Form 10-K NYTEX Energy Holdings, For: Dec 31

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the fiscal year ended December 31, 2014

Commission File Number: 53915

SABLE NATURAL RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		84-1080045
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



12222 Merit Drive, Suite 1850 Dallas, Texas		75251
(Address of principal executive offices)		(Zip Code)

972-770-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

None

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $0.001 par value per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $1,877,926

As of March 27, 2015, the registrant had 35,157,501 shares of common stock outstanding.

__________________________________________________

Documents Incorporated by Reference

Portions of the registrant’s notice of annual meeting of shareholders and proxy statement to be filed pursuant to Regulation 14A within 120 days after the registrant’s fiscal year end of December 31, 2014 are incorporated by reference into Part III of this Form 10-K.

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TABLE OF CONTENTS



		Page
PART I

Item 1.	Business	4

Item 1A.	Risk Factors	8

Item 1B.	Unresolved Staff Comments	16

Item 2.	Properties	17

Item 3.	Legal Proceedings	19

Item 4.	Mine Safety Disclosures	19

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20

Item 6.	Selected Financial Data	21

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 8.	Financial Statements and Supplementary Data	29

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	29

Item9A.	Controls and Procedures	29

Item 9B.	Other Information	29

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	30

Item 11.	Executive Compensation	30

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	30

Item 13.	Certain Relationships and Related Transactions and Director Independence	30

Item 14.	Principal Accounting Fees and Services	30

PART IV

Item 15.	Exhibits and Financial Statement Schedules	31

Signatures		32

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FORWARD-LOOKING STATEMENTS

The statements contained in all parts of this document relate to future events, including, but not limited to, any and all statements regarding future operations, financial results, business plans and cash needs and other statements that are not historical facts are forward looking statements. When used in this document, the words “anticipate,” “budgeted,” “planned,” “targeted,” “potential,” “estimate,” “expect,” “may,” “project,” “believe” and similar expressions are intended to be among the statements that identify forward looking statements. Such statements involve known and unknown risks and uncertainties, including, but not limited to, those relating to the current economic environment and conditions, the volatility of natural gas and oil prices, our dependence on our key personnel, factors that affect our ability to manage our growth and achieve our business strategy, technological changes, our significant capital requirements, the potential impact of government regulations and the taxation of the oil and gas industry, adverse regulatory determinations, litigation, competition, availability of drilling, completion and production equipment and materials, business and equipment acquisition risks, weather, availability of financing and the terms of any such financing, financial condition of our industry partners, ability to obtain permits, drilling and completion of wells, infrastructure for salt water disposal, costs of exploiting and developing our properties and conducting other operations, competition in the oil and gas industry, developments in oil producing and natural gas producing countries, and other factors detailed herein. Some of the factors that could cause actual results to differ from those expressed or implied in forward-looking statements are described under “Risk Factors” and in other sections of this Form. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement and we undertake no obligation to update or revise any forward-looking statement.

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PART I

Item 1. Business

Sable Natural Resources Corporation (“Sable”) is an energy holding company with principal operations centralized in its wholly-owned subsidiary, Sable Operating Company, Inc. ("Sable Operating") Sable was formerly known as NYTEX Energy Holdings, Inc. and Sable Operating was formerly known as NYTEX Petroleum Inc. Sable Operating is a development stage exploration and production ("E&P") company engaged in the acquisition, development, and production of liquids rich natural gas and oil reserves from low-risk, high rate-of-return wells in the Fort Worth Basin of Texas. On December 31, 2014, our estimated proved reserves were 669.12 MBOE, of which 100% were proved developed. Our portfolio of proved developed natural gas and oil reserves is weighted in favor of liquids rich natural gas, with our proved reserves consisting of 15% oil, 38% natural gas liquids (“NGL”) and 47% natural gas. Also, on December 31, 2014 our probable reserves were 565 MBOE consisting of 17% oil, 2% NGL, and 81% natural gas, and our possible reserves were 1,231 MBOE consisting of 19% oil, 2% NGL, and 79% natural gas.

Sable and its subsidiaries, headquartered in Dallas, Texas, are collectively referred to herein as the “Company,” “we,” “us,” and “our.”

General Information

Our headquarters is located at 12222 Merit Drive, Suite 1850, Dallas, Texas, 75251, and our telephone number is 972-770-4700. Our internet address is www.snrcorp.com. Our trading symbol is SNRE.

General information about us, including our corporate governance policies can be found on our website. We make available on our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) as soon as reasonably practicable after we electronically file or furnish them to the Securities and Exchange Commission (“SEC”). The public may read and copy any materials we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains our reports, proxy and information statements, and our other filings. The address of that site is www.sec.gov.

Our Strategy

The principal components of our strategy include:


•	Growing reserves and production through acquisition, exploitation and development

We are focused on the acquisition, exploitation and development of unconventional liquids rich natural gas and oil reserves in the Fort Worth Basin. Our strategy is to increase production and expand our reserves through low cost unconventional recompletions and restimulations of existing wells and the drilling of low risk, high rate-of return natural gas and oil wells.


•	Leveraging the skills of our experienced management and technical team

We believe our management and technical team is pivotal to the success of our business strategy averaging over 25 years of individual experience in conventional and unconventional E&P operations. We believe our team has the technical expertise and managerial track record to advance its development plan of recompletion and restimulation opportunities while orchestrating a development drilling program. Independently, the team has experience acquiring assets, running vertical and horizontal development programs within conventional and unconventional fields, and managing large an varied field operations. As a team, we have acquired a producing natural gas and oil property with exploitation and development opportunities and constructed a financial and operating plan to successfully grow and develop Sable.


•	Identifying, acquiring and exploiting additional emerging liquids rich natural gas and oil assets

After acquiring, and now developing our platform acquisition, we have identified additional acquisition opportunities and plan to continue acquiring producing and leasehold properties in the Company's core area of the Fort Worth Basin. Utilizing our extensive network of industry professionals and operators within our core area, Sable is poised as an early entrant in the expansion of the Marble Falls play and other regional resource plays. With its platform acquisition in hand, larger acquisitions in play, and an aggressive development strategy, Sable's growth initiative is well underway.

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•	Upholding the ethical and business standards of the Company and maintaining the highest standards of health, safety, and environmental performance

We believe our success is grounded in our purpose, core values, and conduct demonstrated each day through ethical business practices, commitment to our employees, and our stakeholders.

Governmental Regulation

Our oil and natural gas exploration and production activities are subject to extensive laws, rules and regulations promulgated by federal and state agencies. In particular, oil and natural gas production and related operations are, or have been, subject to price controls, taxes and numerous other laws and regulations. The jurisdictions in which we own or operate properties for oil and natural gas production have statutory provisions regulation the exploration for and production of oil and natural gas, including provisions related to permits for the drilling of wells, bonding requirements to drill or operate wells, the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, sourcing and disposal of water used in the drilling and completion process and the abandonment of wells. Failure to comply with such laws, rules and regulations can result in substantial penalties, including the delay or stopping of our operations. The legislative and regulatory burden on the oil and natural gas industry increases our cost of doing business and affects our profitability.

Regulation of Production. Our exploration and drilling activities, including the construction and operation of pipelines and facilities for gathering, processing or storing oil, natural gas and other products, are subject to stringent federal, state, and local laws and regulations governing environmental quality, including those relating to oil spills, pipeline ruptures and pollution control, which are constantly changing. Although such laws and regulations can increase the cost of planning, designing, installing and operating such facilities, it is anticipated that, absent the occurrence of an extraordinary event, compliance with existing federal, state, and local laws, rules and regulations governing the release of materials in the environment or otherwise relating to the protection of the environment, will not have a material effect upon our business operations, capital expenditures, operating results or competitive position. See “Item 1A. Risk Factors— We are subject to federal, state and local regulations regarding issues of health, safety and protection of the environment. Under these regulations, we may become liable for penalties, damages or costs of remediation. Any changes in these laws and government regulations could increase our costs of doing business.”

We commonly use hydraulic fracturing as part of our operations. Hydraulic fracturing typically is regulated by state oil and natural gas commissions, but the U.S. Environmental Protection Agency, referred to as the EPA, has asserted federal regulatory authority pursuant to the Safe Drinking Water Act over certain hydraulic fracturing activities involving the use of diesel. In addition, legislation has been introduced before Congress to provide for federal regulation of hydraulic fracturing under the Safe Drinking Water Act and to require disclosure of the chemicals used in the hydraulic fracturing process. Several states, including Texas, are also considering implementing, or in some instances, have implemented, new regulations pertaining to hydraulic fracturing, including the disclosure of chemicals used in connection therewith. In addition, local governments also may seek to adopt ordinances within their jurisdictions regulation the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular. These regulatory requirements may result in additional costs and operational restrictions and delays, which could have an adverse impact on our business, financial condition, results of operations and cash flows. See “Item 1A. Risk Factors— Legislation and regulatory initiatives relating to hydraulic fracturing could increase our cost of doing business and adversely affect our operations.”

Regulation of Transportation. Sales of crude oil and natural gas are not currently regulated and are made at negotiated prices. Nevertheless, Congress could reenact price controls in the future. Our sales of crude oil are affected by the availability, terms and cost of transportation. The transportation of oil by common carrier pipelines is also subject to rate and access regulation. The Federal Energy Regulatory Commission (“FERC”) regulates interstate oil pipeline transportation rates under the Interstate Commerce Act. In general, interstate oil pipeline rates must be cost-based, although settlement rates agreed to by all shippers are permitted and market-based rates may be permitted in certain circumstances. In 1995, the FERC implemented regulations establishing an indexing system (based on inflation) for transportation rates for oil pipelines that allows a pipeline to increase its rates annually up to a prescribed ceiling, without making a cost of service filing. Every five years, the FERC reviews the appropriateness of the index level in relation to changes in industry costs.

Intrastate oil pipeline transportation rates are subject to regulation by state regulatory commissions. The basis for intrastate oil pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate oil pipeline rates, varies from state to state. Insofar as effective interstate and intrastate rates are equally applicable to all comparable shippers, we believe that the regulation of oil transportation rates will not affect our operations in any way that is of material difference from those of our competitors who are similarly situated.

In addition, interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to all similarly situated shippers requesting service on the same terms and under the same rates. When oil pipelines operate at full capacity, access is generally governed by prorationing

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provisions set forth in the pipelines’ published tariffs. Accordingly, we believe access to oil pipeline transportation services generally will be available to us to the same extent as to our similarly situated competitors.

Historically, the transportation and sale for resale of natural gas in interstate commerce has been regulated by the FERC under the Natural Gas Act of 1938 (“NGA”), the Natural Gas Policy Act of 1978 (“NGPA”) and regulations issued under those statutes. In the past, the federal government has regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at market prices, Congress could reenact price controls in the future.

The FERC regulates interstate natural gas transportation rates, and terms and conditions of service, which affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas. The FERC has stated open access policies are necessary to improve the competitive structure of the interstate natural gas pipeline industry and to create a regulatory framework that will put natural gas sellers into more direct contractual relations with natural gas buyers by, among other things, unbundling the sale of natural gas from the sale of transportation and storage services. The FERC issued a series of orders resulting in the elimination of the interstate pipelines’ traditional role of providing the sale and transportation of natural gas as a single service and replacing it with a structure under which pipelines provide transportation and storage service on an open access basis to others who buy and sell natural gas. Although the FERC’s orders do not directly regulate natural gas producers, they are intended to foster increased competition within all phases of the natural gas industry.

In 2000, the FERC issued Order No. 637 and subsequent orders, which imposed a number of additional reforms designed to enhance competition in natural gas markets. Among other things, Order No. 637 revised the FERC’s pricing policy by waiving price ceilings for short-term released capacity for a two-year experimental period, and effected changes in FERC regulations relating to scheduling procedures, capacity segmentation, penalties, rights of first refusal and information reporting. The natural gas industry historically has been very heavily regulated. Therefore, we cannot provide any assurance the less stringent regulatory approach recently established by the FERC under Order No. 637 will continue. However, we do not believe any action taken will affect us in a way that materially differs from the way it affects other natural gas producers.

The price at which we sell natural gas is not currently subject to federal rate regulation and, for the most part, is not subject to state regulation.

Intrastate natural gas transportation and facilities are also subject to regulation by state regulatory agencies, and certain transportation services provided by intrastate pipelines are also regulated by FERC. The basis for intrastate regulation of natural gas transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to state. We believe the regulation of similarly situated intrastate natural gas transportation in any states in which we operate and ship natural gas on an intrastate basis will not affect our operations in any way that is of material difference from those of our competitors. Like the regulation of interstate transportation rates, the regulation of intrastate transportation rates affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas.

Climate Change. Climate change has become the subject of an important public policy debate. Climate change remains a complex issue, with some scientific research suggesting that an increase in greenhouse gas emissions, or GHGs, may pose a risk to society and the environment. The oil and natural gas exploration and production industry is a source of certain GHGs, namely carbon dioxide and methane. The commercial risk associated with the production of fossil fuels lies in the uncertainty of government-imposed climate change legislation, including cap and trade schemes, and regulations that may affect us, our suppliers and our customers. The cost of meeting these requirements may have an adverse impact on our business, financial condition, results of operations and cash flows, and could reduce the demand for our products. See “Item 1A. Risk Factors— Regulations related to global warming and climate change could have an adverse effect on our operations and the demand for oil and natural gas.”

Competition and Other External Factors

The level of our revenues, earnings and cash flows are substantially dependent upon, and affected by, the level of U.S. oil and gas exploration and development, as well as the equipment capacity in any particular region.

We derive revenue from the sale of oil and natural gas. As a result, our revenues will be determined, to a large degree, by prevailing prices for crude oil and natural gas. We expect our operating partners to sell our oil and natural gas on the open market at prevailing market prices. The market price for oil and natural gas is dictated by supply and demand, and we cannot accurately predict or control the price we may receive for our oil and natural gas. In addition, the oil and natural gas industry is a highly competitive industry. We experience competition from other oil and natural gas companies in all areas, including the acquisition of leasing options on oil and natural gas properties and the exploration and development of these properties. Our competition includes major oil and natural gas companies, a variety of independent oil and natural gas companies, individuals and drilling and income programs. Many of our competitors are large, well established enterprises with substantially greater resources.

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Our ability to acquire additional properties and discover additional reserves will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment.

Price decreases would adversely affect our revenues, profits and the value of any proved reserves. Historically, the prices received for oil and natural gas have fluctuated widely. Among the factors that can cause these fluctuations are:


•	The domestic and foreign supply of natural gas and oil


•	Overall economic conditions


•	The level of consumer product demand


•	Weather conditions


•	The price and availability of competitive fuels such as heating oil and coal


•	Political conditions in the Middle East and other natural gas and oil producing regions


•	The level of oil and natural gas imports


•	Domestic and foreign governmental regulations

The demand for our land services fluctuates in relation to the identification of newly discovered oil and natural gas plays and by the price (or anticipated price) of oil and natural gas which is impacted by the supply of, and demand for, oil and natural gas. Generally, as supply of those commodities decreases and demand increases, demand for our services increase as oil and natural gas producers attempt to expand their inventory of undeveloped oil and natural gas properties. However, in a lower oil and natural gas price environment, demand for our services generally decreases as oil and natural gas producers decrease their activity.

Operating Hazards and Risks

Drilling activities are subject to many risks, including the risk that no commercially productive reservoirs will be encountered. There can be no assurance that the new wells we drill will be productive or that we will recover all or any portion of our investment. Drilling for oil and natural gas may involve unprofitable efforts, not only from dry wells, but also from wells that are productive, but do not produce sufficient net revenues to return a profit after drilling, completion, operating and other costs. The cost and timing of drilling, completing and operating wells is often uncertain. Our drilling operations may be curtailed, delayed or canceled as a result of numerous factors, many of which are beyond our control. These factors include, but are not limited to, low oil and natural gas prices, title issues, weather conditions, delays by or disputes with project participants, compliance with governmental requirements, shortages or delays in the delivery of equipment and services and increases in the cost for such equipment and services. Our future drilling activities may not be successful and, if unsuccessful, such failures may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our operations are subject to hazards and risks inherent in drilling for and producing and gathering and transporting oil and natural gas, such as fires, natural disasters, explosions, encountering formations with abnormal pressures, blowouts, craterings, pipeline ruptures and spills, any of which can result in the loss of hydrocarbons, environmental pollution, personal injury claims and damage to our properties and those of others. We maintain insurance against some but not all of the risks described above. In particular, the insurance we maintain does not cover claims relating to failure of title to oil and natural gas leases, loss of surface equipment at well locations, business interruption, loss of revenue due to low commodity prices or loss of revenue due to well failure.

Furthermore, in certain circumstances where such insurance is available, we may determine not to purchase it due to cost or other factors. The occurrence of an event that is not covered by, or not fully covered by insurance could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Hydraulic Fracturing

Hydraulic fracturing, a technique in use for over 60 years, is commonly applied to wells drilled in low permeability reservoir rock. A hydraulic fracture is formed by pumping fracturing fluid into the wellbore at a rate sufficient to cause the formation to crack, allowing the fracturing fluid to enter and extend the crack farther into the formation. To keep this fracture open after the injection stops, a solid proppant, primarily sand, is added to the fracture fluid. The propped hydraulic fracture then becomes a high permeability conduit through which the oil and/or natural gas can flow to the well.

The fluid injected into the rock is mostly water. Various types of proppant are added, such as silica sand, resin-coated sand, and fired bauxite clay (man-made ceramics), depending on the type of permeability or grain strength needed. Chemical

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additives are sometimes applied by the driller/well operator to tailor the injected material to the specific geological situation, protect the well, and improve its operation, though chemical additives typically make up less than 1% of the total composition of the injected fluid, varying slightly based on the type of well.

Seasonality

Winter weather conditions and lease stipulations can limit or temporarily halt our drilling and producing activities and other oil and natural gas operations. These constraints and the resulting shortages or high costs could delay or temporarily halt our operations and materially increase our operating and capital costs. Such seasonal anomalies can also pose challenges for meeting our well drilling objectives and may increase competition for equipment, supplies and personnel during the spring and summer months, which could lead to shortages and increase costs or delay or temporarily halt our operations.

Customers

Our customers include purchasers of the oil and natural gas we produce and independent oil and gas exploration and production companies. Of our consolidated revenues during the year ended December 31, 2014, we had four customers that accounted for more than 10% of our total consolidated revenues at a rate of 36%, 29%, 18% and 16%, respectively. Of our consolidated revenues during the year ended December 31, 2013, we had two customers that accounted for more than 10% of our total consolidated revenues at a rate of 37% and 26%, respectively.

Employees

As of March 27, 2015, we had twelve employees between our Oil and Gas business and corporate holding company. Our employees are not represented by a labor union and are not covered by collective bargaining agreements.

Acquisitions

On October 15, 2014, the Company completed the acquisition of 19,881 acres, the Panther Creek property ("Panther Creek"), held by production in the Fort Worth Basin at a purchase price of $9,5000,000 from Upham Oil & Gas Co., L.P. of Mineral Wells, Texas. The acquisition of Panther Creek was financed primarily by the issuance of secured notes of $8,900,000; bearing interest at the rate of 13% per annum with a maturity in three years. In addition, each secured lender receives (i) a pro rata share of a 3.0% overriding royalty interest effective at closing, (ii) on the date that the principal and interest on the Secured Notes is paid in full, a record assignment of such secured lender's pro rata share of a 33.33% working interest.

RKJ Holdings, LLC is one of the secured lenders under the Loan Agreement dated as of October 14, 2014. RKJ Holdings, LLC is owned and managed by Mr. Cory R. Hall, the President and Chief Operating Officer of Sable and a member of the Sable Board of Directors. As a lender, RKJ Holdings loaned Sable $2,850,000 at closing.

In connection with the transactions described above, effective October 14, 2014, Sable issued warrants exercisable for approximately 4,895,000 shares of common stock of Sable to the lenders, at an exercise price of $0.50 per share, in consideration of the distribution of the loan proceeds to Sable, pursuant to warrant agreements with each of the lenders. As a lender, Mr. Hall’s entity, RKJ Holdings, LLC was issued warrants to purchase 1,567,500 shares of our common stock as part of the transactions contemplated by the loan agreement.

Additional Information

For additional information on our business, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Results of Operations”.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. In evaluating our business, you should carefully consider all of the risks described in this Annual Report on Form 10-K, together with the other information contained in this Annual Report. If any of the risks discussed in this Annual Report actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen the value of our common stock could decline significantly and you may lose all or a part of your investment. These risk factors are provided for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to identify or predict all such factors and, therefore, you should not consider these risks to be a complete statement of all the uncertainties we face.

Our business model has changed.

Prior to its sale on May 4, 2012, our oil field services operation accounted for approximately 99 percent of our revenues and approximately 97 percent of our assets and the provision of drilling fluids and oil and natural gas well fracturing propellants had been our primary business strategy. Following the sale of this operating segment, we altered our business strategy to focus on the expansion and development of oil and natural gas reserves. In the future, we may explore additional and different opportunities, some of which may prove not to be viable or advisable and we will not develop every business we evaluate. Further, exploring and executing new business models and opportunities can be time consuming, result in significant expenses that may never be recouped and may divert management’s attention from our existing businesses. Even if we determine to further develop a business, the integration of any new business into our existing structure will likely be complex, time consuming and potentially expensive and could disrupt business operations if not completed in a timely and efficient manner. Any failure to identify new business opportunities, successfully integrate any new businesses with our current structure or receive the anticipated benefits of any new business could have a material adverse effect on our business, financial condition and operating results.

Our historical financial results are not indicative of future results.

Our historical financial results provide only a limited basis for you to assess our business and our historical financial results are not indicative of future financial results.

We will need additional capital to pursue future strategic plans, and the sale of additional shares or other equity securities would result in additional dilution to our stockholders.

We cannot be certain that our existing sources of cash will be adequate to meet our liquidity requirements. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain an additional credit facility. We cannot assure you that any additional equity sales or financing will be available in amounts or on terms acceptable to us, if at all. The sale of additional equity securities would result in additional dilution to our stockholders and, depending on the amount of securities sold, could result in a significant reduction of your percentage interest in us. The incurrence of additional indebtedness would result in increased debt service obligations and could result in additional operating and financing covenants that would further restrict our operations. If we are unable to secure sufficient sources of liquidity, we may be unable to continue our operations.

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improvements to results from existing operations. There can be no assurance that we will be successful with our plans or that our results of operations will materially improve in either the short-term or long-term and accordingly, we may be unable to meet our obligations as they become due.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Our independent registered public accounting firm issued its report dated March 31, 2015 in connection with the audit of our consolidated financial statements as of December 31, 2014 and 2013, which included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern. Reports of independent auditors questioning a company’s ability to continue as a going concern are generally viewed unfavorably by analysts and investors. This report, along with our recent net losses and our accumulated deficit, may make it difficult for us to raise additional debt or equity financing necessary to conduct our operations. If we are not able to continue as a going concern, it is likely that holders of our common stock will lose all of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We cannot control activities on properties we do not operate and are unable to control their proper operation and profitability.

We do not operate all of the properties in which we own an ownership interest. As a result, we have limited ability to exercise influence over, and control the risks associated with, the operations of these properties. The failure of an operator on these properties to adequately perform operations, an operator’s breach of the applicable agreements or an operator’s failure to act in ways that are in our best interests could negatively impact our operations. The success and timing of drilling and development activities on properties operated by others therefore depend upon a number of factors outside of our control, including:


•	the nature and timing of the operator’s drilling and other activities;


•	the timing and amount of required capital expenditures;


•	the operator’s geological and engineering expertise and financial resources;


•	the approval of other participants in drilling wells; and


•	the operator’s selection of suitable technology.

A substantial or extended decline in oil and natural gas prices may adversely affect our business, financial condition or results of operations and our ability to meet our financial commitments.

The price we receive for our oil and natural gas heavily influences our revenue, profitability, access to capital and future rate of growth. The prices for oil and natural gas are subject to wide fluctuations in response to relatively minor

changes in supply and demand. Historically, the markets for oil and natural gas have been very volatile and will likely continue to be volatile in the future. The prices we receive for our production, and the levels of our production, depend on numerous factors beyond our control. These factors include the following:


•	worldwide and regional economic conditions impacting the global supply and demand for oil and natural gas;


•	the actions of OPEC;


•	the price and quantity of imports of foreign oil and natural gas;


•	political conditions in or affecting other oil-producing and natural gas-producing countries, including the current conflicts in the Middle East and conditions in South America, China, India and Russia;


•	the level of global oil and natural gas exploration and production;


•	the level of global oil and natural gas inventories;


•	localized supply and demand fundamentals and regional, domestic and international transportation availability;


•	weather conditions and natural disasters;


•	domestic and foreign governmental regulations;

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•	speculation as to the future price of oil and the speculative trading of oil and natural gas futures contracts;


•	price and availability of competitors’ supplies of oil and natural gas;


•	technological advances affecting energy consumption; and


•	the price and availability of alternative fuels.

If oil and natural gas prices remain volatile, or decline, the demand for our land services could be adversely affected.

The demand for our land services is primarily determined by current and anticipated oil and natural gas prices and the related general production spending and level of drilling activity in the areas in which we have operations. Volatility or weakness in oil and natural gas prices (or the perception that oil and natural gas prices will decrease) affects the spending patterns of our customers and may result in the drilling of fewer new wells or lower production spending on existing wells. This, in turn, could result in lower demand for our services and may cause lower rates and lower utilization of our well service equipment. Continued volatility in oil and natural gas prices or a reduction in drilling activities could materially and adversely affect the demand for our services and our results of operations.

If oil and natural gas prices decline we may be required to take write-downs of the carrying values of our oil and natural gas properties.

Accounting rules require us to periodically review the carrying value of our producing oil and natural gas properties for possible impairment. Based on specific market factors and circumstances at the time of prospective impairment reviews, which may include depressed oil and natural gas prices, and the continuing evaluation of development plans, production data, economics and other factors, we may be required to write down the carrying value of our oil and natural gas properties.

Our results of operations depend on our ability to acquire properties with adequate reserves which produce results.

Our future operations depend on our ability to find, develop, or acquire oil and natural gas reserves that are economically producible. In general, properties produce oil and natural gas at a declining rate over time. In order to maintain production rates, we must locate and develop or acquire new oil and natural gas reserves to replace those being depleted by production. In addition, competition for oil and natural gas properties is intense and many of our competitors have financial, technical, human, and other resources needed to evaluate and integrate acquisitions that are substantially greater than ours. Without successful drilling or acquisition activities, our reserves and production will decline over time.

In the event we do complete an acquisition, its successful impact on our business will depend on a number of factors, many of which are beyond our control. These factors include the purchase price, future oil and natural gas prices, the ability to reasonably estimate or assess the recoverable volumes of reserves, rates of future production and future net revenues attainable from reserves, future operating and capital costs, results of future exploration, exploitation and development activities on the acquired properties, and future abandonment and possible future environmental or other liabilities. There are numerous uncertainties inherent in estimating quantities of proved oil and natural gas reserves, actual future production rates, and associated costs and potential liabilities with respect to prospective acquisition targets. Actual results may vary substantially from those assumed in the estimates. A customary review of subject properties will not necessarily reveal all existing or potential problems.

Additionally, significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties if they have substantially different operating and geological characteristics or are in different geographic locations than our existing properties. To the extent acquired properties are substantially different than our existing properties, our ability to efficiently realize the expected economic benefits of such transactions may be limited.

Our property acquisitions may not be worth what we paid due to uncertainties in evaluating recoverable reserves and other expected benefits, as well as potential liabilities.

Successful property acquisitions require an assessment of a number of factors sometimes beyond our control. These factors include exploration potential, future crude oil and natural gas prices, operating costs, and potential environmental and other liabilities. These assessments are not precise and their accuracy is inherently uncertain.

In connection with our acquisitions, we typically perform a customary review of the acquired properties that will not necessarily reveal all existing or potential problems and may not allow us to fully assess the potential deficiencies of a property.

In addition, significant acquisitions can change the nature of our operations and business if the acquired properties have substantially different operating and geological characteristics or are in different geographic locations than our existing

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properties. To the extent acquired properties are substantially different than our existing properties, our ability to efficiently realize the expected economic benefits of such acquisitions may be limited.

Integrating acquired properties and businesses involves a number of other special risks, including the risk that management may be distracted from normal business concerns by the need to integrate operations and systems as well as retain and assimilate additional employees. Therefore, we may not be able to realize all of the anticipated benefits of any acquisitions.

Exploration and development drilling may not result in commercially producible reserves.

Crude oil and natural gas drilling and production activities are subject to numerous risks, including the risk that no commercially producible oil or natural gas will be found. The cost of drilling and completing wells is often uncertain, and oil and natural gas drilling and production activities may be shortened, delayed, or canceled as a result of a variety of factors, many of which are beyond our control. These factors include:


•	unexpected drilling conditions;


•	title problems;


•	disputes with owners or holders of surface interests on or near areas where we operate;


•	pressure or geologic irregularities in formations;


•	engineering and construction delays;


•	equipment failures or accidents;


•	compliance with environmental and other governmental requirements; and


•	shortages or delays in the availability of, or increases in the cost of, drilling rigs and crews, equipment, pipe, chemicals, water and other drilling supplies.

The prevailing prices for crude oil and natural gas affect the cost of and the demand for drilling rigs, completion and production equipment, and other related services. However, changes in costs may not occur simultaneously with corresponding changes in commodity prices. The availability of drilling rigs can vary significantly from region to region at any particular time. Although land drilling rigs can be moved from one region to another in response to changes in levels of demand, an undersupply of rigs in any region may result in drilling delays and higher drilling costs for the rigs that are available in that region. In addition, the recent economic and financial downturn has adversely affected the financial condition of some drilling contractors, which may constrain the availability of drilling services in some areas.

When we elect to conduct drilling operations, such operations may not be productive.

When we determine to drill wells, the wells we drill may not be productive and we may not recover all or any portion of our investment in such wells. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well if oil or natural gas is present, or whether they can be produced economically. The cost of drilling, completing, and operating a well is often uncertain, and cost factors can adversely affect the economics of a project. Drilling activities can result in dry holes or wells that are productive but do not produce sufficient net revenues after operating and other costs to cover initial drilling and completion costs.

Any of our drilling activities may not be successful. Our overall drilling success rate or our drilling success rate within a particular area may decline. In addition, we may not be able to obtain any options or lease rights in potential drilling locations that we identify. Although we have identified numerous potential drilling locations, we may not be able to economically produce oil or natural gas from all of them.

Another significant risk inherent in any drilling plan is the need to obtain drilling permits from state, local, and other governmental authorities. Delays in obtaining regulatory approvals and drilling permits, including delays that jeopardize our ability to realize the potential benefits from leased properties within the applicable lease periods, the failure to obtain a drilling permit for a well, or the receipt of a permit with unreasonable conditions or costs could have a materially adverse effect on our ability to explore on or develop our properties.

Our success depends on key members of our management, the loss of any of whom could disrupt our business operations.

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We depend to a large extent on the services of some of our executive officers. The loss of the services of Michael K. Galvis, our Chief Executive Officer; Cory Hall, our President and Chief Operating Officer; or other key personnel could disrupt our operations. Although we have entered into employment agreements with Mr. Galvis, Mr. Hall and certain other executive officers that contain, among other provisions, non-compete agreements, we may not be able to retain the executives past the terms of their employment agreements or enforce the non-compete provisions in the employment agreements.

Our operations are subject to inherent risks, some of which are beyond our control. These risks may be self-insured, or may not be fully covered under our insurance policies.

Our operations are subject to hazards inherent in the oil and gas industry, such as, but not limited to, accidents, blowouts, explosions, craterings, fires and oil spills. These conditions can cause:


•	personal injury or loss of life;


•	damage to or destruction of property and equipment (including the collateral securing our indebtedness) and the environment;


•	suspension of our operations; and


•	lost profits.

The occurrence of a significant event or adverse claim in excess of the insurance coverage we maintain or which is not covered by insurance could have a material adverse effect on our financial condition and results of operations. In addition, claims for loss of oil and natural gas production and damage to formations can occur in the well services industry. Litigation arising from a catastrophic occurrence at a location where our equipment and services are being used may result in our being named as a defendant in lawsuits asserting large claims.

We maintain insurance coverage we believe to be customary in the industry against these hazards. However, we do not have insurance against all foreseeable risks, either because insurance is not available or because of the high premium costs. As a result, not all of our property is insured.

The occurrence of an event not fully insured against, or the failure of an insurer to meet its insurance obligations, could result in substantial losses. In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable. Insurance may not be available to cover any or all of the risks we are exposed to, or, even if available, it may be inadequate, or prohibitively expensive. It is likely that, in the future, our insurance renewals, our premiums and deductibles will be higher, and certain insurance coverage either will be unavailable or considerably more expensive than it has been in the recent past. In addition, our insurance is subject to coverage limits, and some policies exclude coverage for damages resulting from environmental contamination. Our insurance program is administered by an officer of the Company, is reviewed not less than annually with our insurance brokers and underwriters, and is reviewed by our Board of Directors on an annual basis.

We are subject to federal, state and local regulations regarding issues of health, safety and protection of the environment. Under these regulations, we may become liable for penalties, damages or costs of remediation. Any changes in these laws and government regulations could increase our costs of doing business.

Our operations are subject to federal, state and local laws and regulations relating to protection of natural resources and the environment, health and safety, waste management, and transportation of waste and other materials. Liability under these laws and regulations could result in cancellation of well operations, fines and penalties, expenditures for remediation, and liability for property damage and personal injuries. Sanctions for noncompliance with applicable environmental laws and regulations also may include assessment of administrative, civil and criminal penalties, revocation of permits and issuance of corrective action orders.

Regulations related to global warming and climate change could have an adverse effect on our operations and the demand for oil and natural gas.

Recent scientific studies have suggested that emissions of certain gases, commonly referred to as “greenhouse gases,” may be contributing to the warming of the Earth’s atmosphere. Methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of refined oil products and natural gas, are examples of greenhouse gases. From time to time the U.S. Congress has considered climate-related legislation to reduce emissions of greenhouse gases. In addition, many states have developed measures to regulate emissions of greenhouse gases, primarily through the planned development of greenhouse gas emissions inventories and/or regional greenhouse gas Cap and Trade programs. These regulations would likely increase our costs and adversely affect our operating results. The EPA has also adopted regulations imposing permitting and

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best available control technology requirements on the largest greenhouse gas stationary sources, regulations requiring reporting of greenhouse gas emissions from certain facilities and is considering additional regulation of greenhouse gases as “air pollutants” under the existing federal Clean Air Act. Passage of climate change legislation or other regulatory initiatives by Congress or various states, or the adoption of regulations by the EPA or analogous state agencies, that regulate or restrict emissions of greenhouse gases (including methane or carbon dioxide) in areas in which we conduct business could have an adverse effect on our operations and the demand for oil and natural gas.

Legislation and regulatory initiatives relating to hydraulic fracturing could increase our cost of doing business and adversely affect our operations.

Our operations utilize the practice of hydraulic fracturing for new oil and natural gas wells. Hydraulic fracturing is also occasionally used to recomplete or restimulate an existing well that has declined in production performance. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure into rock formation to stimulate oil and natural gas production. The use of hydraulic fracturing is necessary to produce commercial quantities of oil and natural gas from many reservoirs, especially shale formations. The process is typically regulated by state oil and natural gas commissions and agencies, and continues to receive significant regulatory and legislative attention at the federal, state, and local level. On May 11, 2012, the Bureau of Land Management (the “BLM”) proposed regulations that would require public disclosure of the chemicals used in hydraulic fracturing and impose certain permitting, testing and other requirements on such operations on federal lands, although the BLM announced on January 18, 2013 that it would revise and reissue these regulations at a later time. Various other federal agencies (including the EPA and the Department of Energy) continue to study hydraulic fracturing and may propose additional regulations. From time to time, legislation has been introduced in Congress to amend the federal SDWA to eliminate exemptions for most hydraulic fracturing activities. On August 16, 2012, the EPA published final rules that establish new air emission controls for natural gas and natural gas liquids production, processing and transportation activities, including New Source Performance Standards to address emissions of sulfur dioxide and volatile organic compounds, and a separate set of emission standards to address hazardous air pollutants frequently associated with production and processing activities. Similar efforts to review the practice of hydraulic fracturing and impose new regulatory conditions are taking place at the state and local level in Texas where we operate and states where we may operate in the future. California, Texas and Wyoming as well as other states, have adopted or are considering new regulations and statutes pertaining to hydraulic fracturing. These new requirements will (and future regulatory and legislative changes, if enacted, could) create new permitting and financial assurance requirements, require us to adhere to certain construction specifications, fulfill monitoring, reporting and recordkeeping obligations, and meet plugging and abandonment requirements. The imposition of stringent new regulatory and permitting requirements related to the practice of hydraulic fracturing could significantly increase our cost of doing business, create adverse effects on our operations including creating delays related to the issuance of permits, and depending on the specifics of any particular proposal that is enacted, could be material.

Furthermore, multiple lawsuits have been filed against regulatory agencies throughout the country by non-profit environmental organizations seeking to challenge various rules and regulations related to the practice of hydraulic fracturing and permitting of new wells completed with hydraulic fracturing. The resolution of these lawsuits could create new permitting or regulatory requirements, which could have an effect on our business.

The high cost or unavailability of drilling rigs, equipment, supplies and other oil field services could adversely affect our ability to execute our exploration and development plans on a timely basis and within our budget, which could have an adverse effect on our business, financial condition or results of operations.

Our industry is cyclical and, from time to time, there is a shortage of drilling rigs, equipment or supplies. During these periods, the costs of rigs, equipment and supplies are substantially greater and their availability may be limited. Additionally, these services may not be available on commercially reasonable terms. The high cost or unavailability of drilling rigs, equipment, supplies, personnel and other oil field services could adversely affect our ability to execute our exploration and development plans on a timely basis and within our budget, which could have an adverse effect on our business, financial condition or results of operations.

Risk factors relating to an investment in our securities

The issuance of shares of common stock upon conversion of the Series A Preferred Stock, as well as upon exercise of outstanding warrants may cause immediate and substantial dilution to our existing stockholders.

If the market price per share of our common stock at the time of conversion of our Series A Preferred Stock and exercise of any warrants, options, or any other convertible securities is in excess of the various conversion or exercise prices of these derivative securities, conversion or exercise of these derivative securities would have a dilutive effect on our common stock.

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As of December 31, 2014, we had outstanding (i) 3,724,004 shares of Series A Preferred Stock which are convertible into an aggregate of 3,724,004 shares of our common stock at $.82 per share, and (ii) warrants to purchase 10,971,190 shares of our Common Stock at a weighted average exercise price of $0.80 per share.

Further, any additional financing we may secure could require the granting of rights, preferences or privileges senior to those of our common stock, which may result in additional dilution of the existing ownership interests of our common stockholders.

We are subject to the reporting requirements of federal securities laws, compliance with which is expensive.

We are a public reporting company in the U.S. and, accordingly, subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders will cause our expenses to be higher than they would be if we were a privately held company.

Our compliance with the Sarbanes Oxley Act and SEC rules concerning internal controls are time consuming, difficult, and costly.

As a reporting company, it is time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. In order to comply with our obligations, we hired additional financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the Sarbanes-Oxley Act’s requirements regarding internal controls, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires publicly traded companies to obtain.

If we fail to maintain the adequacy of our internal controls, our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act could be impaired, which could cause the market price of our common stock to decrease substantially.

We have committed limited personnel and resources to the development of the external reporting and compliance obligations that are required of a public company. We have taken measures to address and improve our financial reporting and compliance capabilities and we are in the process of instituting changes to satisfy our obligations in connection with being a public company, when and as such requirements become applicable to us. If our financial and managerial controls, reporting systems, or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decline substantially.

Our stock price may be volatile, which may result in losses to our stockholders.

Domestic and international stock markets often experience significant price and volume fluctuations especially in times of economic uncertainty. In particular, the market prices of companies quoted on the OTC QB market tier operated by OTC Markets Group, Inc., where our shares of common stock are quoted, generally have been very volatile and have experienced sharp share-price and trading-volume changes. The public trading price of our common stock is likely to be volatile and could fluctuate widely in response to the following factors, some of which are beyond our control:


•	variations in our operating results;


•	changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;


•	changes in operating and stock price performance of other companies in our industry;


•	additions or departures of key personnel;


•	future sales of our common stock; and


•	general economic and political conditions.

The market price for our common stock may be particularly volatile given our status as a smaller reporting company with a relatively small and thinly-traded “float.” You may be unable to sell your common stock at or above your purchase price, if at all, which may result in substantial losses to you.

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The market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. As noted above, our common stock may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price.

Our common stock is thinly-traded. You may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.

We cannot predict the extent to which an active public trading market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a smaller reporting company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume. Even if we come to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our common stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained or that current trading levels will be sustained.

Our common stock may be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer, prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

We do not anticipate paying any dividends.

We presently do not anticipate we will pay any dividends on our common stock in the foreseeable future. The payment of dividends on our common stock, if any, would be contingent upon our revenues, earnings, capital requirements, and our general financial condition. We will pay dividends on our common stock only if and when declared by our board of directors. The ability of our board of directors to declare a dividend is subject to restrictions imposed by Delaware law. In determining whether to declare dividends, our board of directors will consider these restrictions as well as our financial condition, results of operations, working capital requirements, future prospects and other factors it considers relevant.

We have a substantial number of authorized common shares available for future issuance that could cause dilution of our stockholders’ interest and adversely impact the rights of holders of our common stock.

We have a total of 200,000,000 shares of common stock authorized for issuance. As of December 31, 2014, we had 164,842,499 shares of common stock available for issuance. We have reserved 3,724,004 shares for conversion of our Series A Preferred Stock, 10,971,190 shares for issuance upon the exercise of outstanding warrants held by various security holders, and 3,083,632 shares for issuance under the 2013 Equity Incentive Plan. We may seek financing that could result in the issuance of additional shares of our capital stock and/or rights to acquire additional shares of our capital stock. We may also make acquisitions that result in issuances of additional shares of our capital stock. Furthermore, the book value per share of our common stock may be reduced.

The introduction of a substantial number of shares of our common stock into the market or by the registration of any of our other securities under the Securities Act may significantly and negatively affect the prevailing market price for our common stock. The future sales of shares of our common stock issuable upon the exercise of outstanding warrants and options

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may have a depressive effect on the market price of our common stock, as such warrants and options are likely to be exercised only at a time when the price of our common stock is greater than the exercise price.

Other risk factors

Reserve data of our oil and natural gas operations are estimates based on assumptions that may be inaccurate.

There are uncertainties inherent in estimating natural gas and oil reserves and their estimated value, including many factors beyond our control as producer. Reservoir engineering is a subjective and inexact process of estimating underground accumulations of natural gas and oil that cannot be measured in an exact manner and is based on assumptions that may vary considerably from actual results.

Accordingly, reserve estimates and actual production, revenue and expenditures likely will vary, possibly materially, from estimates. Additionally, there recently has been increased debate and disagreement over the classification of reserves, with particular focus on proved undeveloped reserves. Changes in interpretations as to classification standards or disagreements with our interpretations could cause us to write down these reserves.

The extent to which we can benefit from successful acquisition and development activities or acquire profitable oil and natural gas producing properties with development potential is highly dependent on the level of success in finding or acquiring reserves.

Item 1B. Unresolved Staff Comments

We do not have any unresolved comments from the SEC staff regarding our periodic or current reports under the Securities Exchange Act of 1934, as amended.

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Item 2. Properties

Our corporate headquarters comprises 3,700 square feet of leased office space, located at 12222 Merit Drive, Suite 1850, Dallas, Texas 75251.

Our properties consist primarily of oil and gas wells and our ownership in leasehold acreage, both developed and undeveloped. At December 31, 2014 , we had interests in 135 gross (116.3 net) oil and gas wells and owned leasehold interests in approximately 7,752.3 gross (1,059.9 net) undeveloped acres.

Beginning in 2012, we re-focused our strategy on oil and natural gas production as well as early stage development of minor oil and natural gas resource plays. The following table summarizes our oil and natural gas production for the years ended December 31, 2014 and 2013:



	2014		2013
Production
Oil Revenue	$	333,700	$	116,126
Natural Gas Revenue	$	219,651	$	103,034
NGL Revenue	$	108,939	—
Net oil production (bbl)	3,593		1,060
Net natural gas production (mcf)	46,189		16,847
Net NGL Production (gallons)	182,584		$	—
Average oil sales price per bbl	$	92.88	$	96.31
Average natural gas sales price per mcf	$	4.15	$	4.71
Average NGL price per gallon	$	0.60	—
Average net daily production (BOED)	41		8

During 2012, we began re-focusing on the acquisition, development, and production of oil and natural gas. However, nearly all of the wells in which we have interests were not completed nor in production until late in the fourth quarter of 2012. Further, due to negative financial and legal matters impacting the third-party operator's ability to effectively operate and manage the six wells completed in 2012, we recognized a $355,865 impairment charge in 2013 related to our non-operated interest in the six wells and accordingly, we do not present reserve data for these six wells for the years ended December 31, 2014 and 2013.

During 2014 we did not drill any new wells and during 2013, we drilled and completed two wells. On October 15, 2014 we purchased 19,881 leasehold acres with 123 existing wells, including 49 commercially producing wells at the time of acquisition, 69 shut-in wells that we plan to return to production through a combination of workovers including mechanical repairs, adding perforations, acidizing, fracture stimulations and recompletions in additional productive formations behind pipe, 4 injection wells and 1 salt water disposal well. The property contains sufficient leasehold acres upon which we intend to drill numerous infield wells. The acquired properties comprise most of our reserves at December 31, 2014.

Based on our 2014 year end reserve study we have recorded an impairment charge of $453,968 for the year ended December 31, 2014 against our Newman and Coley wells in Jack County, TX to align our cost basis in these wells with their estimated net present value.

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Oil and Natural Gas Reserves

The following table sets forth our estimated net oil and natural gas reserves and the PV-10 value of such reserves as of December 31, 2014, all of which are located in Texas:



	Reserves
Reserve Category	Oil (MBbls)	Natural Gas Liquids (MBbls)	Gas (MMcf)	Total Oil Equivalents^(a) (MBoe)	PV 10 of Reserves
					(in thousands)
Developed	101.05	255.80	1,873.59	669.12	$	7,889.35
Undeveloped	—	—	—	—	—
Total Proved	101.05	255.8	1,873.59	669.12	$	7,889.35
Probable (b)	98.3	10.24	2,737.08	564.72	7,163.45
Possible (b)	234.42	21.88	5,848.89	1,231.12	11,584.9

(a) Natural gas reserves have been converted to oil equivalents at the ratio of six Mcf of gas to one Bbl of oil.

(b) “Probable” or “possible” reserves are lower categories of reserves, commonly combined and referred to as “unproved reserves,” with decreasing levels of technical certainty. Probable reserves are volumes that are defined as “less likely to be recovered than proved, but more certain to be recovered than Possible Reserves”. Possible reserves are reserves which analysis of geological and engineering data suggests are less likely to be recoverable than probable reserves.

The PV-10 value as of December 31, 2014 is pre-tax and was determined utilizing the twelve-month un-weighted arithmetic average of the first day of the month price for the period January through December 2014. Natural gas prices are referenced to a Henry Hub (HH) price of $4.39 per Mcf. Oil and NGL prices are referenced to a Cushing, OK West Texas Intermediate (WTI) crude oil price of $93.26 per barrel and an NGL price of $28.14 per barrel. These reference prices are held constant in accordance with SEC guidelines. Management believes that the presentation of PV-10 value may be considered a non-GAAP financial measure as defined in Item 10(e) of Regulation S-K. Therefore, we have included a reconciliation of the measure to the most directly comparable GAAP financial measure (standardized measure of discounted future net cash flows in footnote (2) below). Management believes that the presentation of PV-10 value provides useful information to investors because it is widely used by professional analysts and sophisticated investors in evaluating oil and gas companies. Because many factors that are unique to each individual company may impact the amount of future income taxes to be paid, the use of the pre-tax measure provides greater comparability when evaluating companies. It is relevant and useful to investors for evaluating the relative monetary significance of Sable's oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of Sable’s reserves to other companies. Management also uses this pre-tax measure when assessing the potential return on investment related to its oil and natural gas properties and in evaluating acquisition candidates. The PV-10 value is not a measure of financial or operating performance under GAAP, nor is it intended to represent the current market value of the estimated oil and natural gas reserves owned by Sable. PV-10 value should not be considered in isolation or as a substitute for the standardized measure of discounted future net cash flows as defined under GAAP. The after-tax PV-10 value of Net Total Proved Reserves (or “Standardized Measure of Discounted Future Net Cash Flows”) is $4,509,237.

Reserve estimation procedures

Overview

We have established a system of internal controls over our reserve estimation process, which we believe provides us reasonable assurance that reserve estimates have been prepared in accordance with the SEC and Financial Accounting Standards Board (the “FASB”) standards. These controls include oversight by trained technical personnel employed by us and by the use of qualified independent petroleum engineers to evaluate our proved reserves on an annual basis. Our estimated proved reserves as of December 31, 2014 were derived from engineering evaluation reports prepared by Crest Engineering Services, Inc.

Qualifications of technical manager and consultants

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operations, reservoir, completions and production engineering experience. Mr. Coley holds a Bachelor of Science degree in Petroleum Engineering from Texas Tech University.

Crest Engineering Services, Inc. is an independent petroleum engineering consulting firm registered in the State of Texas, and W. Waterson Calhoun, President, Reservoir Engineer is the technical person primarily responsible for evaluating the proved reserves covered by its report. Mr. Calhoun has 25 years experience in evaluating oil and gas reserves. Mr. Calhoun holds a Bachelor of Science degree in Petroleum Engineering from the University of Texas at Austin. He is a Registered Professional Engineer in the State of Texas and is a member of the Society of Petroleum Engineers and the Society of Petroleum Evaluation Engineers.

Other information concerning our proved reserves

Proved reserves are the estimated quantities that geologic and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods. Due to the inherent uncertainties and the limited nature of reservoir data, such estimates are subject to change as additional information becomes available. The reserves actually recovered and the timing of production of these reserves may be substantially different from the original estimate. Revisions result primarily from new information obtained from development drilling and production history, and changes in economic factors. Oil reserves, which include condensate and natural gas liquids, are stated in barrels and natural gas reserves are stated in thousands of cubic feet.

The PV-10 value was prepared utilizing the twelve-month un-weighted arithmetic average of the first day of the month price for the period January through December 2014, discounted at 10% per annum on a pretax basis, and is not intended to represent the current market value of the estimated oil and natural gas reserves owned by Sable Operating. For further information concerning the present value of future net revenues from these proved reserves, see Supplemental Oil & Gas Data to the Notes to Consolidated Financial Statements.

Numerous uncertainties exist in estimating quantities of proved reserves. Reserve estimates are imprecise and subjective and may change at any time as additional information becomes available. Furthermore, estimates of oil and natural gas reserves are projections based on engineering data. There are uncertainties inherent in the interpretation of this data as well as the projection of future rates of production. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As of December 31, 2014 and 2013, we did not have any delivery commitments.

We believe Sable Operating has taken all necessary steps to fully comply with Rule 4-10(a) of Regulation S-X for oil and natural gas reserves.

Item 3. Legal Proceedings

Other than ordinary routine litigation incidental to our business, we are not party to any material pending legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

A public trading market for our common stock began trading on April 1, 2011, and our common stock is now traded in very limited quantities under the symbol “NYTE” on the OTCQB market tier, an interdealer quotation system operated by OTC Markets Group, Inc. The range of closing prices for our common stock, as reported during each quarter during the years ended December 31, 2014 and 2013 was as follows.



2014 Quarter Ended	High	Low
December 31, 2014	$0.46	$0.17
September 30, 2014	$0.30	$0.08
June 30, 2014	$0.11	$0.05
March 31, 2014	$0.10	$0.03

2013 Quarter Ended	High	Low
December 31, 2013	$0.15	$0.08
September 30, 2013	$0.17	$0.09
June 30, 2013	$0.34	$0.15
March 31, 2013	$0.60	$0.29

These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. As of March 27, 2015, the closing price of our common stock was $0.15 per share.

Holders

As of March 27, 2015, we had approximately 35,157,501 shares of common stock outstanding held by 382 stockholders of record.

Dividends

We have not historically and do not currently anticipate that we will declare or pay cash dividends on our common stock in the foreseeable future. We will pay dividends on our common stock only if and when declared by our Board of Directors. The ability of our Board of Directors to declare a dividend is subject to restrictions imposed by Delaware law and by restrictions under certain of our financing arrangements. In determining whether to declare dividends, our Board of Directors will consider these restrictions as well as our financial condition, results of operations, working capital requirements, future prospects and other factors it considers relevant.

Securities Authorized For Issuance Under Equity Compensation Plans

In November 2012, we established our 2013 Equity Incentive Plan for the purpose of attracting and retaining the services of key employees, consultants, and non-employee members of our board of directors and to provide such persons with a proprietary interest in the Company through the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and/or other awards. It is our intent that these awards will:


•	increase the interest of such persons in our welfare,


•	furnish an incentive to such persons to continue their services for the Company, and


•	provide a means through which we may attract able persons as employees, contractors, and non-employee members of our board of directors.

In addition, we have granted performance-based stock awards to certain employees of the Company and its subsidiaries pursuant to terms negotiated under individual employment agreements for such employees with no exercise price. The following table sets forth the number of shares of restricted common stock outstanding under such plans and the number of shares that remain available for issuance under such plans, as of December 31, 2014:

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	Total Securities to be Issued Upon Exercise of Outstanding Options or Vesting of Restricted Stock
Plan Category	Number (a)	Weighted-average exercise price (b)		Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	—	—		—
Equity compensation plans not approved by security holders	1,691,667	$	0.15	3,083,632
Total	1,691,667	$	0.15	3,083,632

Recent Sales of Unregistered Securities

Share Repurchase Program

In April 2013, our Board of Directors approved the repurchase of up to an aggregate of 2.7 million shares of our common stock, or approximately 10% of outstanding common shares. The repurchases will be made from time-to-time on the open market at prevailing market prices. The repurchase program is expected to continue over the next twelve months unless extended or shortened by the Board of Directors. The timing and amount of any repurchase will depend on economic and market conditions, the trading price and other factors and any purchases will be executed in compliance with applicable laws and regulations. The plan does not obligate the Company to acquire any particular amount of common stock and can be implemented, suspended or discontinued at any time without prior notice at the Company’s sole discretion. The share repurchase program will be funded with the Company’s available working capital. During the year ended December 31, 2013, the Company acquired a total of 1,450 shares at an average price per share of $0.24. Based on the average of daily high / low price per share for the year ended December 31, 2013, or $0.23 per share, the approximate dollar value of shares that may yet be purchased under the plan is $621,000. The Company did not acquire any shares for the year ended December 31, 2014.

Issuance and Sale of Securities

On June 20, 2014, the Board of Directors (the “Board”) of the Company approved the sale and issuance of 8,013,902 shares of Common Stock of the Company to Cory Hall in exchange for consideration of $1,001,738 in accordance with the Securities Purchase Agreement executed on June 20, 2014 between the Company and Mr. Hall. (the “Hall Offering”). The Hall Offering was made in reliance on the exemption provided by Rule 506(b) promulgated under the Securities Act of 1933, as amended, and certain provisions of Regulation D thereunder based on Mr. Hall’s status as an accredited investor.

In connection with the transactions described above, effective June 23, 2014, the Board approved the expansion of the size of the Board from three to four members and appointed Cory Hall to the vacancy on the Board created by such expansion. At this time, Mr. Hall is not appointed to any Board committees. Mr. Hall is 39 years old and has no family relationships with anyone on the Board or any of the officers of the Company. In addition to his appointment as a member of the Board, effective June 20, 2014, Mr. Hall was also appointed as the President and Chief Operating Officer of the Company.

In February 2014, we initiated a $1,000,000 offering of convertible debt ("12% Convertible Debenture") to fund our ongoing working capital needs. The offering was subsequently increased to $2,000,000. Terms of the 12% Convertible Debenture were as follows: (i) $100,000 per unit with interest at a rate of 12% per annum payable monthly with a maturity of three years from the date of issuance; (ii) convertible at any time prior to maturity at $0.50 per share of the Company's common stock; and, (iii) each unit includes a three-year warrant to purchase up to 50,000 shares of the Company's common stock at an exercise price of $0.50 per share for a period of three years from the effective date of the warrant. As of December 31, 2014, we had raised $1,950,000 under the 12% Convertible Debenture offering including warrants to purchase up to 915,000 shares of the Company's common stock.

Item 6. Selected Financial Data

The information is not required under Regulation S-K for “smaller reporting companies.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the notes thereto.

Overview

Our strategy is to enhance value for our shareholders by:


•	Growing reserves and production through exploration and development;


•	Applying technically-proved drilling and completion technologies to continue our successful exploration and development program;


•	Identifying, accessing and exploring emerging oil and liquids rich resources; and


•	Upholding the ethical and business standards of the Company and maintaining the highest standards of health, safety, and environmental performance.

We are an energy holding company consisting of one operating segment represented by the operations of our wholly-owned subsidiary, Sable Operating Company, Inc., an exploration and production company engaged in the acquisition, development and production of oil and natural gas reserves from low-risk, high rate-of-return wells in carbonate reservoirs. By focusing on early, low and no-cost entry into “tight oil” resource plays in North Texas, using multiple entry methods, Sable Operating has acquired overriding and working interests in nearly 107,000 leasehold acres primarily in the Fort Worth Basin of North Texas. We believe these plays can be developed uniformly over expansive geographical areas with a high rate of success due to the recent advancements in horizontal drilling and multi-stage hydraulic fracturing technologies.

Sable and subsidiaries are collectively referred to herein as “we,” “us,” “our,” “its,” and the “Company”.

Results of Operations

The following discussion is intended to provide information relevant to an understanding of our financial condition, changes in our financial condition and our results of operations and cash flows and should be read in conjunction with the accompanying consolidated financial statements, including the notes thereto.

Year ended December 31, 2014 compared to the year ended December 31, 2013

Revenues.


•	Land Services. Revenues from land services decreased 57% to $187,303 for the year ended December 31, 2014 compared to the prior year of $434,906 as we have shifted our focus toward holding and developing oil and natural gas properties.


•	Oil and Natural Gas Sales. Oil and natural gas sales increased 202% to $662,290 for the year ended December 31, 2014 compared to the prior year of $219,160 primarily due to the acquisition of the Panther Creek property production in the fourth quarter of 2014.


•	Sale of oil and natural gas interests. Sales of oil and natural gas interests were down 77% to $62,262 for the year ended December 31, 2014 compared to the prior year of $276,092 as we have shifted our focus toward holding and developing oil and natural gas properties.

Lease operating expenses. Lease operating expenses increased 788% to $770,312 in the current year ended December 31, 2014 compared to $86,740 in the prior year ended December 31, 2013 due primarily to non-recurring LOE costs of $496,745 incurred to rebuild the Panther Creek property following the acquisition in the fourth quarter of 2014.

Depletion, depreciation, and amortization ("DD&A"). DD&A increased 359% to $459,981 in the current year ended December 31, 2014 compared to $100,207 in the prior year period due primarily to an increase in overall depreciable assets including depletion recognized on the Panther Creek wells totaling approximately $366,746.

Selling, general and administrative expenses ("SG&A"). SG&A expenses increased 11%, by $334,846 to $3,389,447 for the year ended December 31, 2014 compared to $3,054,601 in the prior year due to increases in salary, wages and benefits; acquisition related expenses; and consulting fees partially offset by decreased legal and professional fees and bad debt expense.

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Exploration. Exploration costs totaling $112,763 were incurred in 2014, primarily geological & geophysical costs, as we began developing the Panther Creek properties. We did not incur any exploration costs in 2013.

Loss on sale of assets. We incurred a loss on sale of assets of $134,106 in 2014 relating to payments from restricted cash for 2010 tax payments for a previously divested entity.

Impairment loss. Impairment loss increased 28% in 2014 compared to the prior year as we recognized an impairment charge totaling $453,968 related to the Newman and Coley wells based on the year end reserve study compared to the $355,865 impairment charge in 2013 related to the six non-operated wells in Jack County, Texas that were impaired due to on-going legal, financial, and operating difficulties of the wells' third-party operator.

Interest expense. Interest expense increased 677% to $557,006 for the year ended December 31, 2014 compared to $71,685 in the prior year period due primarily to the issuance of the 12% Convertible Debentures during the year and the issuance of the 13% Secured Notes in the fourth quarter of 2014.

Adjusted EBITDAX

To assess the operating results of our segments, our chief operating decision maker analyzes net income (loss) before income taxes, interest expense, DD&A, impairments, gains or losses resulting from the sale of assets other than dispositions of oil and natural gas interests, or resolution of commercial disputes, and changes in fair value attributable to derivative liabilities (“Adjusted EBITDAX”). Our definition of Adjusted EBITDAX, which is not a GAAP measure, excludes interest expense to allow for assessment of operating results without regard to our financing methods or capital structure. Similarly, DD&A and impairments are excluded from Adjusted EBITDAX as a measure of operating performance because capital expenditures are evaluated at the time capital costs are incurred. In addition, changes in fair value attributable to derivative liabilities are excluded from Adjusted EBITDAX since these unrealized (gains) losses are not considered to be a measure of asset-operating performance. Management believes that the presentation of Adjusted EBITDAX provides information useful in assessing the Company’s financial condition and results of operations and that Adjusted EBITDAX is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures and make distributions to stockholders.

Adjusted EBITDAX, as we define it, may not be comparable to similarly titled measures used by other companies. Therefore, our consolidated Adjusted EBITDAX should be considered in conjunction with net income (loss) and other performance measures prepared in accordance with GAAP, such as operating income or cash flow from operating activities. Adjusted EBITDAX has important limitations as an analytical tool because it excludes certain items that affect net income (loss) and net cash provided by operating activities. Adjusted EBITDAX should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP. Below is a reconciliation of consolidated Adjusted EBITDAX to consolidated net loss as reported on our consolidated statements of operations.



	December 31,
	2014			2013
Net loss	$	(4,629,534	)	$	(2,676,629	)
DD&A	459,981			100,207
Loss on sale of assets	134,106			31,892
Impairment loss	453,968			355,865
Interest expense, net	555,981			60,656
Deferred financing cost	242,498			—
Change in fair value of derivative liabilities	(464,273		)	—
Change in value of 33.33% WI liability	(113,394		)	—
Share based compensation	221,765			68,742
Non-recurring LOE	496,745			—
Exploration	112,763			—
Loss on sale of marketable securities	—			27,755
Income tax provision (benefit)	—			(110,929		)
Consolidated Adjusted EBITDAX	$	(2,529,394	)	$	(2,142,441	)

Liquidity and Capital Resources

Our working capital needs have historically been satisfied through operations, equity and debt investments from private investors, loans with financial institutions, and through the sale of assets. Historically, our primary use of cash has been to pay

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for acquisitions and investments, service our debt, and for general working capital requirements. As of December 31, 2014, we had cash and cash equivalents totaling $205,999 on hand.

We cannot be certain that our existing sources of cash will be adequate to meet our liquidity requirements including cash requirements that may be due under existing debt obligations as well as amounts due to our vendors in the normal course of business. For the year ended December 31, 2014, we incurred a net loss from continuing operations of $4,629,534 and have an accumulated deficit totaling $23,807,498, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due.

We intend to seek substantial sources of liquidity. In addition, management has implemented plans to improve liquidity through cash flows generated from improvements to results from existing operations. There can be no assurance that we will be successful with our plans or that our results of operations will materially improve in either the short-term or long-term and accordingly, we may be unable to meet our obligations as they become due.

At December 31, 2014, we had outstanding long term debt obligations totaling $10,963,915 net of discount, of which $282,791 is determined to be due in one year or less. None of our debt obligations have negative covenant requirements.

In January 2014, we entered into a $100,000 secured promissory note agreement with a third party to provide working capital to the Company. The secured promissory note was due in four months from the date of issuance. Under the terms of the secured promissory note, the loan paid interest at a rate of 18%, plus an accommodation fee, such that including the interest payable under the loan, an amount ranging from $5,000 to $20,000, depending upon the number of months the secured promissory note remained outstanding, plus 12,500 shares of the Company's common stock. In February 2014, the holder of the secured promissory note transferred their outstanding principal due under the agreement to the Company's private offering of three-year 12% convertible debentures, and the secured promissory note was deemed paid in full. (See discussion regarding 12% convertible debentures below.)

In February 2014, we entered into two $100,0000 secured bridge loans ("Secured Bridge Loans") with two third parties to provide working capital to the Company. Under the terms of the Secured Bridge Loans, principal is due in forty days with interest payable at 18%, plus an accommodation fee, such that combined with the interest due and payable, a sum equal to $20,000, plus 25,000 shares of the Company's common stock. In March 2014, in consideration of an additional 25,000 shares of the Company's common stock, the maturity date of both Secured Bridge Loans was extended. In April 2014, the Company made a partial payment totaling $140,000 on the Secured Bridge Loans. In May 2014, one of the Secured Bridge Loans was paid in full. At June 30, 2014, amounts due under the remaining Secured Bridge Loan totaled $20,700, of which $15,700 represents accrued and unpaid interest.

In February 2014, we initiated a $1,000,000 offering of convertible debt ("12% Convertible Debentures") to fund our ongoing working capital needs. Terms of the 12% Convertible Debentures were as follows: (i) $100,000 per unit with interest at

a rate of 12% per annum payable monthly with a maturity of three years from the date of issuance; (ii) convertible at any time prior to maturity at $0.75 per share of the Company's common stock; (iii) each unit included a three-year warrant to purchase up to 30,000 shares of the Company's common stock at an exercise price of $0.75 per share for a period of three years from the effective date of the warrant; and, (iv) an anti-dilution provision that requires a reduction in the conversion price should at-market issuances of the Company’s common stock be issued below the stated conversion price prior to August 31, 2014. The offering was subsequently extended to $2,000,000 with the terms modified as follows: (i) convertible at any time prior to maturity at $0.50 per share of the Company's common stock; (ii) each unit included a three-year warrant to purchase up to 50,000 shares of the Company's common stock at an exercise price of $0.50 per share for a period of three years from the effective date of the warrant. One unit was issued with a maturity of one year from the date of issuance. As of December 31, 2014, we had raised $1,950,000 under the 12% Convertible Debenture offering including warrants to purchase up to 915,000 shares of the Company's common stock.

On October 15, 2014, the Company completed the acquisition of 19,881 acres, the Panther Creek property, held by production in the Fort Worth Basin at a purchase price of $9,500,000 from Upham Oil & Gas Co., L.P. of Mineral Wells, Texas. The acquisition of Panther Creek was financed primarily by issuance of Secured Notes of $8,900,000; bearing interest at the rate of 13% per annum with a maturity in three years. In addition, each Secured Lender will receive (i) a pro rata share of a 3.0% overriding royalty interest effective at closing, (ii) on the date that the principal and interest on the Secured Notes is paid in full a record assignment of such Secured Lender's pro rata share of a 33.33% working interest.

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RKJ Holdings, LLC is one of the Lenders under the Loan Agreement as of October 14, 2014. RKJ Holdings, LLC is owned and managed by Mr. Cory R. Hall, the President and Chief Operating Officer of Sable and a member of the Sable Board of Directors. As a Lender, RKJ Holdings loaned Sable $2,850,000 at closing.

In connection with the transactions described above, effective October 14, 2014, Sable issued warrants exercisable for approximately 4,895,000 shares of common stock of Sable to the Lenders on such date, at an exercise price of $0.50 per share, in consideration of the distribution of the Loan proceeds to Sable, pursuant to warrant agreements with each of the Lenders. As a Lender, Mr. Hall’s entity, RKJ Holdings, LLC was issued warrants to purchase 1,567,500 shares of NYTEX common stock as part of the transactions contemplated by the Loan Agreement.

Each of the warrants issued on October 14, 2014 in connection with the transactions contemplated by the Loan Agreement are exercisable for a two year period beginning on October 14, 2014 and ending on October 14, 2016. As of December 31, 2014 we had raised $9,650,000 under the 13% Secured Notes offering including warrants to purchase up to 5,307,500 of the Company's common stock.

Cash Flows

The following table summarizes our cash flows and has been derived from our audited financial statements for the years ended December 31, 2014 and 2013.



	December 31,
	2014			2013
Cash flows used in operating activities	(1,900,056		)	(210,102		)
Cash flow provided by (used in) investing activities	(10,590,100		)	1,222,534
Cash flow provided by (used in) financing activities	12,602,427			(2,403,090		)

Net increase (decrease) in cash and cash equivalents	112,271			(1,390,658		)
Beginning cash and cash equivalents	93,728			1,484,386

Ending cash and cash equivalents	$	205,999		$	93,728

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies

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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we review these estimates based on information that is currently available. Changes in facts and circumstances may cause us to revise our estimates. The most significant estimates relate to revenue recognition, depreciation, depletion and amortization, the assessment of impairment of long-lived assets and oil and natural gas properties, income taxes, and fair value. Actual results could differ from estimates under different assumptions and conditions, and such results may affect operations, financial position, or cash flows.

Cash and Cash Equivalents

We consider all demand deposits, money market accounts, and highly liquid investments with original maturities of three months or less to be cash equivalents. The carrying amount of cash and cash equivalents reported on the consolidated balance sheet approximates fair value. We maintain funds in bank accounts which, from time to time, exceed federally insured limits.

Accounts Receivable

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Marketable Securities

We determine the appropriate classification of our investments in marketable securities at the time of acquisition and reevaluate such determinations at each balance sheet date. Marketable securities are classified as held to maturity when we have the positive intent and ability to hold securities to maturity. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with the unrealized gains and losses recognized in earnings. Marketable securities not classified as held to maturity or as trading, are classified as available for sale, and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income (loss) and reported in shareholders’ equity. We have classified all of our marketable securities as available for sale. The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.

We review our marketable securities on a regular basis to determine if any security has experienced an other-than-temporary decline in fair value. We consider several factors including the length of the time and the extent to which the fair value has been below cost, the financial condition and near-term prospects of the affiliated entity, and other factors, in our review. If we determine that an other-than-temporary decline exists in a marketable security, we write down the investment to its market value and record the related write-down as an investment loss in our Consolidated Statement of Operations.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation, depletion, and amortization (“DD&A”). Costs of improvements that appreciably improve the efficiency or productive capacity of existing properties or extend their lives are capitalized. Maintenance and repairs are expensed as incurred. Upon retirement or sale, the cost of properties and equipment, net of the related accumulated DD&A, is removed and, if appropriate, gain or loss is recognized in the respective period’s consolidated statement of operations.

For our oil and natural gas properties, we follow the successful efforts method of accounting for oil and natural gas exploration and development costs. Under this method of accounting, all property acquisition costs and costs of exploratory wells are capitalized when incurred, pending determination of whether additional proved reserves are found. If an exploratory well does not find additional reserves, the costs of drilling the well are charged to expense. The costs of development wells, whether productive or nonproductive, are capitalized. Geological and geophysical costs on exploratory prospects and the costs of carrying and retaining unproved properties are expensed as incurred.

Long-lived Assets

Long-lived assets are reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is generally measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If it is determined that the carrying amount may not be recoverable, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is the estimated value at which the asset could be bought or sold in a transaction between willing parties. We consider projected future undiscounted cash flows, trends, strategic decisions regarding future development plans, and other factors in our assessment of whether impairment conditions exist. While we believe our estimates of future cash flows are reasonable, different assumptions regarding factors such as the price of oil and natural gas, production volumes and costs, drilling activity, and economic conditions could significantly affect these estimates.

Deposits Held in Trust

We record a liability for funds held on behalf of outside investors in oil and natural gas exploration projects, which are to be paid to the project operator as capital expenditures are billed. The liability is reduced as we make payments on behalf of those outside investors to the operator of the project.

Asset Retirement Obligations

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We recognize liabilities for retirement obligations associated with tangible long-lived assets, such as producing well sites when there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The initial measurement of an asset retirement obligation is recorded as a liability at its fair value, with an offsetting asset retirement cost recorded as an increase to the associated property and equipment on the consolidated balance sheet. If the fair value of a recorded asset retirement obligation changes, a revision is recorded to both the asset retirement obligation and the asset retirement cost. The asset retirement cost is depreciated using a systematic and rational method similar to that used for the associated property and equipment.

Fair Value Measurements

Certain of our assets and liabilities are measured at fair value at each reporting date. Fair value represents the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants. This price is commonly referred to as the “exit price”.

Fair value measurements are classified according to a hierarchy that prioritizes the inputs underlying the valuation techniques. This hierarchy consists of three broad levels. Level 1 inputs on the hierarchy consist of unadjusted quoted prices in active markets for identical assets and liabilities and have the highest priority. Level 2 measurements are based on inputs other than quoted prices that are generally observable for the asset or liability. Common examples of Level 2 inputs include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in markets not considered to be active. Level 3 measurements have the lowest priority and are based upon inputs that are not observable from objective sources. The most common Level 3 fair value measurement is an internally developed cash flow model. We use appropriate valuation techniques based on the available inputs to measure the fair values of our assets and liabilities. When available, we measure the fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value.

The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable, and accrued expenses reported on the accompanying consolidated balance sheets approximates fair value due to their short-term nature. The fair value of debt is the estimated amount we would have to pay to repurchase our debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at each balance sheet date. Debt fair values are based on quoted market prices for identical instruments, if available, or based on valuations of similar debt instruments.

Revenue Recognition

Revenues from the sales of natural gas and crude oil are recorded when product delivery occurs and title and risk of loss pass to the customer, the price is fixed or determinable, and collection is reasonably assured. The Company uses the sales method of accounting for oil and natural gas revenues. Under this method, revenues are recognized based on the actual volumes of natural gas and oil sold to purchasers. The volume sold may differ from the volumes the Company may be entitled to, based on the Company's individual interest in the property. Periodically, imbalances between production and nomination volumes can occur for various reasons. In cases where imbalances have occurred, a production imbalance receivable or liability will be recorded when determined. If an imbalance exists at the time the wells’ reserves are depleted, settlements are made among the joint interest owners under a variety of arrangements.

Revenues from land services are recorded when title work is completed and the customer has been invoiced for services provided. Revenues from the sale of interests in oil and natural gas properties are recorded once a formal agreement has been reached and the agreement has been consummated through the exchange of consideration.

•Land services revenue - Land services revenues consist of fees generated from analyzing land and mineral title reports, leasehold title analysis and reports, land title runsheets, sourcing, negotiating and acquiring leases, document preparation and performing title curative functions. Such revenues had previously been reported as Other revenues on the consolidated statements of operations. Sable provides land services to its customers by identifying the landowners and performing various land services identified above. The buyer (Sable’s customer) pays the landowner directly for the undeveloped lease acreage. Sable does not take title to the leasehold acreage and the buyer’s purchase from the landowner is non-recourse. For its services, Sable receives fees directly from its customer for services provided for clearing title, etc., generally based on a per acre amount. There is no substantial performance obligation or a retained interest by Sable as we do not obtain an interest in the leasehold acreage (not a conveyance of interests).

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been performed and Sable sells 100% of the leasehold interest. The difference between the sale price and the amount (cost) paid for the lease by Sable is recognized as a gain on sale in accordance with ASC 932-360-55-8. Such gains are not deemed to be incidental or peripheral transactions as providing land services and facilitating the purchase of oil and natural gas leasehold interest for its customers are transactions that are part of Sable’s principal ongoing operations, thus reported within the Company’s revenues.

Share Based Compensation

We grant share-based awards to acquire goods and/or services, to members of our Board of Directors, and to selected employees. All such awards are measured at fair value on the date of grant and are recognized as a component of general and administrative expenses in the accompanying consolidated statements of operations over the applicable requisite service periods.

Income Taxes

We are subject to current income taxes assessed by the federal government and various state jurisdictions in the United States. In addition, we account for deferred income taxes related to these jurisdictions using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for the future tax benefits attributable to the expected utilization of existing tax net operating loss carryforwards and other types of carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

We recognize the financial statement effects of tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the years ended December 31, 2014 and 2013. There were no interest and penalties related to unrecognized tax positions for the years ended December 31, 2014 and 2013. The tax years subject to examination by tax jurisdictions in the United States are 2011 to 2013.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is calculated in the same manner, but also considers the impact to net loss and common shares for the potential dilution from stock options, stock warrants and any outstanding convertible securities.

The Company has issued potentially dilutive instruments in the form of our restricted common stock granted and not yet issued, common stock warrants, common stock options granted to our employees and directors, 12% Convertible Debentures, and our Series A Convertible Preferred Stock. The Company did not include any of these instruments in its calculation of diluted net loss per share during the periods because to include them would be anti-dilutive due to the Company's loss from continuing operations during the periods.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We are currently evaluating the impact of adopting the guidance on our financial statements.

The FASB has issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in the ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to financial reporting of

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discontinued operations guidance in U.S. GAAP. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. This disclosure will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The amendments in the ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. Early adoption is permitted. We are currently evaluating the impact of adopting the guidance on our financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information is not required under Regulation S-K for “smaller reporting companies.”

Item 8. Financial Statements and Supplementary Data

The information required by this Item 8 is included in our Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness in future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our operating results could be harmed. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Based on our evaluation, our management concluded that there are material weaknesses in our internal control over financial reporting. The material weaknesses identified did not result in the restatement of any previously reported financial statements or any related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company’s financial statements for the current reporting period. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness relates to not having sufficient technical accounting personnel to ensure monitoring and review of financial reporting work performed in the preparation of financial statements, footnotes and financial data provided to the Company’s registered public accounting firm in connection with the annual audit. All of our financial reporting is carried out by our Controller. A material weakness relates to minimal segregation of duties. This lack of accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. We are currently evaluating staffing needs. As soon as practical, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed. Because of the material weakness described above, management concluded that, as of December 31, 2014, our internal control over financial reporting was not effective based on the criteria established in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO").

Changes in Internal Control Over Financial Reporting

Other than as described above, there have not been any other changes in our internal control over financial reporting during the year ended December 31, 2014, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Information required by this Item 10 is incorporated by reference to our definitive proxy statement relating to the 2015 Annual Meeting of Stockholders, which will be filed with the SEC no later than April 30, 2015.

Item 11. Executive Compensation

Information required by this Item 11 is incorporated by reference to our definitive proxy statement relating to the 2015 Annual Meeting of Stockholders, which will be filed with the SEC no later than April 30, 2015.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Information required by this Item 12 is incorporated by reference to our definitive proxy statement relating to the 2015 Annual Meeting of Stockholders, which will be filed with the SEC no later than April 30, 2015.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this Item 13 is incorporated by reference to our definitive proxy statement relating to the 2015 Annual Meeting of Stockholders, which will be filed with the SEC no later than April 30, 2015.

Item 14. Principal Accounting Fees and Services

Information required by this Item 14 is incorporated by reference to our definitive proxy statement relating to the 2015 Annual Meeting of Stockholders, which will be filed with the SEC no later than April 30, 2015.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) EXHIBITS

1. The Consolidated Financial Statements of Sable Natural Resources Corporation are listed on the Index set forth on page F-1.

2. Exhibits filed in response to Item 601 of Regulation S-K are listed in the Exhibit Index attached hereto.

(b) FINANCIAL STATEMENT SCHEDULES

Financial statement schedules have been omitted because they are not required, not applicable, or the information is included in the Company’s Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	NYTEX Energy Holdings, Inc.

	By:	/s/ Michael K. Galvis
		Michael K. Galvis
		President and Chief Executive Officer

March 31, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



/s/ Michael K. Galvis	Chief Executive Officer, and Director	March 31, 2015
Michael K. Galvis	(Principal Accounting Officer)


/s/ Cory R. Hall	Director	March 31, 2015
Cory R. Hall


/s/ William G. Brehmer	Director	March 31, 2015
William G. Brehmer


/s/ Jonathan Rich	Director	March 31, 2015
Jonathan Rich

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page

Financial Statements

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of December 31, 2014 and 2013	F-3

Consolidated Statements of Operations for the Years Ended December 31, 2014 and 2013	F-4

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2014 and 2013	F-5

Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2014 and 2013	F-6

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013	F-7

Notes to Consolidated Financial Statements	F-8

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Sable Natural Resources Corporation (formerly NYTEX Energy Holdings, Inc.)

We have audited the accompanying consolidated balance sheets of Sable Natural Resources Corporation (formerly NYTEX Energy Holdings, Inc.) and subsidiaries (the “Company”), as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sable Natural Resources Corporation (formerly NYTEX Energy Holdings, Inc.) and subsidiaries, as of December 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company will need additional working capital to fund operations. This condition raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ Whitley Penn LLP

Dallas, Texas

March 31, 2015

F-2

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SABLE NATURAL RESOURCES CORPORATION

Consolidated Balance Sheets



	At December 31,
	2014			2013
Assets
Current assets:
Cash and cash equivalents	$	205,999		$	93,728
Accounts receivable, net	117,833			76,696
Inventory	59,385			—
Prepaid expenses and other	91,480			82,027
Total current assets	474,697			252,451

Restricted cash	2,986,154			3,119,949
Oil and natural gas properties and equipment, net	11,665,160			934,486
Deferred financing costs	3,209,168			—
Deposits and other assets	262,697			56,134
Total assets	$	18,597,876		$	4,363,020

Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	1,674,295		$	491,492
Accounts payable - related party	480,000			—
Accrued liabilities	414,567			106,338
Revenues payable	69,548			7,837
Debt - current portion	282,791			289,891
Total current liabilities	2,921,201			895,558

Other liabilities:
Debt	10,681,124			128,807
Accrued working interest	3,053,272			—
Derivative liabilities	617,125			2,510
Asset retirement obligation	1,284,771			7,199
Total liabilities	18,557,493			1,034,074

Commitments and contingencies (Note 8)

Mezzanine equity:
Preferred stock, Series A convertible, $0.001 par value; redemption value of $3,724,004 and $3,724,004 at December 31, 2014 and 2013, respectively	3,724,004			3,724,004

Stockholders’ equity (deficit):
Common stock, $0.001 par value; 200,000,000 shares authorized; 36,158,542 issued and 35,157,501 outstanding at December 31, 2014; and, 27,729,736 issued and 26,728,695 outstanding at December 31, 2013	36,158			27,730
Additional paid-in capital	21,947,952			20,615,409
Treasury stock, at cost: 1,001,041 and 1,001,041 shares at December 31, 2014 and 2013, respectively	(1,860,233		)	(1,860,233		)
Accumulated deficit	(23,807,498		)	(19,172,770		)
Accumulated other comprehensive income	—			(5,194		)
Total stockholders’ equity (deficit)	(3,683,621		)	(395,058		)
Total liabilities and stockholders’ equity (deficit)	$	18,597,876		$	4,363,020

See accompanying Notes to Consolidated Financial Statements

F-3

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SABLE NATURAL RESOURCES CORPORATION

Consolidated Statements of Operations



	Years Ended December 31,
	2014			2013
Revenues:
Land services	$	187,303		$	434,906
Oil and natural gas sales	662,290			219,160
Sale of oil and natural gas interests	62,262			276,092
Total revenues	911,855			930,158

Operating expenses:
Lease operating expenses	770,312			86,740
Depletion, depreciation and accretion	459,981			100,207
Selling, general and administrative expenses	3,389,447			3,054,601
Exploration	112,763			—
Loss on sale of assets, net	134,106			31,892
Impairment loss	453,968			355,865
Total operating expenses	5,320,577			3,629,305

Loss from operations	(4,408,722		)	(2,699,147		)

Other income (expense):
Interest and dividend income	1,025			11,029
Interest expense	(557,006		)	(71,685		)
Deferred financing cost amortization	(242,498		)	—
Change in fair value of derivative liabilities	464,273			—
Change in value of accrued working interest	113,394			—
Loss on sale of marketable securities	—			(27,755		)
Total other income (expense)	(220,812		)	(88,411		)

Loss before taxes	(4,629,534		)	(2,787,558		)
Income tax (provision) benefit	—			110,929

Net loss	(4,629,534		)	(2,676,629		)

Basic and diluted loss per share:
Net loss	$	(0.15	)	$	(0.10	)

Weighted average shares outstanding
Basic and diluted	31,148,146			26,704,835

See accompanying Notes to Consolidated Financial Statements

F-4

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SABLE NATURAL RESOURCES CORPORATION

Consolidated Statements of Comprehensive Income (Loss)



	Years Ended December 31,
	2014			2013
Net loss	$	(4,629,534	)	$	(2,676,629	)

Other comprehensive income:
Unrealized holding gains on securities available-for-sale	(5,194		)	(10,388		)
Reclassification adjustment	5,194			10,388

Other comprehensive income	—			—

Comprehensive loss	$	(4,629,534	)	$	(2,676,629	)

See accompanying Notes to Consolidated Financial Statements

F-5

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SABLE NATURAL RESOURCES CORPORATION

Consolidated Statements of Stockholders’ Equity (Deficit)



	Common Stock			Additional Paid-In		Treasury Stock				Accumulated			Accumulated Other Comprehensive
	Shares	Amounts		Capital		Shares	Amounts			Deficit			Income			Total
Balance at December 31, 2012	27,652,749	$	27,653	$	20,546,744	999,591	$	(1,859,890	)	$	(16,506,529	)	$	5,194		$	2,213,172

Shares issued for share based compensation and services	76,987	77		61,029												61,106
Other share based compensation				7,636												7,636
Treasury stock acquired						1,450	(343		)							(343		)
Comprehensive income (loss):
Net loss										(2,676,629		)				(2,676,629		)
Reclassification adjustment for losses included in net income										10,388			(10,388		)	—
Comprehensive loss to common stockholders																(2,676,629		)
Balance at December 31, 2013	27,729,736	$	27,730	$	20,615,409	1,001,041	$	(1,860,233	)	$	(19,172,770	)	$	(5,194	)	$	(395,058	)

Shares issued with promissory notes	112,500	112		11,137												11,249
Shares issued for share based compensation and services	302,404	302		221,463												221,765
Warrants issued with debentures				106,219												106,219
Issuance of common stock	8,013,902	8,014		993,724												1,001,738
Comprehensive income (loss):
Net loss										(4,629,534		)				(4,629,534		)
Reclassification adjustment										(5,194		)	5,194			—
Comprehensive loss to common stockholders																(4,629,534		)
Balance at December 31, 2014	36,158,542	$	36,158	$	21,947,952	1,001,041	$	(1,860,233	)	$	(23,807,498	)	$	—		$	(3,683,621	)

See accompanying Notes to Consolidated Financial Statements

F-6

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SABLE NATURAL RESOURCES CORPORATION

Consolidated Statements of Cash Flows



	Years Ended December 31,
	2014			2013
Cash flows from operating activities:
Net loss	$	(4,629,534	)	$	(2,676,629	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depletion, depreciation, and accretion	459,981			100,208
Bad debt expense	—			549,818
Share-based compensation	221,765			68,742
Stock based interest expense	11,249			—
Amortization of debt discount	129,635			65,796
Amortization of deferred financing costs	242,498			—
Change in fair value of derivative liabilities	(464,273		)	—
Change in value of accrued working interest liability	(113,394		)	—
Sale of oil and natural gas interest	(62,262		)	(276,092		)
Loss on sale of assets, net	134,106			31,892
Loss on sale of marketable securities	—			27,755
Impairment loss	453,968			355,865
Change in working capital:
Accounts receivable	(41,137		)	1,913,463
Inventory	(59,385		)	—
Prepaid expenses and other	(9,453		)	(1,775		)
Accounts payable	1,182,803			(145,666		)
Accounts payable related party	480,000			—
Accrued liabilities	308,229			—
Revenues payable	61,711			—
Deposits and other assets	(206,563		)	(369		)
Other liabilities	—			(223,110		)
Net cash used in operating activities	(1,900,056		)	(210,102		)
Cash flows from investing activities:
Acquisition of oil and natural gas properties	(9,500,000		)	—
Additions to property and equipment	(221,550		)	(41,295		)
Proceeds from sale of assets	197,776			1,322,143
Investments in oil and natural gas properties	(1,066,015		)	(1,738,453		)
Restricted cash	(311		)	1,193,650
Purchase of marketable securities	—			(8,136		)
Proceeds from sale of marketable securities	—			494,625
Net cash provided by (used in) investing activities	(10,590,100		)	1,222,534
Cash flows from financing activities:
Proceeds from the issuance of 13% Secured Notes	9,650,000			—
Proceeds from the issuance of 12% Convertible Debentures	1,950,000			—
Proceeds from the issuance of Common Stock	1,001,738			—
Redemption of Series A convertible preferred stock	—			(2,039,865		)
Borrowings under notes payable	409,682			273,535
Payments on notes payable	(408,993		)	(636,417		)
Purchase of treasury stock	—			(343		)
Net cash provided by (used in) financing activities	12,602,427			(2,403,090		)
Net increase (decrease) in cash and cash equivalents	112,271			(1,390,658		)
Cash and cash equivalents at beginning of year	93,728			1,484,386
Cash and cash equivalents at end of year	$	205,999		$	93,728

See accompanying Notes to Consolidated Financial Statements

F-7

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

NOTE 1. NATURE OF BUSINESS

Sable Natural Resources Corporation (“Sable”), which was formerly known as NYTEX Energy Holdings, Inc., is an energy holding company with principal operations centralized in its wholly-owned subsidiary, Sable Operating Company, Inc. (“Sable Operating”) which was formerly known as NYTEX Petroleum, Inc. Sable Operating is an early-stage exploration and production company engaged in the acquisition, development, and production of oil and natural gas reserves from low-risk, high rate-of-return wells in carbonate reservoirs.

Sable and subsidiaries are collectively referred to herein as the “Company,” “we,” “us,” and “our.”

Sable and its subsidiaries are headquartered in Dallas, Texas.

Liquidity

We cannot be certain that our existing sources of cash will be adequate to meet our liquidity requirements including cash requirements that may be due under existing debt obligations as well as amounts due to our vendors in the normal course of business. For the year ended December 31, 2014, we incurred a net loss of $4,629,534 and have an accumulated deficit totaling $23,807,498, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due.

We intend to seek substantial sources of liquidity. In addition, management has implemented plans to improve liquidity through cash flows generated from development of new business initiatives within the oil & gas industry and improvements to results from existing operations. There can be no assurance that we will be successful with our plans or that our results of operations will materially improve in either the short-term or long-term and accordingly, we may be unable to meet our obligations as they become due.

A fundamental principle of the preparation of financial statements in accordance with generally accepted accounting principles is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business. This principle is applicable to all entities except for entities in liquidation or entities for which liquidation appears imminent. In accordance with this requirement, our policy is to prepare our consolidated financial statements on a going concern basis unless we intend to liquidate or have no other alternative but to liquidate. Our consolidated financial statements have been prepared on a going concern basis and do not reflect any adjustments that might specifically result from the outcome of this uncertainty.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. The consolidated financial statements include the accounts of Sable and entities in which it holds a controlling interest. All intercompany transactions have been eliminated. Certain prior-period amounts have been reclassified to conform to the current-year presentation. This has not affected previously reported results.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we review these estimates based on information that is currently available. Changes in facts and circumstances may cause us to revise our estimates. The most significant estimates relate to revenue recognition, depreciation, depletion and amortization, the assessment of impairment of long-lived assets and oil and natural gas properties, income taxes, and fair value. Actual results could differ from estimates under different assumptions and conditions, and such results may affect operations, financial position, or cash flows.

F-8

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Cash and Cash Equivalents

Accounts Receivable

We provide credit in the normal course of business to our customers and perform ongoing credit evaluations of those customers. We maintain an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. A portion of our receivables are from the operators of producing wells in which we maintain ownership interests. These operators market our share of crude oil and natural gas production. The ability to collect is dependent upon the general economic conditions of the purchasers/participants and the oil and gas industry. Our Allowance for doubtful accounts was $331,689 and $554,401 as of December 31, 2014 and 2013, respectively. During the year ended December 31, 2014 we did not recognize any bad debt expense. During the year ended December 31, 2013, we recognized $549,818 in bad debt expense which is reported in general and administrative expenses on the accompanying Consolidated Statement of Operations.

Marketable Securities

Restricted cash

On May 4, 2012, (the “Closing Date”), we entered into an agreement with a third party, FDF Resources Holdings LLC (the” Purchaser”), which resulted in the sale of 100% of the outstanding interests of FDF. The total consideration for the sale was $62.5 million. In accordance with the Merger Agreement, $6,250,000 of the total consideration was set aside to be held in escrow and is reported as restricted cash on the accompanying consolidated balance sheets. The funds held in escrow are subject to distribution in accordance with terms set forth in the Merger Agreement including final closing date net working capital. The remaining balance at December 31, 2014 of $2,986,154 will be distributed to liquidate the preferred shareholders on May 15, 2015.

Property and equipment

Property and equipment are recorded at cost less accumulated depletion, depreciation, and accretion (“DD&A”). Costs of improvements that appreciably improve the efficiency or productive capacity of existing properties or extend their lives are capitalized. Maintenance and repairs are expensed as incurred. Upon retirement or sale, the cost of properties and equipment, net of the related accumulated DD&A, is removed and, if appropriate, gain or loss is recognized in the respective period’s consolidated statement of operations.

F-9

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Long-lived Assets

We evaluate impairment of our oil and natural gas properties on a property-by-property basis and estimate the fair value based on discounted cash flows expected to be generated from the production of proved reserves. During 2013, we recognized an impairment charge totaling $355,865 related to our non-operated interest in six wells in Jack County, Texas. Based on our year end reserve study we have recorded an impairment charge of $453,968 against our Newman and Coley wells in Jack County, TX to align our cost basis in these wells with their estimated net present value.

Deposits Held in Trust

Asset Retirement Obligations

The following table reflects the changes in ARO for the years ended December 31, 2014 and 2013:



	2014	2013
Beginning of year	7,199	7,912
Additional ARO from new properties	1,266,659	2,673
Accretion expense	10,913	4,734
Abandonment of properties	—	(8,120	)
End of year	1,284,771	7,199

Financial Instruments

The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable, and accrued expenses reported on the accompanying consolidated balance sheets approximates fair value due to their short-term nature. The carrying value of certain long-term debt instruments approximates fair value since these instruments bear market rates of interest. Additional non-interest bearing long-term instruments have been reduced by a market interest rate. They approximate fair value as a result of this imputed interest.

Revenue Recognition

F-10

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Company's individual interest in the property. Periodically, imbalances between production and nomination volumes can occur for various reasons. In cases where imbalances have occurred, a production imbalance receivable or liability will be recorded when determined. If an imbalance exists at the time the wells’ reserves are depleted, settlements are made among the joint interest owners under a variety of arrangements.

•Sale of oil and natural gas interests - As there is a very competitive market to purchase oil and natural gas lease interests, especially in newer oil and natural gas plays with increasing acreage costs, Sable may purchase undeveloped leasehold acreage from landowners and take title to the leasehold. However, holding the leasehold acreage is generally short term in nature (less than 90 days) as we only acquire the undeveloped property when an identified customer has already agreed to the 100% re-purchase of the leasehold acreage from Sable. Accordingly, we do not acquire the leasehold acreage on a speculative basis nor for our own development. There is no substantial performance obligation or retained interest by Sable as all land services have been performed and Sable sells 100% of the leasehold interest. The difference between the sale price and the amount (cost) paid for the lease by Sable is recognized as a gain on sale in accordance with GAAP. Such gains are not deemed to be incidental or peripheral transactions as providing land services and facilitating the purchase of oil and natural gas leasehold interest for its customers are transactions that are part of Sable’s principal ongoing operations, thus reported within the Company’s revenues.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the years ended December 31, 2014 and 2013 are summarized below :



	December 31,
	2014		2013
Salary, wages, and benefits	$	1,588,589	$	1,205,352
Legal, accounting, and professional fees	357,015		706,703
Acquistion-related expenses	484,156		—
Consulting fees	554,055		—
Office expense	227,701		85,352
Insurance	127,252		129,243
Bad debt expense	—		549,818
Other	50,679		267,596
	$	3,389,447	$	2,944,064

Share Based Compensation

Income Taxes

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Deferred Financing Costs

In connection with debt financing, the Company has issued warrants. The fair value of the warrants when the debt is originated is recorded to debt financing costs, and these costs are amortized to interest expense over the life of the debt instrument using the straight line method. Amortization of deferred financing costs for the year ended December 31, 2014 was $242,498, and none for the year ended December 31, 2013.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is calculated in the same manner, but also considers the impact to net loss and common shares to reflect the potential dilution that could occur if dilutive share-based instruments were exercised. There is no dilution effect on loss per share due to the net loss for the period, however, the Company has the following potentially dilutive securities outstanding:



	December 31,
	2014	2013
Warrants	10,971,190	4,748,690
Stock Options	745,000	209,000
Restricted Stock	946,667	95,800
Convertible Debentures	3,900,000	—
Series A Convertible Preferred Stock	3,724,004	3,724,004
	20,286,861	8,777,494

Recently Issued Accounting Standards

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Components of an Entity. The amendments in the ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to financial reporting of discontinued operations guidance in U.S. GAAP. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. This disclosure will provide users with information about the ongoing trends in a reporting organization’s results from continuing operations. The amendments in the ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. Early adoption is permitted. We are currently evaluating the impact of adopting the guidance on our financial statements.

NOTE 3. ACQUISITION

On October 15, 2014, the Company completed the acquisition of 19,881 acres ("Panther Creek") held by production in the Fort Worth Basin at a purchase price of $9,500,000 from Upham Oil & Gas Co., L.P. of Mineral Wells, Texas. The acquisition was financed primarily by issuance of Secured Notes of $8,900,000; bearing interest at the rate of 13% per annum with a maturity in three years. In addition, each Secured Lender will receive (i) a pro rata share of a 3.0% overriding royalty interest effective at closing, (ii) on the date that the principal and interest on the Secured Notes is paid in full a record assignment of such Secured Lender's pro rata share of a 33.33% working interest. We recorded an accrued liability for the 33.33% working interest at October 31, 2014 of $3,166,666 reflecting the proportionate share of the acquisition value, which was reduced by a gain of $113,394 at year end to reflect the reduction of the liability due to a proportionate share of depletion on the property.

In connection with the transactions described above, effective October 14, 2014, Sable issued warrants exercisable for approximately 4,895,000 shares of common stock of Sable to the Lenders on such date, at an exercise price of $0.50 per share, in consideration of the distribution of the Loan proceeds to Sable, pursuant to warrant agreements with each of the Lenders. As a Lender, Mr. Hall’s entity, RKJ Holdings, LLC was issued warrants to purchase 1,567,500 shares of NYTEX common stock as part of the transactions contemplated by the Loan Agreement.

Each of the warrants issued on October 14, 2014 in connection with the transactions contemplated by the Loan Agreement are exercisable for a two year period beginning on October 14, 2014 and ending on October 14, 2016. We recorded a derivative liability related to these warrants, see Note 6 - "Derivative Liabilities" for more information.

Transaction costs incurred with the Panther Creek acquisition included $401,033 in referral fees for the property acquisition and $420,500 in consulting fees to assist in structuring and closing the acquisition and financing. Revenues and earnings of the Panther Creek property since the acquisition are - Revenues $240,296 and direct operating costs $399,153.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:



Oil and natural gas properties	$	10,766,659
Total assets acquired	10,766,659

Asset retirement obligations	1,266,659
Total liabilities assumed	1,266,659

Net assets acquired	$	9,500,000

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Pro forma results of operations

The following table presents the unaudited pro forma results of operations for the years ended December 31, 2014 and 2013 as though the acquisition of Panther Creek had occurred at January 1, 2013:



	proforma
	2014

Revenues	$	2,623,020
Operating expenses	6,310,810
Loss from operations	(3,687,790		)
Net loss	$	(3,908,602	)

	proforma
	2013

Revenues	$	2,710,609
Operating expenses	5,374,849
Loss from operations	(2,664,240		)
Net loss	$	(2,641,722	)

NOTE 4. ACCOUNTS RECEIVABLE

Accounts receivable at December 31, 2014 and 2013 consist of the following:



	December 31,
	2014			2013
Trade receivables	$	444,829		$	627,652
Other	4,693			3,445
Total accounts receivable	449,522			631,097
Allowance for doubtful accounts	(331,689		)	(554,401		)

Accounts receivable, net	$	117,833		$	76,696

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

NOTE 5. OIL AND NATURAL GAS PROPERTIES AND EQUIPMENT

Oil and natural gas properties and equipment at December 31, 2014 and 2013 consists of the following:



	December 31,
	2014			2013
Oil and natural gas properties	$	11,903,045		$	1,073,497
Equipment	359,931			138,378
Total oil and natural gas properties and equipment	12,262,976			1,211,875
Accumulated depletion and depreciation	(597,816		)	(277,389		)

Oil and natural gas properties and equipment, net	$	11,665,160		$	934,486

Depletion, depreciation and accretion related to our properties and equipment was $459,981 and $100,207 for the years ended December 31, 2014 and 2013, respectively.

NOTE 6. DERIVATIVE LIABILITIES

At December 31, 2014 and 2013, we had one derivative on our consolidated balance sheet which was related to the warrants issued to the holders of the Company’s Series A Convertible Preferred Stock. The agreement setting forth the terms of the warrants include an anti-dilution provision that requires a reduction in the instrument’s exercise price should subsequent at-market issuances of the Company’s common stock be issued below the instrument’s original exercise price of $2.00 per share. Accordingly, we consider the warrants to be a derivative; and, as a result, the fair value of the derivative is included as a derivative liability on the accompanying consolidated balance sheets. At December 31, 2014 and 2013, the fair value of the warrants issued to the holders of the Series A Convertible Preferred Stock was $33,300 and $2,510, respectively. During the year ended December 31, 2014 we recorded a loss on the derivative of $30,790 to reflect the change in value.

Beginning on October 14, 2014 we issued warrants to the holders of the Company’s 13% Secured Notes. The agreement setting forth the terms of the warrants include an anti-dilution provision that requires a reduction in the instrument’s exercise price should subsequent at-market issuances of the Company’s common stock be issued below the instrument’s original exercise price of $0.50 per share. Accordingly, we consider the warrants to be a derivative; and, as a result, the fair value of the derivative is included as a derivative liability on the accompanying consolidated balance sheets. At December 31, 2014 the fair value of the warrants issued to the holders of the 13% Secured Notes was $583,825. The aggregate valuation of the warrants when issued was $1,078,888 so at year end we recognized a gain on the derivative of $495,063 to reflect the change in value.

Significant unobservable inputs to the Monte Carlo simulation for valuing our derivative liabilities are:



Interest Rate	(risk free)	1.076%
Volatility	(annual)	129.196%
Average time to expiry		1.79 years

Changes in fair value of the derivative liabilities are included as a separate line item within other income (expense) in the accompanying consolidated statement of operations for the years ended December 31, 2014 and 2013.

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

NOTE 7. DEBT

A summary of our outstanding debt obligations is presented as follows:



	December 31,
	2014			2013

13% Secured Notes	$	9,650,000		$	—
12% Convertible Debentures	1,950,000			—
Francis Promissory Note (non-interest bearing)	225,000			300,000
Strasburger Promissory Note (non-interest bearing)	105,642			178,333
7.5% Secured Equipment Loans	130,465			—
5.5% Insurance Financing	68,203			45,211
7.5% Secured Equipment Loan	7,390			12,467

Total debt	$	12,136,700		$	536,011

Discount - 13% Secured Notes - warrants	(1,023,508		)	—
Discount - 12% Convertible Debentures - warrants	(97,760		)	—
Discount - Francis Note - interest	(42,835		)	(99,949		)
Discount - Strasburger Note - interest	(8,682		)	(17,364		)

Total debt net of discount	$	10,963,915		$	418,698

Less: current maturities	(282,791		)	(289,891		)

Total long-term debt	$	10,681,124		$	128,807

Debt maturities as of December 31, 2014 are as follows:



2015	$	729,345
2016	3,887,200
2017	7,467,001
2018	28,312
2019	24,842

	$	12,136,700

13% Secured Notes

On October 15, 2014, the Company completed the acquisition of 19,881 acres held by production in the Fort Worth Basin at a purchase price of $9,500,000 from Upham Oil & Gas Co., L.P. of Mineral Wells, Texas. The acquisition was financed primarily by issuance of Secured Notes of $8,900,000; bearing interest at the rate of 13% per annum with a maturity in three years. In addition, each Secured Lender will receive (i) a pro rata share of a 3.0% overriding royalty interest effective at closing, (ii) on the date that the principal and interest on the Secured Notes is paid in full a record assignment of such Secured Lender's pro rata share of a 33.33% working interest.

Payment terms on the 13% Secured Notes are as follows: Interest only on each Note shall be due and payable quarterly in arrears commencing on January 15, 2015, and continuing on the fifteenth (15) day of each April, July, October, and January thereafter through April 15, 2016. Commencing on July 15, 2016, and continuing on the fifteenth (15) day of each October, January, April and July thereafter, principal and interest shall be due and payable quarterly based upon a fifteen (15) year amortization schedule. The unpaid principal balance, and all accrued and unpaid interest, shall be due and payable on the Maturity Date, October 15, 2017.

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

As of December 31, 2014 we had raised $9,650,000 under the 13% Secured Notes offering including warrants to purchase up to 5,307,500 of the Company's common stock.

12% Convertible Debentures

Payment terms are as follows: The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 12% per annum, payable in arrears on the first business day of each month following the date of closing and on the maturity date. The debentures mature ranging from March 5, 2015 through December 30, 2017.

The sale of common stock on June 20, 2014 was a "Subsequent Equity Sale" as defined in the 12% Convertible Debentures wherein the stated conversion price of the debenture to common stock is adjusted. As a result the debentures issued prior to March 31, 2014 with a stated conversion price of $0.75 were adjusted to a $0.64 conversion price. Debentures issued after March 31, 2014 and before June 20, 2014 with a stated conversion price of $0.50 were adjusted to a $0.43 conversion price. The fair value of the warrants was calculated using the Black Sholes model, and were recorded as a discount to the Convertible Debentures to be amortized to deferred financing cost over the life of the debenture, and a corresponding credit to equity at the inception of the note.

Francis Promissory Note

In connection with the FDF acquisition, on November 23, 2010, we entered into a promissory note payable to a former interest holder of FDF (“Francis Promissory Note”) in the face amount of $750,000. The Francis Promissory Note is an unsecured, non-interest bearing loan that requires quarterly payments of $37,500 and matures October 1, 2015. For the years ended December 31, 2014 and 2013, we have recorded the Francis Promissory Note as a discounted debt of $182,165 and $200,051, respectively, using an imputed interest rate of 9%.

Other Loans

In November 2012, we entered into a ten-month promissory note with a third party to finance premiums related to certain insurance policies. The promissory note bears an annual interest rate of 5.5% with principal and interest payments of $8,109 due monthly through maturity in August 2013. The note was paid in full in August 2013.

In December 2012, we entered into an unsecured, non-interest bearing promissory note with a former vendor in the amount of $342,500 as a settlement for outstanding payables due to the former vendor. The promissory note required an initial payment of $75,000 with monthly payments of $7,431 due through maturity, on December 31, 2015. For the years ended December 31, 2014 and 2013, we have recorded the promissory note as a discounted debt of $96,960 and $160,969, respectively, using an imputed interest rate of 7.5%.

In December 2013, we entered into a ten-month promissory note with a third party to finance premiums related to certain insurance policies. The promissory note bears an annual interest rate of 5.74% with principal and interest payments of $5,689 due monthly through maturity in September 2014.

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

In January 2014, we entered into a $100,000 secured promissory note agreement with an unrelated third party to provide working capital to the Company. The secured promissory note was due in four months from the date of issuance. Under the terms of the secured promissory note, the loan paid interest at a rate of 18%, plus an accommodation fee, such that including the interest payable under the loan, an amount ranging from $5,000 to $20,000, depending upon the number of months the secured promissory note remained outstanding, plus 12,500 shares of the Company's common stock. In February 2014, the holder of the secured promissory note transferred their principal due under the agreement to the Company's private offering of three-year 12% convertible debentures and the secured promissory note was deemed paid in full. (See discussion regarding 12% convertible debentures below.)

In February 2014, we entered into two $100,000 secured bridge loans ("Secured Bridge Loans") with two unrelated third parties to provide working capital to the Company. Under the terms of the Secured Bridge Loans, principal is due in forty days with interest payable at 18%, plus an accommodation fee, such that combined with the interest due and payable, a sum equal to $20,000, plus 25,000 shares of the Company's common stock. In March 2014, in consideration of an additional 25,000 shares of the Company's common stock, the maturity date of both Secured Bridge Loans was extended. In April 2014, the Company made a partial payment totaling $140,000 on the Secured Bridge Loans. In May 2014, one of the Secured Bridge Loans was paid in full, and in September 2014 the second Secured Bridge Loan was paid in full.

We also have a secured equipment loan outstanding that requires a monthly principal and interest payment of $524.53 based on a fixed interest rate of 7.5% and matures in March of 2016, as well as secured equipment loans that require monthly principal and interest payments totaling $2,534.94 based on a fixed interest rate of 5% that mature in October of 2019.

NOTE 8. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain equipment and office space under non-cancelable operating leases which provide for minimum annual rentals. Future minimum obligations under these lease agreements at December 31, 2014 are as follows:



2015	150,296
2016	136,682
2017	60,378
2018	2,140
Thereafter	3,222
	$	352,718

Total lease rental expense for the years ended December 31, 2014 and 2013 was $108,447 and $85,352 respectively.

Litigation

We may become involved from time to time in litigation on various matters, which are routine to the conduct of our business. We believe that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial position or operations, although any adverse decision in these cases, or the costs of defending or settling such claims, could have a material adverse effect on our financial position, operations, and cash flows.

Environmental

We are subject to extensive federal, state, and local environmental laws and regulations. These laws, which are constantly changing, regulate the discharge of materials into the environment and may require us to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Liabilities for expenditures of a non-capital nature are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated.

NOTE 9. STOCKHOLDERS’ EQUITY

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

The authorized capital of Sable consists of 200 million shares of common stock, par value $0.001 per share; and 10 million shares of Series A Convertible Preferred Stock, par value $0.001 per share. The holders of Series A Convertible Preferred Stock have the same voting rights and powers as the holders of common stock. Each holder of Series A Convertible Preferred Stock may, at any time, convert their shares of Series A Convertible Preferred Stock into shares of common stock at an initial conversion ratio of one-to-one. For the years ended December 31, 2014 and 2013, there were no conversions to shares of common stock related to the Company’s Series A Convertible Preferred Stock.

Private Placements — Common Stock

On June 20, 2014, the Board of Directors of the Company approved the sale and issuance of 8,013,902 shares of Common Stock of the Company to Cory R. Hall in exchange for $1,001,738 in accordance with that certain Securities Purchase Agreement executed on June 20, 2014 between the Company and Mr. Hall (the “Offering”). The Offering was made in reliance on the exemption provided by Rule 506(b) promulgated under the Securities Act of 1933, as amended, and certain provisions of Regulation D thereunder based on Mr. Hall’s status as an accredited investor.

Other Common Stock Issuances

For the years ended December 31, 2014 and 2013, we issued 302,404 and 76,987 shares, respectively, of our common stock to certain employees and individuals. The fair value of the shares for the years ended December 31, 2014 and 2013 of approximately $221,765 and $61,106, respectively, was recorded as selling, general and administrative expense in the accompanying consolidated statements of operations.

Restructuring of Series A Convertible Preferred Stock

On August 31, 2012, Sable’s Amended and Restated Certificate of Designation in respect of the Series A Convertible Preferred Stock was approved by written consent of the holders of a majority of the total outstanding voting power of Sable’s voting securities (the “Restructuring”). On September 12, 2012, we commenced mailing to all holders of the Company’s common stock and Series A Convertible Preferred Stock, a definitive information statement related to Sable’s Amended and Restated Certificate of Designation. On October 2, 2012 (“Effective Date”), we filed the Amended and Restated Certificate of Designation with the Secretary of State of the State of Delaware. The Amended and Restated Certificate of Designation amended the terms of our Series A Convertible Preferred Stock as follows:


(i)	The 9% dividend payable with respect to the shares of Series A Convertible Preferred Stock ceased to accrue effective as of June 15, 2012 (the “Termination Date”) and, thereafter, no dividends will be payable with respect to such shares unless declared by the Company’s board of directors;

(ii)

In exchange for all accrued and unpaid dividends as of the Termination Date, each holder of Series A Convertible Preferred Stock (a “Series A Holder”), as of the record date of July 24, 2012 (the “Record Date”), was issued shares of our common stock at a rate of one (1) share of our common stock for each $1.00 of accrued and unpaid dividends due such holder (collectively, the “Dividend Common Shares”). As a result, in October 2012 the Company issued an aggregate of approximately 768,090 Dividend Common Shares to the Series A Holders;

(iii)

The original terms of the Series A Convertible Preferred Stock also provided for a liquidation preference of $1.50 per share which would have been payable on a liquidation event involving the Company. As part of the Restructuring and in consideration for reducing the liquidation preference to $1.00 per share and eliminating the right to declare a deemed liquidation event, in October 2012 the Company issued to the Series A Holders, as of the Record Date, shares of our common stock at a rate of 0.42735 shares for each share of Series A Preferred held by them, or an aggregate of approximately 2,463,214 common shares (the “Liquidation Adjustment Common Shares”);


(iv)	As part of the Restructuring, in October 2012 we paid to the Series A Holders as of the Record Date, a restructuring fee in the amount of 0.0075% of the original $1.00 per share purchase price of the Series A Convertible Preferred Stock, with such fee totaling approximately $43,230; and

(v)

At any time following the Effective Date of the Restructuring, the Company has the right to redeem any or all of the outstanding shares of Series A Convertible Preferred Stock at the original purchase price of $1.00 per share. Further, the Company is required to redeem outstanding shares of Series A Convertible Preferred Stock, from time-to-time, upon any release to the Company of any portion of the $6,250,361 currently being held in the post-closing escrow fund (reported as restricted cash on the accompanying consolidated balance sheet at December 31, 2012) in connection with the sale of FDF on May 4, 2012, which mandatory redemption would

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

be made by the Company out of funds legally available therefor to the extent of 100% of the amount of funds released at that time. Each redemption would be applied pro rata among all Series A Holders.

In October 2012, we issued the Dividend Common Shares and Liquidation Adjustment Common Shares to the Series A Holders, and along with the payment of the restructuring fee, were recognized as a charge to retained earnings as a dividend and a reduction to earnings available to common shareholders for the year ended December 31, 2012. Accordingly, subsequent to the Effective Date, the Series A Convertible Preferred Stock is presented outside of permanent equity as mezzanine equity on the accompanying consolidated balance sheets.

Redemption of Series A Convertible Preferred Stock

On March 28, 2013, we provided notice to the holders of our Series A Convertible Preferred Stock of our election to redeem on May 1, 2013 (the "Redemption Date") an aggregate $1 million in principal amount of outstanding shares of the Series A Convertible Preferred Stock at a redemption price of $1.00 per share. Pursuant to the terms of the Amended and Restated Certificate of Designation, the Series A Convertible Preferred Stock was redeemed pro rata based on the number of shares held by each holder of record relative to the total number of Series A Convertible Preferred shares outstanding as of the Redemption Date. On May 1, 2013, we redeemed a total of 999,958 shares of Series A Convertible Preferred Stock.

On November 15, 2013, we provided notice to the holders of our Series A Convertible Preferred Stock of our election to redeem on December 17, 2013 an additional $1,039,907 in aggregate principal amount of outstanding shares of the Series A Convertible Preferred Stock at a redemption price of $1.00 per share. On December 17, 2013, we redeemed a total of 1,039,907 shares of Series A Convertible Preferred Stock. There were no redemptions for the year ended December 31, 2014.

Treasury Stock

In April 2013, our Board of Directors approved the repurchase of up to an aggregate of 2.7 million shares of our common stock, or approximately 10% of our outstanding common shares. The repurchases were made from time-to-time on the open market at prevailing market prices. The repurchase program continued over the next twelve months and has now been suspended. The timing and amount of any repurchase will depend on economic and market conditions, the trading price and other factors and any purchases will be executed in compliance with applicable laws and regulations. The plan does not obligate the Company to acquire any particular amount of common stock and can be implemented, suspended or discontinued at any time without prior notice at the Company’s sole discretion. The share repurchase program will be funded with the Company’s available working capital. During the year ended December 31, 2013, we repurchased a total of 1,450 shares of our common stock on the open market. These shares were purchased at an average cost of $0.24 per share, for a total cost of $343. There were no shares repurchased during the year ended December 31, 2014.

Warrants

In connection with the private placement offering of 13% Secured Notes during the year ended December 31, 2014, we issued warrants to the holders to purchase up to 5,307,500 shares of common stock at an exercise price of $0.50 per share. The warrants may be exercised for a period of two years from the date of grant. The 13% Secured Note warrants are considered a derivative liability, see Note 11 - "Fair Value Measurements". The 13% Secured Note warrants were fair valued using the Monte Carlo simulation at $0.19 each when issued and then revalued at December 31, 2014 at $0.11 each which generated a $495,063 gain on the change in the fair value of the derivative liability.

Significant unobservable inputs to the Monte Carlo simulation for valuing the 13% Secured Note warrant derivative liabilities are:



Interest Rate	(risk free)	1.076%
Volatility	(annual)	129.196%
Average time to expiry		1.79 years

In connection with the private placement offering of 12% Convertible Debentures during the year ended December 31, 2014, we issued warrants to the holders to purchase up to 915,000 shares of common stock at a weighted average $0.52 exercise price of per share. The warrants may be exercised for a weighted average period of 2.8 years from the date of grant. The 12% Convertible Debenture warrants are not considered to be a derivative liability as the exercise price is indexed to the Company's

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

stock after August 20, 2014. The total fair value of the 12% Convertible Debenture warrants issued during the year ended December 31, 2014 was $106,219. The Black Scholes model was used to calculate fair value of the 12% Convertible Debenture warrants with the following range of inputs:



Interest Rate	(risk free)	.72% - 1.12%
Standard deviation	(annualized)	104.41% - 155.91%
Periods to exercise		3 years

In connection with the private placement offering of Series A Convertible Preferred Stock during the year ended December 31, 2011, we issued warrants to the holders to purchase up to 126,000 shares of common stock at an exercise price of $2.00 per share. The warrants may be exercised for a period of three years from the date of grant. There were no warrants issued or exercised during the years ended December 31, 2014 and 2013.

In addition, during the year ended December 31, 2011, we issued warrants to purchase up to 16,800 shares of Series A Convertible Preferred Stock to the placement agent of the private placement offering of Series A Convertible Preferred Stock. The warrants may be exercised for a period of three years from date of grant at an exercise price of $1.00 per share.

For the years ended December 31, 2014 and 2013, we did not issue any shares of common stock related to the exercise of warrants granted in connection with the issuance of Series A Convertible Preferred Stock. During the first quarter 2012, we extended the exercise dates on these warrants for an additional 24 months from the original effective date of the warrant.

The fair value of our warrants is determined using the Black-Scholes option pricing model and the Monte Carlo simulation. The expected term of each warrant is estimated based on the contractual term or an expected time-to-liquidity event. The volatility assumption is estimated based on expectations of volatility over the term of the warrant as indicated by implied volatility. The risk-free interest rate is based on the U.S. Treasury rate for a term commensurate with the expected term of the warrant. A summary of warrant activity for the years ended December 31, 2014 and 2013 is as follows:



	For the Years Ended December
	2014			2013
	Warrants	Weighted Average Exercise Price		Warrants	Weighted Average Exercise Price
Outstanding at beginning of period	4,748,690	$	1.18	4,748,690	$	1.18
Issued	6,222,500	0.50		—	—
Exercised	—	—		—	—
Forfeited or expired	—	—		—	—
Outstanding at end of period	10,971,190	$	0.84	4,748,690	$	1.18

NOTE 10. STOCK BASED COMPENSATION

In November 2012, the Board of Directors adopted the 2013 Equity Incentive Plan for the purpose of attracting and retaining the services of key employees, consultants, and non-employee members of the Board of Directors and to provide such persons with a proprietary interest in the Company through the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and/or other awards. At December 31, 2014 , 3.1 million shares of the 5.0 million shares of Sable common stock originally authorized for awards under the 2013 Equity Incentive Plan remained available for future issuance.

During the year ended December 31, 2014 the Company granted nonqualified stock options to purchase an aggregate 625,000 shares of the Company’s common stock at $0.10 per share were awarded; 1/3 of these options vested immediately, the remainder vest ratably over a service period of two years. The Company also granted a total of 945,000 shares of restricted stock and such awards also vest over a three year period. The total grant date fair value of all of these awards was approximately $519,295.

During the year ended December 31, 2013 the Company granted nonqualified stock options to purchase an aggregate 227,000 shares of the Company’s common stock at $0.42 per share; these options vest ratably over a service period of three years.

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

A total of 136,200 shares of restricted stock were granted and such awards vest over a three year period. The total grant date fair value of all of these awards was approximately $101,000.

Stock Options

We utilize the Black-Scholes option pricing model to measure the fair value of stock options granted to employees and directors. For the year ended December 31, 2014 and 2013, we recognized $84,946 and $11,354, respectively, in stock-based compensation related to stock options. At December 31, 2014, the unrecognized compensation expense related to stock options which is expected to be recognized over a weighted average period of 1.73 years is approximately $129,176. The intrinsic value of outstanding and exercisable stock options a December 31, 2014 was $27,083.

The following table summarizes our stock option activity for the years ended December 31, 2014 and 2013:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Term (Yrs)
Outstanding, December 31, 2012	—		$	—	$	—	—
Granted	227,000		$	0.42	$	0.19
Exercised	—		$	—	$	—
Canceled / Forfeited	(18,000	)	$	0.42	$	0.19
Outstanding, December 31, 2013	209,000		$	0.42	$	0.19	9.2 years
Granted	625,000		$	0.10	$	0.10
Exercised	—		$	—	$	—
Canceled / Forfeited	(89,000	)	$	0.42	$	0.19
Outstanding, December 31, 2014	745,000		$	0.15	$	0.31	9.5 years
Options exercisable at December 31, 2014	248,333		$	0.15	$	0.31	9.5 years

The following table shows the weighted average assumptions used in the Black-Scholes-Merton calculation of the fair value of the stock option grants for the years ended December 31, 2014 and 2013:



	2014		2013
Expected dividend yield	—	%	—	%
Volatility	256.77	%	47.3	%
Risk-free interest rate	1.77	%	1.3	%
Expected life	6.0 years		6.0 years

Restricted Stock

Restricted stock awards are awards of common stock that are subject the restrictions on transfer and to a risk of forfeiture if the awardee terminates employment with the Company prior to the lapse of the restrictions. The fair value of such stock was determined using the closing price on the grant date and compensation expense is recorded over the applicable vesting periods. For the years ended December 31, 2014 and 2013, we recognized $106,467 and $56,194, respectively, of stock-based compensation expense related to restricted stock awards. At December 31, 2014, the unrecognized compensation expense related to restricted stock awards which is expected to be recognized over a weighted average period of 1.91 years is approximately $230,867.

The following table summarizes our restricted stock activity for the years ended December 31, 2014 and 2013:

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements



	Shares		Weighted Average Grant Date Fair Value Per Share
Nonvested, December 31, 2012	116,666		$	0.48
Granted	136,200		$	0.42
Vested	(103,733	)	$	0.55
Canceled / Forfeited	(53,333	)	$	0.26
Nonvested, December 31, 2013	95,800		$	0.44
Granted	1,145,000		$	0.29
Vested	(243,333	)	$	0.34
Canceled / Forfeited	(50,800	)	$	0.46
Nonvested, December 31, 2014	946,667		$	0.28

NOTE 11. FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We utilize a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.


•	Level 1 — Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.


•	Level 2 — Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.


•	Level 3 — Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

As discussed in Note 6, we consider certain of our warrants to be derivatives, and, as a result, the fair value of the derivative liabilities are reported on the accompanying consolidated balance sheets. We value the derivative liabilities using a Monte Carlo simulation which contains significant unobservable, or Level 3, inputs. The use of valuation techniques requires us to make various key assumptions for inputs into the model, including assumptions about the expected behavior of the instruments’ holders and expected future volatility of the price of our common stock. At certain common stock price points within the Monte Carlo simulation, we assume holders of the instruments will convert into shares of our common stock. In estimating the fair value, we estimated future volatility by considering the historic volatility of the Company's stock over a one year period.

We classify our marketable securities as available-for-sale, which are reported at fair value. Unrealized holding gains and losses, net of the related income tax effect, if any, on available-for-sale securities are excluded from income and are reported as accumulated other comprehensive income in stockholders’ equity. Realized gains and losses from securities classified as available-for-sale are included in income. We measure the fair value of our marketable securities based on quoted prices for identical securities in active markets, or Level 1 inputs. The realized earnings from our marketable securities portfolio include realized gains and losses, based upon specific identification, and dividend and interest income. During the fourth quarter of 2013, we sold all of our marketable securities for total gross proceeds of $494,625 resulting in a realized loss of $27,755 on sale of marketable securities as presented in our consolidated statement of operations for the year ended December 31, 2013.

We review our marketable securities to determine whether a decline in fair value of a security below the cost basis is other than temporary. Should the decline be considered other than temporary, we write down the cost basis of the security and

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

include the loss in current earnings as opposed to an unrealized holding loss. No losses for other than temporary impairments in our marketable securities portfolio were recognized during the years ended December 31, 2014 and 2013.

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:



	Carrying Amount		Level 1		Level 2		Level 3
December 31, 2014
Derivative liabilities	$	617,125	$	—	$	—	$	617,125



	Carrying Amount		Level 1		Level 2		Level 3
December 31, 2013
Derivative liabilities	$	2,510	$	—	$	—	$	2,510



Balance, December 31, 2013	$	2,510
Change in derivative liabilities	(464,273		)
Issuance of warrant derivatives	1,078,888
Balance, December 31, 2014	$	617,125

Significant unobservable inputs to the Monte Carlo simulation for valuing our derivative liabilities are:



Interest Rate	(risk free)	1.076%
Volatility	(annual)	129.196%
Average time to expiry		1.79 years

NOTE 12. INCOME TAXES

For the years ended December 31, 2014 and 2013, we had a loss before income taxes of $4,629,534 and $2,787,558, respectively. The components of the income tax benefit (provision) are as follows:



	December 31,
	2014		2013
Current:
Federal	$	—	$	175,758
State	—		(64,829		)
	—		110,929
Deferred:
Federal	—		—
State	—		—
	—		—
Income tax provision	$	—	$	110,929

At December 31, 2014, we have accumulated net operating losses totaling $20,169,384. The net operating loss carryforwards will begin to expire in 2028 if not utilized. Based upon all available objective evidence, including the Company’s loss history, management believes it is more likely than not that the net deferred assets related to our net operating losses will not be fully realized. Accordingly, we have provided a valuation allowance against those deferred tax assets at December 31, 2014 and 2013.

F-24

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

Total income taxes differed from the amounts computed by applying the statutory income tax rate to income (loss) from continuing operations before income taxes. The sources of these differences are as follows:



	December 31,
	2014			2013
Expected income tax (benefit) expense based on U.S. statutory rate	$	(1,620,337	)	$	(975,645	)
State income taxes (net of federal income tax benefit)	—			(64,829		)
Permanent differences	(101,871		)	(3,426		)
Other	—			3,360,373
Valuation allowance	1,722,208			(2,205,544		)
Income tax benefit	$	—		$	110,929

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities are presented below:



	December 31,
	2014			2013
Deferred tax assets:
Net operating loss carryforwards	$	6,963,869		$	5,225,412
Impairment of oil & natural gas properties	161,739			176,169
Bad debt allowance	151,692			194,040
Stock based compensation	19,798			—
Other	111,879			33,148
Capital loss carryforward	4,028,768			3,983,279
Valuation allowance on deferred tax assets	(11,199,275		)	(9,477,067		)
Total deferred tax assets	238,470			134,981

Deferred tax liabilities:
Unrealized gain or loss	(98,450		)	—
Property, plant, and equipment	(79,062		)	(115,010		)
Accrued working interest liability	(37,280		)	—
Other	(23,678		)	(19,971		)
Total deferred tax liabilities	(238,470		)	(134,981		)

Net deferred tax liability	$	—		$	—

Deferred tax assets and liabilities included in the consolidated balance sheets are as follows:



	December 31,
	2014		2013
Current deferred tax asset, net	$	—	$	—
Non-current deferred tax liability, net	—		—
	$	—	$	—

We are subject to income taxes in the U.S. federal jurisdiction and various states jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, we are no longer subject to U.S. federal, state and/or local income tax examinations by authorities for the tax years before 2011.

F-25

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

NOTE 13. RELATED PARTY TRANSACTIONS

RKJ Holdings, LLC is one of the Lenders under the Loan Agreement as of October 14, 2014. RKJ Holdings, LLC is owned and managed by Cory R. Hall, the President and Chief Operating Officer of Sable and a member of the Sable Board of Directors. As a Lender, RKJ Holdings loaned Sable $2,850,000 at closing.

On August 27, 2014 the Company received a loan from Mr. Hall in the amount of $500,000 to secure an extension on the closing date for the acquisition of the Panther Creek property. The loan will be due when the Company closes the financing of the acquisition and is at zero interest. At December 31, 2014 the balance due on the loan was $480,000.

NOTE 14. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is summarized below:



	Years Ended December 31,
	2014		2013
Supplemental disclosures:
Total cash paid for interest	$	167,920	$	6,040
Total cash paid for taxes	$	22,677	$	70,000
Supplemental non-cash financing activities:
Deferred financing 33.33% WI accrual	$	3,166,666	$	—
Deferred financing 3.0% ORRI accrual	$	285,000	$	—
Debt discount 13% Secured Note warrants	$	1,078,888	$	—
Debt discount 12% Convertible Debenture warrants	$	106,224	$	—

NOTE 15. SUBSEQUENT EVENTS

On January 22, 2015 the Company extended the expiration of 2,977,951 outstanding Founder's Warrants for an additional three years so that all will expire if not exercised on February 1, 2018.

As of March 20, 2015 the Company has issued an additional $1,675,000 in 13% Secured Notes under the same terms as described in Note 7 - Debt.

F-26

Table of Contents

SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

SUPPLEMENTAL DISCLOSURE OF OIL & GAS OPERATIONS (Unaudited)

The following tables set forth supplementary disclosures for oil and producing activities in accordance with FASB ASC Topic 932, Extractive Activities — Oil and Gas.

Capitalized Costs Relating to Oil and Gas Producing Activities



	2014		2013

Unproved oil and natural gas properties	440,557		388,937
Proved oil and gas properties (including asset retirement costs)	11,462,488		684,546
Less Accumulated DD&A	(452,120	)	(156,502	)

Net capitalized costs	11,450,925		916,981

Costs Incurred

A summary of costs incurred in oil and natural gas property acquisition, development, and exploration activities (both capitalized and charged to expense) for the years ended December 31, 2014 and 2013, is as follows.



	2014		2013
Acquisition of proved properties	$	9,500,000	$	—
Acquisition of unproved properties	$	118,244	$	970,336
Development costs	$	1,256,941	$	768,117
Exploration costs	$	112,763	$	—

Results of Operations for Producing Activities

The following table presents the results of operations for our oil and natural gas producing activities for the years ended December 31, 2014 and 2013.



	2014			2013
Revenues	662,290			$	219,160
less:
Production costs	770,312			86,740
Exploration expenses	112,763			—
Depreciation, depletion and valuation provisions	435,158			27,875
	(655,943		)	104,545
less:
Income tax expenses	—			64,829
Results of operations from producing activities	$	(655,943	)	$	39,716

Reserve Quantity Information

F-27

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

We maintain internal controls designed to provide reasonable assurance that the estimates of proved reserves are computed and reported in accordance with the rules and regulations provided by the SEC. Numerous uncertainties exist in estimating quantities of proved reserves.

Chris Coley, our Vice President - Engineering & Production, is the person within the Company who is primarily responsible for overseeing the preparation of the reserve estimates. Mr. Coley joined the Company in 2014 with nine years of relevant operations, reservoir, completions and production engineering experience. Mr. Coley holds a Bachelor of Science degree in Petroleum Engineering from Texas Tech University.



	Oil		NGL		Natural Gas
	(Bbls)		(Gallons)		(Mcf)
Changes in proved developed and undeveloped reserves:
Balance at January 1, 2013	—		—		—
Extensions and discoveries	8,560				205,380
Production	(1,060	)			(16,847	)
Revisions of prior estimates	—		—		—
Purchase of minerals in place	—		—		—
Balance at December 31, 2013	7,500		—		188,533
Extensions and discoveries	—		—		—
Production	(3,593	)	(182,584	)	(46,189	)
Revisions of prior estimates	9,303		(134,406	)	151,186
Purchase of minerals in place	87,840		11,060,420		1,580,060
Balance at December 31, 2014	101,050		10,743,430		1,873,590

Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Gas Reserves

The following table, which presents a standardized measure of discounted future net cash flows (“standardized measure”) and changes in such cash flows, is presented pursuant to ASC 932. In computing this data, assumptions other than those required by the FASB could produce different results. Accordingly, the standardized measure should not be construed as being representative of management's estimate of the Company’s future cash flows or the value of the Company’s proved oil and natural gas reserves. Probable and possible reserves, which may become proved in the future, are excluded from the calculations. Furthermore, prices used to determine the standardized measure of discounted cash flows are influenced by seasonal demand and other factors and may not be the most representative in estimating future revenues or reserve data.

Our reserve calculations and future cash inflows as of December 31, 2014 and 2013 have been prepared and presented under SEC rules. These rules are effective for fiscal years ending on or after December 31, 2009, and require SEC reporting companies to prepare their reserves estimates using revised reserve definitions and revised pricing based on a 12-month unweighted average of the first-day-of-the-month pricing. The previous rules required that reserve estimates be calculated using last-day-of-the-period pricing. The average prices used for 2014 and 2013 under these new rules were $93.26 and $96.60 per Bbl for oil and $4.39 and $3.68 per Mcf for natural gas, respectively, each as adjusted for location, grade and quality. Future price changes were considered only to the extent provided by contractual arrangements in existence at year-end. Future development and production costs were computed by estimating the expenditures to be incurred in developing and producing the proved oil and natural gas reserves at the end of the year, based on year-end costs. Future income tax expenses were computed by applying the year-end statutory tax rate to the future pre-tax net cash flows relating to our proved oil and natural gas reserves.

F-28

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SABLE NATURAL RESOURCES CORPORATION

Notes to Consolidated Financial Statements

The standardized measure of our proved oil and natural gas reserves at December 31, 2014 and 2013, which represents the present value of estimated future cash flows using a discount rate of 10% a year, is as follows:



	2014			2013
Future cash inflow	$	23,407,590		$	1,418,346
Future production and development costs	(11,446,750		)	(356,096		)
Future income taxes	(4,186,294		)	(371,787		)
Future net cash flows	7,774,546			690,463
10% annual discount for estimated timing of cash flows	(3,265,309		)	(289,605		)
Standardized measure of discounted net cash flows	$	4,509,237		$	400,858

Changes in the standardized measure of our proved oil and natural gas reserves for the years ended December 31, 2014 and 2013, were as follows:



	2014			2013
Beginning of year	$	400,858		$	—
Revisions of quantity estimates	(714,781		)	—
Net change in prices and production costs	(24,970		)	400,858
Purchases of minerals in place	4,848,130			—
End of year	$	4,509,237		$	400,858

F-29

Table of Contents

EXHIBIT INDEX



Exhibit		Document

3.1		Certificate of Incorporation of the Registrant, as amended (filed as Exhibit 3.1 to the Registrant’s Form 10-12G/A filed August 12, 2010 and incorporated herein by reference)

3.2		Bylaws of Registrant, as amended (filed as Exhibit 3.2 to the Registrant’s Form 10-12G/A filed August 12, 2010 and incorporated herein by reference)

4.1		Amended and Restated Certificate of Designation in respect of Senior Series A Redeemable Preferred Stock (filed as Exhibit 10.9 to the Registrant’s Form 8-K filed November 30, 2010 and incorporated herein by reference)

4.2		Amended and Restated Certificate of Designation in respect of Senior Series B Redeemable Preferred Stock (filed as Exhibit 10.10 to the Registrant’s Form 8-K filed November 30, 2010 and incorporated herein by reference)

4.3		Amended and Restated Certificate of Designation in respect of Series A Convertible Preferred Stock (filed as Exhibit 4.3 to the Registrant’s Form 10-Q filed November 6, 2012 and incorporated herein by reference)

4.4		Amended and Restated Certificate of Designation in respect of Senior Series A Redeemable Preferred Stock (filed as Exhibit 10.9 to the Registrant’s Form 8-K filed November 30, 2010 and incorporated herein by reference)

4.5		Amended and Restated Certificate of Designation in respect of Senior Series B Redeemable Preferred Stock (filed as Exhibit 10.10 to the Registrant’s Form 8-K filed November 30, 2010 and incorporated herein by reference)

4.6		NYTEX Energy Holdings, Inc. 2013 Equity Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 28, 2013 and incorporated herein by reference)

4.7		NYTEX Energy Holdings, Inc. Amendment No. 1 to 2013 Equity Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with on February 7, 2013 and incorporated herein by reference)

10.1		Employment Agreement - Galvis (filed as Exhibit 10.1 to the Registrant's Form 10-K filed August 14, 2014 and incorporated herein by reference.

10.2		Employment Agreement - Hall (filed as Exhibit 10.2 to the Registrant's Form 10-K filed August 14, 2014 and incorporated herein by reference.

10.3		NYTEX Energy Holdings, Inc. 2014 12% Convertible Debenture (filed as Exhibit 10.3 to the Registrant's Form 10-K filed August 14, 2014 and incorporated herein by reference.

10.4		NYTEX Energy Holdings, Inc. 2014 Debenture Warrant (filed as Exhibit 10.4 to the Registrant's Form 10-K filed August 14, 2014 and incorporated herein by reference.

10.5		Securities Purchase Agreement - Hall (filed as Exhibit 10.5 to the Registrant's Form 10-K filed August 14, 2014 and incorporated herein by reference.

10.6		Form of Loan Agreement - 13% Secured Note (filed as Exhibit 10.1 to the Registrant's Form 8-K filed October 20, 2014 and incorporated herein by reference)

Table of Contents




21*		List of Subsidiaries of Registrant

23.1*		Consent of Whitley Penn LLP

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certifications of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002***

101.INS**		XBRL Instance Document

101.SCH**		XBRL Taxonomy Extension Schema

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase

101.DEF**		XBRL Taxonomy Extension Definition Linkbase

101.LAB**		XBRL Taxonomy Extension Label Linkbase

101.PRE**		XBRL Taxonomy Extension Presentation Linkbase

________________________________________________________

* Filed herewith

** Furnished herewith

*** In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

Exhibit 21

LIST OF SUBSIDIARIES

Sable Operating Company, Inc.

Petro Staffing Group, LLC

NYTEX FDF Acquisition, Inc.

NYTEX Environmental Services, LLC

NYTEX Energy Development LLC

NYTEX Drilling Program 2013 I LP

NYTEX Securities LLC

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 333-186635) of Sable Natural Resources Corporation (formerly NYTEX Energy Holdings, Inc.) of our report dated March 31, 2015, relating to the consolidated financial statements appearing in this Annual Report on Form 10-K of Sable Natural Resources Corporation (formerly NYTEX Energy Holdings, Inc.) for the year ended December 31, 2014.

/s/ Whitley Penn LLP

Dallas, Texas

March 31, 2015

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER and PRINCIPAL ACCOUNTING OFFICER

I, Michael K. Galvis, certify that:

1. I have reviewed this annual report on Form 10-K of Sable Natural Resources Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Dated this 31st day of March, 2015
	/s/ Michael K. Galvis

	Michael K. Galvis
	CEO
	(As Principal Executive Officer and Principal Accounting Officer)

Exhibit 32.1

SECTION 1350 CERTIFICATIONS

This Certificate is being delivered pursuant to the requirements of Section 1350 of Chapter 63 (Mail Fraud) of Title 18 (Crimes and Criminal Procedures) of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of Section 18 of the Securities Act of 1934, as amended.

The undersigned, who is the Chief Executive Officer of NYTEX Energy Holdings, Inc. (the “Company”), hereby certifies as follows:

The Annual Report on Form 10-K of the Company (the “Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Dated this 31st day of March, 2015

	/s/ Michael K. Galvis
	Michael K. Galvis
	CEO
	(As Principal Executive Officer and Principal Accounting Officer)

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