UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 8 K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):
June 26, 2012 (May 10, 2012)

 

Santa Fe Petroleum, Inc.

(Exact name of registrant as specified in its charter)

 

Former name:

Baby All Corp.

 

Delaware		333-17302		99-0362658
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

 

4011 West Plano Parkway, Suite 126 Plano, Texas		75093
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (888) 870-7060

 

Former address:

 

c/o Efrat Schwartz

17 HaRav Frank Street

Jerusalem, Israel 96387

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY

 

As a company with less than $1.0 billion in revenue during its last fiscal year, we qualify as an “emerging growth company,” as that term is defined in the Jumpstart our Business Startups Act of 2012, or the “JOBS Act.” An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise generally applicable to public companies. These provisions include:

 

o

A requirement to have only two years of audited financial statements and only two years of related MD&A in a registration statement;

o

Exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting;

o

Reduced disclosure about our executive compensation arrangements; and

o

No non-binding advisory votes on executive compensation or golden parachute arrangements.

 

Some of these exemptions, such as the exemption from the auditor attestation requirement and the exemption from say-on-pay votes, are already available to us as a “smaller reporting company,” as that term is defined in Regulation S-K of the Securities Act of 1933, as amended (the “Securities Act”). Under the JOBS Act, we may take advantage of these provisions for up to five years, or until such earlier time as we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of our shares of common stock held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three year period. We may choose to take advantage of some, but not all, of these reduced burdens. We have not taken advantage of any of these reduced reporting burdens in this Current Report on Form 8-K (this “Form 8-K”), although we may choose to do so in future filings. If we do, the information that we provide to our shareholders may be different than what our shareholders might get from other public companies in which they hold equity interests. 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On May 10, 2012, Santa Fe Petroleum, Inc., f/k/a Baby All Corp., a Delaware corporation (the “Registrant”), entered into a Share Exchange Agreement, attached hereto as Exhibit 2.1 (the “Exchange Agreement”), with Santa Fe Operating, Inc., a Delaware corporation engaged in the exploration and production of oil and gas (“SFO”), Tom Griffin, an individual, on behalf of the holders (the “SFO Shareholders”) of 100% of the issued and outstanding common stock of SFO (the “SFO Stock”), and Efrat Schwartz, an individual and the holder of a majority of the issued and outstanding shares of the Registrant’s common stock, par value $0.0001 per share (the “Common Stock”). Pursuant to the Exchange Agreement, each SFO Shareholder was issued one share of Common Stock in exchange for all of its shares of SFO Stock (the “Exchange”). Pursuant to the terms of the Exchange Agreement, the Exchange closed on May 20, 2012 (the “Closing Date”). As a result, (i) the Registrant issued an aggregate of 33,478,261 shares of Common Stock to the SFO Shareholders; (ii) the Registrant issued warrants to purchase an aggregate of 6,764,856 shares of Common Stock to the SFO Shareholders, at an exercise price of $0.50 per share; and (iii) SFO became a wholly-owned subsidiary of the Registrant.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

On May 10, 2012, the Registrant entered into the Exchange Agreement, as described in Item 1.01 (which is incorporated by reference), pursuant to which SFO became a wholly-owned subsidiary of the Registrant on the Closing Date. Prior to consummating the Exchange, the Registrant was a shell company, as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result of the Exchange, the Registrant acquired an unevaluated oil and natural gas property in Comanche County, Texas, which is currently the Registrant’s principal asset. The assets acquired by the Registrant pursuant to the Exchange are described in further detail in the disclosure attached hereto and provided pursuant to Item 2.01(f).

 

The disclosure provided pursuant to this Item 2.01 relates primarily to SFO and Santa Fe Land, LLC, a wholly-owned subsidiary of SFO, and to our business plans following the Share Exchange. Information relating to our business prior to the Share Exchange has been previously reported in our Annual Report on Form 10-K for the fiscal year-ended December 31, 2011, as filed with the Securities and Exchange Commission on March 22, 2012, and is incorporated herein by reference.

 

For accounting purposes, this transaction is being accounted for as a reverse merger, since the SFO Shareholders collectively beneficially own approximately 84.8% of the Common Stock.  In connection with the Exchange, the Registrant amended its articles of incorporation to change its name from Baby All Corp. to Santa Fe Petroleum, Inc. on May 17, 2012.

 

 Item 3.02 Unregistered Sales of Equity Securities.

 

 On the Closing Date, pursuant to the Exchange Agreement, as described in Item 1.01 (which is incorporated by reference), the Registrant effected the Exchange. In accordance with the Exchange, and in consideration for 100% of the issued and outstanding SFO Stock, the Registrant issued to the SFO Shareholders: (i) an aggregate of 33,478,261 shares of Common Stock (the “Exchange Shares”), and (ii) warrants to purchase an aggregate of 6,764,856 shares of Common Stock (the “Warrants”), which Warrants are exercisable at any time for a period of three years from the date of issuance at an exercise price of $0.50 per share.

 

The offer and sale of the Exchange Shares and the Warrants were exempt from the registration and prospectus delivery requirements of the Securities Act by virtue of Section 4(2) and Regulation D promulgated thereunder. The Exchange Shares and the Warrants were issued directly by the Registrant and did not involve a public offering or general solicitation. Each SFO Shareholder represented to us in writing that it is an “accredited investor,” as that term is defined in Rule 501(a) of Regulation D, promulgated under the Securities Act.

 

 Item 5.01 Changes in Control of Registrant.

 

 On the Closing Date, in connection with the Exchange and as described in Items 1.01 and 3.02 (which are incorporated by reference), 33,478,261 shares of Common Stock, or approximately 84.8% of the issued and outstanding shares of Common Stock, became beneficially owned by the SFO Shareholders. Effective May 10, 2012, and pursuant to the terms of the Exchange Agreement, Efrat Schwartz and Merav Shalom, who comprised the entire board of directors of the Registrant on that date, resigned. Immediately thereafter, the SFO Shareholders elected Tom Griffin, Bruce Hall and Jack Nelson to the Board of Directors, resulting in a change in control of the Registrant. Prior to the Exchange, Efrat Schwartz was the beneficial owner of a majority of the issued and outstanding Common Stock. Following the Exchange, 72.2% of the issued and outstanding Common Stock was collectively owned by Messrs. Griffin, Hall and Nelson.

 

The disclosure required by Item 5.01 (a)(8) is attached hereto.

 

 Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Effective May 10, 2012, Efrat Schwartz and Merav Shalom, who comprised the entire board of directors of the Registrant on that date, resigned. Neither of Mmes. Schwartz and Shalom had any disagreement with the Registrant, known to an executive officer of the Registrant, on any matter related to the Registrant’s operations, policies or practices.

 

On May 10, 2012, the SFO Shareholders acted by written consent to elect Tom W. Griffin, Bruce A. Hall and Jack Nelson to serve as members of the Registrant’s board of directors, and elected Mr. Griffin to serve as Chairman of the Board. Also effective May 10, 2012, Ms. Schwartz resigned as the Registrant’s President and Chief Executive Officer, and Ms. Shalom resigned as the Registrant’s principal accounting officer and principal financial officer. Immediately thereafter, the Registrant’s board of directors appointed Mr. Griffin as the President and Secretary of the Registrant, and appointed Mr. Hall as Chief Executive Officer and Chief Financial Officer of the Registrant. For a complete discussion of the composition of the Board as well as the newly-appointed officers of the Company, and in accordance with the disclosure requirements of Item 5.02(c), please see the section of the attached disclosure entitled “DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS,” which is incorporated herein by reference.

 

 Item 5.06 Change in Shell Company Status.

 

 In connection with the Exchange and as reported in Item 1.01 and 2.01 (which are incorporated by reference), the Company has ceased to be a “shell company,” as that term is defined in Rule 12b-2 of the Exchange Act.

  

TABLE OF CONTENTS

 

Description of Business	6
Risk Factors	14
Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Description of Properties	29
Security Ownership of Certain Beneficial Owners and Management	29
Directors, Executive Officers, Promoters, and Control Persons	31
Indemnification of Directors and Officers	32
Executive Compensation	33
Certain Relationships and Related Transactions, and Director Independence	33
Recent Sales of Unregistered Securities	35
Description of Securities	35
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters	37
Legal Proceedings	38
Financial Statements and Supplementary Data	38
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	38
Financial Statements and Exhibits	38

 

  

DESCRIPTION OF BUSINESS

 

On May 10, 2012, Santa Fe Petroleum, Inc., f/k/a Baby All Corp., a Delaware corporation (the “we,” “us,” “our,” or the “Company”), entered into a Share Exchange Agreement (the “Exchange Agreement”), with Santa Fe Operating, Inc., a Delaware corporation engaged in the exploration and production of oil and gas (“SFO”), Tom Griffin, an individual, on behalf of the holders (the “SFO Shareholders”) of 100% of the issued and outstanding common stock of SFO (the “SFO Stock”), and Efrat Schwartz, an individual and the holder of a majority of the issued and outstanding shares of our common stock, par value $0.0001 per share (the “Common Stock”). Pursuant to the Exchange Agreement, each SFO Shareholder was issued one share of Common Stock in exchange for all of its shares of SFO Stock (the “Exchange”). Pursuant to the terms of the Exchange Agreement, the Exchange closed on May 20, 2012 (the “Closing Date”). As a result, (i) we issued an aggregate of 33,478,261 shares of Common Stock to the SFO Shareholders; (ii) we issued warrants to purchase an aggregate of 6,764,856 shares of Common Stock to the SFO Shareholders, at an exercise price of $0.50 per share; and (iii) SFO became a wholly-owned subsidiary of ours.

 

Prior to the Exchange, our business plan was to seek third party entities interested in licensing the rights to manufacture and market the patent design of an “infant medicine dispenser.” We were incorporated in Delaware on November 30, 2010, and a Design Patent Transfer and Sale Agreement was signed between Mrs. Julie Franchi (the inventor and seller), in relation to a patented technology on December 13, 2010, granting us exclusive rights, title and interest in and to the Design Patent Number: 380828 and all Intellectual Property rights, free and clear of any lien, charge, claim, preemptive rights, etc. for an infant medicine dispenser. We were not able to commercialize the product due to a lack of funds, and we did not build a prototype. Hence, no testing has been done to determine the ability of the technology to perform as we expect, its reliability or its cost effectiveness. As a result, we were not able to commence operations under the infant medicine dispenser business plan and were in the development stage at the time of the Exchange.

 

As the result of the Exchange, we are now a development stage company engaged in the acquisition, exploration, and development of oil and gas properties. In addition to the development of our existing property interests, we intend to acquire additional oil and gas interests in the future. Management believes that our future growth will primarily occur through the acquisition of additional oil and gas properties following extensive due diligence by our company. We also may elect to proceed through collaborative agreements and joint ventures in order to share expertise and reduce operating costs with other experts in the oil and gas industry. The analysis of new property interests will be undertaken by or under the supervision of our management and board of directors. Although the oil and gas industry is currently very competitive, management believes that many undervalued prospective properties remain available for acquisition purposes.

 

Our principal asset consists of an unevaluated oil and natural gas property in Comanche County, Texas, which approximated $494,000 as of December 31, 2011.

 

 

The unevaluated oil and natural gas property was originally drilled in 2009, as the Barnett Cody #1A test. However, additional capital was needed for us to commence further drilling activities. As a result of the additional capital requirements, the reservoir analysis has not yet being completed. As such, we have classified the oil and natural gas property as unevaluated as of December 31, 2011. As of December 31, 2011, the primary term of our oil and natural gas lease was through March 2012; however, subsequent to December 31, 2011, we extended the primary term through March 2014.

 

On May 11, 2011, we acquired 100 percent of the member units (the “SFL Acquisition”) of Santa Fe Land, LLC (“SFL”), a Texas limited liability company and a wholly-owned subsidiary of SFO. We issued 33,478,261 shares of common stock and 1,999,150 warrants to SFL member unit holders in exchange for their LAND member units. The SFL member unit holders were comprised entirely of entities under the control of Tom Griffin, the Company’s Chairman of the Board and a related party (the “Principal Stockholder”). The acquisition of SFL is being accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost basis of the assets transferred. The warrants to purchase common stock of the Company are at an exercise price of $0.50 per share and have a three year exercise period.

 

In connection with the SFL Acquisition, we acquired SFL’s oil and natural gas working interests of 100% with a net revenue interest of 75% for the Barnett Cody #1A in Comanche County, Texas. Additionally, we acquired approximately 76 acres of a mineral lease of land as part of the SFL Acquisition.

 

SFL has entered into Lease Acquisition Agreements (the “Lease Acquisition Agreements”), a form of which is attached hereto as Exhibit 10.2 with Langtre LLC and Woodlake, LLC (together, the “Land Banks”), both of which are wholly-owned by Long Branch Petroleum, LP (“LB”) and Santa Fe Petroleum, LLC (“SFP”), the managing member of LB. The President of both LB and SFP is Tom Griffin, our President and Chairman of the Board. The arrangement with the Land Banks, and other similar arrangements we intend to enter into, is designed to allow us to build an inventory of oil and gas leases utilizing less of our available funds. As of May 1, 2012, the Land Banks had acquired leases on approximately 1,338 acres and top leases on an additional 1,045 acres. Under the Lease Acquisition Agreement, we may purchase the leases, or portions of the leases, held by the Land Banks from time to time and are obligated to purchase all the leases held by the Land Banks within 20-24 months from the closing of the Share Exchange, subject to change by mutual consent. The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through the sale of its SFO Stock and utilized for the support of the Land Banks.

 

Land Bank investors will receive proceeds from the sale of leases by the Land Banks to SFL based on their Participation Agreements. We have entered into a variety of arrangements with affiliates, a form of which is attached hereto as Exhibit 10.3, that will raise capital through a private offering of participation interests, and in turn we will use these funds to acquire oil and gas leases selected by SFL. Additionally, at our discretion, we may borrow up to $150,000 of the funds from the Land Bank for testing the Barnett Cody #1 well owned by SFL.

 

As part of the commercial arrangement with the Land Banks, we guarantee all obligations of SFL under the Lease Acquisition Agreement. The amount of our financial risk related to these guarantees will depend on the amount and value of the leases that the Land Banks acquire. Based on current estimates we expect that we will be guaranteeing the purchase of up to $5,000,000 in leases, or more, which amount is subject to change.

 

Under the Lease Acquisition Agreement, SFL will have the right to acquire leases from the Land Banks. The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through the sale of its SFO Stock and utilized for the support of the Land Banks. SFL’s acquisitions of Leases may occur from time to time, but must be completed within two years from the date the Land Bank is formed. Additionally, if the Land Banks have loaned funds to complete the testing of the Barnett Cody #1 well owned by SFL, the loan will bear interest at 15% per year and be payable in full not later than 18 months after the Land Bank was formed.

 

At the time SFL completes the acquisition of all the Leases or pays the loan in full, whichever is later, the Lease Acquisition Agreement will require that SFL make an additional payment to the Land Bank equal to the greater of (a) 50% of the total contributions by participants to the Land Bank less the sum of (i) lease acquisition payments made by SFL to the Land Bank in excess of the Land Bank’s costs to acquire the leases plus (ii) aggregate interest paid on the loan to SFL or (b) an amount that, after taking into account the amount and timing of all distributions from the Land Bank to participants, will repay the participants’ contributions and provide a minimum of a 50% annual return to the participants on their unpaid contributions over the life of the Land Bank.

 

If, for any reason, SFL fails to acquire all remaining leases or repay the loan as discussed above, in addition to any other remedies it may have for such failure, the Land Bank may sell the remaining leases to other purchasers. Additionally, we will be liable if SFL does not perform its obligations.

 

Background

 

In 1997 our chairman of the board, Tom Griffin, established Santa Fe Texas, LLC (“SFT”), a business to engage in oil and gas exploration and production. That business drilled 25 vertical and horizontal wells in East Texas and achieved significant aggregate returns for investors in those projects. We have no ownership in the prior business or wells drilled in East Texas. In December 2009 that business drilled a test well on a 76-acre lease in the Bend Arch-Fort Worth Basin in Texas. Interpretation and analysis of the logs and core samples from the test well indicated the potential for substantial production of oil and gas from the test-well site and surrounding acreage. Baker Hughes, a top-tier oilfield services company, interpreted the logs and Weatherford Laboratories, who is engaged in all facets of rock and fluid analysis for the purpose of evaluating hydrocarbon resources around the world, analyzed the core samples. The Baker Hughes log-interpretation report estimated 1.37 million barrels of oil at the Test Well site based on an 80-acre Project. The side-wall core samples were taken every two feet beginning a few feet below the Barnett Shale in the Ellenberger formation and above the Barnett Shale a few feet in the Marble Falls formation. The results show oil exists in a porous, 101-feet-thick blanket formation with the top of the formation at the initial test-well location at a depth of approximately 2,600 feet below the surface. The analysis of core samples by Weatherford Laboratories estimated 1.6 million barrels in place in the same 80-acre Project.

 

In order to exploit this opportunity, Mr. Griffin and the investors in the test well formed SFO, a Texas corporation, in 2010. SFO’s wholly owned subsidiary, SFL, which was incorporated in Texas in 2009, owns the 76-acre oil and gas lease and the test well. Aside from acquiring the test well and associated leases, SFO and SFL have not conducted any operations and have not begun oil and gas production from the test well. As a result of the Share Exchange on May 10, 2012, SFO and SFL became our wholly owned subsidiaries.

 

Our Business

 

We are a development stage oil and gas company led by an experienced management team and focused on production of oil and natural gas. Our business plan is to acquire oil and gas properties for appraisal and development.   Through the Land Bank arrangement and similar arrangements, we plan to gain control over substantial oil and gas prospects, which will be acquired from the Land Bank(s) from time to time as we are prepared to begin our appraisal and drilling operations on specific leases. We will employ strict selection guidelines for our projects including but not limited to 1) priority to projects with near term cash flow potential, pay-back period, quantity and quality of oil and gas reserves and utilizing premier oilfield services and engineering firms in analyzing and conducting our operations. Until we form a subsidiary that is qualified to be the operator under our oil and gas leases, an affiliated company will act as contract operator.   

 

The Test-Well Site

 

We hold a 100% working interest (75% net revenue interest) on approximately 76 acres located in the Fort Worth Basin in North Central Texas. A working interest is an interest in a mineral property that entitles the owner of that interest to a share of the mineral production from the property, usually subject to a royalty. A working interest permits the owner to explore, develop, and operate the property. The working-interest owner bears the costs of exploration, development, and operation of the property and, in return, is entitled to a share of the mineral production from the property or to a share of the proceeds therefrom. It may be assigned to another party in whole or in part, or it may be divided into other special property interests. Net revenue interest is an interest net of the payment for a royalty.

 

The terms of the lease, a form of which is attached hereto as Exhibit 10.4, includes an expiration date of March 2012 or as long as there is commercial production of oil and gas, with the option to extend the primary term for two years at the option of the lessee. The Company has exercised its option to extend the term, and the new expiration date is March 2014 or as long as there is commercial production of oil and gas. We have not yet started commercial production of oil and gas on our lease. Our lease is located in the Bend Arch-Fort Worth Basin oil and gas producing province designated by the United States Geological Survey. Several prolific-producing fields have been discovered in this province beginning in the early 1900s. Management believes that since the turn of the 21^st century, the Barnett Shale in the eastern part of the Fort Worth Basin has become one of the largest natural-gas-producing formations in North America. At the test-well site, the Barnett Shale begins at a depth of approximately 2,600 feet. Another target oil and gas producing horizon in the region surrounding the test-well site will be the Marble Falls Formation, a layer of limestone and shaley (tight) limestone that lies directly above the Barnett Shale.

 

Participation Agreement for Land Acquisition

 

                We have entered into a variety of arrangements with affiliates (“Land Banks”) that will raise capital from third party investors (“Participants”) through a private offering of participation interests, and in turn use its funds to acquire oil and gas leases selected by SFL.  Additionally, at our discretion, we may borrow up to $150,000 of the funds from the Land Bank for testing the Barnett Cody #1 well owned by SFL.  

 

                SFL has entered into Lease Acquisition Agreements with the Land Banks pursuant to which SFL will have the option from time-to-time to acquire leases held by the Land Banks at prices to be determined based on the date of each purchase and the obligation to buy any remaining leases the Land Bank owns at the end of a two (2) year period at a price determined by a preset formula as discussed below.

 

As part of the commercial arrangement, we guarantee all obligations of SFL under the Lease Acquisition Agreement.  The amount of our financial risk related to these guarantees will depend on the amount and value of the leases that the Land Bank acquires.  Based on current estimates we expect that we will be guaranteeing the purchase of up to $5,000,000 in leases, or more, which amount is subject to change.  Additionally, the Land Bank may lend up to $150,000 to SFL to fund the expenses of testing the Barnett Cody #1 well owned by SFL. 

 

Under the Lease Acquisition Agreement, SFL will have the right to acquire leases from the Land Banks.  The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through the sale of its Company common stock and utilized for the support of the Land Banks. SFL’s acquisitions of Leases may occur from time to time, but must be completed within two years from the date the Land Bank is formed.  Additionally, if the Land Banks have loaned funds to complete the testing of the Barnett Cody #1 well owned by SFL, the loan will bear interest at 15% per year and be payable in full not later than 18 months after the Land Bank was formed.

 

At the time SFL completes the acquisition of all the Leases or pays the loan in full, whichever is later, the Lease Acquisition Agreement will require that SFL make an additional payment to the Land Bank equal to the greater of (a) 50% of the total contributions by Participants to the Land Bank less the sum of (i) Lease acquisition payments made by SFL to the Land Bank in excess of the Land Bank’s costs to acquire the Leases plus (ii) aggregate interest paid on the loan to SFL or (b) an amount that, after taking into account the amount and timing of all distributions from the Land Bank to Participants, will repay the Participants’ contributions and provide a minimum of a 50% annual return to the Participants on their unpaid contributions over the life of the Land Bank.  Participants in the Land Bank are third party investors under separate agreements.

 

As an example, at the time of the filing of this Form 8-K, if a Participant invested $150,000 with the Land Bank and a lease of 1,000 acres was purchased, SFL could purchase the lease for the 1,000 acres from the Land Bank for $225,000 (investment plus 50% return) or at an effective rate of $225 per acre.

 

                If, for any reason, SFL fails to acquire all remaining leases or repay the loan as discussed above, in addition to any other remedies it may have for such failure, the Land Bank may sell the remaining leases to other purchasers.  Additionally, we will be liable if Santa Fe Land does not perform its obligations.

 

               As of the date of this filing, the Land Banks have leased approximately 1,338 acres in the general vicinity of the Barnett Cody #1 test well.  Additionally, the Land Bank has obtained “top leases” on approximately 1,045 acres of land also in the general vicinity of the Barnett Cody #1 test well.  A top lease is a lease taken on “top” of another preexisting lease, with the top lease becoming effective only after the termination of the first lease.  We believe that the acreage covered by top leases will become available to be leased within a three month timeframe based upon discussions we have had with the land owners in the area.  The Land Bank intends to continue leasing additional acreage in the general area of the Barnett Cody #1 test well.

 

Business Strategy

 

Our immediate strategy is to acquire control of oil and gas leases on substantial acreage in the southwest part of the Bend Arch-Fort Worth Basin in Texas. We plan to evaluate these prospects with a focus on drilling for and production of oil from the Barnett Shale and Marble Falls Formations in this prospect area.

 

 Competition

 

We compete with other companies for financing and for the acquisition of new oil and gas properties. Many of the oil and gas exploration companies with which we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of oil and gas properties of merit, on exploration of their properties, and on development of their properties. In addition, they may be able to afford more geological and other technical expertise in the targeting and exploration of oil and gas properties. This competition could result in competitors having properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could have an adverse impact on our ability to achieve the financing necessary for us to conduct further exploration of our acquired properties.

 

We will also compete with other junior oil and gas exploration companies for financing from a limited number of investors that are prepared to make investments in junior oil and gas exploration companies. The presence of competing junior oil and gas exploration companies may have an adverse impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the oil and gas properties under investigation and the price of the investment offered to investors.

 

We also compete with other junior and senior oil and gas companies for available resources, including, but not limited to, professional exploration and production, geological and engineering personnel services and supplies, for the drilling completion and production of hydrocarbon resources.

 

Intellectual Property

 

We do not own any copyrights, patents, or trademarks. We own the Internet domain name www.sfpetro.com. Under current domain name registration practices, no one else can obtain an identical domain name, but someone might obtain a similar name, or the identical name with a different suffix, such as “.org”, or with a country designation. The regulation of domain names in the United States and in foreign countries is subject to change, and we could be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our domain names. During each of the last two fiscal years, we had no expenditures on research and development activities.

 

 Governmental Regulation

 

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

 

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

 

Failure to comply with environmental laws could result in fines or penalties being owed to third parties or governmental entities, the payment of which could have a material adverse effect on our financial condition or results of operations. 

 

The Company believes that through its affiliate entities, it has or will have all required permits, licenses and other authorizations necessary to conduct its business plan.

 

Employees

 

We currently have no employees. Our officers and other personnel currently provide their services pursuant to oral consulting agreements, and we plan to enter into written agreements with these individuals in the future. Until the scope of our operations warrants otherwise, we plan to outsource independent consultant engineers and geologists on a part time basis to conduct our operations.

 

Facilities

 

Our executive offices are located at 4011 W. Plano Parkway, Suite 126, Plano, Texas 75093, where we occupy approximately 1,000 square feet of office space. We pay rent of $1,500 per month under an arrangement with a company controlled by Mr. Griffin, which leases the space from an unaffiliated owner. We believe that our current office space and facilities will have to be expanded in the near future to meet our growth plans.

 

Reports to Security Holders

 

At the current time, we are subject to the reporting requirements of the Exchange Act pursuant to Section 15(d) of the Exchange Act. We are currently not subject to the reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, however we intend to become subject to those requirements by the end of the calendar year 2012. The public may read and copy any materials we file with the Commission at the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission. The address of that site is http://www.sec.gov.

 

Internet Website

 

Our Internet website is www.sfpetro.com, which is currently under construction.

 

 

RISK FACTORS

 

Risks Related to Our Business

 

If we do not raise additional capital, we may be unable to continue as a going concern.

 

In order to fully execute our business strategy, we require additional cash resources of approximately $5,000,000 over the next twelve months. If we are unable to raise this money, we may need to drill less wells, thereby reducing value to holders of our equity securities. If our resources are insufficient to satisfy our cash requirements, we will seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our stockholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all, and failure to secure the necessary financing could have a significant impact on our ability to continue as a going concern.

 

We closed the share exchange with no cash proceeds, and we may not be able to obtain the required capital to fund our continuing operations and our business plan.

 

We closed the share exchange transaction with no cash proceeds. Accordingly, we are subject to corporate governance and financial reporting requirements without any cash. Although we expect that the closing of a proposed offering of our common stock will occur in the near future, there is a risk that the we will not close the proposed offering would have no way to operate our business.

 

We expect that our current capital and our other existing resources will only be sufficient to provide a limited amount of working capital, and the revenues generated from our properties in Texas alone will not be sufficient to fund both our continuing operations and our planned growth. We will require additional capital to continue to operate our business beyond the initial phase of our current properties, and to further expand our exploration and development programs to additional properties. We may be unable to obtain additional capital required, which may hamper our growth or cause us to incur losses on ongoing projects if we do not have sufficient resources to manage them.

 

Our business may be harmed if we are unable to retain our interests in leases.

 

All our properties are held under interests in oil and gas mineral leases. If we fail to meet the specific requirements of each lease, especially future drilling and production requirements, the lease may be terminated or otherwise expire. We cannot be assured that we will be able to meet our obligations under each lease. The termination or expiration of our working interest relating to any lease would harm our business, financial condition, and results of operations.

 

Our oil and gas property is held in the form of leases.  If we default on those leases, we may lose our interest in those properties.

 

Our properties are held in the form of leases and working interests in leases. If we or the holder of the lease fails to meet the specific requirement of a lease, the lease may terminate or expire. There can be no assurance that any of the obligations required to maintain each lease will be met, although we exercise our commercially reasonable efforts to do so. The termination or expiration of our leases or the working interests relating to a lease may have a material adverse effect on our results of operations and business.

 

The loss or unavailability of our key personnel for an extended period of time could adversely affect our business operations and prospects.

 

Our success depends in large measure on certain key personnel, including our chairman of the board and our chief executive officer and chief financial officer. The loss of the services of such key personnel could have a material adverse effect on us.  We do not currently have any key-person insurance in effect for these key individuals. In addition, the competition for qualified personnel in the oil and gas industry is intense, and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the development and operation of our business.

 

We depend on the services of third parties for material aspects of our operations, including drilling operators, and accordingly if we cannot obtain certain third-party services, we may not be able to operate.

 

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

 

Risks Related to the Oil and Gas Industry

 

Our exploration, appraisal, and development activities are subject to many risks that may affect our ability to profitably extract oil and gas reserves or achieve targeted returns.  In addition, continued growth requires that we acquire and successfully develop additional oil reserves.

 

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

 

Our commercial success depends on our ability to find, acquire, develop, and commercially produce oil and natural gas reserves.  Without the continual addition of new reserves, any existing reserves and production will decline over time as such existing reserves are depleted. A future increase in our reserves will depend not only on our ability to explore and develop any properties we may have from time to time, but also on our ability to select and acquire suitable producing properties or prospects.  No assurance can be given that we will be able to continue to locate satisfactory properties for acquisition or participation.  Moreover, if such acquisitions or participations are identified, we may determine that current markets, terms of acquisition, and participation or pricing conditions make such acquisitions or participations economically disadvantageous.  There is no assurance that commercial quantities of oil or gas will be discovered or acquired by us.

 

Our oil and gas operations are subject to operating hazards that may increase our operating costs to prevent such hazards or may materially affect our operating results if any of such hazards were to occur.

 

Oil and gas exploration, development, and production operations are subject to all the risks and hazards typically associated with such operations, including hazards such as fire, explosion, blowouts, cratering, unplanned gas releases, and spills, each of which could result in substantial damage to oil wells, production facilities, other property and the environment or in personal injury. Oil and gas production operations are also subject to all the risks typically associated with such operations, including encountering unexpected formations or pressures, premature decline of reservoirs, and the invasion of water into hydrocarbon producing formations. Losses resulting from the occurrence of any of these risks could have a material adverse effect on our results of operations, liquidity, and financial condition.

 

To date, we have not generated revenues from production of our oil and gas lease interests.  Our oil and gas exploration and development activities will be focused on the exploration and development of our properties which are high-risk ventures with uncertain prospects for success.  In addition, we will not have earnings to support our activities should the wells drilled or properties acquired prove not to be commercially viable.  No assurance can be given that commercial quantities of oil or gas will be successfully produced as a result of our exploration and development efforts.  Further there is no guarantee that we will generate sufficient revenues from production of our reserves.

 

Our exploration and development activities will depend in part on the evaluation of data obtained through geophysical testing and geological analysis, as well as test drilling activity.  The results of such studies and tests are subjective, and no assurances can be given that exploration and development activities based on positive analysis will produce oil or gas in commercial quantities or costs.  As developmental and exploratory activities are performed, further data required for evaluation of our oil and gas interests will become available.  The exploration and development activities that will be undertaken by us are subject to greater risks than those associated with the acquisition and ownership of producing properties.  The drilling of development wells, although generally consisting of drilling to reservoirs believed to be productive, may result in dry holes or a failure to produce oil or gas in commercial quantities.  Moreover, any drilling of exploratory wells is subject to significant risk of dry holes.

 

If we are unable to compete successfully with the large number of oil and gas producers in our industry, we may not be able to achieve profitable operations.

 

Oil and gas exploration is intensely competitive in all its phases and involves a high degree of risk.  We compete with numerous other participants in the search for and the acquisition of oil and gas properties and in the marketing of oil and gas.  Our competitors include oil and gas companies that have substantially greater financial resources, staff, and facilities than we do.  Our ability to increase reserves in the future will depend not only on our ability to explore and develop our existing properties, but also on our ability to select and acquire suitable producing properties or prospects for exploratory drilling.  Competitive factors in the distribution and marketing of oil and gas include price and methods and reliability of delivery.  Competition may also be presented by alternative fuel sources.

 

We are subject to various regulatory requirements, including environmental regulations, and may incur substantial costs to comply and remain in compliance with those requirements.

 

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

 

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

 

Moreover, we cannot predict what legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered, enforced, or made more stringent. Compliance with more stringent laws or regulations, or more vigorous enforcement policies of the regulatory agencies, could require us to make material expenditures for the installation and operation of systems and equipment for remedial measures, all of which could have a material adverse effect on our financial condition or results of operations.

 

Our ability to market and sell oil and gas successfully is subject to a number of factors that are beyond our control and that may adversely impact our ability to produce and sell oil and gas or to achieve profitability.

 

The marketability and price of oil or gas that may be acquired or discovered by us will be affected by numerous factors beyond our control.  Our ability to market our oil and gas may depend upon our ability to acquire space on pipelines that deliver oil or gas to commercial markets. We may also be affected by operational problems with such pipelines and facilities, and by government regulation relating to price, taxes, royalties, land tenure, allowable production, export of oil or gas, and by many other aspects of the oil and gas business.

 

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

 

Volatile oil and gas prices make it difficult to estimate the value of producing properties for acquisition and often cause disruption in the market for oil and gas producing properties, as buyers and sellers have difficulty agreeing on such value. Price volatility also makes it difficult to budget for and project the return on acquisitions and development and exploitation projects.

 

We cannot guarantee that title to our properties does not contain a defect that may materially affect our interest in those properties.

 

It is our practice in acquiring significant oil and gas leases or interests in oil and gas leases to retain lawyers to fully examine the title to the interest under the lease.  In the case of minor acquisitions, we rely upon the judgment of oil lease brokers or landmen who do the field work in examining records in the appropriate governmental office before attempting to place under lease a specific interest. We believe that this practice is widely followed in the oil and gas industry. Nevertheless, there may be title defects that affect some of our properties, which may adversely affect us.

 

Our reserve estimates are subject to numerous uncertainties and may be inaccurate.

 

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

 

Estimates of proved or unproved reserves that may be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history and production practices will result in variations in the estimated reserves, and such variations could be material.

 

Risks Related to Investment in Our Common Stock

 

We are subject to the reporting requirements of federal securities laws, which will be expensive.

 

We are a public reporting company in the United States and, accordingly, subject to the information and reporting requirements of the Securities Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”) and furnishing audited reports to stockholders will cause our expenses to be higher than they would be if we remained a privately held company.

 

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

 

It will be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley. We will need to hire additional financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with Sarbanes-Oxley’s internal controls requirements, we may not be able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires publicly traded companies to obtain.

 

We may not be able to achieve the benefits we expect to result from the Share Exchange.

 

On May 10, 2012, we completed the Share Exchange.  We may not realize the benefits that we hope to receive as a result of the Share Exchange, which include:

 

·

access to the capital markets of the United States;

·

increased market liquidity expected to result from the Share Exchange;

·

ability to use registered securities to make acquisition of assets or businesses;

·

increased visibility in the financial community;

·

enhanced access to the capital markets;

·

improved transparency of operations; and

·

perceived credibility and enhanced corporate image of being a publicly traded company.

 

There can be no assurance that any of the anticipated benefits of the Share Exchange will be realized in respect to our business operations. In addition, the attention and effort devoted to achieving the benefits of the Share Exchange and attending to the obligations of being a public company, such as reporting requirements and securities regulations, could significantly divert management’s attention from other important issues, which could materially and adversely affect our operating results or stock price in the future.

 

We will operate as a public company subject to evolving corporate governance and public disclosure regulations that may result in additional expenses and continuing uncertainty regarding the application of such regulations.

 

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

 

We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.

 

We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

 

Our shares may have limited liquidity.

 

A substantial portion of our shares of common stock will be closely held by certain insider investors. Consequently, the public float for our shares may be highly limited. As a result, should you wish to sell your shares into the open market you may encounter difficulty selling large blocks of your shares or obtaining a suitable price at which to sell your shares.

 

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

 

The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the Over-The-Counter Bulletin Board, where our shares of common stock will be quoted, generally have been very volatile and have experienced sharp share-price and trading-volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following factors, some of which are beyond our control:

 

·

variations in our operating results;

·

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

·

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

·

additions or departures of key personnel; and

·

future sales of our common stock.

 

 

Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, following initial public offerings, the market prices for stocks of companies often reach levels that bear no established relationship to the operating performance of these companies. These market prices are generally not sustainable and could vary widely. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.  

 

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

 

We have been subject to public reporting requirements only since January 2012 have committed limited personnel and resources to the development of the external reporting and compliance obligations that required of a public company. We plan to obtain additional financial and accounting resources to support and enhance our ability to meet the requirements of being a public company. We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls, reporting systems, or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially.

 

Our common shares have not yet traded and in the future, may be thinly traded, and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.

 

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

 

The market price for our common stock may be particularly volatile given our status as a relatively small company with a presumably small and thinly traded “float” and lack of current revenues that could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

 

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

 

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

 

We do not anticipate paying any cash dividends.

 

We currently do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our board of directors. We currently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.

 

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

 

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

 

Volatility in our common stock price may subject us to securities litigation.

 

The market for our common stock will be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

 

We may need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.

 

We will require additional cash resources due to fully execute our business strategy. If our resources are insufficient to satisfy our cash requirements, we will seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our stockholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

 

Pursuant to the recently enacted JOBS Act, we may take advantage of an extended transition period for complying with new or revised accounting standards, which could have a negative effect on the trading market for our shares.

 

Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are electing to delay such adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result of such election, our financial statements may not be comparable to the financial statements of other companies that comply with public company effective dates. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We cannot predict if investors will find our capital stock less attractive because we rely on these exemptions. If some investors find our shares less attractive as a result, there may be a less active trading market for our shares, and our trading price may be more volatile.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the financial information included elsewhere in this Form 8-K, including SFO’s audited financial statements for the period from May 11, 2011 (commencement of operations) to December 31, 2011, and related notes.

 

Overview

 

We are a development stage exploration oil and gas company led by an experienced management team and focused on exploration and production of oil and natural gas. Our business plan is to acquire oil and gas properties for exploration, appraisal, and development.   We will employ strict selection guidelines for our projects including but not limited to 1) priority to projects with near term cash flow potential, pay-back period, quantity and quality of oil and gas reserves and utilizinge premier oilfield services and engineering firms in analyzing and conducting our operations.

 

As a result of the Share Exchange, for accounting purposes, SFO is deemed to have acquired the Company. Accordingly, the financial statement data presented are those of SFO for all periods.

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

JOBS Act and Emerging Growth Company

 

Section 107 (b) of the JOBS Act provides that an “emerging growth company” can take advantage of the transition period for complying with new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1 of the Jobs Act. This election allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates.

 

Oil and Gas Properties

 

The Company uses the successful efforts method of accounting for oil and natural gas producing activities, as further defined under ASC 932, Extractive Activities - Oil and Natural Gas. Under these provisions, costs to acquire mineral interests in oil and natural gas properties, to drill exploratory wells that find proved reserves, and to drill and equip development wells are capitalized. Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process that relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part of the cost of the well. Capitalized costs of producing oil and natural gas interests are depleted on a unit-of-production basis. If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. If a determination cannot be made as to whether the reserves that have been found can be classified as proved, the cost of drilling the exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired and its costs are charged to expense. Its cost can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the well to justify its completion as a producing well and the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project.

 

Use of Estimates

 

The Company’s estimates of oil and natural gas reserves are, by necessity, projections based on geologic and engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production and the timing of development expenditures. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that are difficult to measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation, and judgment. Estimates of economically recoverable natural gas and oil reserves and future net cash flows necessarily depend upon a number of variable factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effect of regulations by governmental agencies, and assumptions governing future natural gas and oil prices, future operating costs, severance taxes, development costs and workover costs, all of which may in fact vary considerably from actual results. The future drilling costs associated with reserves assigned to proved undeveloped locations may ultimately increase to the extent that these reserves are later determined to be uneconomic. For these reasons, estimates of the economically recoverable quantities of expected natural gas and oil attributable to any particular group of properties, classifications of such reserves based on risk of recovery, and estimates of the future net cash flows may vary substantially. Any significant variance in the assumptions could materially affect the estimated quantity of the reserves, which could affect the carrying value of the Company’s oil and natural gas properties and/or the rate of depletion related to the oil and natural gas properties.

 

Recent Accounting Pronouncements

 

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2010–03, Extractive Activities – Oil and Gas (Topic 932), to align the oil and natural gas reserve estimation and disclosure requirements of Topic 932 with the Securities and Exchange Commission’s final rule, Modernization of Oil and Gas Reporting. The Company adopted ASU No. 2010-03 on May 11, 2011 (commencement of operations). There was no immediate impact of this adoption given the Company is in the development stage and its oil and natural gas property are not proven as of December 31, 2011. Management expects ASU No. 2010-03 to affect the Company once the Company has the financial wherewithal to carry out its drilling plans.

 

In December 2011, the FASB issued ASU No. 2011–11, Disclosures about Offsetting Assets and Liabilities. This ASU affect all entities that have financial instruments and derivative instruments that are either offset or subject to an enforceable master netting arrangement or similar agreement. ASU 2011–11 requires an entity to disclose information about offsetting and related arrangements to enable user of its financial statements to understand the effect of those arrangements on its financial position. The provisions of ASU 2011–11 are applicable to annual reporting periods beginning on or after January 1, 2011 and interim periods within those annual periods. The Company has not yet determined the impact of this ASU on our consolidated financial statements.

 

Going Concern

 

As reflected in the accompanying consolidated financial statements, the Company had a net loss of $542,000 for the period from May 11, 2011 (commencement of operations) through December 31, 2011. Additionally, at December 31, 2011, the Company had no cash, a working capital deficit of $418,000 and an accumulated deficit of $542,000, which could have a material impact on the Company’s financial condition and operations. Our substantial obligations pose risks to our business and stockholders by:

 

·

making it more difficult for us to satisfy our obligations;

·

impeding us from obtaining additional financing in the future for working capital, capital expenditures and general corporate purposes; and

·

making us more vulnerable to a downturn in our business and limit our flexibility to plan for, or react to, changes in our business.

 

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

 

Results of Operations

 

For the period from May 11, 2011 to December 31, 2011, we had no revenue. We had expenses of $542,000 consisting principally of compensation ($304,000) and professional and consulting fees ($212,000) incurred in connection with our efforts to raise capital and to achieve listing with OTC Markets and trading as a public company. For this period we had a net loss of $542,000.

 

Liquidity and Capital Resources

 

At December 31, 2011, we had no cash and a working capital deficit of $418,000. At May 10, 2012, we had no cash to meet our outstanding obligations and conducting our oil and gas exploration and production activities.

 

A critical component of our operating plan is the ability to obtain additional capital through additional equity or debt financing. We do not believe that existing capital and anticipated funds from operations will be sufficient to execute our strategic plan during 2012 without either equity or debt financing. We have engaged an investment bank to raise up to $5 million in a private placement of our common stock. We believe that the $5 million of funding will provide sufficient capital to conduct our business plan over the next twelve months. We cannot ensure that financing will be available in amounts or on terms acceptable to us, if at all, and failure to secure the necessary financing could have a significant impact on our ability to continue as a going concern. We plan to seek additional capital in the future to fund growth and expansion through additional equity or debt financing. No assurance can be made that such financing will be available.

 

We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in their early stage of development, particularly companies in the oil and gas exploration industry. To address these risks we must, among other things, implement and successfully execute our business strategy. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition, and results of operations.

 

Off-Balance Sheet Arrangements

 

We have entered into a variety of arrangements with affiliates (“Land Banks”) that will raise capital through a private offering of participation interests, and in turn use its funds to acquire oil and gas leases selected by Santa Fe Land.  Additionally, at our discretion, we may borrow up to $150,000 of the funds from the Land Bank for testing the Barnett Cody #1 well owned by SFL.  

 

              We, along with SFL, have entered into Lease Acquisition Agreements with the Land Banks pursuant to which SFL will have the option from time-to-time to acquire leases held by the Land Banks at prices to be determined based on the date of each purchase and the obligation to buy any remaining leases the Land Bank owns at the end of a two (2) year period at a price determined by a preset formula as discussed below.

 

As part of the commercial arrangement, we guarantee all obligations of SFL under the Lease Acquisition Agreement.  The amount of our financial risk related to these guarantees will depend on the amount and value of the leases that the Land Bank acquires.  Based on current estimates we expect that we will be guaranteeing the purchase of up to $5,000,000 in leases, or more, which amount is subject to change.  Additionally, the Land Bank may lend up to $150,000 to SFL to fund the expenses of testing the Barnett Cody #1 well owned by SFL. 

 

Under the Lease Acquisition Agreement, SFL will have the right to acquire leases from the Land Banks.   The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through the sale of its SFO common stock and utilized for the support of the Land Banks. SFL’s acquisitions of Leases may occur from time to time, but must be completed within two years from the date the Land Bank is formed.  Additionally, if the Land Banks have loaned funds to complete the testing of the Barnett Cody #1 well owned by SFL, the loan will bear interest at 15% per year and be payable in full not later than 18 months after the Land Bank was formed.

 

At the time SFL completes the acquisition of all the Leases or pays the loan in full, whichever is later, the Lease Acquisition Agreement will require that SFL make an additional payment to the Land Bank equal to the greater of (a) 50% of the total contributions by Participants to the Land Bank less the sum of (i) Lease acquisition payments made by SFL to the Land Bank in excess of the Land Bank’s costs to acquire the Leases plus (ii) aggregate interest paid on the loan to SFL or (b) an amount that, after taking into account the amount and timing of all distributions from the Land Bank to Participants, will repay the Participants’ contributions and provide a minimum of a 50% annual return to the Participants on their unpaid contributions over the life of the Land Bank. 

 

                If, for any reason, SFL fails to acquire all remaining leases or repay the loan as discussed above, in addition to any other remedies it may have for such failure, the Land Bank may sell the remaining leases to other purchasers.  Additionally, we will be liable if Santa Fe Land does not perform its obligations.

 

Plan of Operations

 

During the remainder of 2012, if sufficient funds are obtained, we plan to re-complete the test well that was originally drilled in December 2009 in the Barnett Shale and drill four additional wells, one of which will be a gas-injection well, at the test-well site. Because of a lack of funds, the test well was not previously completed and put into production as an operating well. Management believes that re-completing the test well will prove that oil and gas reserves are at the site and will be placed into production as an operating well. We plan to acquire oil and gas leases in the surrounding area and begin drilling additional five-well projects in the Barnett Shale. We also intend to drill horizontal wells in the Marble Falls Formation on the same acreage. The amount of leased acreage we acquire and the number of five-well projects in the Barnett Shale and horizontal wells in the Marble Falls Formation will depend to a large extent on whether we are successful in raising sufficient capital to execute this plan of operation.

 

DESCRIPTION OF PROPERTIES

 

The Company’s properties and principal asset consists of an unevaluated oil and natural gas property in the Bend Arch-Fort Worth Basin in Texas.

 

The unevaluated oil and natural gas property was originally drilled in 2009, as a test well. However, additional capital was needed for the Company to commence further drilling activities. As a result of the additional capital requirements, the reservoir analysis has not yet being completed. As such, the Company has classified the oil and natural gas property as unevaluated as of December 31, 2011. As of December 31, 2011, the primary term of the Company’s oil and natural gas lease was through March 2012; however, subsequent to December 31, 2011, the Company extended the primary term through March 2014.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information, as of May 10, 2012 with respect to the beneficial ownership of the Company’s outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the directors and executive officers; and (iii) our directors and executive officers as a group. Except as otherwise indicated, to our knowledge each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.

 

Name and Address of Beneficial Owner (1)	Number of Shares of Common Stock Beneficially Owned (4)	Percent of Outstanding Shares
Tom Griffin, Director and Chairman of the Board	17,149,579 (2)	37.1%
Bruce A. Hall, Director, Chief Executive Officer, and Chief Financial Officer	8,347,826 (3)	18.1%
Vernon Hughes, Director of Field Operations, Textron Southwest	3,000,000	13.07%
Jack Nelson, Director	--	--
Directors and executive officers as a group	25,497,405	55.2%

 

(1)

The address of each beneficial owner is care of the Company at 4011 W. Plano Parkway, Suite 126, Plano, Texas 75093.

(2)

Includes shares held by Long Branch Petroleum, L.P., of which Mr. Griffin is the President.

(3)

Includes shares held by BHDH Family, L.P., of which Mr. Hall’s spouse is the general partner and the primary limited partner.

(4)

Based upon 46,243,117 fully-diluted outstanding shares of common stock. This includes 39,478,261 outstanding shares of common stock and 6,784,856 exercisable warrants to purchase shares of common stock.

 

 

 

 

DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following individuals serve as our directors and executive officers and significant employees. All directors of our company hold office until the next annual meeting of our shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation, or removal from office. There are no family relationships between any of our directors or executive officers.

 

Name	Age	Positions
Tom Griffin	67	Chairman of the Board, President, Secretary, Director
Bruce A. Hall	55	Chief Executive officer, Chief Financial Officer, Director
Jack Nelson	65	Director
Vernon Hughes	49	Control Person

 

Tom Griffin, Director, Chairman of the Board, President, Secretary and Director

 

Mr. Griffin, has over 16 years of experience in the exploration and production of oil and natural gas. Since 1997, he has been the chief executive of Santa Fe Petroleum, LLC, an oil and gas exploration and production company and our predecessor, where he managed drilling of 25 wells and provided substantial investment returns to investors. Mr. Griffin was selected to serve as a director of the Company due to his extensive experience and expertise in managing companies involved in the field of oil and gas exploration.

 

Bruce A. Hall, Chief Executive Officer, Chief Financial Officer, and Director

 

Mr. Hall is a senior financial executive with experience in the energy, real estate, private equity, construction, and manufacturing industries. From May 2003 to present, Mr. Hall has been the principal of his own CFO consulting and advisory firm assisting both large and small public and private companies with complete services, including, all areas of accounting and financial operations, interim CFO and COO, mergers and acquisitions, recapitalizations, crisis management, cash flow management, banking and capital, taxation and regulatory (including extensive SEC reporting), and compliance. Since July 2008, Mr. Hall has been the chief financial officer and a director of Triland International, Inc., a privately held Canadian real estate group conducting residential and commercial real estate development and construction. Since July 2008, Mr. Hall has also been the chief financial officer and a director of Chipman Development Corporation and Canadian Cottage Corporation, both affiliates of Triland. Since March 2006, Mr. Hall has been the chief financial officer and a director of Nortia Capital Partners, Inc., a publicly traded merchant banking firm. Since January 2008, Mr. Hall has been the chief financial officer and director of System Services, Inc., a privately held information technology company. Since September 2008, Mr. Hall has been a director of Arcland Energy Corporation, a publicly traded oil and gas exploration and development company. From March 2006 to April 2009, Mr. Hall was the chief financial officer and a director of Knight Energy Corp., a publicly traded oil and gas exploration and production company that filed for protection under Chapter 11 of the United States Bankruptcy Code (“Code”) in April 2009, and was converted to a Chapter 7 in April of 2010. From May 2004 to July 2007, Mr. Hall was the chief financial officer of RG America, a publicly traded company in the insurance restoration business. From May 1999 to May 2003, Mr. Hall was the chief financial officer of Probex Corp., a formerly publicly traded used oil recycling company that filed for protection under Chapter 7 of the Code in May 2003. Mr. Hall began his career in public accounting with Ernst & Young LLP, and is a licensed Certified Public Accountant in the State of Texas, a licensed Certified Management Accountant. He graduated from the University of Texas at Austin in B.S. in Accounting and a minor in Finance. Mr. Hall was selected to serve as a Director of the Company due to his extensive experience as a CFO of several publicly traded companies.

 

Jack Nelson, Director

 

Mr. Nelson has extensive experience in many facets of the construction, aviation, and oil and gas industries. His depth of knowledge extends through sales, marketing, management and consulting. Mr. Nelson has worked with international land and commercial development companies as well as international aviation companies. Since 2007, he has served as President of D&J Enterprises LLC, a multifaceted management and consulting firm. He also served as Vice President of Santa Fe Petroleum, Inc., a private company that is unrelated to us, from 2008 to 2010. Mr. Nelson is a military veteran having served as an officer flying helicopters in the Army. He is a multi-rated pilot, and from 1990 to 2008, he served as a captain for ATA Airlines. In his spare time, he raises Quarter and Paint horses. Mr. Nelson was selected to serve as a Director of the Company due to his extensive experience in several industries and specifically, for the oil and gas industry.

 

Indemnification of Directors and Officers

 

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

 

EXECUTIVE COMPENSATION

 

No executive officer of the Company received salary, bonus or other compensation from the Company during 2011. No director of the Company received compensation in 2011.

 

Mr. Hall acquired all of his Company shares beneficially owned by him from a limited partnership controlled by Mr. Griffin in exchange for promissory notes totaling $83,478.26. The principal of and accrued interest upon the promissory notes shall be due and payable in equal quarterly installments, each in the amount of $20,869.57, commencing on the date on which the Lender consummates a reverse merger with a public company (the “Loan Commencement Date”) and continuing on the last day of each third month thereafter until the one year anniversary of the Loan Commencement Date, when the entire unpaid principal balance of this Note shall be due and payable in full. If Mr. Hall fails to pay the promissory notes, the shares will revert to the limited partnership. In addition, if Mr. Hall resigns as an officer of the Company or is terminated for cause, the limited partnership will have the right to acquire 4,000,000 of such shares if the resignation or termination occurs before May 10, 2013; 2,666,666 of such shares if the resignation or termination occurs after May 10, 2013 and before May 102, 2014; and 1,333,334 of such shares if the resignation or termination occurs after May 10, 2014 and before May 10, 2015.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Following is a description of certain relationships and related transactions between us and our directors, executive officers, and 5% stockholders. In the future, we plan to present all such possible transactions to our board of directors for consideration and approval. Any such transaction will require approval by a majority of the disinterested directors, and such transactions will be on terms no less favorable than those available to disinterested third parties.

 

Capitalization of SFO

 

On May 11, 2011, SFO acquired 100% of the member units of Santa Fe Land, LLC (“LAND”), which held the oil and gas lease and test well now owned by us, in exchange for 33,478,261 shares of common stock and 1,999,150 warrants to LAND member unit holders in exchange for their LAND member units. All the LAND member unit holders were entities under the control of Tom Griffin, our chairman of the board. This acquisition was accounted for as a combination of entities under common control; therefore, the assets transferred are reflected on our balance sheet at their historical cost basis of $494,132.

 

Share Exchange

 

In the Share Exchange described previously, Mr. Griffin exchanged 18,157,329 shares of SFO for 18,157,329 shares of our common stock and, Mr. Hall exchanged 8,347,826 shares of SFO for 8,347,826 shares of our common stock.

 

Land Banks

 

Santa Fe Land, LLC (“SFL”), a wholly owned subsidiary of SFO, has entered into Lease Acquisition Agreements (the “Lease Acquisition Agreement with Langtre LLC and Woodlake, LLC (the “Land Banks”), both wholly owned by Long Branch Petroleum, LP (“LB”) and Santa Fe Petroleum, LLC (“SFP”), its managing member. The President of both LB and SFP is Tom Griffin, the Company’s President and Chairman of the Board. The Land Bank arrangement, and other similar arrangements we intend to enter into, is designed to allow us to build an inventory of oil and gas leases utilizing less of our available funds. As of May 1, 2012, the Land Banks had acquired leases on approximately 1,338 acres and top leases on an additional 1,045 acres. Under the Lease Acquisition Agreement, we can purchase the leases, or portions of the leases, held by the Land Banks from time to time and are obligated to purchase all the leases held by the Land Banks within 20-24 months from the closing of the Share Exchange, subject to change by mutual consent. The aggregate purchase price for the leases will be equal to a 50% annualized return of the total investment raised by LB through the sale of its SFO common stock and utilized for the support of the Land Banks.

 

Land Bank Participation investors with the Land Banks subsequent to the closing of the Share Exchange will receive proceeds from the sale of leased by the Land Banks to SFL based on their Participation Agreements.

 

Our executive offices are located at 4011 W. Plano Parkway, Suite 126, Plano, Texas 75093, where we occupy approximately 1,000 square feet of office space. We pay rent of $1,500 per month under an arrangement with a company controlled by Mr. Griffin, which leases the space from an unaffiliated owner. We believe that our current office space and facilities will have to be expanded in the near future to meet our growth plans.

 

From May 11, 2011 (commencement of operations) through December 31, 2011, Santa Fe Petroleum, Inc. (“SFP Inc.”) expended $73,385 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying consolidated balance sheet at December 31, 2011. SFP Inc. is owned entirely by entities under the control of the Principal Stockholder. The majority of the expenditures were related to compensation and legal expenses for the Company related to the Company preparing to structure a transaction to become a publicly traded company.

 

From May 11, 2011 (commencement of operations) through December 31, 2011, Santa Fe Petroleum, LLC (“SFP LLC”), expended $13,936 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying consolidated balance sheet at December 31, 2011. SFP LLC is owned entirely by entities under the control of the Principal Stockholder. The majority of the expenditures were related to legal and consulting expenses for the Company related to the Company preparing to structure a transaction to become a publicly traded company.

 

We currently do not have a lease but we are accruing a pro-rata charge from a company controlled by the Principal Stockholder, which approximated $24,000 for the period from May 11, 2011 (commencement of operations) through December 31, 2011 and is included in the accompanying consolidated statement of operations.

 

We have engaged, and may engage in the future, in transactions with our affiliates or stockholders, officers and directors of our affiliates. TexTron Southwest, Inc. (“TexTron”) provides operating services including drilling of wells and ongoing operating management for oil and gas entities and is owned by entities under the control of the Principal Stockholder.

 

Director Independence

 

Currently we are not subject to a requirement of any securities exchange or inter-dealer quotation system that any of our directors be independent. Mr. Nelson, however, would qualify as an “independent director” under the NASDAQ Stock Market’s Rule 5605(a)(2).

 

RECENT SALES OF UNREGISTERED SECURITIES

 

On December 1, 2010, we issued a total of 3,000,000 shares of our Common Stock (the “Placement Shares”) in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 904 of Regulation S, promulgated thereunder, to two individuals: (i) our then-Principal Executive Officer and Treasurer and (ii) our then-Principal Financial and Accounting Officer. The purchase price for the Placement Shares was equal to their par value, $0.0001 per share, amounting in the aggregate for all 3,000,000 shares to $300. The offer and sale of the Placement Shares did not involve any underwriters, underwriting discounts or commissions or any public offering. No advertising or general solicitation was employed in offering the securities.

 

On May 10, 2012, the Company completed the Share Exchange, as discussed in Items 1.01 and 3.01 of this Form 8-K, and such sections are incorporated herein by reference.

 

DESCRIPTION OF SECURITIES

 

The following description of our capital stock is a summary and is qualified in its entirety by the provisions of our Articles of Incorporation, with amendments, all of which have been filed as exhibits to our registration statement of which this prospectus is a part.

 

Common Stock

 

We are authorized to issue 200,000,000 shares of our Common Stock, $0.0001 par value, of which, as of May 10, 2012, 39,478,261 shares are issued and outstanding. Of these 39,478,261 shares of common stock outstanding, none may be resold unless (i) to a “non-U.S. person” (as that term is defined in Rule 902(k) of Regulation S, promulgated under the Securities Act) in accordance with the Rule 904 of Regulation S, (ii) in a private resale pursuant to Rule 4(1), (iii) to a “qualified institutional buyer” (as that term is defined in rule 144A(a)(1) of the Securities Act) in accordance with Rule 144A(d) of the Securities Act, or (iv) until (x) the Company has been current in its filing requirements under the Exchange Act (other than current reports on Form 8-K) for a period of twelve months, and (y) one year has elapsed since the filing of this Form 8-K. Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Under Delaware Law, a corporation’s stockholders may appoint Directors by cumulative voting as set forth in its certificate of incorporation, however, our certificate of incorporation does not include such a right and therefore our holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefore. In the event of our liquidation, dissolution, or winding up, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Pursuant to Article X, Section 6 of our by-laws we have the ability to hold our shareholders liable for calls on partly paid shares in accordance with Delaware General Corporations Law §156 and to redeem shares called by us in accordance with Delaware General Corporations Law §160. Holders of common stock have no preemptive rights to purchase our common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock. Delaware General Corporations Law §156 states that the corporation MAY (emphasis added) issue shares as partially paid and subject to a call on the remaining amount due for the purchase of the issued shares. At the present time, the Corporation has not intent to issue shares for partial payment.

 

The restrictions on the ability of shareholders to call meetings in Article III, the authority of your board of directors to set the size of your board and appoint directors in Article V, and limitations on the ability to remove directors in Article V of Exhibit 3.2 would have an effect of delaying, deferring, or preventing a change in control.

 

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

 

Preferred Stock

 

We have not authorized the issuance of shares of preferred stock. In order to authorize the issuance of shares of preferred stock, our stockholders and Directors will be required to amend our Certificate of Incorporation to designate and fix the relative rights, preferences and limitations of the preferred stock.

 

Anti-Takeover Effects Of Provisions of the Articles of Incorporation Authorized and Unissued Stock

 

The authorized but unissued shares of our common stock are available for future issuance without our stockholders’ approval. These additional shares may be utilized for a variety of corporate purposes including but not limited to future public or direct offerings to raise additional capital, corporate acquisitions and employee incentive plans. The issuance of such shares may also be used to deter a potential takeover of the Company that may otherwise be beneficial to stockholders by diluting the shares held by a potential suitor or issuing shares to a stockholder that will vote in accordance with the Company’s Board of Directors’ desires. A takeover may be beneficial to stockholders because, among other reasons, a potential suitor may offer stockholders a premium for their shares of stock compared to the then-existing market price.

 

The existence of authorized but unissued and unreserved shares of preferred stock may enable the Board of Directors to issue shares to persons friendly to current management which would render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger or otherwise, and thereby protect the continuity of our management.

 

MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

At May 10, 2012, there were 39,478,261 shares of our common stock outstanding held by approximately 86 holders of record. In addition, we have issued warrants to acquire 6,764,856 shares of our common stock at $0.50 per share exercisable for 3 years.

 

The Company’s Common Stock is currently not yet trading on the public markets.

 

Dividend Policy

 

We currently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our board of directors.

 

LEGAL PROCEEDINGS

 

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder is an adverse party or has a material interest adverse to us.

 

Financial Statements and Supplementary Data.

 

  Not applicable to Smaller Reporting Companies.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

  None.

 

Financial Statements and Exhibits.

 

 (a) Financial Statements of business acquired.

 

 The required financial statements of Santa Fe Operating, Inc. and Subsidiary for the periods specified in Rule 3-05(b) of Regulation S-X are included herein. This Current Report includes the audited financial statements for the period from May 11, 2011 (Commencement of Operations) to December 31, 2011.

 

 

SANTA FE OPERATING, INC. AND SUBSIDIARY
(A Development Stage Company)
Contents
Report of Independent Registered Public Accounting Firm						37
Financial Statements
Consolidated Balance Sheet						38
Consolidated Statement of Operations						39
Consolidated Statement of Stockholders' Equity						40
Consolidated Statement of Cash Flows						41
Notes to Consolidated Financial Statements						42-53

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

To the Board of Directors and Stockholders of Santa Fe Operating, Inc.:

 

 

We have audited the accompanying consolidated balance sheet of Santa Fe Operating, Inc. and Subsidiary (A Development Stage Company) (collectively the “Company”) as of December 31, 2011 and the related consolidated statements of operations, stockholders' equity, and cash flows for the period from May 11, 2011 (commencement of operations) through December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

 

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

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and the results of their operations and their cash flows for the period from May 11, 2011 (commencement of operations) through December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has an accumulated deficit, a working capital deficit and a net loss from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ Rothstein Kass

 

Dallas, Texas

April 9, 2012

(Except for Note 10, as to which the date is May 10, 2012)

 

SANTA FE OPERATING, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
December 31, 2011

 

ASSETS
Unevaluated oil and natural gas property, successful efforts method		$	494,132
Deferred offering costs			23,784
Total assets		$	517,916
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	203,338
Accounts payable, related parties			87,321
Accrued compensation			127,350
Total current liabilities			418,009
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.0001 par value, 5,000,000 shares authorized,
zero issued and outstanding			-
Common stock, $0.0001 par value, 50,000,000 shares authorized
33,478,261 shares issued and outstanding			3,348
Additional paid in capital			638,149
Deficit accumulated during the development stage			(541,590	)
Total stockholders' equity			99,907
Total liabilities and stockholders' equity		$	517,916

 

SANTA FE OPERATING, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENT OF OPERATIONS

 

 

 

Period from May 11, 2011 (commencement of operations) through December 31, 2011

 

Expenses
Compensation		$	303,581
Professional			115,650
Consulting			96,200
Rent			23,649
Other			2,510
Total expenses			541,590
Net loss		$	(541,590	)
Basic and diluted loss per share		$	(0.02	)
Basic and diluted weighted average shares outstanding			33,478,261

 

  

SANTA FE OPERATING, INC. AND SUBSIDIARY (A Development Stage Company) CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Period from May 11, 2011 (commencement of operations) to December 31, 2011

 

																						Deficit
																						Accumulated
										Additional												During the				Total
		Common Stock								Paid - In				Preferred Stock								Development				Stockholders'
		Shares				Amount				Capital				Shares				Amount				Stage				Equity
May 11, 2011 - Common stock and
1,999,150 warrants issued to unit
holders of Santa Fe Land, LLC			33,478,261			$	3,348			$	490,784															$	494,132
May 11, 2011 - Stock based compensation provided by
Principal Stockholder											123,581																123,581
May 17, 2011 - Common stock and 1,573,956 warrants issued for
capital placement fees
provided by Principal Stockholder											23,784																23,784
Net loss																							(541,590	)			(541,590	)
Balances at December 31, 2011			33,478,261			$	3,348			$	638,149											$	(541,590	)		$	99,907

 

  

SANTA FE OPERATING, INC. AND SUBSIDIARY (A Development Stage Company) CONSOLIDATED STATEMENT OF CASH FLOWS
Period from May 11, 2011 (commencement of operations) to December 31, 2011

 

Cash flows from operating activities
Net loss		$	(541,590	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation			123,581
Increase in cash attributable to changes in operating assets and liabilities:
Accounts payable			203,338
Accounts payable, related parties			87,321
Accrued compensation			127,350
Net cash used in operating activities			-
Net increase (decrease) in cash			-
Cash, beginning of period			-
Cash, end of period		$	-
Supplemental disclosure of non-cash investing activity
Unevaluated oil and natural gas property acquired through the Santa Fe Land, LLC acquisition		$	494,132
Supplemental disclosure of non-cash financing activity
Common stock and warrants issued to capital placement group as deferred offering costs		$	23,784

 

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.

Nature of Operations

 

Santa Fe Operating, Inc. and Subsidiary (collectively the “Company”, “We”, or “Our”) are privately owned companies which are engaged in the acquisition, exploration, development, and producing and marketing of oil and natural gas.

 

The Company was incorporated on May 11, 2011 (commencement of operations) under the laws of the State of Delaware and is classified as a development stage company in accordance with Accounting Standard Codification (“ASC”) 915, Development Stage Entities, since no revenues have been generated from inception through the date of these consolidated financial statements. During the development stage, the Company has primarily incurred compensation, professional, and consulting expenses associated with the Company’s contemplated equity financing plan.

 

 

2.

Going Concern and Liquidity

 

As reflected in the accompanying consolidated financial statements, the Company had a net loss of $541,590 for the period from May 11, 2011 (commencement of operations) through December 31, 2011. Additionally, at December 31, 2011, the Company had no cash, a working capital deficit of $418,009 and an accumulated deficit of $541,590, which could have a material impact on the Company’s financial condition and operations.

 

Our substantial obligations pose risks to our business and stockholders by:

 

·

making it more difficult for us to satisfy our obligations;

·

impeding us from obtaining additional financing in the future for working capital, capital expenditures and general corporate purposes; and

·

making us more vulnerable to a downturn in our business and limit our flexibility to plan for, or react to, changes in our business.

 

The time required for us to become profitable is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from operations to meet our planned capital expenditures and working capital requirements. Our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for our business. The necessary additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.

 

Management believes that the contemplated equity financing, which will require the Company to become publicly traded, will provide several options in obtaining financing from third parties in order to carry out the business plan of the Company.

 

The accompanying consolidated financial statements do not include any adjustments to reflect the possible effects on recoverability and classification of assets or the amount and classification of liabilities which may result from the inability of the Company to continue as a going concern.

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

 

 

3.

Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

 

These consolidated financial statements were approved by management and available for issuance on April 9, 2012. Subsequent events have been evaluated through this date.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the general accounts of Santa Fe Operating, Inc. and its wholly-owned subsidiary as of December 31, 2010. All significant intercompany transactions, accounts and balances have been eliminated in consolidation.

 

Oil and Gas Properties

 

The Company uses the successful efforts method of accounting for oil and natural gas producing activities, as further defined under ASC 932, Extractive Activities - Oil and Natural Gas. Under these provisions, costs to acquire mineral interests in oil and natural gas properties, to drill exploratory wells that find proved reserves, and to drill and equip development wells are capitalized.

 

Exploratory drilling costs are capitalized when incurred pending the determination of whether a well has found proved reserves. A determination of whether a well has found proved reserves is made shortly after drilling is completed. The determination is based on a process that relies on interpretations of available geologic, geophysic, and engineering data. If a well is determined to be successful, the capitalized drilling costs will be reclassified as part

of the cost of the well. Capitalized costs of producing oil and natural gas interests are depleted on a unit-of-production basis.

 

If a well is determined to be unsuccessful, the capitalized drilling costs will be charged to expense in the period the determination is made. If a determination cannot be made as to whether the reserves that have been found can be classified as proved, the cost of drilling the exploratory well is not carried as an asset for more than one year following completion of drilling. If, after that year has passed, a determination that proved reserves exist cannot be made, the well is assumed to be impaired and its costs are charged to expense. Its cost can, however, continue to be capitalized if a sufficient quantity of reserves is discovered in the well to justify its completion as a producing well and the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project.

 

Impairment of Long-Lived Assets

 

The Company accounts for the impairment of long-lived assets in accordance with ASC 360-10, Property, Plant and Equipment, which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to the undiscounted cash flow that the asset or asset group is expected to generate. If such assets or asset groups are considered to be impaired, the loss recognized is the amount by which the carrying amount of the property, if any, exceeds its fair market value.

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

  

 

3. Summary of Significant Accounting Policies (Continued)

 

Deferred Offering Costs

 

The Company complies with the requirements of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) Topic 5A, Expenses of Offering. Deferred offering costs consist principally of the fair value of stock grants and warrants issued to placement agents incurred through December 31, 2011 that are related to the Company’s contemplated equity financing and will be charged to stockholders’ equity upon the receipt of the contemplated equity financing proceeds or charged to expense if the contemplated equity financing is not completed.

 

Income Taxes

 

Income taxes are accounted for under the asset and liability method of ASC 740, Income Taxes. Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

Effective May 11, 2011 with the commencement of operations, the Company adopted provisions of ASC 740, Sections 25 through 60, Accounting for Uncertainties in Income Taxes. These sections provide detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. Upon the adoption of ASC 740, the Company had no unrecognized tax benefits. For the period from May 11, 2011 (commencement of operations) through December 31, 2011, no adjustments were recognized for uncertain tax benefits. The Company’s initial tax year for 2011 is still subject to audit.

 

The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties were recognized during the period from May 11, 2011 (commencement of operations) through December 31, 2011

 

The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the outcomes of such matters. In addition, when applicable, the Company will adjust tax expense to reflect the Company’s ongoing assessments of such matters which require judgment and can materially increase or decrease its effective rate as well as impact operating results. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

The number of years with open tax audits varies depending on the tax jurisdiction. The Company’s major taxing jurisdictions include the United States.

 

Stock-Based Compensation

 

The Company adopted ASC 718, Compensation – Share Based Compensation, as of May 11, 2011. This statement requires the recognition of compensation expense measured at fair value when the Company obtains employee services in stock-based payment transactions.

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

 

 

3. Summary of Significant Accounting Policies (Continued)

 

Net Income (loss) per Common Share

 

The Company computes earnings (loss) per share in accordance with ASC 260-10, Earnings Per Share. ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. At December 31, 2011, there were warrants to purchase 3,573,106 shares of the Company’s common stock which may dilute future earnings per share.

 

Legal Costs and Contingencies

 

In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received.

If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

The Company’s estimates of oil and natural gas reserves are, by necessity, projections based on geologic and engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production and the timing of development expenditures. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and oil that are difficult to measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation and judgment. Estimates of economically recoverable natural gas and oil reserves and future net cash flows necessarily depend upon a number of variable factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effect of regulations by governmental agencies, and assumptions governing future natural gas and oil prices, future operating costs, severance taxes, development costs and workover costs, all of which may in fact vary considerably from actual results. The future drilling costs associated with reserves assigned to proved undeveloped locations may ultimately increase to the extent that these reserves are later determined to be uneconomic. For these reasons, estimates of the economically recoverable quantities of expected natural gas and oil attributable to any particular group of properties, classifications of such reserves based on risk of recovery, and estimates of the future net cash flows may vary substantially. Any significant variance in the assumptions could materially affect the estimated quantity of the reserves, which could affect the carrying value of the Company’s oil and natural gas properties and/or the rate of depletion related to the oil and natural gas properties.

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

 

 

3. Summary of Significant Accounting Policies (Continued)

 

JOBS Act and Emerging Growth Company

 

Section 107 (b) of the Jumpstart Our Business Startups Act (“JOBS Act”) provides that an “emerging growth company” can take advantage of the transition period for complying with new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1 of the JOBS Act. This election allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company effective dates.

 

Recent Accounting Pronouncements

 

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2010–03, Extractive Activities – Oil and Gas (Topic 932), to align the oil and natural gas reserve estimation and disclosure requirements of Topic 932 with the Securities and Exchange Commission’s final rule, Modernization of Oil and Gas Reporting. The Company adopted ASU No. 2010-03 on May 11, 2011 (commencement of operations). There was no immediate impact of this adoption since the Company is in the development stage and its oil and natural gas property are not proven as of December 31, 2011. Management expects ASU No. 2010-03 to affect the Company once the Company has the financial wherewithal to carry out its drilling plans.

 

In December 2011, the FASB issued ASU No. 2011–11, Disclosures about Offsetting Assets and Liabilities. This ASU affect all entities that have financial instruments and derivative instruments that are either offset or subject to an enforceable master netting arrangement or similar agreement. ASU 2011–11 requires an entity to disclose information about offsetting and related arrangements to enable user of its financial statements to understand the effect of those arrangements on its financial position. The provisions of ASU 2011–11 are applicable to annual reporting periods beginning on or after January 1, 2011 and interim periods within those annual periods. The Company has not yet determined the impact of this ASU on its consolidated financial statements.

 

 

4.

Acquisition of Oil and Natural Gas Company

 

On May 11, 2011, the Company acquired 100 percent of the member units of Santa Fe Land, LLC (“LAND”), a Texas limited liability company. The Company issued 33,478,261 shares of common stock and 1,999,150 warrants to LAND member unit holders in exchange for their LAND member units. The LAND member unit holders were comprised entirely of entities under the control of Tom Griffin, the Company’s Chairman of the Board and a related party (the “Principal Stockholder”),. The acquisition of LAND is being accounted for as a combination of entities under common control. Therefore, the acquisition has been recorded at the historical cost basis of the assets transferred. The warrants to purchase common stock of the Company are at an exercise price of $0.50 per share and have a three year exercise period.

 

The Company acquired LAND’s oil and natural gas working interests of 100% with a net revenue interest of 75% for the Barnett Cody #1A in Comanche County, Texas. Additionally, the Company acquired approximately 76 acres of land as part of the purchase.

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

 

The following table presents a summary of the historical costs of assets and liabilities acquired at the date of acquisition:

 

Assets acquired, unevaluated oil and natural gas property		$	494,132
Liabilities assumed			-
Net assets acquired for 33,478,261 shares of Company common stock and 1,999,150 warrants to purchase Company common stock at $0.50 per share		$	494,132

 

 

Concurrent with this transaction, the Principal Stockholder assigned 10,446,782 of his personal shares and 1,573,956 warrants in the Company to employees and consultants of the Company for services rendered. Under SAB Topic 5T, Miscellaneous Accounting, payments made by a principal stockholder to settle the Company’s obligations were deemed to be capital contributions.  Accordingly, the assignment of shares has been recognized in the accompanying consolidated financial statements as stock based compensation and deferred offering costs of approximately $124,000 and $24,000, respectively.

 

5.

Unevaluated Oil and Natural Gas Property

 

The Company’s principal asset consists of an unevaluated oil and natural gas property in Comanche County, Texas, which approximated $494,000 as of December 31, 2011.

 

The unevaluated oil and natural gas property was originally drilled in 2009, as the Barnett Cody #1A test. However, additional capital was needed for the Company to commence further drilling activities. As a result of the additional capital requirements, the reservoir analysis has not yet being completed. As such, the Company has classified the oil and natural gas property as unevaluated as of December 31, 2011. As of December 31, 2011, the primary term of the Company’s oil and natural gas lease was through March 2012; however, subsequent to December 31, 2011, the Company extended the primary term through March 2014.

 

 

6.

Income Taxes

 

There was no income tax during the period from May 11, 2011 (commencement of operations) to December 31, 2011 due to the Company’s net loss and valuation allowance position.

The Company’s effective tax expense differs from the “statutory” tax expense (benefit) for the period from May 11, 2011 (commencement of operations) to December 31, 2011 (computed by applying the Federal Corporate tax rate of 35% for 2011 to loss before taxes), as follows:

Computed “expected” tax benefit		$	189,557
Stock based compensation			(43,253	)
Valuation allowance			(146,303	)
Net taxable benefit		$	-

 

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2011 are as follows:

 

Deferred tax assets:
Net operating loss carryforward		$	101,730
Accrued compensation			44,573
Total deferred tax assets			146,303
Valuation allowance			(146,303	)
Net deferred taxes		$	-

 

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

 

In assessing the recognition of deferred tax assets, management estimates it is more likely than not that the Company will not be able to recover its deferred tax asset. As a result, the valuation allowance has been recorded for the entire amount of the net deferred tax asset. As of December 31, 2011, the Company’s net operating loss carry-forwards approximated $291,000 and expires in years through 2032.

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

  

 

7.

Stockholders’ Equity

 

Capital Structure

The Company is authorized to issue up to 5,000,000 shares of preferred stock, at $0.0001 par value per share, of which none were issued and outstanding as of December 31, 2011.

 

The Company is authorized to issue up to 50,000,000 shares of common stock, at $0.0001 par value per share, of which 33,478,261 shares were issued and outstanding at December 31, 2011.

 

Common Stock

 

Effective on the commencement date of May 11, 2011 (commencement of operations), the Company issued 33,478,261 shares of common stock for the acquisition of LAND from a related party. The stock was valued based on the historical cost basis of the asset acquired, which approximated $494,000.

 

Stock Warrants

 

Effective on the commencement date of May 11, 2011(commencement of operations), the Company granted 1,999,150 warrants to purchase common stock for the acquisition of LAND. The warrants have an exercise price of $0.50 per share and an exercise period of three years from the date of grant. The Company evaluated the warrants and determined that the warrants were not separable from the common stock issued for the acquisition of LAND. Therefore, no Black Scholes calculation was made by the Company.

 

Effective May 17, 2011, the Company granted 1,573,956 warrants to purchase common stock to a consultant of the Company. The Company evaluated the stock warrants in accordance with ASC 718, Stock Compensation, and utilized the Black Scholes method to determine valuation. As a result of our analysis, the total value for the stock warrant issuance on the grant date of May 17, 2011 approximated $2,000 and is included in deferred offering costs in the accompanying consolidated balance sheet.

 

The Company used the following Black Sholes inputs in determining the fair value of the warrants:

 

Stock Price (grant date)		$	0.0139
Exercise Price		$	0.50
Expected Term (between vesting period and term of stock options)			1.5
Volatility			153	%
Annual Rate of Quarterly Dividends			0.00	%
Risk Free Interest Rate (1 year T-bill rate)			0.1	%

 

We have adopted the guidance of ASC 718-10-S99-1 for purposes of determining the expected term for stock warrants. Due to limited historical data to rely upon, we use the "simplified" method in developing an estimate of expected term for stock warrants per ASC 718-10-S99-1. Additionally, the volatility utilized is based on the composite of several comparable guideline companies.

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

 

 

7. Stockholders’ Equity (Continued)

 

Stock Warrants (continued)

 

The following table summarizes activity related to warrants:

 

		Number of Shares				Weighted Average Exercise Price
Balance at May 11, 2011(commencement of operations)			-			$	-
Granted			3,573,106				0.50
Exercised			-				-
Forfeited			-				-
Balance at December 31, 2011			3,573,106			$	0.50

 

The terms of warrants to purchase our common stock are summarized below:

 

----------------Warrants Outstanding----------------- -------------------Warrants Exercisable---------------------

Range of Exercise Prices		Number Outstanding at December 31, 2011		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at December 31, 2011		Weighted Average Exercise Price
$0.50		3,573,106		2.37 Years		$0.50		3,573,106		$0.50

 

Stock Grants

 

Effective May 11, 2011(commencement of operations), the Principal Stockholder granted 8,872,826 shares of common stock to employees and consultants of the Company. Under SAB Topic 5T, Miscellaneous Accounting, these were deemed stock based compensation of the Company and were valued in accordance with ASC 718, Stock Compensation. As a result of our analysis, the total fair value for the stock grant, based on the net asset value of the Company on May 11, 2011, approximated $124,000 and is included in compensation expense within the accompanying consolidate statement of operations. Additionally, on May 17, 2011, the Principal Stockholder granted 1,573,956 shares of common stock to a capital placement agent which had a fair value of approximately $22,000, based on the net asset value of the Company on May 17, 2012. This amount is included in deferred offering costs within the accompanying consolidated balance sheet.

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

 

 

8.

Related Party Transactions

 

On May 11, 2011 (commencement of operations), the Company acquired 100% of the member units of LAND as discussed under Note 4. The LAND member unit holders were comprised entirely of entities under the control of the Principal Stockholder.

 

From May 11, 2011 (commencement of operations) through December 31, 2011, Santa Fe Petroleum, Inc. (“SFP Inc.”) expended $73,385 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying consolidated balance sheet at December 31, 2011. SFP Inc. is owned entirely by entities under the control of the Principal Stockholder. The majority of the expenditures were related to compensation and legal expenses for the Company related to the Company preparing to structure a transaction to become a publicly traded company.

 

From May 11, 2011 (commencement of operations) through December 31, 2011, Santa Fe Petroleum, LLC (“SFP LLC”), expended $13,936 of funds on behalf of the Company and is recorded as a component of accounts payable, related parties in the accompanying consolidated balance sheet at December 31, 2011. SFP LLC is owned entirely by entities under the control of the Principal Stockholder. The majority of the expenditures were related to legal and consulting expenses for the Company related to the Company preparing to structure a transaction to become a publicly traded company.

 

We currently do not have a lease but we are accruing a pro-rata charge from a company controlled by the Principal Stockholder, which approximated $24,000 for the period from May 11, 2011 (commencement of operations) through December 31, 2011 and is included in the accompanying consolidated statement of operations.

 

We have engaged, and may engage in the future, in transactions with our affiliates or stockholders, officers and directors of our affiliates. TexTron Southwest, Inc. (“TexTron”) provides operating services including drilling of wells and ongoing operating management for oil and gas entities and is owned by entities under the control of the Principal Stockholder.

 

9.

Commitment and Contingencies

 

From time-to-time the Company may become subject to proceedings, lawsuits and other claims in the ordinary course of business including proceedings related to environmental and other matters. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. The Company is unaware of any claim or lawsuit as of December 31, 2011.

 

The Company is subject to various possible contingencies that arise primarily from interpretation of federal and state laws and regulations affecting the oil and natural gas industry. Such contingencies include differing interpretations as to the prices at which oil and natural gas sales may be made, the prices at which royalty owners may be paid for production from their leases, environmental issues and other matters. Although management believes that it has complied with the various laws and regulations, administrative rulings and interpretations thereof, adjustments could be required as new interpretations and regulations are issued. In addition, environmental matters are subject to regulation by various federal and state agencies. 

 

SANTA FE OPERATING AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

---

  

 

10.

Subsequent Events

 

On May 10, 2012, Operating and Baby All Corp. (“Baby All”) entered into a Share Exchange Agreement ((the Exchange Agreement”. Pursuant to the Exchange Agreement, the shareholders of Operating were issued a share of Baby All’s common stock, $0.0001 par value (Common Stock”) in exchange for each of their shares of Operating. As a result, the shareholders of Operating were issued 33,478,261 shares of Common Stock and Operating became a wholly-owned subsidiary of Baby All upon the closing of the Share Exchange. Additionally, the shareholders of Operating were issued warrants to purchase 6,764,856 shares of Common Stock at $0.50 per share.

 

For accounting purposes, this transaction is being accounted for as a reverse merger, since the stockholders of Operating will own and control approximately 84.8% of Baby All’s outstanding Common Stock. In connection with the reverse merger, the Company will change its name to Santa Fe Petroleum, Inc.

 

Pro Forma Financial Information (Unaudited)

 

The following selected unaudited pro forma consolidated financial information of Baby All and Operating is prepared to illustrate the effect of Operating’s reverse acquisition of Baby All, whereby Operating is the acquirer for accounting purposes. The unaudited pro forma consolidated balance sheet gives effect to the reverse merger as if it occurred on December 31, 2011. The unaudited pro forma consolidated statement of operations gives effect to the merger as if it occurred at the beginning of the year ended December 31, 2011.

  

10. Subsequent Events (continued)

 

Pro Forma Financial Information (Unaudited)

 

December 31, 2011
										PRO-FORMA
		BABY				SFO				ADJUST				TOTAL
ASSETS
Current assets
Cash and cash equivalents		$	300			$	-			$	-			$	300
Deferred offering costs			20,000				-				(20,000	)	(A)		-
Total current assets			20,300				-				(20,000	)			300
Other assets
Unevaluated oil and natural gas property, successful efforts method		$	-				494,132								494,132
Deferred offering costs			-				23,784				-				23,784
Total other assets			-				517,916				-				517,916
Total assets		$	20,300			$	517,916			$	(20,000	)		$	518,216
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	41,125			$	203,338							$	244,463
Accounts payable, related parties			-				87,321								87,321
Loans, related parties			22,900				-								22,900
Accrued compensation			-				127,350								127,350
Total current liabilities			64,025				418,009				-				482,034
Commitments and contingencies
Stockholders' equity (deficit)
Common stock, $0.0001 par value, 200,000,000 shares authorized
39,478,261 shares issued and outstanding			300				3,348				600		(B)		3,948
											(300	)	(C)
Additional paid in capital			-				638,149				(600	)	(B)		573,824
											300		(C)
											(44,025	)	(C)
											(20,000	)	(A)
Deficit accumulated during the development stage			(44,025	)			(541,590	)			44,025		(C)		(541,590	)
Total stockholders' equity (deficit)			(43,725	)			99,907				(20,000	)			36,182
Total liabilities and stockholders' equity (deficit)		$	20,300			$	517,916			$	(20,000	)		$	518,216

  

  

10. Subsequent Events (continued)

 

Pro Forma Financial Information (Unaudited)

 

Year Ended December 31, 2011
										PRO FORMA
		BABY				SFO				ADJUST				TOTAL
Expenses
Compensation		$	-			$	303,581							$	303,581
Professional			26,970				115,650								142,620
Consulting			-				96,200								96,200
Rent			-				23,649								23,649
Other			6,600				2,510								9,110
Total expenses			33,570				541,590				-				575,160
Net loss		$	(33,570	)		$	(541,590	)		$	-			$	(575,160	)
Basic and diluted loss per share														$	(0.01	)
Basic and diluted weighted average
shares outstanding							-								39,478,261

    

(A) To remove Baby All deferred offering costs.

(B) To record Baby All common shares issued at reverse merger.

(C) To eliminate the capital structure of Baby All.

 

The pro forma information presented may not be indicative of the financial position or results of operations had the transaction been completed at December 31, 2011 or at the beginning of the each of the periods presented, nor is it indicative of the future financial position or results of the combined entity.

 

 

11. Supplemental Oil and Gas Disclosures (Unaudited)

 

Since the Company is in the development stage and its oil and natural gas property are not proven, reserve data is not presented

 

Item 7.01.

Regulation FD

 

 

 

On May 11, 2012, the Company issued the press release filed as Exhibit 99.1, which is incorporated by reference.

 

Item 9.01.	Financial Statements and Exhibits
(a)	Please see attached financial information.
(b)	Please see attached financial information.
(c)	Please see attached financial information.
(d)	Exhibits.

 

 

Exhibit
Number		Description
2.1		Share Exchange Agreement between the Company and Santa Fe Operating, Inc. dated May 10, 2012 (previously filed as Exhibit 2.1 to the Current Report on Form 8-K of the Issuer filed on May 11, 2012)
3.1		Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Registration Statement on Form S-1 of the Company filed on April 5, 2011)
3.2		By-Laws of the Company (previously filed as Exhibit 3.2 to the Registration Statement on Form S-1 of the Company filed on April 5, 2011)
3.3		Form of Common Stock Certificate of the Company (previously filed as Exhibit 3.3 to the Registration Statement on Form S-1 of the Company filed on April 5, 2011)
3.4		Amendment to Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Current Report on Form 8-K of the Company filed on May 24, 2012)
10.1		Design Patent Transfer and Sale Agreement dated December 13, 2010 (previously filed as Exhibit 10.1 to the Registration Statement on Form S-1 of the Company filed on April 5, 2011)

 

 

10.2		Form of Lease Acquisition Agreement
10.3		Form of Participation Agreement
10.4		Paid Up Oil and Gas Lease, dated as of March 24, 2009, by and between Cody S. Rogers and Gas Group Limited
21.1		Santa Fe Land, LLC, a Texas limited liability company
99.1		Press Release, dated May 11, 2012 (previously filed as Exhibit 99.1 to the Current Report on Form 8-K of the Issuer filed on May 11, 2012)

 

 

EXHIBITS

 

Exhibit
Number		Description
2.1		Share Exchange Agreement between the Company and Santa Fe Operating, Inc. dated May 10, 2012 (previously filed as Exhibit 2.1 to the Current Report on Form 8-K of the Issuer filed on May 11, 2012)
3.1		Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Registration Statement on Form S-1 of the Company filed on April 5, 2011)
3.2		By-Laws of the Company (previously filed as Exhibit 3.2 to the Registration Statement on Form S-1 of the Company filed on April 5, 2011)
3.3		Form of Common Stock Certificate of the Company (previously filed as Exhibit 3.3 to the Registration Statement on Form S-1 of the Company filed on April 5, 2011)
3.4		Amendment to Certificate of Incorporation of the Company (previously filed as Exhibit 3.1 to the Current Report on Form 8-K of the Company filed on May 24, 2012)
10.1		Design Patent Transfer and Sale Agreement dated December 13, 2010 (previously filed as Exhibit 10.1 to the Registration Statement on Form S-1 of the Company filed on April 5, 2011)
10.2		Form of Lease Acquisition Agreement
10.3		Form of Participation Agreement
10.4		Paid Up Oil and Gas Lease, dated as of March 24, 2009, by and between Cody S. Rogers, an individual, and Gas Group Limited

 

 

21.1		Santa Fe Land, LLC, a Texas limited liability company
99.1		Press Release, dated May 11, 2012

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	Baby All Corp.
Date:  June 26, 2012	By:	/s/Bruce A. Hall
		Bruce A. Hall
		Chief Executive Officer