock units,
      performance grants intended to comply with Section 162(m) of the Internal
      Revenue Code (the &#8220;Code&#8221;), and stock appreciation rights, as described below:
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Options
                granted under the 2006 Plan entitle the grantee, upon exercise, to
                purchase a specified number of shares from us at a specified exercise
                price per share. The exercise price for shares of Common Stock covered
                by
                an option cannot be less than the fair market value of the Common
                Stock on
                the date of grant unless we agree otherwise at the time of the grant.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Restricted
                stock awards and restricted stock units may be awarded on terms and
                conditions established by the compensation committee, which may include
                performance conditions for restricted stock awards and the lapse
                of
                restrictions on the achievement of one or more performance goals
                for
                restricted stock units. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                compensation committee may make performance grants, each of which
                will
                contain performance goals for the award, including the performance
                criteria, the target and maximum amounts payable, and other terms
                and
                conditions. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                2006 Plan authorizes the granting of stock awards. The compensation
                committee will establish the number of shares of Common Stock to
                be
                awarded and the terms applicable to each award, including performance
                restrictions. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#167;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Stock
                appreciation rights (&#8220;SARs&#8221;) entitle the participant to receive a
                distribution in an amount not to exceed the number of shares of Common
                Stock subject to the portion of the SAR exercised multiplied by the
                difference between the market price of a share of Common Stock on
                the date
                of exercise of the SAR and the market price of a share of Common
                Stock on
                the date of grant of the SAR. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Duration,
      Amendment and Termination</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Board
      may suspend or terminate the 2006 Plan without stockholder approval or
      ratification at any time or from time to time. Unless sooner terminated, the
      2006 Plan will terminate 10 years after it is adopted. The Board may also amend
      the 2006 Plan at any time. No change may be made that increases the total number
      of shares of Common Stock reserved for issuance pursuant to incentive awards
      or
      reduces the minimum exercise price for options or exchange of options for other
      incentive awards, unless such change is authorized by our
      stockholders.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-29-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>7.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      anticipate entering into an agreement with Moyes &amp; Co., Inc. to identify
      potential acquisition, development, exploitation and exploration opportunities
      that fit with our strategy. Moyes &amp; Co. is expected to screen opportunities
      and perform detailed evaluation of those opportunities that we decide to pursue,
      as well as assist with due diligence and negotiations with respect to such
      opportunities. Christopher P. Moyes, the President of Moyes &amp; Co., Inc.,
      will be appointed to the Board on April 16, 2006. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>8.
      DESCRIPTION OF SECURITIES.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Authorized
      Capital Stock</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of
      March 1, 2006, the Articles of Incorporation of Foothills authorized the
      issuance of 100,000,000 shares of Common Stock and 10,000,000 shares of
      preferred stock, par value $0.001 per share.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Capital
      Stock Issued and Outstanding</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of the
      date of the Closing Date, there were issued and outstanding </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">45,883,009
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock, including: (i)&#160;17,375,000 shares issued to the Brasada
      Stockholders, (ii)&#160;12,625,000 shares issued to the Foothills Stockholders,
      (iii)&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,383,009
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      issued in the Offering, and 500,000 shares issued as a finder fee in connection
      with the Transactions. In addition, there were outstanding warrants to
      acquire&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11,537,257
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock issued to investors in the Offering. These warrants are exercisable
      at any time following the Closing Date. Further, 2,000,000 shares of Common
      Stock have been reserved for issuance under the 2006 Equity Incentive Plan.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following description of Foothills capital stock is derived from various
      provisions of Foothills&#8217; Articles of Incorporation and By-laws as well as
      provisions of applicable law. Such description is not intended to be complete
      and is qualified in its entirely by reference to the relevant provisions of
      Foothills&#8217; Articles of Incorporation and By-laws included as exhibits to the
      registration statement on Form SB-2/A filed with the SEC on June 18, 2001.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description
      of Common Stock </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Holders
      of the Common Stock are entitled to one vote for each share held on all matters
      submitted to a stockholder vote. Holders of Common Stock do not have cumulative
      voting rights. Therefore, holders of a majority of the shares of Common Stock
      voting for the election of directors can elect all of the directors. Holders
      of
      the Common Stock representing a majority of the voting power of the capital
      stock issued, outstanding and entitled to vote, represented in person or by
      proxy, are necessary to constitute a quorum at any meeting of stockholders.
      A
      vote by the holders of a majority of the outstanding shares of Common Stock
      is
      required to effectuate certain fundamental corporate changes such as
      liquidation, merger or an amendment to the articles of incorporation.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Holders
      of Common Stock are entitled to share in all dividends that the Board, in its
      discretion, declares from legally available funds. In the event of a
      liquidation, dissolution or winding up, each outstanding share entitles its
      holder to participate pro rata in all assets that remain after payment of
      liabilities and after providing for each class of stock, if any, having
      preference over the Common Stock. Holders of the Common Stock have no
      pre-emptive rights, no conversion rights and there are no redemption provisions
      applicable to the Common Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-30-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description
      of Preferred Stock</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Foothills
      is authorized to issue 10,000,000 shares of &#8220;blank check&#8221; preferred stock, par
      value $0.001 per share, none of which are issued and outstanding as of the
      Closing Date. The Board is vested with authority to divide the shares of
      preferred stock into series and fix and determine the relative rights and
      preferences of the shares of any such series. Once authorized, the dividend
      or
      interest rates, conversion rates, voting rights, redemption prices, maturity
      dates and similar characteristics of the preferred stock will be determined
      by
      the Board, without the necessity of obtaining approval of the
      stockholders.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description
      of Warrants</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of the
      Closing Date there were warrants issued and outstanding representing the right
      to purchase&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11,537,257
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock. The outstanding warrants were issued to the investors in
      connection with the Offering. The warrants are exercisable at a price of $1.00
      per whole share for a period of five years. Each warrant has customary
      provisions. The shares of Common Stock underlying the outstanding warrants
      issued in connection with the purchase of Units in the Offering are subject
      to
      registration under the Securities Act of 1933 by the Company, within 120 days
      of
      the Closing Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description
      of Options</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of the
      Closing Date, there were options outstanding to purchase </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">800,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shares
      of Common Stock. Under the terms of our 2006 Equity Incentive Plan, we may
      issue
      incentive awards that may include the issuance of up to 2,000,000 shares of
      Common Stock. The 2006 Equity Incentive Plan was adopted by the Board and
      Foothills Stockholders prior to the Merger, and we anticipate that our
      stockholders after the Merger will ratify and adopt the 2006 Equity Incentive
      Plan and any awards that have been made under the Plan through the Closing
      Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PART
      II</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>1.&#160;&#160;&#160;&#160;
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>MARKET
          PRICE OF AND DIVIDENDS ON COMMON EQUITY AND OTHER STOCKHOLDER
          MATTERS</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Common Stock is quoted on the NASD OTC Bulletin Board&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">under
      the
      symbol &#8220;FTRS.OB.&#8221;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      is
      currently no established market for the Common Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of the
      Closing Date, there were approximately 20 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">holders
      of record of shares of the Common Stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Trades
      in
      the Common Stock may be subject to Rule 15g-9 of the Exchange Act, which rule
      imposes certain requirements on broker/dealers who sell securities subject
      to
      the rule to persons other than established customers and accredited investors.
      For transactions covered by the rule, brokers/dealers must make a special
      suitability determination for purchasers of the securities and receive the
      purchaser&#8217;s written agreement to the transaction prior to sale. The SEC also has
      rules that regulate broker/dealer practices in connection with transactions
      in
&#8220;penny stocks.&#8221; Penny stocks generally are equity securities with a price of
      less than $5.00 (other than securities registered on certain national securities
      exchanges or quoted on the NASDAQ system, provided that current price and volume
      information with respect to transactions in that security is provided by the
      applicable exchange or system). The penny stock rules require a broker/dealer,
      before a transaction in a penny stock not otherwise exempt from the rules,
      to
      deliver a standardized risk disclosure document prepared by the SEC that
      provides information about penny stocks and the nature and level of 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&#8217;s
      account. The bid and offer quotations, and the broker/dealer and salesperson
      compensation information, must be given to the customer orally or in writing
      before effecting the transaction, and must be given to the customer in writing
      before or with the customer&#8217;s confirmation. These disclosure requirements may
      have the effect of reducing the level of trading activity in the secondary
      market for shares of the Common Stock. As a result of these rules, investors
      may
      find it difficult to sell their shares. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of the
      Closing Date, there are </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">45,883,009
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock issued and outstanding. The shares of Common Stock issued in
      connection with the Transactions, are &#8220;restricted securities&#8221; which may be sold
      or otherwise transferred only if such shares are first registered under the
      Securities Act or are exempt from such registration requirements. As discussed
      elsewhere in this Current Report on Form 8-K, we have agreed to file a
      registration statement within 120 days of the Closing Date to register certain
      of these shares.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, there are 2,000,000 shares of Common Stock reserved for issuance
      of
      stock options and other incentive awards pursuant to the 2006 Equity Incentive
      Plan. We expect to file a registration statement on Form S-8 to register the
      shares of Common Stock reserved for issuance of incentive awards under the
      2006
      Equity Incentive Plan. This registration statement is expected to become
      effective on filing. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Dividend
      Policy</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Foothills
      has never declared or paid dividends. We intend to retain earnings, if any,
      to
      support the development of the business and therefore do not anticipate paying
      cash dividends for the foreseeable future. Payment of future dividends, if
      any,
      will be at the discretion of the Board after taking into account various
      factors, including current financial condition, operating results and current
      and anticipated cash needs.</font></div>
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      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Securities
      Authorized for Issuance Under Equity Compensation Plans</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      had no
      securities authorized for issuance under any equity compensation plan as of
      the
      end of fiscal year 2005. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2.&#160;&#160;
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LEGAL
          PROCEEDINGS</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
      time
      to time we may be named in claims arising in the ordinary course of business.
      Currently, no legal proceedings or claims are pending against us or involve
      us
      that, in the opinion of our management, could reasonably be expected to have
      a
      material adverse effect on our business or financial condition.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>3.&#160;&#160;
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CHANGES
          IN AND DISAGREEMENTS WITH ACCOUNTANTS</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">None.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>4.&#160;&#160;
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RECENT
          SALES OF UNREGISTERED SECURITIES </strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Shares
      Issued in Connection with the Merger and the Offering</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      the
      Closing Date, the Brasada Stockholders surrendered all of the issued and
      outstanding shares of Brasada and received 17,375,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock. The Foothills Stockholders retained 12,625,000 shares of Common
      Stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the Offering, we sold </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,383,009
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock and warrants to purchase up to&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11,537,257
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shares
      of
      Common Stock for five years at a price of $1.00 per whole share, to accredited
      investors, for a total purchase price of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$10,768,106</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      In
      connection with the Closing, Foothills issued warrants to acquire 500,000 shares
      of Common Stock to the Placement Agent, which warrants are exercisable for
      five
      years at $1.00 per whole share. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Concurrently
      with the Merger, Foothills granted options to purchase </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">800,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shares
      of Common Stock under the 2006 Equity Incentive Plan to the Named Executive
      Officers</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.&#160;
      Except as otherwise described herein, the options are issuable pursuant to
      the
      2006 Equity Incentive Plan at an exercise price of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$0.70</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      per
      share and will vest over the three-year period following the date of
      grant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      transactions discussed above are exempt from registration under Section 4(2)
      of
      the Securities Act and Rule 506 of Regulation D as promulgated by the
      SEC.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>5.&#160;&#160;
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>INDEMNIFICATION
          OF DIRECTORS AND OFFICERS</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Nevada
      Revised Statutes (&#8220;NRS&#8221;) Sections 78.7502 and 78.751 provide Foothills with the
      power to indemnify any of its directors and officers. The director or officer
      must have conducted himself/herself in good faith and reasonably believe that
      his/her conduct was in, or not opposed to, our best interests. In a criminal
      action the director, officer, employee or agent must not have had a reasonable
      cause to believe his/her conduct was unlawful.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Under
      NRS
      Section 78.751, advances for expenses may be made by agreement if the director
      or officer affirms in writing that he/she believes he/she has met the standards
      and will personally repay the expenses if it is determined such officer or
      director did not meet the standards.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Foothills&#8217;
      By-laws include an indemnification provision under which Foothills has the
      power
      to indemnify its directors, officers and former directors and officers
      (including heirs and personal representatives) against all costs, charges and
      expenses actually and reasonably incurred, including an amount paid to settle
      an
      action or satisfy a judgment to which the director or officer is made a party
      by
      reason of being or having been a director or officer of Foothills or any of
      its
      subsidiaries.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Foothills&#8217;
      By-laws also provide that the directors may cause Foothills to purchase and
      maintain insurance for the benefit of a person who is or was serving as a
      director, officer, employee or agent of Foothills or any of its subsidiaries
      (including heirs and personal representatives) against a liability incurred
      by
      him/her as a director, officer, employee or agent.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Foothills&#8217;
      Articles of Incorporation provide a limitation of liability in that no director
      or officer shall be personally liable to Foothills or any of its stockholders
      for damages for breach of fiduciary duty as director or officer involving any
      act or omission of any such director or officer, provided there was no
      intentional misconduct, fraud or a knowing violation of the law, or payment
      of
      dividends in violation of NRS Section 78.300.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PART
      III</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>1.&#160;&#160;
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>INDEX
          TO EXHIBITS</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
      Item
      9.01(d) below, which is incorporated by reference herein.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2.&#160;&#160;
          DESCRIPTION OF EXHIBITS</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
      Exhibit Index below and the corresponding exhibits, which are incorporated
      by
      reference herein.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      3.02.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Recent
      Sales of Unregistered Securities.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on
      Form 8-K, which disclosure is incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      5.01.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Changes
      in Control of Registrant.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on
      Form 8-K, which disclosure is incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      5.02.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 36.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Departure
      of Directors or Principal Officers; Election of Directors; Appointment of
      Principal Officers.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on
      Form 8-K, which disclosure is incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      5.06.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Change
      in Shell Company Status.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on
      Form 8-K, which disclosure is incorporated herein by reference. As a result
      of
      the Merger described under Item 2.01 of this Current Report on Form 8-K, we
      believe that Foothills Resources, Inc. is no longer a shell corporation as
      that
      term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange
      Act.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-34-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      9.01.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Financial
      Statements and Exhibits.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(a)</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Financial
                Statements of Businesses
                Acquired.</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(b)</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pro
                Forma Financial
                Information.</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      financial statements of Foothills for the periods and dates indicated below
      are
      filed with this report.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="69%">&#160;</td>
            <td align="right" valign="top" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Page</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Audited
                Financial Statements:</strong></font></div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brasada
                California, Inc. (f/k/a Brasada Resources LLC):</strong></font></div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#REPORT">Independent
                Auditor&#8217;s Report</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-2</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#BS">Balance
                Sheet as of December 31, 2005</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-3</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#SOO">Statement
                of Operations for the year ended December 31,
                2005</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-4</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#SOM"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Statement
                of Members&#8217; Capital for the period from Inception </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(December
                29, 2005) through December 31, 2005</font></a></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-4</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#CF"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Statement
                of Cash Flows for the period from Inception </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(December
                29, 2005) through December 31, 2005</font></a></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-5</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#NOTES">Notes
                to Financial Statements</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-6</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#SUPPLEMENTALOIL">Supplemental
                Oil and Gas Information
                (Unaudited)</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-9</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Unaudited
                Pro forma Financial Information:</strong></font></div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Foothills
                Resources, Inc.:</strong></font></div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#INTRODUCTION">Introduction</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-10</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#bs2">Pro
                Forma Consolidated Balance Sheet as of December 31,
                2005</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-11</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#soo2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                Forma Consolidated Statement of Operations for the year ended </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">December&#160;31,
                2005 </font></a></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-12</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#NOTES2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Note
                to Pro Forma Financial Statements as of December 31, 2005 and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
                the year ended December 31, 2005</font></a></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-13</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-35-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(d)</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibits.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="left">
      <table border="1" bordercolor="black" cellpadding="8" cellspacing="1" width="100%">

          <tr bgcolor="white">
            <td valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
                No.</strong></font></div>
            </td>
            <td valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description</strong></font></div>
            </td>
            <td valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Reference</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex2-1.htm">2.1</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Agreement
                and Plan of Merger and Reorganization, dated as of April 6, 2006,
                by and
                between Foothills Resources, Inc., a Nevada corporation, Brasada
                Acquisition Corp., a Delaware corporation and Brasada California,
                Inc., a
                Delaware corporation.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Articles
                of Incorporation of Foothills Resources, Inc.</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference to Exhibit&#160;3.1 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certificate
                of Amendment of the Articles of Incorporation of Foothills Resources,
                Inc.</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference to Exhibit&#160;3.2 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Bylaws
                of Foothills Resources, Inc.</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference to Exhibit&#160;3.3 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Specimen
                Stock Certificate of Foothills Resources, Inc.</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference to Exhibit&#160;4.1 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex4-2.htm">4.2</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Warrant issued to the Investors in the Private Placement Offering,
                April 6, 2006.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex4-3.htm">4.3</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Lock-Up Agreement by and between Foothills Resources, Inc. and
                the
                Brasada Stockholders.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-1.htm">10.1</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Subscription Agreement by and between Foothills Resources, Inc.
                and the
                investors in the Offering.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-2.htm">10.2</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Registration Rights Agreement by and between Foothills Resources,
                Inc.
                and the investors in the Offering.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-3.htm">10.3</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Split
                Off Agreement, dated April 6, 2006, by and among Foothills Resources,
                Inc., J. Earl Terris, Foothills Leaseco, Inc. and Brasada California,
                Inc.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-4.htm">10.4</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and Dennis B. Tower.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-5.htm">10.5</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and John L. Moran.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-6.htm">10.6</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and W. Kirk Bosch&#233;.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-7.htm">10.7</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Indemnity Agreement by and between Foothills Resources, Inc. and
                the
                Directors and Officers of Foothills Resources, Inc.* </font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.8</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Farmout
                and Participation Agreement, dated as of January 3, 2006, by and
                between
                INNEX California, Inc. and Brasada Resources, LLC.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;10.9</font></div>
            </td>
            <td align="left" valign="top" width="42%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notice
              and Acknowledgement of Increase of Offering.*</font></td>
            <td align="left" valign="top" width="42%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="15%">
      </div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Filed
                herewith.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-36-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SIGNATURES</strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">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.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: "><strong>FOOTHILLS
              RESOURCES, INC.</strong></font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
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          <tr valign="top" bgcolor="#ffffff">
            <td>&#160;</td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">By:&#160;&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;Dennis
              B.
              Tower</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
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              B. Tower</font></td>
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          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">Title:<font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt" size="3">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
              Executive Officer</font></font></td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dated:
      April 6, 2006</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-37-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
      INDEX</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="left">
      <table border="1" bordercolor="black" cellpadding="8" cellspacing="1" width="100%">

          <tr bgcolor="white">
            <td valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
                No.</strong></font></div>
            </td>
            <td valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description</strong></font></div>
            </td>
            <td valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Reference</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex2-1.htm">2.1</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Agreement
                and Plan of Merger and Reorganization, dated as of April 6, 2006,
                by and
                between Foothills Resources, Inc., a Nevada corporation, Brasada
                Acquisition Corp., a Delaware corporation and Brasada California,
                Inc., a
                Delaware corporation.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Articles
                of Incorporation of Foothills Resources, Inc.</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference to Exhibit&#160;3.1 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certificate
                of Amendment of the Articles of Incorporation of Foothills Resources,
                Inc.</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference to Exhibit&#160;3.2 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Bylaws
                of Foothills Resources, Inc.</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference to Exhibit&#160;3.3 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Specimen
                Stock Certificate of Foothills Resources, Inc.</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Incorporated
                by reference to Exhibit&#160;4.1 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex4-2.htm">4.2</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Warrant issued to the Investors in the Private Placement Offering,
                April 6, 2006.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex4-3.htm">4.3</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Lock-Up Agreement by and between Foothills Resources, Inc. and
                the
                Brasada Stockholders.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-1.htm">10.1</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Subscription Agreement by and between Foothills Resources, Inc.
                and the
                investors in the Offering.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-2.htm">10.2</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Registration Rights Agreement by and between Foothills Resources,
                Inc.
                and the investors in the Offering.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-3.htm">10.3</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Split
                Off Agreement, dated April 6, 2006, by and among Foothills Resources,
                Inc., J. Earl Terris, Foothills Leaseco, Inc. and Brasada California,
                Inc.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-4.htm">10.4</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and Dennis B. Tower.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-5.htm">10.5</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and John L. Moran.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-6.htm">10.6</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and W. Kirk Bosch&#233;.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="v039598_ex10-7.htm">10.7</a></font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Indemnity Agreement by and between Foothills Resources, Inc. and
                the
                Directors and Officers of Foothills Resources, Inc.* </font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="10%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.8</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Farmout
                and Participation Agreement, dated as of January 3, 2006, by and
                between
                INNEX California, Inc. and Brasada Resources, LLC.*</font></div>
            </td>
            <td align="left" valign="top" width="42%" style="border-bottom: black thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.9</font></div>
            </td>
            <td align="left" valign="top" width="42%"><font size="2">Notice and
              Acknowledgement of Increase of Offering.*</font></td>
            <td align="left" valign="top" width="42%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <hr style="COLOR: black" align="left" noshade size="1" width="15%">
      </div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">*</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Filed
                herewith. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">-38-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="69%">&#160;</td>
            <td align="right" valign="top" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Page</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Audited
                Financial Statements:</strong></font></div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brasada
                California, Inc. (f/k/a Brasada Resources LLC):</strong></font></div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#REPORT">Independent
                Auditor&#8217;s Report</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-2</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#BS">Balance
                Sheet as of December 31, 2005</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-3</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#SOO">Statement
                of Operations for the year ended December 31,
                2005</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-4</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#SOM"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Statement
                of Members&#8217; Capital for the period from Inception </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(December
                29, 2005) through December 31, 2005</font></a></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-4</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#CF"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Statement
                of Cash Flows for the period from Inception </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(December
                29, 2005) through December 31, 2005</font></a></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-5</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#NOTES">Notes
                to Financial Statements</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-6</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#SUPPLEMENTALOIL">Supplemental
                Oil and Gas Information
                (Unaudited)</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-9</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">&#160;</td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Unaudited
                Pro forma Financial Information:</strong></font></div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Foothills
                Resources, Inc.:</strong></font></div>
            </td>
            <td align="right" valign="top" width="11%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#INTRODUCTION">Introduction</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-10</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><a href="#bs2">Pro
                Forma Consolidated Balance Sheet as of December 31,
                2005</a></font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-11</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#soo2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                Forma Consolidated Statement of Operations for the year ended </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">December&#160;31,
                2005 </font></a></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-12</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="69%">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a href="#NOTES2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Note
                to Pro Forma Financial Statements as of December 31, 2005 and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">for
                the year ended December 31, 2005</font></a></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-13</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">F-1</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><a name="REPORT">INDEPENDENT
      AUDITOR&#8217;S REPORT</a></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      the
      Audit Committee</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brasada
      California, Inc.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Successor
      in interest Brasada Resources, LLC</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Houston,
      Texas</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      audited the balance sheet of Brasada Resources, LLC, a development stage
      company, as of December 31, 2005, and the related statements of operations,
      member&#8217;s capital and cash flows for the period from inception on December 29,
      2005 through December 31, 2005. These financial statements are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements based on our audits.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      conducted our audits in accordance with auditing standards generally accepted
      in
      the United States of America. Those standards require that we plan and perform
      the audits to obtain reasonable assurance about whether the financial statements
      are free of material misstatement. An audit includes examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial statements.
      An
      audit also includes assessing the accounting principles used and significant
      estimates made by management, as well as evaluating the overall financial
      statement presentation. We believe that our audits provide a reasonable basis
      for our opinion.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      our
      opinion, the financial statements referred to above present fairly in all
      material respects the financial position of Brasada Resources, LLC, a
      development stage company, at December 31, 2005, and the results of its
      operations and its cash flows for the period from inception on December 29,
      2005
      through December 31, 2005, in conformity with accounting principles generally
      accepted in the United States of America.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 153pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">BROWN
      ARMSTRONG PAULDEN </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 153pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">McCOWN
      STARBUCK THORNBURGH &amp; KEETER</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 153pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ACCOUNTANCY
      CORPORATION</font></div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Bakersfield,
      California</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March
      21,
      2006</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">F-2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>FINANCIAL
      STATEMENTS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Set
      forth
      below are the audited financial statements of Brasada Resources LLC, the
      predecessor company to Brasada, as of December 31, 2005. The business operations
      of Brasada will be the business operations of Foothills following the Merger.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>
      <div>
        <table cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td colspan="8" valign="top" width="51%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>BRASADA
                  RESOURCES LLC</strong></font></div>
              </td>
            </tr>
            <tr>
              <td colspan="8" valign="top" width="51%">
                <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>(A
                  DEVELOPMENT STAGE COMPANY)</strong></font></div>
              </td>
            </tr>
            <tr>
              <td valign="top" width="2%">&#160;</td>
              <td valign="top" width="2%">&#160;</td>
              <td valign="top" width="2%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
              <td valign="top" width="13%">&#160;</td>
              <td valign="top" width="8%">&#160;</td>
            </tr>
            <tr>
              <td colspan="8" valign="top" width="51%">
                <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong><a name="BS">BALANCE
                  SHEET</a></strong></font></div>
              </td>
            </tr>
            <tr>
              <td colspan="8" valign="top" width="51%">
                <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>DECEMBER
                  31, 2005</strong></font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div>
        <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

            <tr bgcolor="#ccffcc">
              <td valign="bottom" width="85%" style="border-bottom: #ccffcc;">
                <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>Assets
                  </strong></font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" colspan="2" valign="bottom" width="11%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
              <td width="2%" style="border-bottom: medium none;">&#160;</td>
              <td align="right" colspan="2" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Property
                  and equipment, at cost:</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" colspan="2" valign="bottom" width="11%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Oil
                  and gas properties, using full cost accounting -</font></div>
              </td>
              <td width="2%" style="border-bottom: medium none;">&#160;</td>
              <td align="right" colspan="2" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ffffff solid;">
                <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Unproved
                  properties not being amortized</font></div>
              </td>
              <td width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total
                  assets</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>
            <tr>
              <td valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
              <td width="2%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td valign="bottom" width="85%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>Liabilities
                  and Members' Capital </strong></font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
              <td width="2%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Accounts
                  payable</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
              <td width="2%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Members'
                  capital:</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ffffff solid;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Members'
                  capital</font></div>
              </td>
              <td width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">50,000
                  </font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total
                  liabilities and members' capital</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>
            <tr>
              <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
              <td width="2%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            </tr>

        </table>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      accompanying notes are an integral part of these financial
      statements</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">F-3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>BRASADA
                RESOURCES LLC</strong></font></div>
            </td>
          </tr>
          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>(A
                DEVELOPMENT STAGE COMPANY)</strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="13%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
          </tr>
          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong><a name="SOO">STATEMENT
                OF OPERATIONS</a></strong></font></div>
            </td>
          </tr>
          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>FOR
                THE PERIOD FROM INCEPTION</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="right" colspan="8" valign="top" width="51%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>(DECEMBER
                29, 2005) THROUGH DECEMBER 31,
                2005</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Income</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="85%" style="border-bottom: white solid;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Costs
                and expenses</font></div>
            </td>
            <td width="2%" style="border-bottom: white thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net
                income (loss)</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black double;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>BRASADA
                RESOURCES LLC</strong></font></div>
            </td>
          </tr>
          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>(A
                DEVELOPMENT STAGE COMPANY)</strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="13%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
          </tr>
          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong><a name="SOM">STATEMENT
                OF MEMBERS' CAPITAL</a></strong></font></div>
            </td>
          </tr>
          <tr>
            <td colspan="8" valign="top" width="51%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>FOR
                THE PERIOD FROM INCEPTION</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="right" colspan="8" valign="top" width="51%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>(DECEMBER
                29, 2005) THROUGH DECEMBER 31,
                2005</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">
      <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Contributions</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">50,000</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net
                income (loss) for the period from inception </font></div>
            </td>
            <td width="2%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ffffff solid;">
              <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">(December
                29, 2005) through December 31, 2005</font></div>
            </td>
            <td width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Balance,
                December 31, 2005</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black double;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">50,000</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
            <td width="2%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      accompanying notes are an integral part of these financial
      statements</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">F-4</font></div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>BRASADA
                RESOURCES LLC</strong></font></div>
            </td>
          </tr>
          <tr>
            <td colspan="8" valign="top" width="51%">
              <div align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>(A
                DEVELOPMENT STAGE COMPANY) </strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="2%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
            <td valign="top" width="13%">&#160;</td>
            <td valign="top" width="8%">&#160;</td>
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          <tr>
            <td colspan="8" valign="top" width="51%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong><a name="CF">STATEMENT
                OF CASH FLOWS</a></strong></font></div>
            </td>
          </tr>
          <tr>
            <td colspan="8" valign="top" width="51%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>FOR
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          <tr>
            <td align="right" colspan="8" valign="top" width="51%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman"><strong>(DECEMBER
                29, 2005) THROUGH DECEMBER 31,
                2005</strong></font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash
                flows from operating activities:</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" colspan="2" valign="bottom" width="11%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ffffff solid;">
              <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net
                income (loss)</font></div>
            </td>
            <td width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
              <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net
                cash provided by operating activities</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
            <td width="2%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash
                flows from investing activities:</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ffffff solid;">
              <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Additions
                to oil and gas properties</font></div>
            </td>
            <td width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(50,000</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
              <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net
                cash used for investing activities</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(50,000</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
            <td width="2%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash
                flows from financing activities:</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ffffff solid;">
              <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Capital
                contributions by members</font></div>
            </td>
            <td width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">50,000
                </font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
              <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net
                cash provided by financing activities</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">50,000
                </font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
            <td width="2%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net
                increase (decrease) in cash and cash equivalents</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: medium none;">&#160;</td>
            <td width="2%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ffffff solid;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash
                and cash equivalents at beginning of period</font></div>
            </td>
            <td width="2%" style="border-bottom: #ffffff thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Cash
                and cash equivalents at end of period</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black double;">
              <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      accompanying notes are an integral part of these financial
      statements</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">F-5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>BRASADA
      RESOURCES LLC</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>(A
      DEVELOPMENT STAGE COMPANY)</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><a name="NOTES">NOTES
      TO FINANCIAL STATEMENTS</a></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DECEMBER
      31, 2005</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Note
      1 - Summary of Operations and Going Concern</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Brasada
      Resources LLC (the &#8220;Company&#8221;) was organized December 29, 2005 as a limited
      liability company under the laws of the state of Delaware. The Company&#8217;s
      principal business is to pursue opportunities in oil and gas acquisition,
      exploration and development. In accordance with Statement of Financial
      Accounting Standards (&#8220;SFAS&#8221;) No. 7, Accounting and Reporting by Development
      Stage Enterprises, the Company is considered to be a development stage
      company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company&#8217;s ability to continue as a going concern is dependent upon obtaining the
      necessary financing to acquire, explore and develop oil and gas interests and
      to
      generate profitable operations from its oil and gas interests in the future.
      To
      address these matters, management intends to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">borrow
                from Foothills Resources, Inc., a Nevada company (&#8220;Foothills&#8221;), under a
                bridge loan facility to fund its planned initial acquisition, exploration
                and development activities (see Note 3);
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">pursue
                a merger with Foothills, which will allow the Company to raise additional
                capital through the sale and issuance of common shares of its corporate
                successor-in-interest (see Note 3).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Should
      the going concern assumptions not be appropriate and the Company not be able
      to
      realize its assets and settle its liabilities in the normal course of
      operations, these financial statements would require adjustments to the amounts
      and classifications of assets and liabilities.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Note
      2 - Significant Accounting Policies</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Principles
      of consolidation</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company accounts for its investments in oil and gas joint ventures using the
      proportionate consolidation method, whereby the Company&#8217;s proportionate share of
      each entity&#8217;s assets, liabilities, revenues and expenses is included in the
      appropriate classification in the financial statements.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Use
      of estimates</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts reported in the financial
      statements. Actual results could differ from such estimates. Changes in such
      estimates may affect amounts reported in future periods.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Oil
      and gas properties</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company follows the full-cost method of accounting for oil and gas properties.
      Under this method, all productive and nonproductive costs incurred in connection
      with the acquisition, exploration and development of oil and gas reserves are
      capitalized in separate cost centers for each country in which the Company
      has
      operations. Such capitalized costs include leasehold acquisition, geological,
      geophysical and other exploration work, drilling, completing and equipping
      oil
      and gas wells, asset retirement costs, internal costs directly attributable
      to
      property acquisition, exploration and development, and other related costs.
      The
      Company also capitalizes interest costs related to unevaluated oil and gas
      properties.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">F-6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      capitalized costs of oil and gas properties in each cost center are amortized
      using the unit-of-production method. Sales or other dispositions of oil and
      gas
      properties are normally accounted for as adjustments of capitalized costs.
      Gains
      or losses are not recognized in income unless a significant portion of a cost
      center&#8217;s reserves is involved. Capitalized costs associated with the acquisition
      and evaluation of unproved properties are excluded from amortization until
      it is
      determined whether proved reserves can be assigned to such properties or until
      the value of the properties is impaired. Unproved properties are assessed at
      least annually to determine whether any impairment has occurred. If the net
      capitalized costs of oil and gas properties in a cost center exceed an amount
      equal to the sum of the present value of estimated future net revenues from
      proved oil and gas reserves in the cost center and the costs of properties
      not
      being amortized, both adjusted for income tax effects, such excess is charged
      to
      expense. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Asset
      retirement obligations</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      fair
      value of an asset retirement obligation is recognized in the period in which
      it
      is incurred if a reasonable estimate can be made. The Company&#8217;s asset retirement
      obligations primarily relate to the abandonment of oil and gas wells and
      producing facilities.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Members'
      capital</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      operations of the Company are governed by the provisions of an operating
      agreement executed by and among its members. The total capital contributed
      by
      the members as of December 31, 2005 was $50,000.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Revenue
      recognition</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Oil
      and
      gas revenues from producing wells are recognized when title and risk of loss
      is
      transferred to the purchaser of the oil or gas.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>New
      accounting pronouncements</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      December 2004, the Financial Accounting Standards Board (&#8220;FASB&#8221;) issued SFAS No.
      123 (revised 2004), Share-Based Payment (&#8220;SFAS 123(R)&#8221;). SFAS 123(R) is a
      revision of SFAS No. 123, Accounting for Stock Based Compensation (&#8220;SFAS 123&#8221;),
      and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock
      Issued to Employees (&#8220;APB 25&#8221;). Among other items, SFAS 123(R) eliminates the
      use of APB 25 and the intrinsic value method of accounting, and requires
      companies to recognize the cost of employee services received in exchange for
      awards of equity instruments based on the grant date fair value of those awards.
      SFAS 123(R) permits the use of the Black-Scholes model as well as other standard
      option pricing models. The compliance date for SFAS 123(R) has been amended
      such
      that the standard will be effective for the first full fiscal year beginning
      after June 15, 2005. The Company has not yet determined which model it will
      use
      to measure the fair value of employee stock options upon the adoption of SFAS
      123(R) and has not yet determined the impact on the Company&#8217;s future operating
      results. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      March
      2005, the Securities and Exchange Commission (&#8220;SEC&#8221;) issued Staff Accounting
      Bulletin (&#8220;SAB&#8221;) No. 107 on SFAS No. 123(R) (&#8220;SAB 107&#8221;). SAB 107 reinforces the
      flexibility allowed by SFAS 123(R) to choose an option pricing model, provides
      guidance on when it would be appropriate to rely exclusively on either
      historical or implied volatility in estimating expected volatility and provided
      examples and simplified approaches to determining the expected term. In April
      2005, the SEC extended the date by which companies are required to adopt SFAS
      123(R) from the first reporting period beginning on or after June 15, 2005
      to
      the first reporting period of the first full fiscal year beginning on or after
      June 15, 2005.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
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      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Note
      3 - Subsequent Events</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      January 2006, the Company&#8217;s members contributed an additional $50,000 to its
      capital.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      January 2006, the Company entered into a Farmout and Participation Agreement
      providing for a joint venture for exploration, development and production of
      oil
      and gas in the Eel River Basin, California (the &#8220;Eel River Agreement&#8221;). Under
      the terms of the Eel River Agreement, the Company will serve as operator of
      the
      joint venture. To earn interests in certain of the leases held by its joint
      venture partner, the Company must (a) drill two exploratory wells no later
      than
      June 30, 2006, subject to rig availability, (b) acquire 1,000 additional
      leasehold acres in the area of mutual interest, and (c) conduct certain other
      operations. Following successful completion of these activities, the Company
      has
      the right, but not the obligation, to conduct additional activities in
      accordance with the Eel River Agreement to earn additional leasehold
      interests.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      February 2006, the Company was converted into a Delaware corporation named
      Brasada California, Inc. (&#8220;Brasada&#8221;). Under Delaware law, all of the Company&#8217;s
      assets, liabilities, rights and obligations were acquired and assumed by
      Brasada, and the capital of the Company&#8217;s members was exchanged for shares of
      Brasada&#8217;s common stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      March
      2006, Brasada entered into a binding term sheet with Foothills providing for
      (a)
      a private placement of $7,000,000 of common stock and warrants of Foothills,
      (b)
      the merger of Brasada into a wholly owned subsidiary of Foothills, in exchange
      for the issuance of 42.9% of the issued and outstanding common stock of
      Foothills to the shareholders of Brasada, and (c) the bridge loan facility
      described in the following paragraph.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      March
      2006, Brasada entered into agreements with Foothills, pursuant to which Brasada
      may borrow up to $3,000,000 from Foothills to meet agreed working capital
      commitments. The loans are evidenced by a promissory note (the &#8220;Bridge Note&#8221;),
      which matures 120 days from the date of the loans, bears interest at 9% per
      annum payable monthly commencing 30 days from the date of the loans, and is
      secured by all of Brasada&#8217;s assets and shares of its common stock equal to 51%
      of such stock issued and outstanding. Upon the closing of the transaction
      described in the preceding paragraph, all amounts outstanding under the Bridge
      Note will be forgiven, and the Bridge Note will be deemed repaid in
      full.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><a name="SUPPLEMENTALOIL">SUPPLEMENTAL
      OIL AND GAS
      INFORMATION</a></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(unaudited)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following tables set forth information about the Company&#8217;s oil and gas producing
      activities pursuant to the requirements of SFAS No. 69, &#8220;Disclosures About Oil
      and Gas Producing Activities.&#8221; All of the Company&#8217;s oil and gas producing
      activities are within the United States.</font></div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Capitalized
      Costs as of December 31, 2005</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

            <tr bgcolor="white">
              <td align="left" valign="bottom" width="85%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="11%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proved
                  properties </font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="85%" style="border-bottom: white solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Unproved
                  properties </font></div>
              </td>
              <td width="2%" style="border-bottom: white thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856
                  </font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white thin solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">&#160;</td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856
                  </font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="85%" style="border-bottom: white;">&#160;</td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="85%" style="border-bottom: white solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Accumulated
                  depreciation, depletion and amortization </font></div>
              </td>
              <td width="2%" style="border-bottom: white thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                  <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
                </div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white thin solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Net
                  capitalized costs </font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="85%" style="border-bottom: white;">&#160;</td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>

        </table>
      </div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Costs
      Incurred for the Period from Inception (December 29, 2005) through December
      31,
      2005</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>
      <div>
        <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

            <tr bgcolor="white">
              <td align="left" valign="bottom" width="85%" style="border-bottom: white;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Property
                  acquisition: </font></div>
              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="right" colspan="2" valign="bottom" width="11%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Proved
                  properties </font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="85%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 9pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Unproved
                  properties </font></div>
              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,072
                  </font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Exploration
                  </font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">784
                  </font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="85%" style="border-bottom: white solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Development
                  </font></div>
              </td>
              <td width="2%" style="border-bottom: white thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px">
                  <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">&#8212;</font></div>
                </div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white thin solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="85%" style="border-bottom: #ccffcc solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman">Total
                  costs incurred </font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="11%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; COLOR: #000000; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>

        </table>
      </div><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Oil
      and Gas Reserve Quantities</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Proved
      reserves represent estimated quantities of crude oil and natural gas which
      geological and engineering data demonstrate to be reasonably recoverable in
      the
      future from known reservoirs under existing economic and operating conditions.
      Proved developed reserves can be expected to be recovered through existing
      wells, with existing equipment and operating methods.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company had no proved reserves as of December 31, 2005.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">F-9</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><a name="INTRODUCTION">FOOTHILLS
      RESOURCES, INC.</a></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PRO
      FORMA FINANCIAL STATEMENTS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AS
      OF DECEMBER 31, 2005 </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AND
      FOR THE YEAR ENDED DECEMBER 31, 2005</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      accompanying unaudited pro forma consolidated financial statements (&#8220;pro forma
      statements&#8221;) reflect the acquisition of Brasada by Foothills using the purchase
      method of accounting. The acquisition is accounted as a reverse takeover of
      Foothills by Brasada, as the shareholders of Brasada will control the
      consolidated entity after the acquisition.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subsequent
      to December 31, 2005, Foothills advanced funds through a bridge financing
      facility to Brasada to enable Brasada to meet certain specific working capital
      requirements. The bridge financing facility has not been included in the pro
      forma statements as the amount due to Foothills by Brasada and the amount due
      by
      Brasada to Foothills are eliminated on consolidation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      pro
      forma statements have been prepared from, and should be read in conjunction
      with, Brasada&#8217;s audited financial statements for the period from inception
      (December 29, 2005) through December 31, 2005, and Foothills&#8217; audited financial
      statements for the year ended December 31, 2005.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">F-10</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><a name="INTRODUCTION">FOOTHILLS
        RESOURCES, INC.</a></strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PRO
        FORMA CONSOLIDATED BALANCE SHEET</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;DECEMBER
        31, 2005 </strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><strong><font size="2">(Unaudited)</font></strong></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br>
      <div>
        <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

            <tr>
              <td align="left" valign="bottom" width="43%" style="border-bottom: medium none;">&#160;</td>
              <td width="2%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: medium none;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: medium none;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: medium none;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pro
                  Forma</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;"><strong>&#160;</strong></td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: medium none;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Note</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;"><strong>&#160;</strong></td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: medium none;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Pro
                  Forma</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;"><strong>&#160;</strong></td>
            </tr>
            <tr>
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ffffff solid;"><strong>&#160;</strong></td>
              <td width="2%" style="border-bottom: #ffffff solid;"><strong>&#160;</strong></td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brasada</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><strong>&#160;</strong></td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Foothills</strong></font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><strong>&#160;</strong></td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: black thin solid;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
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              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Ref</strong></font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><strong>&#160;</strong></td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Consolidated</strong></font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ASSETS</strong></font></div>
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              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Current
                  assets:</font></div>
              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: white;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: white;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: white;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: white;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: white;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Cash</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">3,188</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,093,106</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2b</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,096,294</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Property
                  and equipment, at cost:</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Oil
                  and gas properties, using full cost accounting -</font></div>
              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unproved
                  properties not being amortized</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">50,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2a</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">104,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">3,188</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,143,106</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ffffff solid;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,201,150</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LIABILITIES</strong></font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Current
                  liabilities:</font></div>
              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
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            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Accounts
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              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,856</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,048</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(10,048</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;"><font size="2">)</font>&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2c</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,856</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Due
                  to related party</font></div>
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              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2,500</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(2,500</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;"><font size="2">)</font>&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2c</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Loans
                  payable</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">313,051</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(313,051</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;"><font size="2">)</font>&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2c</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">325,599</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(325,599</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><font size="2">)</font>&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ffffff thin solid;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>MEMBERS'
                  CAPITAL</strong></font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Members'
                  capital</font></div>
              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">50,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(50,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font></td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2a</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>STOCKHOLDERS'
                  EQUITY (DEFICIT)</strong></font></div>
              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Preferred
                  stock</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
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              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">&#160;</td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">100</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2a</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
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            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
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              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">15,383</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2b</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
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            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">&#160;</td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(8,956</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;"><font size="2">)</font>&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2c</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">&#160;</td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">99,900</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2a</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additional
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              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">104,562</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,077,723</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2b</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,150,411</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">&#160;</td>
              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(131,774</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;"><font size="2">)</font>&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2c</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ffffff solid;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deficit
                  accumulated during the development stage</font></div>
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              <td width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(466,329</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)</font>&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">466,329</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ffffff thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2c</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 18pt" align="left">&#160;</div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(322,411</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;"><font size="2">)</font>&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,518,705</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc thin solid;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">10,196,294</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">54,856</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">3,188</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
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              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" colspan="2" valign="bottom" width="10%" style="border-bottom: #ccffcc;">
                <div align="left">&#160;</div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
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              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">18,346</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
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            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Bank
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              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">195
                  </font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">195
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
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            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Deferred
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              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">280,100
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">280,100
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest</font></div>
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              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">6,658
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Legal
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              </td>
              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(3,000</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
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              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Management
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              <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">19,500
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: #ccffcc;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">19,500
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
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            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Office
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              <td width="2%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">6,000
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: white;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">6,000
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              <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Transfer
                  agent and filing fees</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,042
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black thin solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">4,042
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              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
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            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
                  loss for the period</font></div>
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              <td width="2%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(331,841</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(331,841</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Basic
                  loss per share</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(0.01</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
              </td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(0.01</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
              </td>
            </tr>
            <tr bgcolor="white">
              <td align="left" valign="bottom" width="43%">&#160;</td>
              <td width="2%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
              <td align="right" valign="bottom" width="9%">&#160;</td>
              <td align="left" valign="bottom" width="1%">&#160;</td>
            </tr>
            <tr bgcolor="#ccffcc">
              <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc solid;">
                <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Weighted
                  average number of shares outstanding</font></div>
              </td>
              <td width="2%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">411
                  </font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">35,566,972
                  </font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: black double;">&#160;</td>
              <td align="right" valign="bottom" width="9%" style="border-bottom: black double;">
                <div style="MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">45,883,009</font></div>
              </td>
              <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc solid;">&#160;</td>
            </tr>

        </table>
      </div>
    </div>
    <div><br>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: "><a name="soo2">F-12</a></font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="3">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FOOTHILLS
      RESOURCES, INC.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><a name="NOTES2">NOTES
      TO PRO FORMA FINANCIAL STATEMENTS</a></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AS
      OF DECEMBER 31, 2005 </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AND
      FOR THE YEAR ENDED DECEMBER 31, 2005</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">BASIS
                OF PRESENTATION</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
      pro
      forma consolidated financial statements have been prepared in accordance with
      generally accepted accounting principles in the United States of America
      (&#8220;GAAP&#8221;) and Brasada&#8217;s accounting policies, as disclosed in Note 2 of the
      audited financial statements of Brasada for the period ended December 31,
      2005.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      pro
      forma consolidated financial statements are based on the estimates and
      assumptions included in these notes and include all adjustments necessary for
      the fair presentation of the transactions in accordance with GAAP. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">These
      pro
      forma consolidated financial statements are not intended to reflect results
      of
      operations or the financial position which would have actually resulted had
      the
      acquisition been effected on the dates indicated. These pro forma statements
      do
      not include any cost savings or other operations or financial position which
      may
      be obtained in the future.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PRO
                FORMA ADJUSTMENTS TO THE CONSOLIDATED BALANCE
                SHEET</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following adjustments have been made as of December 31, 2005 to reflect the
      transactions described below, as if these transactions occurred on December
      31,
      2005 for purposes of the pro forma consolidated balance sheet.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Additional
                contributions in January 2006 to Brasada&#8217;s limited liability company
                predecessor by its members totaling $50,000, consummation of the
                INNEX
                Agreement and payment of the remaining $50,000 INNEX project fee
                in
                January 2006, and conversion of Brasada&#8217;s predecessor to a corporation in
                February 2006, including the issuance of 100,000 shares of Brasada&#8217;s
                common stock in exchange for the capital of the members of Brasada&#8217;s
                predecessor.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sale
                of 15,383,009 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Units
                of Foothills at $0.70 per Unit for total proceeds of $10,768,106,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
                net proceeds of $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10,093,106
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">after
                estimated issue costs of $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">675,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exchange
                of common shares of Brasada for Common Stock of Foothills resulting
                in the
                acquisition of Foothills by Brasada, accounted for as a reverse takeover,
                and consummation of the merger, including the effect of the Stock
                Split,
                the surrender of 15,000</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,000
                shares of outstanding Common Stock of Foothills by stockholders prior
                to
                the merger, the surrender of 45,945,769 shares of outstanding Common
                Stock
                of Foothills in connection with the split off of Foothills Leaseco,
                Inc.,
                the elimination of all liabilities </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
                Foothills, and the issuance of 500,000 shares of Common Stock as
                the
                Finder Fee.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PRO
                FORMA ADJUSTMENTS TO THE CONSOLIDATED STATEMENT OF
                OPERATIONS</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
      adjustments were necessary to reflect the transactions described above, as
      if
      the transactions occurred on January 1, 2005 for purposes of the pro forma
      consolidated statement of operations for the year ended December 31,
      2005.</font></div>
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Unassociated Document
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): April 6, 2006
FOOTHILLS
      RESOURCES, INC.
(Exact
      name of registrant as specified in its charter)
Nevada
001-31546
98-0339560
(State
                or other jurisdiction
of
                incorporation)
(Commission
                File Number)
(I.R.S.
                Employer
Identification
                Number)
11902
                Shanklin Street
Bakersfield,
                California
93312
(Address
                of principal executive offices)
(Zip
                Code)
(832)
567-0766
(Registrant's
      telephone number, including area code)
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 (see General Instruction A.2. below):
¨
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))
FORWARD
      LOOKING STATEMENTS
This
      Current Report on Form 8-K contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. This Current Report
      includes statements regarding our plans, goals, strategies, intent, beliefs
      or
      current expectations. These statements are expressed in good faith and based
      upon a reasonable basis when made, but there can be no assurance that these
      expectations will be achieved or accomplished. These forward looking statements
      can be identified by the use of terms and phrases such as "believe," "plan,"
"intend," "anticipate," "target," "estimate," "expect," and the like, and/or
      future-tense or conditional constructions ("will," "may," "could," "should,"
etc.). Items contemplating or making assumptions about, actual or potential
      future sales, market size, collaborations, and trends or operating results
      also
      constitute such forward-looking statements.
Although
      forward-looking statements in this report reflect
the
      good faith judgment of management, forward-looking statements are inherently
      subject to known and unknown risks, business, economic and other risks and
      uncertainties that may cause actual results to be materially different from
      those discussed in these forward-looking statements. Readers are urged not
      to
      place undue reliance on these forward-looking statements, which speak only
      as of
      the date of this report. We assume no obligation to update any forward-looking
      statements in order to reflect any event or circumstance that may arise after
      the date of this report, other than as may be required by applicable law or
      regulation. Readers are urged to carefully review and consider the various
      disclosures made by us in our reports filed with the Securities and Exchange
      Commission which attempt to advise interested parties of the risks and factors
      that may affect our business, financial condition, results of operation and
      cash
      flows. If one or more of these risks or uncertainties materialize, or if the
      underlying assumptions prove incorrect, our actual results may vary materially
      from those expected or projected.
EXPLANATORY
      NOTE
Upon
      the
      consummation of the Transactions (as defined and described more fully below),
      Foothills Resources, Inc. became the parent company and sole stockholder of
      Brasada California, Inc. The business operations of Foothills following the
      Transactions are primarily those of its wholly-owned subsidiary, Brasada
      California, Inc. Unless otherwise indicated or the context otherwise requires,
      the terms "Company," "Brasada," "we," "us," and "our" refer to Brasada
      California, Inc. and its affiliates, including Foothills Resources, Inc., after
      giving effect to the Transactions. Unless otherwise indicated or the context
      otherwise requires, references to "Foothills" refer to Foothills Resources, Inc.
      before giving effect to the Transactions. This Current Report on Form 8-K
      contains summaries of the material terms of various agreements executed in
      connection with the transactions described herein. The summaries of these
      agreements are subject to, and qualified in their entirety by, reference to
      these agreements, all of which are incorporated herein by
      reference.
Item
      1.01.
Entry
      into a Material Definitive Agreement.
On
April
      6
,
      2006,
      Foothills completed a merger and an offering of common stock and warrants in
      a
      private placement transaction. For a description of the merger and the offering,
      and the material agreements entered into in connection therewith, please see
      Item 2.01 of this Current Report, which disclosure is incorporated herein by
      reference.
-2-
Item
      2.01.
Completion
      of Acquisition or Disposition of Assets.
THE
      MERGER AND RELATED TRANSACTIONS
The
      Merger
On
April
      6
,
      2006
      (the "Closing Date"), Foothills, Brasada Acquisition Corp. ("Acquisition Sub"),
      a wholly owned subsidiary of Foothills, and Brasada entered into a Merger
      Agreement and Plan of Reorganization (the "Merger Agreement"). On the Closing
      Date, Acquisition Sub merged with and into Brasada, with Brasada remaining
      as
      the surviving corporation and a wholly-owned subsidiary of Foothills (the
"Merger"). Prior to their entry into the Merger Agreement, no material
      relationship previously existed among the parties to the Merger Agreement.
      The
      Merger Agreement has been attached as an exhibit hereto and is incorporated
      herein by reference.
On
      the
      Closing Date, the holders of Brasada's issued and outstanding capital stock
      before the Merger (the "Brasada Stockholders") surrendered all of their issued
      and outstanding capital stock of Brasada and received 17,375,000
shares
      of
      common stock of Foothills, par value $0.001 per share ("Common Stock"). The
      stockholders of Foothills before the Merger (the "Foothills Stockholders")
      retained 12,625,000 shares of Common Stock.
The
      Merger Agreement contains customary representations, warranties and covenants
      of
      Brasada, Foothills and, as applicable, Acquisition Sub, for like transactions.
      Breaches of representations and warranties are secured by customary
      indemnification provisions. The Merger Agreement contains a post-closing
      adjustment to the number of shares of Common Stock issued to the Brasada
      Stockholders in an amount up to 2,000,000 shares of Common Stock issued on
      a pro
      rata basis for any breach of the Merger Agreement by Foothills discovered during
      the two year period following the Closing Date.
The
      Merger will be treated as a recapitalization of Foothills for financial
      accounting purposes. Accordingly, the historical financial statements of
      Foothills before the Merger will be replaced with the historical financial
      statements of Brasada before the Merger in all future filings with the
      Securities and Exchange Commission.
On
      the
      Closing Date, the then-current officers and directors of Foothills resigned
      and
      new executive officers designated by the Brasada Stockholders were appointed.
      In
      addition, the sole member of the Foothills board of directors (the "Board")
      appointed one new member to the Board and resigned, effective 10 days after
      the
      Closing Date. Following the Merger, the Board consists of two members and is
      expected to increase to five members. The Foothills Stockholders received the
      right to designate one of the members of the Board.
Prior
      to
      the Closing Date, the Board and the Foothills Stockholders approved and adopted
      a stock option plan (the "Plan"), which is expected to be ratified and adopted
      by the Company's stockholders soon after the consummation of the Merger. Under
      the Plan, 2,000,000 shares of Common Stock are reserved for issuance as
      incentive awards granted to executive officers, key employees and directors
      after the Closing Date.
The
      Offering and Bridge Financing
Concurrently
      with the Merger, Foothills closed a private offering of
15,383,009
units
      ("Units") consisting of one share of Common Stock and a warrant to acquire
      three-quarters of a share of Common Stock for five years at a purchase price
      of
      $1.00 per whole share (the "Offering"). On the Closing Date of the Merger, the
      investors in the Offering collectively purchased
15,383,009
Units
      for
      total consideration of $
10,768,106
(the
"PPO Closing"). Some of the consideration for the Units was in the form of
      Foothills Debentures which converted into Units on a dollar-for-dollar basis
      upon the PPO Closing and the closing of the Merger. The Foothills Debentures
      are
      described more fully below.
-3-
The
      debenture holders' Units were issued at the same price as the Units issued to
      other accredited investors as the fair value of the Units issued was equal
      to
      the carrying amount of the debt extinguished. No gain or loss was recorded
      on
      the repayment of the debentures. Therefore, the consideration we received on
      the
      Closing Date consisted of approximately $6,780,606
in
      cash
      and
$3,987,500
in
      cancelled debt. The investors participating in the PPO Closing hold
15,383,009
shares
      of
      Common Stock and warrants to acquire 11,537,251
shares
      of
      Common Stock.
The
      sale
      of Units in the Offering was exempt from registration under Section 4(2) of
      the
      Securities Act of 1933, as amended (the "Securities Act") and Rule 506 of
      Regulation D as promulgated by the SEC. The Merger, the Offering and the other
      transactions related thereto are collectively referred to herein as the
"Transactions."
To
      facilitate the completion of the Merger and to enable Brasada to meet certain
      specific working capital requirements, Foothills agreed to provide bridge
      financing (the "Bridge Financing") to Brasada. The Bridge Financing was provided
      to Brasada from the proceeds of the sale of debentures convertible into Units
      (the "Foothills Debentures") upon the closing of the Offering and the Merger
      (collectively, the "Transactions"). Foothills Debentures in the aggregate face
      amount of $3,987,500
were
      issued to investors in the Bridge Financing on March 17 and March 23,
      2006.
The
      Bridge Financing was evidenced by a secured promissory note (the "Bridge Note")
      which was to mature 120 days from the closing of the Bridge Financing and bear
      interest at the rate of 9% per annum. Brasada's obligations related to the
      Bridge Financing were secured by a security interest in all of the assets of
      Brasada, evidenced by a Security Agreement entered into among Brasada and
      Foothills. To further secure Brasada's obligations, the Brasada Stockholders
      pledged such number of shares of the common stock of Brasada as represented
      51%
      of the total number of shares of common stock issued and outstanding at that
      time. The security interest and the pledged shares were released (and the Bridge
      Note forgiven) on the Closing Date, upon the consummation of the
      Transactions.
In
      connection with the completion of the Offering, our placement agents in
      connection with the offering, Sanders Morris Harris Inc., Canaccord Capital,
      Inc. and GEM Advisors, Inc. (the "Placement Agents") received fees $275,000 and
      GEM Advisors, Inc. was issued 500,000 shares of Common Stock (the "Finder Fee").
Registration
      Rights
Within
      120 days of the Closing Date, Foothills will be required to file a registration
      statement (the "Registration Statement") registering for resale the shares of
      Common Stock purchased by the investors in the Offering, the shares of Common
      Stock issuable on exercise of the warrants issued to the investors in the
      Offering and the shares of Common Stock to be issued on the Closing Date as
      the
      Finder Fee, which shares will also include the shares and warrants underlying
      the Foothills Debentures.
Split-Off
      Agreement
Contemporaneously
      with the closing of the Merger, Foothills split-off its wholly-owned subsidiary,
      Foothills Leaseco, Inc., a Nevada corporation ("Leaseco"), through the sale of
      all of the outstanding capital stock of Leaseco (the "Split-Off"). We executed a
      split-off agreement with J. Earl Terris and Leaseco, a copy of which is attached
      to this Current Report on Form 8-K and incorporated herein by
      reference.
-4-
Lock-Up
      Agreements
The
      Brasada Stockholders have agreed not to offer, pledge, sell, contract to sell
      or
      grant any option to purchase, or otherwise transfer or dispose of, directly
      or
      indirectly, any of their shares of Common Stock or any securities convertible
      into or exercisable for shares of Common Stock for a period ending on the
      12-month anniversary of the Closing Date. Such agreements were set forth in
      written Lock-Up Agreements, executed as of the Closing Date, with the Brasada
      Stockholders.
Pro
      Forma Ownership
Immediately
      after giving effect to the Merger and Offering, there are issued and outstanding
      on a fully diluted basis (including shares of Common Stock underlying warrants
      and shares reserved for issuance under the Company's 2006 Equity Incentive
      Plan), 59,420,266 shares of Common Stock, as follows:
§
the
                pre-Merger Brasada Stockholders hold 17,375,000 shares of Common
                Stock
                from the Merger;
§
the
                pre-Merger Foothills Stockholders hold 12,625,000
shares
                of Common Stock;
§
the
                investors in the Offering, including the holders of converted Foothills
                Debentures, hold 15,383,009 shares of Common Stock and warrants to
                acquire 11,537,257 shares of Common
                Stock;
§
GEM
                Advisors, Inc. holds 500,000 shares of Common Stock received as part
                of
                the Finder Fee; and
§
the
                Company's 2006 Equity Incentive Plan has 2,000,000 shares of Common Stock
                authorized for issuance.
-5-
PART
      I
1.
      DESCRIPTION OF BUSINESS
Company
      Overview
The
      primary operations of the Company are those of Brasada California, Inc. (f/k/a
      Brasada Resources LLC), our wholly-owned subsidiary ("Brasada"). Brasada is a
      private oil and gas exploration company engaged in the acquisition, exploration
      and development of oil and natural gas properties. Brasada was formed on
      December 29, 2005 as Brasada Resources LLC, a Delaware limited liability
      company, and converted to a corporation in Delaware on February 28, 2006. On
April
      6
,
      2006,
      Brasada merged with Brasada Acquisition Corp., a Delaware corporation and our
      wholly owned subsidiary, leaving Brasada as the surviving entity and our wholly
      owned subsidiary. Unless otherwise indicated or the context otherwise requires,
      the terms "Brasada," "we," "us," and "our" refer to Brasada California, Inc. and
      its affiliates, including Foothills Resources, Inc., after giving effect to
      the
      Transactions.
Our
      business strategy is to identify and exploit low risk resources in and adjacent
      to existing or indicated producing areas that can be quickly developed and
      put
      on production at low cost, including the acquisition of producing properties
      with exploitation and exploration potential. We will also take advantage of
      our
      expertise to develop exploratory projects in focus areas and to participate
      with
      other companies in those areas to explore for oil and natural gas using
      state-of-the-art 3D seismic technology.
Our
      management will use its extensive domestic and international oil and gas
      experience to establish and grow the Company. Our initial focus is on oil and
      natural gas properties located in the Eel River Basin, California and the
      Anadarko Basin, Oklahoma. We expect to have access to additional opportunities
      on a worldwide scale through a contractual relationship with Moyes & Co.,
      Inc.
California
We
      believe that the oil and gas industry has in effect overlooked California in
      recent years because of the perceived difficulties of conducting operations
      in
      the state. This situation creates opportunities.
California
      has abundant and long-lived oil and gas resources with prolific hydrocarbon
      basins. Infrastructure supporting oil and gas exploration, development and
      production activities is in place, consisting of contractors, suppliers,
      pipelines and refineries. Most oil and gas basins in the state are significantly
      under-explored even near large fields, with operators concentrating on a few,
      large, heavy oil resources. Offset exploration in and near fields has frequently
      been ignored. There is a dramatic lack of use of 3D seismic and other latest
      seismic technologies in many of the basins, and in some areas (such as the
      Eel
      River Basin) there has been insufficient attention to drilling and drilling
      fluid engineering. Through the experience and relationships of its management,
      Brasada has strong ties to other significant oil and gas companies operating
      in
      California.
Oklahoma
The
      Anadarko Basin in western Oklahoma and the Texas panhandle is one of the most
      prolific oil and natural gas producing basins in the United States. Most of
      the
      shallow shelf portion of the basin can be characterized as very mature. However,
      much promise remains in the deeper portion of the basin that is characterized
      by
      stratigraphic traps in the Pennsylvanian Morrow formation and structural traps
      in the Ordovician Hunton formation, two of the formations targeted by
      Brasada.
-6-
Project
      Status
Eel
      River Basin
The
      Eel
      River Basin is the northernmost of the California sedimentary basins. Most
      of
      the basin exists offshore of northern California and southern Oregon. However,
      a
      portion of the basin is present onshore in Humboldt County, California.
      Hydrocarbons generated in the deeper offshore part of the basin have migrated
      updip into the Miocene and Pliocene rocks present in this area. The onshore
      portion of the basin contains the Tompkins Hill natural gas field that was
      discovered by Texaco in 1937. It is now owned and operated by Occidental, has
      produced in excess of 120 billion cubic feet ("BCF) of natural gas, and
      continues to produce.
The
      Grizzly Bluff area approximately five miles south of the Tompkins Hill Field
      was
      initially proven to contain natural gas in well drilled by Zephyr in the
      mid-1960s. In the early 1970s, Chevron drilled a deep well seeking oil but
      found
      strong indications of natural gas. In the early 1990s, ARCO drilled several
      wells and found natural gas in the shallow zones. These wells were successfully
      tested at rates of up to 5 million cubic feet ("MMCF") of gas per day, but the
      wells were never put into production due to the lack of a natural gas market
      and
      pipeline connection.
In
      the
      past decade, the industry has overlooked the hydrocarbon potential and
      production within the Eel River Basin due to its relatively isolated position
      in
      California. INNEX Energy, L.L.C. recognized this overlooked potential in the
      form of multiple low resistivity, low contrast sands that possibly define part
      of a widespread, basin-centered natural gas play. INNEX began acquiring oil
      and
      gas leases in the area in 2000 to test this concept and entered into a joint
      venture with Forexco, Inc. in 2002. A subsequent 10-well drilling program in
      2003 by Forexco encountered drilling and completion problems, but established
      production from four wells in the Grizzly Bluff area that are now producing
      approximately 500,000 cubic feet of gas per day. This field was brought on
      line
      in late 2003 with the completion of a natural gas gathering system and a new
      pipeline that connects to the PG&E backbone grid for northern California.
      INNEX and Forexco terminated their joint venture in 2004.
The
      Tompkins Hill Field is the analog field in the basin for the Eel River Project.
      This production is from similar age rocks at similar depths that will be tested
      in the Grizzly Bluff Prospect, the first prospect that we plan to drill in
      the
      Eel River Project. Our mapping indicates that substantial natural gas reserves
      occur above the lowest tested gas in the Grizzly Bluff Field in multiple stacked
      Pliocene sandstone reservoirs. Shallow proved producing, proved undeveloped,
      and
      probable reserves overlie additional deeper potential, defining a project that
      will involve drilling between 3,000 and 10,500 feet. Reserve analysis indicates
      that the Grizzly Bluff Prospect could contain in excess of 100 BCF of natural
      gas recoverable reserves from relatively shallow Pliocene reservoirs. Much
      of
      this gas is categorized as proved undeveloped. Additional significant upside
      potential in the range of 500 BCF to 1 trillion cubic feet ("TCF") of natural
      gas exists in the Grizzly Bear Prospect which is a deep exploratory prospect
      that underlies the shallow Grizzly Bluff Prospect.
We
      believe that n
umerous
      defined prospects, including several with direct hydrocarbon indicators on
      the
      seismic data, can add one to two TCF of gas resources in the basin.
The
      Eel
      River Project is the centerpiece of a large exploitation-exploration
      opportunity. There is presently minimal competition in the basin, providing
      us
      with an opportunity to effectively control the entire basin.
-7-
Consequently,
      on January 3, 2006, we entered into a Farmout and Participation Agreement (the
      "INNEX Agreement") with INNEX California, Inc. ("INNEX") to acquire, explore and
      develop oil and natural gas properties located in the basin, the material terms
      of which are as follows:
§
Brasada
                serves as operator of a joint venture with INNEX, and has the right
                to
                earn an interest in approximately 3,500 existing leasehold acres
                held by
                INNEX in the basin, and to participate as operator with INNEX in
                oil and
                gas acquisition, exploration and development activities within an
                area of
                mutual interest consisting of the entire Eel River
                Basin.
§
The
                INNEX Agreement provides for "drill-to-earn" terms, and consists of three
                phases.
§
In
                Phase I, Brasada will pay 100% of the costs of drilling two wells,
                acquiring 1,000 acres of new leases, and certain other activities.
                Upon
                completion of Phase I, Brasada will receive an assignment from INNEX
                of a
                75% working interest (representing an approximate 56.3% net revenue
                interest) in the leases held by INNEX in the two drilling units to
                the
                deepest depth drilled in the two Phase I obligation
                wells.
§
Brasada
                will then have the option, but not the obligation, to proceed into
                Phase
                II. In Phase II, Brasada will pay 100% of the costs of drilling one
                well
                and conducting a 3-D seismic survey covering not less than 15 square
                miles. Upon completion of Phase II, Brasada will receive an assignment
                from INNEX of a 75% working interest (representing an approximate
                56.3%
                net revenue interest) in the leases held by INNEX in the drilling
                unit and
                a 75% working interest (representing an approximate 59.3% net revenue
                interest) in all remaining leases held by INNEX to the deepest depth
                drilled in the three Phase I and II obligation
                wells.
§
Brasada
                will then have the option, but not the obligation, to proceed into
                Phase
                III. In Phase III, Brasada will pay 100% of the costs of drilling
                one deep
                well. Upon completion of Phase III, Brasada will receive an assignment
                from INNEX of a 75% working interest (representing an approximate
                56.3%
                net revenue interest) in the leases held by INNEX in the drilling
                unit and
                a 75% working interest (representing an approximate 59.3% net revenue
                interest) in all remaining leases held by INNEX with no depth
                limitation.
§
After
                completion of Phase III, the two parties will each be responsible
                for
                funding their working interest share of the joint venture's costs and
                expenses. Brasada will generally have a 75% working interest in activities
                conducted on specified prospects existing at the time of execution
                of the
                INNEX Agreement, and a 70% working interest in other activities.
                A party
                will be able to elect not to participate in exploratory wells on
                a
                prospect-by-prospect basis, and a non-participating party will lose
                the
                opportunity to participate in development activities and all rights
                to
                production relating to that
                prospect.
§
Brasada
                is also entitled to a proportionate assignment from INNEX of its
                rights to
                existing permits, drill pads, roads, rights-of-way, and other
                infrastructure, as well as its pipeline access and marketing
                arrangements.
§
INNEX
                has an option to participate for a 25% working interest in certain
                producing property acquisitions by Brasada in the area of mutual
                interest.
We
      are
      completing drilling plans for the two Phase I wells, including location
      selection, well design, and services and equipment procurement. We are also
      initiating a leasing program to extensively expand the joint venture's leasehold
      position in the basin. Further, we have identified two strategic opportunities
      to acquire existing producing fields in the basin. If consummated, these
      acquisitions will provide immediate cash flow from existing production, as
      well
      as access to proved undeveloped and probable reserves and deeper exploration
      potential through new drilling. Because both acquisition targets have existing
      proved developed producing reserves and production, we would expect to fund
      some
      portion of the acquisition costs with reserve-based debt financing.
-8-
Anadarko
      Basin
The
      initial focus of our activity within the Anadarko Basin will be in the area
      covered by a 75 square mile 3D seismic survey in Roger Mills County, Oklahoma.
      Through a license held by one of our officers, Brasada has semi-exclusive access
      to this survey, which was shot by Texaco in 1998. The 3D seismic survey was
      initially shot to define stratigraphic traps in the Pennsylvanian sedimentary
      section in an area of substantial Pennsylvanian natural gas production. Only
      one
      well has been drilled to date using the 3D seismic data set. The well, drilled
      by Texaco, encountered wet Morrow sand and was plugged and abandoned. Texaco
      subsequently exited oil and gas exploration activity in the MidContinent region.
      Numerous exploratory ideas remain to be exploited on this data set, both in
      the
      Pennsylvanian section as well as the deeper Ordovician section. The best wells
      completed in these rocks typically flow in excess of 10 MMCF of natural gas
      per
      day and contain reserves in the 20 to 50 BCF range.
We
      are
      completing preliminary geological and geophysical interpretations of the 3D
      seismic data, and plan to reprocess the 3D data, finalize the interpretations,
      and identify drillable prospects. We then plan to acquire oil and gas leases
      over those prospects, and to negotiate joint ventures with other companies,
      who
      will be able to earn interests in the leases by drilling one or more exploratory
      wells on the prospects.
Markets
      and Customers
The
      market for oil and natural gas that we will produce depends on factors beyond
      our control, including the extent of domestic production and imports of oil
      and
      natural gas, the proximity and capacity of natural gas pipelines and other
      transportation facilities, demand for oil and natural gas, the marketing of
      competitive fuels and the effects of state and federal regulation. The oil
      and
      gas industry also competes with other industries in supplying the energy and
      fuel requirements of industrial, commercial and individual
      consumers.
Our
      oil
      production is expected to be sold at prices tied to the spot oil markets. Our
      natural gas production is expected to be sold under short-term contracts and
      priced based on first of the month index prices or on daily spot market prices.
Regulations
General
Our
      business is affected by numerous laws and regulations, including energy,
      environmental, conservation, tax and other laws and regulations relating to
      the
      energy industry. Most of our drilling operations will require permit or
      authorizations from federal, state or local agencies. Changes in any of these
      laws and regulations or the denial or vacating of permits could have a material
      adverse effect on our business. In view of the many uncertainties with respect
      to current and future laws and regulations, including their applicability to
      us,
      we cannot predict the overall effect of such laws and regulations on our future
      operations.
We
      believe that our operations comply in all material respects with applicable
      laws
      and regulations. There are no pending or threatened enforcement actions related
      to any such laws or regulations. We believe that the existence and enforcement
      of such laws and regulations will have no more restrictive an effect on our
      operations than on other similar companies in the energy industry.
Proposals
      and proceedings that might affect the oil and gas industry are pending before
      Congress, the Federal Energy Regulatory Commission ("FERC"), state legislatures
      and commissions and the courts. We cannot predict when or whether any such
      proposals may become effective. In the past, the natural gas industry has been
      heavily regulated. There is no assurance that the regulatory approach currently
      pursued by various agencies will continue indefinitely. Notwithstanding the
      foregoing, we do not anticipate that compliance with existing federal, state
      and
      local laws, rules and regulations will have a material adverse effect upon
      our
      capital expenditures, earnings or competitive position.
-9-
Federal
      Regulation of Sales and Transportation of Natural Gas
Historically,
      the transportation and sale of natural gas and its component parts in interstate
      commerce has been regulated under several laws enacted by Congress and the
      regulations passed under these laws by FERC. Our sales of natural gas, including
      condensate and liquids, may be affected by the availability, terms and cost
      of
      transportation. The price and terms of access to pipeline transportation are
      subject to extensive federal and state regulation. From 1985 to the present,
      several major regulatory changes have been implemented by Congress and FERC
      that
      affect the economics of natural gas production, transportation and sales. In
      addition, FERC is continually proposing and implementing new rules and
      regulations affecting those segments of the natural gas industry, most notably
      interstate natural gas transmission companies that remain subject to FERC's
      jurisdiction. These initiatives may also affect the intrastate transportation
      of
      gas under certain circumstances. The stated purpose of many of these regulatory
      changes is to promote competition among the various sectors of the natural
      gas
      industry.
The
      ultimate impact of the complex rules and regulations issued by FERC cannot
      be
      predicted. In addition, many aspects of these regulatory developments have
      not
      become final but are still pending judicial and final FERC decisions. We cannot
      predict what further action FERC will take on these matters. Some of FERC's more
      recent proposals may, however, adversely affect the availability and reliability
      of interruptible transportation service on interstate pipelines. We do not
      believe that we will be affected by any action taken materially differently
      than
      other natural gas producers, gatherers and marketers with whom we
      compete.
State
      Regulation
Our
      operations are also subject to regulation at the state and in some cases,
      county, municipal and local governmental levels. Such regulation includes
      requiring permits for the drilling of wells, maintaining bonding requirements
      in
      order to drill or operate wells and regulating the location of wells, the method
      of drilling and casing wells, the surface use and restoration of properties
      upon
      which wells are drilled, the plugging and abandonment of wells and the disposal
      of fluids used and produced in connection with operations. Our operations are
      also subject to various conservation laws and regulations pertaining to the
      size
      of drilling and spacing units or proration units and the unitization or pooling
      of oil and gas properties.
In
      addition, state conservation laws, which frequently establish maximum rates
      of
      production from oil and gas wells, generally prohibit the venting or flaring
      of
      gas and impose certain requirements regarding the rates of production. State
      regulation of gathering facilities generally includes various safety,
      environmental and, in some circumstances, nondiscriminatory take requirements,
      but, except as noted above, does not generally entail rate regulation. These
      regulatory burdens may affect profitability, but we are unable to predict the
      future cost or impact of complying with such regulations.
Environmental
      Matters
General
We
      are
      subject to extensive federal, state and local environmental laws and regulations
      relating to water, air, hazardous substances and wastes, and threatened or
      endangered species that restrict or limit our business activities for purposes
      of protecting human health and the environment. Compliance with the multitude
      of
      regulations issued by federal, state, and local administrative agencies can
      be
      burdensome and costly. State environmental regulatory programs are generally
      very similar to the corresponding federal environmental regulatory programs,
      and
      federal environmental regulatory programs are often delegated to the
      states.
-10-
Our
      oil
      and gas exploration and production operations are subject to state and/or
      federal solid waste regulations that govern the storage, treatment and disposal
      of solid and hazardous wastes. However, much of the solid waste that will be
      generated by our oil and gas exploration and production activities is exempt
      from regulation under federal, and many state, regulatory programs. To the
      extent our operations generate solid waste, such waste is generally subject
      to
      state regulations. We will comply with solid waste regulations in the normal
      course of business.
In
      addition to solid and hazardous waste, our production operations may generate
      produced water as a waste material. This water can sometimes be disposed of
      by
      discharging it to surface waters under discharge permits issued pursuant to
      the
      Clean Water Act, or an equivalent state program. Another common method of
      produced water disposal is subsurface injection in disposal wells. Such disposal
      wells are permitted under the Safe Drinking Water Act, or an equivalent state
      regulatory program. The drilling, completion, and operation of produced water
      disposal wells are integral to oil and gas operations.
Air
      emissions and exhaust from gas-fired generators and from other equipment, such
      as gas compressors, are potentially subject to regulations under the Clean
      Air
      Act, or equivalent state regulatory programs. To the extent that our air
      emissions are regulated, they are generally regulated by permits issued by
      state
      regulatory agencies. We will obtain air permits, where needed, in the normal
      course of business.
In
      the
      event that spills or releases of crude oil or produced water occur, we would
      be
      subject to spill notification and response regulations under the Clean Water
      Act, or equivalent state regulatory programs. Depending on the nature and
      location of our operations, we may also be required to prepare spill prevention,
      control and countermeasure response plans under the Clean Water Act, or
      equivalent state regulatory programs. Response costs could be high and may
      have
      a material adverse effect on our operations. We may not be fully insured for
      these costs.
Failure
      to comply with environmental regulations may result in the imposition of
      substantial administrative, civil, or criminal penalties, or restrict or
      prohibit our desired business activities. Environmental laws and regulations
      impose liability, sometimes strict liability, for environmental cleanup costs
      and other damages. Other environmental laws and regulations may delay or
      prohibit exploration and production activities in environmentally sensitive
      areas or impose additional costs on these activities.
Costs
      associated with responding to a major spill of crude oil or produced water,
      or
      costs associated with remediation of environmental contamination, are the most
      likely occurrences that could result in a material adverse effect on our
      business, financial condition and results of operations. In addition, changes
      in
      applicable federal, state and local environmental laws and regulations
      potentially could have a material adverse effect on our business, financial
      condition and results of operations.
Competition
The
      oil
      and gas industry is highly competitive. Competitors include major oil companies,
      other independent energy companies and individual producers and operators,
      many
      of which have financial resources, personnel and facilities substantially
      greater than we have. We face intense competition for the acquisition of oil
      and
      gas leases and properties. For a more thorough discussion of how competition
      could impact our ability to successfully complete our business strategy, see
      "Risk Factors — Competition in Obtaining Rights to Explore and Develop Oil and
      Gas Reserves and to Market Our Production May Impair Our Business."
-11-
Employees
As
      of
      March 1, 2006 we had three full-time employees. None of our employees is
      represented by a labor union, and we consider our employee relations to be
      good.
Legal
      Proceedings
From
      time
      to time we may be named in claims arising in the ordinary course of business.
      Currently, no legal proceedings or claims are pending against or involve us
      that, in the opinion of our management, could reasonably be expected to have
      a
      material adverse effect on our business and financial condition.
Available
      Information
We
      are
      subject to the reporting requirements of the Securities Exchange Act of 1934,
      as
      amended (the "Exchange Act"). Reports filed with the SEC pursuant to the
      Exchange Act, including proxy statements, annual and quarterly reports, and
      other reports we file, can be inspected and copied at the public reference
      facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
      Investors may obtain information on the operation of the public reference room
      by calling the SEC at 1-800-SEC-0330. Investors can request copies of these
      documents upon payment of a duplicating fee by writing to the SEC. The reports
      we file with the SEC are also available on the SEC's Internet site
      (http://www.sec.gov).
RISK
      FACTORS
An
      investment in the Company involves a high degree of risk. Investors should
      carefully consider the risks below before making an investment decision. Our
      business, financial condition or results of operations could be materially
      adversely affected by any of these risks. In such case, the trading price of
      the
      Common Stock could decline and investors could lose all or part of their
      investment.
As
      used in this section, and unless the context clearly indicates otherwise, "we,"
"us," "our," "Brasada" and the "Company," prior to giving effect to the Merger,
      refer to Brasada California, Inc., the operations of which are expected to
      be
      the primary operations of the combined Foothills - Brasada entity following
      the
      Merger. After giving effect to the Merger, the combined Brasada - Foothills
      entity is referred to in this section as "Foothills," "we," "us," "our" and the
"Company." Please refer to the other information contained in this Current
      Report on Form 8-K (including the financial statements) for further details
      pertaining to the Company's business and financial condition.
RISKS
      RELATED TO OUR BUSINESS
We
      are a
      new enterprise engaged in the business of oil and gas exploration and
      development. The business of acquiring, exploring for, developing and producing
      oil and natural gas reserves is inherently risky.
We
      are a Development Stage Company With Limited Operating History for Investors
      to
      Evaluate Our Business. We May Never Attain Profitability.
We
      are a
      development stage company and have limited current oil or natural gas
      operations. As an oil and gas acquisition, exploration and development company
      with limited operating history, it is difficult for potential investors to
      evaluate our business. Our proposed operations are therefore subject to all
      of
      the risks inherent in light of the expenses, difficulties, complications and
      delays frequently encountered in connection with the formation of any new
      business, as well as those risks that are specific to the oil and gas industry.
      Investors should evaluate us in light of the delays, expenses, problems and
      uncertainties frequently encountered by companies developing markets for new
      products, services and technologies. We may never overcome these
      obstacles.
-12-
Our
      business is speculative and dependent upon the implementation of our business
      plan and our ability to enter into agreements with third parties for the rights
      to exploit potential oil and natural gas reserves on terms that will be
      commercially viable for us.
Our
      Lack of Diversification Will Increase the Risk of an Investment in Foothills,
and
      Our Financial Condition and Results of Operations May Deteriorate if We Fail
      to
      Diversify
.
Our
      business will focus on the oil and gas industry in a limited number of
      properties, initially in California and Oklahoma with the intention of expanding
      elsewhere. Larger companies have the ability to manage their risk by
      diversification. However, we will lack diversification, in terms of both the
      nature and geographic scope of our business. As a result, we will likely be
      impacted more acutely by factors affecting our industry or the regions in which
      we operate than we would if our business were more diversified, enhancing our
      risk profile. If we cannot diversify our operations, our financial condition
      and
      results of operations could deteriorate.
Strategic
      Relationships Upon Which We May Rely are Subject to Change, Which May Diminish
      Our Ability to Conduct Our Operations.
Our
      ability to successfully acquire additional properties, to discover reserves,
      to
      participate in drilling opportunities and to identify and enter into commercial
      arrangements with customers will depend on developing and maintaining close
      working relationships with industry participants and on our ability to select
      and evaluate suitable properties and to consummate transactions in a highly
      competitive environment. These realities are subject to change and may impair
      our ability to grow.
To
      develop our business, we will endeavor to use the business relationships of
      our
      management to enter into strategic relationships, which may take the form of
      joint ventures with other private parties and contractual arrangements with
      other oil and gas companies, including those that supply equipment and other
      resources that we will use in our business. We may not be able to establish
      these strategic relationships, or if established, we may not be able to maintain
      them. In addition, the dynamics of our relationships with strategic partners
      may
      require us to incur expenses or undertake activities we would not otherwise
      be
      inclined to in order to fulfill our obligations to these partners or maintain
      our relationships. If our strategic relationships are not established or
      maintained, our business prospects may be limited, which could diminish our
      ability to conduct our operations.
Competition
      in Obtaining Rights to Explore and Develop Oil and Gas Reserves and to Market
      Our Production May Impair Our Business.
The
      oil
      and gas industry is highly competitive. Other oil and gas companies may seek
      to
      acquire oil and gas leases and other properties and services we will need to
      operate our business in the areas in which we expect to operate. This
      competition is increasingly intense as prices of oil and natural gas on the
      commodities markets have risen in recent years. Additionally, other companies
      engaged in our line of business may compete with us from time to time in
      obtaining capital from investors. Competitors include larger companies, which,
      in particular, may have access to greater resources, may be more successful
      in
      the recruitment and retention of qualified employees and may conduct their
      own
      refining and petroleum marketing operations, which may give them a competitive
      advantage. In addition, actual or potential competitors may be strengthened
      through the acquisition of additional assets and interests. If we are unable
      to
      compete effectively or adequately respond to competitive pressures, this
      inability may materially adversely affect our results of operation and financial
      condition.
-13-
We
      May Be Unable to Obtain Additional Capital That We Will Require to Implement
      Our
      Business Plan, Which Could Restrict Our Ability to Grow.
We
      expect
      that our current capital and our other existing resources will be sufficient
      only to provide a limited amount of working capital, and the revenues generated
      from our properties in California and Oklahoma alone will not alone be
      sufficient to fund our operations or planned growth. We will require additional
      capital to continue to operate our business beyond the initial phase of our
      current properties, and to expand our exploration and development programs
      to
      additional properties. We may be unable to obtain additional capital required.
      Furthermore, inability to maintain capital may damage our reputation and
      credibility with industry participants in the event we cannot close previously
      announced transactions.
Future
      acquisitions and future exploration, development, production and marketing
      activities, as well as our administrative requirements (such as salaries,
      insurance expenses and general overhead expenses, as well as legal compliance
      costs and accounting expenses) will require a substantial amount of additional
      capital and cash flow.
We
      plan
      to pursue sources of such capital through various financing transactions or
      arrangements, including joint venturing of projects, debt financing, equity
      financing or other means. We may not be successful in locating suitable
      financing transactions in the time period required or at all, and we may not
      obtain the capital we require by other means. If we do not succeed in raising
      additional capital, the capital received through the Offering may not be
      sufficient to fund our operations going forward without obtaining additional
      capital financing.
Any
      additional capital raised through the sale of equity may dilute the ownership
      percentages of existing stockholders. This could also result in a decrease
      in
      the fair market value of our equity securities because our assets would be
      owned
      by a larger pool of outstanding equity. The terms of securities we issue in
      future capital transactions may be more favorable to our new investors, and
      may
      include preferences, superior voting rights and the issuance of warrants or
      other derivative securities, and issuances of incentive awards under equity
      employee incentive plans, which may have a further dilutive effect.
Our
      ability to obtain needed financing may be impaired by such factors as the
      capital markets (both generally and in the oil and gas industry in particular),
      our status as a new enterprise without a demonstrated operating history, the
      location of our oil and natural gas properties and prices of oil and natural
      gas
      on the commodities markets (which will impact the amount of asset-based
      financing available to us) and/or the loss of key management. Further, if oil
      and/or natural gas prices on the commodities markets decrease, then our revenues
      will likely decrease, and such decreased revenues may increase our requirements
      for capital. If the amount of capital we are able to raise from financing
      activities, together with our revenues from operations, is not sufficient to
      satisfy our capital needs (even to the extent that we reduce our operations),
      we
      may be required to cease our operations.
We
      may
      incur substantial costs in pursuing future capital financing, including
      investment banking fees, legal fees, accounting fees, securities law compliance
      fees, printing and distribution expenses and other costs. We may also be
      required to recognize non-cash expenses in connection with certain securities
      we
      may issue, such as convertible notes and warrants, which may adversely impact
      our financial condition.
-14-
We
      May Not Be Able To Effectively Manage Our Growth, Which May Harm Our
      Profitability.
Our
      strategy envisions expanding our business. If we fail to effectively manage
      our
      growth, our financial results could be adversely affected. Growth may place
      a
      strain on our management systems and resources. We must continue to refine
      and
      expand our business development capabilities, our systems and processes and
      our
      access to financing sources. As we grow, we must continue to hire, train,
      supervise and manage new employees. We cannot assure investors that we will
      be
      able to:
§
meet
                our capital needs;
§
expand
                our systems effectively or efficiently or in a timely manner;
§
allocate
                our human resources optimally;
§
identify
                and hire qualified employees or retain valued employees; or
§
incorporate
                effectively the components of any business that we may acquire in
                our
                effort to achieve growth.
If
      we are
      unable to manage our growth, our operations and our financial results could
      be
      adversely affected by inefficiency, which could diminish our profitability.
Our
      Business May Suffer If We Do Not Attract and Retain Talented
      Personnel.
Our
      success will depend in large measure on the abilities, expertise, judgment,
      discretion integrity and good faith of our management and other personnel in
      conducting the business of the Company. We have a small management team, and
      the
      loss of a key individual or inability to attract suitably qualified staff could
      materially adversely impact our business.
Our
      success depends on the ability of our management and employees to interpret
      market and geological data correctly and to interpret and respond to economic
      market and other conditions in order to locate and adopt appropriate investment
      opportunities, monitor such investments, and ultimately, if required, to
      successfully divest such investments. Further, no assurance can be given that
      our key personnel will continue their association or employment with us or
      that
      replacement personnel with comparable skills can be found. We have sought to
      and
      will continue to ensure that management and any key employees are appropriately
      compensated; however, their services cannot be guaranteed. If we are unable
      to
      attract and retain key personnel, our business may be adversely affected.
Our
      Management Team Does Not Have Extensive Experience in Public Company Matters,
Which
      Could Impair Our Ability to Comply With Legal and Regulatory
      Requirements
.
Our
      management team has had limited U.S. public company management experience or
      responsibilities, which could impair our ability to comply with legal and
      regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable
      federal securities laws including filing required reports and other information
      required on a timely basis. There can be no assurance that our management will
      be able to implement and affect programs and policies in an effective and timely
      manner that adequately respond to increased legal, regulatory compliance and
      reporting requirements imposed by such laws and regulations. Our failure to
      comply with such laws and regulations could lead to the imposition of fines
      and
      penalties and further result in the deterioration of our business.
Risks
      Related to our Prior Business May Adversely Affect our
      Business.
Foothills'
      business prior to the Merger involved mineral exploration. In 2001, Foothills
      acquired a mining lease on a total of five unpatented lode mineral claims
      property located in the State of Nevada. Subsequent to Foothills' fiscal year
      ended December 31, 2004, Foothills decided to abandon the property and terminate
      the claims and has since been in the process of reviewing other potential
      resource and non-resource assets for acquisition. We have determined not to
      pursue this line of business following the Merger, but could still be subject
      to
      claims arising from the former Foothills business. These claims may arise from
      Foothills' operating activities (such as employee and labor matters), financing
      and credit arrangements or other commercial transactions. While no claims are
      pending and we have no actual knowledge of any threatened claims, it is possible
      that third parties may seek to make claims against us based on Foothills' former
      business operations. Such claims are unlikely because the five mineral claims
      were never operated and Foothills was released by the lessor of the claims.
      Even
      if such asserted claims were without merit and we were ultimately found to
      have
      no liability for such claims, the defense costs and the distraction of
      management's attention may harm the growth and profitability of our business.
      While the relevant definitive agreements executed in connection with the Merger
      provide indemnities to us for liabilities arising from the prior business
      activities of Foothills, these indemnities may not be sufficient to fully
      protect us from all costs and expenses.
-15-
RISKS
      RELATED TO OUR INDUSTRY
Our
      Exploration for Oil and Gas Is Risky and May Not Be Commercially Successful,
      Impairing Our Ability to Generate Revenues from Our
      Operations.
Oil
      and
      gas exploration involves a high degree of risk. These risks are more acute
      in
      the early stages of exploration. Our expenditures on exploration may not result
      in new discoveries of oil or natural gas in commercially viable quantities.
      It
      is difficult to project the costs of implementing an exploratory drilling
      program due to the inherent uncertainties of drilling in unknown formations,
      the
      costs associated with encountering various drilling conditions, such as
      over-pressured zones and tools lost in the hole, and changes in drilling plans
      and locations as a result of prior exploratory wells or additional seismic
      data
      and interpretations thereof. If exploration costs exceed our estimates, or
      if
      our exploration efforts do not produce results which meet our expectations,
      our
      exploration efforts may not be commercially successful, which could adversely
      impact our ability to generate revenues from our operations.
We
      May Not Be Able to Develop Oil and Gas Reserves on an Economically Viable Basis,
      and Our Reserves and Production May Decline as a Result.
To
      the
      extent that we succeed in discovering oil and/or natural gas reserves, we cannot
      assure that these reserves will be capable of production levels we project
      or in
      sufficient quantities to be commercially viable. On a long-term basis, our
      viability depends on our ability to find or acquire, develop and commercially
      produce additional oil and natural gas reserves. Without the addition of
      reserves through acquisition, exploration or development activities, our
      reserves and production will decline over time as reserves are produced. Our
      future reserves will depend not only on our ability to develop then-existing
      properties, but also on our ability to identify and acquire additional suitable
      producing properties or prospects, to find markets for the oil and natural
      gas
      we develop and to effectively distribute our production into our
      markets.
Future
      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-downs of connected wells resulting from extreme weather
      conditions, problems in storage and distribution and adverse geological and
      mechanical conditions. While we will endeavor to effectively manage these
      conditions, we cannot be assured of doing so optimally, and we will not be
      able
      to eliminate them completely in any case. Therefore, these conditions could
      diminish our revenue and cash flow levels and result in the impairment of our
      oil and natural gas interests.
-16-
Estimates
      of Oil and Natural Gas Reserves that We Make May Be Inaccurate and Our Actual
      Revenues May Be Lower than Our Financial Projections.
We
      will
      make estimates of oil and natural gas reserves, upon which we will base our
      financial projections. We will make these reserve estimates using various
      assumptions, including assumptions as to oil and natural gas prices, drilling
      and operating expenses, capital expenditures, taxes and availability of funds.
      Some of these assumptions are inherently subjective, and the accuracy of our
      reserve estimates relies in part on the ability of our management team,
      engineers and other advisors to make accurate assumptions. Economic factors
      beyond our control, such as interest rates, will also impact the value of our
      reserves. The process of estimating oil and natural gas reserves is complex,
      and
      will require us to use significant decisions and assumptions in the evaluation
      of available geological, geophysical, engineering and economic data for each
      property. As a result, our reserve estimates will be inherently imprecise.
      Actual future production, oil and natural gas prices, revenues, taxes,
      development expenditures, operating expenses and quantities of recoverable
      oil
      and natural gas reserves may vary substantially from those we estimate. If
      actual production results vary substantially from our reserve estimates, this
      could materially reduce our revenues and result in the impairment of our oil
      and
      natural gas interests.
Drilling
      New Wells Could Result in New Liabilities, Which Could Endanger Our Interests
      in
      Our Properties and Assets.
There
      are
      risks associated with the drilling of oil and natural gas wells, including
      encountering unexpected formations or pressures, premature declines of
      reservoirs, blow-outs, craterings, sour gas releases, fires and spills. The
      occurrence of any of these events could significantly reduce our revenues or
      cause substantial losses, impairing our future operating results. We may become
      subject to liability for pollution, blow-outs or other hazards. We intend to
      obtain insurance with respect to these hazards; however, such insurance has
      limitations on liability that may not be sufficient to cover the full extent
      of
      such liabilities. The payment of such liabilities could reduce the funds
      available to us or could, in an extreme case, result in a total loss of our
      properties and assets. Moreover, we may not be able to maintain adequate
      insurance in the future at rates that are considered reasonable. Oil and natural
      gas production operations are also subject to all the risks typically associated
      with such operations, including premature decline of reservoirs and the invasion
      of water into producing formations.
Decommissioning
      Costs Are Unknown and May be Substantial; Unplanned Costs Could Divert Resources
      from Other Projects.
We
      may
      become responsible for costs associated with abandoning and reclaiming wells,
      facilities and pipelines which we use for production of oil and natural gas
      reserves. Abandonment and reclamation of these facilities and the costs
      associated therewith is often referred to as "decommissioning." We have not yet
      determined whether we will establish a cash reserve account for these potential
      costs in respect of any of our properties or facilities, or if we will satisfy
      such costs of decommissioning from the proceeds of production in accordance
      with
      the practice generally employed in onshore and offshore oilfield operations.
      If
      decommissioning is required before economic depletion of our properties or
      if
      our estimates of the costs of decommissioning exceed the value of the reserves
      remaining at any particular time to cover such decommissioning costs, we may
      have to draw on funds from other sources to satisfy such costs. The use of
      other
      funds to satisfy such decommissioning costs could impair our ability to focus
      capital investment in other areas of our business.
Our
      Inability to Obtain Necessary Facilities Could Hamper Our
      Operations.
Oil
      and
      gas exploration and development activities are dependent on the availability
      of
      drilling and related equipment, transportation, power and technical support
      in
      the particular areas where these activities will be conducted, and our access
      to
      these facilities may be limited. To the extent that we conduct our activities
      in
      remote areas, needed facilities may not be proximate to our operations, which
      will increase our expenses. Demand for such limited equipment and other
      facilities or access restrictions may affect the availability of such equipment
      to us and may delay exploration and development activities. The quality and
      reliability of necessary facilities may also be unpredictable and we may be
      required to make efforts to standardize our facilities, which may entail
      unanticipated costs and delays. Shortages and/or the unavailability of necessary
      equipment or other facilities will impair our activities, either by delaying
      our
      activities, increasing our costs or otherwise.
-17-
We
      May Have Difficulty Distributing Our Production, Which Could Harm Our Financial
      Condition.
In
      order
      to sell the oil and natural gas that we are able to produce, we will have to
      make arrangements for storage and distribution to the market. We will rely
      on
      local infrastructure and the availability of transportation for storage and
      shipment of our products, but infrastructure development and storage and
      transportation facilities may be insufficient for our needs at commercially
      acceptable terms in the localities in which we operate. This could be
      particularly problematic to the extent that our operations are conducted in
      remote areas that are difficult to access, such as areas that are distant from
      shipping and/or pipeline facilities. These factors may affect our ability to
      explore and develop properties and to store and transport our oil and natural
      gas production and may increase our expenses.
Furthermore,
      weather conditions or natural disasters, actions by companies doing business
      in
      one or more of the areas in which we will operate, or labor disputes may impair
      the distribution of oil and/or natural gas and in turn diminish our financial
      condition or ability to maintain our operations.
Prices
      and Markets for Oil and Natural Gas Are Unpredictable and Tend to Fluctuate
      Significantly, Which Could Reduce Profitability, Growth and the Value of Our
      Business.
Oil
      and
      natural gas are commodities whose prices are determined based on world demand,
      supply and other factors, all of which are beyond our control. World prices
      for
      oil and natural gas have fluctuated widely in recent years, and rose to
      near-record levels in 2005. The average price for West Texas Intermediate oil
      in
      1999 was $22 per barrel. In 2002 it was $27 per barrel. In 2005, it was $57
      per
      barrel. We expect that prices will fluctuate in the future. Price fluctuations
      will have a significant impact upon our revenue, the return from our reserves
      and on our financial condition generally. Price fluctuations for oil and natural
      gas commodities may also impact the investment market for companies engaged
      in
      the oil and gas industry. Prices may not remain at current levels. Future
      decreases in the prices of oil and natural gas may have a material adverse
      effect on our financial condition, the future results of our operations and
      quantities of reserves recoverable on an economic basis.
Increases
      in Our Operating Expenses will Impact Our Operating Results and Financial
      Condition.
Exploration,
      development, production, marketing (including distribution costs) and regulatory
      compliance costs (including taxes) will substantially impact the net revenues
      we
      derive from the oil and natural gas that we produce. These costs are subject
      to
      fluctuations and variation in different locales in which we will operate, and
      we
      may not be able to predict or control these costs. If these costs exceed our
      expectations, this may adversely affect our results of operations. In addition,
      we may not be able to earn net revenue at our predicted levels, which may impact
      our ability to satisfy our obligations.
Penalties
      We May Incur Could Impair Our Business.
Failure
      to comply with government regulations could subject us to civil and criminal
      penalties, could require us to forfeit property rights, and may affect the
      value
      of our assets. We may also be required to take corrective actions, such as
      installing additional equipment or taking other actions, each of which could
      require us to make substantial capital expenditures. We could also be required
      to indemnify our employees in connection with any expenses or liabilities that
      they may incur individually in connection with regulatory action against them.
      As a result, our future business prospects could deteriorate due to regulatory
      constraints, and our profitability could be impaired by our obligation to
      provide such indemnification to our employees.
-18-
Environmental
      Risks May Adversely Affect Our Business.
All
      phases of the oil and gas business present environmental risks and hazards
      and
      are subject to environmental regulation pursuant to a variety of federal, state
      and municipal laws and regulations. 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 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
      we expect may result in stricter standards and enforcement, larger fines and
      liability and potentially increased capital expenditures and operating costs.
      The discharge of oil, natural 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. The application of
      environmental laws to our business may cause us to curtail our production or
      increase the costs of our production, development or exploration
      activities.
Our
      Insurance May Be Inadequate to Cover Liabilities We May Incur.
Our
      involvement in the exploration for and development of oil and gas properties
      may
      result in our becoming subject to liability for pollution, blow-outs, property
      damage, personal injury or other hazards. Although we will obtain insurance
      in
      accordance with industry standards to address such risks, such insurance has
      limitations on liability that may not be sufficient to cover the full extent
      of
      such liabilities. In addition, such risks may not, in all circumstances, be
      insurable or, in certain circumstances, we may choose not to obtain insurance
      to
      protect against specific risks due to the high premiums associated with such
      insurance or for other reasons. The payment of such uninsured liabilities would
      reduce the funds available to us. If we suffer a significant event or occurrence
      that is not fully insured, or if the insurer of such event is not solvent,
      we
      could be required to divert funds from capital investment or other uses towards
      covering our liability for such events.
Our
      Business Will Suffer if We Cannot Obtain or Maintain Necessary
      Licenses.
Our
      operations will require licenses, permits and in some cases renewals of licenses
      and permits from various governmental authorities. Our ability to obtain,
      sustain or renew such licenses and permits on acceptable terms is subject to
      change in regulations and policies and to the discretion of the applicable
      governments, among other factors. Our inability to obtain, or our loss of or
      denial of extension, to any of these licenses or permits could hamper our
      ability to produce revenues from our operations.
Challenges
      to Our Properties May Impact Our Financial Condition.
Title
      to
      oil and gas interests is often not capable of conclusive determination without
      incurring substantial expense. While we intend to make appropriate inquiries
      into the title of properties and other development rights we acquire, title
      defects may exist. In addition, we may be unable to obtain adequate insurance
      for title defects, on a commercially reasonable basis or at all. If title
      defects do exist, it is possible that we may lose all or a portion of our right,
      title and interests in and to the properties to which the title defects
      relate.
-19-
If
      our
      property rights are reduced, our ability to conduct our exploration, development
      and production activities may be impaired.
We
      Will Rely on Technology to Conduct Our Business and Our Technology Could Become
      Ineffective Or Obsolete.
We
      rely
      on technology, including geographic and seismic analysis techniques and economic
      models, to develop our reserve estimates and to guide our exploration,
      development and production activities. We will be required to continually
      enhance and update our technology to maintain its efficacy and to avoid
      obsolescence. The costs of doing so may be substantial, and may be higher than
      the costs that we anticipate for technology maintenance and development. If
      we
      are unable to maintain the efficacy of our technology, our ability to manage
      our
      business and to compete may be impaired. Further, even if we are able to
      maintain technical effectiveness, our technology may not be the most efficient
      means of reaching our objectives, in which case we may incur higher operating
      costs than we would were our technology more efficient.
RISKS
      RELATED TO OUR COMMON STOCK
There
      Has Been No Established Trading Market for the Common Stock.
There
      has
      been no established trading market for the Common Stock in the context of the
      business that the Company will operate after the Merger. The lack of an active
      market may impair investors' ability to sell their shares at the time they wish
      to sell them or at a price that they consider reasonable. The lack of an active
      market may also reduce the fair market value of investors' shares. An inactive
      market may also impair our ability to raise capital by selling shares of capital
      stock and may impair our ability to acquire other companies or technologies
      by
      using Common Stock as consideration.
Investors
      May Have Difficulty Trading and Obtaining Quotations for Our Common Stock.
The
      Common Stock is currently quoted on the NASD's Over-the-Counter Bulletin Board
      under the symbol "FTRS.OB." The Common Stock is not actively traded, and the bid
      and asked prices for our Common Stock have fluctuated widely. As a result,
      investors may find it difficult to dispose of, or to obtain accurate quotations
      of the price of, our securities. This severely limits the liquidity of the
      Common Stock, and would likely reduce the market price of the Common Stock
      and
      our hamper ability to raise additional capital.
The
      Market Price of Our Common Stock Is, and Is Likely to Continue to Be, Highly
      Volatile and Subject to Wide Fluctuations.
The
      market price of the Common Stock following the Closing Date is likely to be
      highly volatile and could be subject to wide fluctuations in response to a
      number of factors that are beyond our control, including:
§
dilution
                caused by our issuance of additional shares of Common Stock and other
                forms of equity securities, which we expect to make in connection
                with
                future capital financings to fund our operations and growth, to attract
                and retain valuable personnel and in connection with future strategic
                partnerships with other companies;
-20-
§
announcements
                of new acquisitions, reserve discoveries or other business initiatives
                by
                our competitors;
§
fluctuations
                in revenue from our oil and gas business as new reserves come to
                market;
§
changes
                in the market for oil and natural gas commodities and/or in the capital
                markets generally;
§
changes
                in the demand for oil and natural gas, including changes resulting
                from
                the introduction or expansion of alternative fuels;
§
quarterly
                variations in our revenues and operating
                expenses;
§
changes
                in the valuation of similarly situated companies, both in our industry
                and
                in other industries;
§
changes
                in analysts' estimates affecting our company, our competitors and/or our
                industry;
§
changes
                in the accounting methods used in or otherwise affecting our
                industry;
§
additions
                and departures of key personnel;
§
announcements
                of technological innovations or new products available to the oil
                and gas
                industry;
§
announcements
                by relevant governments pertaining to incentives for alternative
                energy
                development programs;
§
fluctuations
                in interest rates and the availability of capital in the capital
                markets;
                and
§
significant
                sales of our Common Stock, including sales by the investors following
                registration of the shares of Common Stock issued in this Offering
                and/or
                future investors in future offerings we expect to make to raise additional
                capital.
These
      and
      other factors are largely beyond our control, and the impact of these risks,
      singly or in the aggregate, may result in material adverse changes to the market
      price of our Common Stock and/or our results of operations and financial
      condition.
Our
      Operating Results May Fluctuate Significantly, and These Fluctuations May Cause
      Our Stock Price to Decline.
Our
      operating results will likely vary in the future primarily as the result of
      fluctuations in our revenues and operating expenses, including the coming to
      market of oil and natural gas reserves that we are able to develop, expenses
      that we incur, the prices of oil and natural gas in the commodities markets
      and
      other factors. If our results of operations do not meet the expectations of
      current or potential investors, the price of our Common Stock may
      decline.
We
      Do
      Not Expect to Pay Dividends In the Foreseeable Future.
We
      do not
      intend to declare dividends for the foreseeable future, as we anticipate that
      we
      will reinvest any future earnings in the development and growth of our business.
      Therefore, investors will not receive any funds unless they sell their Common
      Stock, and stockholders may be unable to sell their shares on favorable terms
      or
      at all. Investors cannot be assured of a positive return on investment or that
      they will not lose the entire amount of their investment in the Common
      Stock.
-21-
Investors
      Will Experience Dilution Upon the Exercise of Warrants or
      Options.
There
      are
11,537,257
shares
      of
      common stock underlying warrants issued to purchasers of the Units, which if
      exercised or converted, could decrease the net tangible book value of investors'
Common Stock. In addition, there are 2,000,000 shares of Common Stock underlying
      options that may be granted pursuant to the Plan. If the holders of those
      options exercise those options, investors may experience dilution in the net
      tangible book value of their Common Stock. Further, the sale or availability
      for
      sale of the underlying shares in the marketplace could depress our stock price.
      We have registered or agreed to register for resale all of the underlying shares
      described above. Holders of registered underlying shares could resell the shares
      immediately upon registration, resulting in significant downward pressure on
      our
      stock price.
Directors
      and Officers of the Company Will Have a High Concentration of Common Stock
      Ownership.
Based
      on
      the
45,883,009
shares
      of
      Common Stock that are outstanding as of the Closing Date, our officers and
      directors will beneficially own approximately
28.0
%
      of our
      outstanding Common Stock. Such a high level of ownership by such persons may
      have a significant effect in delaying, deferring or preventing any potential
      change in control of Foothills. Additionally, as a result of their high level
      of
      ownership, our officers and directors might be able to strongly influence the
      actions of the Board and the outcome of actions brought to our shareholders
      for
      approval. Such a high level of ownership may adversely affect the voting and
      other rights of our shareholders.
Applicable
      SEC Rules Governing the Trading of "Penny Stocks" Limit the Trading and
      Liquidity of the Common Stock, Which May Affect the Trading Price of the Common
      Stock.
Shares
      of
      Common Stock may be considered a "penny stock" and be subject to SEC rules and
      regulations which impose limitations upon the manner in which such shares may
      be
      publicly traded and regulate broker-dealer practices in connection with
      transactions in "penny stocks." Penny stocks generally are equity securities
      with a price of less than $5.00 (other than securities registered on certain
      national securities exchanges or quoted on the NASDAQ system, provided that
      current price and volume information with respect to transactions in such
      securities is provided by the exchange or system). The penny stock rules require
      a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
      from the rules, to deliver a standardized risk disclosure document that provides
      information about penny stocks and the risks in the penny stock market. The
      broker-dealer must also 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 which may increase the
      difficulty investors may experience in attempting to liquidate such securities.
2.
      MANAGEMENT'S PLAN OF OPERATION
A
      discussion of our past financial results is not pertinent to the business plan
      of the Company on a going forward basis, as the result of the change in our
      business and operations from a pre-exploration stage company prior to the Merger
      and Split-off to a company engaged in the acquisition, exploration and
      development of oil and natural gas properties following the
      Transactions.
-22-
After
      giving effect to the Transactions, our cash balance is expected to be
      approximately $9 million, representing net proceeds received from the private
      placement of securities, less amounts expended to date from the proceeds of
      the
      Bridge Financing and costs associated with the Transactions.
This
      amount is expected to be sufficient to complete Phase I and a portion of Phase
      II under the INNEX Agreement, and to conduct certain other activities during
      the
      next 12 months.
The
      following describes our current business plan, including a summary of planned
      acquisition, exploration and development opportunities, our ability to satisfy
      our cash requirements, and our need to raise additional funds over the next
      year.
·
In
                Phase I of the Eel River Project, we have an obligation to pay 100%
                of the
                costs of drilling two wells, acquiring additional leasehold acres,
                and
                certain other activities. We are completing drilling plans for the
                two
                Phase I wells, including location selection, well design, and services
                and
                equipment procurement. We expect to drill these wells during the
                second
                quarter of 2006. We have also initiated a leasing program to significantly
                expand the joint venture's leasehold position in the basin. Following the
                drilling of the first two wells and the completion of Phase I, we
                will
                have the option, but not the obligation, to proceed into Phase II.
                If we
                elect to proceed into Phase II, we will have an obligation to pay
                100% of
                the costs of drilling another well to be commenced by the end of
                2006 and
                of conducting a 3D seismic survey covering not less than 15 square
                miles.
                Subject to the completion of permitting and regulatory requirements,
                we
                expect to conduct the 3D seismic survey in the fall of 2006 and to
                commence the drilling of the Phase II well in late 2006. Our existing
                financial resources are expected to be adequate to complete the Phase
                I
                activities and a portion of the Phase II activities.
·
On
                the Anadarko Project, we are completing preliminary geological and
                geophysical interpretations of the 3D seismic data, and plan to reprocess
                the 3D data, finalize the interpretations, and identify drillable
                prospects. We then plan to acquire oil and gas leases over those
                prospects, and to negotiate joint ventures with other companies,
                who will
                be able to earn interests in the leases by paying some or all of
                the costs
                of drilling one or more exploratory wells on the prospects. Our existing
                financial resources are expected to be adequate to conduct these
                activities during the remainder of 2006, although it is possible
                that we
                will elect to defer some of these activities in order to utilize
                the
                required funds for other planned activities or
                opportunities.
·
We
                have identified strategic opportunities to acquire existing producing
                fields in the United States, including in the Eel River Basin. If
                consummated, these acquisitions will provide immediate cash flow
                from
                existing production, as well as access to proved undeveloped and
                probable
                reserves and deeper exploration potential through new drilling. Because
                the acquisition targets have existing proved developed producing
                reserves
                and production, we would expect to fund some portion of the acquisition
                costs with reserve-based debt financing. Assuming that mutually
                satisfactory agreements can be reached with the existing owners of
                the
                fields, our existing financial resources are expected to be adequate
                to
                conduct the evaluation of these opportunities, but not sufficient
                to
                complete the acquisitions.
·
We
                plan to continue to evaluate exploration and development opportunities
                and
                appropriate acquisitions. Successful completion of acquisitions will
                provide additional cash flow which will allow us to expand our activities
                and capabilities, and advance exploration and development
                opportunities.
·
We
                expect a gradual increase in general and administrative expenses
                to
                approximately $150,000 per month in the second half of 2006. We expect
                to
                expand our staff from three to seven employees with additions in
                the areas
                of land and legal, geoscience, accounting and administration.
·
It
                is likely
that we will need to (i) raise additional equity and/or debt financing
                during the next 12 months in order to complete these planned activities
                or
                to access additional opportunities, or (ii) adjust the scope and
                extent of
                our plans to correspond with our available financial resources.
-23-
Off-Balance
      Sheet Arrangements
We
      have
      no off-balance sheet arrangements.
3.
      DESCRIPTION OF PROPERTY
Our
      business strategy is to identify and exploit low risk resources in and adjacent
      to existing or indicated producing areas that can be quickly developed and
      put
      on production at low cost, including the acquisition of producing properties
      with exploitation and exploration potential. We will also take advantage of
      our
      expertise to develop exploratory projects in focus areas and to participate
      with
      other companies in those areas to explore for oil and natural gas using
      state-of-the-art 3D seismic technology. Our management will use its extensive
      domestic and international oil and gas experience to establish and grow the
      Company.
Our
      initial focus is on oil and natural gas properties located in the Eel River
      Basin, California and the Anadarko Basin, Oklahoma. We expect to have access
      to
      additional opportunities on a worldwide scale through a contractual relationship
      with Moyes & Co., Inc.
On
      January 3, 2006 we entered into the INNEX Agreement. Our assets consist
      primarily of the right to acquire interests in existing leasehold acreage
      pursuant to the terms of the INNEX Agreement, and certain rights to a 75-square
      mile 3D seismic survey covering a portion of the Anadarko Basin in Roger Mills
      County, Oklahoma.
Our
      principal executive offices are located at 11902 Shanklin Street, Bakersfield,
      California 93303 and our phone number is (832) 567-0766.
We
      are
      negotiating a lease for approximately 3,200 square feet of office space which
      will serve as our headquarters in Bakersfield, California. We believe that
      suitable additional space to accommodate our anticipated growth will be
      available in the future on commercially reasonable terms.
4.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
      following table sets forth certain information regarding the expected beneficial
      ownership of the Common Stock as of the Closing Date, calculated in accordance
      with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
      amended. The table sets forth the beneficial ownership of (i) each person who,
      to our knowledge, beneficially owns more than 5% of the outstanding shares
      of
      Common Stock; (ii) each of the directors and executive officers of the Company;
      and (iii) all of our executive officers and directors as a group.
Unless
      otherwise indicated, the address of each of our directors and executive officers
      is 11902 Shanklin Street, Bakersfield, California 93312.
-24-
Name
                and Address of Beneficial Owner
Number
                of Shares Beneficially Owned
(1)
Percentage
of
                Common Stock Outstanding
John
                L. Moran (2)
4,961,719
10.80
%
Dennis
                B. Tower (3)
4,899,219
10.63
%
Christopher
                P. Moyes (4)
4,403,250
9.59
%
W.
                Kirk Bosché (5)
3,331,212
7.24
%
Executive
                Officers and Directors as Group
13,192,150
28.52
%
(1)
Beneficial
                ownership is calculated based on
45,883,009
shares
                of Common Stock issued and outstanding as of the Closing Date. Beneficial
                ownership is determined in accordance with Rule 13d-3 of the SEC.
                The
                number of shares beneficially owned by a person includes shares of
                Common
                Stock underlying options or warrants held by that person that are
                currently exercisable or exercisable within 60 days of the Closing
                Date.
                The shares issuable pursuant to the exercise of those options or
                warrants
                are deemed outstanding for computing the percentage ownership of
                the
                person holding those options and warrants but are not deemed outstanding
                for the purposes of computing the percentage ownership of any other
                person. The persons and entities named in the table have sole voting
                and
                sole investment power with respect to the shares set forth opposite
                that
                person's name, subject to community property laws, where applicable,
                unless otherwise noted in the applicable footnote.
(2)
Includes
                options exercisable within 60 days to acquire 75,000 shares of Common
                Stock, granted under the Company's 2006 Equity Incentive
                Plan.
(3)
Includes
                warrants to acquire 112,500 shares of Common Stock exercisable within
                60
                days, and options exercisable within 60 days to acquire 75,000 shares
                of
                Common Stock, granted under the Company's 2006 Equity Incentive Plan.
(4)
Includes
                4,343,750 shares of Common Stock distributed to affiliates of MMP
                LLP, a
                Brasada Stockholder, the holders of which have executed an irrevocable
                proxy giving Mr. Moyes sole voting power over the shares through
                April 6,
                2007. Also includes 34,000 shares of Common Stock and warrants to
                acquire
                25,500 shares of Common Stock exercisable within 60 days, which shares
                and
                warrants were purchased by Choregus Master Trust, Plan I, Money Purchase
                and Choregus Master Trust, Plan II, Profit Sharing in the Offering,
                and of
                which shares and warrants Mr. Moyes is deemed to be the beneficial
                owner.
(5)
Includes
                warrants to acquire 54,000 shares of Common Stock exercisable within
                60
                days, and options exercisable within 60 days to acquire 50,000 shares
                of
                Common Stock, granted under the Company's 2006 Equity Incentive
                Plan.
5.
      DIRECTORS AND EXECUTIVE OFFICERS
On
      the
      Closing Date, the then-current officers of Foothills resigned and,
      simultaneously, new officers were elected by the Board. Also on the Closing
      Date, J. Earl Terris, the then-sole director of Foothills, appointed Dennis
      B.
      Tower to the Board. Ten days after the Closing Date, Mr. Terris is expected
      to
      resign as a member of the Board, and Mr. Tower is expected to name two new
      directors to the Board. For more information regarding the changes to our Board,
      please see our Information Statement Pursuant to Section 14(F) of the Securities
      Exchange Act of 1934, filed with the SEC on April 6, 2006 and incorporated
      herein by reference.
Officers
      and Directors
The
      following persons are executive officers and directors of Foothills following
      the Merger, and hold the offices set forth opposite their names:
Name
Age
Position
Dennis
                B. Tower
59
Chief
                Executive Officer, Director
John
                L. Moran
60
President
W.
                Kirk Bosché
55
Chief
                Financial Officer
J.
                Earl Terris
60
Director
-25-
Dennis
      B. Tower
Before
      joining Brasada as its Chief Executive Officer in 2006, Mr. Tower had extensive
      involvement in all phases of new venture exploration, appraisal, project
      evaluation and development, asset acquisition and disposal, strategic goals
      setting and human resource evaluation. During 2005, Mr. Tower, together with
      Messrs. Moran and Bosché, evaluated opportunities that would be appropriate for
      launching a new oil and gas exploration and development company, which
      ultimately led to the formation of Brasada at the end of 2005. From 2000 through
      2004, Mr. Tower served as President and Chief Executive Officer at First
      International Oil Corporation, a privately held independent oil company with
      extensive holdings in Kazakhstan, where he led the company to a successful
      sale
      with a major Chinese oil company. Previously, Mr. Tower held several Vice
      President, Manager, Director and Geologist positions at Atlantic Richfield
      Company ("ARCO"), where he was responsible for the company's Mozambique drilling
      operations, managed the company's exploration licenses in Myanmar and the
      Philippines, coordinated exploration efforts in other Asian countries and
      evaluated field redevelopment and asset acquisition opportunities. Mr. Tower
      led
      ARCO's North Sea exploration activities for a nine-year period during which ARCO
      made numerous new oil and natural gas discoveries in the United Kingdom, Norway
      and the Netherlands. During the course of his career, Mr. Tower has been
      directly involved in the discovery of 35 oil and gas fields in 11 different
      countries. Mr. Tower holds both MSc and BSc degrees in Geology from Oregon
      State
      University.
John
      L. Moran
Prior
      to
      joining Brasada in 2006, Mr. Moran, together with Messrs. Tower and Bosché,
      evaluated opportunities during 2005 that would be appropriate for launching
      a
      new oil and gas exploration and development company, which ultimately led to
      the
      formation of Brasada at the end of 2005. In May of 2000, Mr. Moran formed and
      later served as President and Exploration Manager of Carneros Energy, Inc.,
      a
      private oil and gas exploration company with exploration and acquisition
      emphasis in the San Joaquin and Sacramento Basins of California, where he was
      responsible for obtaining $75 million in equity funding. From 1997 through
      1998,
      Mr. Moran founded and acted President of Integrated Petroleum Exploration
      ("IPX") which merged with and into Prime Natural Resources ("Prime") in 1998,
      where he served as Vice President of Exploration. Prior to his time at IPX
      and
      Prime, Mr. Moran served as both Vice President Exploration/Chief Geologist
      and
      Exploration Manager/MidContinent Region for Apache Corporation. In 1995 Mr.
      Moran founded TeTra Exploration, an oil and gas exploration and development
      company using 3D seismic data base in the Anadarko Basin in Oklahoma. He was
      responsible for the acquisition of the right to use 13,000 miles of 2D seismic
      data base for exploration purposes and was instrumental in developing a 75
      square-mile 3D seismic data base that was later sold to a major oil and gas
      company. Mr. Moran holds both Bachelors and Masters Degrees in Geology with
      a
      major in Stratigraphy and a minor in Petrology from Oregon State
      University.
W.
      Kirk Bosché
Mr.
      Bosché has diversified experience as a financial and accounting executive
      officer in public and private oil and gas exploration and production
      organizations. Mr. Bosché joined Brasada in 2006 as its Chief Financial Officer.
      During 2005, Mr. Bosché, together with Messrs. Tower and Moran, evaluated
      opportunities that would be appropriate for launching a new oil and gas
      exploration and development company, which ultimately led to the formation
      of
      Brasada at the end of 2005. Mr. Bosché served as Chief Financial Officer of
      First International Oil Corporation from 1997 through 2004. From 1986 through
      1997, Mr. Bosché was Vice President and Treasurer for Garnet Resources
      Corporation, a NASDAQ National Market System independent oil and gas exploration
      and production company with activities in seven foreign countries. He began
      his
      career with Price Waterhouse & Co., and has been a Certified Public
      Accountant since 1975. Mr. Bosché holds a BBA in Accounting from the University
      of Houston.
-26-
J.
      Earl Terris
J.
      Earl
      Terris is the founder of our company. Mr. Terris was the President,
      Secretary-Treasurer and Director from the company's inception on November 17,
      2000. On the Closing Date, Mr. Terris resigned from all offices, and resigned
      as
      a director effective 10 days after the Closing Date. He is currently employed
      as
      the president and owner of Sirret Investments, Ltd., a Canadian private
      investment company, and as a development manager for Berkshire Young
      Enterprises. Between September 1999 and January 2000 he was employed as the
      deputy store manager for Thresher Wine Stores. From November 1998 through August
      1999 he was employed as a sales advisor and sales administrator for Comet
      Stores, Inc. From September 1996 through April 1998 he was employed as the
      president of Koda Resources, Ltd., a Canadian public resources company. From
      1994 through 1997 Mr. Terris was a partner in Franchise Sales Associates and
      Franchise Conxions.
Changes
      in Directors and Principal Officers
On
      the
      Closing Date, J. Earl Terris, the sole member of the Board on that date,
      appointed Dennis B. Tower as a member of the Board. On the same date, Mr. Terris
      submitted a written resignation to the Company expressing his intent to resign
      from the Board as of 10 days following the Closing Date. Also on the Closing
      Date, Mr. Terris resigned as President and Secretary-Treasurer of the Company,
      effective upon submission. Concurrent with its acceptance of Mr. Terris'
resignation, the Board elected Mr. Tower as Chief Executive Officer, Mr. Moran
      as President, and Mr. Bosché as Chief Financial Officer of the Company.
Board
      Committees
The
      Board
      intends to appoint such persons and form such committees as are required to
      meet
      the corporate governance requirements imposed by the national securities
      exchanges. Therefore, we intend that a majority of our directors will eventually
      be independent directors and at least one director will qualify as an "audit
      committee financial expert." Additionally, the Board is expected to appoint an
      audit committee, nominating committee and compensation committee, and to adopt
      charters relative to each such committee. Until further determination by the
      Board, the full Board will undertake the duties of the audit committee,
      compensation committee and nominating committee. We do not currently have an
      "audit committee financial expert" since we currently do not have an audit
      committee in place.
Code
      of Ethics
The
      Company has not formally adopted a written code of ethics that applies to the
      Company's principal executive officer, principal financial officer or
      controller, or persons performing similar functions. Based on the Company's
      small size, early development stage and limited financial and human resources,
      Foothills did not adopt a written code of ethics prior to the Merger. We intend
      to formalize and adopt a written code of ethics as soon as practicable following
      the Closing Date.
-27-
6.
      EXECUTIVE COMPENSATION
Executive
      Compensation
Brasada
      was formed in December 2005, and its business activities did not commence until
      January 2006. Accordingly, no compensation was paid to its executive officers
      during the year ended December 31, 2005. The executive officers of Brasada
      became the executive officers of Foothills on the Closing Date. Therefore,
      there
      was no compensation paid to the "Named Executive Officers" for any of the fiscal
      years ended 2005, 2004 or 2003.
Compensation
      of Directors
There
      are
      currently no compensation arrangements in place for the members of the Board.
      We
      expect to establish these arrangements as additional members are appointed
      to
      the Board.
Agreements
      with Executive Officers
Foothills
      entered into executive employment agreements with all members of our current
      management team on the Closing Date. The employment agreements entered into
      between Foothills and Dennis B. Tower, John L. Moran and W. Kirk Bosché have
      identical terms except for the position held by, the annual salary for, and
      the
      options granted to each such person. The respective employment agreements
      provide for an initial annual base salary of $190,000 each for Messrs. Tower
      and
      Moran and $175,000 for Mr. Bosché, for option grants of 300,000 shares of Common
      Stock each for Messrs. Tower and Moran and 200,000 shares of Common Stock for
      Mr. Bosché, and for unspecified annual bonuses as warranted. The options granted
      to each of Messrs. Tower, Moran and Bosché vest according to the following
      schedule: 25% of the options vest on the date of grant, 25% vest on the first
      anniversary of the date of grant, 25% vest on the second anniversary of the
      date
      of grant, and the remaining 25% vest on the third anniversary of the date of
      grant.
The
      executive employment agreements have unspecified terms of service subject to
      termination for cause and without cause, and provide for severance payments
      to
      each employee in the event he is terminated without cause or the employee
      terminates the agreement for good reason, in the amount of two times total
      compensation for the prior year. "Good reason" includes an adverse change in the
      executive's position, title, duties or responsibilities, or any failure to
      re-elect him to such position (except for termination for "cause"). All of these
      employment agreements include standard indemnity, insurance, non-competition
      and
      confidentiality provisions.
2006
      Equity Incentive Plan
Summary
The
      Board
      reserved a total of 2,000,000 shares of our Common Stock for issuance under
      our
      2006 Equity Incentive Plan (the "2006 Plan"). If an incentive award granted
      under the 2006 Plan expires, terminates, is unexercised or is forfeited, or
      if
      any shares are surrendered to us in connection with an incentive award, the
      shares subject to such award and the surrendered shares will become available
      for further awards under the 2006 Plan.
-28-
Shares
      issued under the 2006 Plan through the settlement, assumption or substitution
      of
      outstanding awards or obligations to grant future awards as a condition of
      acquiring another entity will not reduce the maximum number of shares available
      under the 2006 Plan. In addition, the number of shares of Common Stock subject
      to the 2006 Plan, any number of shares subject to any numerical limit in the
      2006 Plan, and the number of shares and terms of any incentive award may be
      adjusted in the event of any change in our outstanding Common Stock by reason
      of
      any stock dividend, spin-off, split-up, stock split, reverse stock split,
      recapitalization, reclassification, merger, consolidation, liquidation, business
      combination or exchange of shares or similar transaction.
Administration
The
      compensation committee of the Board (or the Board in the absence of such a
      committee), will administer the 2006 Plan. Subject to the terms of the 2006
      Plan, the compensation committee will have complete authority and discretion
      to
      determine the terms of awards under the 2006 Plan.
Grants
The
      2006
      Plan authorizes the grant to participants of nonqualified stock options,
      incentive stock options, restricted stock awards, restricted stock units,
      performance grants intended to comply with Section 162(m) of the Internal
      Revenue Code (the "Code"), and stock appreciation rights, as described below:
§
Options
                granted under the 2006 Plan entitle the grantee, upon exercise, to
                purchase a specified number of shares from us at a specified exercise
                price per share. The exercise price for shares of Common Stock covered
                by
                an option cannot be less than the fair market value of the Common
                Stock on
                the date of grant unless we agree otherwise at the time of the grant.
§
Restricted
                stock awards and restricted stock units may be awarded on terms and
                conditions established by the compensation committee, which may include
                performance conditions for restricted stock awards and the lapse
                of
                restrictions on the achievement of one or more performance goals
                for
                restricted stock units.
§
The
                compensation committee may make performance grants, each of which
                will
                contain performance goals for the award, including the performance
                criteria, the target and maximum amounts payable, and other terms
                and
                conditions.
§
The
                2006 Plan authorizes the granting of stock awards. The compensation
                committee will establish the number of shares of Common Stock to
                be
                awarded and the terms applicable to each award, including performance
                restrictions.
§
Stock
                appreciation rights ("SARs") entitle the participant to receive a
                distribution in an amount not to exceed the number of shares of Common
                Stock subject to the portion of the SAR exercised multiplied by the
                difference between the market price of a share of Common Stock on
                the date
                of exercise of the SAR and the market price of a share of Common
                Stock on
                the date of grant of the SAR.
Duration,
      Amendment and Termination
The
      Board
      may suspend or terminate the 2006 Plan without stockholder approval or
      ratification at any time or from time to time. Unless sooner terminated, the
      2006 Plan will terminate 10 years after it is adopted. The Board may also amend
      the 2006 Plan at any time. No change may be made that increases the total number
      of shares of Common Stock reserved for issuance pursuant to incentive awards
      or
      reduces the minimum exercise price for options or exchange of options for other
      incentive awards, unless such change is authorized by our
      stockholders.
-29-
7.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We
      anticipate entering into an agreement with Moyes & Co., Inc. to identify
      potential acquisition, development, exploitation and exploration opportunities
      that fit with our strategy. Moyes & Co. is expected to screen opportunities
      and perform detailed evaluation of those opportunities that we decide to pursue,
      as well as assist with due diligence and negotiations with respect to such
      opportunities. Christopher P. Moyes, the President of Moyes & Co., Inc.,
      will be appointed to the Board on April 16, 2006.
8.
      DESCRIPTION OF SECURITIES.
Authorized
      Capital Stock
As
      of
      March 1, 2006, the Articles of Incorporation of Foothills authorized the
      issuance of 100,000,000 shares of Common Stock and 10,000,000 shares of
      preferred stock, par value $0.001 per share.
Capital
      Stock Issued and Outstanding
As
      of the
      date of the Closing Date, there were issued and outstanding
45,883,009
shares
      of
      Common Stock, including: (i) 17,375,000 shares issued to the Brasada
      Stockholders, (ii) 12,625,000 shares issued to the Foothills Stockholders,
      (iii)
15,383,009
shares
      issued in the Offering, and 500,000 shares issued as a finder fee in connection
      with the Transactions. In addition, there were outstanding warrants to
      acquire
11,537,257
shares
      of
      Common Stock issued to investors in the Offering. These warrants are exercisable
      at any time following the Closing Date. Further, 2,000,000 shares of Common
      Stock have been reserved for issuance under the 2006 Equity Incentive Plan.
The
      following description of Foothills capital stock is derived from various
      provisions of Foothills' Articles of Incorporation and By-laws as well as
      provisions of applicable law. Such description is not intended to be complete
      and is qualified in its entirely by reference to the relevant provisions of
      Foothills' Articles of Incorporation and By-laws included as exhibits to the
      registration statement on Form SB-2/A filed with the SEC on June 18, 2001.
Description
      of Common Stock
Holders
      of the Common Stock are entitled to one vote for each share held on all matters
      submitted to a stockholder vote. Holders of Common Stock do not have cumulative
      voting rights. Therefore, holders of a majority of the shares of Common Stock
      voting for the election of directors can elect all of the directors. Holders
      of
      the Common Stock representing a majority of the voting power of the capital
      stock issued, outstanding and entitled to vote, represented in person or by
      proxy, are necessary to constitute a quorum at any meeting of stockholders.
      A
      vote by the holders of a majority of the outstanding shares of Common Stock
      is
      required to effectuate certain fundamental corporate changes such as
      liquidation, merger or an amendment to the articles of incorporation.
Holders
      of Common Stock are entitled to share in all dividends that the Board, in its
      discretion, declares from legally available funds. In the event of a
      liquidation, dissolution or winding up, each outstanding share entitles its
      holder to participate pro rata in all assets that remain after payment of
      liabilities and after providing for each class of stock, if any, having
      preference over the Common Stock. Holders of the Common Stock have no
      pre-emptive rights, no conversion rights and there are no redemption provisions
      applicable to the Common Stock.
-30-
Description
      of Preferred Stock
Foothills
      is authorized to issue 10,000,000 shares of "blank check" preferred stock, par
      value $0.001 per share, none of which are issued and outstanding as of the
      Closing Date. The Board is vested with authority to divide the shares of
      preferred stock into series and fix and determine the relative rights and
      preferences of the shares of any such series. Once authorized, the dividend
      or
      interest rates, conversion rates, voting rights, redemption prices, maturity
      dates and similar characteristics of the preferred stock will be determined
      by
      the Board, without the necessity of obtaining approval of the
      stockholders.
Description
      of Warrants
As
      of the
      Closing Date there were warrants issued and outstanding representing the right
      to purchase
11,537,257
shares
      of
      Common Stock. The outstanding warrants were issued to the investors in
      connection with the Offering. The warrants are exercisable at a price of $1.00
      per whole share for a period of five years. Each warrant has customary
      provisions. The shares of Common Stock underlying the outstanding warrants
      issued in connection with the purchase of Units in the Offering are subject
      to
      registration under the Securities Act of 1933 by the Company, within 120 days
      of
      the Closing Date.
Description
      of Options
As
      of the
      Closing Date, there were options outstanding to purchase
800,000
shares
      of Common Stock. Under the terms of our 2006 Equity Incentive Plan, we may
      issue
      incentive awards that may include the issuance of up to 2,000,000 shares of
      Common Stock. The 2006 Equity Incentive Plan was adopted by the Board and
      Foothills Stockholders prior to the Merger, and we anticipate that our
      stockholders after the Merger will ratify and adopt the 2006 Equity Incentive
      Plan and any awards that have been made under the Plan through the Closing
      Date.
-31-
PART
      II
1.
MARKET
          PRICE OF AND DIVIDENDS ON COMMON EQUITY AND OTHER STOCKHOLDER
          MATTERS
The
      Common Stock is quoted on the NASD OTC Bulletin Board
under
      the
      symbol "FTRS.OB."
There
      is
      currently no established market for the Common Stock.
As
      of the
      Closing Date, there were approximately 20
holders
      of record of shares of the Common Stock.
Trades
      in
      the Common Stock may be subject to Rule 15g-9 of the Exchange Act, which rule
      imposes certain requirements on broker/dealers who sell securities subject
      to
      the rule to persons other than established customers and accredited investors.
      For transactions covered by the rule, brokers/dealers must make a special
      suitability determination for purchasers of the securities and receive the
      purchaser's written agreement to the transaction prior to sale. The SEC also has
      rules that regulate broker/dealer practices in connection with transactions
      in
"penny stocks." Penny stocks generally are equity securities with a price of
      less than $5.00 (other than securities registered on certain national securities
      exchanges or quoted on the NASDAQ system, provided that current price and volume
      information with respect to transactions in that security is provided by the
      applicable exchange or system). The penny stock rules require a broker/dealer,
      before a transaction in a penny stock not otherwise exempt from the rules,
      to
      deliver a standardized risk disclosure document prepared by the SEC that
      provides information about penny stocks and the nature and level of 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. The bid and offer quotations, and the broker/dealer and salesperson
      compensation information, must be given to the customer orally or in writing
      before effecting the transaction, and must be given to the customer in writing
      before or with the customer's confirmation. These disclosure requirements may
      have the effect of reducing the level of trading activity in the secondary
      market for shares of the Common Stock. As a result of these rules, investors
      may
      find it difficult to sell their shares.
As
      of the
      Closing Date, there are
45,883,009
shares
      of
      Common Stock issued and outstanding. The shares of Common Stock issued in
      connection with the Transactions, are "restricted securities" which may be sold
      or otherwise transferred only if such shares are first registered under the
      Securities Act or are exempt from such registration requirements. As discussed
      elsewhere in this Current Report on Form 8-K, we have agreed to file a
      registration statement within 120 days of the Closing Date to register certain
      of these shares.
In
      addition, there are 2,000,000 shares of Common Stock reserved for issuance
      of
      stock options and other incentive awards pursuant to the 2006 Equity Incentive
      Plan. We expect to file a registration statement on Form S-8 to register the
      shares of Common Stock reserved for issuance of incentive awards under the
      2006
      Equity Incentive Plan. This registration statement is expected to become
      effective on filing.
Dividend
      Policy
Foothills
      has never declared or paid dividends. We intend to retain earnings, if any,
      to
      support the development of the business and therefore do not anticipate paying
      cash dividends for the foreseeable future. Payment of future dividends, if
      any,
      will be at the discretion of the Board after taking into account various
      factors, including current financial condition, operating results and current
      and anticipated cash needs.
-32-
Securities
      Authorized for Issuance Under Equity Compensation Plans
We
      had no
      securities authorized for issuance under any equity compensation plan as of
      the
      end of fiscal year 2005.
2.
LEGAL
          PROCEEDINGS
From
      time
      to time we may be named in claims arising in the ordinary course of business.
      Currently, no legal proceedings or claims are pending against us or involve
      us
      that, in the opinion of our management, could reasonably be expected to have
      a
      material adverse effect on our business or financial condition.
3.
CHANGES
          IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
4.
RECENT
          SALES OF UNREGISTERED SECURITIES
Shares
      Issued in Connection with the Merger and the Offering
On
      the
      Closing Date, the Brasada Stockholders surrendered all of the issued and
      outstanding shares of Brasada and received 17,375,000
shares
      of
      Common Stock. The Foothills Stockholders retained 12,625,000 shares of Common
      Stock.
In
      connection with the Offering, we sold
15,383,009
shares
      of
      Common Stock and warrants to purchase up to
11,537,257
shares
      of
      Common Stock for five years at a price of $1.00 per whole share, to accredited
      investors, for a total purchase price of
$10,768,106
.
      In
      connection with the Closing, Foothills issued warrants to acquire 500,000 shares
      of Common Stock to the Placement Agent, which warrants are exercisable for
      five
      years at $1.00 per whole share.
Concurrently
      with the Merger, Foothills granted options to purchase
800,000
shares
      of Common Stock under the 2006 Equity Incentive Plan to the Named Executive
      Officers
. 
      Except as otherwise described herein, the options are issuable pursuant to
      the
      2006 Equity Incentive Plan at an exercise price of
$0.70
per
      share and will vest over the three-year period following the date of
      grant.
The
      transactions discussed above are exempt from registration under Section 4(2)
      of
      the Securities Act and Rule 506 of Regulation D as promulgated by the
      SEC.
5.
INDEMNIFICATION
          OF DIRECTORS AND OFFICERS
Nevada
      Revised Statutes ("NRS") Sections 78.7502 and 78.751 provide Foothills with the
      power to indemnify any of its directors and officers. The director or officer
      must have conducted himself/herself in good faith and reasonably believe that
      his/her conduct was in, or not opposed to, our best interests. In a criminal
      action the director, officer, employee or agent must not have had a reasonable
      cause to believe his/her conduct was unlawful.
Under
      NRS
      Section 78.751, advances for expenses may be made by agreement if the director
      or officer affirms in writing that he/she believes he/she has met the standards
      and will personally repay the expenses if it is determined such officer or
      director did not meet the standards.
-33-
Foothills'
      By-laws include an indemnification provision under which Foothills has the
      power
      to indemnify its directors, officers and former directors and officers
      (including heirs and personal representatives) against all costs, charges and
      expenses actually and reasonably incurred, including an amount paid to settle
      an
      action or satisfy a judgment to which the director or officer is made a party
      by
      reason of being or having been a director or officer of Foothills or any of
      its
      subsidiaries.
Foothills'
      By-laws also provide that the directors may cause Foothills to purchase and
      maintain insurance for the benefit of a person who is or was serving as a
      director, officer, employee or agent of Foothills or any of its subsidiaries
      (including heirs and personal representatives) against a liability incurred
      by
      him/her as a director, officer, employee or agent.
Foothills'
      Articles of Incorporation provide a limitation of liability in that no director
      or officer shall be personally liable to Foothills or any of its stockholders
      for damages for breach of fiduciary duty as director or officer involving any
      act or omission of any such director or officer, provided there was no
      intentional misconduct, fraud or a knowing violation of the law, or payment
      of
      dividends in violation of NRS Section 78.300.
PART
      III
1.
INDEX
          TO EXHIBITS
See
      Item
      9.01(d) below, which is incorporated by reference herein.
2.  
          DESCRIPTION OF EXHIBITS
See
      Exhibit Index below and the corresponding exhibits, which are incorporated
      by
      reference herein.
Item
      3.02.
Recent
      Sales of Unregistered Securities.
Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on
      Form 8-K, which disclosure is incorporated herein by reference.
Item
      5.01.
Changes
      in Control of Registrant.
Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on
      Form 8-K, which disclosure is incorporated herein by reference.
Item
      5.02.
Departure
      of Directors or Principal Officers; Election of Directors; Appointment of
      Principal Officers.
Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on
      Form 8-K, which disclosure is incorporated herein by reference.
Item
      5.06.
Change
      in Shell Company Status.
Reference
      is made to the disclosure set forth under Item 2.01 of this Current Report
      on
      Form 8-K, which disclosure is incorporated herein by reference. As a result
      of
      the Merger described under Item 2.01 of this Current Report on Form 8-K, we
      believe that Foothills Resources, Inc. is no longer a shell corporation as
      that
      term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange
      Act.
-34-
Item
      9.01.
Financial
      Statements and Exhibits.
(a)
Financial
                Statements of Businesses
                Acquired.
(b)
Pro
                Forma Financial
                Information.
The
      financial statements of Foothills for the periods and dates indicated below
      are
      filed with this report.
Page
Audited
                Financial Statements:
Brasada
                California, Inc. (f/k/a Brasada Resources LLC):
Independent
                Auditor's Report
F-2
Balance
                Sheet as of December 31, 2005
F-3
Statement
                of Operations for the year ended December 31,
                2005
F-4
Statement
                of Members' Capital for the period from Inception
(December
                29, 2005) through December 31, 2005
F-4
Statement
                of Cash Flows for the period from Inception
(December
                29, 2005) through December 31, 2005
F-5
Notes
                to Financial Statements
F-6
Supplemental
                Oil and Gas Information
                (Unaudited)
F-9
Unaudited
                Pro forma Financial Information:
Foothills
                Resources, Inc.:
Introduction
F-10
Pro
                Forma Consolidated Balance Sheet as of December 31,
                2005
F-11
Pro
                Forma Consolidated Statement of Operations for the year ended
December 31,
                2005
F-12
Note
                to Pro Forma Financial Statements as of December 31, 2005 and
for
                the year ended December 31, 2005
F-13
-35-
(d)
Exhibits.
Exhibit
                No.
Description
Reference
2.1
Agreement
                and Plan of Merger and Reorganization, dated as of April 6, 2006,
                by and
                between Foothills Resources, Inc., a Nevada corporation, Brasada
                Acquisition Corp., a Delaware corporation and Brasada California,
                Inc., a
                Delaware corporation.*
3.1
Articles
                of Incorporation of Foothills Resources, Inc.
Incorporated
                by reference to Exhibit 3.1 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).
3.2
Certificate
                of Amendment of the Articles of Incorporation of Foothills Resources,
                Inc.
Incorporated
                by reference to Exhibit 3.2 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).
3.2
Bylaws
                of Foothills Resources, Inc.
Incorporated
                by reference to Exhibit 3.3 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).
4.1
Specimen
                Stock Certificate of Foothills Resources, Inc.
Incorporated
                by reference to Exhibit 4.1 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).
4.2
Form
                of Warrant issued to the Investors in the Private Placement Offering,
                April 6, 2006.*
4.3
Form
                of Lock-Up Agreement by and between Foothills Resources, Inc. and
                the
                Brasada Stockholders.*
10.1
Form
                of Subscription Agreement by and between Foothills Resources, Inc.
                and the
                investors in the Offering.*
10.2
Form
                of Registration Rights Agreement by and between Foothills Resources,
                Inc.
                and the investors in the Offering.*
10.3
Split
                Off Agreement, dated April 6, 2006, by and among Foothills Resources,
                Inc., J. Earl Terris, Foothills Leaseco, Inc. and Brasada California,
                Inc.*
10.4
Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and Dennis B. Tower.*
10.5
Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and John L. Moran.*
10.6
Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and W. Kirk Bosché.*
10.7
Form
                of Indemnity Agreement by and between Foothills Resources, Inc. and
                the
                Directors and Officers of Foothills Resources, Inc.*
10.8
Farmout
                and Participation Agreement, dated as of January 3, 2006, by and
                between
                INNEX California, Inc. and Brasada Resources, LLC.*
10.9
Notice
              and Acknowledgement of Increase of Offering.*
*
Filed
                herewith.
-36-
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.
FOOTHILLS
              RESOURCES, INC.
By:
/s/ Dennis
              B.
              Tower
Name:
Dennis
              B. Tower
Title:
Chief
              Executive Officer
Dated:
      April 6, 2006
-37-
EXHIBIT
      INDEX
Exhibit
                No.
Description
Reference
2.1
Agreement
                and Plan of Merger and Reorganization, dated as of April 6, 2006,
                by and
                between Foothills Resources, Inc., a Nevada corporation, Brasada
                Acquisition Corp., a Delaware corporation and Brasada California,
                Inc., a
                Delaware corporation.*
3.1
Articles
                of Incorporation of Foothills Resources, Inc.
Incorporated
                by reference to Exhibit 3.1 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).
3.2
Certificate
                of Amendment of the Articles of Incorporation of Foothills Resources,
                Inc.
Incorporated
                by reference to Exhibit 3.2 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).
3.2
Bylaws
                of Foothills Resources, Inc.
Incorporated
                by reference to Exhibit 3.3 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).
4.1
Specimen
                Stock Certificate of Foothills Resources, Inc.
Incorporated
                by reference to Exhibit 4.1 to the Registration Statement on Form
                SB-2/A filed with the Securities and Exchange Commission on June
                18, 2001
                (File No. 333-59708).
4.2
Form
                of Warrant issued to the Investors in the Private Placement Offering,
                April 6, 2006.*
4.3
Form
                of Lock-Up Agreement by and between Foothills Resources, Inc. and
                the
                Brasada Stockholders.*
10.1
Form
                of Subscription Agreement by and between Foothills Resources, Inc.
                and the
                investors in the Offering.*
10.2
Form
                of Registration Rights Agreement by and between Foothills Resources,
                Inc.
                and the investors in the Offering.*
10.3
Split
                Off Agreement, dated April 6, 2006, by and among Foothills Resources,
                Inc., J. Earl Terris, Foothills Leaseco, Inc. and Brasada California,
                Inc.*
10.4
Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and Dennis B. Tower.*
10.5
Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and John L. Moran.*
10.6
Employment
                Agreement , dated April 6, 2006, by and between Foothills Resources,
                Inc.
                and W. Kirk Bosché.*
10.7
Form
                of Indemnity Agreement by and between Foothills Resources, Inc. and
                the
                Directors and Officers of Foothills Resources, Inc.*
10.8
Farmout
                and Participation Agreement, dated as of January 3, 2006, by and
                between
                INNEX California, Inc. and Brasada Resources, LLC.*
10.9
Notice and
              Acknowledgement of Increase of Offering.*
*
Filed
                herewith.
-38-
Page
Audited
                Financial Statements:
Brasada
                California, Inc. (f/k/a Brasada Resources LLC):
Independent
                Auditor's Report
F-2
Balance
                Sheet as of December 31, 2005
F-3
Statement
                of Operations for the year ended December 31,
                2005
F-4
Statement
                of Members' Capital for the period from Inception
(December
                29, 2005) through December 31, 2005
F-4
Statement
                of Cash Flows for the period from Inception
(December
                29, 2005) through December 31, 2005
F-5
Notes
                to Financial Statements
F-6
Supplemental
                Oil and Gas Information
                (Unaudited)
F-9
Unaudited
                Pro forma Financial Information:
Foothills
                Resources, Inc.:
Introduction
F-10
Pro
                Forma Consolidated Balance Sheet as of December 31,
                2005
F-11
Pro
                Forma Consolidated Statement of Operations for the year ended
December 31,
                2005
F-12
Note
                to Pro Forma Financial Statements as of December 31, 2005 and
for
                the year ended December 31, 2005
F-13
F-1
INDEPENDENT
      AUDITOR'S REPORT
To
      the
      Audit Committee
Brasada
      California, Inc.
Successor
      in interest Brasada Resources, LLC
Houston,
      Texas
We
      have
      audited the balance sheet of Brasada Resources, LLC, a development stage
      company, as of December 31, 2005, and the related statements of operations,
      member's capital and cash flows for the period from inception on December 29,
      2005 through December 31, 2005. These financial statements are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements based on our audits.
We
      conducted our audits in accordance with auditing standards generally accepted
      in
      the United States of America. Those standards require that we plan and perform
      the audits to obtain reasonable assurance about whether the financial statements
      are free of material misstatement. An audit includes examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial statements.
      An
      audit also includes assessing the accounting principles used and significant
      estimates made by management, as well as evaluating the overall financial
      statement presentation. We believe that our audits provide a reasonable basis
      for our opinion.
In
      our
      opinion, the financial statements referred to above present fairly in all
      material respects the financial position of Brasada Resources, LLC, a
      development stage company, at December 31, 2005, and the results of its
      operations and its cash flows for the period from inception on December 29,
      2005
      through December 31, 2005, in conformity with accounting principles generally
      accepted in the United States of America.
BROWN
      ARMSTRONG PAULDEN
McCOWN
      STARBUCK THORNBURGH & KEETER
ACCOUNTANCY
      CORPORATION
Bakersfield,
      California
March
      21,
      2006
F-2
FINANCIAL
      STATEMENTS
Set
      forth
      below are the audited financial statements of Brasada Resources LLC, the
      predecessor company to Brasada, as of December 31, 2005. The business operations
      of Brasada will be the business operations of Foothills following the Merger.
BRASADA
                  RESOURCES LLC
(A
                  DEVELOPMENT STAGE COMPANY)
BALANCE
                  SHEET
DECEMBER
                  31, 2005
Assets
Property
                  and equipment, at cost:
Oil
                  and gas properties, using full cost accounting -
Unproved
                  properties not being amortized
$
54,856
Total
                  assets
$
54,856
Liabilities
                  and Members' Capital
Accounts
                  payable
$
4,856
Members'
                  capital:
Members'
                  capital
50,000
Total
                  liabilities and members' capital
$
54,856
The
      accompanying notes are an integral part of these financial
      statements
F-3
BRASADA
                RESOURCES LLC
(A
                DEVELOPMENT STAGE COMPANY)
STATEMENT
                OF OPERATIONS
FOR
                THE PERIOD FROM INCEPTION
(DECEMBER
                29, 2005) THROUGH DECEMBER 31,
                2005
Income
$
—
Costs
                and expenses
—
Net
                income (loss)
$
—
BRASADA
                RESOURCES LLC
(A
                DEVELOPMENT STAGE COMPANY)
STATEMENT
                OF MEMBERS' CAPITAL
FOR
                THE PERIOD FROM INCEPTION
(DECEMBER
                29, 2005) THROUGH DECEMBER 31,
                2005
Contributions
$
50,000
Net
                income (loss) for the period from inception
(December
                29, 2005) through December 31, 2005
—
Balance,
                December 31, 2005
$
50,000
The
      accompanying notes are an integral part of these financial
      statements
F-4
BRASADA
                RESOURCES LLC
(A
                DEVELOPMENT STAGE COMPANY)
STATEMENT
                OF CASH FLOWS
FOR
                THE PERIOD FROM INCEPTION
(DECEMBER
                29, 2005) THROUGH DECEMBER 31,
                2005
Cash
                flows from operating activities:
Net
                income (loss)
$
—
Net
                cash provided by operating activities
—
Cash
                flows from investing activities:
Additions
                to oil and gas properties
(50,000
)
Net
                cash used for investing activities
(50,000
)
Cash
                flows from financing activities:
Capital
                contributions by members
50,000
Net
                cash provided by financing activities
50,000
Net
                increase (decrease) in cash and cash equivalents
—
Cash
                and cash equivalents at beginning of period
—
Cash
                and cash equivalents at end of period
$
—
The
      accompanying notes are an integral part of these financial
      statements
F-5
BRASADA
      RESOURCES LLC
(A
      DEVELOPMENT STAGE COMPANY)
NOTES
      TO FINANCIAL STATEMENTS
DECEMBER
      31, 2005
Note
      1 - Summary of Operations and Going Concern
Brasada
      Resources LLC (the "Company") was organized December 29, 2005 as a limited
      liability company under the laws of the state of Delaware. The Company's
      principal business is to pursue opportunities in oil and gas acquisition,
      exploration and development. In accordance with Statement of Financial
      Accounting Standards ("SFAS") No. 7, Accounting and Reporting by Development
      Stage Enterprises, the Company is considered to be a development stage
      company.
The
      Company's ability to continue as a going concern is dependent upon obtaining the
      necessary financing to acquire, explore and develop oil and gas interests and
      to
      generate profitable operations from its oil and gas interests in the future.
      To
      address these matters, management intends to:
·
borrow
                from Foothills Resources, Inc., a Nevada company ("Foothills"), under a
                bridge loan facility to fund its planned initial acquisition, exploration
                and development activities (see Note 3);
                and
·
pursue
                a merger with Foothills, which will allow the Company to raise additional
                capital through the sale and issuance of common shares of its corporate
                successor-in-interest (see Note 3).
Should
      the going concern assumptions not be appropriate and the Company not be able
      to
      realize its assets and settle its liabilities in the normal course of
      operations, these financial statements would require adjustments to the amounts
      and classifications of assets and liabilities.
Note
      2 - Significant Accounting Policies
Principles
      of consolidation
The
      Company accounts for its investments in oil and gas joint ventures using the
      proportionate consolidation method, whereby the Company's proportionate share of
      each entity's assets, liabilities, revenues and expenses is included in the
      appropriate classification in the financial statements.
Use
      of estimates
The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts reported in the financial
      statements. Actual results could differ from such estimates. Changes in such
      estimates may affect amounts reported in future periods.
Oil
      and gas properties
The
      Company follows the full-cost method of accounting for oil and gas properties.
      Under this method, all productive and nonproductive costs incurred in connection
      with the acquisition, exploration and development of oil and gas reserves are
      capitalized in separate cost centers for each country in which the Company
      has
      operations. Such capitalized costs include leasehold acquisition, geological,
      geophysical and other exploration work, drilling, completing and equipping
      oil
      and gas wells, asset retirement costs, internal costs directly attributable
      to
      property acquisition, exploration and development, and other related costs.
      The
      Company also capitalizes interest costs related to unevaluated oil and gas
      properties.
F-6
The
      capitalized costs of oil and gas properties in each cost center are amortized
      using the unit-of-production method. Sales or other dispositions of oil and
      gas
      properties are normally accounted for as adjustments of capitalized costs.
      Gains
      or losses are not recognized in income unless a significant portion of a cost
      center's reserves is involved. Capitalized costs associated with the acquisition
      and evaluation of unproved properties are excluded from amortization until
      it is
      determined whether proved reserves can be assigned to such properties or until
      the value of the properties is impaired. Unproved properties are assessed at
      least annually to determine whether any impairment has occurred. If the net
      capitalized costs of oil and gas properties in a cost center exceed an amount
      equal to the sum of the present value of estimated future net revenues from
      proved oil and gas reserves in the cost center and the costs of properties
      not
      being amortized, both adjusted for income tax effects, such excess is charged
      to
      expense.
Asset
      retirement obligations
The
      fair
      value of an asset retirement obligation is recognized in the period in which
      it
      is incurred if a reasonable estimate can be made. The Company's asset retirement
      obligations primarily relate to the abandonment of oil and gas wells and
      producing facilities.
Members'
      capital
The
      operations of the Company are governed by the provisions of an operating
      agreement executed by and among its members. The total capital contributed
      by
      the members as of December 31, 2005 was $50,000.
Revenue
      recognition
Oil
      and
      gas revenues from producing wells are recognized when title and risk of loss
      is
      transferred to the purchaser of the oil or gas.
New
      accounting pronouncements
In
      December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No.
      123 (revised 2004), Share-Based Payment ("SFAS 123(R)"). SFAS 123(R) is a
      revision of SFAS No. 123, Accounting for Stock Based Compensation ("SFAS 123"),
      and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock
      Issued to Employees ("APB 25"). Among other items, SFAS 123(R) eliminates the
      use of APB 25 and the intrinsic value method of accounting, and requires
      companies to recognize the cost of employee services received in exchange for
      awards of equity instruments based on the grant date fair value of those awards.
      SFAS 123(R) permits the use of the Black-Scholes model as well as other standard
      option pricing models. The compliance date for SFAS 123(R) has been amended
      such
      that the standard will be effective for the first full fiscal year beginning
      after June 15, 2005. The Company has not yet determined which model it will
      use
      to measure the fair value of employee stock options upon the adoption of SFAS
      123(R) and has not yet determined the impact on the Company's future operating
      results.
In
      March
      2005, the Securities and Exchange Commission ("SEC") issued Staff Accounting
      Bulletin ("SAB") No. 107 on SFAS No. 123(R) ("SAB 107"). SAB 107 reinforces the
      flexibility allowed by SFAS 123(R) to choose an option pricing model, provides
      guidance on when it would be appropriate to rely exclusively on either
      historical or implied volatility in estimating expected volatility and provided
      examples and simplified approaches to determining the expected term. In April
      2005, the SEC extended the date by which companies are required to adopt SFAS
      123(R) from the first reporting period beginning on or after June 15, 2005
      to
      the first reporting period of the first full fiscal year beginning on or after
      June 15, 2005.
F-7
Note
      3 - Subsequent Events
In
      January 2006, the Company's members contributed an additional $50,000 to its
      capital.
In
      January 2006, the Company entered into a Farmout and Participation Agreement
      providing for a joint venture for exploration, development and production of
      oil
      and gas in the Eel River Basin, California (the "Eel River Agreement"). Under
      the terms of the Eel River Agreement, the Company will serve as operator of
      the
      joint venture. To earn interests in certain of the leases held by its joint
      venture partner, the Company must (a) drill two exploratory wells no later
      than
      June 30, 2006, subject to rig availability, (b) acquire 1,000 additional
      leasehold acres in the area of mutual interest, and (c) conduct certain other
      operations. Following successful completion of these activities, the Company
      has
      the right, but not the obligation, to conduct additional activities in
      accordance with the Eel River Agreement to earn additional leasehold
      interests.
In
      February 2006, the Company was converted into a Delaware corporation named
      Brasada California, Inc. ("Brasada"). Under Delaware law, all of the Company's
      assets, liabilities, rights and obligations were acquired and assumed by
      Brasada, and the capital of the Company's members was exchanged for shares of
      Brasada's common stock.
In
      March
      2006, Brasada entered into a binding term sheet with Foothills providing for
      (a)
      a private placement of $7,000,000 of common stock and warrants of Foothills,
      (b)
      the merger of Brasada into a wholly owned subsidiary of Foothills, in exchange
      for the issuance of 42.9% of the issued and outstanding common stock of
      Foothills to the shareholders of Brasada, and (c) the bridge loan facility
      described in the following paragraph.
In
      March
      2006, Brasada entered into agreements with Foothills, pursuant to which Brasada
      may borrow up to $3,000,000 from Foothills to meet agreed working capital
      commitments. The loans are evidenced by a promissory note (the "Bridge Note"),
      which matures 120 days from the date of the loans, bears interest at 9% per
      annum payable monthly commencing 30 days from the date of the loans, and is
      secured by all of Brasada's assets and shares of its common stock equal to 51%
      of such stock issued and outstanding. Upon the closing of the transaction
      described in the preceding paragraph, all amounts outstanding under the Bridge
      Note will be forgiven, and the Bridge Note will be deemed repaid in
      full.
F-8
SUPPLEMENTAL
      OIL AND GAS
      INFORMATION
(unaudited)
The
      following tables set forth information about the Company's oil and gas producing
      activities pursuant to the requirements of SFAS No. 69, "Disclosures About Oil
      and Gas Producing Activities." All of the Company's oil and gas producing
      activities are within the United States.
Capitalized
      Costs as of December 31, 2005
Proved
                  properties
$
—
Unproved
                  properties
54,856
54,856
Accumulated
                  depreciation, depletion and amortization
—
Net
                  capitalized costs
$
54,856
Costs
      Incurred for the Period from Inception (December 29, 2005) through December
      31,
      2005
Property
                  acquisition:
Proved
                  properties
$
—
Unproved
                  properties
54,072
Exploration
784
Development
—
Total
                  costs incurred
$
54,856
Oil
      and Gas Reserve Quantities
Proved
      reserves represent estimated quantities of crude oil and natural gas which
      geological and engineering data demonstrate to be reasonably recoverable in
      the
      future from known reservoirs under existing economic and operating conditions.
      Proved developed reserves can be expected to be recovered through existing
      wells, with existing equipment and operating methods.
The
      Company had no proved reserves as of December 31, 2005.
F-9
FOOTHILLS
      RESOURCES, INC.
PRO
      FORMA FINANCIAL STATEMENTS
AS
      OF DECEMBER 31, 2005
AND
      FOR THE YEAR ENDED DECEMBER 31, 2005
The
      accompanying unaudited pro forma consolidated financial statements ("pro forma
      statements") reflect the acquisition of Brasada by Foothills using the purchase
      method of accounting. The acquisition is accounted as a reverse takeover of
      Foothills by Brasada, as the shareholders of Brasada will control the
      consolidated entity after the acquisition.
Subsequent
      to December 31, 2005, Foothills advanced funds through a bridge financing
      facility to Brasada to enable Brasada to meet certain specific working capital
      requirements. The bridge financing facility has not been included in the pro
      forma statements as the amount due to Foothills by Brasada and the amount due
      by
      Brasada to Foothills are eliminated on consolidation.
The
      pro
      forma statements have been prepared from, and should be read in conjunction
      with, Brasada's audited financial statements for the period from inception
      (December 29, 2005) through December 31, 2005, and Foothills' audited financial
      statements for the year ended December 31, 2005.
F-10
FOOTHILLS
        RESOURCES, INC.
PRO
        FORMA CONSOLIDATED BALANCE SHEET
DECEMBER
        31, 2005
(Unaudited)
Pro
                  Forma
Note
Pro
                  Forma
Brasada
Foothills
Adjustments
Ref
Consolidated
ASSETS
Current
                  assets:
Cash
$
-
$
3,188
$
10,093,106
2b
$
10,096,294
Property
                  and equipment, at cost:
Oil
                  and gas properties, using full cost accounting -
Unproved
                  properties not being amortized
54,856
-
50,000
2a
104,856
$
54,856
$
3,188
$
10,143,106
$
10,201,150
LIABILITIES
Current
                  liabilities:
Accounts
                  payable and accrued liabilities
$
4,856
$
10,048
$
(10,048
)
2c
$
4,856
Due
                  to related party
-
2,500
(2,500
)
2c
-
Loans
                  payable
-
313,051
(313,051
)
2c
-
4,856
325,599
(325,599
)
4,856
MEMBERS'
                  CAPITAL
Members'
                  capital
50,000
-
(50,000
)
2a
-
STOCKHOLDERS'
                  EQUITY (DEFICIT)
Preferred
                  stock
-
-
-
-
100
2a
Common
                  stock
-
39,356
15,383
2b
45,883
(8,956
)
2c
99,900
2a
Additional
                  paid-in capital
-
104,562
10,077,723
2b
10,150,411
(131,774
)
2c
Deficit
                  accumulated during the development stage
-
(466,329
)
466,329
2c
-
(322,411
)
10,518,705
10,196,294
$
54,856
$
3,188
$
10,143,106
$
10,201,150
F-11
FOOTHILLS
          RESOURCES, INC.
PRO
          FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR
          ENDED DECEMBER 31, 2005
(Unaudited)
Pro
                  Forma
Note
Pro
                  Forma
Brasada
Foothills
Adjustments
Ref
Consolidated
Expenses
Accounting
                  and audit fees
$
-
$
18,346
$
18,346
Bank
                  charges
-
195
195
Deferred
                  acquisition costs written off
-
280,100
280,100
Interest
-
6,658
6,658
Legal
                  (recovery)
-
(3,000
)
(3,000
)
Management
                  fees
-
19,500
19,500
Office
                  and miscellaneous
-
6,000
6,000
Transfer
                  agent and filing fees
-
4,042
4,042
Net
                  loss for the period
$
-
$
(331,841
)
$
(331,841
)
Basic
                  loss per share
$
-
$
(0.01
)
$
(0.01
)
Weighted
                  average number of shares outstanding
411
35,566,972
45,883,009
F-12
FOOTHILLS
      RESOURCES, INC.
NOTES
      TO PRO FORMA FINANCIAL STATEMENTS
AS
      OF DECEMBER 31, 2005
AND
      FOR THE YEAR ENDED DECEMBER 31, 2005
1.
BASIS
                OF PRESENTATION
These
      pro
      forma consolidated financial statements have been prepared in accordance with
      generally accepted accounting principles in the United States of America
      ("GAAP") and Brasada's accounting policies, as disclosed in Note 2 of the
      audited financial statements of Brasada for the period ended December 31,
      2005.
The
      pro
      forma consolidated financial statements are based on the estimates and
      assumptions included in these notes and include all adjustments necessary for
      the fair presentation of the transactions in accordance with GAAP.
These
      pro
      forma consolidated financial statements are not intended to reflect results
      of
      operations or the financial position which would have actually resulted had
      the
      acquisition been effected on the dates indicated. These pro forma statements
      do
      not include any cost savings or other operations or financial position which
      may
      be obtained in the future.
2.
PRO
                FORMA ADJUSTMENTS TO THE CONSOLIDATED BALANCE
                SHEET
The
      following adjustments have been made as of December 31, 2005 to reflect the
      transactions described below, as if these transactions occurred on December
      31,
      2005 for purposes of the pro forma consolidated balance sheet.
a.
Additional
                contributions in January 2006 to Brasada's limited liability company
                predecessor by its members totaling $50,000, consummation of the
                INNEX
                Agreement and payment of the remaining $50,000 INNEX project fee
                in
                January 2006, and conversion of Brasada's predecessor to a corporation in
                February 2006, including the issuance of 100,000 shares of Brasada's
                common stock in exchange for the capital of the members of Brasada's
                predecessor.
b.
Sale
                of 15,383,009
Units
                of Foothills at $0.70 per Unit for total proceeds of $10,768,106,
and
                net proceeds of $
10,093,106
after
                estimated issue costs of $
675,000
.
c.
Exchange
                of common shares of Brasada for Common Stock of Foothills resulting
                in the
                acquisition of Foothills by Brasada, accounted for as a reverse takeover,
                and consummation of the merger, including the effect of the Stock
                Split,
                the surrender of 15,000
,000
                shares of outstanding Common Stock of Foothills by stockholders prior
                to
                the merger, the surrender of 45,945,769 shares of outstanding Common
                Stock
                of Foothills in connection with the split off of Foothills Leaseco,
                Inc.,
                the elimination of all liabilities
of
                Foothills, and the issuance of 500,000 shares of Common Stock as
                the
                Finder Fee.
3.
PRO
                FORMA ADJUSTMENTS TO THE CONSOLIDATED STATEMENT OF
                OPERATIONS
No
      adjustments were necessary to reflect the transactions described above, as
      if
      the transactions occurred on January 1, 2005 for purposes of the pro forma
      consolidated statement of operations for the year ended December 31,
      2005.
F-13